In re N.J.C.

• Decision Date: 10 October 2019
• Docket Number: Court of Appeals No. 18CA0915
• Citation: 467 P.3d 1209
• Parties: IN RE the Parental Responsibilities Concerning N.J.C., a Child, and Concerning N.E., Appellant, and V.J.C., Appellee.
• Court: Colorado Court of Appeals

467 P.3d 1209

IN RE the Parental Responsibilities Concerning N.J.C., a Child, and Concerning N.E., Appellant, and V.J.C., Appellee.

Court of Appeals No. 18CA0915

Colorado Court of Appeals, Division I.

Announced October 10, 2019

As Modified on Denial of Rehearing November 14, 2019

Fairfield and Woods, P.C., Lee Katherine Goldstein, Michael R. McCurdy, Denver, Colorado, for Appellant

James J. Keil, Jr., Denver, Colorado, for Appellee

Opinion by JUDGE TAUBMAN

¶ 1 As a matter of first impression, N.E. (mother) urges us to conclude that deferred compensation in a nonqualified plan¹ is income for child support purposes if it is being earned during a period when a parent is obligated to pay child support. We disagree with her arguments, and therefore affirm the juvenile court's order adopting the magistrate's order modifying mother's child support award from V.J.C. (father). We also affirm the remaining portions of the juvenile court's order denying mother's requests for attorney fees and to reallocate costs paid for parental responsibilities evaluations (PRE).

¶ 2 However, we remand for the juvenile court to consider mother's request for appellate attorney fees under section 19-4-117, C.R.S. 2019.

I. Appellate Standard of Review

¶ 3 This case arises out of the Uniform Parentage Act (UPA), sections 19 -4-101 to - 130, C.R.S. 2019. Magistrates may preside over UPA actions, but parties have the right to seek a judge's review of the magistrate's findings and rulings. § 19-1-108(1), (4)(b), (5.5), C.R.S. 2019.

¶ 4 "We defer to the magistrate's and district courts' findings of fact if they are supported by the evidence and we review conclusions of law de novo." In re B.J. , 242 P.3d 1128, 1132 (Colo. 2010).

II. Father's Deferred Compensation Plan

A. Relevant Facts

¶ 5 Mother and father are the unmarried parents of one child, N.J.C. In 2013, and as part of the initial paternity proceeding in this case, father's child support calculation was based on the salary he earned working as a cardiologist for his own medical practice.

¶ 6 In 2016, father closed his practice and accepted a job with Healthy Connections, Inc. (HCI), a health care center providing medical, dental, and outreach services to impoverished communities. Believing that father's income had gone up at his new job, mother moved to increase child support. Father, however, responded that his income had actually decreased.

¶ 7 Evidence presented at a hearing on mother's motion showed that father's compensation package with HCI consisted of a $150,000 annual salary and $200,000 of yearly deferred compensation in a nonqualified plan. Father, who was then fifty-two years old, testified that he would only receive the deferred compensation after he retired from HCI at age sixty-five. HCI's CEO, his brother, agreed that father "does not receive — physically receive $200,000 above his salary," and he described the deferred compensation as "an obligation at a future date and time for [father's] benefit providing that he meets the criteria after his retirement."

¶ 8 The CEO explained that the deferred compensation plan allowed HCI to attract and retain qualified medical doctors, like father, that it could not otherwise afford. He testified that half of the ten to thirteen medical doctors on HCI's staff were employed under the deferred compensation plan. According to the CEO, while each plan was tailored to the employee, they all had the same payout structure — the employee had to retire from HCI at a certain age before he or she would receive any deferred funds, which would then be paid over ten years. As of the hearing date, the CEO said that the deferred compensation plan was unfunded; in fact, the CEO stated there was not even an account established with which to pay deferred compensation.

¶ 9 Regarding father's specific deferred compensation plan, the CEO submitted a letter to father's counsel (admitted at the hearing as Exhibit A) detailing that father had no control over the funds or the plan; the deferred amounts belonged to HCI and were not protected in case of insolvency or creditor claims; the deferred amounts were subject to forfeiture if father was fired, quit, or retired before age sixty-five; father would not be fully vested until he worked at HCI for five years; and the funds were not taxable until received by the employee.

¶ 10 Arguing that it was significant that father earned the money, even if he did not actually receive it, mother asked the magistrate to include the deferred compensation as income to father. The magistrate declined to do so, based on the restrictive provisions of father's plan described above. The magistrate then modified father's child support obligation, including in father's income only his salary and nominal dividend and interest income.²

¶ 11 The juvenile court judge adopted the magistrate's decision not to include the deferred compensation, pointing out the magistrate's reasoning that father could not contribute to the plan, had no control over the funds, and had no guarantee he would ever receive the money.

B. Deferred Compensation is Not Income

¶ 12 Section 14-10-115, C.R.S. 2019, applies to child support obligations established or modified under the UPA. § 19-4-129, C.R.S. 2019. We review child support orders for an abuse of discretion. In re Marriage of Garrett , 2018 COA 154, ¶ 8, 444 P.3d 812, 815. However, we review de novo the legal standard applied by the court. In re Marriage of Tooker , 2019 COA 83, ¶ 12, 444 P.3d 856, 859.

¶ 13 A child support calculation begins with a determination of the parties' combined gross incomes. See § 14-10-115(1)(b)(I), (5)(a). A parent's gross income for child support purposes is "income from any source[.]" § 14-10-115(5)(a)(I).

¶ 14 The statute, however, neither specifically includes nor excludes "deferred compensation" as gross income available to a parent. See id. (nonexclusive list of income included in definition of gross income); § 14-10-115(5)(a)(II) (excluding certain income from definition of gross income).

¶ 15 No Colorado case has addressed this specific issue. Thus, we look to other Colorado appellate decisions addressing whether financial benefits or contributions not specifically defined by the statute are income for child support purposes. We then consider similar decisions from other states.

¶ 16 In re Marriage of Mugge , 66 P.3d 207, 210 (Colo. App. 2003), addressed whether an employer's pension contributions, not yet distributed to the employee, were gross income for child support purposes. The division decided that such pension contributions were not because "the employers determined the amounts of their pension plan contributions and the employees did not have the option of directly receiving the amounts as wages." Id. at 211. Until distribution of the funds actually occurred, the division concluded, the employer contribution was not income. Id.

¶ 17 The division in In re Marriage of Davis , 252 P.3d 530, 534 (Colo. App. 2011), similarly concluded that employer contributions to a parent's 401(k) and health insurance plans were not income for child support purposes. Like Mugge , the division reasoned that unrealized employer contributions are income only if the employee has the option to receive the contributions as wages and use them for general living expenses. Id. at 535.

¶ 18 Most recently, the division in Tooker , ¶¶ 1-2, 444 P.3d at 858, considered whether tuition assistance and a book stipend paid through a GI Bill were income for child support and maintenance purposes. The district court concluded that the benefits were not income, since they were paid directly to the college and the parent could not use them for daily living or discretionary expenses. Id. at ¶¶ 9-10, 444 P.3d at 859.

¶ 19 In reviewing the district court's decision, the Tooker division found Davis and Mugge "instructive":

The principle that emerges from these cases is that, to be included as gross income for purposes of maintenance and child support, benefits received by an individual (if not otherwise excluded from the definition of gross income in the maintenance and child support statutes) must be available for the individual's discretionary use or to reduce daily living expenses.

Tooker , ¶ 18, 444 P.3d at 860.

¶ 20 Following that principle, the division upheld the district court's conclusion that the tuition and book stipend benefits were not income because the parent could not receive the benefits personally or use them to pay expenses. Id. at ¶¶ 19-21, 444 P.3d at 860-61.

¶ 21 Last, the supreme court in In re A.M.D. , 78 P.3d 741, 745 (Colo. 2003), discussed whether all or only a portion of the principal of a monetary inheritance should be included in gross income for child support purposes. The A.M.D. court directed the district court to examine the recipient's use of the inheritance to determine how much should be included as income for child support. Id. at 746. It held that the principal was income only "[i]f the recipient uses the principal as a source of income either to meet existing living expenses or to increase the recipient's standard of living." Id.

¶ 22 We agree with the principle arising from A.M.D. , Tooker , Davis , and Mugge , and conclude that deferred compensation is income only if the parent has the ability to use it to pay his or her expenses, including child support. See A.M.D. , 78 P.3d at 746 ; Tooker , ¶¶ 18, 20-21, 444 P.3d at 860-61 ; Davis , 252 P.3d at 535 ; Mugge , 66 P.3d at 211.

¶ 23 This decision accords with decisions made in other states. See, e.g. , Severn v. Severn , 567 S.W.3d 246, 262-63 (Mo. Ct. App. 2019) (Deferred compensation is not income because there is "no discernible way in which the contributions made to the deferred compensation plan would be available to [the parent] in satisfying any child support obligation."); Jordan v. Brackin , 992 P.2d 1096, 1100 (Wyo. 1999) (income does not include mandatory deferred compensation that is not available until death,...