Usher v. Usher (In re Usher)

• Decision Date: 02 December 2016
• Docket Number: B263721
• Citation: 6 Cal.App.5th 347,210 Cal.Rptr.3d 875
• Parties: IN RE MARRIAGE OF Kinka USHER and Frederique Benhamou Usher Kinka Usher, Respondent, v. Frederique Benhamou Usher, Appellant.
• Court: California Court of Appeals Court of Appeals

6 Cal.App.5th 347

210 Cal.Rptr.3d 875

IN RE MARRIAGE OF Kinka USHER and Frederique Benhamou UsherKinka Usher, Respondent,

v.Frederique Benhamou Usher, Appellant.

B263721

Court of Appeal, Second District, Division 4, California.

Filed December 2, 2016

Law Offices of Marjorie G. Fuller, Marjorie G. Fuller, Fullerton; Freid & Goldsman, Melvin S. Goldsman, Los Angeles, and Jon Summers for Appellant.

Honey Kessler Amado, Beverly Hills, and James A. Karagianides for Respondent.

MANELLA, J.

Pursuant to an agreement entered into at the time of dissolution, respondent Kinka Usher paid his ex-wife, appellant Frederique Benhamou Usher, child support of $17,500 per month, an amount commensurate with their wealth and lifestyle during the marriage, and the lifestyle respondent continued to live. In March 2015, the trial court granted respondent's request to reduce the monthly child support payment to $9,842, finding a material change in circumstances based on a decline in respondent's employment income. Appellant contends that the court abused its discretion in making that determination because respondent's reduced income did not constitute a material change in circumstances in light of his extreme wealth. Appellant further contends the court imputed an unreasonably low rate of return to respondent's substantial assets, valued at over $67 million.

We agree. We conclude that substantial evidence did not support the trial court's finding of a material change in respondent's circumstances for purposes of meeting his child support obligation. Specifically, we conclude that in light of respondent's overall wealth, the reduction in his employment income did not materially impair his ability to pay the agreed upon child support. We further conclude that the trial court imputed an unreasonably low rate of return to respondent's tens of millions of dollars in assets.

FACTUAL AND PROCEDURAL BACKGROUND

Appellant and respondent were married in 2006 and separated in 2008. Their child, Roman, was born in February 2006. Respondent was a successful director and producer during the marriage, earning approximately $4.25 million per year, and owned substantial assets, including cash, investment funds, and real and personal property.

A. Stipulated Judgment

The marriage was formally dissolved in October 2009 by stipulated judgment of dissolution (the Stipulated Judgment). The Stipulated Judgment provided for spousal support of $15,329 per month for two years (October 2009 to September 2011). Appellant waived all further right to spousal support.

The Stipulated Judgment also provided that respondent was to pay child support of $12,500 per month and permit appellant and Roman to live in respondent's Pacific Palisades home until June 2010. At the end of that period, appellant and Roman would vacate the house, and respondent would pay an additional $5,000 in child support.¹ The Stipulated Judgment acknowledged: (1) that respondent was a " ‘high earner’ " within the meaning of Family Code section 4057, subdivision (b)(3) ;² (2) that "the child support arrangement set forth ... was not arrived at pursuant to the California Guidelines provided for in Family Code §§ 4055 -4065"; (3) that the deviation from the child support guidelines was "in the best interest of [Roman]," whose his needs would be "adequately met" by the parties' agreement; and (4) that each party "had the opportunity to analyze (with his/her respective accountants and attorneys) the expenses and needs of their minor child." The parties "waive[d] the right to seek modification of a non-guideline child support order without making a showing of a material change of circumstances...."

In June 2010, appellant and Roman vacated respondent's Pacific Palisades house and rented a new residence in the same area at a cost of $7,500 per month. Pursuant to the Stipulated Judgment, child support increased to $17,500 per month. Spousal support terminated in September 2011.

B. Request to Reduce Child Support Payment

In June 2014, when Roman was eight, respondent filed a request for an order reducing his monthly child support payment to $5,184, plus a percentage of any income he earned above $841,272 annually.³ The sole basis for his request was that he was then "earn[ing] significantly less than when [the] Stipulated Judgment was negotiated in 2009." He stated that his monthly income had decreased from approximately $350,000 when the parties entered into the Stipulated Judgment to $70,106.⁴ The proposed reduced monthly child support figure was obtained by use of the DissoMaster program, inputting $70,106 as respondent's monthly income, deducting for health insurance and property tax on his primary residence, and presuming custodial time of 30 percent.⁵

Appellant filed opposition, contending that the decrease in respondent's income from employment was not a material change of circumstances warranting modification of the existing child support payment, and that respondent had numerous alternative sources of income and assets from which to pay the agreed upon child support.⁶ Her expert, Michael T. Miskei, a certified public accountant, pointed out that according to respondent's income and expense statement, he had assets of over $67 million—approximately $37.5 million in liquid assets, and nearly $30 million in real and personal property.⁷ After deducting approximately $2.1 million from respondent's assets to account for the value of the Santa Barbara home Miskei believed to be respondent's primary residence, Miskei opined that conservatively invested in a blend of treasury notes, triple A bonds, and bond funds, respondent's assets could generate income at a rate of 4.5 percent and provide him a monthly cash flow of $260,826, including his salary. Miskei prepared a DissoMaster calculation based on this income, expenses similar to those deducted by respondent, and an estimated custodial time share of 20 percent.⁸ This generated a monthly child support payment of $17,244, nearly identical to the amount appellant was paying under the Stipulated Judgment.

Prior to the hearing on the request for modification, respondent filed a reply, conceding that some income should be attributed to his assets. In separate declarations, respondent and his expert, Lawrence Goodfriend, a certified public accountant and respondent's business manager, stated that respondent was a cautious investor who did not wish to tie up his assets in long term notes or bonds. Goodfriend opined that the 4.5 percent return estimated by Miskei was "excessive," and that the "assumed rate of return should be 1%," an amount Goodfriend described as "achievable in the current investment world...." Although neither respondent nor Goodfriend disputed that treasury bonds would be "relatively safe[ ]," they contended investing in bonds would require respondent to "tie up" his money for decades. Respondent stated Miskei was mistaken in concluding his primary residence was the $2.1 million Santa Barbara home on two lots, and that he was in fact residing in the $19.2 million Montecito home, while making plans to sell the $2.1 million Santa Barbara property. In addition, respondent took the position that before attributing any income to his retirement account or his real property, the cost of cashing in those assets should be deducted.⁹ Taking deductions for the cost of cashing in assets and the value of the Montecito home left respondent with investable assets of just under $42.7 million. Applying a one percent return to this amount resulted in imputed investment income of $35,583 per month, and increased respondent's total monthly income (employment income plus investment income) to $91,609. Respondent further contended that assets owned by appellant should be expected to generate a similar return and that she should be contributing a share of the imputed income to Roman's support.¹⁰ Utilizing $91,609 for respondent's income, $1,023 for appellant's income, and continuing to assume respondent had custody 30 percent of the time and the same deductible expenses, respondent generated a revised DissoMaster child support amount of $6,926.

C. Hearing

At the January 2015 hearing, Miskei testified that after reviewing updated financial records, he had concluded respondent's income from his employment was higher than originally estimated by the parties, viz., approximately $65,000 per month. He imputed income to appellant of $3,455 per month based on the value of her assets. Miskei continued to believe a 4.5 percent return was reasonable and that no more than $2.1 million should be deducted from respondent's assets to account for his personal residence.¹¹ Inputting the new figures for employment income into the DissoMaster, Miskei calculated monthly guideline child support at $19,099.¹² Miskei denied that his proposed investment strategy was risky or would tie up respondent's investment funds, as the investments could be laddered by buying bonds and notes with different maturity dates.¹³ In addition, Miskei reviewed respondent's investment accounts for three years and found that although the majority of the currently invested funds were in cash and money markets earning less than one percent, approximately $14 million (out of $34.7 million) were in Charles Schwab accounts, returning from 5.5 to 7 percent. For 2013, Miskei prepared a chart which showed that respondent had $35,060,966 in investment funds on which he earned $861,817, an overall rate of return of 2.46 percent.

Goodfriend testified that respondent had employed a conservative investment strategy, which included having "[$]12 of [$]35 million of his capital in stocks and bonds," and that this strategy had been in place for at least five years. Goodfriend explained that "tying up" capital in long term notes and bonds could lead to a loss if the investor needed to liquidate assets prior to the maturity dates of the notes and bonds, but only if interest rates had risen substantially between the time of purchase and...