Filed 8/3/16 M.G. v. M.S. CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.




              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                         (Butte)
                                                            ----



M.G.,                                                                                        C077241

                   Plaintiff and Respondent,                                        (Super. Ct. No. P9397)

         v.

M.S.,

                   Defendant and Appellant.




         Appellant father challenges a $1,399 child support order for his son despite his
ownership of income-producing properties in Santa Cruz, his failure to provide the
mandatory rental schedule, his redaction of many of his expenses on his bank statements,
his sizeable unexplained monthly deposits, his history of lucrative marijuana sales, his
designation of a paltry appellate record, and the receipt of regular monthly pension and
disability payments. As meager as the record is, there is sufficient evidence to support
the trial court’s award and no evidence the court abused its discretion in making the child
support order or in awarding the child’s mother $5,000 in attorney fees. We affirm.




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                                         FACTS
       It is nearly impossible to construct a cohesive narrative from the skimpy appellate
record before us. There is no petition. Prior orders are not included. Appellant does not
include his own trial brief, if indeed he ever filed one. He improperly attempts to
introduce new evidence on appeal by attaching a rental schedule as an exhibit to his
opening brief. The schedule itself is not supported by many of his citations to the record.
He does not cite to the reporter’s transcript. He admits to receipt of pension and
disability payments for a combined $3,561 in monthly income, but he declares he derives
zero income from his rental properties. The best we can do on this record is to piece
together enough evidence to support the trial court’s rulings. Thus, we begin with the
pertinent findings.
       The trial court attributed $8,361 in monthly income to appellant based on the
following allocation: disability income of $2,033; pension of $1,528; fair market value
of the rent from the roommate of $500; rental income from Santa Cruz properties of
$2,000; and unexplained income of $2,300. Appellant contends the disability income
cannot be counted as income for determining his child support obligation as a matter of
law. He also contends the trial court abused its discretion by imputing $2,000 as monthly
rental income and $2,300 as unexplained income.
Income-Producing Properties in Santa Cruz
       Appellant owns two rental properties in Santa Cruz (referred to as the King and
Western properties.) There is some evidence that the King property’s market value is
$675,996 and the Western property’s value is $806,570. The Western property, however,
was also appraised at $876,000. Appellant testified he has substantial equity in both
properties: over $200,000 in Western and $425,000 in King. On his most recent income
and expense declaration, he represented that he had no rental income on these properties.
       Reasonable rent for the properties was contested. For 2013, appellant received
$3,100 a month for his King property and $3,800 for his Western property. He testified

                                             2
the rent for King had declined to $2,100. On appeal, appellant complains that his
expenses were not properly deducted from the rental income he received. But he had
commingled his personal and business expenses in one account, he redacted many of the
expenses set forth in his bank statements, and he failed to introduce a rental schedule as
evidence of the income produced and the expenses incurred on each of the properties.1
On his income and expense declaration, he listed $1,488 in personal monthly loan
payments but conceded at the hearing that he had not actually made any payments on
these loans in many years. Respondent’s attorney characterizes them as “ ‘phantom
payments.’ ”
       Thus the trial court relied on evidence of appellant’s bank deposits. In 2012
appellant made total deposits of $147,606.19, or $12,300.52 in monthly gross deposits.
His deposits in 2013 were $126,833.05, or $10,518 per month. In April and May of 2013
alone he made deposits of $17,311. Yet he claimed his monthly income was a mere
$3,561. Respondent asked the court to impute an additional $3,220 in unexplained
monthly income. His monthly mortgage payments were $3,637.07 for the Western
property (including property taxes) and $1,697.94 for the King property, or a combined
monthly mortgage obligation of $5,335.01. As mentioned, the bank statements were
heavily redacted and therefore it was impossible to determine whether additional
expenses were attributable to the Western and King properties. Appellant testified to
random expenses he incurred, including the cost of a new water heater and new piping




1 Judicial Council form No. FL-150, income and expense declaration, directs a party
claiming rental property income to “[a]ttach a schedule showing gross receipts less cash
expenses for each piece of property.” Appellant did not attach such a schedule to his
income and expense declaration.

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under the house, but he never offered a complete rental schedule listing all the income
and expenses for the properties.2
       On his 2012 tax return, the most recent return he had filed before the March 2014
hearing, he took a total of $31,306 in depreciation expenses on the properties. He shows
a loss of $81,324 and carried forward a $74,739 tax loss. He did not pay any taxes and
would not have to pay them in the foreseeable future.
       Appellant’s tenants have grown marijuana on the properties with his permission.
Respondent testified that appellant grew marijuana on the King property and made
between $5,000 and $10,000 at each harvest.
Chico House
       Appellant denied that he owned the house he lived in or that he had asked his
sister to purchase it or to lend him the money to finance it. His sister’s name is on the
title to the house, but she has never lived in it. Respondent contends she purchased the
house for $250,000. Appellant lives in the house and pays the full amount of the
mortgage, purportedly as rent. He rents a room in the house for $200 a month to his
friend, who resides in the room with his seven- and nine-year-old children. He testified




2 The clerk’s transcript contains an unsigned declaration by appellant “in support of
rental property income.” There is no file stamp on the document. We cannot consider a
declaration that is not signed, not filed, and not introduced into evidence at the hearing.
There is a second declaration on the same subject that is signed and was filed on
November 28, 2012. Respondent complains that the declaration was not admitted as
evidence at the hearing. It is entered at page 1 of the clerk’s transcript but without any
indication if it was submitted for this hearing or an earlier hearing. The record references
earlier orders, but they are not included in the record on appeal. Since this declaration
was filed some 16 months before the hearing on the most recent child support order, we
cannot say it pertains to the matter before us or was considered by the trial court. We
certainly cannot consider new evidence on appeal. We will discuss further appellant’s
burden of proof within the body of the opinion.

                                             4
that $200 is a reasonable rental. The trial court disagreed, attributing $500 a month to
appellant as the reasonable value of the rental.
       In the past, appellant grew marijuana at the Chico house on Jean Lane. He
testified he gave his marijuana to a collective, and in return, the collective produced
“organic pain pill[s]” for him. He took the pills to alleviate the pain in his neck and
lower back.
       Respondent contradicted appellant’s testimony. She insisted that appellant asked
his sister to put her name on the title to the house, but he paid the $30,000 down payment,
makes the monthly payments, and resides in the house. In respondent’s view, the house
belongs to appellant.
Pension and Disability Payments
       There is no factual dispute about the amount of these payments. Appellant
receives $1,528 in monthly pension benefits and $2,033 in monthly disability payments.
Unexplained Income
       The trial court imputed $2,300 in unexplained income to appellant. As described
above, the amount was predicated on the large monthly deposits made into appellant’s
commingled bank account and his failure to introduce a rental schedule identifying his
expenses.
       Appellant and respondent were not married. Their son spends 25 percent of his
time with appellant and 75 percent with respondent. The child support order is
predicated on this time-share arrangement.




                                              5
                                       DISCUSSION
                                               I
                           De Novo Review of Disability Income
        Relying on Family Code section 17450, subdivision (c)(2) rather than Family
Code section 4058, subdivision (a)(1),3 appellant contends the trial court erroneously
included his monthly Social Security disability payments as income available for the
payment of child support. We agree the question posed is a question of law requiring de
novo review (Asfaw v. Woldberhan (2007) 147 Cal.App.4th 1407, 1415 (Asfaw)), but we
disagree with his interpretation of the pertinent statutory scheme.
        The trial court relied on section 4058, which provides: “(a) The annual gross
income of each parent means income from whatever source derived, except as specified
in subdivision (c) and includes, but is not limited to, the following:
        “(1) Income such as commissions, salaries, royalties, wages, bonuses, rents,
dividends, pension, interest, trust income, annuities, workers’ compensation benefits,
unemployment insurance benefits, disability insurance benefits, social security benefits,
and spousal support actually received from a person not a party to the proceeding to
establish a child support order under this article.” Subdivision (c) of section 4058 creates
an exception providing that “[a]nnual gross income does not include any income derived
from . . . any public assistance program, eligibility for which is based on a determination
of need.”
        On its face, section 4058 clearly applies. Appellant receives Social Security
benefits for his disability. The only exception to inclusion of Social Security benefits in
the calculation of income for child support purposes is when the benefit is need based.
(Elsenheimer v. Elsenheimer (2004) 124 Cal.App.4th 1532; In re Marriage of Daugherty




3   All further statutory references are to the Family Code.

                                              6
(2014) 232 Cal.App.4th 463.) Appellant testified that his application for need-based
Social Security was denied because his income was too high to qualify. Thus, the Social
Security disability payments appellant receives are not need based and the trial court
properly included those monthly payments as income.
       Appellant argues that section 17450, subdivision (c)(2) conflicts with section 4058
and should prevail. Section 17450 pertains to the collection of delinquent child support
payments. It states, in pertinent part: “(b)(1) When a delinquency is submitted to the
department pursuant to subdivision (c) of Section 17500, the amount of the child support
delinquency shall be collected by the department in any manner authorized under state or
federal law. [¶] . . . [¶]
       “[(c)](2) If an obligor is disabled, meets the federal Supplemental Security
Income resource test, and is receiving Supplemental Security Income/State
Supplementary Payments (SSI/SSP), or, but for excess income . . . would be eligible to
receive as SSI/SSP . . . then the child support delinquency shall not be referred to the
department for collection, and, if referred, shall be withdrawn, rescinded, or otherwise
recalled from the department by the local child support agency. The department shall not
take any collection action, or if the local child support agency has already taken
collection action, shall cease collection actions in the case of a disabled obligor when the
delinquency is withdrawn, rescinded, or otherwise recalled by the local child support
agency in accordance with the process established as described in paragraph (1).” In re
Marriage of Hopkins (2009) 173 Cal.App.4th 281, cited by appellant, involved such a
delinquency and the attempted collection of the father’s child support arrearages.
       This case does not involve the collection of delinquent child support and therefore
section 17450 is irrelevant. Rather, the trial court properly applied the plain language of
section 4058 by including appellant’s Social Security benefits as part of his income
available for the payment of child support. There is no conflict between the two sections
and no legal error.

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                                              II
               Substantial Evidence of Rental and Unexplained Income
       Our review of the trial court’s child support order is limited to a determination
whether the trial court abused its discretion. (Asfaw, supra, 147 Cal.App.4th at p. 1414.)
Factual findings, including the determination of a parent’s income, will be upheld on
appeal if there is substantial evidence to support them. We construe all evidence in favor
of the prevailing party and will not reweigh the evidence or reexamine the trial court’s
assessment of credibility. (In re Marriage of Calcaterra & Badakhsh (2005)
132 Cal.App.4th 28, 34 (Calcaterra & Badakhsh).)
       “The first obligation of a parent is to support his or her children.” (In re Marriage
of Chakko (2004) 115 Cal.App.4th 104, 106 (Chakko).) Appellant’s persistent attempt to
minimize child support by understating his income and underutilizing his capital and
thereby skirt his responsibility to his son is not, unfortunately, precedent setting. (See,
e.g., id. at pp. 108-109; Calcaterra & Badakhsh, supra, 132 Cal.App.4th 28; In re
Marriage of Dacumos (1999) 76 Cal.App.4th 150 (Dacumos).) Nor is his failure to abide
by fundamental rules of full disclosure and appellate review. The court’s conclusion in
Chakko is equally applicable here: “Father fails to appreciate the rules on appeal
concerning substantial evidence and abuse of discretion. He fails to understand that the
trial court did not credit his testimony. Those who interfere with the truth-seeking
function of the trial court strike at the very heart of the justice system. The courts will
not tolerate such interference.” (Chakko, supra, 115 Cal.App.4th at p. 110.)
       Respondent asserts a litany of appellant’s shortcomings in these proceedings. He
did not produce the requisite rental schedule whereby he should have identified both the
income he received and the expenses he incurred operating his Santa Cruz rentals. His
testimony was incredible. He could not explain his tax return, why his bank statements
had been redacted, or why his business and personal checking accounts had been
commingled. According to respondent, he lied about the ownership of the Chico house

                                              8
and his involvement in the growing and selling of marijuana. He offered an anemic
excuse for his thousand-dollar-a-month reduction of rent on the King property. On
appeal, his transgressions continue. He fails to cite to the reporter’s transcript, attempts
to introduce new evidence, and ignores the deferential scope of appellate review. In sum,
respondent asserts, appellant should fare no better on appeal than his counterparts in
Chakko, Calcaterra & Badakhsh, and Dacumos.
       When the father refinanced his house in Chakko, his loan application stated that
his monthly income was $40,000. (Chakko, supra, 115 Cal.App.4th at p. 107.) On
appeal, he asserted that the loan application did not constitute substantial evidence to
uphold the child support award because he did not fill out the loan application. (Id. at
pp. 108-109.) The mortgage broker testified that the application was based on the very
same documents the father refused to produce in discovery. (Id. at p. 109.) The trial
court drew the legitimate inference that the father’s structuring of income and expenses
was an attempt to minimize his support obligations. (Ibid.)
       Although the father in Calcaterra & Badakhsh, unlike the father in Chakko but
like appellant here, provided the mother his tax returns, his testimony was also
discredited. (Calcaterra & Badakhsh, supra, 132 Cal.App.4th at p. 35.) Simply put, the
trial court did not believe him. (Id. at p. 36.) There were huge discrepancies between his
tax return and various loan applications, his income and expense declaration, and his
testimony. The court wrote: “His income and expense declaration just doesn’t ‘add up.’
He owns a Unocal 76 gas station, two residences, and 28 apartments. His labors and
these properties allegedly produce a net income of $1,714 per month. This declaration
simply does not have the ‘ring of truth.’ ” (Ibid.)
       More significantly, the father in Calcaterra & Badakhsh, like appellant, claimed it
was unfair to use the gross rental income without deducting expenses. (Calcaterra &
Badakhsh, supra, 132 Cal.App.4th at p. 36.) The court wrote bluntly: “He is wrong.
Any unfairness is occasioned by father’s perjury. . . . Thus, the trial court could credit

                                              9
father’s indication of gross income and disregard his indication of expenses necessary to
service the properties.” (Ibid.) The trial court used its discretion to impute income to the
father based on his earning capacity. The Court of Appeal lamented, “Cases like this one
are far too common.” (Id. at p. 38.) This case is but one more example.
       Perhaps the most poignant instance is Dacumos, supra, 76 Cal.App.4th 150. In
Dacumos, the father also owned two rental properties. He claimed the expenses were
higher than the rental income he received. Although the rentals were underperforming,
the trial court imputed rental income based on the fair market rental value of the
properties and the father’s net equity in the properties. (Id. at p. 153.) On appeal we
agreed. “Just as a parent cannot shirk his parental obligations by reducing his earning
capacity through unemployment or underemployment, he cannot shirk the obligation to
support his child by underutilizing income-producing assets.” (Id. at p. 155.)
       Incredibly, appellant testified he had “zero” in the way of rental income, a
statement belied by his own 2012 tax return. While it is true that his return showed a tax
loss, that loss was based on fictional paper losses—$31,306 as a depreciation expense
and $74,739 as a tax loss carry-forward. Depreciation is “ ‘a mere book figure which
does not either reduce the actual dollar income of the [parent] or involve an actual cash
expenditure when taken. On the contrary, it represents additional cash available to the
[parent] by permitting substantial tax deductions and, ultimately tax savings.’
[Citation.]” (Asfaw, supra, 147 Cal.App.4th at p. 1423.) Thus, “depreciation of rental
property is not deductible in calculating child support . . . .” (Id. at p. 1425.)
       Respondent helps us with the arithmetic. The $31,306 represents a paper loss of
$2,609 per month. Subtract the paper loss and appellant had positive cash receipts of
$6,306, or $525 per month. He clearly did not, as he testified, have no income from his
rental properties. His deceptive testimony and the conduct outlined above justified the
court in rejecting his calculations and imputing income to him based on the equity he



                                              10
owned, the income-producing potential of the properties, and, most importantly, the
substantial deposits he made over a protracted period of time.
       There is evidence in the record to support a finding that appellant’s Santa Cruz
properties have a market value approaching, if not exceeding, $1.5 million. By his own
admission, appellant has in excess of $600,000 in equity. In addition, the trial court did
not believe his testimony that he did not have an interest in the home in Chico, a home
with a market value of at least $250,000.
       In addition to his real estate assets, appellant makes substantial monthly deposits.
In 2012 appellant made total deposits of $147,606.19, or $12,300.52 in monthly gross
deposits. His deposits in 2013 were $126,833.05, or $10,518 per month. In April and
May of 2013 alone he made deposits of $17,311. He complains the trial court did not
take all of his expenses into account. As in Chakko and Calcaterra & Badakhsh, that is a
problem of his own making. By redacting his bank statements and failing to submit a
rental schedule, he gave the court no choice but to rely on the financial information it had
and to reasonably impute income to him. We note that by imputing $2,000 in monthly
income, the court impliedly found that the Santa Cruz properties generated a 1.6 percent
rate of return. This reasonable rate does not constitute an abuse of discretion. (In re
Marriage of Schlafly (2007) 149 Cal.App.4th 747, 755-756.)
       Nor does the imputation of $2,300 in unexplained income. Respondent’s
testimony that appellant had a lucrative marijuana business in the past and his own
admission to growing marijuana in Chico constitute sufficient evidence upon which the
court drew adverse factual inferences that appellant continued to generate unaccounted-
for income. Again, appellant had the opportunity to openly disclose all of his expenses,
an opportunity he not only failed to take but went out of his way to disguise by redacting
many of the expenses on his commingled bank account. His monthly deposits for over
two years were in excess of $10,000, peaking at $17,311 in April and May of 2013. In



                                             11
the absence of evidence documenting his expenses, we can find no abuse of discretion in
the court’s finding of $2,300 in unexplained income a month.4
                                       Attorney Fees
       Appellant challenges the $5,000 attorney fee award. His own fees were in excess
of $26,000, although it is unclear in the record whether he paid those fees or not. On his
income and expense declaration, appellant stated he had paid his lawyer $0. “Pursuant to
Family Code sections 2030 and 2032, the trial court is empowered to award fees and
costs between the parties based on their relative circumstances in order to ensure parity of
legal representation in the action. It is entitled to take into consideration the need for the
award to enable each party to have sufficient financial resources to present his or her case
adequately.” (In re Marriage of Falcone & Fyke (2012) 203 Cal.App.4th 964, 974-975,
fn. omitted.) “If necessary, the trial court may order one party to pay the other party’s
‘reasonably necessary’ attorney fees ‘based on the income and needs assessments’ of the
parties.” (In re Marriage of Hofer (2012) 208 Cal.App.4th 454, 458 (Hofer).) We
review the award for an abuse of discretion.
       In Hofer, despite the lack of evidence of a party’s ability to pay, the court affirmed
a $200,000 fee award because the party refused to comply with discovery requests.
(Hofer, supra, 208 Cal.App.4th at p. 458.) Appellant, too, failed to provide unredacted
bank statements. Moreover, a court may compel a paying parent to invade his capital if
necessary. (In re Marriage of Berger (2009) 170 Cal.App.4th 1070, 1083-1084.) As
discussed at length above, appellant has substantial assets and the amount of the attorney




4 In a second ruling after the hearing, the trial court further found that all of appellant’s
income was nontaxable for purposes of calculating child support. Appellant’s tax return
provides substantial evidence to support this factual finding. For tax purposes, he
suffered substantial losses that inured to his benefit and resulted in a zero tax liability.
The court did not abuse its discretion in concluding that the amount of money he saved
resulted in more income available to pay support.

                                              12
fee award is comparatively small. Given the size of his real property holdings and his
conduct in failing to fully disclose his income and expenses, the trial court did not abuse
its discretion in making such a modest award.
       Respondent asks for an additional $5,000 in sanctions. She provides little by way
of legal authority and no analysis. We cannot say the appeal was totally without merit,
and in the absence of a cogent argument to the contrary, we must deny the request.
                                     DISPOSITION
       The judgment is affirmed. Respondent is awarded costs on appeal.



                                                            RAYE              , P. J.



We concur:



        BLEASE              , J.



         MAURO              , J.




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