Filed 10/16/15 Marriage of Jeha CA1/1
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION ONE


In re the Marriage of JACK G. and
LORI M. JEHA.

JACK G. JEHA,                                                        A143386

         Appellant,                                                  (Contra Costa County
v.                                                                   Super. Ct. No. D12-00385)
LORI M. JEHA,
         Respondent.


         Upon their separation, Jack G. Jeha (Husband) and Lori M. Jeha (Wife) entered
into a marital settlement agreement, through which they agreed Husband’s family support
payments would be based on the amount of his taxable income. Although Husband
draws a $156,000 salary from his subchapter S corporation, he asserts he has no income
available for support because the company is unprofitable and its losses are greater than
his salary. The trial court rejected this claim because Husband’s father has covered the
business’s losses. Husband now argues the trial court erred in allowing the advances
from his father to offset his business losses. He also challenges the trial court’s award of
attorney fees to Wife. We affirm.
                                               I. BACKGROUND
A. The Marital Settlement Agreement
         Husband and Wife married in 1995 and separated in 2011. They executed a
marital settlement agreement (MSA) in August 2012, which was later approved by the
court and incorporated into the judgment. The MSA awards Husband and Wife joint
legal custody of their four sons.
       The MSA contains various provisions concerning family support payments from
Husband to Wife, payments providing for both spousal and child support. According to
the MSA, Wife has a serious medical condition that limits her ability to work.1 Husband
agreed to make baseline family support payments to Wife in the amount of $5,411 per
month until December 31, 2012, and $5,832 per month thereafter. These base payments
were calculated through DissoMaster,2 based on the assumption Husband would earn
$39,000 per quarter, i.e., $156,000 per year. Additionally, every quarter, Husband was to
make supplemental family support payments consisting of 26.5 percent of the amount by
which Husband’s gross income exceeded $39,000 for that quarter. For the purposes of
calculating family support payments, the MSA defines income as “ ‘taxable income of
any kind from any business, including but not limited to salary, bonuses, and taxable
income reported on K-1 forms.’ ”
       The MSA further provides family support payments may be subject to an “annual
retroactive true up,” which is to be conducted no later than August 15 of every year for
the preceding calendar year. The true up allows Husband to recover overpayments in
family support if his actual income in a particular year is lower than expected. Likewise,
Wife may recover for underpayments if Husband’s actual income is higher than expected.
The agreement requires a true up to be performed for the year 2012, unless otherwise
agreed by the parties. Thereafter, the true up is performed only if requested by one or
both of the parties. In calculating the true up, the parties are to engage a mutually
acceptable accountant to calculate Husband’s annual income. Underpayments or
overpayments in one year are reconciled by adjusting the base amount of support paid in
the following year. For example, if Husband overpays family support by $2,400 in
calendar year 2013, then he may reduce support by $200 per month in 2014.
       1
           Wife testified she has been diagnosed with multiple sclerosis.
       2
        DissoMaster is a privately developed computer program used to calculate
guideline child support as required by the Family Code.


                                               2
B. Husband’s Finances
       At issue in this case is the true up for the year 2013, and the last four months of
2012. Specifically, the parties disagreed whether advances to and from Husband, losses
incurred by his business, and the salary Husband pays himself from that business should
have any impact on Husband’s “income,” as that term is defined by the MSA.
       Husband has owned and operated Plant Hazardous Services, Inc. (PHS), a
construction company, since 2005. PHS is a subchapter S corporation, which has the
feature of paying no taxes and instead passing through profits and losses pro rata to its
shareholders. Husband is the sole shareholder of PHS and pays himself an annual salary
of $156,000 through the company.
       In recent years, PHS has not been profitable. It had a negative income in 2012 and
2013. In order to keep the business running, pay his salary, and support his family,
Husband has taken out sizeable loans. Husband borrowed $733,000 from his father, Ron
Jeha (Father)—$433,000 between sometime in 2005 and November 5, 2010, and another
$300,000 between September 2012 and March 2014. Father executed a promissory note
for $433,000 in November 2010, and later executed a $733,000 deed of trust and
assignment of rents, secured by Husband’s separate property. On May 28, 2014, a new
promissory note was signed, reflecting another $44,000 in loans from Father to Husband.
Husband borrowed another $200,000 from Mechanics Bank in December 2012. This
loan may also be covered by Father, as he is in the process of negotiating it with the bank.
In addition to these loans, at various times, Father has directly paid Husband’s expenses,
including his mortgage, utilities, and insurance premiums. Since March 2014, Father has
made family support payments directly to Wife.
       The parties dispute whether the money from Father was a loan or a gift. The
promissory note executed by Father indicates there is no deadline for repayment, other
than upon demand. Father testified he hoped to get his money back before he died.
When asked if he expected to be repaid, Father responded: “If I don’t, I don’t. . . . he’s
my son.” Father never demanded repayment of his loans to Husband, even when PHS
was profitable. He also stated he was unsure whether he would foreclose on Husband’s


                                              3
property in the event of default, explaining he only executed the promissory note and
deed of trust because he wanted to be “first in line” in the event Husband went bankrupt.
       Husband used a portion of the money he borrowed from Mechanics Bank and
Father to lend or advance $289,000 to Chris Knapp. Knapp is a demolition and
excavation contractor, who is sometimes employed by PHS as a subcontractor. Knapp is
also a longtime friend of Husband. Husband claimed Knapp needed the money to
complete jobs for PHS, and that PHS could not have hired another subcontractor to
perform the work because Husband and Knapp had a “trusting relationship.” Not all of
the loans to Knapp were related to PHS’s business. At one point, Husband loaned Knapp
$27,000 to buy a collectible car and “ ‘flip’ it.”
C. Procedural History
       In September 2013, the parties stipulated to the appointment of Tim Mulgrew to
perform the true-up calculations. Mulgrew determined the financial records prepared by
PHS’s outside bookkeeper were substantially inadequate, and he therefore recreated the
accounting records for the time periods in question. In his final report, dated March 12,
2014, Mulgrew found the net income available for support for the period of September 1,
2012 through December 31, 2012 was negative $53,460. For the period of January 1,
2013 through December 31, 2013, Mulgrew found the net income available was negative
$44,457. Based on Mulgrew’s findings, Husband asserts he had no family support
obligations for this period and is entitled to a true up.
       In February 2014, Wife filed a request for an order modifying spousal support and
a request for attorney fees, arguing Mulgrew failed to calculate Husband’s true income
pursuant to the terms of the MSA. The trial court set the matter for a trial and ordered
Husband to pay the base amount of family support from March 2014 going forward.
       Following a two-day trial, the court issued a statement of decision. The court held
that because PHS was a subchapter S corporation, its actual losses could potentially be
deducted from Husband’s income available for support. However, in consideration of
Father’s advances to Husband and PHS, the court declined to recognize those losses. The
court reasoned: “[A]s long as [Husband] continues to reap the benefit of [Father’s]


                                               4
largesse in continuing his business, in paying his bills and in supporting his lifestyle, with
no subjective or objective belief that the funds will be repaid those funds cannot be
excluded from consideration when it comes to [Husband]’s duty to support his children
and his spouse. [¶] [The reason] PHS continues to operate and [Husband] continues to
take his $13,000 per month salary, plus additional distributions, is that [Father] provides
whatever support is necessary, whenever it is necessary, to do so.” The court also held
the $27,000 loan to Knapp for a custom car should be added back into Husband’s
income, but the rest of Husband’s loans to Knapp should not. The court concluded
Husband’s income available for support was the amount of his salary and distributions—
$78,528 for the last four months of 2012, and $182,033 for calendar year 2013. The
court also held the disparity in the parties’ income was sufficient to justify the award of
attorney fees under Family Code3 section 2030.
                                      II. DISCUSSION
A. Standard of Review
       The order at issue concerns the award of family support to Wife, which combines
both child and spousal support. (§ 3586.) Child support orders are reviewed for an abuse
of discretion (In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 282), as are orders
modifying spousal support (In re Marriage of Samson (2011) 197 Cal.App.4th 23, 29).
Under this standard, “Our review is limited to determining whether the court’s factual
determinations are supported by substantial evidence and whether the court acted
reasonably in exercising its discretion. [Citation.] We do not substitute our judgment for
that of the trial court, but confine ourselves to determining whether any judge could have
reasonably made the challenged order.” (In re Marriage of de Guigne (2002)
97 Cal.App.4th 1353, 1360.) However, “we must also recognize that determination of a
child support obligation is a highly regulated area of the law, and the only discretion a
trial court possesses is the discretion provided by statute or rule.” (In re Marriage of
Butler & Gill (1997) 53 Cal.App.4th 462, 465.) Thus, “the trial court’s discretion is not

       3
           All statutory references are to the Family Code.


                                               5
so broad that it ‘may ignore or contravene the purposes of the law regarding . . . child
support.’ ” (In re Marriage of Cheriton, at p. 283.) To the extent this appeal turns on the
interpretation of the MSA, and that interpretation does not require the consideration of
conflicting extrinsic evidence, we conduct an independent review. (Appleton v. Waessil
(1994) 27 Cal.App.4th 551, 556.)
B. Husband’s Income Available for Support
       Husband contends the trial court erred in finding the advances from Father
constituted income available for family support. We conclude we need only resolve the
narrower question of whether the trial court abused its discretion in declining to consider
Husband’s business losses as a reduction of his income available for family support
purposes. There was no abuse of discretion, as the losses were fictional and thus did not
actually reduce Husband’s income available for support.
       According to Husband’s 2013 income tax returns, he paid himself a salary of
$156,000 through PHS. Nevertheless, his taxable income for that year was $0, primarily
because he deducted $83,630 in losses from PHS, his subchapter S corporation, on his
personal income tax return.4 But the $83,630 loss is fictional. Through advances, Father
covered that loss, plus the amount needed to allow Husband to take salary and
distributions. As the trial court found, when it comes to Husband’s business, Father
“provides whatever support is necessary, whenever it is necessary, to do so.” Moreover,
allowing Husband to evade his family support obligations based on losses assumed by
Father makes little sense in this context, since the losses did not actually reduce
Husband’s income available for support. (Cf. Asfaw v. Woldberhan (2007)
147 Cal.App.4th 1407, 1423–1426 [for the purposes of support payments, income must

       4
         Husband also deducted an additional $75,984 for alimony, i.e., family support
payments. We see no reason why this deduction should also apply to Husband’s income
available for support. As an initial matter, the DissoMaster calculations attached to the
MSA show the parties did not contemplate deducting family support payments from
Husband’s income available for support. Moreover, allowing such a deduction would be
circular, as it would both decrease Husband’s support obligations and increase his income
available for support.


                                              6
reflect available resources, not fictional financial picture resulting from depreciation
deductions].) Because the support payments include child support, the policies
underlying the child support statutes are also relevant to our review. Those policies are at
odds with allowing parents to pay nothing in child support where they have sufficient
income to meet their obligations. (Id. at p. 1426; see In re Marriage of Chakko (2004)
115 Cal.App.4th 104, 109 [trial court properly rejected husband’s attempt to structure his
income and expenses to minimize child support obligations].)
       Husband argues his business losses had a real impact on his financial situation,
since the advances from Father used to cover those losses were loans, not gifts. The trial
court found otherwise. Its conclusion was well founded. “Courts are appropriately
skeptical of transfers by the parents of one of the parties in a divorce case. ‘There is an
incentive for both sides of the transfer, the parents making it and the litigant receiving it,
to conform their testimony to the disadvantage of the other litigant.’ ” (In re Marriage of
Williamson (2014) 226 Cal.App.4th 1303, 1313 (Williamson).) Here, Father testified he
hoped to get his money back, but indicated he had no intention of demanding repayment.
Though Father executed promissory notes in connection with some of the purported loans
at issue, those notes do not have any repayment terms and they are not due or payable.
Moreover, Father conceded he drew up the $733,000 deed of trust as a precaution in the
event Husband filed for bankruptcy, and indicated he was unsure he would ever foreclose
on the security, Husband’s residence, since he did not want to evict his son and
grandchildren from their home. Significantly, the deed of trust was recorded in
March 2014, just over a month after Wife filed a request to modify family support and
the advances to Husband came under scrutiny. Taking into account the $44,000
promissory note signed in 2014, Husband has borrowed at least $777,000 from Father
since 2005. He has yet to repay a penny.5


       5
         Husband also contends we should treat the advances from Father as loans
because that is what Wife understood them to be. The argument lacks merit. It is
entirely unclear why Wife’s understanding of the advances should matter, especially
since she was not a party to the transactions. Husband cites two cases in which parental

                                               7
       Husband suggests that, under the terms of the MSA, the trial court was required to
account for all tax deductions, including those related to his business losses, in
calculating Husband’s income available for support. Though California courts have gone
to great lengths to distinguish taxable income from “actual income,” as that term is
defined by sections 4053 and 4058 (Alter, supra, 171 Cal.App.4th 718), Husband argues
the parties contractually agreed not to follow this line of authority by including a
provision in the MSA defining his income as “ ‘taxable income of any kind from any
business, including but not limited to salary, bonuses, and taxable income reported on K-
1 forms.’ ” However, nothing in the MSA indicates any and all deductions claimed or
losses incurred by Husband should reduce his income available for support. Indeed, such
an approach would lead to absurd results, as it would allow Husband to use his family
support payments, which are tax deductible, to reduce his family support obligations.
Even Mulgrew’s report, which Husband claims should control the outcome of this appeal,
does not mention many of the deductions taken on Husband’s individual tax returns. In
short, the MSA’s use of the term “taxable income” did not preclude the trial court from
considering the actual impact of Husband’s purported losses.
       The distinction between “actual income,” as defined by the Family Code, and
“taxable income,” as defined by the MSA, might have been significant for the purposes
of this appeal had the trial court considered nontaxable income, such as from gifts, as

advances were found to be gifts, rather than loans, Williamson, supra, 226 Cal.App.4th
1303 and In re Marriage of Alter (2009) 171 Cal.App.4th 718 (Alter). But neither case
suggests a supported spouse’s understanding of a parental advance should have any
bearing on its treatment as a loan or a gift. Rather, the cases focus on the status of
repayment and the parents’ expectation of repayment. (Williamson, at pp. 1313–1314;
Alter, at p. 731.)
       Husband also argues the MSA establishes the loans from Father were bona fide.
We need not consider the contention as it was raised for the first time in the reply brief.
In any event, the argument is unpersuasive. The MSA merely states Husband shall
indemnify Wife for all debts and obligations owed to Husband’s father and brothers,
“including all notes payable.” Moreover, that Husband convinced Wife to accept an
unfavorable division of community property because he assumed the obligation to pay
what he represented to be a bona fide loan has no bearing on the legitimacy of that loan.


                                              8
income available for support. But it did not. The only income considered by the trial
court for the purposes of calculating Husband’s family support obligations was his salary
and personal distributions, both of which are taxable. During the relevant period,
Husband also received $300,000 in gifts from Father. The trial court did not consider this
money to be income available for support. While the trial court did use the advances
from Father to offset Husband’s business losses, as discussed above, neither California
law nor the MSA prohibit such an approach.6
       Husband asserts the trial court erred in rejecting Mulgrew’s findings, since both
parties agreed that Mulgrew, as the jointly appointed accounting expert, would determine
Husband’s income. We disagree. Mulgrew concluded Husband’s net income available
for support in 2013 was negative $44,457. He reached this figure by taking the sum of
Husband’s taxable salary, $156,000, and the “Free Cash Flow from PHS,” negative
$200,457.7 The trial court accepted the accuracy “if not the significance” of Mulgrew’s
figures, noting the substantial difference between the company’s performance and the
amount Husband took from PHS in salary and distributions. The trial court ultimately
declined to consider PHS’s negative cash flow for the purposes of calculating Husband’s
income available for support because Father covered PHS’s losses. The court’s approach
was the correct one. The issue of whether business losses should affect income available
for support when those losses are assumed by a third party is a question of law, not
accounting. Accordingly, the trial court was not required to defer to Mulgrew’s
conclusion on this point. Indeed, doing so would have been error, as Mulgrew’s analysis

       6
          For similar reasons, we reject Husband’s contention that the trial court erred in
considering the advances from Father because they were irregular and based on need. As
Husband points out, gifts may only be considered as income available for support where
they “ ‘bear a reasonable relationship to the traditional meaning of income as a recurrent
monetary benefit.’ ” (Williamson, supra, 226 Cal.App.4th at p. 1314.) But in this case,
the trial court did not treat the gifts in question as income.
       7
         Mulgrew also accounted for personal distributions taken by Husband by
deducting them from the free cash flow. Mulgrew performed a similar calculation the
last quarter of 2012, the other period at issue, and determined Husband’s income
available for support for that period was negative $53,460.


                                             9
was contrary to the legal principle that courts should not recognize expenses that do not
actually reduce a parent’s income available for support. (See Asfaw v. Woldberhan,
supra, 147 Cal.App.4th at pp. 1425–1426.)
       Husband argues the trial court’s family support order is “self-perpetuating”
because it treats the monies “lent” by Father as income available for support, increasing
Husband’s support obligations, and requiring him to “borrow” even more to meet future
family support obligations. Husband asserts he only took money from Father to meet his
family support obligations, and that he expected to receive relief from those obligations
through the annual retroactive true up. We are not persuaded. As discussed above, the
trial court only considered Husband’s salary and distributions as income available for
support. Moreover, it strains credulity to suggest Father provided the advances at issue
solely to offset Husband’s family support obligations. Those obligations were only
$5,411 to $5,843 per month, and during the relevant period, they amounted to only about
one-third of the $300,000 Husband received from Father. Husband conceded at trial this
money was used to pay other obligations as well, and Father testified the money was also
used for the business. Moreover, Mulgrew’s report indicates PHS’s operating losses
were covered by advances from Husband’s family.8
       According to Husband, the trial court’s order compels him to either persuade
Father to support him in perpetuity or fall behind in his family support obligations. There
is another option. If Husband’s taxable income is legitimately reduced, for example, by
Father ceasing to support Husband’s business and Husband no longer pays himself a
salary, Husband may seek a modification of the judgment.9 But so long as Husband



       8
          According to Mulgrew, the losses were also covered by the Mechanics Bank
credit line. However, the trial court found this loan, like Husband’s other debts, might be
covered by Father. The court also found Father has “provided whatever is necessary to
enable [Husband] to draw his salary plus distributions, and those figures, not the loan
from Mechanic’s Bank, are the basis for calculating family support.”
       9
       It is also conceivable that, at one point, Husband’s business could earn enough to
pay Husband’s expenses without Father’s support.


                                            10
continues to draw a salary and PHS’s losses have no actual effect on Husband’s income,
Husband must satisfy his family support obligations to his ex-wife and children.
C. Attorney Fees
       “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.” (In re Marriage of Falcone & Fyke
(2012) 203 Cal.App.4th 964, 974, fn. omitted.) Here, the trial court found that, including
her family support payments, Wife’s monthly income was $6,000, and Husband’s was
$16,285. The court concluded this disparity was sufficient to justify a fee award to Wife.
Husband argues this was error because his taxable income for the relevant period was
zero due to his business losses. But as discussed above, we find the trial court properly
declined to consider those losses because they were covered by Father.
                                   III. DISPOSITION
       The trial court’s order awarding family support and attorney fees is affirmed.
Wife shall recover her costs on appeal.




                                                 _________________________
                                                 Margulies, J.


We concur:


_________________________
Humes, P.J.


_________________________
Dondero, J.




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