IKOLA, J.
Ex-husband Dennis F. Graham appeals the court's downward adjustment of his spousal support obligation to ex-wife Donna J. Graham from $3,000 per month to $2,500 per month. Dennis
The parties married in 1976 and separated in 2001. In 2002, the parties executed a settlement agreement to resolve all issues arising out of their dissolution of marriage proceedings (including the division of community property and mutual obligations, and the acknowledgement of separate property). The court entered judgment of dissolution of marriage in 2003.
The settlement agreement provided for Dennis to pay spousal support to Donna. From May 1, 2002, through April 30, 2007: "Husband shall pay to Wife the sum of three thousand dollars ($3,000.00) per month . . . . Said support shall be non-modifiable as to either amount or duration. . . ." Beginning May 1, 2007: "Husband shall pay to Wife the sum of three thousand dollars ($3,000.00) per month. Both the amount and duration of support shall be modifiable." Dennis had previously earned $225,000 per year, but was earning $135,000 per year in 2002. Donna was "a housewife and last employed in 1977 outside the family business and has been employed from time to time in the family business." The $3,000 figure was selected by the parties "based on Husband's current income of $11,250 per month, and Wife's current income of zero."
In January 2008, Dennis applied for an order modifying the $3,000 per month spousal support order. He stated in support of the application: "The judgment in this matter provided for [Donna] to receive non-modifiable support for a period of five years. [¶] It was the intention that [Donna] would become supporting during those five years and the support could then be reduced or terminated accordingly. [Donna] has made no effort to obtain employment and the court therefore must reduce her support." Donna responded with a request to increase her spousal support.
It appears Dennis's income was not an issue at the time he applied for a modification of spousal support. A November 29, 2007 letter from Dennis's attorney to Donna's attorney stated in relevant part: "I have received your request for my client's financial information. However, it is my opinion that my client's financial information is not relevant in these proceedings. My client is willing to stipulate that he has the ability to pay spousal support. The issue is your client's lack of obtaining employment."
Dennis's income and expense declaration, filed July 31, 2008, stated Dennis was paid $3,365 (gross) per week (which would total $174,980 per year). Dennis earned a monthly average (over the previous 12 months) of $16,667 (which amounts to $200,004 annually). On March 9, 2009, Dennis filed an updated income and expense declaration indicating he got paid $2,403 per week ($124,956 per year). Dennis's 2008 United States individual income tax return (Form 1040) included the following information: $169,231 in wages, salaries, tips, etc.; $10,737 in taxable interest; and $267,193 in losses (real estate, royalties, partnerships, S corporations, trusts, etc.). As a result of his investment losses, Dennis paid no federal income tax for 2008.
Dennis testified he was primarily employed by Pacific Air, an air conditioning service firm of which he is the sole owner. In 2008, Dennis transferred $550,000 in cash from his personal bank account to a corporation, Rutherford Funding. Rutherford Funding was wholly owned by Rutherford International, a corporation apparently not owned by Dennis at the time of the $550,000 transfer. Rutherford Funding transferred the money it received from Dennis into Pacific Air and other operating entities. Dennis owned several corporate entities ("more than five, less than ten").
When Dennis submitted his written closing argument to the court on June 3, 2009, he contended neither he nor his companies had any income in 2008 or 2009 due to economic conditions. The brief explained: "[Dennis] did pay himself a salary from his corporations, but he funded that salary by his loan to the corporations. . . . [Dennis] loaned $450,000 of his savings to the corporations." Dennis's brief argued his spousal support obligation should be reduced or eliminated because of his lack of income and because Donna had failed to meet her obligation to obtain employment.
In September 2009, the court ordered Dennis to pay $2,500 per month in spousal support to Donna, retroactive to January 1, 2009 "and continuing until further court order, remarriage of [Donna], or death of either party, whichever occurs first." The court also ordered Dennis to pay for $20,000 of Donna's attorney fees, at a rate of $500 per month until paid in full.
The court made lengthy factual findings in support of its orders. As to Dennis's income, the court explained: "[Dennis] claims his income is zero (0) in 2008 according t[o] his tax return, which reflected an adjusted gross income of negative $123,225.00. The sum was arrived at by including losses from rental Real Estate Investments and S corporation losses, which offset his salary of $169,123.00 and interest. [Dennis's] own forensic CPA opines that his 2008 income is $12,091.00 per month, after adjustments. [Dennis's] accountant's controllable cash flow statements are in evidence as [Dennis's] Exhibit `E.' Exhibit `E' includes 2007, 2008, and a two-month pay stub period in 2009 showing 2009 income to be $8,000 per month. The corporations owned by [Dennis] each reported losses in 2008 in the total sum of negative $374,733.00. [Dennis's accountant] did not use those losses in arriving at income for [Dennis]."
"The court finds the 2008 income of [Dennis] was $12,091.00. [¶]. . . The income of [Dennis] continues to decline in the year 2009. Through February, the income had declined to $8,012.00 gross per month. [Dennis's] Exhibit `K' reflects a trend downward. The customers of [Dennis] have been adversely affected by the recession of 2008-2009."
The court found the parties' earning capacities could not provide for the marital standard of living. But Dennis "can pay the support this Court orders. His ability is vastly diminished as a result of the business climate of recession . . . ." "Neither parties['] needs will be met by this court order at this time."
"In a judgment of dissolution of marriage . . . of the parties, the court may order a party to pay for the support of the other party an amount, for a period of time, that the court determines is just and reasonable, based on the standard of living established during the marriage, taking into consideration the circumstances as provided in Chapter 2 (commencing with Section 4320)." (§ 4330, subd. (a).) Included among the lengthy list of circumstances a court "shall consider" in "ordering spousal support" (§ 4320) is the following factor: "The ability of the supporting party to pay spousal support, taking into account the supporting party's earning capacity, earned and unearned income, assets, and standard of living." (§ 4320, subd. (c).)
A family court has discretion to determine an amount of spousal support under section 4330 or to modify a spousal support award based on a finding of changed circumstances. (In re Marriage of Dietz (2009) 176 Cal.App.4th 387, 398; In re Marriage of De Guigne (2002) 97 Cal.App.4th 1353, 1366.) It is an abuse of discretion for a court to fail to consider each of the section 4320 factors. (In re Marriage of Geraci (2006) 144 Cal.App.4th 1278, 1296-1299.) But, assuming a court has considered and weighed the section 4320 factors, only a spousal support award exceeding the bounds of reason may be reversed for an abuse of discretion. (In re Marriage of De Guigne, at p. 1366.)
There is no assertion here that the court ignored its obligation to consider and weigh all of the section 4320 factors. The issue presented is whether the court abused its discretion by basing an award on a factual finding of "income" (§ 4320, subd. (c)) that actually amounted (according to Dennis) to economically meaningless transfers of money back and forth between Dennis's business and personal accounts, rather than true "income" generated by business activities. In essence, Dennis argues there is no substantial evidence for the court's "income" findings, and the court thereby abused its discretion by basing the support award on a flawed factual finding. (In re Marriage of Schmir (2005) 134 Cal.App.4th 43, 47 ["court must . . . base its findings on substantial evidence"].)
"The spousal support statute does not define income." (In re Marriage of Blazer (2009) 176 Cal.App.4th 1438, 1445.) It is unclear to what extent courts hearing spousal support disputes should look to section 4058,
Having reviewed the entire record, we conclude substantial evidence supports the court's finding that Dennis's "income" was the amount of money paid to him on a regular basis for performing his job, notwithstanding the setbacks suffered by Dennis's personal and corporate balance sheets during 2008 and 2009. Dennis's salary was money available to Dennis for purposes of paying his own recurring monthly expenses (including spousal support owed to Donna). The court kept its task simple by treating this number as Dennis's "income" for purposes of its spousal support inquiry. Dennis complains the court confused his expert's identification of Dennis's "cash flow" with Dennis's "income." But for a self-employed individual like Dennis, "cash flow" sometimes may be synonymous with "income" in a spousal support case. (See In re Marriage of Rosen (2002) 105 Cal.App.4th 808, 824-825.)
It is true the court's determination of Dennis's income is not the only possible way to view the record. Because he is an entrepreneur (rather than an employee with a steady paycheck), determining Dennis's personal "income" is complicated. Is there a dividing line between Dennis's "income" and the recent profitability (or lack thereof) of his business entities? Perhaps not for some purposes, but we reject the notion that an individual with no gross income for tax purposes or business profits for accounting purposes necessarily has no "income" for spousal support purposes.
We also reject Dennis's contention that his salary must be treated as repayment of a loan rather than income. Dennis, by way of Rutherford Funding, indirectly put significant amounts of cash assets into his various operating companies. According to Dennis, because his businesses all lost money in 2008-2009, this transaction should be treated by courts as a "loan," repaid in monthly installments as "salary" to Dennis. But this was not a matter of Dennis simply transferring money in and directly out of his operating companies, or providing an unequivocal loan to his operating companies with clear documentation defining interest terms and payment periods (in which case the interest would amount to income, but the return of principal would not). Dennis transferred $550,000 to Rutherford Funding, which in turn transferred such funds to several entities. The operating companies that received funds from Rutherford Funding then paid Dennis's salary. Having created a multiplicity of corporate entities and utilized such corporate entities to engage in opaque financing arrangements, Dennis cannot now liken such transactions to a simple, two-party loan.
The transaction is more easily understood as a capital infusion (not a loan) into Dennis's operating companies by Rutherford Funding, with the capital ultimately provided by Dennis. Were the transaction a loan, presumably the loan repayment would have been made to Rutherford Funding, not Dennis. Instead, it appears Dennis chose to invest his assets in his companies to keep them afloat during the economic crisis. A byproduct of this investment was that he was able to continue to draw a salary from his operating companies. Dennis evidently believed his companies would return to profitability (why else would he sink hundreds of thousands of dollars into his companies). The court was not required to focus exclusively on Dennis's business losses in characterizing his intra-company transactions and determining his "income."
Finally, we question whether Dennis could show prejudice from the court deeming his salary to be "income," even if we were to find that classification to be in error. The court was required to consider, among numerous other factors, Dennis's "ability . . . to pay spousal support, taking into account [his] earning capacity, earned and unearned income, assets, and standard of living." (§ 4320, subd. (c).) The court demonstrated it understood Dennis's overall economic position based on the evidence presented. The court awarded spousal support in the amount of $2,500 per month based on its balancing of all the pertinent factors, including Dennis's ability to pay. (See In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 305-306 [ignoring party's ability to pay spousal support is abuse of discretion].) Dennis does not make the case in his brief that, had the court deemed Dennis to have no "income," such finding would have changed the court's ultimate conclusion that Dennis had the ability to pay $2,500 per month in spousal support and that such award was appropriate given all of the circumstances.
The postjudgment order modifying spousal support is affirmed. Donna shall recover costs incurred on appeal.
WE CONCUR:
ARONSON, ACTING P. J.
FYBEL, J.
