HOWARD v. HOWARD

(unpublished)

JULY 18, 2000

Record No. 1400-93-4

MARY E. HOWARD

JAMES T. HOWARD

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY

Quinlan H. Hancock, Judge

Present: Judges Willis, Elder and Senior Judge Cole

Argued at Richmond, Virginia

Mary E. Howard, pro se.

No brief or argument for appellee.

MEMORANDUM OPINION^* BY JUDGE LARRY G. ELDER

Mary E. Howard (wife) appeals from a 1993 order of the Circuit
Court of Fairfax County (1) determining the amount of child and
spousal support to be paid to her by her former spouse, James T.
Howard (husband)[1];
(2) refusing her request to make the figures retroactive to the
date of her request for support; and (3) failing to impose
sanctions on husband’s attorney. We hold that the bulk of the
trial court’s challenged rulings did not constitute an abuse of
discretion but that the court committed reversible error in
determining husband’s gross income for purposes of calculating
child and spousal support by failing to include husband’s net
rental income from the dental corporation, interest, dividends,
capital gains, and certain clothing and tax preparation costs;
improperly including in his income wife’s spousal support; and in
apportioning child support expenses between the parties.
Therefore, we reverse the decision of the trial court as to child
and spousal support and remand for further proceedings consistent
with this opinion.

ANALYSIS

SPOUSAL AND CHILD SUPPORT

1. GROSS INCOME CALCULATION

"Decisions concerning both [spousal and child] support
rest within the sound discretion of the trial court
. . . ." Calvert v. Calvert, 18 Va.
App. 781, 784, 447 S.E.2d 875, 876 (1994). "The trial
court’s decision, when based upon credibility determinations made
during an ore tenus hearing, is owed great weight
and will not be disturbed unless plainly wrong or without
evidence to support it." Douglas v. Hammett, 28 Va.
App. 517, 525, 507 S.E.2d 98, 102 (1998). In computing a party’s
gross income for child support, Code ? 20-108.2(C) requires
the inclusion of "all income from all sources." Such
income "shall include, but not be limited to, income from
salaries, wages, commissions, bonuses, . . . pensions,
interest, . . . spousal support, [and] rental
income." Code ? 20-108.2(C). This income
"include[s] nonmonetary as well as cash income." Carmon
v. Dep’t of Soc. Servs., 21 Va. App. 749, 755, 467 S.E.2d
815, 818 (1996). Gross income "shall be subject to deduction
of reasonable business expenses for persons with income from
self-employment, a partnership, or a closely held business."
Code ? 20-108.2(C).

A court determining spousal support also shall consider all
income of the parties. See Code ? 20-107.1.

a. Imputation of Income

A spouse’s voluntary underemployment may serve as a basis for
the trial court to impute income to the underemployed spouse when
calculating child and spousal support. See Code
?? 20-107.1, 20-108.1(B), 20-108.2(A); see also
Stubblebine v. Stubblebine, 22 Va. App. 703, 708, 473
S.E.2d 72, 74 (1996) (en banc); Bennett v. Dep’t
of Soc. Servs. ex. rel. Bennett, 22 Va. App. 684, 691-92, 472
S.E.2d 668, 672 (1996).

Husband testified that his employment with Seylor’s Dental
Laboratory did not detract from his dental practice earnings
because "[he] did not have the patients to replace it"
and had been unable to find other suitable employment. Wife
presented no evidence to refute husband’s testimony, other than
her general implication during cross-examination of husband that
he could earn more money working as a dental hygienist than he
did working at Seylor’s. The trial court did not abuse its
discretion by accepting husband’s testimony and failing to impute
income to husband for purposes of calculating child and spousal
support.

b. Rental Income and Other Benefits

We hold the trial court did not err in excluding income
husband received from renting a jointly owned condominium but did
err in failing to include income he received from renting space
in his home to his dental corporation. Including husband’s
expenses for the condominium mortgage, homeowner’s fees,
maintenance, repairs and the like, husband claimed a net loss for
rental of the condominium. Although Code ? 20-108.2(C)
requires the inclusion of rental income in the gross income
calculation, it also permits the deduction of reasonable business
expenses. Therefore, we hold the trial court did not abuse its
discretion in concluding implicitly that husband had no net
rental income attributable to the condominium for purposes of
child support. Similarly, we hold the trial court also acted
within its discretion in concluding implicitly that husband had
no net rental income from the condominium for purposes of spousal
support. See Code ? 20-107.1.

In contrast to the expenses for the condominium, husband
claimed no reasonable business expenses to be deducted from the
$400 monthly income he received for rental of office space in his
home to his dental practice. Although husband used the $400
monthly rental income to make his $390 monthly mortgage payment,
this payment covered the mortgage for the entire house, and no
evidence established what portion of the payment may have been
attributable to the office portion of the house rather than the
residential portion. Under these facts, the trial court abused
its discretion in failing to include the $400 rent husband
received from the corporation each month in determining husband’s
gross income for purposes of calculating child support. The
court’s failure to include this rental income in its child
support calculations also calls into question whether it
considered the rental income in the context of its spousal
support calculations. Therefore, we reverse and remand to the
trial court for a recalculation of both child and spousal
support.[2]

Wife contends the trial court erroneously excluded from
husband’s gross income sums paid by his corporation for various
benefits he received. We hold the court did not err in excluding
sums paid for the lease and operation of an automobile;
utilities; lawn care; pest control; appliances; furnishings;
entertainment; meals; disability, life and health insurance, and
unreimbursed medical expenses. The evidence, viewed in the light
most favorable to husband, supported a finding that these costs
were legitimate business expenses.

Wife contends the trial court erroneously permitted husband to
deduct from his gross income expenses paid by the corporation for
attorney’s fees incurred in the parties’ divorce proceedings. We
hold the record contains insufficient evidence to establish the
allegation that any such payments were made contemporaneously
with the support proceeding. On brief, wife indicated that
entries in the corporate checkbook showing loan repayments to
Hallmark Bank & Trust totaling $5,451.73 in 1992 were for a
loan used to satisfy legal fees paid by the corporation, but wife
cites nothing to support this assertion, and we are unable to
find any evidence in the record to support it. See Buchanan
v. Buchanan, 14 Va. App. 53, 56, 413 S.E.2d 237, 239 (1992).
Therefore, we presume these payments were for a reasonable
business expense listed on the corporation’s expense sheet for
calendar year or fiscal year 1992 and deemed deductible by the
trial court. Given the absence of evidence to rebut this
inference, we hold the trial court did not abuse its discretion
in permitting the deduction.

Wife also contends that the trial court erred in allowing the
corporation’s payment of certain expenses for clothing, fees for
personal income tax preparation, and dividends and pension plan
contributions without including these items as income to husband.[3] On the issue of clothing,
husband was not entitled to a reduction in gross income for the
purchase of clothing not specifically required for his work as a
dentist. In addition to deductions for special shoes, pants, lab
coats and the like used in his dental practice, husband also
claimed deductions for a tie, sports jacket and suit all
purchased from an ordinary department store, and for alterations
for the suit. These ordinary clothing items did not constitute
reasonable business expenses, and the corporation’s payment for
these items and the costs for dry cleaning these and other
articles of ordinary clothing, which totaled $459.55, should have
been included as income to husband.

The evidence also established that husband paid his accountant
with funds from the corporation and that $300 of her fees were
for the preparation of his personal rather than corporate tax
returns. Therefore, $300 paid by the corporation for preparation
of husband’s personal income tax returns should have been
included in his gross income.

Finally, wife contends husband’s receipt of a $100 dividend
from the corporation and the corporation’s contributions to the
pension plan should be included in gross income. Because Code
? 20-108.2(C) specifically includes dividends in gross
income, we hold that failure to include this sum in husband’s
gross income was error. As to the pension plan contributions, we
previously have held that voluntary contributions to one’s
pension plan are includable in gross income. See Frazer
v. Frazer, 23 Va. App. 358, 377-79, 477 S.E.2d 290, 299-300
(1996) (voluntary contributions of $30,000 per year). In
husband’s case, however, the contributions were made directly by
the corporation, were listed as mandatory by the corporate
accountant, and totaled no more than $911 for calendar year 1992.
Under these circumstances, we hold the court did not abuse its
discretion in failing to include these sums in husband’s gross
income.

Wife claims husband "laundered money" through their
eldest son. However, husband testified that the corporation’s
original payment to the son was for cleaning of the office
carpets and that the son’s check to husband individually for the
same amount was for payment of back rent on the condominium the
son rented from father. The trial court was entitled to accept
this explanation and to conclude that the cleaning of the office
carpets was a reasonable business expense.

In keeping with the above, we hold the trial court abused its
discretion in excluding from husband’s gross income his rental
income from the dental corporation and certain other benefits he
received from the corporation, and we remand for a recalculation
of child and spousal support.

c. Excess Capital in Corporation

Husband testified that his accountant recommended retaining
operating capital of about $23,000 in the corporate account. The
accountant testified that the overhead was about forty percent.
Using gross corporate receipts of approximately $184,000 for
calendar year 1992, the corporation’s net receipts after forty
percent overhead, excluding husband’s salary, would be $110,400.
Subtracting husband’s "elective" salary of $91,105 left
corporate operating capital of approximately $19,000, an amount
lower than recommended by husband’s accountant. Finally, the
accountant’s testimony established that the legitimate expenses
paid by the corporation during calendar year 1992, adjusted for
the $759.55 of expenses disallowed above, totaled $85,592.15,
making the actual overhead figure more than forty-six percent and
leaving corporate operating capital of only approximately $7,000.

This evidence, viewed in the light most favorable to husband,
established the trial court did not abuse its discretion in
failing to adjust husband’s gross income upward based on earnings
retained by the corporation.

d. Math Error

The trial court did not abuse its discretion in failing to
adjust husband’s income based on the purported mathematical
error. First, the accountant testified that she did not use the
erroneous figures reported by husband and relied instead on the
actual deposits in the corporate bank account. Therefore, viewing
the evidence in the light most favorable to husband, the error
had no impact on the accountant’s calculations.

Second, assuming the error did impact the accountant’s figures
such that the patient income for calendar year 1992 should have
been $159,580, as represented by wife, this difference has no
impact on the funds available to husband. Under either analysis
in Section I.A.1(c) concerning excess capital in the corporation,
this increase in receipts would still have left corporate
operating capital at a level lower than the $23,000 amount
recommended by husband’s accountant. Under either formulation,
the error, if any, was harmless because the increase in corporate
income was not large enough to require husband to increase his
elective wages under the facts of this case.

2. WIFE’S NEED VERSUS HUSBAND’S ABILITY TO
PAY

Because we remand the issue of spousal support for
redetermination based on the trial court’s failure to consider
various items of additional income to husband, we do not consider
wife’s proportionality argument in this appeal.

DATE FOR MODIFICATION OF SPOUSAL AND CHILD
SUPPORT

Code ?? 20-108 and 20-112 provide that awards of child
and spousal support "may be modified with respect to any
period during which there is a pending petition for
modification." The legislature’s use of the word
"may" indicates that the decision whether to make a
modification effective as of the date of notice of the petition
to the opposing party rests within the discretion of the trial
court. Compare Code ? 20-108.1(B) (as amended in
1996) (providing that "[i]n any proceeding on the issue of
determining child support . . . , [l]iability for
support shall be determined retroactively for the period
measured from the date that the proceeding was commenced by the
filing of an action with the court" provided certain
conditions are met (emphasis added)). The court’s failure to make
the modification effective as of the date of wife’s petition did
not constitute an abuse of discretion.

FAILURE TO SANCTION HUSBAND’S ATTORNEY

Any duty the trial court may have had to report attorney
violations of the Code of Professional Responsibility is not
within our jurisdiction. The appropriate professional authority
to which the trial court had a duty to report, if any, was the
Virginia State Bar. See Virginia Code of Prof. Resp.,
Disc. Rule 1-103.

The only authority the trial court had to sanction husband’s
attorney was to hold him in contempt of court. Code
? 18.2-456 provides that trial courts "may"
punish officers of the court for "[m]isbehavior in the
presence of the court, or so near thereto as to obstruct or
interrupt the administration of justice." Code
? 18.2-456 (emphasis added). A court merely has the
discretion to punish for contempt but is not required to do so. See
id.; Brown v. Commonwealth, 26 Va. App. 758, 762,
497 S.E.2d 147, 149 (1998). The court was not required, simply by
recognizing counsel’s misrepresentations in his motion for
recusal, to find counsel in contempt. Whether to sanction counsel
for the alleged misrepresentations rested within the sound
discretion of the court.

II.

CONCLUSION

We hold the trial court did not abuse its discretion in
failing to make wife’s requests for modification of support
retroactive to the date of the filing of her petition or in not
imposing sanctions on husband’s attorney. On the issue of
husband’s gross income, the court did not abuse its discretion in
concluding husband was not voluntarily underemployed or underpaid
by his corporation or in concluding that the possible
mathematical error acknowledged by husband’s accountant had no
impact on its calculation of gross income. However, we hold the
trial court abused its discretion in failing to include in
husband’s gross income his net rental income from the dental
corporation, interest, dividends, capital gains, and certain
clothing and tax preparation costs; improperly including in his
income wife’s spousal support; and in apportioning child support
expenses between the parties. Therefore, we reverse and remand to
the trial court without reaching wife’s assignment of error
alleging that the court improperly balanced her need for spousal
support against husband’s ability to pay.

Affirmed in part, reversed in part and remanded.

* Pursuant to Code ? 17.1-413, recodifying Code
? 17-116.010, this opinion is not designated for
publication.

FOOTNOTES:

[1] Wife’s appeal was stayed during
the pendency of husband’s bankruptcy petition.

[2]
Although wife has not assigned error to the trial court’s failure
to include husband’s 1992 interest and capital gains in his gross
income, we note that both categories of receipts are income under
Code ? 20-108.2(C) if held to have been received
contemporaneously. See Goldhamer v. Cohen, 31 Va.
App. 728, 737 n.2, 525 S.E.2d 599, 603 n.2 (2000); id. at
730, 525 S.E.2d at 604 (Elder, J., concurring). We also note that
same code section contains specific requirements regarding the
consideration of spousal support payments in apportioning child
support payments between parents. It provides that "spousal
support included in gross income shall be limited to spousal
support paid pursuant to a pre-existing order . . . and
. . . shall be deducted from the gross income of the
payor when paid pursuant to a pre-existing order or written
agreement between the parties to the present proceeding."
That code section also states that "’gross income’ shall
mean all income from all sources, and shall include
. . . spousal support." Although such errors,
standing alone, negate each other in the calculation of combined
gross income, they produce an incorrect allocation of child
support between the parties.

[3]
Although the court’s failure to include most of these figures in
husband’s income appears to be error, they amount to only a small
sum of money as compared to the calculation of husband’s overall
income and, standing alone, would not necessarily support the
conclusion that the trial court committed reversible error in
fashioning the child and spousal support awards. Cf. Gamble
v. Gamble, 14 Va. App. 558, 575, 421 S.E.2d 635, 645 (1992).
However, because we reverse and remand for the trial court’s
failure to include husband’s more substantial rental income, we
also review these issues.