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HomeMy WebLinkAbout00-0083 supportLINDA M. SHARRETTS, Plaintiff VS. THOMAS P. SHARRETTS, Defendant · IN THE COURT OF COMMON PLEAS OF · CUMBERLAND COUNTY, PENNSYLVANIA 2000 SUPPORT 0083 DOMESTIC RELATIONS SECTION IN RE' SUPPORT APPEAL BEFORE HESS, J.. ORDER AND NOW, this 27 day of May, 2001, it is ordered and directed that all prior orders in this case shall be modified to provide that effective February 3, 2000, until June 9, 2000, the defendant shall pay on account of child and spousal support the sum of $2,360.84 per month. From and after June 10, 2000, the defendant shall pay on account of spousal support the sum of $2,092.00. BY THE COURT, Robert Saidis, Esquire For the Plaintiff John Howett, Esquire For the Defendant Hess, J. DRO :rim LINDA M. SHARRETTS, Plaintiff VS. THOMAS P. SHARRETTS, Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA 2000 SUPPORT 0083 DOMESTIC RELATIONS SECTION IN RE' SUPPORT APPEAL BEFORE HESS, J. OPINION AND ORDER Before the court is the complaint of Linda M. Sharretts for spousal support and child support for the youngest child of the parties, Melinda. We will not belabor the procedural history of the case but will note that, as a result of conferences before a domestic relations officer, the entire net amount of the husband's paycheck from one of his employer's is subject to a wage attachment to satisfy the order. On this de novo appeal, the sole question is the net income of the defendant. The parties have agreed to use the year 1999 as an appropriate yardstick. Support cases frequently involve an allegation on the part of the plaintiff that the defendant is understating his income. This case is, in that respect, typical. What is unusual about the instant matter is the magnitude of the plaintiff' s perturbation. The husband's conduct and testimony are variously described in the plaintiff' s brief as "shameless," "beyond belief," "exasperating," "ludicrous," "downright criminal," "absurd," and "bold-faced lies." It is important, therefore, for us to note at the outset that we have a different view of the defendant's testimony. Instead, we reach the same factual conclusions as outlined in the brief of the defendant which we now incorporate herein. 2000 SUPPORT 0083 Specifically, husband has a non-controlling ownership interest in three family operated Sub-chapter S corporations' Charles D. Snyder & Sons, Inc. ("Charles D. Snyder"), in which Husband owns 50% of the equity of the company and 50% of its voting stock; Sharretts Plating Company, Inc. ("Sharretts Plating"), in which Husband owns 45.9725% of the equity of the company but owns 0% of its voting stock; and Tito Corporation ("Tito"), in which Husband owns 50% of the equity of the company and 50% of its voting stock. N.T. 12/20/00 at 5;see also Husband's Exhibits 3-7. Husband is president of Charles D. Snyder, and it is the only company where he receives a salary ($49,800.00 gross per year of $3,150.00 net per month).~ Charles D. Snyder and Sharretts Plating, a Harrisburg based and a York based plating operation respectively, were started by Husband's father, Paul Sharretts. Through a series of gifts, Paul Sharretts conveyed ownership interests in both corporations to Husband and Husband's brother, Tim Sharretts. N.T. 12/20/00 at 14. In the mid 1990s, both plating operations began to experience considerable downturns in profitability, due to both internal and external factors. N.T. 12/20/00 at 16. Foremost, both companies encountered debilitating environmental problems, which resulted in fines and legal fees totaling several hundreds of thousands of dollars and the loss of confidence of several customers. Id. Inasmuch as both companies are heavily dependent upon toxic chemicals in their business, these environmental scandals have had crippling effect on the businesses. Additionally, given the ever expanding new alternatives to silver and chemical plating, both companies lost several long-standing customers. As a result of these tribulations, both ! Husband formerly received a salary from Sharretts Plating, but in 1996 both Husband's and his brother's salary were discontinued at the direction of the father, Paul Sharretts, until such time as the company regained its solvency. . 2000 SUPPORT 0083 companies teetered on the verge of insolvency, and each has borrowed roughly $500,000.00 as operating capital. N.T. 12/20/00 at 18. As for Tito, Husband and Tim formed the corporation as a brokerage firm to purchase the silver used by Charles D. Snyder in its silver plating operations. Charles D. Snyder places its silver purchase orders with Tito who, in turn, purchases the silver from regional distributors. Tito generates a profit by charging a one dollar premium on each ounce of silver ordered by Charles D. Snyder. Consequently, the vitality of Tito is exclusively dependent upon the vitality of Charles D. Snyder, a rapidly declining company in an outdated area of business. In his filings with the court, the defendant suggests that his net monthly income is $6,035.00. This'income figure for 1999 is reached by adding together income from Charles D. Snyder, Sharretts Plating and Tito for a total of $65,885.00. In addition, the defendant has added back $6,535.00 in capital gain tax for a total 1999 net income of $72,420.00. The proposed income figures of the defendant, however, ignore certain financial perquisites of his employment, a situation which we must remedy in the resolution of this case. The legal principles applicable to this case were aptly summarized in Fennell v. Fennell, 753 A.2d 866 (Pa. Super.2000)' It is well settled that "[i]n determining the financial responsibilities of the parties to a dissolving marriage, the court looks to the actual disposable income of the parties." Labar v. Labar, 557 Pa. 54, 59-60, 731 A.2d 1252, 1255 (1999) (quoting Cunningham v. Cunningham, 548 A.2d 611, 612- 613 (Pa. Super. 1996)). Moreover, the Pennsylvania Supreme Court has adopted the reasoning often employed by this Court that such "income must reflect actual available financial resources and not the oft-time fictional financial 2000 SUPPORT 0083 picture" created by the application of federal tax laws. Id. (citations omitted). We have held repeatedly that deductions or losses reflected on corporate books or individual tax returns are irrelevant to the calculation of available income unless they reflect an actual reduction in available cash. For example, in Heisey v. Heisey, 633 A.2d 211, 212 (Pa. Super. 1993), we considered the calculation of the income of a sole owner of an incorporated insurance business. We held that the trial court had erred in deducting from income "a 'loss' shown on the corporate federal income tax return that has no relevance in determining actual cash available for support." Id. Accord McAuliffe v. McAuliffe, 613 A.2d 20, 22 (Pa. Super. 1992) ("Depreciation and depletion expenses that are allowed under federal income tax law will not automatically be deducted from gross income for the purpose of determining support responsibilities."); Flory v. Flory, 527 A.2d 155, 157 (Pa. Super. 1987) (trial court erred by calculating father's income based on income reported on tax return alone; "[f]ederal income tax law permits deductions that may not reduce a parent's disposable income"). We have held as well that all benefits flowing from corporate ownership must be considered in determining income available to calculate a support obligation. In Heisey, we stated that even if not received by the support obligor as cash, "personal perquisites, such as entertainment and personal automobile expenses, paid by a party's business must be included in income for purpose of calculating support." Heisey, 633 A.2d at 212. Accord Callabrese, 682 A.2d at 396 ("It is clear that automobile expenses paid by a company for the payor spouse are properly included in the determination of the payor's available income."). Our jurisprudence is clear, therefore, that the owner of a closely-held corporation cannot avoid a support obligation by sheltering income that should 2000 SUPPORT 0083 be available for support by manipulating salary, perquisites, corporate expenditures, and/or corporate distribution amounts. By the same token, however, we cannot attribute as income funds not actually available to or received by the party. Fennell, 753 A.2d at 868. In this case, we are satisfied that the retained earnings of the Subchapter S corporations should not be considered as income for purposes of calculating the husband's support obligation. The defendant has established that the amounts retained by both Charles D. Snyder and Sharretts Plating were necessary for the continued operation and smooth running of the businesses. Specifically, there was an increased need to keep operating capital in the businesses. In addition, environmental enforcement problems have resulted in considerable debt. Moreover, the defendant does not have a controlling interest in the corporations involved and thus cannot make unilateral decisions with respect to the retention of earnings. While we agree with the defendant in the treatment of his earnings, we do not share his approach to the perquisites of his employment. By the same token, we do not agree with the plaintiff that Mr. Sharretts's perquisites for 1999 approached $44,000.00. Many of the expenses paid by the corporation inured to the benefit of family members other than the defendant. In Mascaro v. Mascaro, 2000 W.L. 1823300 (Pa. Super. 2000), the trial court had held that because company perks in the case benefited both the plaintiff and the defendant, they would not be included "in either party's net monthly income." In that regard, the Superior Court found that the trial court had not abused its discretion. Id. at 4. Mr. Sharretts, however, benefited directly from an expense payment in the amount of $1,750.00 per month. This he received in lieu of mileage. By the same token, there is no question that the defendant travels extensively and that 2000 SUPPORT 0083 payments are made for legitimately incurred expenses. Determining a monthly amount of money which Mr. Sharretts receives as a benefit of employment over and above salary is anything but an exact science. To say, however, that he has no such income simply because it is not capable of exact ascertainment will do a disservice to the plaintiff. We are satisfied that expense statements to Mr. Sharretts gives him an additional income of at least $1,000.00 per month though we cannot say with certitude that it is any more than that. For the purpose of the orders that are at issue, we will deem the defendant's net income to be $7,040.00 per month. The support guidelines promulgated by the Pennsylvania Supreme Court govern this support case since the parties' total net monthly income is less than $15,000.00.2 See Pa.R.C.P. 1910.16-1 et seq. Accordingly, we determine the amount of support as follows: Child and Spousal Support (for period February 3, 2000 until June 9, 2000) Husband Wife Net monthly income: $7,040.00 $1,810.00 Combined total net monthly income' $8,85O.O0 Basic monthly child support obligation: $1,416.00 Percentage share of total net monthly income: 80% 20% Husband's child support obligation: $1,132.80 Husband's spousal support obligation: $1,229.16 ($7,040.00 - $1,810.00 - $1,132.80 x 30%) 2 The wife's income of $1,810.00 per month is not in dispute. 2000 SUPPORT 0083 Total obligation' $2,361.96 (effective 2/3/00 until 6/9/00) Spousal Support (for the period from and after June 10, 2000) Husband Wife Net monthly income' $7,040.00 $1,810.00 Income difference: $5,230.00 Total spousal support obligation: x 40% $2,092.00 (effective 6/10/00) We will enter an order, modifying previous orders in this case, reflecting the above calculations. ORDER AND NOW, this day of May, 2001, it is ordered and directed that all prior orders in this case shall be modified to provide that effective February 3, 2000, until June 9, 2000, the defendam shall pay on account of child and spousal support the sum of $2,360.84 per month. From and after June 10, 2000, the defendant shall pay on account of spousal support the sum of $2,092.00. B Y THE COURT, Ke s, J. 2000 SUPPORT 0083 Robert Saidis, Esquire For the Plaintiff John Howett, Esquire For the Defendant DRO :rim