HomeMy WebLinkAbout184 S 2007LIA A. FITZGERALD, : IN THE COURT OF COMMON PLEAS OF
Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA
V. : DOMESTIC RELATIONS SECTION
MATTHEW C.
FITZGERALD, : PACSES NO. 470109020
Defendant : No. 184 SUPPORT 2007
PLAINTIFF'S EXCEPTIONS TO
SUPPORT MASTER'S REPORT
BEFORE OLER, J.
OPINION and ORDER OF COURT
OLER, J., February 11, 2008.
In this difficult child and spousal support case involving two children
residing primarily with Plaintiff (their mother), the Cumberland County Support
Master recommended a monthly support obligation on the part of Defendant of
$10,273.00, including Defendant's direct payment of mortgage amounts, real
estate taxes and homeowners' insurance premiums related to the marital residence
occupied by Plaintiff, and Defendant's direct payment of a monthly vehicle
obligation. For disposition at this time are exceptions filed by Plaintiff to the
support master's report and recommendation.' Plaintiffs exceptions, in pertinent
part, read as follows:
2. The Support master's Report and Recommendation ... is against
the weight of evidence.
3. The Support Master's Report and Recommendation ... is contrary
to law.
4. The Master erred in allowing Defendant to directly pay the
mortgages, real estate taxes, homeowners' insurance and car payment to
the appropriate recipients with direct offset against the sums due and
owing to Plaintiff.
5. The Master erred in determining Defendant's income. These errors
include, but are not limited to: (1) Incorrectly amortizing the 2007 earned
commission by inclusion of December, 2006 earnings, which amortization
' Plaintiff's Exceptions to the Support Master's Report, filed July 25, 2007; N.T. 3, Support
Master's Hearing, June 6, 2007 (hereinafter N.T. _).
resulted in a reduced calculation of expected commissions for 2007; (2)
improper deduction to Defendant's income of undocumented business
expenses and failure to consider employer's reimbursement of said
expenses; and (3) failure to include received deferred compensation paid in
2007.
6. The tax assignment and calculation in the Order is illogical and in
error. Defendant is the only wage earner and the net income for support
purposes should increase with assignment of a different tax status
allocation.
7. The Master erred in failure to apply the Meltzer formula.Z
Following the submission of briefs by the parties, Plaintiff's exceptions
were argued on October 19, 2007. For the reasons stated in this opinion,
Plaintiff's exceptions will be denied.
STATEMENT OF FACTS
Plaintiff is Lia A. Fitzgerald, an adult individual residing in
Mechanicsburg, Cumberland County, Pennsylvania.3 Defendant is Matthew C.
Fitzgerald, an adult individual also residing in Mechanicsburg, Cumberland
County, Pennsylvania.4 The parties are the parents of two daughters ,5 eleven and
eight years old .6
A complaint for spousal and child support was filed by Plaintiff against
Defendant on March 12, 2007.' The complaint was the subject of a hearing held
by the Cumberland County Support Master on June 6, 2007. The resultant
master's report included the recommendations recited above, which were
incorporated into an interim order of court dated July 10, 2007.8
The evidence at the master's hearing consisted of the testimony of the
parties and several exhibits. Plaintiff Lia A. Fitzgerald testified that the parties
2 Plaintiff's Exceptions to the Support Master's Report, filed July 25, 2007.
'N.T. 4.
4 N.T. 61.
'N.T. 61.
6 N.T. 61.
Plaintiff's Complaint for Support, filed March 12, 2007.
s Order of Court, July 10, 2007; see Pennsylvania Rule of Civil Procedure 1910.12(e).
2
married on October 21, 1995,9 that two daughters were born of the marriage,
Sierra and Talia,10 that she had primary physical custody of the children and
exclusive possession of the marital residence located at 4 Foxfield Court,
Mechanicsburg, Cumberland County, Pennsylvania," and that a divorce action
was pending.l2 Plaintiff further testified that she was 32 years old13 and in good
health, 14 had earned 40 college credits but did not have a college degree, 15 had
been a homemaker during the marriage in accordance with Defendant's wishes
that she not work, 16 had no skills, 17 was not employed,1 s and had no income. 19
The house which she occupied and Lincoln Navigator which she drove were in
Defendant's name, according to her testimony. 20
According to an Income and Expense Statement submitted by Plaintiff, the
combined monthly expenses of her and the children were $21,451.18.21 Of these,
monthly house -related expenses were said to be $9,357.94, and additional
expenses were said to be $12,093.24.22 Her share of these expenses was said to be
$11,097.55, and the children's $10,353.63.23
9 N.T. 5.
10 N.T. 4
" N.T. 4-5.
12 N.T. 6.
13 N.T. 4.
14 N.T. 7.
15 N.T. 5.
16 N.T. 6.
17 N.T. 6.
18 N.T. 6.
19 N.T. 7-8.
20 N.T. 41.
21 Plaintiff's Ex. 1, Support Master's Hearing, June 6, 2007 (hereinafter Plaintiff's/Defendant's
Ex. _).
22 Plaintiff's Ex. 1.
23 Plaintiff's Ex. 1.
3
Plaintiff's Statement as to monthly house -related expenses listed, inter alia,
three mortgage payments totaling $6,227.26, real estate taxes and homeowner's
insurance payments totaling $769.24, and payments for house care, pool and
landscaping service, and lawn and tree care in the amount of $945.99.24 Other
expenses listed included (a) attorney's fees of $1,500.00 per month ,25 (b) monthly
clothing expenses of $1,250.00, (c) vacation expenses of $1,000.00 per month, (d)
a car payment of $858.49 per month, (e) monthly health club and country club
expenses of $700.00, (f) pet expenses of $600.00 per month, (g) monthly tutorial
expenses of $433.00 for the children, and (h) monthly expenses of $775.00 for
lessons of various types for the children.26
Plaintiff's Statement also indicated that she had amassed a credit card debt
of $12,638.00.27 It appeared from her testimony that Defendant was making the
mortgage payments ,28 was paying most of the house -related expenses,29 and was
making the car payments.30
Plaintiff testified that during the weekdays, when the children were in
school, she maintained the house and took care of her dog and cats .31 Although
her residence offered amenities in the form of a hot tub, in -ground pool and full
gym, she noted that the country club offered an opportunity to be with friends and
that the health club offered the services of a personal trainer. 32
24 Plaintiff's Ex. 1.
2s Apparently, Defendant also paid $10,000.00 for Plaintiff's legal fees. N.T. 27-28, 46.
26 Plaintiff's Ex. 1; see N.T. 13-14, 19-20.
27 Plaintiff's Ex. 1.
28 N.T. 8.
29 N.T. 9.
so N.T. 41.
31 N.T. 26.
12 N.T. 29-30.
11
Defendant Matthew C. Fitzgerald indicated that the parties separated on
March 1, 2007.33 He denied that he had ever suggested that Plaintiff not work 34
Defendant testified that he was employed as a vice-president and financial
officer for Merrill Lynch, in which capacity he assisted people in the management
of their investments. 35 The bonding required for his position, according to
Defendant, depended upon a good credit rating. 36
Defendant testified that his income from work was largely based on
commissions. 37 According to a pay stub detail prepared by his employer and
covering the first four months of 2007, Defendant's commission income averaged
$32,144.66 per month .38 In addition, a stock option gain of $170.67 per month,
and an "RS Dividend" payment of $23.83 per month 39 were indicated by the pay
stub detail,40 and a vacation benefit of $431.48 per month was suggested by
Defendant's testimony.41 Finally, Defendant's 2006 tax return and a pay stub
detail showed dividends of $78.28 per month on stock purchased by Defendant
pursuant to an employee stock purchase plan, which was subsequently sold at a
substantial loss.42 The foregoing figures, including the $78.28 per month dividend
figure, yielded a monthly income amount of $32,848.92.
" See Defendant's Ex. 2.
34 N.T. 119.
" N.T. 61.
36 N.T. 90-91.
37 N.T. 62.
" Defendant's Ex. 1. This figure is comprised of the sum of a draw against commission and the
balance of the commission earned. N.T. 63-65.
s9 At one point in the master's report, a typographical error transformed this item of income into a
figure of $286,000.00 per year. Support Master's Report, at 5.
40
Defendant's Ex. 1. According to Defendant's testimony, the "growth award," stock option
gain, and "RS Dividend" payment were received in lump sums in the course of a year. N.T. 66.
41 N.T. 141.
42 Defendant's Ex. 1. Defendant reported overall capital losses on his 2006 federal income tax
return of $3,000.00. Id.
E
However, according to Defendant's most recent tax return he incurred
monthly business expenses for travel ($980.25), meals and entertainment
($937.17), an assistant's compensation ($936.17),43 vehicle mileage ($281.83),
and parking, tolls and transportation ($17.75), totaling $3,153.17.44 Offsetting
such expenses, according to Defendant's testimony, was $291.67 per month in a
business expense allowance ,45 resulting in an unreimbursed business expense
figure of $2,861.50 per month and a monthly gross income figure from
employment of $29,987.42.
A sum of $138,808.08, denominated FACAAP TXBL, was received by
Defendant in January of 2007 from his employer, according to a pay stub detail for
that month 46 A sum of $21,488.70, denominated Growth Awards, was received
by Defendant in February of 2007, from his employer.47 However, according to
Defendant's testimony, the former amount related to stock in the employer
attributable to work he performed in 1996,48 and the latter was for work performed
in 2002.49 With regard to these items, Defendant testified that in his view they
were "marital assets [to be distributed in equitable distribution, as opposed to
income at the time of receipt]," and he noted that for "everyone who has been
divorced at Merrill Lynch, it is the same thing. It is a marital asset. ,50
43 Defendant's Ex. 1; See also N.T. 100-03.
44 Defendant's Ex. 1. With respect to one aspect of the employer's policy on business expenses,
Defendant testified that "they mandatory make us put in our own money pre-tax to use on
business expenses." N.T. 122.
45 N.T. 123-24; see also Defendant's Ex. 2.
46 Defendant's Ex. 1.
47 Defendant's Ex. 1.
48 N.T. 71, 145, 147, 167. The FACAAP TXBL designation may stand for Financial Advisor
Capital Accumulation Award Plan.
49 N.T. 139.
so N.T. 145.
0
Defendant's income and expense statement related personal expenses of
about $23,360.00 per month"and several hundred thousand dollars of debt .52
Defendant also testified to a child support obligation from a prior relationship of
$1,166.66 per month '53 and his payment of $601.41 per month for medical -type
insurance covering the family. 54
Following the hearing, the support master issued a master's report .55 In the
report, the master assigned Plaintiff a net earning capacity for support purposes
based on a minimum wage, part-time employment, and head -of -household tax
filing status, of $794.00 per month .56 He found Defendant's net monthly
income/earning capacity for support purposes to be $19,055.00, based upon (a) a
monthly income figure of $32,561.00 and (b) a reduction in the amount of
$12,927.35 for taxes and similar deductions ,57 and (c) a reduction of $579.00 for
health insurance premiums paid by Defendant .58 The amount of deductions for
taxes and similar items was calculated utilizing the standard computer program
employed by Cumberland County for this purpose.59
With respect to child support, the parties' combined net monthly incomes
for purposes of child support of $19,849.01 yielded a monthly guideline child
support obligation for two children under the support guidelines of $2,860.00,60
Defendant's proportionate share of which (96%)61 was $2,746.00. To this figure,
" Defendant's Ex. 2.
Sz Defendant's Ex. 2.
" N.T. 86.
14 N.T. 76.
" Support Master's Report, filed July 10, 2007.
16 Support Master's Report, at 6-7, Ex. "A".
5' Support Master's Report, at 6, Ex. "A'; see Pa. R.C.P. 1910.16-2(c)(1).
" Support Master's Report, at 6; see Pa. R.C.P. 1910.16-6(b)(4).
59 See, Cunningham v. Cunningham, 49 Cumb. 219, 224, F.N. 32 (Oler, J., 2000).
60 See Pa. R.C.P. 1910.16-3; Support Master's Report, at 7.
61 See Pa. R.C.P. 1910.16-4; Support Master's Report at 7.
7
as permitted by Pennsylvania Rule of Civil Procedure 1910.16(d), the master
added a proportionate share (96%) of the children's monthly tutorial and lesson
charges of $1,208.00, or $1,160.00, for a total monthly child support obligation on
the part of Defendant of about $3,898.00 per month .62
With respect to spousal support, the master arrived at a monthly figure of
$3,959.00, in accordance with the formula provided by Pennsylvania Rule of Civil
Procedure 1910.16-4, reducing Defendant's monthly income available for support
of $19,055.00 by the aforesaid child support figure of $3,898.00, his unrelated
child support obligation of $1,167.00, and Plaintiff's earning capacity figure of
$794.00, and multiplying the result by 30%.63
Finally, the support master recommended an addition to Defendant's
monthly support obligation as permitted by Pennsylvania Rule of Civil Procedure
1910.16-6(e) to provide for his payment of one-half of the monthly mortgage,
insurance, and tax amounts due on the residence Plaintiff was occupying with the
children ($6,996.50), to the extent that the mortgage/insurance/tax payment
exceeded 25% of Plaintiff's earning capacity ($794.00), child support ($3,898.00)
and spousal support ($3,959.00); the mortgage/insurance/tax figure of $6,996.50
being in excess of 25% of the total of Plaintiff's earning capacity, child support
and spousal support ($2,162.75) by $4,833.75, Defendant was assigned an
additional support obligation of $2,417.00.64
A total monthly support obligation on the part of Defendant for the parties'
children and for Plaintiff was thus recommended by the support master in the
amount of $10,273.00.65 He also recommended that mortgage/insurance/tax
payment and the payment on the vehicle being operated by Plaintiff be made
62 Support Master's Report, at 7.
63 Support Master's Report, at 7.
64 Support Master's Report, at 7.
61 Support Master's Report, at 7.
'3
directly by Defendant to the creditors rather than indirectly through Plaintiff from
funds supplied by Defendant .66
In accordance with the support master's report, the following interim order
was entered by the Honorable Edward E. Guido:
AND NOW, this 10th day of July, 2007, upon consideration of the
Support master's Report and Recommendation, a copy of which is
attached hereto as Exhibit"A", it is ordered and decreed as follows:
A. The Defendant shall pay to the Pennsylvania State
Collection and Disbursement Unit for the support of
his wife and children, Sierra C. Fitzgerald, born
October 13, 1996, and Talia C. Fitzgerald, born
February 22, 1999, the unallocated sum of $2,418.00
per month.
B. The Defendant shall pay when due the mortgages
encumbering the marital residence, the real estate
taxes, and the homeowner's Insurance on the
residence directly to the appropriate recipients .. .
C. The Defendant shall make the monthly vehicle
payment on the 2004 Lincoln Navigator currently in
the possession of the Plaintiff directly to the lien
holder. In the event said vehicle is sold and the lien
satisfied, or in the event possession of said vehicle is
transferred from the Plaintiff to the Defendant, the
sum of $858.50 shall be added to the amount payable
to the Pennsylvania State Collection and
Disbursement Unit set forth in Paragraph A above.
D. The Defendant shall provide health insurance
coverage for the benefit of his wife and children as is
available through his employment or other group
coverage at a reasonable cost.
E. The monthly support obligation includes cash medical
support in the amount of $250.00 annually for
unreimbursed medical expenses incurred for each
child and spouse. Unreimbursed medical expenses of
the obligee or children that exceed $250.00 annually
shall be allocated between the parties. The parties
seeking allocation of unreimbursed medical expenses
must provide documentation of expenses to the other
party no later than March 31St of the year following
the calendar year in which the final medical bill to be
allocated was received. The unreimbursed medical
expenses are to be paid as follows: 96% by Defendant
and 4% by Plaintiff.
66 Support Master's Report, at 7-8.
0
F. The Defendant is given credit for direct payments to
the Plaintiff totaling $5,700.00 and for payment of
reasonable and necessary expenses totaling $2,873.54.
G. The Defendant shall be entitled to claim said children
as dependency exemptions for federal income tax
purposes commencing with tax year 2007, and the
Plaintiff shall execute and deliver to the Defendant
any and all documentation required by the Internal
Revenue Code to effectuate said exemptions.
H. Any credits resulting from the retroactive effect of this
order shall be held in abeyance and shall not reduce
the monthly obligation payable by the Defendant set
forth in paragraph A above.
1. The effective date of this order is March 12, 2007.67
Plaintiff's exceptions as recited at the beginning of this opinion were filed
on July 25, 2007.68
DISCUSSION
Standard of review. When reviewing a support master's report, the trial
court is to use the same standard of review as with a divorce master's report.
Goodman v. Goodman, 375 Pa. Super. 504, 507, 544 A.2d 1033, 1035 (1988).
Accordingly, the report should be given the "fullest consideration," particularly
regarding the credibility of witnesses. Id. However, the report is advisory only,
and, when exceptions are filed, the court must conduct its own review of the
evidence to determine whether the master's recommendations, to which
exceptions are taken, are proper. Id.
With respect to the issues raised by exceptions to a master's report, "[i]t is
the sole province and the responsibility of the [trial] court to set an award of
support, however much it may choose to utilize a master's report." Goodman v.
Goodman, 375 Pa. Super. 504, 507-08, 544 A.2d 1033, 1035 (1988).
General exceptions. Under Pennsylvania Rule of Civil Procedure
1910.12(f), each exception to a support master's report is to be set forth
67 Interim Order of Court, July 10, 2007.
68 Plaintiff's Exceptions to the Support Master's Report, filed July 25, 2007.
10
"precisely." Boilerplate exceptions to the effect that a report and recommendation
are "against the weight of evidence" or "contrary to law" are too general to qualify
as cognizable bases for relief. See generally Young Antics, Inc. v. Jaymar Realty
Corp., 245 Pa. Super. 244, 246, 369 A.2d 385, 387 (1976) (noncognizable
exceptions to verdict of court in bench trial); Whitzel v. Whitzel, No. 05-2203 Civil
Term (July 31, 2007) (Cumberland Co.) (noncognizable general exception to
divorce master's report). For this reason, Plaintiff's first and second exceptions to
the master's report in this case will be denied.
Direct payments. Where the obligations in question are relatively fixed and
payments thereon benefit both parties, it is not uncommon for a support obligor to
be ordered to make the payments directly to the third party entitled to receive them
rather than to the obligee. See Smith v. Smith, 285 Pa. Super. 146, 154, 426 A.2d
1184, 1188 (1981). In the present case, where (a) Defendant's employment was
dependent upon a good credit rating, (b) Defendant's recommended support
obligation included an assignment of responsibility for part of the
mortgage/insurance/tax payment, and (c) it was more in Defendant's immediate
interest than Plaintiffs that payments be made in full and on a timely basis on the
house and vehicle, both titled in Defendant's name, the support master's
recommendation that Defendant be directed to make the mortgage/insurance/tax
payment on the house occupied by Plaintiff and the parties' children and on the
vehicle being utilized by Plaintiff was a logical one. Plaintiffs exception to this
aspect of the master's report will therefore be denied.
Tax filing status and calculation method. With respect to tax filing status,
in her brief in support of her exceptions to the support master's report Plaintiff
argues that "the Master ... erred in making the calculation of net income by his
arbitrary assignment of tax filing status."69 In this regard, she states:
The Master assigned Defendant the tax filing status of "married separate
and three exemptions." He assigned to Plaintiff, "head of household."
69 Plaintiff's Brief in Support of Her Exceptions, at 9.
11
Since Plaintiff cannot file head of household unless she has a child as an
exemption, it is believe[d] that the Master meant to file Defendant as
"head of household and three exemptions" and Plaintiff "married filing
separately. ,70
Under Section 2 of the Internal Revenue Code, a head of household is
defined in pertinent part as follows:
(1). In general.-- ... [A]n individual shall be considered a head of a
household if, and only if, such individual ... either—
(A) maintains as his home a household which
constitutes for more than one-half of such taxable year the
principal place of abode, as a member of such household,
of—
(i) a qualifying child of the individual
(as defined in section 152(c), determined
without regard to section 152(e) [special rule for
divorced and similarly -situated parents], but not
if such child—
(I) is married at the close
of the taxpayer's taxable year, and
(II) is not a dependent of
such individual by reason of
section 152(b)(2) [relating to
married dependents] or 152(b)(3)
[relating to citizens or nationals of
other countries], or both, or
(ii) any other person who is a dependent
of the taxpayer, if the taxpayer is entitled to a
deduction for the taxable year for such person
under section 151, or
(B) maintains a household which constitutes for such
taxable year the principal place of abode of the father or
mother of the taxpayer, if the taxpayer is entitled to a
deduction for the taxable year for such father or mother
under section 151.
For purposes of this paragraph, an individual shall be considered as
maintaining a household only if over half of the cost of maintaining the
household during the taxable is furnished by such individual .71
A "qualifying child" for purposes of this provision is defined in Section
152(c) of the Internal Revenue Code as follows:
70 Plaintiffs Brief in Support of Her Exceptions, at 9-10.
7126 U.S.C. §2 (b) (Supp. 2007).
12
(1) Qualifying child.—The term "qualifying child" means ... an
individual—
(A) who bears a relationship to the taxpayer
described in paragraph (2),
(B) who has the same principal place of abode as the
taxpayer for more than one-half of [the] taxable year,
(C) who meets [a certain] age requirement[] ... , and
(D) who has not provided over one-half of such
individual's own support for the calendar year in which
the taxable year of the taxpayer begins.
(2) Relationship.—For purposes of paragraph 1(A), an individual
bears a relationship to the taxpayer described in this paragraph if such
individual is—
(A) a child of the taxpayer or a descendant of such a
child, or
(B) a brother, sister, stepbrother, or stepsister of the
taxpayer or a descendant of any such relative.72
It would appear to the court that under the Internal Revenue Code there is
no requirement that a parent claim, or be entitled to claim, a child living with him
or her as an exemption in order to file as a "head of household." The premise for
Plaintiff's position that "the Master meant to file Defendant as `head of household
and three exemptions' and Plaintiff `married filing separately,"' is thus not correct.
With respect to the calculation of Defendant's income available for support,
Plaintiff argues that "[t]he tax burden attributable to the Defendant in the Master's
calculation is excessive .,,73 As noted previously,74 in Cumberland County
domestic relations matters a standard computer program is routinely utilized for
purposes of calculating taxes and similar items, deductible from gross income
under Pennsylvania Rule of Civil Procedure 1910.16-2.
"Typically, a computer program is utilized by the Domestic Relations
Office to derive the proper tax and F.LC.A. figures based upon a party's gross
income, filing status and exemptions taken." Seely -Burnham v. Burnham, 52
72 26 U.S.C. §152(c) (Supp. 2007).
73 Plaintiff's Brief in Support of Her Exceptions, at 10.
74 See Note 58 supra.
13
Cumberland L.J. 48, 52 (2002); see Cunningham v. Cunningham, 49 Cumberland
L.J. 219, 224 n.32 (2000).
"The use of a standard tax computer program to calculate these
deductions, which is routine practice in domestic relations cases, avoids
problems inherent in relying upon such potential contrivances as
individual withholding schemes, which do not always correspond to the
taxpayer's actual obligations."
Murray v. Kalinoski, No. 01-1097 Support (Cumberland Co. August 15, 2007)
(slip op. at 5. n.38), quoting Parlati v. Morton, 53 Cumberland L.J. 169, 174-75
(2004).
In the present case, where filed tax returns reflective of the parties' current
circumstances of separation and estrangement were not available and where
neither party presented evidence, expert or otherwise, as to their intended future
tax filing statuses, exemptions to be claimed, prospective standard or itemized
deduction elections, computations of future tax and F.I.C.A. figures, etc., it is not
realistic to expect a support master to engage in the investigative, speculative and
labor-intensive task of preparing future tax returns for the parties using tax and
accounting techniques and assumptions other than those incorporated in the
standard computer tax program, in the course of preparing his report. For this
reason, the court is unable to agree with Plaintiff s contention that the master erred
in terms of his calculation of tax and similar deductions herein.
Deferred compensation payments from earlier years. The support master's
rationale for concluding that the $138,808.00 receipt of Defendant in 2007
attributable to his work performance in 1996 was not properly characterized as
current income for support purposes was cogently expressed in the master's report.
This explanation is adopted herein:
... The major disagreement concerns that item on [Defendant's] pay
statement labeled "FACAAP TXBU' The Plaintiff argues that this item
constitutes income for support purposes, while the Defendant argues that it
constitutes a marital asset citing Berry v. Berry, 898 A.2d 1100, 1104 (Pa.
2006) which held that in making a determination of income for support
purposes, "it is axiomatic that the trial court may not include income that
constitutes marital property under 23 Pa. C.S. Section 3501, as such action
would foreclose the equitable distribution of those assets."
14
The testimony revealed that "FACAAP TXBL" is a form of deferred
compensation earned by certain employees of Merrill Lynch, including the
Defendant. In January, 2007 the Defendant was awarded shares of stock
in Merrill Lynch based upon his performance for the 1996 and his
continued employment with the company through December 31, 2006.
The stock was valued at $138,891.00. The Defendant sold the stock soon
after receipt and applied the net proceeds towards various marital
obligations prior to the separation of the parties on March 1.
An argument can certainly be made that the award constitutes income
as "compensation for services." The services on which the award is based
were performed by the Defendant in 1996 and the award was made in
January, 2007. Were it not for the fact that the parties are in the process of
divorce with equitable distribution at issue in that action, the stock award
would clearly be treated as income for support purposes. However, the
Defendant argues that the court's decision in Berry precludes that
treatment in the present support case.
In Berry the husband was a partner in an accounting firm. He filed
for divorce in January, 2004, and in May the wife filed a complaint for
spousal and child support. In June the Husband's employment was
terminated. He subsequently received a distribution of the balance of
funds in his partner's accrual account. The accrual account represented
income earned by the husband in prior periods which had not yet been
distributed to him. The trial court held that the funds distributed
represented income for support purposes. In reversing the trial court, the
Superior Court stated:
The record establishes that the money was in the
partnership accrual account before [the date of separation].
Thus, the money was earned during the marriage; it is
therefore marital property subject to equitable distribution.
Accordingly, the trial court clearly abused its discretion in
finding that the partnership accrual account was income
under 23 Pa. C.S. Section 4302.
Berry v. Berry, supra at 1105.
In the present case the Defendant earned the award for services
rendered in 1996. The award was distributed to him in the form of stock in
January, 2007. Similar to the funds in Mr. Berry's partnership accrual
account, the award was earned during the marriage and must be treated as
marital property subject to equitable distribution and not as income for
support purposes. 75
The same rationale, in the court's view, applies to the "Growth Awards" receipt of
Defendant.
"Undocumented' business expenses. "The absence of documentary support
for testimony of a party as to expenses does not, in itself, mandate a conclusion
75 Support Master's Report, It 4-5.
15
that the evidence was incompetent or insufficient. See generally Grandovic v.
Grandovic, 387 Pa. Super. 619, 622-24, 564 A.2d 960, 962 (1989); Halko v.
Hensley, No. 03-224 Support (Cumberland Co. September 24, 2003) [(slip op.)]."
Bisker v. Bisker, 56 Cumberland L.J. 40, 46 (2007). In the present case, the
business expenses of Defendant appeared on the parties' joint 2006 federal tax
return, filed by the parties subject to the penalty of perjury,76 and were supported
by testimony of Defendant." For this reason, Plaintiff's apparent position that
these expenses could not be considered proven in an evidentiary sense must be
rejected.
In appropriate cases, it is proper to take into consideration a party's
business expenses for purposes of a calculation of his or her income available for
support. Thus, it was stated by the Pennsylvania Superior Court in Berry v. Berry,
2006 PA Super. 98, ¶22, 898 A.2d 1100, 1107, as follows:
In determining monthly gross income for support purposes, Rule
1910.16-2(a)(2) provides that income includes "net income from
business ...." Pa.R.C.P., Rule 1910.16-(a)(2), 42 Pa. Cons. Stat. Ann. The
use of the word "net" in the rule specifically implies that there are
acceptable business deductions. For instance, provided with the
appropriate itemizations, unreimbursed business expenses, when used to
increase income, may be deductible from gross income, although it must
be proven on a case-by-case basis.78
In the present case, where Defendant's income was commission -based and
required his expenditure of many thousands of dollars per year of his own money
in order to generate such commissions, it would be inequitable to ignore those
expenses in a calculation of Defendant's income actually available for support.
Accordingly, the court is unable to agree with Plaintiff's position that the
unreimbursed business expenses of Defendant should not have been factored into
the calculation.
76 N.T. 78-79; Defendant's Ex. 1.
77 N.T. 100-08.
78 Cf. Murray v. Kalinoski, 01-1097 Support (August 15, 2007) (slip op.) (unreimbursed business
expenses of salaried employee utilized as basis for deviation from guidelines).
16
Meltzer. "When the parties' combined net income exceeds $20,000.00 per
month, child support shall be calculated pursuant to Meltzer v. Witsberger, 505 Pa.
462, 480 A.2d 991 (1984)." Pa. R.C. P. 1910.16-2(e)(2). In the present case, the
court's calculation of the parties' monthly income available for support based
upon the evidence presented like the master' s79 does not result in a conclusion that
the parties' combined net income is in excess of $20,000.00 per month. For this
reason, Plaintiff's exception based upon the master's alleged error in failing to
apply the Meltzer formula in this case can not be sustained.
For the foregoing reasons, the following order of court will be entered:
ORDER OF COURT
AND NOW, this 11th day of February, 2008, upon consideration of
Plaintiff's exceptions to the support master's report, and for the reasons stated in
the accompanying opinion, the exceptions are denied and the interim order of
court dated July 10, 2007, is entered as a final order of court.
BY THE COURT,
s/ J. Wesley Oler, Jr.
J. Wesley Oler, Jr., J.
Barbara Sumple-Sullivan, Esq.
549 Bridge Street
New Cumberland, PA 17070
Attorney for Plaintiff
Steven Howell, Esq.
619 Bridge Street
New Cumberland, PA 17070
Attorney for Defendant
79 The figures and legal conclusions arrived at by the court as indicated in the text do not yield a
significantly different support obligation on the part of Defendant from that recommended in the
master's report, nor is the de minimis difference in the exceptant's favor.
17
m
LIA A. FITZGERALD, : IN THE COURT OF COMMON PLEAS OF
Plaintiff : CUMBERLAND COUNTY, PENNSYLVANIA
V. : DOMESTIC RELATIONS SECTION
MATTHEW C.
FITZGERALD, : PACSES NO. 470109020
Defendant : No. 184 SUPPORT 2007
PLAINTIFF'S EXCEPTIONS TO
SUPPORT MASTER'S REPORT
BEFORE OLER, J.
ORDER OF COURT
AND NOW, this 11th day of February, 2008, upon consideration of
Plaintiff's exceptions to the support master's report, and for the reasons stated in
the accompanying opinion, the exceptions are denied and the interim order of
court dated July 10, 2007, is entered as a final order of court.
BY THE COURT,
J. Wesley Oler, Jr., J.
Barbara Sumple-Sullivan, Esq.
549 Bridge Street
New Cumberland, PA 17070
Attorney for Plaintiff
Steven Howell, Esq.
619 Bridge Street
New Cumberland, PA 17070
Attorney for Defendant