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HomeMy WebLinkAbout00-247 SUPPORTJACQUELYN A. BEHNEY,: IN THE COURT OF COMMON PLEAS OF Plaintiff CUMBERLAND COUNTY, PENNSYLVANIA Vo STEVEN J. BEHNEY, Defendant DOMESTIC RELATIONS SECTION CIVIL ACTION - LAW NO. 00-247 SUPPORT DR 29,518 IN RE: OPINION PURSUANT TO PA. R.A.P. 1925 Oler, J., January 28, 2002. In this child support case, the owner of a heating oil company has filed an appeal to the Pennsylvania Superior Court from an order determining his support obligation for two children to be $1,406.00 per month. In a statement of matters complained of on appeal, Defendant has expressed the grounds for the appeal as follows: 1. Undistributed earnings of Behney Oil, an S Corporation, were included as income to Appellant in the determination of Appellant's obligation for child support despite the fact Appellant did not actually receive the undistributed earnings which were necessary for the continued operation of Behney Oil. Therefore, it is Appellant's contention that the undistributed earnings of said Corporation should not have been included in determining Appellant's net monthly income available for child support. Furthermore, the earnings of the corporation for 2001 cannot be determined until the subsequent year and thus the Order for 2001 cannot be set until early 2002. 2. The Court issued an Order based on income of the parties for 1999 and 2000 and 2001 rather than a separate Order for each year. Pa. R.C.P. 1910.16-2(d)(3) requires that support ordered for seasonal employees to be based on yearly averages. Appellant's income is affected by seasonal fluctuations. Therefore, two Orders, at least, for each year, i.e. 1999 and 2000 should have been issued. Appellant's income for 2001 cannot be determined until early 2002 when all corporate expenses for 2001 can be determined. ~ Defendant's Statement of Matters Complained of, paragraphs 1-2, filed November 2, 2001. This opinion is written in support of the order appealed from, pursuant to Pennsylvania Rule of Appellate Procedure 1925(a). STATEMENT OF FACTS Plaintiff is Jacquelyn A. Behney, 43.2 She resides at 716 Hilltop Drive, New Cumberland, Cumberland County, Pennsylvania.3 Defendant is Steven J. Behney, 43.4 He resides at 100 South Front Street, Wormleysburg, Cumberland County, Pennsylvania.5 The parties were married on November 30, 1991.6 Two children were born of their marriage: Alexander Behney (d.o.b. May 17, 1992) and Derrick Behney (d.o.b. June 22, 1993).7 The parties separated on March 7, 2000.8 Plaintiff mother has primary physical custody of the children.9 A divorce is pending, l0 Following the parties' separation, Defendant father ceased contributing to the support of the children.~ Plaintiff mother filed a complaint for child support on March 27, 2000.~2 A Domestic Relations Office conference~3 conducted pursuant to Pennsylvania Rule of Civil Procedure 1910.11 produced a recommended order, entered by the court on July 27, 2000, with which Defendant 2 N.T. 4, 8, Hearing, April 6, 2001 (hereinafter, N.T. __ (April 6, 2001)). 3 See Plaintiff's Exhibit 2, Hearing, April 6, 2001, and September 27, 2001 (hereinafter Plaintiff's/Defendant's Exhibit ~. 4N.T. 4, 15 (April 6, 2001). 5 N.T. 15 (April 6, 2001). 6 N.T. 4, 7-8 (April 6, 2001). 7N.T. 4, 7-8 (April 6, 2001). 8 N.T. 10 (April 6, 2001). 9 N.T. 4, 7-8 (April 6, 2001). l0 N.T. 4, 7-8 (April 6, 2001). ix N.T. 10-11, 17 (April 6, 2001). ~: Plaintiff's Complaint for Support, filed March 27, 2000. 13 N.T. 4 (April 6, 2001). 2 father was dissatisfied. On August 9, 2000, he filed a demand for a hearing de ~4 nava before the court. Efforts by counsel to resolve the case have proven unsuccessful. ~5 Pursuant to Defendant father's demand for a hearing, a de nava hearing was held by the court on Plaintiff mother's complaint for child support on April 6, 2001, and September 27, 2001. Plaintiff mother is a public school teacher.~6 At all times pertinent to this case prior to August 31, 2001, her net monthly income was $3,006.34.~7 Since August 31, 2001, her net monthly income has been $3,100.00.~8 She pays child 19 care expenses in the amount of $50.00 per week for ten months out afthe year. As between the parties, payments for health insurance coverage for the children are made by Plaintiff mather.2° However, she has not requested that the support obligation of Defendant father include a part of these payments.2~ Defendant father is the president and sole owner of a corporation engaged in the business of selling and distributing heating oil to the public.22 Defendant has operated this business since 1978.23 Gross receipts in 2000 exceeded $1,225,000.00.24 ~4 Defendant's Demand for Hearing, filed August 9, 2000. ~5 See N.T. 47 (April 6, 2001). 16 N.T. 8 (April 6, 2001). ~7 N.T. 6-7, Hearing, September 27, 2001 (hereinafter N.T. __ (September 27, 18 N.T. 6-7 (September 27, 2001). 19 N.T. 7 (September 27, 2001). 2o See N.T. 61 (September 27, 2001). :l N.T. 61 (September 27, 2001). 22 N.T. 20 (April 6, 2001). 23 N.T. 20 (April 6, 2001). 24 Defendant's Exhibit 3. 2001)). 3 Defendant is also the sole proprietor of a business called Capital Lease Company.25 This company purchases and renovates properties, and in 1999 it realized a profit of $65,000.00.26 However, Defendant claimed that the divorce proceeding made it impossible for him to undertake any new projects.27 Capital Lease Company presently owns two commercial buildings, one at 501 Bosler Avenue, Lemoyne, Cumberland County, Pennsylvania,28 and the other at 100 South Front Street, Wormleysburg, Cumberland County, Pennsylvania.29 30 Defendant lives rent-free in an apartment at the Wormleysburg property. 3~ Capital Lease Company pays the mortgage and real estate taxes on the property. He drives, on a daily basis,32 a newly-acquired $42,000.00 Ford Excursion SUV owned by the oil company.33 The oil company pays expenses related to the vehicle, including an installment payment of $1,150.00 each month on the purchase price.34 In May of 2000, he paid $125,000.00 in cash for a boat which he keeps at the Chesapeake.35 He vacations on most weekends during the summer at the Chesapeake,36 and uses the Ford Excursion for the trip.37 He does not report his use of the vehicle as personal income, according to his testimony, because he is 25 N.T. 15-16 (April 6, 2001). 26 N.T. 17-19 (April 6, 2001). 27 N.T. 18 (April 6, 2001). 28 N.T. 16 (April 6, 2001). 29 N.T. 15-16 (April 6, 2001). 30 N.T. 16 (April 6, 2001). 3~ N.T. 51 (September 27, 2001). 32 N.T. 40 (April 6, 2001). 33 N.T. 12, 22, 39-41 (April 6, 2001); N.T. 48 (September 27, 2001). 34 N.T. 41 (April 6, 2001). 35 N.T. 49 (September 27, 2001). 36 N.T. 50 (September 27, 2001). 37 N.T. 41 (April 6, 2001). 4 "kind of always working.''38 He purchased the boat, he stated, because he "owe[d] it to [his] children to take and teach them boating.''39 Defendant estimated that his net income for the year 2000 was $30,000.00;4° however, he reported $71,056.00 in taxable income on his 2000 individual federal income tax return.4~ He indicated that he could not predict what his net income would be for 2001.42 On the subject of Defendant's net income, Plaintiff presented testimony of an expert in the person of Robert E. Ribic, Jr., CPA, MBA, CFA, RIA.43 Mr. Rubic's credentials included a master's degree in business administration from Pennsylvania State University, extensive experience as a certified public accountant in private practice, major corporate accounting positions,44 and a college professorship teaching courses in management, accounting and finance.4s He was currently manager of the accounting firm of Brown Shultz Sheridan & Fitz, with fields of concentration that included forensic accounting.46 The court was impressed with his qualifications as an expert in the area of accounting, his acquired knowledge of the details of Defendant's business finances and the cogency of his testimony. 38 N.T. 41 (September 27, 2001). The rule is clear that "personal perquisites, such as... automobile expenses, paid by a party's business must be included in income for purpose[s] of calculating support." Fennell v. Fennell, 753 A.2d 866, 868 (Pa. Super. Ct. 2000) (quoting Heisey v. Heisey, 430 Pa. Super. 16, 19, 633 A.2d 211,212 (1993)). In the present case, neither party offered evidence specific enough to permit the court to assign a value to this benefit for purposes of computing Defendant's net income. 39 N.T. 20 (April 6, 2001). 4o N.T. 45 (September 27, 2001). 4~ Defendant's Exhibit 4. 4: N.T. 46 (September 27, 2001). 43 N.T. 8-36, 55-60 (September 27, 2001); Plaintiff's Exhibit 5. 44 For example, Mr. Ribic had served as a senior accountant with the Borg Warner Corporation, and had held the office of Manufacturing Controller with the Hershey Foods Corporation. Plaintiff's Exhibit 5. Plaintiff's Exhibit 5. 46 Plaintiff's Exhibit 5. 5 In Mr. Ribic's opinion, Defendant's total income for the year 2000 was $90,269.00, resulting in a monthly disposable income figure of $5,689.00.47 This figure did not include the additional income which could properly have been attributed to Defendant arising out of his use of company property as a residence and his personal use of a company vehicle.48 In reaching this conclusion, Mr. Ribic disagreed with the view of Defendant's accountant, Frederick W. Pfister, CPA, that $46,565.00 of undistributed income in the corporation as of December 31, 2000, should not be included in the calculation of Defendant's income.49 Several factors militated strongly in favor of Mr. Ribic's position on this point. First, although not dispositive of the issue,so Defendant had reported the undistributed funds as income on his 2000 individual federal income tax return,s~ Second, notwithstanding that the oil company had had "a very good year,''s2 Defendant had dramatically reduced the salary which he paid himself in 2000.s3 Thus, in 2000 (the year of the parties' separation) Defendant decreased his salary to $23,550.00, from $58,000.00 in 1998 and $40,000.00 in 1999.s4 Third, Defendant's reluctance to withdraw funds from the corporation in 2000 was inconsistent with his prior practice,ss For instance, the much larger salaries drawn in 1998 and 1999 occurred in years when the corporate records 47 N.T. 10-11 (September 27, 2001); Plaintiff's Exhibit 6. 48 N.T. 19, 26-28 (September 27, 2001). 49 N.T. 24-25 (September 27, 2001); Plaintiff's Exhibit 8; Defendant's Exhibit 4. Mr. Pfister did not testify at the hearing, but an analysis prepared by him appears in the record as an attachment to a report of Mr. Ribic. See Plaintiff's Exhibit 8. 5o See Fennell, 753 A.2d at 868-69 (Pa. Super. Ct. 2000). 5~ N.T. 20 (September 27, 2001); Defendant's Exhibit 4. 52 N.T. 58 (September 27, 2001). From 1999 to 2000, long term liabilities of the company had been reduced by $30,000.00. Id. In 2000, the company had "the highest amount of cash on hand in the history of the corporation." N.T. 35 (September 27, 2001). 53 N.T. 25 (September 27, 2000). 54 N.T. 11 (September 27, 2001); Plaintiff's Exhibit 8. 55 See N.T. 47 (September 27, 2001). 6 actually revealed corporate losses of $50,149.00 and $8,929.00 respectively.56 The inconsistency is further demonstrated by the fact that Defendant "ha[d] historically paid himself approximately 99.44% of income available for payout... [whereas i]n 2000... he chose to only pay out approximately 33%.,,57 Fourth, in terms of a percentage of net sales of the business, the salary drawn by Defendant for 2000 from the corporation was "way below the industry average.''58 Thus, his $23,550.00 salary represented 1.9% of net sales, whereas "[a]ccording to industry data provided by Robert Morris Associates... in terms of the industry [which the corporation] operates in and its sales volume, officer[s'] compensations should be 5.1% of net sales.''59 Fifth, the amount of cash held by the corporation in 2000 represented a marked increase in terms of its percentage of current obligations of the corporation.® Thus, on average from 1988 through 1999, Defendant's practice had been to maintain in the corporation cash equaling 33% of current obligations; in 2000, the year of the parties' separation, he was maintaining 73 percent.6~ Sixth, "most of [the corporation's cash was] tied up in a savings account, not a checking account.''62 This practice was not consistent with the argument that the funds were being kept on hand to pay bills.63 Finally, the disposable annual income figure of $23,550.00 proposed by Defendant's accountant,64 and the slightly higher figure of $30,000.00 proposed by 56 Plaintiff's Exhibit 8. s7 Plaintiff's Exhibit 8. s8 Plaintiff's Exhibit 8. s9 Plaintiff's Exhibit 8. 60 N.T. 24 (September 27, 2001). 6~ N.T. 24-25 (September 27, 2001). In 2000, the corporation was holding $107,000.00 in cash. N.T. 56 (September 27, 2001). 62 N.T. 56 (September 27, 2001). 63 N.T. 56 (September 27, 2000). 64 See Plaintiff's Exhibit 8. 7 Defendant,65 were less than consonant with his lifestyle. Based upon all of the evidence presented, the court accepted the opinion of Plaintiff's expert that Defendant's net monthly income was $5,689.00. In view of the additional income that might have been attributed to Defendant, the court felt that the figure was, in fact, a conservative one. On the subject of the alleged cyclical nature of the heating oil business, Mr. Ribic testified as follows: I would tell you from dealing with the number of businesses [that I do], [all] businesses have business cycles, and they have ups and downs, and they have peak times, and they don't have peak times. I don't think there's an industry that escapes that.66 Defendant testified that most of the corporation's revenues were generated in December, January and February.67 However, he noted that the corporation was active even in the middle of the summer because of customers' use of oil for heating their water.68 The reports of Plaintiff's expert, which detailed his rationale and set forth the numbers involved in his calculation, is attached as an appendix to this opinion in lieu of further summary.69 Following the hearing, an order was entered on October 2, 2001, effective March 27, 2000,7o establishing Defendant's support obligation in accordance with the support guidelines, based upon (a) a net monthly income of Plaintiff mother in the amount of $3,006.34 up to August 31, 2001, and $3,100.00 thereafter, (b) a net monthly income on the part of Defendant father in the amount of $5,689.00, and (c) child care expenses on the part of Plaintiff 65 N.T. 45 (September 27, 2001). 66 N.T. 33 (September 27, 2001). 67 N.T. 46 (September 27, 2001). 68 N.T. 50 (September 27, 2001). 69 These items are Plaintiffs Exhibits 6 and 8. 70 This was the date on which Plaintiff mother filed the complaint for child support sub judice. See Pa. R.C.P. 1910.17(a). mother of $50.00 per week for ten months out of the year.TM Under the guidelines, Defendant's monthly support obligation for two children was $1,406.00.TM Defendant's appeal to the Pennsylvania Superior Court from this order was filed on October 29, 2001.73 DISCUSSION Statement of law. "In attempting to determine the net income and earning capacity of a sole owner of a business, a court is faced with special difficulties." Olafsson v. Olafsson, 44 Cumberland L.J. 252, 259 (1995), aff'd, 451 Pa. Super. 612, 678 A.2d 840 (1996); see Murphy v. Murphy, 410 Pa. Super. 146, 154, 599 A.2d 647, 651 (1991), appeal denied, 530 Pa. 633, 606 A.2d 902 (1992), cert. denied, 506 U.S. 868, 113 S. Ct. 196, 121 L. Ed. 2d 139 (1992); cf. Pacella v. Pacella, 342 Pa. Super. 178, 492 A.2d 707 (1985). "The trier of fact is not, of course, required to accept as accurate every assertion as to income made by a person who owns a business." Olafsson, 44 Cumberland L.J. at 259; see Murphy, 410 Pa. Super. at 154, 599 A.2d at 651 (1991). Income, for purposes of support calculations, includes "income derived from business." Act of October 30, 1985, P.L. 264, §1, as amended, 23 Pa. C.S. §4302 (West 1996 & Supp. 2001). Furthermore, "[in] 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). In this regard, it has been stated by the Pennsylvania Superior Court that [o]ur jurisprudence is clear.., that the owner of a closely-held corporation cannot avoid a support obligation by sheltering income that should be available for support by manipulating 7~ Order of Court, October 2, 2001. 72 Order of Court, October 2, 2001. As revealed by the calculations attached to the court's order, the slight change in Plaintiff mother's net monthly income as of August 31,2001, did not result in a change in the amount of Defendant's obligation. Id. Arrearages were payable at the rate of $150.00 per month. Id. 73 Defendant's Notice of Appeal, filed October 29, 2001. 9 salary, perquisites, corporate expenditures, and/or corporate distribution amounts. Fennell v. Fennell, 753 A.2d 866, 868 (Pa. Super. Ct. 2000). There is no "presumption that corporate retained earnings per se are to be excluded from available income for purposes of support calculations, indeed, in situations where the individual with the support obligation is able to control the retention or disbursement of funds by the corporation, he or she ... [bears] the burden of proving that such actions were 'necessary to maintain or preserve' the business." Id at 869 (citations and footnotes omitted). The court, as trier of fact, may believe all, part or none of the evidence. See Murphy, 410 Pa. Super. at 158, 599 A.2d at 653. Thus, the fact-finder is "not required to blindly accept" an obligor's own assessment of his ability to pay support. Id at 153,599 A.2d at 65 i. in addition, with respect to expert testimony, the credibility and weight to be assigned to such testimony is within the province of the trier-of-fact. See Chesney v. Stevens, 435 Pa. Super. 71, 81, 644 A.2d 1240, 1245(1994). Finally, Pennsylvania Rule of Civil Procedure 1910.16-2 provides that "[s]upport orders for seasonal employees, such as construction workers, shall ordinarily be based upon a yearly average." Pa. R.C.P. 1910.16-2(d)(3). Application of law to facts. In the present case, in its capacity as trier-of- fact, the court was not persuaded that undistributed income in the amount of $46,565.00 retained in Defendant's solely-owned corporation at the conclusion of 2000 was necessary to maintain or preserve the business. On the contrary, in the court's view the weight of the evidence was heavily to the contrary. The bases for this view appear in detail in the Statement of Facts above, and thus address the first ground for appeal expressed by Defendant. With respect to the second and final ground for appeal expressed by Defendant--i.e., that the court had erred in not entering separate orders for 1999 and 2000 and in not treating Defendant as a seasonal employee--it may be noted i0 (a) that Plaintiff' s complaint for child support was not filed until 2000 and (b) that the court did consider Defendant's income on an annual basis.TM An order assessing a support obligation for 1999 would not have been appropriate in view of the filing date of the complaint;75 and, in the future, a request for modification is a remedy available to Defendant in the event that his income changes.76 BY THE COURT, John J. Connelly, Esq. 134 Sipe Avenue Hummelstown, PA 17036 Attorney for Plaintiff Steven J. Behney 100 South Front Street Wormleysburg, PA 17043 Defendant, Pro Se J. Wesley Oler, Jr., J. 74 It may be doubted, however, whether the owner/president of a hearing oil corrporation which operates year-round is a "seasonal employee[ ], such as [a] construction worker [ ]." 75 See Pa. R.C.P. 1910.17(a). 76 The court is unable to find authority for Defendant's apparent position with regard to 2001 that the uncertainty of final figures for the year as of the hearing date rendered the court's order invalid. 11