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Case of the Month Archive

September 2018

Failing to give Dad credit would result in impermissible windfall to Mom and child . . .

 

In affirmance, Fourth District holds that Dad is entitled to retroactive child support credit from child’s lump-sum catch-up payment of derivative SSDI benefits against his child support payments even though there were no child support arrearages

 

Y.H. v. M.H. (San Diego County Dept. of Child Support Services)

(July 17, 2018)

California Court of Appeal 4 Civil D071859 (Div 1) 25 Cal.App.5 th 300, 235 Cal.Rptr.3d 663, 2018 FA 1847, per Dato, J (Haller, Acting PJ and Irion, J, concurring). For DCSS: Deputy Attorney General Marina Soto, (916) 210-7912. For Dad: Bruce Beals, CFLS, (619) 321-6611, and Debra Scott, (619) 405-2572. CFLP §E.34.3.

 

Mother (Y.H.) and Father (M.H.) were married in 2001; their daughter (C) was born in 2002. The couple separated in 2003 and began disso proceedings, which they settled by a stipulated MSA. The MSA provided that the parents would have joint legal custody of C, Y.H. would have sole physical custody, and M.H. would pay guideline child support.

 

In 2004, M.H. was honorably discharged from the U.S. Marine Corps and was found to be permanently disabled from injuries he suffered in combat in Iraq. Accordingly, he “[a]t some point” began receiving VA disability benefits. In February 2006, Y.H. asked the San Diego County Dept of Child Support Services (DCSS) to enforce M.H.’s child support obligation. As of March 2007, his child support obligation was $359 per month.

 

In 2011, DCSS moved to modify child support. M.H. filed an I&E declaration, showing that his sole means of support was his $2,870 per month VA disability benefit. Y.H.’s declaration stated that she was currently unemployed and finishing her last year of college. The trial court increased M.H.’s child support payments to $719 per month, effective September 1, 2012. Meanwhile, M.H. had applied for SSDI benefits for himself and for SSDI derivative benefits for C. For the next six years, M.H. waited to see if his application was approved and faithfully paid his child support. On June 29, 2015, SSA finally approved M.H.’s application, determined that his benefits were effective on June 1, 2009, and calculated that he was entitled to a lump-sum payment of $78,057 in accrued past-due benefits, plus $1,800 per month in SDDI benefits. After withholding $19,514 from the lump-sum payment for attorney’s fees, SSA sent M.H. a check for $61,121.

 

SSA also notified Y.H. that she would be C’s representative payee for the child’s SSDI derivative benefits, which would be $596 per month beginning in July 2015. Y.H. also received a lump-sum check for $41,384, representing past-due benefits that accrued while M.H.’s application was pending. Y.H. neglected to notify DCSS that she was receiving the SSDI benefits “[f]or some months” during which SSA was withholding $544 from M.H.’s monthly SSDI benefits. At some point, DCSS began crediting C’s $589 monthly SSDI benefits against M.H.’s child support obligation. In March 2016, DCSS began withholding $123 per month from M.H.’s SSDI and credited him with his overpayments during the past 9 months.

 

M.H. subsequently filed an RFO, seeking a DCSS audit of all of the child support payments he had made and a credit for the lump-sum SSDI payment made to Y.H. on C’s behalf. When discovery requests regarding the amount of C’s monthly benefit and lump-sum payment went unanswered, M.H. filed a motion to compel. At the hearing on that motion, the trial court learned that M.H. had obtained the information by subpoena to the SSA and imposed discovery sanctions of $2,500 on Y.H. At the same time, the lower court allowed DCSS to be heard on the issues, and heard DCSS’s contention that Fam C §4504(b) did not permit a credit for the lump-sum payment because it permitted only credit for current payments or for any arrearages, of which there were none here. Given that, DCSS argued, M.H. was not entitled to a credit from the lump-sum payment in the absence of any arrearages. The trial court, however, found that Fam C §4504(b) mandated a credit against M.H.’s child support obligation. The court ordered DCSS to retroactively apply $596 per month (C’s current benefit) toward M.H.’s monthly child support obligation beginning June 2009, and specified that the SSDI derivative benefits were to be credited first, then M.H.’s voluntary payments. The trial court concluded that any excess would be subject to an offset or refund.

 

DCSS appealed, but the Fourth District modified the judgment to correct a clerical error and affirmed the judgment as modified.

 

This way, or that way . . .
On appeal, DCSS renewed its contention that Fam C §4504(b) does not permit the trial court to order a retroactive credit in the absence of arrearages. The justices pointed out that Fam C §4504(b) requires the trial court to credit the amount that a child receives in SSDI benefits against the amount that a noncustodial parent has been ordered to pay for monthly child support, unless the SSDI payments were considered when the court made its child support order. The statute also provides that any credits should be made in the order set forth in CCP §695.221, that is first against the current month’s support, then to arrears. It doesn’t specify how the remainder of the credit is to be applied if arrears do not exhaust the entire amount. Moreover, the justices reasoned, the language of the statute does not limit the mandate to credit the child’s SSDI benefits against the noncustodial parent’s child support obligation, as DCSS contended. Therefore, the panel determined, where there are no arrearages the lower court must find another way to credit the SSDI payments. With that in mind, the justices reasoned that the payments M.H. made while he was waiting for the SSA to approve his application “were essentially an advance of his support obligation.” (Emphasis in opinion.) The trial court then complied with the statutory mandate by ordering the child support credit retroactive to the months that were covered by the lump-sum payment.

 

Making history . . .
The justices then turned to the legislative history of Fam C §4504(b) to support their reasoning. They noted that a previous version of the statute contained a provision regarding lump-sum payments which required the trial court to give credit for each month for which the lump sum was made. However, the statute did not allow the trial court to order a credit against other arrearages. In 2004, the panel explained, the Legislature amended the statute to remove the provision that limited credit to each month’s payment and to add the current language which requires credit “‘toward the amount ordered by the court to be paid .’” (Emphasis added in opinion.) As the analysis of the Senate Committee on Judiciary states, the solons intended that change to allow the noncustodial parent to receive credit for the full amount of SSDI, “‘regardless of the time period the benefits represent.’” And, in furtherance of that intent, they incorporated CCP §695.221 “to further clarify that excess credit could be applied toward child support arrears .” (Emphasis in opinion.) Limiting the application of SSDI benefits by excluding arrearages, as DCSS argued, would go against both the language of the statute and the intent of the Legislature to broaden the application of credits to lump-sum payments, the panel concluded.

 

Wrong in so many ways . . .
The justices also reasoned that adopting DCSS’s reasoning “would lead to the perverse consequence of encouraging arrears by an obligor who has applied for federal benefits.” In the meantime, the panel reasoned, the child would suffer financial harm from the noncustodial parent’s failure to pay support. On the other hand, the justices pointed out, failing to give the noncustodial parent full credit would result in an impermissible windfall to the child and his or her mother. And, it would penalize men like M.H., who faithfully pay their child support obligation while waiting for their benefits applications to be approved. Summing up, the justices concluded that Fam C §4504(b) requires the trial court to give M.H. credit against his previously paid child support based on C’s lump-sum benefit payment.

 

Math mishap . . .
Finally, the panel, on its own motion, modified the opinion to correct a clerical error. That error resulted from the lower court’s assumption that C’s current benefit of $596 per month had always been that amount, and its failure to take into account cost of living increases that adjusted the amount over the years. Moreover, M.H.’s child support payments had increased from $359 per month to $719 per month. Accordingly, the justices modified the trial court’s order as to the amount of credit owed to M.H. from C’s SSDI payments from June 2009 to December 2014, and then affirmed the order as modified.

 

 

Comment

  

This is one of those cases where the reader can feel that the trial court’s determination must be right, if for no other reason than the windfall that Y.H. would get otherwise and can hope that the appellate court thinks so too. In a footnote, the justices tell us they are not expressing any view as to how the lower court should go about attributing the child’s lump-sum payment to the Dad’s past child support obligation; it could be in the form of an offset against future child support payments or a refund of the excess he already paid. They leave that for the parties and the trial court to decide.

 

 

Most family law attorneys have had a client who simply refuses to pay the child support that may accrue while something else is going on, such as a request for a modification. We may tell them that it’s better to keep paying and then look for reimbursement or an offset when the issue is concluded, but most of them are not convinced. This case may provide ammunition for convincing the client to pay.

 

 

In another footnote, the justices say they are less than impressed by DCSS’s contentions that denying a credit where no arrearages exist “serves legitimate public purposes of ‘1) maximizing support payments received by families, 2) reducing largely uncollectable support arrears totaling in the billions of dollars, and 3) improving California’s performance on federal incentive measures to ensure increased funding for the State’s Title IV-D child support program.’ These macro-level policy objectives cannot justify an inequitable windfall based on an overpayment of child support in an individual case,” they rightfully declare. In conclusion, in another footnote, the justices note that while the trial court called the father’s child support payments “‘voluntary payments,’” it recognized that he made them in compliance with a court order and for not accumulating arrearages.

 

 

 
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