Hendricks v. Haydu

The defendant, Sandor Anthony Haydu, appeals from the judgment of the trial court granting in part the motion for modification of child support filed by the plaintiff, Kimberly Hendricks. On appeal, the defendant claims that the court improperly (1) excluded the plaintiff’s bonus income in calculating her gross income when modifying the child support award; (2) failed to deviate from the child support and arrearage guidelines (guidelines); and (3) ordered the defendant to pay the modified child support amount retroactive to the date of service of the plaintiff’s motion. We agree with the defendant’s first claim, and, accordingly, we reverse in part the judgment of the court.1 The record reveals the following relevant facts and procedural history. The parties, who never married, have four children together.2 On August 17, 2011, the parties entered into a parenting agreement. On November 29, 2011, the court, Malone, J., rendered judgment ordering the defendant to pay $95 per week in child support. On August 22, 2012, the plaintiff filed a motion for modification seeking, inter alia, an increase in child support due to the defendant’s change in employment status. The court, S. Richards, J., heard testimony on April 11, May 7, and June 5, 2013, from both parties, as well as the defendant’s witness, James Pierson, vice presidentforcorporatehumanresourcesatHexcelCorporation (Hexcel). At trial, the defendant introduced four exhibits relevant to the issues on appeal: (1) the plaintiff’s employment offer letter from Hexcel; (2) the plaintiff’s 2012 earningssummary;(3)theplaintiff’s2013earningssummary through March 31, 2013; and (4) the plaintiff’s participant statement showing whether stock options had vested or would vest in the future. The offer letter provided that the plaintiff could participate in Hexcel’s deferred compensation plan, which consisted of a qualified 401(k) component and a nonqualified component. In this plan, the plaintiff could elect to defer receiving part of her base salary and annual bonus. The offer letter also explained that Hexcel provided the plaintiff with two bonus plans. The management incentive compensation plan (MICP) was a cash bonusplan consisting of a‘‘target cash incentive equal to 40% of [the plaintiff’s] annual base salary.’’ The long-term incentive plan (LTIP) was an equity bonus compensation plan consisting of stock options. The compensation range for this plan was between 44 percent to 66 percent of the plaintiff’s ‘‘then-current base pay . . . .’’ It paid out the LTIP in two forms of stock options, namely, restricted stock units (RSU) and performancerestrictedstockunits(PRSU).Hexcelgranted theRSUonthebasisofhowlongtheplaintiffcontinued

employmentwiththecompany.ThePRSUwasaperformance based stock bonus that would only be awarded if the performance criteria were met. The2012 earningssummaryshowedthat theplaintiff was compensated with her base salary, that she was awarded her MICP cash bonus, and that she deferred approximately $25,000 into the deferred compensation plan. The 2012 earnings summary revealed that the plaintiff was awarded RSUs but was not awarded PRSUs.Theplaintiff’s2013earningssummaryindicated that she received the annual MICP and LTIP bonuses. It also showed that she deferred approximately $100,000 into the deferred compensation plan. Finally, theplaintiff’sparticipantstatementindicatedthepotential income of her stock options. It reflected that thousands of various stock options would vest through 2015.3 While explaining the RSU, Pierson testified that the plaintiff’s 2012 earnings summary deduction column contained an entry that reflected ‘‘taxes that [were] taken from the [RSU] income that [was] received.’’ (Emphasis added.) Also, when questioned about the ‘‘categories of income that [the plaintiff] receive[d] in addition to the base [salary],’’ Pierson testified that she received the MICP, LTIP, and deferred compensation. Moreover, in describing the RSU and PRSU, Pierson acknowledgedthat‘‘[t]hoseshareshaveanobviouseconomic value . . . which we calculate and it becomes W-2 income.’’ (Emphasis added.) However, regarding the nonqualified component of the deferred compensation plan, Pierson explained that once the plaintiff deferred money from either her base salary or annual bonus into the nonqualified component of the plan, it became ‘‘an asset of the company.’’4 Althoughtheplaintiff’sbonuseswerenotguaranteed, she had received her MICP cash bonus every year of her employment and Pierson believed that the MICP and LTIP bonuses were in all ‘‘likelihood . . . [to] continue into the future.’’ Indeed, Pierson testified that there was no ‘‘way to determine . . . the future of those potential payouts.’’ Reinforcing the fact that the bonuseswerenotguaranteed,theplaintifftestifiedthat in 2012 Hexcel changed its bonus structure making it ‘‘more difficult to receive the higher bonuses.’’5 OnNovember14,2013,thecourtissueditsmemorandum of decision.6 The court found that the plaintiff was employed by Hexcel since September, 2009, with acurrentannualbasesalaryof$274,735.Thecourtalso found that ‘‘the plaintiff ha[d] the potential to receive . . . two types of bonuses,’’ one type in the form of a cash bonus and the other type in the form of stock options that ‘‘vest over several years and are valued as of the date of vesting.’’ As to the defendant, the court found that he was unemployed from September, 2011 to April, 2012, when he was hired as a controller in a

New York City bakery. His annual salary was $85,000. Pursuant to § 46b-215a-1 et seq. of the Regulations of Connecticut State Agencies, both parties submitted worksheets calculating their respective support obligations. The court rejected the parties’ worksheets and prepared its own worksheet ‘‘based on the actual incomefiguresofthepartiesassetforthintheirrespective financial affidavits . . . .’’7 Without expressly finding the gross income for either party, the court calculatedtheplaintiff’snetweekly incometobe$3402 and the defendant’s to be $1090. The parties’ combined net weekly income, then, was $4492, of which 75.73 percentwasattributedtotheplaintiffand24.27percent was attributedto thedefendant.8 Pursuantto theguidelines, the court found the presumptive minimum child support obligation to be $686 perweek. See Fox v. Fox, 152 Conn. App. 611, 623, 99 A.3d 1206, cert. denied, 314 Conn. 945, 103 A.3d 977 (2014). Thereafter, the court ordered the defendant to pay $166 per week in child support,i.e.,his24.27percentshareofthetotalsupport. The court also ordered, inter alia, the child support paymentretroactivetothedateoftheplaintiff’sservice of the motion. This appeal followed. On appeal, the defendant claims that the court erred in calculating the plaintiffs gross income. Specifically, he argues that the court erred by not ‘‘recogniz[ing] the evidence adduced at trial showing that the plaintiff received [a bonus] award for every year of her employment . . . .’’ We agree. We first set forth the standard of review and applicable law governing the defendant’s claim. ‘‘An appellate court will not disturb a trial court’s orders in domestic relations cases unless the court has abused its discretion or it is found that it could not reasonably conclude as it did, based on the facts presented. . . . In determining whether a trial court has abused its broad discretionindomesticrelationsmatters,weallowevery reasonable presumption in favor of the correctness of its action. . . . Notwithstanding the great deference accorded . . . a trial court’s ruling . . . may be reversed if, in the exercise of its discretion, the trial courtappliesthewrongstandardoflaw.’’(Internalquotation marks omitted.) Misthopoulos v. Misthopoulos, 297 Conn. 358, 372, 999 A.2d 721 (2010). ‘‘[GeneralStatutes§]46b-86governsthemodification or termination of . . . [a] support order after the date of . . . judgment. . . . [T]he applicable provision of the statute is § 46b-86 (a), which provides that a final order for . . . [child support] may be modified by the trial court upon a showing of a substantial change in the circumstances of either party. . . . ‘‘Once a trial court determines that there has been a substantial change in the financial circumstances of one of the parties, the same criteria that determine an

initial award of . . . support are relevant to the question of modification. . . . More specifically, these criteria, as outlined in General Statutes § [48b-84], require the court to consider the needs and financial resources of each of the parties and their children . . . . ‘‘Thus, [w]hen presented with a motion for modification, a court must first determine whether there has beenasubstantialchangeinthefinancialcircumstances of one or both of the parties. . . . Second, if the court finds a substantial change in circumstances, it may properly consider the motion and, on the basis of the § [46b-84] criteria, make an order for modification.’’ (Internal quotation marks omitted; footnotes omitted.) Fox v. Fox, supra, 152 Conn. App. 619–21. Inachildsupportproceeding,thecourtmustfashion its initial financial orders in accordance with criteria contained in § 46b-84 (d).9 See also Bartel v. Bartel, 98 Conn.App.706,711,911A.2d1134(2006)(acknowledging that § 46b-84 (d) ‘‘require[s] consideration of the parties’ ‘amount and sources of income’ in determining the appropriate . . . size of any child support . . . award’’). The legislature also created a commission to ‘‘issue child support and arrearage guidelines to ensure the appropriateness of criteria for the establishment of child support awards . . . .’’ General Statutes § 46b215a(a);seealsoGeneralStatutes§ 46b-215b(a)(‘‘[t]he child support and arrearage guidelines issued pursuant to section 46b-215a . . . shall be considered in all determinations of child support award amounts’’). The primary purposes of the guidelines include: ‘‘To provide uniform procedures for establishing an adequate level of support for children . . . subject to the ability of parents to pay . . . [t]o make awards more equitable by ensuring the consistent treatment of persons in similar circumstances . . . [and] [t]o improve the efficiency of the court process . . . by giving courts and the parties guidance in setting the levels of awards.’’ Child Support and Arrearage Guidelines (2015),preamble,§ (c)(1)through(3),p.v.Importantly, the guidelines are based on the income shares model, which‘‘presumesthatthechildshouldreceivethesame proportion of parental income as he or she would have received if the parents lived together.’’ Id., § (d), p. v; see also Unkelbach v. McNary, 244 Conn. 350, 360, 710 A.2d 717 (1998) (recognizing public policy advanced by guidelines to ‘‘[account] for all income that would have been available to support the children had the family remained intact’’). The guidelines define gross income as the ‘‘average weekly earned and unearned income from all sources before deductions . . . .’’ (Emphasis added.) Regs., Conn. State Agencies § 46b-215a-1 (11). Gross income includes, inter alia: ‘‘salary . . . commissions, bonuses and tips . . . [and] profit sharing, deferred compensation and severance pay . . . .’’ Id., § 46b-215a-1 (11)

(A)(i),(iii)–(iv).Netincomeisdefinedas‘‘grossincome minus allowable deductions.’’ Id., § 46b-215a-1 (17). The guidelines also permit courts, in appropriate cases, to enter ‘‘a supplemental order . . . to pay a percentage of a future lump sum payment, such as a bonus. Such supplemental orders may be entered only when: (i) such payment is of an indeterminate amount; and (ii) the percentage is generally consistent with the [guidelines] schedule . . . .’’ Regs., Conn. State Agencies § 46b-215a-2b (c) (1) (B). ‘‘A supplemental order treats the unknown future lump sum payment separately from the basic current support order and is intended to account only for those instances in which the parties have knowledge of an anticipated future lump sum payment of an unknown amount, such as a bonus.’’ (Internal quotation marks omitted.) Gentile v. Carneiro,107 Conn.App. 630,643, 946A.2d871 (2008). However, our Supreme Court has stated that it broadly interprets the ‘‘definition of gross income contained in the guidelines to include items that, in effect, increase the amount of a parent’s income that is available for childsupportpurposes.’’(Emphasisadded.)Unkelbach v. McNary, supra, 244 Conn. 360; see also Tuckman v. Tuckman, 308 Conn. 194, 213–14, 61 A.3d 449 (2013) (remanding ‘‘the . . . case for a determination of what portionofthedefendant’sincomewasavailableincome for purposes of fashioning . . . child support orders’’). With these principles in mind, we turn to the plaintiff’sargument.TheplaintiffreliesonMaturov.Maturo, 296Conn.80,995A.2d1(2010),primarilyfortheproposition that when annual bonus income fluctuates, it should be excluded from the gross income calculation. Therefore, the plaintiff argues, under Maturo the court properly excluded her bonuses from the gross income calculation. Specifically, the plaintiff focuses on the court’s conclusion in Maturo that ‘‘[w]hen there is a proven, routine consistency in annual bonus income, as when a bonus is based on an established percentage of a party’s steady income, an additional award of child support that represents a percentage of the net cash bonus also may be appropriate if justified by the needs ofthechild.Whenthereisahistoryofwildlyfluctuating bonuses, however, or a reasonable expectation that future bonuses will vary substantially . . . an award based on a fixed percentage of the net cash bonus is impermissible unless it can be linked to the child’s characteristicsanddemonstratedneeds.’’(Emphasisin original.) Id., 106. The plaintiff’s reliance on Maturo is misplaced. In Maturo, the trial court made a finding regarding the value of the defendant’s annual bonus income. Id., 85. There the trial court abused its discretion, as explained by our Supreme Court, in awarding an ‘‘open-ended child support award of 20 percent, rather than 15.89 percent or less, of the defendant’s variable bonus

[because that award] violat[ed] the guideline principles that a declining percentage of the combined net family income should be awarded as the income level rises and that the percentage of any future bonus allocated for child support should be ‘generally consistent’ . . . with the percentages established in the schedule in order to ensure consistency, uniformity and equity in the treatmentof personsin suchcircumstances.’’ (Citation omitted.) Id., 97. Maturo, therefore, does not stand for the proposition that when bonus income fluctuates it should be excluded when calculating a parent’s gross income to fashion a child support award. Thecourtinthiscasemadenofindingsastowhether anyoftheplaintiff’sbonusincome,i.e.,herMICP,LTIP, or deferred compensation, could be used to calculate hergrossincome.Piersontestifiedthattheplaintiffhad elected in past years to defer part of her base salary or annualcashbonusintoHexcel’sdeferredcompensation plan, that the LTIP stock options had ‘‘obvious economic value . . . [which] becomes W-2 income,’’ and that the MICP cash bonus had been awarded to the plaintiff every year since 2009, and, in all ‘‘likelihood,’’ the bonuses would continue in the future. Pierson did notethatthesebonuseswerenotguaranteed.Nevertheless, bearing in mind that the guidelines promote the principle that a ‘‘child should receive the same proportion of parental income as he or she would have received if the parents lived together;’’ Child Support and Arrearage Guidelines (2015), preamble, § (d), p. v; the fact that the plaintiff’s bonuses are not guaranteed does not mean that a court should disregard them as a substantial source of income. Simply put, the court should have madea finding as towhether the plaintiff’s bonusincomewasavailableforinclusioninthecalculation of her gross income for the purpose of modifying child support. The plaintiff’s reliance on Tuckman v. Tuckman, supra, 308 Conn. 194, is also misplaced. In Tuckman, our Supreme Court addressed a defendant’s claim that ‘‘the trial court improperly determined that her subchapter S allocated income should be included in her annual net income. Specifically, the defendant [asserted] that the trial court improperly relied on her personal tax returns showing the taxable income of an S corporation of which she [was] a shareholder. The defendant claim[ed] that the trial court improperly relied on that income in determining alimony and child support, despite the fact that it was not available to her.’’ Id., 208–209. The court in Tuckman examined the defendant’s tax returns and noted that ‘‘a substantial portion of her taxable income for the years 2005 and 2006 was income from her share of the S corporation . . . .’’ Id., 209. Because an S corporation’s ‘‘capital gains and losses, for federal income tax purposes, pass through [it] to the individual shareholders . . . any federalincometaxliabilityoncapitalgainsistheresponsi

bility of the individual shareholder. . . . All of the earningsofsuchacompanymustbereportedasindividual income by its [shareholders].’’ (Citation omitted; internal quotation marks omitted.) Id., 209–10. In Tuckman, our Supreme Court noted the ‘‘[t]he trial court did not . . . make any finding as to what portion of the income reported on her tax returns was actually availabletothedefendantandwhatportionwasmerely ‘[pass] through earnings’ of the S corporation. In fact, the defendant’s testimony at trial indicated that none of theshareholder taxableincome wasavailable toher, butwasretainedbythecorporationforinvestment.She testified that only her salary of approximately $85,000 was available income.’’ Id., 210. Because ‘‘[t]he trial court did not make any findings as to the particular facts or circumstances of the S corporation of which the defendant was a shareholder,’’ our Supreme Court in Tuckman remanded the case for a ‘‘determination ofwhatportionofthedefendant’sincomewasavailable income for purposes of fashioning . . . child support orders.’’ (Emphasis added.) Id., 213–14. Through Tuckman, the plaintiff advances the notion that a court ‘‘should not presume that all deferred income or pass through income [is to] be used in the child support calculations.’’ Indeed, a court should not make the presumption the plaintiff cautions against. The plaintiff’s argument, however, misses the crucial point. Tuckman teaches us that a court should determine what portion of a parent’s income from bonuses is available income to fashion a child support order.10 Seeid., 213–14.Therefore, Tuckman in factcontradicts the plaintiff’s position. After a careful review of the record, including the exhibits submitted by both parties, we conclude that the court abused its discretion by failing to make any findings on how—if at all—the plaintiff’s bonuses shouldbecalculatedforthepurposeoffashioningchild support orders. The guidelines clearly include bonus and deferred compensation in the definition of ‘‘gross income.’’ Regs., Conn. State Agencies § 46b-215a-1 (11) (A). A court must consider ‘‘earned and unearned income from all sources’’ in calculating gross income tofashionchildsupportobligations.(Emphasisadded.) Id., § 46b-215a-1 (11). Therefore, we conclude that the court was obligated to make findings as to whether the plaintiff’sbonusesconstituted‘‘incomethatwouldhave been available to support the children had the family remained intact.’’ Unkelbach v. McNary, supra, 244 Conn. 360. Despite the evidence of bonuses consistently being received by the plaintiff since 2009, the court made no finding as to whether the plaintiff’s bonuses were available as income for the purpose of modifying the child support award. Rather, the court calculated the combinednetweeklyincomebasedontheparties’base

salaries and applied the result to the schedule. See Regs.,Conn.StateAgencies§ 46b-215a-2b(f)(schedule of basic child support obligations). Because the court failedtomakeanyfindingsregardingwhethertheplaintiff’sbonuseswereavailableincome,wecanonlyspeculate as to whether the bonus income is too indeterminate and should not be included as gross income. See Gentile v. Carneiro, supra, 107 Conn. App. 641–42 (‘‘the regulations make clear that only income with a reasonably ascertainable value may be included in gross income’’). Therefore, we conclude that the courtabuseditsdiscretionbymodifyingachildsupport order without determining whether the plaintiff’s bonusesconstitutedincomethatshouldhavebeenconsideredinthecourt’scalculations.See Harlow v. Stickles, 151 Conn. App. 204, 212–13, 94 A.3d 706 (2014) (reversing modification of financial orders and remanding case for trial court’s failure to consider ‘‘the defendant’s auto allowance in its calculation of his income’’).

The judgment is reversed only as to the order modifying child support, which includes the orders with respect to unreimbursed medical and childcare percentages, and the case is remanded for further proceedings consistent with this opinion.