Loan Applications Can Come Back To Haunt

Many cases have been won or lost in both the child and spousal support arenas due to clever lawyers and their clients finding and introducing into evidence for the Court’s consideration recent loan applications where the adverse party claimed inflated income to secure approval of a loan application to a lender.

Now, that same person is in family court telling the judge, usually under penalty of perjury, that he or she has limited income for purposes of paying child or spousal support. 

Income stated on loan application is substantial evidence at trial supporting a court finding that it is the party's income.  A 2005 appellate court decision ruled that a trial court may properly rely on income stated on a loan application that was wildly different from that stated on tax returns.

Although case law permits a trial court to rely on income stated on a loan application, the trial court is not obligated to do so.  The trial court still has wide discretion to believe or not believe the statement of income on a loan application.  In fact, in a 2009 appellate case, In re Marriage of Berger, Mr. Berger had applied for a 1.8 million dollar construction loan.  The loan application listed his income at $65,000 per month.  The trial court did not adopt this figure as Mr. Berger’s income in the family law case.  This case went up on appeal.  The appellate court ruled that, like any other evidence, it is within the discretion of the trial court that hears and considers the evidence contained in the loan application to be persuaded or not be persuaded by the loan application evidence put before the court for review.

Nevertheless, loan applications and associated financial statements are one of the most fertile areas for discovery in support litigation. With the prevalence of refinancing, it is always a good idea to see if the other party has refinanced and, if so, to subpoena the loan records.


Richard Ross
Certified Family Law Specialist

Richard Ross is a certified family law specialist in California who is a member of the Collaborative Family Law Professionals in both Ventura and Los Angeles Counties.

Collaborative AKA No-Court Divorce - A Better Way?

Collaborative divorce is a family law procedure by which the two parties agree that they will not go to court, or threaten to do so.  The parties strive to reach a fair settlement through a series of four-way meetings between the two parties and their lawyers.   This is a relatively new approach to conflict resolution.  It is based on the realization that traditional litigation is not always helpful to families, and often is damaging.  Its popularity is increasing dramatically.

Collaborative law differs from mediation. In mediation the mediator is a neutral third party who doesn't represent either side, though each party usually has a lawyer available to consult with throughout the mediation process. 


The Collaborative process involves treating each other respectfully and satisfying the interests of all family members rather than trying to gain individual advantage.  The Collaborative process sets a positive tone so that the husband and wife can work to satisfy both of their interests.  The process can reduce unnecessary and destructive conflict and avoid litigation.

The key document in a collaborative case is the Participation Agreement. It is a contract signed by the participants, which sets forth the rules for the process.  The Participation Agreement includes a Court Disqualification Clause, which states that if the parties do not resolve the matter in the Collaborative process, neither attorney will represent the parties in any contested litigation between them. 


Thus, the Collaborative process can increase the motivation of all parties and attorneys to reach a settlement.  If negotiations break down and either husband or wife decides to proceed with a litigated court divorce, both parties need to hire new attorneys and the collaborative attorneys are out of a job.  As a result, everyone in the Collaborative process focuses exclusively on reaching agreement.  All parties and attorneys focus on negotiation from the very beginning of the process.  Collaborative attorneys work to negotiate constructively and avoid attacking the other side.  What is said in the settlement meetings remains confidential.

The Collaborative process typically involves a team of Collaborative professionals who have specialized training in collaborative divorce skills.  Using a team approach helps the couple make fully-informed, carefully considered settlement decisions, using professionals with different skills.  The team is assembled based on the individual needs of the case.  For example, separate divorce coaches, who are mental health professionals, can help one or both of the parties to deal with emotional, relationship, and parenting issues.  Child development specialists, financial and real estate professionals may be hired jointly to provide unbiased information and advice.  These specialists are neutral, which saves each party time and money hiring his or her own experts.

Collaborative professionals usually have had special training to help promote constructive settlements.  By investing the time and money for professional training, Collaborative professionals demonstrate a commitment to constructive negotiation. 


Richard Ross
Certified Family Law Specialist

Richard Ross is a certified family law specialist in California who is a member of the Collaborative Family Law Professionals in both Ventura and Los Angeles Counties.

Family Law Goes to the Dogs

We marvel at how crazy our dogs become when we arrive home from the grocery store, even though we may have been gone for only 10 minutes. It's like we have been gone for weeks.  They jump around and go nuts.  No wonder that we love our animals.  Wouldn't it be great if our kids were as excited to see us when we came home from work?  So, when dissolution of marriage occurs in California, who gets the family pet? 

Unfortunately, dogs and cats are usually treated as personal property items and are not treated as children.  Judges usually award the dog to either the husband or wife at the time of trial, but a shared visitation award regarding the family pet is not likely. A local judge recently told me a story about a case before him regarding the family dog. 

The wife had moved out of the family residence in California and relocated to Seattle Washington. Both husband and wife wanted the judge to award the dog to him or her. The judge decided to award the dog to the husband on condition that the husband gives the wife $1000 to purchase a new dog in Seattle. The judge sent the attorneys out to speak with their respective clients, to tell each the news about the judges intended decision, and to write up the judge's order. When they returned to the judge's chambers, the judge was surprised that the order provided for the wife, rather than the husband, to be awarded the dog. The attorneys explained that upon being told of the judges intended decision, the wife broke down in the courthouse hallway crying uncontrollably. After regaining control, she offered to pay husband $2500 for the family dog. The husband refused. The wife then raised her offer to $5000. The husband rejected the $5000 offer, whereupon, the wife offered the husband $7500, which he accepted.

It took 2 additional court hearing, each brought on an emergency basis, at great cost to each party, to work out the logistics of transporting the family dog from California to Seattle, Washington. Finally, the dog arrived in Seattle, only to be hit by a car and killed a week later.

A divorcing couple could sign a written agreement, called a stipulation, providing for a shared custody arrangement of a family pet, which a Court would likely honor.  However, if presented with such an issue at the time of trial, without the agreement of both parties, a family law judge would not order such a shared arrangement of the family dog or cat, but would likely award the animal to either the Husband or Wife.  This is a true story with a terrible ending. Unfortunately sad tales like this are too common in Family Court in California.

Richard Ross
Certified Family Law Specialist

Are Monetary Gifts Considered Income in Child Support Calculations?

Until 2009, it was uncertain whether monetary gifts received by a mother or father of a minor child could be considered by a court in a divorce or paternity case in calculating child support.  That year, a California Appellate Court agreed to decide that issue.  It is very common for parents to give their married children cash gifts to help them pay expenses, particularly when the married couple is young and just getting started.    Likewise, parents often help their adult single mother child or single father child with their bills.  In this 2009 case, In re Marriage of Alter, the husband’s mother had been gifting him $3,000 per month for years.  After dissolution was filed, the husband moved in and lived with his mother.  The mother then bought a house for her son to live in.  She increased her son’s “allowance” to $6,000 per month.  Of that amount, $3,000 was for him to use for his expenses, and the other $3,000 was for him to give back to his mother as rent for the house that she purchased for him to live in. 

We are now in family court and the Wife is asking the Court to consider her Husband’s receipt of gifts from his mother over the years as income to him for the purposes of calculating child support.  The Husband responded that the money he received from his mother were gifts and not income.  What is the result?

Existing California case law provided little guidance on the point. The Appellate Court agreed it is settled that the principal amount of a one-time, lump sum gift or inheritance is not income but the rents, interest, or dividends generated by the gift are income. However, no cases specifically addressed a pattern of recurring gifts.  The Court looked at other states and found that they went in different directions, with some considering gifts as income and some not. It agreed with the treatment described in the Illinois case of In re Marriage of Rogers (2004), wherein the father received gifts and loans from his family which amounted to a steady source of dependable annual income he had received each year over the course of his adult life. He had never repaid any portion of those sums, nor paid tax on them. Rogers held that these gifts fell within the definition of income contained in the Illinois statute, which defined net income as “‘the total of all income from all sources.’”

The Alter Court concluded that “nothing in the law prohibits considering gifts to be income for purposes of child support so long as the gifts bear a reasonable relationship to the traditional meaning of income as a recurrent monetary benefit.”  So, the rule is that One-Time Gifts are NOT INCOME.  However, Recurring Gifts are INCOME so long as they “bear a reasonable relationship to the traditional meaning of income as a recurrent monetary benefit.”  The Trial Court HAS DISCRETION to consider whether to include these recurring gifts as income.  Yet, the Court is NOT REQUIRED to do so.  “While regular gifts of cash may fairly represent income, that might not always be so.”

Winning The Lotto Can Be Bad News If You're Not Divorced Yet

When Holly Lahti of Rathdrum, Idaho learned that she won $190 million in the Mega Millions Lottery in January 2011, it should have been the happiest day of her life.  Under normal circumstances, TV viewers all over the country could expect to see Lahti, smiling and posing with a giant check.  Instead, Ms. Lahti’s joyous win is plagued by a looming court battle with her long-estranged husband.  Although separated for a number of years, the couple is not divorced, and, under Idaho law, Lahti’s husband may be entitled to a portion of her winnings.

In California, income (including lottery winnings)a earned by a person after the date of separation is his or her separate property.  But how does one determine what that date is?  California Courts define separation as “that condition when spouses have come to a parting of the ways with no present intention of resuming marital relations. The fact that husband and wife live in separate residences is not determinative, althought it is usually considered an important factor. The question is whether the parties' conduct evidences a complete and final break in the marital relationship”. 

Determining what constitutes a complete and final break is often a complicated task. Since intentions are, by definition, subjective, courts examine whether the parties' conduct, objectively, reflects that the marriage is over.

For instance, imagine that a spouse moves out of the family home, and lives with a new significant other for the next four years.  Many of us would consider this to be a complete and final break-up of the marriage.  Not so, said the California Court of Appeal in In re Marriage of Baragry (1977) 73 Cal.App.3d 444. 

From 1971 to 1975, Mr. Baragry thought he had the best of both worlds.  He lived with his 28-year-old girlfriend, but continued to have dinner at his former home (with his children and his wife of 20 years) several times a week.  He took his wife to social and professional events, and gave her Christmas, birthday, and anniversary cards.  In 1975, Mr. Baragry filed for divorce and claimed that the substantial sum of money he earned after 1971 was his separate property. The Court disagreed, and ruled that the marriage remained intact until 1975.  The Court may have been persuaded by the fact that Mr. Baragry continued to bring his laundry for his wife to wash and iron twice a month during the entire 4-year period that he claimed they were “separated”.

The moral of this story is that establishing the legal date of separation can be a complicated factual determination, and one may or may not be considered “separated”, regardless of one’s living arrangements.  If Holly Lahti lived in California, this may have made the difference between enjoying a $190 million prize and engaging in a protracted legal battle with an estranged husband.

Check out our blog next month for another fascinating lottery story, and find out why a certain Mrs. Rossi had to give up not half, but all of her lottery winnings!

Marina Ayzenstein
Marina is an Associate Attorney with Richard Ross Associates.