J-A27029-18
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
CHRISTINA CALLAHAN IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
v.
JAMES CALLAHAN
Appellee No. 1394 EDA 2018
Appeal from the Order Entered April 17, 2018 In the Court of Common Pleas of Northampton County Domestic Relations at No: DR-0005814 PACSES 758114428
BEFORE: BOWES, STABILE, and McLAUGHLIN, JJ.
MEMORANDUM BY STABILE, J.: FILED FEBRUARY 21, 2019
Appellant, Christina Callahan (“Mother”), appeals from the April 17,
2018 support order. We affirm.
Mother commenced this action on January 14, 2014, seeking support
from Appellee, James Callahan (“Father”), for the parties’ child born in
September of 2006. On February 21, 2014, she filed an amended complaint
in which she also sought spousal support. The parties eventually reached an
agreement as to spousal support and alimony, child support, child support
arrears, health insurance and uncovered medical expenses. The trial court
adopted the parties’ agreement by order of October 29, 2014.
On September 27, 2016, Father filed a petition for modification seeking
a decrease in support due to a decrease in income. The proceedings on that
petition culminated in a February 14, 2018 argument before the trial court. J-A27029-18
On April 17, 2018, based on the record and the parties’ argument and briefs,
the trial court entered the order on appeal. In this timely appeal, Mother
raises a single issue:
Did the trial court commit an error of law and/or abuse its discretion in calculating Father’s disposable income based upon federally taxed income calculated in his 2016 federal income tax return rather than actual cash flow?
Mother’s Brief at 6. Specifically, Father’s tax 2016 returns—one personal and
one corporate for Callahan Agency, Inc., an insurance agency Father owns—
reflect that he pays $1,886.86 per month toward the repayment of a business
loan. Mother argues that the trial court erred in deducting that amount from
Father’s monthly income for purposes of calculating his support obligation.
We conduct our review as follows:
In reviewing orders granting, denying or modifying support, this Court is limited to considering whether, based on clear and convincing evidence, the trial court abused its discretion. An abuse of discretion requires proof of more than a mere error in judgment, but rather evidence that the law was misapplied or overridden, or that the judgment was manifestly unreasonable or based on bias, ill will, prejudice, or partiality.
Since abuse of discretion allegations call for a review of the record, it is important to remember that this Court is not free to usurp the trial court's duty as the finder of fact. As this Court stated on prior occasions, [a]ppellate courts are becoming more reluctant to substitute themselves as super-support courts when they have not had the opportunity to see and hear the witnesses and so determine credibility.
Simmons v. Simmons, 723 A.2d 221, 222–23 (Pa. Super. 1998) (internal
citations and quotation marks omitted).
-2- J-A27029-18
Mother cites Labar v. Labar, 731 A.2d 1252, 1257 (Pa. 1999) for the
proposition that cash flow, not federally taxed income, determines disposable
income for purposes of calculating a support obligation. In Labar, the wife
argued that one-half of a depreciation deduction the husband’s company took
in determining the amount of taxable income passed on to its shareholders.
Id. at 1255. Our Supreme Court rejected the wife’s argument, explaining that
depreciation is not the equivalent of cash flow, and it does not result in
income. Id.
Husband and the trial court cite Cunningham v. Cunningham, 548
A.2d 611, 612 (Pa. Super. 1988), in which this Court wrote that deductions
permitted under federal income are not automatically deducted from gross
income for purposes of a support obligation. Instead, the courts will look to
actual disposable income instead of the “oft-time fictional picture” that arises
from tax deductions. Id. at 612-13. Instantly, the trial court found that each
of the deductions listed on Father’s 2016 tax return reflected an actual
reduction in his personal income. Thus, the support order is, in fact, based
on Father’s actual cash flow, in accordance with applicable law. The trial court
explained its findings in detail in its opinion of June 26, 2008. The record
supports that conclusion.
Having reviewed the parties’ briefs, the applicable law, and the record,
we affirm the order based on the trial court’s June 26, 2008 opinion. We direct
that a copy of that opinion be filed along with this memorandum.
-3- J-A27029-18
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 2/21/19
-4- Circulated 01/31/2019 10:41 AM ) )
IN THE COURT OF COMMON PLEAS OF NORTHAMPTON COUNTY COMMONWEALTH OF PENNSYLVANIA DOMESTIC RELAT�ONS SECTION
CHRISTINA CALLAHAN, ) No: DR-5814 Plaintiff ) PASCES No.: 758114428 v. ) 1394 EDA 2018 ) JAMES CALLAHAN, ) Defendant )
PENNSYLVANIA RULE OF APPELLATE PROCEDURE 192S(a) STATEMENT
o1 +"'day of June, 2018, the Court issues the AND NOW, this�
following statement pursuant to Pa.R.A.P. No. 1925(a):
Factual and Procedural History
This matter is before the Superior Court on Plaintiff's appeal of
our Order of Court dated April 10, 2018.
On January 14, 2014, Plaintiff filed a Complaint for the support
of one child, Savannah Callahan, born on September 1, 2006. See
Complaint in Support, Callahan v. Callahan, DR-5815 (C.P.
Northampton Co. Jan 14, 2014). On February 13, 2014, the parties
appeared for a conference on the child support Complaint. See
Conference Notes, Callahan, supra. (C.P. Northampton Co. Feb. 13,
2014 ). Defendant reported being the owner of his own business, the
"Callahan Agency". Id. Defendant provided his 2012 personal and
corporate tax returns, however, the Conference Officer noted several
ORIGINAL TO DOCKETING 6/26/18 SUPERIOR COURT OF PA JUN 2 6 2018 HONORABLE JENNIFER R. SLETVOVLD 1 DONALD F. SPRY, 11., ESQ. DOMESTIC RELATIONS STANLEY J. MARGLE, ESQ. SECTION LISA YANY VEISZLEMLEIN(DRS DIRECTOR) I\AI\ I/"")\ •• A .. _ .. __ -·--·--·- part-time by St. Stephen's School, earning $379. 53 bi-weekly, while
also homeschooling the child for whom support was being sought. Id.
Prior to homeschooling, Plaintiff had been employed full-time as a
teacher in the East Penn School District from 2000-2005. Id.
The Conference Officer determined that Defendant's income
should be sent to the Domestic Relations Section ("DRS") accountants
to configure his monthly net income. Id. Addressing Plaintiff's
income, the Conference Officer recommended assessing Plaintiff as an
entry-level elementary school teacher, with an assessed income of
$38,880.00. Id. This resulted in an assessed monthly gross income
for Plaintiff of $3,240.00. Id. At the conclusion of the conference, the
case was listed as "pending" based on Defendant's income being
calculated by the DRS accountants and the parties being required to
submit documentation of several expenses. Id.
On February 21, 2014, Plaintiff flied an Amended Complaint for
support requesting child support for one (1) child as well as spousal
support. Subsequently, the DRS accountants configured a net monthly
income for Defendant of $3,074.37. See, Conference Officer Follow Up
Notes, Callahan, supra. (C.P. Northampton Mar. 3, 2014). The
Conference Officer determined that Plaintiff should not be given
consideration for an extracurricular activities expense, as Defendant
did not agree to them. Id. The Conference Officer also determined
2 that Defendant should not be given consideration for the claimed
health insurance payments, as he failed to submit verification of the
cost thereof. Id. The Conference Officer recommended that
Defendant's support obligation for the one child be set at $552.00 per
month plus 20% on arrears. Id. Spousal support was not addressed
at the time of this conference, as Defendant had not received the
Amended Complaint and did not consent to address spousal support at
that time. Id.
On March 3, 2014, the Honorable Paula A. Roscioli entered an
Order of Court directing Defendant to pay child support, for the
support of one child, in the amount of $662.00 per month. See Order
of Court, Callahan, supra. (C.P. Northampton Mar. 3, 2014).
Defendant's support obligation was allocated $552.00 for current
support and $110.00 for arrears. Id. The support obligation was
based upon Plaintiff's assessed monthly net income of $2,582.56 and
Defendant's net income, as determined by the DRS accountants, of
$3,074.37. Id. Arrears were set, as of March 3, 2014, at $1,454.16.
Id. On March 11, 2014, Plaintiff filed a demand for a de nova hearing
of the March 3, 2014 Order. See Demand for De Novo Hearing,
Callahan, supra. (C.P. Northampton Mar. 11, 2014).
On April 24, 2014, a conference was held on Plaintiff's claim for
spousal support. See Conference Notes, Callahan, supra. (C.P.
3 ) )
Northampton Apr. 24, 2014). Defendant did not contest spousal
support, however, based on the incomes previously established for the
child support calculations, the Conference Officer determined that
there was not a monetary basis for spousal" support. Id. On April 24,
2014, Judge Roscioli entered an Order dismissing Plaintiff's Complaint
for spousal support as the record indicated, in accordance with the
Uniform Support Guidelines, that there was no monetary basis for
spousal support. Id. The parties were directed to comply with the
Order of Court dated March 3, 2014. Id,
On May 7, 2014, Plaintiff filed a demand for a de nova hearing of
the April 24, 2014 Order. The parties were advised that the objections
to the April 24, 2014 Order would be heard on August 25, 2014, when
the de nova hearing on the prior order was scheduled to be heard.
See Correspondence, Callahan, supra. (C.P. Northampton May 14,
2014).
On August 25, 2014, the parties appeared before the Honorable
Michael J. Koury, Jr. for the hearings on the parties' respective
demands for de nova hearing. At that time, the parties entered into
an agreement pursuant to which, beginning October 1, 2014,
Defendant would pay 3 years and 3 months of spousal
support/alimony in the amount of $1,050.00, which would be non-
modifiable. See Notes of Transcript ("N.T."), de nova hearing, 8/25/14
4 ) )
at 3:22-4: 1. Defendant was required to pay for health insurance for
Plaintiff through March 31, 2015. Id. at 4:2-3. Pursuant to the
parties' agreement, child support arrears were reset to $2,500.00 as
of August 25, 2014, and Defendant was to pay $1,200.00 per month in
child support for one child and provide health insurance for the child
through March 2015. Id. at 4:3-8. Arrears were to be paid off at the
rate of $60.00 per month. Id. at 4: 16-19. Uncovered medical
expenses were to be paid 70% by Defendant, 30% by Plaintiff. Id. at
6:3. On August 25, 2014, Judge Koury entered an Order adopting the
parties' agreement as an Order of Court. See Order, Callahan, supra.
(C.P. Northampton Aug. 25, 2014).1
On October 29, 2014, Judge Koury entered an Order directing
that the "Order of Court dated 8/25/14 is hereby amended for child
and spousal support, the Domestic Relations Section having no
jurisdiction to enforce other provisions of agreement." See Order of
Court, Callahan, supra. (C.P. Northampton Nov. 4, 2014). The Order
also indicated that all other stipulations in the prior Order of Court,
dated March 3, 2014, remained in full force and effect. Id. On
November 6, 2014, the October 6, 2014 docket entry was amended to
read as follows:
1 The docket entries in this matter reflect that the Order adopting the agreement of the parties was received by DRS on September 9, 2014, and docketed on October 6, 2014.
s And now, this 25th day of August, 2014, the Court hereby adopts the agreement of the parties as an Order of Court. Recv'd 9/9/14. Beginning 10/1/14 Husband will pay 3 years and 3 months of spousal support, which would convert to post divorce alimony upon the entry of a divorce decree in the amount of $1,050/month, non-modifiable. Child support arrears reset at $2,500 as of 10/1/14. Defendant to pay $1,200/month for child support defendant will continue to pay child and wife's healthcare through March 2015. Parties further agree as part o. the divorce matter husband will retain his business and will retain the marital home in exchange for any other claims other than the spousal support and alimony. Arrears to be paid at $60/month. Defendant is liable for 70% �f unreimbursed medical expenses.
See Order, Callahan, supra. (C.P. Northampton Nov. 6, 2014).
On September 27, 2016, Defendant filed a Petition for
Modification seeking to decrease the support order due to having a
current decrease in income, along with an allegedly pending further
decrease in income in January 2017. See Petition for Modification,
Callahan, supra. (C.P. Northampton Sept. 27, 2016). On November 9,
2016, the parties appeared for a conference on the Petition for
Modification. See Summary of Trier of Fact, Callahan, supra. (C.P.
Northampton Nov. 9, 2016). At the time of the conference, Defendant
submitted his 2013 and 2014 personal and corporate federal income
tax returns, but failed to submit his returns for 2015. Id. The
ti ) )
Conference Officer noted that since Defendant filed the Petition for
Modification, but had failed to document his current income,
Defendant's Petition would be denied without prejudice. Id. On
November 9, 2016, Judge Roscioli entered an Order dismissing
Defendant's Petition for Modification without prejudice as a result of
Defendant's failure to adequately document his current income. See
Order of Court, Callahan, supra. (C.P. Northampton Nov. 9, 2016).
Defendant was permitted to apply fur a modification upon the filing of
his 2015 personal and corporate Federal tax returns. Id. The October
29, 2014 Order remained in full force and effect. Id.
On November 15, 2016, Defendant filed a demand for a de nova
hearing of the November 9, 2016 Order. See Demand for De Novo
Hearing, Callahan, supra. (C.P. Northampton Nov. 15, 2016). The
parties appeared for a de nova hearing on December 7, 2016. On that
date, Judge Roscioli entered an Orc:ier remanding the case to DRS for a
conference. See Order, Callahan, supra. (C.P. Northampton Jan. 18,
2017). The Order noted that if Defendant failed to provide his 2015
tax returns, his petition would be dismissed with prejudice. Id.
On February 2, 2017, the parties appeared for the ordered
conference. See Summary of Trier of Fact. Callahan, supra. (C.P.
Northampton Feb. 2, 2017). The Conference Officer recommended,
with the agreement of the parties, that Plaintiff continue to be
7 assessed as an entry-level teacher earning $38,800 .00 per year,
resulting in an assessed monthly net income for Plaintiff of $2,363.00.
Id. Defendant submitted his 2015 personal and corporate income
taxes, and the Conference Officer determined that Defendant had a
monthly disposable income of $1,972.00. Id. The parties reported
already being divorced, and the Conference Officer requested a copy of
the parties' divorce decree as DRS had not been notified of the divorce
being finalized. Id. Thereafter, the Conference Officer received a copy
of the divorce decree, dated July 1, 2015, and the parties' Property
Settlement Agreement. See Conference Follow Up Notes, Callahan,
supra. (C.P. Northampton Feb. 21, 2017). The Conference Officer
noted that the spousal support was to be converted to alimony and
that alimony was set to terminate on January 1, 2018 as per the
parties' prior agreement. Id. The Conference Officer determined that,
considering the $1,050.00 alimony as income to Plaintiff and an
expense for Defendant, Plaintiff's assessed monthly net income was
$3,529.00 while Defendant had a monthly net income of $922.00. Id.
Utilizing those incomes, the conference office determined that there
was no basis for child support. Id.
On March 21, 2017, Judge Roscioli entered an Order of Court
directing Defendant to pay alimony in the sum of $1,050.00 per month
in accordance with the parties' Property Settlement Agreement. See
8 Order of Court, Callahan, supra. (C.P. Northampton Mar. 21, 2017).
The Order for alimony was noted to be not modifiable by Domestic
Relations, and was only modifiable by written agreement or Order of
Court in the parties' Northampton County divorce matter. Id.
Effective July 1, 2015, spousal support was converted to alimony
based on the parties' agreement . Id, Alimony was set to terminate on
January 1, 2018. Id. The Order stated that in accordance with the
Uniform Support Guidelines, there was no monetary basis for child
support, effective September 27, 2016, when Defendant filed his
Petition for Modification. Id. An overpayment by Defendant in the
amount of $6,157.79 was remitted without prejudice. Id.
On March 29, 2017, Plaintiff filed a demand for a de nova
hearing, and the parties were ordered to appear at a modification
hearing on April 26, 2017. The hearing was rescheduled several
times, and on May 23, 2017, the parties appeared before Judge
Roscioli for the de novo hearing on the March 21, 2017 Order.
Following a hearing on that date, the matter was continued until July
24, 2017 for depositions of the parties to be completed. See Order of
Court, Callahan, supra. (C.P. Northampton Jun. 5, 2017).
The parties appeared before the underslgned on July 24, 2017.
On that date, we entered an Order: 1) directing Defendant to file his
2016 tax returns with DRS by August 31, 2017; 2) directing that
9 depositions of the parties be completed within 60 days; and 3)
scheduling argument for the October 2017 de novo hearing list. See
Order of Court, Callahan, supra. (C.P. Northampton Jul. 24, 2017).
The argument, scheduled for October l 6, 2017, was continued at
Plaintiff's request and was rescheduled to December 18, 2017. On
December 18, 2017, the parties appeared before the undersigned, and
we entered an Order of Court continuing the case to February 14,
2018. See Order of Court, Callahan, supra. (C.P. Northampton Dec.
18, 2017). Defendant's counsel was granted 30 days to submit a
brief, and Plaintiff's counsel was given 10 days thereafter to file a
responsive brief. Id.
The parties timely filed their briefs and submitted the transcripts
of their respective depositions, and counsel for the parties appeared
before the undersigned on February 14, 2018 for argument. On April
10, 2018, we entered the Order of Court currently on appeal, which
provides as follows:
For the time period on [sic] September 27, 2016 through December 31, 2017, Order is entered at $349.00 per month for the support of one (1) child, namely, Savannah Callahan, born September 1, 2006.
Order takes into consideration Alimony award of $1,050.00 per month payable to Christina Callahan.
Effective January 1, 2018, Allrnonv is hereby terminated.
10 ) )
Defendant's liability for uncovered medical expenses is 34%.
Order is hereby modified to $592.00 per month allocated $538.00 for the support of one (1) child plus $54.00 to apply toward arrears effective January 1, 2018.
Order is entered based on all parties agreed earning capacity for Plaintiff of $38,330.00 annually as a teacher. This is an assessed monthly gross of $3,233.00 and an assessed monthly net of $2,663.00.
Order is entered based on Defendant's 2016 Federal Income Tax Return. Defendant has a disposable monthly net of $2,907 .00.
In accordance with Order of Court dated March 21, 2017 overpayment to Plaintiff in the sum of $6,157.79 is reinstated.
Defendant's request for a deviation due to Plaintiff receiving monetary gifts from Plaintiff's parents is denied.
Income attachment modified.
In the event health insurance coverage for dependents on Order terminates, both parties are responsible to provide insurance if available at a reasonable cost.
Defendant's liability for uncovered medical expenses is 52%.
Excess amount has been included in the Order in the event arrears should accrue in the future. No arrears being owed at present, wages are attached for the basic amount of the Order only. Upon arrears accruing, the wage attachment will be modified without further notice to the parties.
11 ) )
Calculations appended.
Order of Court, Callahan, supra. (C.P. Northampton Apr. 10, 2018).
On May 8, 2018, Plaintiff filed her Notice of Appeal of the April
10, 2018 Order. See Notice of Appeal,· Callahan, supra. (C.P.
Northampton May 8, 2018). On May 9, 2018, we entered an Order of
Court directing Plaintiff to file a "Statement of Errors Complained Of"
pursuant to Pa.R.A.P. No. 1925(b) within 21 days and to comply with
Pa.R.A.P. No. 1911 and Pa.R.J.A. 5000.1 through 5000.11 forthwith.
See Order of Court, Callahan, supra. (C.P. Northampton May 9, 2018).
On May 29, 2018, Plaintiff filed her "Concise Statement of Matters
Complained of on Appeal Pursuant to Pa.R..A.P. 1925(b)" (hereinafter
"Concise Statement"). Plaintiff raises one (1) issue on appeal,
averring that "[t]he Trial Court committed an error of law and/or
abused its discretion in calculating Defendant's disposable income
based upon Federally taxed income calculated in his 2016 Federal
income tax return rather than actual cash flow." See Concise
Statement, Callahan, supra. (C.P. Northampton May 29, 2018).
Discussion
It is respectfully submitted that Plaintiff's appeal is without merit
and should be dismissed. Contrary to Plaintiff's assertion, it was not
an error of law or an abuse of discretion to calculate Defendant's
disposable income based upon Federally taxed income as calculated in
12 ) )
his 2016 Federal income tax return for purposes of determining his
support obligation. It is respectfully suggested that Defendant's 2016
corporate and personal Federal taxes accurately reflect Defendant's
income for the calculation of his child support obligation.
Scope and standard of review
It is well established that "[i]n reviewing an order entered in a
support proceeding, an appellate court has a limited scope of review."
Kotzbauer v. Kotzbauer, 937 A.2d 487, 489 (Pa. Super. 2007)
(quoting Commonwealth ex rel. Cann v. Cann, 418 A.2d 403, 404-405
(Pa. Super. 1980)). "The trial court possesses wide discretion as to
the proper amount of child support: and a reviewing court will not
interfere with the determination of the court below unless there has
been a clear abuse of dlscretion." Id. In revlewinq a child support
order, "[t]he function of the appellate court is to determine whether
there is sufficient evidence to sustain the order of the hearing judge."
Id.
"On appeal, a trial court's child support order will not be disturbed
unless there is insufficient evidence to sustain it or the court abused its
discretion in fashioning the award." Haley v. Haley, 549 A. 2d 1316,
1317 (Pa. Super. 1988) (quoting Fee v. Fee, 496 A.2d 793, 794 (Pa.
Super. 1985)). A finding of abuse will be made only upon a showing
of clear and convincing evidence. Id. (citing Koller v. Koller, 481 A.2d
13 ) )
1218 (Pa. Super. 1984)). A finding of abuse of discretion should not
be made lightly. Id., 549 A.2d at 1317 (citing Hartley v. Hartley, 528
A.2d 233 (Pa. Super. 1987)); see also, Shindel v. Leedom, 504 A.2d
353 (Pa. Super. 1986). "An abuse of discretion is not merely an error
of judgment; rather, it occurs when the law is overridden or
misapplied, or the judgment exercised is manifestly unreasonable or
the result of partiality, bias, or ill will." Kotzbauer, supra. (citing In the
Interest of M.S.K., 936 A.2d 103 (Pa. Supr!r. 2007)).
Plaintiff's appeal is without merit.
As set forth above, Plaintiff has raised a single issue as to our
April 10, 2018 Order, specifically alleging that we committed an error
of law and/or abused our discretion in calculating Defendant's
disposable income based upon Federally taxed income calculated in his
2016 Federal income tax return rather than "actual cash flow." It is
respectfully submitted that it was not an error of law or an abuse of
discretion to use the amounts set forth in Defendant's 2016 personal
and business tax returns to calculate his Income for child support
purposes as the tax returns accurately reflect Defendant's disposable
income.
Plaintiff argues that Defendant's personal and business tax
returns do not accurately reflect Defendant's cash flow for support
purposes. See Plaintiff's Reply Brief, Callahan, supra. (C.P.
J /l. ) )
Northampton Jan. 29, 2018); Plaintiff's Brief at p. 4-5, Callahan,
supra. (C.P. Northampton Dec. 18, 2017). Plaintiff asserts that
"[w]hen determining a support obligor's disposable income Federally
taxed income is not the measure, rather cash flow, Labar v. Labar, 731
A.2d 1252 (Pa. 1999)." Plaintiff's Brief at p. 4, Callahan, supra. (C.P.
Northampton Dec. 18, 2017). Plaintiff further notes that "[d]eductions
allowed under Federal tax law which do not represent actual reductions
in personal income for a support obligor will not be allowed in the
disposable income calculation." Id. (citing Labar, supra). Plaintiff also
avers that "[i]t is actual available financial resources of the payor that
must be considered not the often fictional financial picture that
emerges after taking into account tax considerations." Id. (citing
Calabrese v. Calabrese, 682 A.2d 393 (Pa. Super. 1996)). Plaintiff's
arguments are not persuasive based upon the record in this matter.
As noted above, the transcripts of the parties' depositions were
timely filed, along with their respective briefs. 2 Defendant was
deposed on October 2, 2017. See Notes of Transcript ("N.T."),
Depositions of James Callahan & Barbara O'Dowd, Oct. 2, 2017,
Callahan, supra. (C.P. Northampton Dec. 13, 2017).3 In the course of
2 Plaintiff filed her initial brief, along with the transcripts of the parties' depositions on December 18, 2017. Defendant filed his Brief Upon De Novo Review on January 17, 2018. Plaintiff filed her reply brief on January 29, 2018. 3Plaintiff was also deposed on October 2, 2017, and the transcript of her deposition was filed as well. Plaintiff's testimony at her deposition did not address the issue
15 his deposition, Defendant testified that he is the owner/operator of
Callahan Agency, Inc., located in Stockertown, Pa. and that he has
owned and operated the agency since January 1, 2008. See N.T.,
Depositions of James Callahan & Barbara O'Dowd, Oct. 2, 2017 at
4: 19-5:3. Defendant identified a 2016 Federal tax return for Callahan
Agency, Inc. that was marked as Plaintiff's Exhibit 3 and a 2016
Federal tax return for James Callahan that was marked as Plaintiff's
Exhibit 4. Id. at 5: 13-18. Following the identification of various
exhibits, counsel for Plaintiff temporarily concluded Defendant's
deposition to depose his paralegal reqardinq the copying and
segregation of various documents produced by Defendant. Id. at 6:6-
8: 19. Defendant's paralegal identified Plaintiff's Exhibits 14 and 15 as
the documents produced by Defendant to Plaintiff's counsel, along with
a series of checks written by Defendant that were also produced in
discovery. Id.
Upon the resumption of Defendant's deposition, Defendant
identified several "attachments" to Exhibit 14 that represented his
total income for 2016. Id. at 10:8-11:11. Defendant then made it
clear that all of the income identified in Exhlblt 14 was included in his
2016 personal and corporate Federal tax returns. Id. at 11: 12-16.
raised on appeal, and no reference to her testimony at the deposition is necessary to address the single alleged error in this matter.
16 Defendant identified disbursements to several sales producers at the
agency and the agency's secretary/services team, totaling $23,027.00.
Id. at 11: 17-12: 20. Defendant identified expenses for the agency,
including the following: interest totaling $3,460 .00 (Id. at 12: 21-25),
a copier lease in the amount of $1,272.00 (Id. at 13:23-14:9), rent in
the amount of $9,600.00 (Id. at 14:10-19), maintenance costs totaling
$424.00 (Id. at 14: 20-15: 15: 9), insurance totaling $1,200.00 (Id. at
15:10-16), utility payments totaling $1,93}.19 (Id. at 15:17-18:1), a
car lease in the amount of $6,054.00 (Id. at 18:2-7), costs for a
business phone and data totaling $662.00 (Id. at 18:8-20: 11), an
AT&T bill in the amount of $1,960.14 (Id. at 20: 12-23: 16), postage
costs of $634.47 (Id. at 23: 7-18), office supplies costing $591.00 (Id.
at 23: 19-23), and miscellaneous expenses totaling $6 78.12 (Id. at
23:24-29:4).
Regarding the interest reflected on Attachment H to Exhibit 14,
Defendant testified that above and beyond the amounts set forth in
Attachment H, there was also a loan payment to Nationwide Insurance not reflected on the documents. Id. at 12:24-13:1. Defendant
testified that the loan payment totaled $943.83 twice per month. Id.
at 13: 2-8. Defendant indicated that he had been paying that amount
since he purchased the business approximately nine (9) years ago.
Id. at 13:9-12.
st Upon review of Defendant's personal and corporate Federal tax
returns for 2016, each of the above expenses is reflected in the
appropriate entry on the tax return form. Id. at Plaintiff's Exhibit 3
and 4. As noted in Defendant's Brief Upon De Novo Review, the loan
repayment to Nationwide insurance of $1,887 .66 per month, is set
forth in the tax return, along with the "costs of goods sold" totaling
$123,310.00 which includes the commissions and premiums paid to
Nationwide insurance and other costs of sale. Id.; Defendant's Brief
Upon De Novo Review at p. 3-4, Callahan, supra. (C.P. Northampton
Jan. 17, 2018). Defendant's corporate tax return reflects Defendant's
gross receipts of sales totaling $210, 174 and the costs of goods
totaling $123,310.00, for a total income of $86,864.00. See N.T.,
Depositions of James Callahan & Barbara O'Dowd, Oct. 2, 2017 at
Plaintiff's Exhibit 3. Deductions included in the corporate return
include repairs and maintenance ($2,302.00), rents ($9,450.00), taxes
and licenses ($1,312.00), interest ($3,460.00), advertising
($1,154.00) and "other deductior.s" totalinq $69,014.00. Id. The
"other deductions" are reflected on Statern12nt 1, attached to the
corporate return. Id. These "other deductions" include auto expenses,
equipment rentals, insurance expenses, office supplies, postage,
professional fees, professional publications, seminars, supplies,
telephone expenses, travel and utilities. See id. at Plaintiff's Exhibit 3.
18 As was noted in Plaintiff's Brief, "[d]eductions allowed under
Federal tax law which do not repres�nt act!Jal reductions in personal
income of a support obliqor will not be allowed in the disposable
income calculation. Labar [v. Labar, 731 A.2d 1252 (Pa. 1999)."
Plaintiff's Brief at p. 4, Callahan, supra. (C.P. Northampton Dec. 18,
2017) (emphasis added). In Cunningham v. Cunningham, 548 A.2d
611 (Pa. Super. 1988), the Superior Court stated as follows:
It is well established that depreciation and depletion expenses, permitted under federal income tax law without proof of actual loss, will not automatically be deducted from gross income for purposes of determining awards of alimony and equitable distribution. In determining the financial responsibilities of the parties to a dissolving marriage, the court looks to the actual disposable income of the parties ... Depreciation and depletion expenses should be deducted from gross income only where they reflect an actual reduction in the personal income of the party_ claiming the deductions, such as where, e.g., he or she actually expends funds to replace worn equipment or purchase new reserves.
Cunningham v. Cunningham, 548 A.2d 611, 612-13 (Pa. Super. 1988)
(emphasis added).
Contrary to Plaintiff's assertions, each of the deductions claimed
by Defendant in his corporate and personal tax returns for 2016 did, in
fact, reflect an actual reduction in Defendant's personal income.
Therefore, each of the deductions discussed herein were appropriately
considered in determining Defendant's disposable income for child
19 support calculation purposes, and it was not an error of law or abuse
of discretion to utilize the tax returns. See Cunningham, supra.
After review of Defendant's 2016 corporate and personal Federal
tax returns, it was determined that Defendant has a disposable
monthly net income of $2,907 .00. That amount was then properly
utilized in calculating Defendant's support obligation in accordance
with the guidelines and formula set forth in Pa.R.C.P. No. 1910.16-1
through 1910 .16-4. In accordance with that calculation, Defendant
was ordered to pay $592.00 per month, allocated $538.00 for the
support of one child plus $54.00 towards arrears. See Order of Court,
Callahan, supra. (C.P. Northampton Apr. 10, 2018).
Conclusion
Upon a full review of the record in the instant matter, it is clear
that Plaintiff's appeal is without merit. Defendant's 2016 Federal tax
returns included deductions that reflected actual reductions in
Defendant's income. It was not an error of law or an abuse of
discretion to calculate Defendant's disposable income based upon the
figures contained in his 2016 Federal tax returns, as those tax returns
accurately reflected Defendant's actual cash flow. Based upon the
above, it is respectfully suggested that Plaintiff's appeal is without
merit and should be denied.
20 �s1 � wJ BY THF. COURT
��i SLETVOLD, J.