J-A10014-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
LORI JOHNSON DUPRE IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
v.
KENNETH JAMES DUPRE
No. 740 WDA 2015
Appeal from the Order April 9, 2015 In the Court of Common Pleas of Allegheny County Family Court at No(s): FD 09-008294016
BEFORE: GANTMAN, P.J., BENDER, P.J.E., and PANELLA, J.
MEMORANDUM BY PANELLA, J. FILED AUGUST 05, 2016
Appellant, Lori Johnson Dupre (“Mother”), appeals from the order
entered in the Court of Common Pleas of Allegheny County, which set forth
the amount of child support her ex-husband, Kenneth James Dupre
(“Father”), owed for the parties’ two minor children. Specifically, Mother
argues that the trial court erred in failing to include Father’s proportional
share of the retained earnings1 held in his partnership as income available
for support. For the reasons that follow, we reverse the trial court’s support
order.
____________________________________________
1 “Retained earnings” refer to a business’s accumulated profits, i.e., the net sum of the business’s yearly profits and losses. See Rohrer v. Rohrer, 715 A.2d 463, 464 n. 2 (Pa. Super. 1998). J-A10014-16
Father is the managing partner and owner of 45.5% of Dupre Capital
Partnership (“Dupre Capital”). The other partners are Father’s family
members. The only asset held by Dupre Capital is a Charles Schwab
investment account. For the tax year 2013, Father’s share of Dupre Capital
increased in value by $244,344. Father did not withdraw any funds in 2013
and has not taken any distributions since Dupre Capital was formed.
The trial court ruled that Father’s undistributed earnings should not be
included in his income calculation because the decision to retain the earnings
had been a “business decision,” and Father proved that retaining the
earnings was “necessary to maintain or preserve … [Dupre Capital].” Trial
Court Opinion, at 6. In support of its conclusion, the trial court relied on
Father’s testimony that Dupre Capital was meant to be a long-term
investment set up so that the partners could withdraw from it upon
retirement. See id. The trial court cited Father’s position that withdrawing
his funds from Dupre Capital would “set a bad precedent” and would
increase the risk for the other partners. Id., at 7. Finally, the trial court
noted that there was no evidence that Father’s decision to retain the
earnings was an effort to shield income from his support obligation. See id.
Our standard of review for a child support order is well-settled.
When evaluating a support order, this Court may only reverse the trial court’s determination where the order cannot be sustained on any valid ground. We will not interfere with the broad discretion afforded the trial court absent an abuse of the discretion or insufficient evidence to sustain the support order. An abuse of discretion is not merely an error of judgment; if, in
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reaching a conclusion, the court overrides or misapplies the law, or the judgment exercised is shown by the record to be either manifestly unreasonable or the product of partiality, prejudice, bias or ill will, discretion has been abused. In addition, we note that the duty to support one’s child is absolute, and the purpose of child support is to promote the child’s best interests.
Kimock v. Jones, 47 A.3d 850, 854 (Pa. Super. 2012) (citations omitted).
Support orders “must be fair, non-confiscatory and attendant to the
circumstances of the parties.” Fennell v. Fennell, 753 A.2d 866, 868 (Pa.
Super. 2000) (citation omitted). “[I]n determining the financial
responsibilities of the parties to a dissolving marriage, the court looks to the
actual disposable income of the parties.” Id. (citation omitted). “[W]hen
determining income available for child support, the court must consider all
forms of income.” Berry v. Berry, 898 A.2d 1100, 1104 (Pa. Super. 2006)
(citation omitted); see also Pa.R.C.P. 1910.16-2(a). The Domestic Relations
Code defines “income” as follows.
“Income.” Includes compensation for services, including, but not limited to, wages, salaries, bonuses, fees, compensation in kind, commissions and similar items; income derived from business; gains derived from dealings in property; interest; rents; royalties; dividends; annuities; income from life insurance and endowment contracts; all forms of retirement; pensions; income from discharge of indebtedness; distributive share of partnership gross income; income in respect of a decedent; income from an interest in an estate or trust; military retirement benefits; railroad employment retirement benefits; social security benefits; temporary and permanent disability benefits; workers' compensation; unemployment compensation; other entitlements to money or lump sum awards, without regard to source, including lottery winnings; income tax refunds; insurance compensation or settlements; awards or verdicts; and any form of payment due to and collectible by an individual regardless of source.
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23 Pa.C.S.A. § 4302.
In regards to business income, this Court has held that “[w]hen a
payor spouse owns his own business, the calculation of income for child
support purposes must reflect the actual available financial resources of the
payor spouse.” Fitzgerald v. Kempf, 805 A.2d 529, 532 (Pa. Super. 2002)
(internal quotation marks and citation omitted). Thus, all benefits flowing
from business ownership must be considered in determining income
available for a support obligation. See Fennell, 753 A.2d at 868. A business
owner “cannot avoid a support obligation by sheltering income that should
be available for support by manipulating … distribution amounts.” Id.
In Fennell, this Court held that the retained earnings of father, who
was a minority owner of an S-corporation, did not constitute income because
father did not have a controlling interest in the corporation and had no
control over the decision of whether or not he would receive a distribution.
See id., at 869. However, in holding as such, this Court cautioned, “[o]ur
holding herein does not create a presumption that corporate retained
earnings per se are to be excluded from available income for purposes of
support calculations.” Id. Rather, “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 still will bear the burden of proving that such
actions were necessary to maintain or preserve the business.” Id. (citation
and internal quotations omitted).
-4- J-A10014-16
Although Fennell involved an S-corporation, rather than a
partnership, we find the legal principles to be guiding in the instant matter.
Here, Father is the managing partner of Dupre Capital and has complete
control over whether he receives a distribution from the partnership. See
N.T., Support Hearing, 9/29/14, at 117. Thus, Father has the burden of
proving that retaining the earnings was “necessary to maintain or preserve”
Dupre Capital. See Fennell, 753 A.2d at 869.
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J-A10014-16
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
LORI JOHNSON DUPRE IN THE SUPERIOR COURT OF PENNSYLVANIA Appellant
v.
KENNETH JAMES DUPRE
No. 740 WDA 2015
Appeal from the Order April 9, 2015 In the Court of Common Pleas of Allegheny County Family Court at No(s): FD 09-008294016
BEFORE: GANTMAN, P.J., BENDER, P.J.E., and PANELLA, J.
MEMORANDUM BY PANELLA, J. FILED AUGUST 05, 2016
Appellant, Lori Johnson Dupre (“Mother”), appeals from the order
entered in the Court of Common Pleas of Allegheny County, which set forth
the amount of child support her ex-husband, Kenneth James Dupre
(“Father”), owed for the parties’ two minor children. Specifically, Mother
argues that the trial court erred in failing to include Father’s proportional
share of the retained earnings1 held in his partnership as income available
for support. For the reasons that follow, we reverse the trial court’s support
order.
____________________________________________
1 “Retained earnings” refer to a business’s accumulated profits, i.e., the net sum of the business’s yearly profits and losses. See Rohrer v. Rohrer, 715 A.2d 463, 464 n. 2 (Pa. Super. 1998). J-A10014-16
Father is the managing partner and owner of 45.5% of Dupre Capital
Partnership (“Dupre Capital”). The other partners are Father’s family
members. The only asset held by Dupre Capital is a Charles Schwab
investment account. For the tax year 2013, Father’s share of Dupre Capital
increased in value by $244,344. Father did not withdraw any funds in 2013
and has not taken any distributions since Dupre Capital was formed.
The trial court ruled that Father’s undistributed earnings should not be
included in his income calculation because the decision to retain the earnings
had been a “business decision,” and Father proved that retaining the
earnings was “necessary to maintain or preserve … [Dupre Capital].” Trial
Court Opinion, at 6. In support of its conclusion, the trial court relied on
Father’s testimony that Dupre Capital was meant to be a long-term
investment set up so that the partners could withdraw from it upon
retirement. See id. The trial court cited Father’s position that withdrawing
his funds from Dupre Capital would “set a bad precedent” and would
increase the risk for the other partners. Id., at 7. Finally, the trial court
noted that there was no evidence that Father’s decision to retain the
earnings was an effort to shield income from his support obligation. See id.
Our standard of review for a child support order is well-settled.
When evaluating a support order, this Court may only reverse the trial court’s determination where the order cannot be sustained on any valid ground. We will not interfere with the broad discretion afforded the trial court absent an abuse of the discretion or insufficient evidence to sustain the support order. An abuse of discretion is not merely an error of judgment; if, in
-2- J-A10014-16
reaching a conclusion, the court overrides or misapplies the law, or the judgment exercised is shown by the record to be either manifestly unreasonable or the product of partiality, prejudice, bias or ill will, discretion has been abused. In addition, we note that the duty to support one’s child is absolute, and the purpose of child support is to promote the child’s best interests.
Kimock v. Jones, 47 A.3d 850, 854 (Pa. Super. 2012) (citations omitted).
Support orders “must be fair, non-confiscatory and attendant to the
circumstances of the parties.” Fennell v. Fennell, 753 A.2d 866, 868 (Pa.
Super. 2000) (citation omitted). “[I]n determining the financial
responsibilities of the parties to a dissolving marriage, the court looks to the
actual disposable income of the parties.” Id. (citation omitted). “[W]hen
determining income available for child support, the court must consider all
forms of income.” Berry v. Berry, 898 A.2d 1100, 1104 (Pa. Super. 2006)
(citation omitted); see also Pa.R.C.P. 1910.16-2(a). The Domestic Relations
Code defines “income” as follows.
“Income.” Includes compensation for services, including, but not limited to, wages, salaries, bonuses, fees, compensation in kind, commissions and similar items; income derived from business; gains derived from dealings in property; interest; rents; royalties; dividends; annuities; income from life insurance and endowment contracts; all forms of retirement; pensions; income from discharge of indebtedness; distributive share of partnership gross income; income in respect of a decedent; income from an interest in an estate or trust; military retirement benefits; railroad employment retirement benefits; social security benefits; temporary and permanent disability benefits; workers' compensation; unemployment compensation; other entitlements to money or lump sum awards, without regard to source, including lottery winnings; income tax refunds; insurance compensation or settlements; awards or verdicts; and any form of payment due to and collectible by an individual regardless of source.
-3- J-A10014-16
23 Pa.C.S.A. § 4302.
In regards to business income, this Court has held that “[w]hen a
payor spouse owns his own business, the calculation of income for child
support purposes must reflect the actual available financial resources of the
payor spouse.” Fitzgerald v. Kempf, 805 A.2d 529, 532 (Pa. Super. 2002)
(internal quotation marks and citation omitted). Thus, all benefits flowing
from business ownership must be considered in determining income
available for a support obligation. See Fennell, 753 A.2d at 868. A business
owner “cannot avoid a support obligation by sheltering income that should
be available for support by manipulating … distribution amounts.” Id.
In Fennell, this Court held that the retained earnings of father, who
was a minority owner of an S-corporation, did not constitute income because
father did not have a controlling interest in the corporation and had no
control over the decision of whether or not he would receive a distribution.
See id., at 869. However, in holding as such, this Court cautioned, “[o]ur
holding herein does not create a presumption that corporate retained
earnings per se are to be excluded from available income for purposes of
support calculations.” Id. Rather, “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 still will bear the burden of proving that such
actions were necessary to maintain or preserve the business.” Id. (citation
and internal quotations omitted).
-4- J-A10014-16
Although Fennell involved an S-corporation, rather than a
partnership, we find the legal principles to be guiding in the instant matter.
Here, Father is the managing partner of Dupre Capital and has complete
control over whether he receives a distribution from the partnership. See
N.T., Support Hearing, 9/29/14, at 117. Thus, Father has the burden of
proving that retaining the earnings was “necessary to maintain or preserve”
Dupre Capital. See Fennell, 753 A.2d at 869. After reviewing the record, we
find that Father has failed to prove as such.
To start, we are unconvinced that it was necessary for Father to retain
his earnings on the basis that withdrawing them would “set a bad precedent”
for the other partners. Moreover, considering the fact that Dupre Capital is a
partnership with an investment portfolio as its only asset, the instant case
stands in stark contrast to one involving an active brick and mortar
business, such as Fennell. Unlike active brick and mortar businesses, which
have fixed overheads and consistent cash flow needs, Father’s investment
account does not have regular cash flow needs. We further reject Father’s
argument that retaining the earnings was necessary because Dupre Capital
was set up to be a long-term investment that partners could withdraw from
after their retirement. Section 4302 of the Domestic Relations Code
specifically provides that “all forms of retirement” are to be included in an
income calculation. Thus, this argument has no merit.
In sum, we find that Father failed to meet his burden of proving that
retaining his earnings in Dupre Capital was necessary to maintain or
-5- J-A10014-16
preserve the business. Based upon our holding in Fennell, we find that
Father failed to show that the $244,344 in retained earnings should not be
included as income. As such, we conclude that the trial court abused its
discretion in this regard. Accordingly, we reverse the order and remand for
proceedings consistent with this decision.
Order reversed. Case remanded for further proceedings consistent
with this decision. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq. Prothonotary
Date: 8/5/2016
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