In Re The Marriage Of: Sarah Parsons, V. Jey-hsin Chen

• Court: Court of Appeals of Washington
• Decided: August 8, 2022
• Docket: 83148-8
• Status: Unpublished

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON In the Matter of the Marriage of No. 83148-8-I JEY-HSIN CHEN, DIVISION ONE Appellant, UNPUBLISHED OPINION and

SARAH PARSONS,

Respondent.

COBURN, J. — Jey-Hsin Chen appeals the superior court’s order revising a court

commissioner’s order granting his petition to modify spousal support. Chen argues the

modification is warranted because he demonstrated a substantial change in

circumstances not considered when the spousal maintenance order was entered.

Finding no error, we affirm.

FACTS

Jey-Hsin Chen and Sarah Parsons married in 1996 and separated in September

2017. Chen petitioned for dissolution May 2018. Chen is a 50-year-old pathologist who

is a partner physician at a company called CellNetix Pathology and Laboratories.

Parsons, age 65, is a high school graduate who has been a stay-at-home mother since

the couple adopted their daughter in 2007.

The parties disputed how to calculate Chen’s income for purposes of establishing

his obligation to pay maintenance and child support. Much of this dispute revolved

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around complex tax issues regarding the nature and structure of Chen’s compensation.

As a CellNetix partner, Chen receives income in the form of partnership distributions

reported to the individual via IRS Form K-1. At the time of dissolution, Chen’s income

included a guaranteed annual salary of $240,000 plus a percentage of the company’s

net income. 1 Parsons sought a maintenance award of $15,000 per month. Chen

asserted that he is self-employed and “will have little to live on” if Parsons is awarded

more than $8,000 per month.

On August 28, 2019, following a six-day trial, the superior court entered findings

of fact and conclusions of law. The court reasoned that Parsons was entitled to a

substantial maintenance award, as she supported Chen during his education and it is

unrealistic for her to be retrained given her age. The court found that Chen’s income

should be based on his net income as shown on his end-of-year income statement, as

his K-1 income includes amounts which federal tax law requires be added back in as

gross income but which he does not actually receive. Based on Chen’s 2017 year-end

income statement, the court found his annual net income was $249,481 ($20,790 per

month). The court declined to use Chen’s 2018 year-end income statement because it

found he deliberately withheld too much for his federal taxes that year. The court

ordered Chen to pay Parsons $12,000 per month through December 2026 and $5,000

per month through December 2031, the month before Parsons’s 75th birthday.

At a post-trial hearing in September 2019, the parties notified the court that Chen

had overpaid his income taxes in 2017, not 2018. The parties then continued to debate

how best to calculate Chen’s income. Chen proposed that his income be based on his

1 Chen’s 2018 adjusted gross income was $378,095.

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2018 year-end income statement with support payments added back in or, alternatively,

his adjusted gross income from the parties’ 2018 tax return, with taxes calculated based

on his current “single” filing status. Parsons proposed using, at minimum, an adjusted

annual gross income of $432,356.

On November 7, 2019, the court entered final dissolution orders. For purposes

of calculating child support, the court adopted Chen’s proposal to use his 2018 tax

return as his adjusted gross income. Consistent with its previous findings, the court

awarded Parsons maintenance of $12,000 per month through December 2026 and

$5,000 per month through December 2031.

On November 18, 2019, Chen moved for reconsideration of the maintenance

award. Chen argued that his estimated monthly post-divorce tax liability had increased

and that after paying taxes, maintenance, retirement contributions, insurance, and child

support, his income would be substantially less than that of Parsons. He asserted that

the child support worksheet utilized to calculate maintenance did not accurately

calculate self-employment taxes, thus understating his tax liability. He stated that the

actual annual liability on his adjusted gross income was $133,043 ($11,087 monthly),

leaving him with a monthly income of $6,636 in contrast to Parsons’s monthly income of

$12,837.

On March 31, 2020, the superior court granted reconsideration in part and

ordered Chen to pay Parsons $12,000 per month for the remainder of 2020, $10,000

per month through October 2024, and $3,000 per month through December 2031. The

court was “persuaded that the amount of maintenance the Court previously ordered

may be too high” but specified that it was “not prepared to re-address taxation issues,

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as these arguments have evolved with each attempt to shape the Court’s decision.”

The impact of this order was a total reduction of $466,000 in Parsons’s maintenance

award. Three days after the court entered its final order, Chen filed a petition to modify

maintenance based on a significant reduction in income due to the COVID-19

pandemic. That modification action was later dismissed by agreed order. Chen did not

appeal the March order granting reconsideration in part.

On December 31, 2020, Chen again petitioned to modify spousal support based

on a substantial change in circumstances since the March 2020 order on

reconsideration. He argued (1) his net income is significantly less than the court

contemplated because his post-divorce income tax liability is higher, and (2) his income

has been significantly reduced due to the COVID-19 pandemic, leaving him with

$42,081 less than needed to pay his taxes for the year. In opposing modification,

Parsons argued that Chen’s increased tax liability was not a substantial change in

circumstances given that tax issues had already been addressed and briefed numerous

times during and after trial. She asserted that the superior court was aware of Chen’s

tax liability and had already considered its impact on his income when it substantially

reduced his maintenance obligation on reconsideration. She also argued that Chen

failed to demonstrate that the COVID-19 pandemic had a significant or lasting impact on

his income.

On June 25, 2021, following a hearing, a superior court commissioner agreed

with Chen that his higher taxes and the COVID-19 pandemic constituted a substantial

change in circumstances to warrant modifying maintenance and that the reduction in

income was not contemplated by either party or the court when the spousal support

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order was issued. Specifically, the commissioner found (1) the superior court’s order on

reconsideration, which stated that the court was “not prepared to re-address taxation

issues,” indicates that Chen’s present net income is significantly less than the trial court

contemplated, and (2) Chen’s income has been reduced due to the COVID-19

pandemic. The commissioner thus reduced spousal support to $7,200 per month

through October 2024 and $2,160 per month through December 2031, with a retroactive

start date of January 1, 2021. The commissioner denied both parties’ requests for an

award of attorney fees and Parsons’s request for an award of sanctions.

Parsons moved to revise the commissioner’s ruling. She argued, among other

things, that the commissioner erred by (1) failing to consider the substantial reduction in

maintenance on reconsideration, (2) failing to consider evidence about Chen’s taxes on

reconsideration that effectively matched the evidence provided on the motion to modify,

and (3) finding that the superior court’s statement about not readdressing taxation

issues on reconsideration meant that the court did not consider Chen’s tax information.

On August 23, 2021, the superior court granted revision and entered the

following findings:

A. The Commissioner’s Order incorrectly concludes the Trial Court did not already contemplate Petitioner's greater tax obligation with a single marital status, as submitted by him in his November 2019 Motion on Reconsideration.

B. Petitioner’s AGI and net income, as considered by the trial court on reconsideration, varied between 2018 and 2020, first increasing in 2019 and then decreasing in 2020. The average difference is not a significant change that was not contemplated by the Trial Court.

C. Although the Order on Reconsideration ordered a workable support amount, the 2020 support obligation ($12,000 per month before being reduced to $10,000 per month in 2021) resulted in Petitioner failing to pay his taxes and borrowing to do so.

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D. Petitioner has failed to demonstrate a substantial change of circumstances under RCW 26.09.170.

E. The Order entered by the Commissioner Pro Tern imposes an unrealistic and unfair financial burden on Respondent by ordering a retroactive start date and a significant reduction to support for the remaining eleven (11) years it is owed.

F. Petitioner has made duplicative requests to the court based on the same allegations (increased tax obligation and reduction in income due to Covid).

In its oral ruling, the revision court emphasized that it believed the commissioner’s ruling

was “inaccurate and premature” and announced it would revise “100 percent” of what

the commissioner did, thereby returning maintenance to the amount ordered on

reconsideration. The court declined Parsons’s request for an award of attorney fees

and sanctions, finding that “things are generally equalized” and that there was no

intransigence.

Chen appeals.

DISCUSSION

“On revision, the superior court reviews both the commissioner’s findings of fact

and conclusions of law de novo based upon the evidence and issues presented to the

commissioner.” State v. Ramer, 151 Wn.2d 106, 113, 86 P.3d 132 (2004). “[T]he

revision court has full jurisdiction over the case and is authorized to determine its own

facts based on the record before the commissioner.” In re Marriage of Dodd, 120 Wn.

App. 638, 644, 86 P.3d 801 (2004). “Once a judge rules on a motion for revision, any

appeal is from the judge’s decision, not the commissioner’s.” Tupper v. Tupper, 15 Wn.

App. 2d 796, 801, 478 P.3d 1132 (2020).

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Substantial Change in Circumstances

RCW 26.09.170(1)(b) provides that a spousal maintenance order may be

modified “except as otherwise provided in this section, only upon a showing of a

substantial change of circumstances.” “The phrase ‘change in circumstances’ refers to

the financial ability of the obligor spouse to pay vis-à-vis the necessities of the other

spouse.” In re Marriage of Spreen, 107 Wn. App. 341, 346, 28 P.3d 769 (2001)

(quoting In re Marriage of Ochsner, 47 Wn. App. 520, 524, 736 P.2d 292 (1987)). A

substantial change in circumstances is a change that was “not contemplated at the time

the original order [of support] was entered.” In re Marriage of Morris, 176 Wn. App. 893,

902, 309 P.3d 767 (2013). The petitioner bears the burden of demonstrating a

substantial change in circumstances warranting modification. Spreen v. Spreen, 107

Wn. App. 341, 346, 28 P.3d 769 (2001).

“The determination of whether a substantial change of circumstances justifying

modification has occurred is within the sound discretion of the trial court and will not be

reversed on appeal absent an abuse of discretion.” Fox v. Fox, 87 Wn. App. 782, 784,

942 P.2d 1084 (1997). A court abuses its discretion when its decision is based on

untenable grounds or reasons. In re Marriage of Bowen, 168 Wn. App. 581, 586, 279

P.3d 885 (2012). Substantial evidence must support the findings of fact, and those

findings must support the conclusions of law. In re Marriage of Wilson, 165 Wn. App.

333, 340, 267 P.3d 485 (2011). “Substantial evidence supports a factual determination

if the record contains sufficient evidence to persuade a fair-minded, rational person of

the truth of that determination.” Spreen v. Spreen, 107 Wn. App. at 346. A decision not

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supported by the record is untenable. State v. Rohrich, 149 Wn.2d 647, 654, 71 P.3d

638 (2003).

Chen argues the revision court erred by concluding he did not demonstrate a

substantial change in circumstances, not already considered by the superior court on

reconsideration, that warranted a change in his spousal support obligation. This is,

Chen contends, because the record shows the superior court did not consider or base

reconsideration on his unexpectedly high 2019 taxes and commensurate drop in

income. He points out that information about his actual 2019 and 2020 tax liability was

not yet available when the parties briefed the reconsideration matter in November 2019,

so the court necessarily based its ruling on estimates of his future tax liability. We

disagree with Chen.

Substantial evidence supports the revision court’s finding that the reconsideration

court “already contemplate[d] Petitioner's greater tax obligation with a single marital

status, as submitted by him in his November 2019 Motion on Reconsideration.” Chen

notified the reconsideration court that he faced a higher post-divorce income tax rate, as

a result of his single filing status. He argued that his tax liability for future years will be

around $11,100 monthly with a “single” status, in contrast to 2018, when his monthly tax

liability based on the “more advantageous ‘married’ status’” was only $7,237 per month.

Chen submitted a federal income tax summary showing that his actual annual tax

liability on his 2018 adjusted gross income would, after divorce, be $133,043 ($11,087

monthly) based on a marginal tax rate of 35 percent and an effective tax rate of 36.4

percent. Later, in support of his claim that maintenance should be further reduced

because “his actual tax liability has proven to be much greater than the amount tha[t]

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the Court contemplated,” Chen presented a federal income tax summary showing that

his tax liability on his 2019 adjusted gross income was $142,842 ($11,903.50 monthly)

based on a marginal tax rate of 35 percent and an effective tax rate of 36.5 percent.

And while Chen’s income decreased in 2020, his marginal and effective tax rates

remained the same. The increase in Chen’s post-divorce tax rate was not unexpected.

Chen also argues that the court, on reconsideration, could not have based its

ruling on Chen’s taxes, given its statement that “the Court is not prepared to re-address

taxation issues, as these arguments have evolved with each attempt to shape the

Court’s decision.” We are not persuaded this comment means the court neglected to

take tax issues into account when it exercised its discretion to grant Chen’s motion and

reduce his maintenance obligation by $466,000. The court found that the “the amount

of maintenance the Court previously ordered may be too high to result in equalizing the

incomes of the parties.” On reconsideration, in support of his argument that the spousal

support award was unreasonably high, Chen argued that his actual annual liability on

his adjusted gross income was $11,087 per month. Parsons responded that the court

should not revisit the tax calculations on which it based its spousal support award

following trial. The court nevertheless chose to equalize the parties’ incomes by

reducing Chen’s maintenance obligation by $466,000. In doing so, the court

necessarily “contemplated” Chen’s greater post-divorce tax liability.

Next, Chen argues that the revision court erred in finding that the average

difference in Chen’s net income between 2018 and 2020 “is not a significant change

that was not contemplated by the Trial Court.” He contends that his 2020 income was

severely impacted by COVID-19, resulting in a net income that constitutes a substantial

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change in circumstance. We disagree. The record shows Chen’s gross monthly

income increased in 2019, then decreased in 2020. 2 The trial court stated that Chen’s

decrease in income due to COVID “is a premature reason” to change the maintenance

order, given that “things seem to be going back to normal.” The court reasoned that,

“[i]f there is a true change in income, based on COVID over a long, long period of time,

not six months, not a year, I would say two or more years, then this can come back in

front of me to take a look at what’s going on.” The court also observed that Chen’s

income is expected to go up and down because he owns a business, “[a]nd we’re not

going to take more maintenance when his income goes up and we’re not going to take

less when his income goes down, unless there’s something that’s so dramatic and long

term that it requires readjustment.” The court stated that it would retain jurisdiction at

least “through the end of next year” to address changing circumstances that may arise.

Given that the reduction in Chen’s income due to COVID-19 may have been transitory,

the court properly exercised its discretion to “see what happens” over time. See In re

Marriage of Arvey, 77 Wn. App. 817, 821, 894 P.2d 1346 (1995) (father’s decrease in

income caused by poor return on stocks and bonds that year was not a permanent

income change warranting modifying child support).

Chen also argues that the revision court erred in finding that the commissioner’s

order imposed “an unrealistic and unfair financial burden on Respondent by ordering a

retroactive start date and a significant reduction to support for the remaining eleven (11)

years it is owed.” He asserts the record shows Parsons lives comfortably in a multi-

2 The record shows that Chen’s gross monthly income in 2018 was $38,539, $42,053 in 2019,

and $34,325 in 2020.

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million dollar home with a budget for luxuries. He further contends that no legal

authority precluded the commissioner from tying relief to the date the petition was filed.

However, Chen points to no evidence in the record indicating that Parsons’s

needs had changed since the court’s order on reconsideration. In particular, the court

found that Parsons needs to prepare for retirement and cannot be expected to

financially support herself. Moreover, Parsons argues—and Chen does not dispute—

that when the commissioner ordered a 28 percent reduction in support in June 2021, his

gross monthly income had dropped only 4.8 percent from where it was in 2018. Given

the relatively minor reduction in Chen’s income and no evidence that Parsons’s needs

had changed, the trial court did not abuse its discretion in concluding that the

commissioner’s order imposed an unfair financial burden on her.

Lastly, Chen challenges the revision court’s finding that he “made duplicative

requests to the court based on the same allegations (increased tax obligation and

reduction in income due to COVID).” He argues the finding is unwarranted because the

revision court declined to award attorney fees to Parsons on this basis. He further

argues this finding is unsupported to the extent it relates to Parsons’s claim that the

court on reconsideration previously considered Chen’s unexpectedly high taxes. The

record shows that Chen raised these issues multiple times below. Substantial evidence

supports this finding.

Attorney Fees

Parsons requests attorney fees on appeal under RAP 18.1 and RCW 26.09.140.

RAP 18.1(a) provides that we may grant attorney fees “[i]f applicable law grants to a

party the right to recover reasonable attorney fees or expenses on review.” RCW

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26.09.140 allows us to award reasonable costs and attorney fees to either party on

appeal “after considering the financial resources of both parties.” In deciding whether to

award fees on appeal pursuant to RCW 26.09.140, this court considers the merit of the

issues on appeal and the parties’ financial resources. In re Marriage of C.M.C., 87 Wn.

App. 84, 89, 940 P.2d 669 (1997). Parsons submitted an affidavit of financial need, as

required by RAP 18.1(c). Although that rule provides that a party may file and serve an

answer within seven days after service of the affidavit, Chen did not do so. We grant

Parsons’s request for an award of reasonable costs and attorney fees, subject to her

compliance with RAP 18.1(d).

Parsons also requests an award of attorney fees on appeal based on Chen’s

alleged intransigence. “When intransigence causes the party seeking attorney fees ‘to

require additional legal services,’ the parties’ relative financial resources are irrelevant.”

Bresnahan and Bresnahan, 21 Wn. App. 2d 385, 411, 505 P.3d 1218 (2022) (quoting In

re Marriage of Foley, 84 Wn. App. 839, 846, 930 P.2d 929 (1997)). “‘Intransigence’ may

be shown by ‘litigious behavior, bringing excessive motions, or discovery abuses.’” In re

Kelly and Moesslang, 170 Wn. App. 722, 740, 287 P.3d 12 (2012) (quoting In re

Marriage of Wallace, 111 Wn. App. 697, 710, 45 P.3d 1131 (2002). We decline to

award fees on this basis.

Affirmed.

WE CONCUR: