Court of Appeal Affirms LA Superior Court’s Decision Not to Allow Husband to Modify Support Obligation Based on a Transfer of His Business to Current Wife and Claimed Retirement

The Second District Court of Appeal affirmed Judge Larua L. Siegle’s denial of a request for modification of support in the case of In re Marriage of Kevin J. and Cathy Berman (, wherein the husband who owned a private investigation firm, had remarried and when he turned 65 years old, he handed the business to his current wife, for no consideration, signed a “Transmutation Agreement” and declared himself retired with limited income.  When he filed a request for modification of support, Judge Siegle, basically said, wait a minute.

Judge Siegle agreed that the husband was allowed to retire, which would eliminate his $50,000 salary from his business.  The remainder of husband’s income from prior years, however, in the sum of $220,000, was business income, which he would have still had if he had not transferred the business to his wife for no consideration.  Accordingly, the court imputed the business income on the husband, reduced the support obligation based on the change in circumstances which was the elimination of a salary.

Upon review, the Court of Appeal held that while a change of circumstances is sufficient grounds for modification of a support order, the court can recognize when a supporting party has made a “deliberate attempt to depress income in order to avoid a support obligation and base the support amount on the supporting party’s earning capacity rather than actual income.” (Internal quotations omitted)

The court did affirm that the holding of In re Marriage of Reynolds (1998) 63 Cal.App.4th 1373 that “no one may be compelled to work after the usual retirement age of 65 in order to pay the same level of spousal support as when he was employed,” is still the law, but it cannot be applied in a case where the supporting party has been found to have transferred the business away in bad faith to depress his income, while still benefiting from the business income from his current wife.


© 2017 Marina Manoukian