Opinion
No. FA87-0080670S
April 29, 2003
MEMORANDUM OF DECISION
On January 3, 2003, the defendant filed a motion to modify alimony on the grounds that since the date of the original order, dated August 8, 1989, there has been a substantial change in circumstances. The defendant filed a memorandum of law in which he argues that his earnings have substantially decreased, and that the plaintiff's assets and income have substantially increased.
The sole issue in this memorandum is whether the court can consider an asset distributed pursuant to a property distribution in determining a motion to modify periodic alimony. At the time of the dissolution, the defendant retained a Keogh Plan Retirement Account which had a value in the amount of $371,870.00. Since that date, the defendant has made contributions to his plan in the total amount of $181,015.00. The account currently has a value of $1,977,984.00, and the defendant makes withdrawals totaling $51,844.00 per year.
According to the defendant, the plan is an asset which was distributed to the him at the time of the dissolution. For the court to consider the withdrawals as income would be equivalent to allowing the plaintiff to share in an asset which was awarded to the defendant as part of the property settlement. The plaintiff filed a memorandum of law in which she argues that the court may consider funds distributed from the plan as income for purposes of the present motion. The plaintiff argues that the court must consider the totality of the parties' finances at the present time, and therefore must consider the defendant's IRA withdrawals.
DISCUSSION
"[U]nder our statutes and cases, modification of alimony can be entertained and premised upon a showing of a substantial change in the circumstances of either party to the original dissolution decree . . . Thus, once the trial court finds a substantial change in circumstances, it can properly consider a motion for modification of alimony." (Emphasis added.) Borkowski v. Borkowski, 228 Conn. 729, 737, 638 A.2d 1060 (1994). See also General Statutes § 46b-86.
General Statutes § 46b-86 (a) provides in relevant part: "Unless and to the extent that the decree precludes modification any final order for the periodic payment of permanent alimony or support or an order for alimony or support pendente lite may at any time thereafter be continued, set aside, altered or modified by said court upon a showing of a substantial change in the circumstances of either party . . ." (Emphasis added.)
"In general, the same factors used by the court to establish an initial award of alimony are relevant in deciding whether the decree may be modified . . . The party seeking modification bears the burden of showing the existence of a substantial change in the circumstances." (Internal quotation marks omitted.) Spencer v. Spencer, 71 Conn. App. 475, 480-81, 802 A.2d 215 (2002). "When determining whether there is a substantial change in circumstances, the court is limited in its consideration to conditions arising subsequent to the entry of the dissolution decree . . . To permit the trial court to reconsider all evidence dating from before the original divorce proceedings, in determining the adjustment of alimony, would be, in effect, to undermine the policy behind the well established rule of limiting proof of the substantial change of circumstances to events occurring subsequent to the latest alimony order — the avoidance of relitigating matters already settled." (Citations omitted; internal quotation marks omitted.) Id., 481.
The recent decision of Hillis v. Hillis, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket No. FA 00 0179465 (February 19, 2003, Shay, J.) ( 34 Conn.L.Rptr. 232), involved the similar issue of whether withdrawals from the husband's retirement plan constituted gross income for purposes of the payment of alimony. In 1971, the parties entered a settlement agreement following the dissolution of their marriage and the husband retained an IRA of "relatively modest value." Id. In 1997, the husband retired and subsequently stopped making payments to the wife. In 1998, the husband began making withdrawals from his IRA account, which then totaled over $1,200,000, in the amount of $10,000 per month. The wife brought an action to enforce the settlement agreement, and argued that she had the right to receive alimony on the basis of the defendant's IRA withdrawals. The court disagreed and held that "`gross income' does not include the husband's withdrawals from his retirement account, which are in the nature of an accrual in value of an asset retained by the husband at the time of the dissolution and/or acquired subsequent thereto." Id.
"[T]he husband retained the modest retirement account as his share of the marital property. Through appreciation and further contributions, post-dissolution, this asset has grown considerably. During this period of contribution and appreciation, the husband was simultaneously meeting his alimony obligation. In essence, the wife has had the benefit of up-front dollars for her support in the form of alimony payments from the husband's then current income, and at the same time, the husband deferred the enjoyment of a portion of his remaining income until retirement . . . [T]his court finds this to be an `accrual in value' of his asset, and not part of his gross income for calculating his ongoing alimony obligation . . ." Id.
In Denley v. Denley, 38 Conn. App. 349, 661 A.2d 628 (1995), the plaintiff appealed a denial of his motion to modify alimony, arguing that the trial court had improperly considered profits from stock options as income. The Court of Appeals held that because the plaintiff had been awarded the stock options at the time of the divorce, "the trial court should not have included profit that the plaintiff generated by exercising the stock options in its determination of whether there had been a substantial change in circumstances of the parties." Id., 354. This is because "[t]he mere exchange of an asset awarded as property in a dissolution decree, for cash, the liquid form of an asset, does not transform the property into income." Id., 353.
"Although a dramatic increase in the income of one of the parties may constitute a substantial change in circumstances, an increase in the value of assets ordinarily will not . . . Only in cases of fraud can a modification be based on an increase of the value of assets." (Citation omitted.) Simms v. Simms, 25 Conn. App. 231, 234, 593 A.2d 161, cert. denied, 220 Conn. 911, 597 A.2d 335 (1991). The parties in that case were divorced in 1979. In 1984, the defendant withdrew over $1,000,000 from his capital account, which had grown from $102,400 at the time of dissolution, to nearly $4,000,000. The remainder of his account was distributed to him in the form of treasury bonds. When he redeemed the bonds in 1989, the plaintiff moved to modify alimony, arguing that this money was income and should be considered a substantial change in circumstances warranting modification of alimony. The court disagreed with the plaintiff, and held that "the defendant's redemption of the treasury bonds . . . was . . . merely an exchange of assets." Id., 235.
In Gay v. Gay, 70 Conn. App. 772, 780, 800 A.2d 1231, cert. granted on other grounds, 261 Conn. 930, 806 A.2d 1064 (2002), the court held that "capital gains generated by an asset distributed in the dissolution decree do not fall within the purview of § 46b-86 . . ." "The plaintiff argues that the court improperly considered the capital gains that she realized from her investment accounts to be income. Specifically, she argues that because a capital gain represents the appreciation of an asset it cannot be used as the basis for a finding that there has been a substantial change in circumstances. The defendant argues that the appreciation of any asset is a reasonable basis for a court to modify alimony. We conclude . . . that the plaintiff can prevail only if the assets generating the capital gain were acquired by her prior to the divorce and distributed to her pursuant to the divorce decree." CT Page 5419 Id., 775.
In the present case, the defendant's retirement account was distributed to him at the time of the divorce. Therefore, the defendant's withdrawals from that account are "merely an exchange of assets" and may not be considered by the court for purposes of the motion to modify alimony.
This memorandum only addresses the issue posed by the parties at the preliminary hearing held on March 31, 2003 and is not to be considered a decision on the plaintiff's motion to modify.
CUTSUMPAS, J.