Opinion
18-P-849
11-18-2019
Phyllis HOUVOURAS v. Eleutherios HOUVOURAS.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Eleutherios Houvouras appeals from a Probate and Family Court judgment of divorce nisi enforcing the parties' prenuptial and postnuptial agreements. For the reasons discussed, the judgment is affirmed in part, and vacated in part.
Background. We summarize the facts as found by the trial judge (and based in part on uncontested facts as stipulated to by the parties). Phyllis Houvouras (wife) and Eleutherios Houvouras (husband) were married on July 4, 1987; no children were born of the marriage. The parties each have two adult children from previous marriages. Neither spouse worked during the marriage. At the time of trial, the wife was seventy-six years old and the husband ninety-three.
The parties signed a prenuptial agreement on July 2, 1987 (a few days before their wedding), and at various times during the marriage signed five postnuptial agreements amending their prenuptial agreement. The fifth, and final, postnuptial agreement was signed (in May 2004) approximately twelve years prior to their separation in March 2016; this agreement, among other things, increased the husband's alimony obligation, in the event of a divorce, to a monthly amount of $10,000.
During the course of the marriage, the husband established five charitable remainder unitrusts (CRUTs), and, with the wife's consent, transferred a substantial amount of his assets retained under the prenuptial agreement to fund the CRUTs, creating a continuous revenue stream and the parties' primary source of income during the marriage; the parties enjoyed an upper class marital lifestyle. At the time of the trial, the CRUTs generated a weekly income to the husband of $7,345.67. The wife's weekly income at the time of trial, comprised of Social Security payments and alimony received from the husband, totaled $869.31.
The husband's health precipitously declined in 2015 after he suffered two strokes. The husband moved out of the marital home the following year. The parties last lived together in March 2016. In June 2016, the wife filed a complaint for separate support (which she later amended); the husband counterclaimed. In July 2016, the husband filed a complaint for divorce.
After consolidating the two matters, the trial judge heard evidence from the parties over the course of four days during the months of June and July 2017. On December 4, 2017, the judge issued the judgment of divorce nisi (divorce judgment), along with her findings of fact and rationale, and dismissed the wife's complaint for separate support. The judgment validated and enforced the parties' prenuptial and five postnuptial agreements. In enforcing the terms of the prenuptial and postnuptial agreements, the judge ordered the husband to pay, among other things, $10,000 per month in alimony to the wife, all past due alimony owed to the wife (within five years or after his death), and all tax deficiencies owed for income tax years through and including 2015. The judge also distributed the parties' real and personal property in accordance with the terms of the agreements.
As to the parties' joint debt, which was not governed by either the prenuptial or postnuptial agreements, the judge ordered the wife to pay the outstanding credit card debt, and for the parties to share equally in any income tax liability for tax year 2016, and tax year 2017 if they filed joint tax returns for that year. On January 25, 2018, the husband filed a motion to alter or amend the judgment under Mass. R. Dom. Rel. P. 59 (e). The judge denied the motion on the same day, and the husband filed a timely notice of appeal.
Discussion. The husband argues on appeal that the trial judge erred and abused her discretion in finding the prenuptial and postnuptial agreements valid at the time of divorce, and challenges the judge's findings as to the calculation of the husband's available income. He contends that sufficient evidence was presented at trial showing that the husband's income is insufficient to both pay his obligations under the judgment, and to meet the financial demands of his current medical needs.
The trial judge determined that the prenuptial agreement signed by the parties on July 2, 1987, was valid, and "fair and reasonable" at the time of the trial under the criteria of DeMatteo v. DeMatteo, 436 Mass. 18, 35-36 (2002) (governing prenuptial agreements), and that the five postnuptial agreements were likewise valid and "fair and reasonable" under Ansin v. Craven-Ansin, 457 Mass. 283, 291 (2010) (setting forth enforceability criteria governing postnuptial agreements). As the marital estate is plagued with significant debt, and the husband's ongoing expenses are complicated, a determination as to the enforceability of the prenuptial and postnuptial agreements at the time of divorce is dependent on a careful analysis of the judge's findings with respect to the husband's expenses and liabilities. "To prevail on appeal on the basis of an assault on a judge's factual findings is no easy matter, for we accept the judge's findings of fact as true unless they are ‘clearly erroneous.’ " Millennium Equity Holdings, LLC v. Mahlowitz, 456 Mass 627, 636 (2010).
1. The husband's financial obligations to the wife. Upon finding the fifth postnuptial agreement enforceable, the judge ordered the husband to pay the wife $10,000 per month in alimony pursuant to its terms. The husband challenges the judge's finding of enforceability, arguing that the husband's medical and financial circumstances have materially changed, making the husband's compliance with the alimony provision "mathematically impossible." See Ansin, 457 Mass. at 298 (when considering whether postnuptial agreement is enforceable at time of divorce, judge may consider, among other things, "nature and substance of the objecting party's complaint"). The wife counters that the alimony provision is enforceable because the couple's financial decline was due to specific investment decisions made by the husband during the marriage. She further states that the husband's current medical expenses were fully considered by the judge before determining that the husband's income was sufficient to meet both his expenses and his contractual obligations under the parties' agreements.
While the trial judge, and the parties, addressed and analyzed each of the postnuptial agreements separately, we need only consider the terms of the most recent, the fifth postnuptial agreement, signed on May 17, 2004, focusing in particular on the alimony provision challenged by the husband.
The husband does not challenge the additional order to pay alimony arrearage in the amount of $127,500, or any additional arrearage amount accrued since the time of trial.
We have concerns with the specific calculations made by the trial judge as to the husband's weekly expenses, and, in at least one instance, the assignment of liabilities. In light of these concerns, and given the husband's current medical condition, we review the husband's expenses and liabilities to ensure that enforcement of the prenuptial and postnuptial agreements at the time of trial is "fair and reasonable." See Ansin, 457 Mass. at 291 ; DeMatteo, 436 Mass. at 35-36. See also Austin v. Austin, 445 Mass. 601, 607 (2005), quoting DeMatteo, 436 Mass. at 37 (purpose of "second look" at prenuptial agreement "is to ensure that the agreement has the same vitality at the time of divorce that the parties intended at the time of its execution").
Our review of the husband's income, minus his living expenses, assorted liabilities, and contractual obligations to the wife, begins by noting that, as the trial judge found (and the parties acknowledge), the husband has a gross weekly income of $7,345.67, paid to him quarterly from the CRUTs. The husband's alimony obligation under the fifth postnuptial agreement is $10,000 per month, or $2,307.69 weekly. Based on the husband's financial statement dated June 6, 2017 (the first day of trial), we additionally subtract $106.77 for weekly deductions related to Medicare (part B) and prescription drug coverage (part D). Subtracting the alimony ($2,307.69) and the Medicare payments ($106.77) brings the husband's weekly gross income to $4,931.21. Against this figure we will consider the husband's argument that the judge's findings relating to the calculation of his total weekly expenses were clearly erroneous. See Millennium Equity Holdings, LLC, 456 Mass. at 636.
a. The husband's weekly expenses. As a preliminary matter, we note that the judge found reasonable the husband's weekly expenses, totaling $4,356.86, as reported on page four of his June 6 financial statement. Upon review of the financial statement, it appears that this amount was at least partially determined by adding together $1,826.09 in itemized weekly expenses not already deducted from his gross weekly income; $1,269.23 per week toward paying off the parties' outstanding 2015 income tax deficiency; $263.33 in nonrecurring, one-time purchases (amortized over three years); $11.54 in charitable contributions; and $57.69 in toiletries. However, when added together, these items total only $3,427.88. It is unclear as to why the 2015 income tax deficiency ($46,716) is included in the calculation of weekly expenses rather than requiring the liability to be paid in full. Similarly, the nonrecurring purchases are also inexplicably included in this calculation of weekly expenses in an amortized amount of $263.33, rather than a one-time expense.
The husband reported a combined unpaid 2015 income tax deficiency of $46,716 owed to the Internal Revenue Service and the Commonwealth of Massachusetts.
In all, the weekly expenses calculation of $4,356.86 lacks clarity and appears to include at least two items erroneously considered ongoing weekly expenses. Accordingly, we remand for clarification and correction.
b. Income tax expense. The husband contends that the trial judge's calculation of the husband's net gross income and net disposable income was erroneous because it excluded his current tax payments. To the contrary, the trial judge calculated a weekly estimated income tax expense of $591, which represented the husband's one-half share of the parties' estimated average weekly income tax withholding (based on tax year 2016) of approximately $1,182. In the absence of any evidence to suggest that the judge's determination is incorrect, we see no basis upon which to set aside the judge's finding. Accordingly, there was no error in the judge's determination that a weekly deduction of $591 should be made against the husband's gross weekly income.
Page two of the husband's June 4, 2017 financial statement shows the deduction from his gross income of Federal and State tax withholding of $1,214.83 each week. However, the judge more accurately determined the withholding to be $1,182, by averaging the actual tax paid for the previous two years, as reported in the parties' joint income tax returns, which was the only evidence before her.
The husband contends that this assessment is without a factual basis, and that the absence of any expert or other testimony regarding his actual tax liability indicates that the judge is merely "guessing." However, as the judge noted, there was no evidence submitted concerning the tax impact of the alimony payment, and "it is conceivable that going forward, [the husband's] actual income tax liability will be less given the full deductibility of his alimony payments." As further noted by the judge, the absence of evidence, including expert or other testimony, was due to the husband's failure to provide it.
c. Insurance premiums. The husband also argues that the judge erroneously excluded the weekly premium payments he was obligated to pay for the wife's health insurance policy, the wife's long-term care insurance, and a New York Life insurance policy. We consider each item separately.
(i) Health insurance. The trial judge ordered the husband to maintain the wife on his health insurance policy and to pay all premiums. The wife reported in her June 4, 2017 financial statement that her weekly health insurance premium expense is $42.58. While the husband reported in his June 4 financial statement a weekly expense of $97.59, we are unable to determine whether this amount included the wife's premium. On remand, the judge should either clarify her treatment of this payment, or include the wife's weekly health insurance expense of $42.58 in the calculation of the husband's weekly expenses for health insurance.
(ii) Long-term care insurance. The judge also ordered the husband to pay the wife's long-term care insurance premium of $85.18 per week. The husband is again correct in noting that this payment was excluded from the husband's expenses. On remand, the judge should add $85.18 per week to the husband's weekly expenses.
The long-term care insurance policy, issued from Unum Life Insurance Company of America, was put in place on June 21, 2001, under the terms of the fifth postnuptial agreement.
(iii) New York Life Insurance policy. With respect to the New York Life Insurance premium, as the husband acknowledges, the policy is currently funding itself and thus does not incur any additional expense for the husband. Thus, there was no error in the judge's finding with respect to this item.
At the time of trial, the New York Life Insurance policy had a current net cash value of $675,364, and a net death benefit of $1,182,086.
2. Neiman Marcus credit card. In addition to the calculation of the husband's weekly expenses, the husband challenges an assortment of other liabilities, including the party responsible for the debt owed on the joint Neiman Marcus credit card. The trial judge determined that, because the parties did not address the division of their joint credit card debt in their prenuptial or postnuptial agreements, and because of the apparent disparity in the asset division as set forth in those agreements, it would be equitable to require the wife to be responsible for the parties' joint credit card liability. The judge then identified four jointly held credit cards, assigning the debt of each to the wife. The judge separately identified a "Capital One/Neiman Marcus" credit card debt, showing an outstanding balance of $75,435, as an individual liability of the husband. Pointing to trial exhibits two and ninety-four, the husband asserts that this credit card account was also jointly held, but erroneously identified by the judge as an individual liability. While the wife concedes that the account is jointly held, she argues that there is no evidence as to the identity of the other user, and suggests the credit card may have been jointly held with the husband's daughter.
The wife alternatively argues that if there was an error wherein this credit card was intentionally or inadvertently not listed as a joint account, it was harmless.
Upon review of the exhibits, and the itemized credit card liabilities set forth in the judge's findings, we agree that this particular liability was improperly omitted by the judge when she assigned the parties' joint credit card debt to the wife in the divorce judgment. Accordingly, the $75,435 outstanding balance owed on this credit card should be removed from the husband's payment obligations, and added to the total joint debt assigned to the wife (previously, $79,209.36), bringing the corrected total of the wife's payment obligation to $154,644.36.
3. Value of the wife's personal property. The husband also contends that the judge erred in failing to value the wife's possessions when those values were in evidence and uncontested. While the judge found that the wife failed to include in her financial statement certain antique furnishings, jewelry, and several fur coats, there was no credible evidence offered as to the value of the personal property or the household furnishings possessed by the wife.
The husband challenges this finding by pointing to trial exhibits forty and forty-one, claiming that these exhibits contain itemized records of the wife's purchases -- totaling $96,912 in jewelry and furs. He also points to trial exhibit forty-four, one of the postnuptial agreements, indicating that the estimated value of the home furnishings was represented in that agreement to be $95,000. Upon review, we think the husband's reliance on each of these exhibits is problematic. Trial exhibit forty is a bill from the husband's Neiman Marcus credit card account, dated June 2016, showing an outstanding balance due of $67,984.59. It does not contain an itemized record of any purchases let alone $96,912 in jewelry and furs. Trial exhibit forty-one is not included in the record on appeal, and trial exhibit forty-four includes items for which the wife had already been compensated. None of these exhibits provide evidence to suggest that the judge's determination is incorrect. As such, we discern no error in the judge's findings as to the value of the wife's personal property.
This is a different Neiman Marcus account than the one discussed previously.
4. Commingling of assets in the Merrill Lynch account. The husband further challenges the judge's finding that the parties did not commingle assets. The judge found that, during the marriage, investment income from the husband's CRUTs was deposited into a joint Merrill Lynch account. Both parties had access to the funds and the wife had a Visa credit card attached to the account. The husband paid the parties' credit card bills, household expenses, and medical expenses out of the joint account, and in the five years prior to the parties' separation, checks totaling $309,333.62 were written to the wife from the account. At some point, the account was closed (no evidence was offered at trial as to when). Despite these facts, and without citation to any supporting legal authority, the judge found that "the parties followed the [p]renuptial [a]greement by keeping their accounts separate and not commingling funds." Relying on Doucette v. Doucette, 361 Mass. 156, 157 (1972) ("there is a rebuttable presumption that money or other property delivered by a husband to his wife is intended as a gift ... for her benefit"), the wife argues that the Merrill Lynch account was not considered commingling of assets because it constituted the husband gifting or lending his spouse funds. We need not address this issue, as the account was closed prior to the issuance of the divorce judgment and there is no continuing liability. We consider the issue moot.
5. Anticipated medical expenses. While the judge found reasonable the husband's weekly expenses of $4,356.86, she did not credit the additional anticipated medical expenses the husband sought, citing insufficient credible evidence to support the expenses, especially given that they are not being currently incurred. The husband argues that his current medical condition, resulting in significant out-of-pocket expenses, constitutes changed circumstances warranting a release from his alimony obligations under the agreements as it leaves him "without sufficient property [and] maintenance" to support himself if the terms of the parties' agreements are enforced. DeMatteo, 436 Mass. at 37.
The husband notes that not only is he confined to a wheelchair and requires twenty-four hour care, he also has no long-term care insurance (which the trial judge acknowledged the husband elected to forego), and cannot supplement his income due to his disabilities and advanced age.
The trial judge's decision with respect to these additional expenses was made in the context of the judge's calculation of the husband's weekly expenses of $4,356.86. In light of our determination that this calculation needs to be revisited and corrected, we deem it appropriate to also revisit whether the husband's current medical expenses are being sufficiently met.
Conclusion. So much of the divorce judgment as pertains to the enforcement of the prenuptial and postnuptial agreements is vacated, and the matter is remanded for further proceedings consistent with this memorandum and order. The remainder of the judgment, as modified, is affirmed.
So ordered.
Vacated in part and remanded; affirmed in part