Opinion
No. FA 00-0435452S
February 6, 2008
MEMORANDUM OF DECISION ON DEFENDANT'S MOTION FOR MODIFICATION (#121) AND AMENDED POSTJUDGMENT MOTION FOR CONTEMPT (#136)
The parties' 31-year marriage was dissolved by the court, Berdon, J., after an uncontested hearing on March 21, 2001. The defendant's motion for modification of alimony seeks an increased portion of the monthly pension payment that the plaintiff receives. Her amended motion for contempt claims that the plaintiff wrongfully stopped paying her weekly alimony of $350 when he started paying her a portion of his monthly pension check after he retired in January 2002 and that he has underpaid on his pension obligation under the separation agreement incorporated into the judgment of dissolution. After evidence began on July 17, the court granted the defendant leave to modify her original motion for contempt #122 to add the claim regarding cessation of the weekly alimony payments of $350. Evidence resumed after additional discovery for two more days on November 21, 2007, and December 14, 2007. During the hearing the court heard testimony from both parties, the attorney who represented the plaintiff in the dissolution proceeding, and a certified public accountant called as an expert witness by the defendant. On December 18, the court issued a written Notice that it would take judicial notice of all federal and state tax laws and tables for the years in question. Powers v. Powers, 186 Conn. 8, 10, 438 A.2d 846 (1982). When the parties and counsel appeared for closing argument on December 20, they informed the court that they had not yet received the written December 18 notice, and the court then gave both sides one week to file briefs or make requests to open the evidence based on the court's decision to take judicial notice of tax laws and tables. The plaintiff submitted a brief on January 7, 2008, after which the matter was ready for decision. For the reasons stated below, the motion for modification is granted, and the motion for contempt is granted in part and denied in part.
The plaintiff's brief objected to the court's election to take judicial notice of state and federal tax codes and tables for the relevant years. Section 2-1(d) of the Code of Evidence provides that the court may take judicial notice at any stage of the proceeding. Under § 2-2(b) of the Code, parties are entitled to notice of the court's intent to do so "and have an opportunity to be heard for matters susceptible of explanation, but not for matters of established fact, the accuracy of which cannot be questioned." Our Supreme Court approved judicial notice of federal tax statutes and regulations and the mathematical application of tax tables in Powers v. Powers, 186 Conn. 8, 10, 438 A.2d 846 (1982). Similarly, state statutes and laws are subject to judicial notice. In the present case, the court informed the parties it would consider motions to open the evidence after the court told the parties it intended to take judicial notice of federal and state tax laws. The court thus rejects the plaintiff's argument that it should not do so here.
I
CT Page 1766
Defendant's Amended Motion for Contempt
The plaintiff paid the defendant $350 per week in alimony until he retired from the fire department in January 2002, when he began paying her a portion of the monthly pension check that he began receiving. The amended motion for contempt claims that the defendant should still receive $350 per week and that the plaintiff has not paid her the full "one-half of his net Fire Department Pension based on the value of said pension as of the date of dissolution," as required by section 8 of the separation agreement, which is captioned "Alimony" and provides as follows:
The Husband shall currently pay to the Wife the sum of $350 per week as alimony and when he retires from the New Haven Fire Department . . . he will pay her one-half of his net Fire Department Pension based on the value of said pension as of the date of dissolution.
A related portion of the agreement, Section 14, captioned "Pension Plan," provides, in relevant part, that "The Wife shall receive a fifty 50% QDRO of his fire department pension payable only upon his death." The plaintiff maintains, to the contrary, that the weekly order of $350 ended when he began paying her a share of his pension, of which he maintains he has paid her full share. For the following reasons, the motion for contempt is granted in part and denied in part.
The defendant's original motion for contempt, #122, asserted that the plaintiff has not paid her "one-half of his net Fire Department Pension based on the value of said pension as of the date of dissolution," as required by section 8 of the separation agreement. After evidence began on that motion on July 17, 2007, the court granted her request to amend the motion to include the additional claim that the plaintiff's discontinuance of weekly payments to her in the amount of $350 when he began sending her a monthly portion of his retirement check violates the first clause of section 8.
Both of the defendant's claims in this motion require the court to interpret the separation agreement incorporated into the judgment of dissolution, a task governed by principles of contract law. Kremenitzer v. Kremenitzer, 81 Conn.App. 135, 139, 838 A.2d 1026 (2004).
A contract must be construed to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . .
(Internal quotation marks omitted.) Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn. 479, 498, 746 A.2d 1277 (2000). "Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms." Lawson v. Whitey's Frame Shop, 241 Conn. 678, 686, 697 A.2d 1137 (1997).
A contract is unambiguous when its language is clear and conveys a definite and precise intent . . . The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous.
(Citations omitted; internal quotation marks omitted.) United Illuminating Co. v. Wisvest-Connecticut, LLC, 259 Conn. 665, 670, 791 A.2d 546 (2002).
[A] contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself . . . [A]ny ambiguity in a contract must emanate from the language used by the parties . . . If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous.
(Internal quotation marks omitted.) B D Associates, Inc. v. Russell, Conn.App. 66, 71, 807 A.2d 1001 (2002).
When a contract term is ambiguous, the oft-repeated rule is that the intent of the parties is to be ascertained by a fair and reasonable construction of the written words in the light of the circumstances surrounding the execution of the writing and in the light of the object of the parties in executing the contract. The words used by the parties must be accorded their common meaning and usage where they can be sensibly applied to the subject matter of the contract.
(Citations omitted; quotation marks omitted.) Marcus v. Marcus, 175 Conn. 138, 142, 394 A.2d 727 (1978). In deciding the pending matter, moreover, the court must consider the entirety of the agreement for "in construing contracts, we give effect to all the language included therein, as the law of contract interpretation . . . militates against interpreting a contract in a way that renders a provision superfluous." (Internal quotation marks omitted; citations omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 14 (2008).
A Defendant's Claim That She Is Still Entitled to $350 per Week
The amended motion for contempt asserts that the use of the conjunction "and" between the first clause in section 8 ordering the plaintiff to pay alimony of "$350 per week" and the next clauses directing him to pay her half of his net pension after he retires requires the plaintiff to continue paying $350 a week after he retires in addition to half the net pension. Were that word the only pertinent one, the defendant's claim would certainly seem viable. The fourth word in that sentence, that the plaintiff "currently" pay the $350 amount, raises a legitimate possibility, however, that the parties intended, as the plaintiff claimed at the hearing before this court, for the $350 weekly alimony payment to last only until he started paying the defendant a portion of his retirement check. The separation agreement is capable of more than one reasonable construction and is hence ambiguous on this point. It is thus appropriate to consider the extrinsic evidence offered by the parties as to the meaning of this clause. Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., supra, 252 Conn. 503, fn.14. In her original motion and during the hearing before this court, the defendant herself admitted that the parties' intent had been for the $350 per week payments to end when she began receiving a part of the plaintiff's retirement check. The plaintiff offered credible evidence that this was his intent and understanding as well. This aspect of the motion for contempt is denied.
B Defendant's Claim that She Did Not Receive Half of Plaintiff's Net Pension
The defendant's other claim is that the plaintiff does not pay her the full "one-half of his net Fire Department Pension, based on the value of said pension as of the date of dissolution." The parties disagree about the meaning of the words "net Fire Department Pension," which were not specifically defined in the agreement, and how to calculate such. Since the phrase was not defined there, it should be given its "common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . ." Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., supra, 252 Conn. 498.
Two appellate cases are helpful starting points for addressing the issue here. The first is Sturtevant v. Sturtevant, 146 Conn. 644, 648, 153 A.2d 828 (1959), where the parties also disagreed about the meaning of the words "net income." The separation agreement there provided that the plaintiff would pay one-sixth of his net income as alimony and that net income would be "determined upon the basis of his Federal Income Tax Return." The plaintiff sought to deduct the amount of alimony he paid to the defendant from his gross income for purposes of determining net income. Under his theory, since alimony is tax deductible and the agreement said that net income would be determined based on the federal tax return, he could subtract his alimony payments from his gross income, and the one-sixth of his net income to be paid as alimony would therefore be less than if calculated on his income prior to deduction of alimony paid. The court disagreed, however, viewing the reference to the tax return more as a device for accurately recording the plaintiff's income than determinative of his alimony obligation:
It is apparent from the agreement that the parties felt that the defendant's net income would be properly reflected in his income tax returns when legally prepared, as they apparently were. But it is significant that the agreement did not provide that the phrase "net income," as used in the agreement, would be whatever figure, if any, was denominated "net income" in the tax return. "Net income was not defined in the agreement. Therefore it should be given its ordinary meaning as used in general accounting practice as distinguished from any special meaning it may have under the federal income tax laws.
Id., 648. Accepting and applying the definition of net income espoused by defendant's expert here, the Supreme Court rejected the plaintiff's claim there that alimony paid should be subtracted to arrive at net income:
In general accounting practice, net income, as applied to this case, would ordinarily consist of the total income received by the defendant from all sources, less the legitimate expenses of realizing it, such as office expenses or other expenses of practice. A deduction of the alimony paid to the plaintiff during the year covered by the return, even though presently authorized for income tax purposes, should not be made in computing the net income of the defendant under the agreement, since the payment of alimony would not constitute an expense incurred in realizing income.
(Citations omitted.) Id.
In Sunbury v. Sunbury, 13 Conn.App. 651, 538 A.2d 1082 (1988), the court considered a somewhat different situation. The defendant's gross weekly income there was $718, from which the trial court had allowed deductions for taxes, group life insurance, medical insurance, an IRA account and a profit-sharing plan in determining his net income. On appeal the court found that the payments to the profit-sharing plan and the IRA should not have been deducted from gross income or excluded from net income. Acknowledging the general definition of net income set forth in Sturtevant, the Appellate Court held that
For the purposes of General Statutes 46b-81 [equitable division of property of debt] and 46b-82 [awards of alimony], however, we hold that net earned income for a wage earner is the gross amount of salary, wages or commissions, less all deductions by the employer for obligatory statutory or contractual obligations of the employee. Withholding of income taxes, FICA, and wage garnishment are examples of deductions required by law. Union dues, insurance premiums and some deductions for pension plans are examples of deductions authorized by contract. Optional deductions, such as for IRAs, profit sharing plans, stock purchases, and credit union deposits are not proper deductions for a determination of net earned income for alimony or other financial orders. The latter deductions are optional and inure to the benefit of the employee. They are basically within the control of the employee and would allow him to establish the amount of his own net income were he allowed to deduct them from gross income.
CT Page 1771 Id., 661-62. The Sunbury court thus recognized that the accepted definition of net income for accounting purposes — expenses incurred in making that income — does not strictly apply for a wage earner, but that one's tax obligations are a functional equivalent.
The gross annual value of the plaintiff's pension at the time of the dissolution on March 21, 2001, was $62,973.30, or $5,427.78 per month. By the time he retired in January 2002, the value of his pension had increased. That month he paid the defendant half of the partial-month pension check he received. Since February 2002, however, he has paid the defendant half of a portion of the pension check that he calculates by deducting from the gross monthly value of his pension at the time of the dissolution a proportionate share of the taxes withheld from the gross present value of the pension. (He would determine the percentage withheld for tax from his gross monthly pension payment, multiply that percentage by the monthly value of the pension at the time of dissolution ($5,427.78 per month), subtract the resulting product from $5,427.78, and pay his ex-wife one-half the difference.)
From 2002 to 2005, the plaintiff paid the following annual amounts of alimony: $24,429 in 2002, $24,923 in 2003, $27,111 in 2004, and $27,111 in 2005. From January 2002 through the end of December 2003, the plaintiff claimed only one personal exemption on the W-4 filed with the pension administrator, who used it to determine tax withholding from his pension check, although he remarried in September 2002 and has filed joint tax returns with his new wife ever since. After he revised the W-4 form in January 2004 to claim two exemptions, the pension administrator withheld less for taxes each month, and the amount of his monthly pension check increased. The amount withheld for federal taxes thus decreased from $13,473.65 in 2002 and $12,499.80 in 2003 to $7,370.91 in 2004 and $7,319.40 in 2005, thereby increasing the annual alimony paid to the defendant from $24,923 in 2003 to $27,111 in 2004 and 2005.
Under Connecticut and federal tax law the amount of alimony paid may be deducted from total income before income tax is calculated. The defendant's taking of the alimony tax deduction from 2002 to 2005 thus reduced his federal and state tax liability for each of those years. The defendant's expert witness, accountant Martin Squire, testified that, because alimony payments are deductible from income, using the plaintiff's tax liability to determine his "net" income (and, consequently, the amount of alimony due the plaintiff) would require repeated and near endless recalculations of net income. According to Squire, alimony payments in a year reduce that year's tax liability, increase the amount of income the plaintiff has left after taxes, and require additional alimony to be paid to the defendant so that she still receives half of plaintiff's net after-tax pension income; yet that additional alimony payment further reduces his taxable income and tax liability for the year, leaves him with even more net-after tax income, and requires yet another payment of alimony to the defendant so that she receives half of plaintiff's net pension. At some undetermined point, after myriad recalculations, the additional alimony deduction would no longer reduce his tax liability because the smallest unit of American money is the penny. Squire testified that he elected not to repeat those calculations to the final penny, however, because he concluded that the plaintiff's tax liability should not be considered an expense incurred in making the fire department pension income and hence should not be deducted from his gross pension before the defendant's half portion of the pension is calculated. He testified that, in his opinion, gross income and net income are the same thing in this case.
Consistent with her expert's testimony, the defendant testified, without objection, that she had intended and believed that the term "one-half of his net Fire Department Pension" in the separation agreement meant that she would receive half of his gross pension check. Since the court does not find this part of the separation agreement to be ambiguous, her testimony about what she intended or thought this provision meant is extrinsic parole evidence that the court cannot consider; TIE Communications, Inc. v. Kopp, 218 Conn. 281, 288-89, 589 A.2d 329 (1991); but there is some textual support in the agreement for this interpretation. Section 14 of the agreement provides that "The Wife shall receive a fifty 50% QDRO of his fire department pension payable only upon his death." The parties' intent that the wife would receive half of the plaintiff's pension upon his death suggests that perhaps they intended for her to receive the same amount while he still lived. Section 14, however, does not limit the defendant's share to half of the pension value at the date of dissolution. Under this section, the defendant is to receive half of the plaintiff's total pension at plaintiff's death. Thus, although there is some convergence between sections 8 and 14, they do not correspond precisely, and there is no reason to conclude that the sections intend to provide the defendant with the exact same benefit. The parties specifically contracted that defendant would receive one-half of plaintiff's "net" pension valued as of the date of dissolution as alimony, but a greater amount, one-half of his total pension, as a property distribution at plaintiff's death.
The court thus concludes that the fairer and more reasonable construction of the written words used in the separation agreement, accorded their common, natural, and ordinary meaning and usage and as construed by our courts, is to construe the term "net" as suggested by Sunbury. There is no inherent reason why the Sunbury analysis of the meaning of net income for a wage earner should not also apply to the net income of a pensioner so that net pension income means, at minimum, gross income less the obligatory statutory obligation of the pensioner to pay state and federal income tax on that pension income. Under Sunbury, if the money withheld for taxes from a retiree's monthly pension check represented actual tax liability, those funds should not be considered part of net income. If more funds are withheld than necessary to meet the income tax obligations on the gross pension, those additional funds would not be "withholding of income taxes . . . required by law," within the meaning of Sunbury. They would instead be more like the optional deductions for IRAs described in Sunbury that inure to the benefit of the employee. To the extent that withheld funds do not pay for tax liability on the gross pension, they instead meet tax liability on other income of the retiree, and reduce his need to use other funds to pay the taxes on that other income. That is precisely what happened in the year 2003, when the pension administrator withheld more for federal taxes than the total tax liability of the plaintiff and his new wife for the entire year, despite the fact that the plaintiff's pension income was only 56% of the total income reported by plaintiff and his new wife on their 2003 joint federal tax return.
They reported pension income of $72,548, other income of $12,499.80, and total income of $130,380. Although not all of the pension income was taxable, because of the alimony deduction, all of that other income was taxable. Their total federal taxes that year were $10,551, but the pension administrator withheld $12,499.80 for federal income taxes.
Under a Sunbury analysis, then, the tax liability on a pensioner's gross income should be subtracted from that amount to determine his net income. The defendant's expert opined that such an approach cannot be applied where alimony is based on a percentage of net income, since the payments of alimony reduce tax liability, thereby increasing net income, and consequently lead to additional alimony obligation, ad infinitem. The language of the separation agreement here, however, suggests a resolution to this conundrum that is consistent with accepted judicial construction of the term net income. The separation agreement requires the plaintiff to pay the defendant "one-half of his net Fire Department Pension." Pursuant to that language, the plaintiff must first determine the value of his net pension, then pay the defendant half of that amount. At that point, he has complied with his obligation under the agreement. Such an analysis follows Sunbury by deducting tax liability on the gross pension in order to determine net income, avoids the "circular loop" described by the defendant's expert, and is consistent with Sturtevant, where the alimony obligation was to be calculated and paid before any deduction from gross income for the alimony deduction. The court thus concludes that the term "net pension income" in the parties' separation agreement means the amount remaining after deducting the tax liability on the gross pension income, without taking into consideration the fact that any alimony paid will then be tax deductible. Such a construction gives rational and logical meaning to the parties' use of the word "net" in section 8 of the separation agreement and its omission in section 14.
There yet remains, however, the task of determining the plaintiff's net pension income in each of the relevant years. Though the defendant's expert testified that one cannot determine tax on a singular portion of a person's income, the parties' separation agreement directs the plaintiff to do so. Yet federal tax liability depends not just on a taxpayer's income, but numerous other variables, including filing status (single, married filing separately, married filing jointly, etc.), spousal income, whether standard or itemized deductions are claimed, and other taxes and credits, as to all of which the agreement is silent. Many of those additional variables affecting tax liability are present in this case. The plaintiff's remarriage in 2002 entitled him to a larger deduction for personal exemptions than when he was still single, a larger "standard deduction" if deductions were not itemized, and a lower tax rate on taxable income if he and his new wife filed a married joint tax return. In all four years at issue here, the plaintiff and his wife claimed numerous deductions for home mortgage interest, real property taxes, and other allowable federal tax deductions.
There are at least three ways to determine the tax liability on the gross pension income, valued as of the date of dissolution. One would be to determine the tax liability on this amount as if it were the plaintiff's only income. Another would be to determine tax liability on his total pension income for the year and then attribute a proportionate share of that liability to the pension value as of the date of dissolution. A third would be to apportion the actual tax liability of the plaintiff and his new wife on all their income in each year to the pension valued as of the date of dissolution.
The third method does not make sense here, for it would subject the defendant's alimony to variables that have no connection with her. For example, on their joint 2005 federal income tax return the plaintiff and his wife reported total income of $132,246, taxable income of $69,682, and federal taxes due of $10,749. A proportional allocation of those federal taxes to the value of the pension at the time of dissolution would be calculated by multiplying the federal taxes due by the ratio of $62,973.30 to $132,246, or $10,749 x (62,973.30 ÷ $132,246), which equals $5,118.49; subtracting that amount from $62,973.30 leaves a difference of $57,854.81, half of which should be paid to the defendant in the amount of $28,927.41. Yet if the plaintiff and his wife had total taxable income that year of $326,450, their total federal taxes would have been $88,320, which allocated proportionately to $62,973.30 would result in taxes of $18,852.24 being attributed to the pension being divided with the defendant and a substantially reduced alimony obligation to her.
Although there is not much financial difference between methods one and two, the second more closely reflects the language of the separation agreement — that plaintiff would pay defendant "one-half of his net Fire Department Pension based on the value of said pension as of the date of dissolution." Since the dissolution value is the basis for determining the net pension, of which plaintiff must pay defendant one-half, it is consistent to determine tax liability on the basis of the dissolution value also. The court therefore concludes that the second method makes the most sense: (1) Determine what taxes would have been due on the gross value of the pension at the time of the dissolution as if that were the sole income he and his new wife had that year. (2) In doing so, use the personal exemptions, standard deductions, and tax tables available to married persons filing jointly. (3) Deduct that theoretical tax liability from the gross pension value at time of dissolution, and pay one-half that amount to the defendant.
The court also concludes that there is no valid reason to consider the plaintiff's itemized tax deductions, which could vary from year to year and would require waiting until the following year when the plaintiff's tax return was filed to determine the correct alimony. It makes more sense to calculate a theoretical tax liability based on the number of personal exemptions to which plaintiff and his new wife are entitled, apply the standard deduction for married filing jointly, and calculate tax liability on the assumption that the would claim that filing status. Since income tax rates and deductions for personal exemptions and standard deduction will be known well before year's end in most years, following this methodology will allow plaintiff to pay and defendant to receive the correct amount of alimony for a year during that specific year, rather than having to wait until the following year to make any corrections necessary because of the effect of itemized deductions on tax liability.
The court must now return to the facts of this case to determine whether to grant the motion for contempt. The table below shows the net pension as determined above: the dissolution value less, for federal tax purposes, two personal exemptions and the standard deduction for married filing jointly; the federal tax liability on the resulting amount; the state income tax liability on the dissolution value of the pension; the "net pension" after deducting federal and state tax liabilities; the defendant's half share to which she was entitled; the amount she was actually paid; and what she is now owed.
In the year 2002, plaintiff did not receive the pension for the entire year. The evidence showed that he made one weekly payment of $350 that year, and plaintiff testified that he began paying the plaintiff a portion of his fire department pension thereafter. It is therefore fair to infer that he received one year's worth of pension payments in 2002 less one week. The annual value of the pension at the time of the dissolution was $62,937.30, to which defendant was thus entitled to a prorated portion for 2002.
The amount deductible for the standard deduction for married persons filing jointly increased from $6,000 in 2002 to $6,100 in 2003, to $6,200 in 2004, and to $6,400 in 2005.
The standard deduction for married persons filing joint US tax returns increased from $7,850 in 2002 to $9,500 in 2003, to $9,700 in 2004 and to $10,000 in 2005.
2002 2003 2004 2005
Dissolution value of pension 47,938.32 47,373.30 47,073.30 46,573.30 less standard deduction less personal exemptions Federal tax liability 7,060.00 6,406.00 6,339.00 6,256.00 State income tax liability 1,826.89 2,069.00 2,069.00 2,069.00 Net pension after tax liability 54,086.41 54,498.30 54,565.30 54,648.30 Defendant's half share of net 27,043.21 27,249.15 27,282.65 27,324.15 Amount actually paid 24,429.00 24,923.00 27,111.00 27,111.00 Amount owed 2,614.21 2,326.15 171.65 213.15The methodology followed by the plaintiff here to determine how much to pay his ex-wife from the pension did not, as shown above, pay her the amount that the court has determined she was due. In fact, in 2002 and 2003, his choice to have taxes withheld for only one exemption resulted in substantial underpayments. In 2004 and 2005, on the other hand, the amount withheld by the pension administrator, after plaintiff had changed the number of exemptions for withholding from one to two, roughly corresponded to the amounts that the court has determined the defendant should have received.
The court thus finds that the plaintiff did not comply with the court order in the years 2002 through 2005 with regard to the amount of alimony he owed to the defendant. He was well aware, moreover, that the net amount to be split with the defendant could not be the result of excessive deductions from the gross pension value at the time of dissolution. Attorney Frank Kolb, who represented the plaintiff at the dissolution hearing, testified that he advised the plaintiff that, in determining how much he should pay his wife from the pension, "Mr. Brandt would be receiving a check when he retired from the City of New Haven that would have deductions taken from it. He was to take the bottom line of the check, reasonable, customary, normal deductions and then cut a check to Mrs. Brandt for half for his alimony." (Transc., 11/21/07, at 11.) When questioned further, he said:
Q. Attorney Kolb, did you ever perform calculations for Mr. Brandt to tell him what he was going to need to pay when he started receiving his pension?
A . . . I talked to Mr. Brandt about the theory of the calculations; that is to say what he was entitled to for deductions; that he, for instance, couldn't have the pension pay a large sum of money to the credit union to reduce his check so that Mrs. Brandt would end up on the short end.
Id., 19. He also said he advised the plaintiff that "he couldn't over-deduct; he couldn't under-deduct." Id., 20.
In 2002 and 2003 the plaintiff did have excessive tax withheld from the gross pension, and the resulting amounts paid to the defendant as alimony were substantially less than she should have received. For those years, the court finds his conduct wilful and holds him in contempt. In 2004 and 2005, however, the amount paid to the defendant varied only slightly from the amount she was entitled to and did not result from over-withholding by the defendant. In fact his claiming two exemptions resulted in tax withholding that approximately equaled the amount owed to the defendant. His conduct for the latter two years does not warrant a finding of contempt, for he had taken reasonable action to pay his wife one-half of the net pension to which she was entitled. Though the court will order him to pay the defendant the small amount he still owes her, the court does not find him in contempt for 2004 or 2005. "Noncompliance with a court order . . . does not mandate a finding of contempt." Marcil v. Marcil, 4 Conn.App. 403, 405, 494 A.2d 620 (1985). "It is within the sound discretion of the court to deny a claim of contempt when there is an adequate factual basis to explain the failure." Id.
The amended motion for contempt is granted on this second ground, for the years 2002 and 2003. For the years 2002 and 2003, an order of interest under General Statutes § 37-3a is appropriate, in the amount of $1,063.45 for unpaid 2002 alimony and $760.17 for unpaid 2003 alimony. The plaintiff is ordered to pay the defendant the sum of $6,225.16 in unpaid alimony for the years 2002 through 2005, and an additional sum of $1,823.62 as statutory interest within 30 days of the date of this decision.
Section 37-3a(a) of the General Statutes provides, in pertinent part, as follows: "[I]nterest at the rate of ten percent a year, and no more, may be recovered and allowed in civil actions . . . as damages for the detention of money after it becomes payable." An allowance of interest is at the discretion of the trial court, as is the rate of interest allowed. Mihalyak v. Mihalyak, 30 Conn.App. 516, 620 A.2d 1327 (1993). As the court noted in Maloney v. PCRE, LLC, 68 Conn.App. 727, CT Page 1783 755, 793 A.2d 1118 (2002), "A trial court must make two determinations when awarding compensatory interest under § 37-3a: (1) whether the party against whom interest is sought has wrongfully detained money due the other party; and (2) the date upon which the wrongful detention began in order to determine the time from which interest should be calculated." (Internal quotation marks omitted.) The court finds that the defendant should have been paid the full amount of alimony owed her for 2002 and 2003 by the end of each year. The plaintiff acted wrongfully in not doing so, and the first day of the subsequent new year was the "date upon which the wrongful detention began" and from which interest should be ordered. Accordingly, the court exercises its discretion to order statutory interest at the rate of eight percent per year on funds owed for 2002 and not paid by January 1, 2003, and on funds owed for 2003 and not paid by January 1, 2004.
C Counsel Fees
Under General Statutes § 46b-87, the prevailing party in a contempt action may be awarded a reasonable attorneys fee, and both sides have requested counsel fees for the contempt motion here. "The award of attorneys fees in contempt proceedings is within the discretion of the trial court." Tatro v. Tatro, 24 Conn.App. 180, 189, 587 A.2d 154 (1991). In Champagne v. Champagne, 43 Conn.App. 844, 685 A.2d 1153 (1996), the court upheld the trial court's refusal to award counsel fees for successfully defending against a motion for contempt because "the defendant raised a valid issue in his motion." Id., 850. Both parties have sound arguments in support of their claims. The plaintiff successfully defended against the claim that he violated an order to keep paying $350 per week, while defendant successfully pursued her claim that she had not received the full one-half of plaintiff's net pension. Although the parties may have spent significant time pretrial and during discovery on the $350 per week issue, the bulk of the hearing time was spent on the pension claim. From her own testimony, the defendant was aware that the parties had not intended for her to continue receiving $350 a week after the plaintiff retired, and yet she pursued a claim to the contrary. On the other hand, much of the hearing on the pension issue was devoted to the testimony and conclusions of the defendant's expert, whose opinion that in this case net means gross this court has emphatically rejected. On the facts of this case, therefore, the court has elected to exercise its discretion not to award counsel fees to either party.
General Statutes Section 46b-87 provides in relevant part as follows: "When any person is found in contempt of an order of the Superior Court entered under section 46b-60 to 46b-62, inclusive, 46b-81 to 46b-83, inclusive, or 46b-86, the court may award to the petitioner a reasonable attorneys fee and the fees of the officer serving the contempt citation, such sums to be paid by the person found in contempt, provided if any such person is found not to be in contempt of such order, the court may award a reasonable attorneys fee to such person."
II Defendant's Motion for Modification of Alimony
The defendant's motion to modify the amount of alimony is governed by General Statutes § 46-86(a), which provides that "[a] final order for [alimony or] child support may be modified by the trial court upon a showing of a substantial change in the circumstances of either party." Under our law, "[t]he party seeking modification bears the burden of showing the existence of a substantial change in the circumstances." (Citation omitted; internal quotation marks omitted.) Fish v. Igoe, 83 Conn.App. 398, 406, 849 A.2d 910, cert. denied, 271 Conn. 921, 859 A.2d 577 (2004). "Following such a finding, the court then answers the question of modification, taking into account the general alimony factors found in C.G.S. § 46b-82." Gervais v. Gervais, 91 Conn.App. 840, 844, 882 A.2d 731, cert. denied, 276 Conn. 919, 888 A.2d 88 (2005). "[A]lthough the trial court may consider the same criteria used to determine the initial award `without limitation,' in doing so, its inquiry is necessarily confined to a comparison between the current conditions and the last court order." (Citations omitted.) Borkowski v. Borkowski, 228 Conn. 729, 730, 638 A.2d 1060 (1994). Ultimately, the court here must decide whether "circumstances have changed since the last court order such that it would be unjust or inequitable to hold either party to it." Id., 737-38.
Section 46b-82(a) provides in pertinent part as follows: "(a) In determining whether alimony shall be awarded, and the duration and amount of the award, the court shall hear the witnesses, if any, of each party, except as provided in subsection (a) of section 46b-51, shall consider the length of the marriage, the causes for the annulment, dissolution of the marriage or legal separation, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate and needs of each of the parties and the award, if any, which the court may make pursuant to section 46b-81, and, in the case of a parent to whom the custody of minor children has been awarded, the desirability of such parent's securing employment."
The defendant's financial affidavit at the time of the divorce showed no earned income. The only income she listed was social security disability of $156.28 per week and $40 per week rent from her daughter through May 2001. She listed expenses of $796.61 per week, including $35 per week medical and dental expenses. Under the separation agreement, she would receive an additional $350 per week in alimony until the plaintiff retired, and after that she would receive half of his net pension payment. In 2002 she received an average of $470 per week as her share of the net pension, in 2003 approximately $479 per week, and for the last two years approximately $521 per week. Her financial affidavit filed at the hearing before this court listed weekly income of $703 gross and $668 net. Her expenses exceed her net weekly income by $176 per week. She meets that shortfall, she testified, by depleting her assets. The plaintiff's financial affidavit at the time of the dissolution showed weekly income of $1,221 gross and $957 net after taxes. His financial affidavit at the time of the present hearing showed weekly income of $1,361.68 gross and $1,178.68 net. The net income listed on his current financial affidavit thus exceeds the expenses he listed there by $287.90 per week. His financial affidavit does not show or reflect the tax consequences of the alimony payments he lists on his financial affidavit, which result in tax savings of close to $6,000 per year and additional net weekly income of more than $100.
The defendant was in very poor health at the time of the dissolution (and still is), and the separation agreement was drafted in consideration of the possibility that she might predecease her husband. In additional to alimony, the separation provided that the husband would pay the cost of medical benefits for the defendant for three years "and thereafter for so long as he is not retired . . ." The section of the agreement on the health insurance also specifically stated that "A termination of the Husband's obligation to pay said insurance premiums shall not be deemed a change in circumstances so as to modify alimony." The parties' agreement thus created a safe harbor that alimony could not be modified based on the plaintiff having fewer expenses because of no longer having to pay for the defendant's medical insurance. No evidence was offered at the hearing before this court on the cost to the plaintiff postjudgment in maintaining medical coverage for the defendant for those three years.
The defendant testified that she was seeking a modification of alimony because of increased medical expenses and having to pay for her own health insurance now. The plaintiff's post-trial brief argues that the increased medical expenses and cost of medical insurance were anticipated by the parties at the time of the dissolution and therefore cannot be the basis for modifying alimony. This argument is premised on the proposition that "the elimination of the unforeseeability element regarding post-judgment modifications applies only to child support" and not to alimony modifications. Plaintiff's Post-Trial Brief, at 7. General Statutes § 46b-86(a), provides that "After the date of judgment, modification of any child support order issued before or after July 1, 1990, may be made upon a showing of such substantial change of circumstances, whether or not such change of circumstances was contemplated at the time of dissolution." Plaintiff correctly argues that facially this language applies only to child support orders. In Fahy v. Fahy, 227 Conn. 505, 630 A.2d 1328 (1993), however, the Connecticut Supreme Court rejected the argument that
the legislature, by its use of the term "child support order" and by the absence of any concomitant reference to alimony orders, intended to create a different set of rules for support and alimony orders.
Id., 513. The court held, to the contrary, that to carry out the public policy of consistency between child support and alimony orders it would "extend elimination of the noncontemplation of the circumstances requirement to orders of alimony . . ." Id., 516. Hence, plaintiff's argument must fail.
Because the separation agreement provides that alimony cannot be modified based on the plaintiff no longer paying for defendant's medical insurance, the parties' agreement also prevents the defendant from basing a modification of alimony on the cost for her to provide her own health insurance. That does not preclude consideration, however, of medical expenses not covered by insurance, which have increased by approximately one hundred dollars a week, or more than $5,000 per year. Although the plaintiff argues that the increase in defendant's overall expenses is minimal and does not meet the standard of a substantial change of circumstances, the court does not agree. The fact that defendant has limited her expenses to what she believes she can afford from her income and use of assets does not mean that there has not been a substantial change of circumstances in light of her increased unreimbursed medical expenses. The court therefore finds a substantial change in circumstances.
From the defendant's financial affidavit alone, it would appear that she needs close to $200 per week net after taxes to meet her expenses. In closing argument, however, her counsel stated that the alimony should be modified to equal half of the gross pension valued as of the date of dissolution, a change that would represent an increase of approximately $84 per week gross in alimony from what she received in 2005. Taking into account the general alimony factors found in General Statutes § 46b-82 in light of the facts of this case, the court grants the motion for modification and orders plaintiff to pay defendant alimony of $31,486.65 per year, in twelve equal monthly payments. This amount includes plaintiff's obligation to pay the defendant one-half his net pension valued as of the date of the dissolution and the increased amount found appropriate here. This order prevents the necessity for plaintiff to compute every year what his net pension income is or will be and does not require constant recalculations of alimony, as defendant's expert opined should occur if "gross" is not deemed to mean "net" in the present case. It prevents the defendant from having to wait until the following year to obtain all of her alimony. It will also obviate the need for plaintiff to disclose his new wife's income or their itemized deductions. This order is made in recognition of present tax liability under state and federal law. Obviously, a change in federal or state tax law that significantly changes the plaintiff's tax liability on the gross pension value as of the date of dissolution, as calculated here, might be a significant change of circumstances for purposes of considering future modification.
Under General Statutes § 46b-86, no final order for support may be modified retroactively unless a marshal or other process service authorized by General Statutes § 52-50 has served the motion seeking modification. The motion for modification having been brought by way of citation and an order to show cause, the defendant probably caused the plaintiff to be served with her motion, but she did not introduce a marshal's return into evidence and the court could not locate one in the file. Without information as to the date of service in compliance with General Statutes § 52-50, if any, or any basis to order retroactivity here, the court orders none. The modification is effective as of the date of this order.
General Statutes § 46b-86(a) provides, in relevant part, that "[n]o order for periodic payment of permanent alimony or support may be subject to retroactive modification, except that the court may order modification with respect to any period during which there is a pending motion for modification of any alimony or support order from the date of service of notice of such pending motion upon the opposing party pursuant to section 52-50."
General Statutes § 46b-50 provides, in relevant part as follows: "(a) All process shall be directed to a state marshal, a constable or other proper officer authorized by statute, or, subject to the provisions of subsection (b) of this section, to an indifferent person. A direction on the process "to any proper officer" shall be sufficient to direct the process to a state marshal, constable or other proper officer. (b) Process shall not be directed to an indifferent person unless more defendants than one are named in the process and are described to reside in different counties in the state, or unless, in case of a writ of attachment, . . ."
CT Page 1784