Opinion
FA094017386S
08-01-2017
Jill Gilbert Callahan v. James Callahan
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Michael E. Shay, Judge Trial Referee.
Background
The marriage of the parties was dissolved by decree of this court on May 8, 2012, at which time the court entered certain financial orders, all as set forth in a Memorandum of Decision (#314.00) which the court Corrected by written memorandum (#328.00) dated June 29, 2012 (collectively " Munro I "). Thereafter, the court granted a motion by the defendant to open and vacate the judgment based upon the post-judgment conduct of the plaintiff wife. After a second trial, the court granted the defendant's motion, vacated the original judgment, and entered new financial orders (" Munro II "). The defendant initially took an appeal from the original judgment, and the plaintiff appealed from Munro II . On May 5, 2015, the Appellate Court reversed the trial court, and at the same time vacated the second judgment (Munro II ), and reinstated the original orders (Munro I ). Callahan v. Callahan, 157 Conn.App. 78, 101, 116 A.3d 317 (2015). All further appellate avenues for the defendant have been exhausted as of September 8, 2015.
The parties have filed numerous post-judgment motions, including motions for modification and contempt. Subsequent to the appellate ruling, this court, after the filing of briefs, heard argument on April 22, 2016, and filed a Memorandum of Decision (#626.00) dated May 4, 2016, in which it found that interest payable by the defendant on the installments of the lump sum payments ordered per Munro I had been tolled during the appeal period, but were now effective as of September 8, 2015. The plaintiff filed a Request for Review of the court's order with the Appellate Court, which relief was denied as premature, leaving the plaintiff free to raise the issue in any future appeal.
The matter comes before the court by way of the defendant's Motion for Modification of Alimony (#526.01) dated May 15, 2014, which motion was served on the plaintiff in hand on June 9, 2014, as evidenced by the Return of Service (#541.00) on file. Later, the defendant filed an Amended Motion for Modification (#589.00) dated October 15, 2015. At the time of the trial, the original motion was still pending, and the court found that the relief sought in the amended motion (i.e. downward modification of periodic alimony) is the same. Following extensive discovery, and given the substantial delay in hearing the underlying motion, the court bi-furcated the matter and reserved the remaining motions for hearing at a later date.
On June 6, 2017, during argument regarding the Motion for Modification (#526.01) and the Amended Motion for Modification (#589.00), the court indicated that it would treat the Amended Motion as a continuation of the original motion, but that it would not take into consideration the allegations numbered 3 and 6 in the latter.
Counsel for the plaintiff advised the court that she had filed a Motion to Refer the remaining outstanding motions to the RFD, and the court advised her that the decision of such a motion is one for the Presiding Judge, Family. (TR June 20, 2017 @ pp. 113-14.)
The salient issue regarding the motion for modification is fairly straightforward, to wit: Has there been a substantial change in the defendant's net income as expressed in terms of his present earning capacity that would warrant a downward modification of the alimony order? Unfortunately, that point became very nearly lost in the mountain of testimony and evidence offered regarding the valuation of real and personal property awarded to the parties in the original order. So much so, that it tended to, at times, obfuscate the basic issue.
Substantial Change of Circumstances
The defendant is 58 years old and in apparent good health. He continues to work with four companies bearing the name Pentalpha which he co-founded with the plaintiff in 1994. While the original consulting segment of the business has shown a decline in revenues, he told the court that he is optimistic about the long-term prospects for Pentalpha Surveillance.
The companies are: The Pentalpha Group, LLC; Pentalpha Capital, LLC; Pentalpha Funding, LLC; and Pentalpha Surveillance (hereinafter " Pentalpha").
The plaintiff is 57 years old, with a B.A. from Northwestern University and an M.B.A. from New York University. She continues to suffer from the same serious health issues as found by the court in May of 2012 to have stemmed from her marriage, including PTSD, ulcerative colitis, migraines, and back problems, which taken together prevent her from engaging in gainful employment consistent with her education and experience, at least for the foreseeable future. The evidence supports a finding that her principal sources of income continue to be derived from periodic alimony, along with some minimal investment income. (Exhibits ##124 through 127.)
The court heard testimony from the defendant's expert, Mark Harrison regarding the diminution of income from the Pentalpha group of companies, as well as from the plaintiff's expert, Barry Sziklay on the same subject. Mr. Sziklay also served as the plaintiff's expert at the time of trial, and his testimony and report formed the basis for the trial court's original order (Munro I ). The testimony of both experts was supported by exhibits. The evidence supports a finding that Mr. Harrison used the same basic format that Mr. Sziklay used at the time of trial, which was adopted by the court, to demonstrate the defendant's earning capacity of $2,000,000.00 per annum. In brief, the trial court determined that the defendant's " earning capacity at Pentalpha " was " attributed to 50 percent of the pre-tax profits" at three Pentalpha entities (Munro I @ p. 9) (Exhibit #39) Applying the same standard, Mr. Harrison calculated the defendant's present earning capacity to be $210,000.00 per annum. (Exhibit #40) When Mr. Harrison applied the same formula (i.e. 50% of pre-tax profits) to all four Pentalpha companies, as opposed to the original three, he found that the defendant's present earning capacity to be $370,000.00 per annum (Exhibit #41). Mr. Harrison also testified as to the reduction in the cash flow over time, as well as the fact that the defendant has been using his assets to meet his marital obligations. The court found Mr. Harrison's testimony to be more credible and compelling, and that there has been a substantial change of circumstances due to the defendant's lower earning capacity. Specifically, the evidence supports a finding that his earning capacity from the Pentalpha entities has dropped from $2,000,000.00 per annum in 2012 to $370,000.00 per annum at present.
Considerations Re General Statutes § 46b-82
The plaintiff was awarded the family home at 3 Partridge Hollow, Greenwich, Connecticut. At the time of the decree, the court valued the property at $3,400,000.00. According to the respective financial affidavits of the parties on file at that time, there was an outstanding principal balance on the mortgage in the amount of between $778,172.29 and $800,000.00. (#277.00 and #306.00) At present, the plaintiff, who resides in a rental, has contracted for extensive renovations, as well as repairs due to serious water damage. (Exhibits 4128 through #130.) She values the property on her financial affidavit dated May 31, 2017, at $1,250,000.00, with a present mortgage balance of $180,127.00.
The court awarded the plaintiff home furnishings, jewelry, antiques and furnishings valued at $129,441.00. She has listed them on her financial affidavit as having a collective value of $67,000.00.
For her part, during the pendency of this matter, the plaintiff has settled a lawsuit for $490,000.00 against an accounting firm that had provided personal services as well as for Pentalpha. (Exhibit #123.) In addition, also during the pendency of this matter, the parties resolved a long-standing dispute regarding the payment of the balance of a $600,000.00 lump sum award to the plaintiff in the Munro I . Plaintiff had already received approximately $122,000.00 from the defendant, but she had been reluctant to take the balance even though proffered by the defendant. After receiving satisfactory assurances from defendant's counsel, the plaintiff agreed to accept the sum of $487,961.35. (Exhibits #132 and #133.)
The court has also heard extensive testimony from both parties and numerous witnesses, including experts, regarding the current valuation of the defendant's real and personal property. The defendant was awarded the vacation home on 561 Shincreek Road, Lew Beach, New York, which the trial court valued at $700,000.00. The court heard the testimony of real estate appraisers for both the plaintiff and the defendant as to the current market value of the property, both of whom prepared written appraisals. Robert G. Buckles testified for the plaintiff that the market value of the property is $1,700,000.00. (Exhibit #111.) By way of contrast, Brian A. Roeder testified for the defendant that the market value of the property is $605,000.00. (Exhibit #113.) Both witnesses testified at some length about the comparable properties selected by themselves and their opposite number. Mr. Roeder testified very clearly that property values in that somewhat unique area have been relatively flat during the period from the date of dissolution to the present, however, like the trial court, this court believes that the value he found is far too low. By the same token, this court also finds that the value attributed to the property by Mr. Buckles is far too high. The court finds that a better measure of market value can be found in Exhibit #111 which is a compilation of data from the town records that shows the full tax value to be $1,131,774.00 after applying the factor of .62 to the assessed value of $701,700.00
The court awarded the defendant his interest in a real estate venture in Virginia called MLeesburg, LLC, which it valued at $558,000.00 based upon the defendant's capital contributions. (Munro I @ p. 15.) The evidence demonstrates that the defendant's capital account had, in fact, decreased to $387,148.00 by the end of December 2014. (Exhibit #94.) The defendant listed the value of his interest based upon his contributed capital as $687,000.00 on his financial affidavit dated November 3, 2016, as on file with the court. (TR January 25, 2017 @ p. 8.) The plaintiff alleges that there was a recent sale of a portion of the property, and suggested that the defendant benefitted financially by the transaction. The defendant testified as to the current status of the property and denied that he received any such benefit. The court found his testimony to be credible. (TR May 12, 2017 @ pp. 55-58.)
The defendant is an avid collector of antique cars and trucks. At the time of the dissolution, the court awarded him two vehicles, a 1959 Aston Martin valued at $140,000.00 and a 1948 Chrysler Town and Country valued at $130,000.00 for a total of $270,000.00. Since that time his collection has expanded with the addition of other vehicles. According to his financial affidavit, the total current value of the collection is $407,000.00. The plaintiff offered the testimony of Manny Dragone of Dragone Classic Motorcars, Inc. regarding the value of this collection, and who also provided a written appraisal report. (Exhibit #116.) The court found him to be a very knowledgeable and credible witness. His total valuation for nine vehicles was $489,000.00. Specifically, he found the value of the Aston Martin to be $195,000.00 and the Chrysler to be $90,000.00. The court has accepted his valuations.
At the time of the dissolution, the court awarded the defendant two antique shotguns valued at $200,000.00, the present value of which have remained essentially the same. (Exhibit #74.) The defendant was awarded certain home furnishings, antiques and artwork, from the Connecticut and New York properties having a value of $303,660.00 per a written appraisal Art Peritus, LLC. (Exhibit #101.) The defendant lists these assets on his current financial affidavit as having a collective value of $220,000.00.
Both parties have substantial retirement assets in the form of IRA's and § 401(K)'s. The trial court ordered the defendant to transfer $370,000.00 from his retirement account to the plaintiff, and the defendant has indicated on his financial affidavit that an attorney is currently preparing a QDRO to accomplish this. Once done, the parties will be in relative parity on this score. Both party's accounts have appreciated in value since the date of the dissolution. Each of the parties has the cars that they or other family members drive.
Other miscellaneous assets include the defendant's remaining interest in one used sailboat that he values at $9,000; fishing gear that was awarded to him having a value of $125,000.00, which he now values at $100,000.00, and two club bonds with a combined face amount of $105,000.00, which the defendant described as illiquid, with a current estimated value of $25,000.00. At the time of the dissolution, the defendant had two life insurance policies with an aggregate of $319,213.00 in cash value. Today, he reports only one policy with a cash value of $259,875.00.
Subsequent to the dissolution of the marriage, the defendant sold his interest in another sailboat that had been awarded to him for $40,000.00 to $50,000.00. TR January 25, 2017 @ pp. 118-19.
With certain exceptions, the changes in the valuation of most assets of the parties are within the normal parameters given the passage of time since the original decree and the nature of the assets, some of which were disposed of and others purchased subsequent to the decree. Notably, the plaintiff's Vanguard account has lost virtually all of its value, however, this has been somewhat offset by her recent receipt of funds from a legal settlement in the amount of $490,000.00, and the payment of the balance due from the $600,000.00 lump sum originally awarded to her. In addition, the plaintiff claims a significant drop in value of the Greenwich property, which the court does not find credible. As for her indebtedness, the most significant sources are related to her medical condition, the protracted litigation, and her current tax debt. As to the latter, since the defendant is current with his alimony payments of $720,000.00 a year, the court finds that her tax debt resulted from her own choice of spending priorities. As for the defendant, as noted above, the increase in the value of the Shin Creek property is likely due to an undervaluation in the original decree. Finally, no credible evidence was presented to the court as to the current fair market value of the Pentalpha group of entities, so the court has made no such finding.
In addition, the court heard from Dr. Orla Cashman, who testified that the plaintiff continues to suffer from PTSD stemming from incidents that occurred during the marriage as found by the trial court at the time of the dissolution. (TR May 17, 2017 @ pp. 54-57.)
Conclusion
On March 28, 2017, following a hearing on plaintiff's motion for a further continuance of the trial, the court granted the motion, and as a condition, temporarily suspended the monthly alimony payment, but did not modify the underlying award. The suspension was for a three-month period commencing April 1, 2017, during which time alimony continued to accrue, which fact the court explained to the parties. At the same time, the court indicated that this sum would be taken into consideration in the final orders. (TR February 24, 2017 @ pp. 15-18, and TR March 28, 2017, 2017 @ pp. 35-47.) In brief, the court balanced the equities, given the needs of the plaintiff and the length of time the underlying motion for modification had been pending. At the time of this order, the court also considered the fact that the defendant had been current with his monthly alimony payments of $60,000.00 per month, and that there was evidence that for some time, these payments have been made from the defendant's assets. Subsequently, at the time of final argument, the court, after further hearing, continued the suspension, but modified the terms thereof, in which it ordered the defendant to pay the sum of $10,000.00 per month as periodic alimony until further order. (TR June 28, 2017 @ pp. 17-22.
The motion for modification was heard over the course of approximately fifteen trial days commencing in November 2016, together with numerous status conferences and hearings re motions in limine, with final argument on June 28, 2017. The court held the evidence open until July 14, 2017, in order to allow the parties to file Affidavits of Attorneys Fees. Subsequently, the court has determined not to award attorneys fees to either party, and has advised the parties that no further hearing is necessary.
FINDINGS
The court having heard the testimony of both parties and their witnesses, and having considered the evidence and, inter alia, the provisions of General Statutes § 46b-62, § 46b-82, and § 46b-86(a), makes the following findings:
1. That an award of periodic alimony may be modified upon the demonstration of a substantial change of circumstances since the date of the last order, unless the order itself clearly precludes modification; that where a substantial change of circumstances has been found, the court shall consider the factors set forth in General Statutes § 46b-82; and that " the power of the trial court to modify the existing order does not, however, include the power to retry issues already decided, " such as the cause of the dissolution, or issues that do not change, such as the length of the marriage. General Statutes § 46b-86(a); Borkowski v. Borkowski, 228 Conn. 729, 737-38, 638 A.2d 1060 (1994); Schorsch v. Schorsch, 53 Conn.App. 378, 382, 731 A.2d 330 (1999); Spencer v. Spencer, 71 Conn.App. 475, 481, 802 A.2d 215 (2002).
2. That there has been a substantial change of circumstances since the date of the initial order (#312.00) dated May 8, 2012, as corrected on June 29, 2012 (#328.00) in that the defendant's earning capacity from Pentalpha has substantially decreased.
3. That where retroactivity is sought pursuant to General Statutes § 46b-86(a), motions for modification of alimony must be served in accordance with General Statutes § 52-50; that the purpose of that provision is to accord due process to the other party. Shedrick v. Shedrick, 32 Conn.App. 147, 151-52, 627 A.2d 1387 (1993); that the evidence supports a finding that the plaintiff was served in hand on June 9, 2014, per the marshal's return (#514.00) as on file; that the defendant filed an amended motion for modification (#589.00) dated October 15, 2015; that at the time of the trial, the original motion was still pending and undecided, and the relief sought is identical; that any retroactive relief would relate back to the date of service of the original motion. Lucas v. Lucas, 88 Conn.App. 246, 255, 869 A.2d 239 (2005); and that under all the facts and circumstances, it is equitable and appropriate to enter an order of modification retroactive to July 1, 2014.
4. That periodic alimony orders must be based upon the available net income of the parties. Procaccini v. Procaccini, 157 Conn.App. 804, 808, 118 A.3d 112 (2015); Morris v. Morris, 262 Conn. 299, 306, 811 A.2d 1283 (2003); Ludgin v. McGowan, 64 Conn.App. 355, 358-59, 780 A.2d 198 (2001).
5. That that for the period July 1, 2014 through December 31, 2015, the earning capacity of the defendant based his W-2 earnings and net income of Pentalpha for 2014 (Exhibit #44) was $850,000.00 per annum; that his net income for the same period was $489,692.00; that that for the period January 1, 2016 through the present, the earning capacity of the defendant based upon the net income of Pentalpha for 2015 (Exhibit #41) was $370,000.00 per annum; that his net income for the same period was $230,322.00; and that based upon her financial affidavit, aside from alimony, the net income of the plaintiff is effectively $0.00 per annum.
For the calculation of the defendant's net income after taxes the court has utilized the Family Law software program.
6. That the orders herein have created a substantial overpayment of periodic alimony by the defendant; that for the period July 1, 2014 through and including August 1, 2017, the defendant has paid the sum of $1,990,000.00 (33 months x $60,000.00 plus 1 month @ $10,000.00); that for the period April 2017 through June 2017, payment of the defendant's alimony obligation was suspended; that after taking into account the new orders herein retroactive to July 1, 2014, the defendant's total alimony obligation since that date is $660,000.00 (18 months x $24,000.00 plus 19 months x $12,000.00); and that the overpayment of periodic alimony amounts to $1,330,000.00.
7. That an award of attorneys fees is within the sound discretion of the court. In making a determination as to whether or not to grant such a request, the court must look at the financial abilities of the parties and apply the criteria set forth in General Statutes § 46b-62 and § 46b-82; that an award is not based upon whether one party has greater assets than the other, but rather, whether the party seeking relief has " ample liquid assets" to pay the fees, and if not, will that party be " deprived of [their] rights because of lack of sufficient funds to retain an attorney. Koizim v. Koizim, 181 Conn. 492, 500-01, 435 A.2d 1030 (1980); that ability to pay the fees is not an " absolute litmus test" especially where the court finds that the use of that party's assets would " undermine" the purpose of the court's financial orders. Fitzgerald v. Fitzgerald, 190 Conn. 26, 29-30, 459 A.2d 498 (1983); that where both parties are found to have sufficient ability to pay their own fees, they should do so. Blake v. Blake, 211 Conn. 485, 489, 560 A.2d 396 (1989); and that the evidence supports a finding that each party has the ability to make satisfactory arrangements with counsel to pay their own fees and costs.
8. That although the discovery was extensive and the litigation protracted, there was no " clear evidence" introduced that would give rise to a finding with a " high degree of specificity" that either party's claims were without color. Kupersmith v. Kupersmith, 146 Conn.App. 79, 98-99, 78 A.3d 860 (2013); Berzins v. Berzins, 306 Conn. 651, 663, 51 A.3d 941 (2012); Maris v. McGrath, 269 Conn. 834, 845-48, 850 A.2d 133 (2004); Munro v. Munoz, 146 Conn.App. 853, 860-61, 81 A.3d 252 (2013); Lederle v. Spivey, 174 Conn.App. 592 (released July 18, 2017).
9. That " the financial awards in a marital dissolution case should be based on the parties' current financial circumstances to the extent reasonably possible, " and the proper date for determining the net income of the parties for purposes of the motion for modification of alimony is the date that the motion is heard; that, however, where there has been a substantial period of time between the date of the filing of the motion and the date of the hearing, the court " the court may examine the changes in the parties' incomes and needs during the time the motion is pending to fashion an equitable award based on those changes." Olson v. Mohammadu, 169 Conn.App. 243, 255, 149 A.3d 198 (2016); Zahringer v. Zahringer, 124 Conn.App. 672, 688-89, 6 A.3d 141 (2010); and that the court finds it to be equitable and appropriate to take those changes into account in fashioning its award herein.
10. That the court is entitled to rely upon the sworn financial affidavits of the parties filed at the time of trial and at the time the motion for modification is heard. Olson v. Mohammadu, 169 Conn.App. 243, 257, 149 A.3d 198 (2016); Ceddia v. Ceddia, 164 Conn.App. 266, 275, 137 A.3d 830 (2016).
11. That " the weight to be given the evidence and the credibility of the witnesses are within the sole province of the trial court." Stearns v. Stearns, 4 Conn.App. 323, 327, 494 A.2d 595 (1985); Schoenborn v. Schoenborn, 144 Conn.App. 846, 851, 74 A.3d 482 (2013).
12. That the court may order that life insurance or other security be maintained to secure the financial orders of the court. General Statutes § 46b-82(a) and § 46b-84(f)(1).
ORDERS
IT IS HEREBY ORDERED THAT the defendant's Motion for Modification, as amended, is HEREBY GRANTED as follows:
1. Commencing effective July 1, 2014, and monthly thereafter, the defendant shall pay to the plaintiff the sum of $24,000.00 as and for periodic alimony, until the death of either party or the remarriage of the plaintiff, or the entry into a civil union by her, or December 31, 2015, whichever shall sooner occur. Thereafter, commencing effective January 1, 2016, and monthly thereafter, the defendant shall pay to the plaintiff the sum of $12,000.00 as and for periodic alimony, until the death of either party or the remarriage of the plaintiff, or the entry into a civil union by her, whichever shall sooner occur. The foregoing notwithstanding, the occurrence of any of the following shall be considered a substantial change of circumstances for purposes of a future modification: (a) the defendant reaching the age of 67; (b) the cohabitation of the plaintiff; or (c) her " living together" with another person that falls within the ambit of General Statutes § 46b-86(b). The foregoing is not to be construed as an exclusive list so as to preclude either party from moving for modification of the alimony order on other grounds.
2. The plaintiff shall pay to the defendant the sum of $1,330,000.00, which represents the overpayment of alimony by the defendant, in installments as follows: On or before December 31, 2017, the sum of $250,000.00, together with simple interest in the amount of 5% per annum from August 1, 2017 on the then balance due; and a like sum together with simple interest in the amount of 5% per annum from August 1, 2017 on the then balance due commencing January 1, 2019, and likewise on each and every anniversary thereof until such sum, together with interest, is paid in full.
3. Pursuant to General Statutes § 46b-84(f), as and for security for his alimony obligation hereunder, the defendant shall maintain so much of the existing life insurance in the amount of $500,000.00, and shall name the plaintiff as beneficiary thereof for so long as he has an obligation to pay alimony under the terms of this decree.
4. Each party shall be responsible for their respective attorneys fees and costs incurred in connection with this action.
5. The Court hereby orders a Contingent Wage Withholding Order pursuant to General Statutes § 52-362(b) in order to secure the payment of the alimony order.
6. There having been a contested hearing at which the financial orders were in dispute, the financial affidavits of the parties are hereby unsealed per P.B. § 25-59A(h).