Opinion
No. FST FA 03-0197091S
March 29, 2011
MEMORANDUM OF DECISION ON PLAINTIFF'S MOTION TO MODIFY CHILD SUPPORT, POST-JUDGMENT DATED DECEMBER 21, 2009 (#153.00)
Counsel claims that this motion will be the first trial court child support decision involving a payor, whose income exceeds the Child Support Guidelines, after the Connecticut Supreme Court decisions of Maturo v. Maturo, 296 Conn. 80 (2010), and Misthopoulos v. Misthopoulos, 297 Conn. 358 (2010). In essence this case explores the following: How far up the income stream must a trial court apply the guideline percentages? Two other novel issues are also presented in this motion: (1) What are the procedures necessary to impute investment earnings? and (2) How do the Child Support Guidelines consider a minor child's substantial assets and income, factors in the child support statute Gen. Stat. § 46b-84(d) but not mentioned in the guidelines?
No appellate court has ruled on a post-May 4, 2010 high income/high asset child support case since the release of Maturo v. Maturo on May 4, 2010 and Misthopoulos v. Misthopoulos on July 13, 2010. Five trial court decisions published after May 4, 2010 discuss Maturo v. Maturo but none of those five trial decisions involve Combined Net Weekly Income in excess of $4,000. The Appellate Court's opinion in Turkman v. Turkman, 127 Conn.App. 217 (2011) involved a high income/high assets case but the trial court judgment was entered on January 8, 2009, more than a year before Maturo. The Appellate Court reversed the Turkman judgment for an insufficient amount of child support citing extensively from Maturo. A sixth trial court decision published on June 29, 2010 did involve a high income/high asset case but was based on a Motion to Terminate the Stay in an appeal from a trial court dissolution decision issued prior to May 4, 2010. The trial court noted the plurality opinion of Maturo: "Accordingly, the guidelines cannot be ignored when the combined net family income exceeds the upper limit of the schedule, but remain applicable to all determinations of child support." Maturo v. Maturo, supra, 296 Conn. 109. This trial court turned aside counsel's arguments on the Motion to Terminate the Stay and found that its original decision complied with Maturo, noting that its dissolution decree found: (1) significant extraordinary child care needs such as private schools and sleep away camps; (2) the court's child support order did exceed the presumptive support amount on the guidelines schedule; (3) the trial court "did not extrapolate any non-descending percentage for child support" and (4) the trial court in its memorandum of decision acknowledged that it considered statutory law regarding the order of child support. Brody v. Brody, Superior Court, judicial district of Stamford-Norwalk of Stamford, Docket Number FST FA 08-4014434 S (June 29, 2010, Munro, J.).
See court's response on pages 26, 31-32 and 49-51 of this Memorandum of Decision.
See court's response on pages 14, 16-17 and 20-21 of this Memorandum of Decision.
See court's response on pages 38-43 of this Memorandum of Decision.
After hearing the testimony, considering the evidence and reviewing the file and the claims of law and facts, the court finds the following facts and legal conclusions.
On November 30, 2005 the court dissolved the March 11, 1989 marriage of Darby Fox (Wife) and Rodman Fox (Husband) and incorporated into the decree the terms and conditions of a Separation Agreement dated November 30, 2005. (#129.10.) The parties had four minor children. The two oldest children, then ages 15 and 14, are now ages 20 and 19, and both have completed their high school education and are now full-time college students. There are only two minor children for whom child support is at issue: Timothy Fox, born January 16, 1993, age 17 at the 2010 hearing, and John Fox, born June 4, 1997, age 13. Timothy Fox attained age 18 after the evidentiary hearings concluded. According to the court's trial notes Timothy should still be enrolled in high school. In any event, a child support order in regards to Timothy Fox is not moot since the Wife is claiming a retroactive order of child support for Timothy.
The court issued a Memorandum of Decision of even date herewith on the issue of alimony. The Separation Agreement stated that the periodic alimony was nonmodifiable and would terminate on September 30, 2015. The Husband is currently paying alimony pursuant to that nonmodifiable order established by Article 2.2 of the Separation Agreement. There were no provisions in the Separation Agreement for the nonmodifiability of child support. Guille v. Guille, 196 Conn. 260, 267 (1985); Greenwald v. Rybicki, Superior Court, judicial district of Stamford/Norwalk at Stamford, Docket Number FA92-0126685 S (June 16, 1997, Tierney, J.) [ 19 Conn. L. Rptr. 634]. The parties agree that the last child support order was November 30, 2005. (#129.10.)
The Wife, as the movant in this request for modification of child support, has the obligation to establish "a substantial change in the circumstances of either party." Gen. Stat. § 46b-86(a); Borkowski v. Borkowski, 228 Conn. 729, 734 (1994). Once a finding that a substantial change of circumstances of either party has occurred, then the court must apply the standards for child support including the child support guidelines established pursuant to Gen. Stat. § 46b-215a and the factors of Gen. Stat. § 46b-84(d) and § 46b-56. Hardesty v. Hardesty, 183 Conn. 253, 258-59 (1981).
The court finds that the Wife has established a substantial change in the circumstances of both parties since the last order of child support on November 30, 2005. In 2007 the Husband was paid an incentive bonus in excess of $40,000,000. That bonus increased his assets and the potential for increased investment income on those assets. The Wife's alimony paid pursuant to Article 2.2 of the Separation Agreement based upon the Husband's "annual gross compensation from employment," and its formula has decreased. The Wife's assets have decreased since November 30, 2005. Her November 30, 2005 financial affidavit (#125.10) indicated assets of $23,438,810.18 and her current financial affidavit dated September 8, 2010 (#176.00) indicated assets of $15,407,123.42. This decrease in the Wife's assets of over $8,000,000 is more than a twenty-five (25%) percent reduction in her assets since the last child support order on November 30, 2005. Since the Wife has established "a substantial change of circumstances of either party" as required by Gen. Stat. § 46b-86(a), the court need not determine whether a showing has been made that the "final order for child support substantially deviates from the Child Support Guidelines established pursuant to section 46b-215a, unless there was a specific finding on the record that the application of the guidelines would be inequitable or inappropriate." Gen. Stat. § 46b-86(a).
Article 3.1 of the Separation Agreement establishes the monthly child support orders. "Commencing December 1, 2005, the Husband shall during his lifetime pay the Wife the sum of ONE THOUSAND TWO HUNDRED FIFTY ($1,250) DOLLARS per month per child for their support." Article 3.1 also establishes the termination events for the monthly child support.
Article 3.2 provides that the Husband shall cause the Wife to receive from "the children's trusts and/or custodian accounts established for their benefit, as set forth in Schedule A hereto, the sum of FIFTEEN THOUSAND ($15,000.00) DOLLARS per year per child payable on January 1st each year, commencing January 1, 2006, as a contribution to their support." Article 3.2 also establishes termination events for this $15,000 order. Schedule A is labeled "Assets held by the parties for the benefit of the minor children." Those children's assets as of November 30, 2005 were $6,052,587. The Husband's September 9, 2010 financial affidavit (#177.00) states that the children's trusts and custodial accounts are now worth $5,668,667.
Article 5.1 requires the Wife to pay the first $40,000 per year for the two minor children's grammar, middle and high school tuition including related expenses. The Husband and the children's trusts and custodian accounts pay any excess.
The Wife seeks a modification of Articles 3.1, 3.2 and 5.1. The court finds that Articles 3.1, 3.2 and 5.1 are in the nature of child support and these orders are modifiable. The Wife's claims for relief are contained in Plaintiff's Amended Proposed Orders, Post-Judgment dated October 28, 2010 (#179.00). Without reciting the exact language of the proposed orders, the Wife is requesting four claims for relief as follows:
(1) $6,963.33 per month child support per child commencing May 1, 2010 to be paid only by the Husband in lieu of payments to be made from the children's trusts and/or custodial accounts.
(2) The cost of the children's private secondary school education is to be divided between the Husband 80% and the Wife 20%.
(3) Child support orders would be retroactive to May 6, 2009, the date of the Wife's original Plaintiff's Motion to Modify Child Support, Post-Judgment. This May 6, 2009 motion to modify was served on the Husband on May 21, 2009. (#144.10.)
(4) Attorneys fees pursuant to Gen. Stat. § 46b-62 for the prosecution of the motion to modify in the sum of $108,000.
The current "Child Support and Arrearage Guidelines" established by the State of Connecticut are effective August 1, 2005. According to the Schedule of Basic Child Support Obligations, the highest "Combined Net Weekly Income" is $4,000. For two minor children at the $4,000 Combined Net Weekly Income level, the percentage is 15.89% for a presumptive support amount of $636 per week. For one minor child at the $4,000 Combined Net Weekly Income level, the percentage is 11.83% for a presumptive support amount of $473 per week.
The Husband's current financial affidavit dated September 9, 2010 (#177.00) states that his gross income from earnings is $400,000 per year. Therefore, the parties' combined net weekly income is at least double the maximum provided by the guidelines. The Child Support Guidelines state: "When the parents' combined net weekly income exceeds $4,000, child support awards shall be determined on a case-by-case basis, and the current support prescribed at the $4,000 net weekly income level shall be the minimum presumptive amount." § 46b-215a-2b(a)(2).
The Child Support Guidelines state that the guidelines are based upon the Income Shares Model, which considers the income of both parents and "presumes that the child should receive the same proportion of parental income as he or she would have received if the parents lived together." Preamble (d), page ii. "Although parents may spend more on their children in absolute dollars as their income grows, thus raising the child's station and standard of living, the income shares model reflects the principle that spending on children as a percentage of household income actually declines as family income rises. The preamble specifically notes that `economic studies have found that spending on children declines as a proportion of family income as that income increases, and a diminishing portion of family income is spent on each additional child.'" Maturo v. Maturo, supra, 296 Conn. 93. "The guidelines are based on the premise that a parent with a high net income pays a lower percentage of his income for child support as compared to an obligor with lower net income." Gentile v. Carneiro, 107 Conn.App. 630, 648 (2008).
The plaintiff's claim for increased child support to $6,963.33 per month per child is based on the Husband's earning capacity. At the final argument the Wife presented various financial scenarios, all of which lead the Wife to claim an order of increased child support in the amount of $6,963.33 per month per child.
Now that a substantial change of circumstances of either party has been found, the next step is to determine the Combined Net Weekly Income of the parties.
The Wife's current financial affidavit (#176.00) discloses no earned income. The monthly child support paid by the Husband and the monthly alimony paid by the Husband are not "gross income" under the Child Support Guidelines, section 46b-215a-1(11)(A)(xviii) and (11)(B)(i). The Wife's financial affidavit discloses $23,356 per month investment income from dividends, interest and tax free income. Thus the Wife's "Gross income" for guidelines purposes is $5,390 per week and her "Net income" is $4,823 per week. The parties agree and both have included essentially this number on their respective Child Support Guidelines Worksheet (#173.00, #174.00). The parties have a great disagreement on the Husband's "Gross income" for guidelines purposes. The Husband is claiming his gross income is $12,307 per week, which is based on his September 9, 2010 financial affidavit (#177.00), which discloses $400,000 annual salary and $240,000 annual interest and dividends. These are the numbers disclosed in the Husband's guideline Worksheet (#173.00). The Wife is claiming that the Husband's Gross income is $32,636 per week, which is $1,697,072 per year. This claim is based on his past W-2 income and his earning capacity from investment income. The Wife offered proof of the Husband's greater earning capacity from his employment being the average of his 2005, 2006 and 2007 employment income, $1,327,771 per year as well as proof of increased investment earning capacity.
Both parties have submitted guideline Worksheets. Both contain the same amount for the "Presumptive current support amounts" in line 20. That amount is $636 per week. That $636 per week is derived from the chart for the maximum "Combined Net Weekly Income" of $4,000. The court therefore finds that the presumptive current support amount for two minor children is $636 per week. This finding is based on the Wife's gross income of $5,390 per week and the Husband's gross income of either $12,207 per week or $32,636 per week using the net income for both parties. The court notes that the presumptive current support amount does not change, despite the great disparity of the claims regarding the Husband's income, since the Combined Net Weekly Income of both parties is always greater than $4,000.
The court is being asked by the Wife to enter a child support order on the Husband's earning capacity from his employment and earning capacity from his investments. The Wife asks that the court disregard the Husband's annual $400,000 salary and annual $240,000 interest and dividends income in his September 9, 2010 financial affidavit (#177.00). The Husband disagrees.
The parties, in their Separation Agreement (#129.10), have limited the sources for the Husband's alimony obligation to "gross annual compensation from employment." That term is further defined in detail in Articles 2.4 and 2.7. The definition sections of Articles 2.4 and 2.7 are not applicable to child support, which are in Articles 3.1, 3.2 and 5.1. The parties have not limited, by their Separation Agreement, the amount and sources of the Husband's income for child support. The orders of child support are modifiable, although the order of alimony is nonmodifiable by Article 2.6 (#129.10). Therefore, the court will apply the definition of "Gross Income Inclusions and Exclusions" in the guidelines to determine the Husband's gross income from line 1 of the guideline Worksheet. Section 46b-215a-1(11)(A) and (B).
"It is well established that the trial court may under appropriate circumstances in a marital dissolution proceeding base financial awards on the earning capacity of the parties rather than on actual earned income." Lucy v. Lucy, 183 Conn. 230, 234 (1981). This rule is applicable to earnings from employment and income from investments.
Earning capacity, in this context, is not an amount which a person can theoretically earn, nor is it confined to actual income, but rather it is an amount which a person can realistically be expected to earn considering such things as his vocational skills, employability, age and health. (Internal quotation marks omitted.) Unkelbach v. McNary, 244 Conn. 350, 372, 710 A.2d 717 (1998). Neither party disputes that a court properly may impute earning capacity from employment, as the trial court did for both parties in the present case. While "it also is especially appropriate for the court to consider whether the defendant has wilfully restricted his earning capacity to avoid support obligations"; Bleuer v. Bleuer, 59 Conn.App. 167, 170, 755 A.2d 946 (2000); we never have required a finding of bad faith before imputing income based on earning capacity. We can perceive no reason to adopt a different standard for the ascertainment of investment income than the one we employ for the ascertainment of earning capacity.
Indeed, the role of both earning capacity and investment income are governed by General Statutes § 46b-84, which is entitled, "[p]arents' obligation for maintenance of minor child" and provides that, "(d) [i]n determining whether a child is in need of maintenance and . . . the amount thereof, the court shall consider the . . . earning capacity, amount and sources of income [and] estate . . . of each of the parents . . ." There is no indication in § 46b-84(d) that the trial court should calculate the "earning capacity" and "amount and sources of income" of each parent in a different manner.
Weinstein v. Weinstein, 280 Conn. 764, 772-73 (2007).
In appropriate circumstances in marital dissolution proceedings, a trial court may base its financial awards on the earning capacity rather than the actual earned income of the parties . . . Such circumstances include those where there is evidence that a party voluntarily quit or avoided employment in his or her field of expertise and where there is evidence of that party's previous earnings. (Internal citations omitted; citations omitted.)
Paddock v. Paddock, 22 Conn.App. 367, 371 (1990).
The Husband argues that this is not an earning capacity case since the husband is working full time in his chosen career field in the same high level executive capacity. The Husband argues that no Connecticut court has applied the earning capacity rules to these circumstances. Hart v. Hart, 19 Conn.App. 91, 94 (1989); Boyne v. Boyne, 112 Conn.App. 279, 282-83 (2009); Milazzo-Panico v. Panico, 103 Conn.App. 464, 469 (2007); Miller v. Miller, 181 Conn.App. 610, 612 (1980).
To apply the earnings capacity protocol to alimony requires (1) an obligor who is voluntarily depleting his employment skills or not exercising same, (2) proof that the payer is shunning available employment or not seeking it and (3) the earnings are thereby reduced or are nonexistent. The court is unable to conclude, based on the evidence, that the defendant is avoiding available employment or has avoided employment or that he has not accepted available employment. He has employed headhunters, has networked, has submitted 50 resumes, and is presently waiting on a potential position being held up due to a possible merger. The court declines to apply the classic "earning capacity" test, as was used in the above cited cases, for lack of sufficient evidence in the current case.
O'Toole v. O'Toole, Superior Court, judicial district of Stamford/Norwalk of Stamford, Docket Number FST FA 01-0187057 S (April 12, 2007, Harrigan, J.T.R.).
The Husband offers a second reason why the increased child support should be denied.
Since modification of alimony is precluded by the Separation Agreement, the Wife now improperly seeks to increase child support as disguised alimony.
The second, but improper, way in which the presence of a minor child could, in theory, affect an alimony award is if the alimony is disguised child support, as the defendant in this case alleges. This court has not addressed directly the issue of child support disguised as alimony. In Brown v. Brown, 190 Conn. 345, 347-49, 460 A.2d 1287 (1983), however, we addressed the reverse allegation — that an award of child support was disproportionate to the needs of the children and was, in fact, alimony in disguise. In Brown, this court set aside the child support award and held: Child support orders must be based on the statutory criteria enumerated in . . . § 46b-84 of which one of the most important is the needs of the child. The support award may not be used to disguise alimony awards to the custodial parent.
Loughlin v. Loughlin, 280 Conn. 632, 655-56 (2006).
"The court is cautioned in our case law against allowing a child support award to become alimony in disguise." Brown v. Brown, 190 Conn. 345, 349, 460 A.2d 1287 (1983); Rodrigues v. Butler, Superior Court, judicial district of New London at New London, Docket Number FA 93-0103245 S (June 25, 2010, Adams, FSM).
On November 30, 2005 the Husband, by agreeing to the Separation Agreement and being ordered to pay child support and other child related expenses, assumed an obligation to place the financial interests of his children ahead of his personal financial interests. "Any award of periodic alimony based on a party's income or earning capacity requires that party to continue work or find other sources of income to meet the obligations of the court's order." Lawler v. Lawler, 26 Conn.App. 193, 204 (1988); Bleuer v. Bleuer, 59 Conn.App. 167, 170 (2000) ("to avoid support obligations"): Schade v. Schade, 110 Conn.App. 57, 61 (2008) ("avoiding his present familial financial obligations of unallocated support and alimony"). The children were not represented by counsel either in the dissolution proceedings or on this motion to modify child support. The Wife's financial interests were protected by a large distribution of assets. The Wife was represented by counsel. She agreed to limit the Husband's income to "gross annual compensation from employment for alimony purposes." The children's child support is not tied to such a limited definition. Since November 30, 2005 the Husband has chosen a business venture that emphasizes capital gains over current income. There is no evidence that he has purposely reduced his salary in order to deprive the Wife of alimony. The court has so found in a Memorandum of Decision on a Motion for Order (#154.00) of even date. The court can consider a payor's earning capacity even if there is no evidence that the payor in bad faith reduced his earnings. Weinstein v. Weinstein, supra, 280 Conn. 772.
The Husband's current financial affidavit dated September 9, 2010 shows current monthly income of $33,333 gross salary and $20,000 gross monthly interest and dividends. His net monthly income from these two sums is $31,322.95 (#177.00). His monthly expenses are $67,606.12 of which $10,042 is alimony and $2,500 is child support. His monthly personal expenses are $55,064.12. These monthly personal expenses exceed his net monthly income by $23,741.17. He shows no uncontingent debts. The court concludes that the Husband pays these monthly personal expenses from his assets. The Husband's standard of living, as demonstrated by his September 9, 2010 financial affidavit, far exceeds his net monthly income. He pays more in gifts to a friend than for his current child support order. He spends more money on vacations than for his current child support order. He spends more on charitable donations than for his current child support order. He lives off his assets. The Husband's spending levels are a factor in determining his earning capacity. The court concludes that it is appropriate for the court to base a child support order on the Husband's earning capacity from both his employment and investments. Carasso v. Carasso, 80 Conn.App. 299, 304-05 (2003); Milazzo-Panico v. Panico, supra, 103 Conn.App. 468. The effect of such an order would require the Husband to pay child support from his assets, an event that is already occurring.
As of November 30, 2005 the Husband's W-2 wages and bonus income was $984,240. For 2006 his W-2 earnings were $736,165. For 2007 his W-2 earnings were $2,262,908. Ex. 13. In 2007 the Praetorian insurance business was sold and he received an incentive bonus of $40,382,836. Ex. 7. This gave the Husband the freedom to start a new business venture in which his financial goals focused on capital gains and increased earnings at some time in the future, as opposed to current salary income. Thus in 2008 his W-2 salary was reduced to $182,961. Ex. 8, Ex. 13. In 2009 his W-2 salary was $216,904. Ex. 10, Ex. 13. He was originally paid in his current employment $200,000 per year salary and that has been increased to $400,000 per year. His equal partner in his current business venture is being paid at the same rate. The Husband's and partner's salary are now controlled by a compensation committee established in 2010 by the new investor in the business.
The court finds that the Husband is engaged full time in the same business, reinsurance broker, and in the same capacity, a high ranking executive, since November 30, 2005. As a high ranking insurance executive, the Husband earned in 2005, 2006 and 2007; $984,240, $736,165 and $2,262,908. These amounts are verified by the Husband's income tax returns for those years which are in evidence. Each of these amounts far exceeds his current $400,000 annual salary. It is reasonable for the court to use the years 2005, 2006 and 2007 to establish earning capacity since those were the years immediately following the dissolution prior to the 2007 sale of the business. The average of those three gross incomes for 2005, 2006 and 2007 is $1,327,771. The court finds that the Husband's current annual earning capacity from employment is $1,327,721 and child support orders can be based on this employment earning capacity of $1,327,721.
The Wife also argues that the Husband's income from investments is too low. The Husband's assets disclosed on his September 9, 2010 financial affidavit is $45,082,623.56 (#177.00). Eliminating motor vehicles, personal property, his 401(k), business assets and real estate, the court finds that the Husband's investment assets are $30,530,634. The Husband claims investment income on this $30,530,634 of $240,000 per year, an annual rate of return at just under 8/10th of one percent (.007860970 to be exact). The Wife claims that the Husband's return on investments of $30,530,634 should be $830,433, an annual rate of return of 2.72%. The Wife has obtained this 2.72% rate of return using the Treasury constant maturities — Nominal 10 years as of September 3, 2010 and September 20, 2010. The court notes that the Weinstein trial court used the five-year treasury bill rate of 2.96% as of April 14, 2003 to determine the payor's investment earning capacity. "We express no opinion as to whether the return on five year treasury bills is the proper rate to use as the ordinary rate of return in all future cases. We conclude only that the trial court's use of that rate of return was not in dispute in this case." Weinstein v. Weinstein, supra, 280 Conn. 776, fn.11.
The Wife wants this court to impute a rate of return on the Husband's $30,530,824 investable assets based on the "Treasury nominal constant maturities-Nominal 10 years," since she claims the rate of return demonstrated by the Husband's financial affidavit is below a reasonable return and is less than one percent per year. "Instead, the plaintiff claims that a court may impute an ordinary rate of return to an asset that yields less than an ordinary rate of return. We agree and, accordingly, reverse the judgment of the Appellate Court." Weinstein v. Weinstein, supra, CT Page 8823 280 Conn. 769. There are two elements to consider: (1) Is the actual rate of return on investments lower than the average rate of return? and (2) If so, what is the appropriate rate of return that should be imputed on the parties' investable assets? In Weinstein the actual rate of return on the husband's $1,050,000 of investable assets was 1.24%. To establish that this 1.24% rate of return was less than the ordinary rate of return, the plaintiff offered evidence of the "five year treasury bill rate as of April 14, 2003" published just before the April 21, 2003 hearing. The Weinstein trial court found that the 1.24% was too low and imputed income on the husband's $1,050,000 investable assets at the 2.96% five-year treasury bill rate as of April 14, 2003.
Following Weinstein, a trial court found that $36,000 of dividends and interest income earned on $2,691,000 of investable assets was a rate of return of 1.33%. The court found: "The 10-year US Treasury bond is in excess of 2.5%, which would result in approximately double the return." Koren v. Koren, Superior Court, judicial district of Fairfield at Bridgeport, Docket Number FBT FA 93-0308581 S (March 25, 2009, Pinkus, J.). The Koren court concluded that the husband's earnings from employment as well as his rate of return of investable assets were understated, and found his actual earnings from employment and investments to be $250,000. No breakdown was furnished in the Koren decision on how much of the $250,000 was related to the imputed rate of return on his investable assets.
At trial on October 28, 2010 this court, on the record, consulted the Federal Reserve website, www.federalreserve.gov/releases/h15/data.htm. The Federal Reserve regularly publishes historical data of rates of return for a variety of investment instruments. That publication, available at the website, is commonly known as H.15. H.15 contains 64 different instruments. Each of these instruments contains a schedule of rates of return for a "Business day, Weekly (Friday), Monthly, or Annual." One general category is entitled "Treasury constant maturities," which contains two subcategories: "Nominal" and "Inflation indexed." The subcategory of "Nominal" contains twelve further subcategories based on time: "1-month" to "30-year." Two different subcategories based on time were used by the Weinstein and Koren courts: "Treasury constant maturities — Nominal 5 year" and "Treasury constant maturities — Nominal-10 years." There were four days of hearings: September 9, 2010, September 10, 2010, October 28, 2010 and October 29, 2010.
The court then informed counsel that it intended to take judicial notice of the Treasury constant maturities — Nominal 10 year. The court informed both counsel that it would give the parties an opportunity to offer evidence at a hearing for the purpose of determining a rate of return, if the court found a rate of return based on another judicially noticed rate. Izard v. Izard, 88 Conn.App. 506, 509-10 (2005); Moore v. Moore, 173 Conn. 120, 123, fn.1 (1977). "Parties are entitled to receive notice and have an opportunity to be heard for matters susceptible of explanation or contradiction, but not for matters of established fact the accuracy of which cannot be questioned." Connecticut Code of Evidence § 2-2(b). This court found, and so informed the parties, that they could have a hearing since a rate of return is not a matter of established fact such as the time of sunset, or what day of the week a calendar date is. Moore v. Moore, supra, 173 Conn. 123. Neither party requested a hearing either on October 28, 2010 or the next day, the last of trial October 29, 2010 when the Wife presented extensive mathematical argument on the Husband's imputed rate of return on his investment income. Neither party has requested such a judicial notice hearing to date.
The court notes that two different trial judges in marital matters selected what appears to be Treasury constant maturities-Nominal in order to impute a rate of return. The documentary source of these rates of return is not contained within the court record in either Weinstein or Koren. The court believes publication H.15 is authoritative and should be a useful source for future courts to take judicial notice of rates of returns.
Unfortunately publication H.15, although an accurate and authoritative government publication, does not offer one set rate of return. There are many variables that can be chosen: (1) Treasury bills (secondary market); (2) Treasury constant maturities-Nominal; (3) Treasury constant maturities Inflation indexed; (4) bank prime loan; (5) CDs (secondary market); (6) the subcategory of each of the above based on a time period of 1-month, 3-month, etc. to 20-year and 30-year; (7) a frequency of a Business day, Weekly (Friday), Monthly or Annual; and (8) finally, if choosing a Business day, what Business day: the date of the motion, the date of the first hearing, the last hearing date, the date of the decision or some other date in between.
An example of the disparity in rates of return can be understood by considering only the 5-year and 10-year Treasury constant maturities — Nominal, the two rates selected by the Weinstein and Koren courts. The Wife has asked this court to take judicial notice of a rate of return of 2.72%, which was the rate of return on Treasury constant maturities-Nominal 10 year on one "Business day," September 20, 2010. Those rates of return on the four trial days were respectively: 2.77%, 2.81%, 2.69% and 2.63%. The rate of return published in H.15 on Wednesday, February 23, 2011 is 3.49%. The "Weekly (Friday)" rate varies from Friday, September 3, 2010 through Friday, February 18, 2010: 2.59% to 3.60%. Using the Treasury constant maturities-Nominal 5 year, the rates of return on the four trial days were: 1.57%, 1.59%, 1.23% and 1.17%. The 5-year rate of return on the "Business day" on September 20, 2010, the date selected by the Wife, is 1.43%. The rate of return published by H.15, Wednesday on February 23, 2011, is 2.21%. The "Weekly (Friday)" rate varies from Friday September 3, 2010 until Friday, February 18, 2010: 1.41% to 2.34%.
These differences in rates of return in the two different Treasury instruments selected by the Weinstein and Koren courts when applied to the Husband's $30,530,634 investable assets produce a wide difference of imputed income. Taking the Wife's selected "Business day" of September 20, 2010, the 10-year rate of return is 2.72% and the 5-year rate of return is 1.43%. One produces an imputed annual income of $830,433 and the other an imputed annual income of $436,588. Simply stated, taking judicial notice of a Treasury instrument without more information is of little assistance to a trial court in determining an accurate imputed rate of return on investable assets.
The court also notes one further problem with the Wife's use of 2.72% based on the September 20, 2010 Treasury constant maturities — Normal 10-year rate of return: the general market forces that impacted the parties' assets and investment techniques since November 30, 2005. The Wife hired a financial advisor to assist her in her post-dissolution investments. Despite this professional assistance her assets have decreased by 25%. She joins millions of investors, who had competent outside financial assistance but notwithstanding lost substantial assets in the last four years, which is now being labeled as the Great Recession. New York Times, August 6, 2010, Judith Warner "What the Great Recession has done to Family Life." The Husband, on the other hand, invested his assets, including the after tax proceeds of the $40,000,000 incentive bonus, $5,000,000 in a new business venture and the $35,000,000 balance in conservative holdings with an emphasis on cash-type investments. As a result the Husband did not suffer the massive loss of capital. As a trade off, since he was invested in cash and cash-type investments, the interest rates were very low, less than 1.0%. He lost income but he essentially preserved his capital. In the scheme of things, how can one fault the Husband for changing his investment strategy in late 2007 to conservative?
The court notes the Dow Jones Industrial Average of thirty large publicly-traded United States corporations. Each of these thirty companies is known to virtually every United States resident, let alone investors. The Dow Jones average is considered a bellwether measurement of the United States economy. At the time of the decree in November 30, 2005 the Dow was in the 11,000 range. It was consistently over 12,000 for all of 2007 and peaked in late 2007 at just over 14,000. Then it fell and fell and fell, dropping to a low of 6,745 on March 9, 2009, losing over half of its value. The thirty best of the best fared no better than the average investor and in some cases worse. Since its low in early 2009, the Great Recession has been formally declared over. The Dow has recovered a majority of its losses and as of its second anniversary of its low point opened on March 9, 2011 at 12,213.
The Standard and Poors 500 index has been widely regarded as the single best gauge of the large capitalization stocks. www.standardandpoors.com/indices/sp-500/en/us. The S P index reached a high in late 2007 and bottomed at one-half of its high to rise to a current level of just below its late 2007 high. http://money.cnn.com/data/markets/sandp/. The NASDAQ is the largest electronic based securities, trading market in the United States. The NASDAQ Composite Index (NAS) also peaked in late 2007, bottomed out at less than half its peak and is currently close to its late 2007 peak. The Wilshire 5000 is a total market index, the broadest indicator in the United States equity market. It too reached a high, lost half of its value and is currently approaching 90% of its previous high.
No investing picking mechanism is a sure thing. Every Sunday the Wall Street Journal publishes the results of a stock picking contest. Readers as well as Wall Street Journal experts pick six stocks. The performance of these stocks has been evaluated weekly since September 30, 2010. Those hand picked stocks were then compared to six other stocks for the same period selected at random by throwing darts at stock listings. As of last week the dart selected stocks have performed better.
One can invest only for income in such instruments as corporate bonds, treasury instruments, municipal bonds, certificates of deposit, exchange traded funds (ETFs), money market funds, annuities, ladders of certificate of deposits and ladders of bonds. A conservative investment technique is to invest in large corporations that pay dividends. The top ten dividend yields among the thirty companies forming the Dow as of February 24, 2011 ranged from 3.16% for Chevron to 5.85% for AT T. One method of investing in those dividend-yielding companies is to use a technique called the Dogs of the Dow. An investor selects for investment the ten Dow companies whose dividend is the highest fraction of its stock price. That selection of stock is adjusted among the thirty Dow blue chip companies annually. The theory of the Dogs of the Dow is that an investor is getting a decent rate of return on the dividends alone, coupled with a possible increase in value of the stock of the blue chip companies. Thus the Dogs of the Dow is designed to out perform the overall stock market.
The plaintiff has furnished this court with no authority that this court can require the Husband, an investor with substantial capital, to invest only in income-producing assets, thus foregoing participation in the growth of the capital markets. The Husband though must consider his court-ordered obligations when selecting investments: his obligations under the Separation Agreement for the continued provision for his children. The Wife has waived her right to seek periodic alimony from the Husband's investment income by the terms of the Separation Agreement. But the Husband still has a continuing obligation to provide for his children and if his earnings are not adequate, then to provide from his investable assets. Bleuer v. Bleuer, 59 Conn.App. 167, 170 (2000). There is a name for this investment obligation: liability driven investing, Wall Street Journal, Sunday, February 27, 2011, "A Portfolio to Keep Income Flowing," Tom Lauricella.
No experienced investor successfully times the market over any extended period of time. That is a sure way to lose assets. But at some point a prudent investor should have reinvested more actively in the market since its low point in early 2009. At what point in time that increased active investment should have occurred is not for this court to say. It is for the court to determine if the Husband's investment assets are producing a proper current rate of return. Lawler v. Lawler, supra, 16 Conn.App. 204.
One novel issue raised by the evidence in this case is: What are the procedures necessary for a court to impute investment earnings? In this court's opinion this question cannot be answered by a court by simply taking judicial notice of one rate of return. The procedure suggested by this court to establish earning capacity from investable assets is: (1) the parties can suggest to the court various rates of returns supported by recognized financial indices or sources; (2) the parties should offer testimony on the needs of the parties and their investment goals; (3) the parties should offer testimony, preferably from experts, as to why the suggested rate of return is appropriate for the court and why the other party's suggested rate of return is not appropriate; (4) the court will then propose a preliminary designated rate of return that the court finds most appropriate under the circumstances, which the court proposes to take judicial notice of; (5) thereafter, the parties may offer evidence, testimony, documents and expert testimony on that court proposed judicial-noticed rate of return under the provisions of Izard v. Izard, supra, 88 Conn.App. 509; (6) the court should then take judicial notice of a rate of return; (7) the court determines the amount of investable assets that will be used to calculate the investment earnings; and (8) finally the court sets forth in detail the mathematical calculations using the judicially noticed rate of return and the amount of investable assets it found to determine the investment earning capacity.
In this case it was incumbent upon the parties to offer expert testimony on the subject. Neither party offered expert evidence on the rates of return of the Husband's investable assets. The court has found one rate of return that was provided by the evidence before this court. That rate of return is higher than the .08% on the Husband's investable assets. Neither party questioned this rate of return at the hearing. Both appeared to have accepted it. The rate of return is based on the $280,271 dividends, interest and tax free interest earned by the Wife on her $12,549,102 of investable assets in the Securities/Brokerage Accounts section of her September 8, 2010 financial affidavit (#176.00). Although the rate of return was not calculated on her September 8, 2010 financial affidavit and was not mentioned in testimony or in oral argument, such evidence was before the court. That rate of return is 2.23339%. The court will impute a 2.23339% rate of return on the Husband's investable assets of $30,530,634 for the purpose of determining child support and finds the Husband's earning capacity from investments to be $682,024 per year.
The Wife presented a number of financial scenarios in order to justify her claim of increased child support of $6,963.33 per child per month. Those scenarios are as follows:
(1) Accept the Husband's current annual salary as stated in his financial affidavit of $400,000. The Husband's investment return of .00786%, $240,000 on $30,530,634 investment assets is too low. In 2007 the Husband reorganized his investments. He earned $1,297,083 in investment income in 2008 on the same investment assets, which is an annual rate of return at 4.2%. Ex. 13. His 2008 federal income tax returns breaks down the $1,297,083 ($426,875 taxable interest, $178,888 tax free interest and $691,320 ordinary and qualified dividends). The Husband had already received $40,387,836 in 2007 in an incentive bonus and paid income taxes on his 2007 federal tax return. Ex. 7. Thus the Husband's assets in 2008 should have been the equivalent to those that he holds currently, since the Husband changed his investments to essentially cash holdings, protecting his assets from the coming recession. The Wife argues: assuming that the Husband had approximately $30,000,000 in investment assets in 2008, the $1,297,083 was a 4.3% rate of return. The Wife therefore claims that the Husband's current income capacity from his $30,530,634 investment assets is $1,297,083 per year, the amount he earned from investment assets in 2008 after he reorganized his investment portfolio to conservative. Combined with the $400,000 W-2 employment salary, the Husband's gross annual income is $1,697,083 or $32,636 per week. This $32,636 per week is the Husband's "Gross cash income" used by the Wife in line 1 of her guideline Worksheet. (#174.00.) Argument #1 would result in a $6,963 per week per child support order. Using the Wife's guideline Worksheet; the Net Income for the Wife is $4,823 and for the Husband is $20,146; a 19%/81% division. The Combined Net Income is $24,970 per week. Using the percentage of 15.89% times the $24,970 results in $3,968 per week. The Husband's 81% share of the $3,968 is $3,214; $167,121 per year or $6,963.33 per month per week child support for two children. This argument assumes that the "presumptive support amount" under the guidelines as stated in Maturo is 15.89%; not the $636 per week.
(2) Accept the Husband's current annual salary as stated in his financial affidavit of $400,000 and using the 2.72% Treasury constant maturities-Nominal — 10 year as of September 3, 2010 and September 20, 2010 applied to the Husband's $30,530,634 investment assets, the result is $830,433 per year investment income. Combined with the $400,000 salary, the Husband's annual gross income is $1,230,433 or $23,662 per week. Argument #2 would result in $5,404 child support per child per month. The Husband's gross weekly income would be $23,662 and net $14,692 and the Wife's gross weekly income would be $5,390 and net $4,834. The combined net weekly income is $19,516 on a 25%/75% division. Using what the Wife claims is the presumptive child support amount, the percentage of 15.89% times the $19,516 combined net weekly income, results in $3,101 basic child support obligation. The Husband's 75% share of the $3,101 is $2,326; $120,952 per year or $5,040 per child per month child support for two children.
(3) In claiming additional alimony in her Motion for Order (#154.00), the Wife presented evidence and argued simultaneously with this child support motion. In the Motion for Order the Wife claimed that the Husband's "Gross annual compensation for employment" should be the average of the Husband's annual salaries for 2005, 2006 and 2007. Before the sale of the insurance business that average was $1,327,723 annually. Argument #3 would result in the Husband's gross income from earnings of $1,327,723 plus either $1,297,083 or $830,433 investment earning capacity for a total of either $2,624,806 or $2,158,156. The Wife did not present calculations of the net income from the Husband's earning capacity based on either $2,158,156 or $2,624,806. The court can find that the evidence produced by the Wife at the hearing established the Husband's current annual earning capacity for child support purposes from his employment as $1,327,723. No doubt using the 15.89% presumptive percentage, the resulting child support order would have far exceeded the $6,963.33 per month per child.
(4) The Wife seeks to invoke the substantial asset deviation criteria if Argument #2 is accepted by the court. Section 46b-215a-3(b)(1)(A). Argument #2 is based on the Husband's annual salary of $400,000 together with an investment earning capacity calculated at a 2.72% return on his investment assets for annual income for $830,433. This would result in a child support order of $5,040 per child per week. The $5,040 is based on a Combined Net Weekly Income of $19,516 and the percentage of 15.89%. In Argument #2 the Wife is requesting a child support order of $6,963.33 per week per child. When the $6,963 per child per month ($167,112 per year) is compared to the $19,516 Combined Net Weekly Income ($1,014,832 per year), the result is 16.46696%. The difference between the 16.47% and 15.89% is .58%, a deviation of 3.65% from the percentage of 15.89%.
"The presumption regarding each such amount may be rebutted by a specific finding on the record that such amount would be inequitable or inappropriate in a particular case." Section 46b-215a-3(a). The Wife argues that such a substantial asset deviation is needed because: (1) the Husband's assets increased by a substantial amount, tens of millions of dollars in 2007; (2) the Husband's assets did not suffer the market losses due to the Husband's conservative cash investments after 2007; (3) the Wife's assets did suffer a substantial loss of approximately 25% due to market forces; (4) the Husband has been living off of his assets since the expenses on his September 9, 2010 affidavit shows monthly personal expenses of $55,064.12 and monthly net income of $31,322.95; (5) the Husband has been paying his Wife alimony from his assets; (6) the Husband has been paying child support from his assets; (7) the Husband has incurred no debt except for one contingent New York income tax liability; and (8) a deviation of less than fifteen percent is not a substantial deviation. "There shall be a rebuttable presumption that any deviation of less than fifteen percent from the child support guidelines is not substantial and any deviation of fifteen percent or more from the guidelines is substantial." Gen. Stat. § 46b-86(a).
The definition section of the guidelines references "Presumptive Support Amount:" "Presumptive Support Amounts" means the child support award components calculated under sections 46b-215a-2b and 46b-215a-4a of the Regulations of Connecticut State Agencies, prior to consideration of the deviation criteria specified in section 46b-215a-3 of the Regulations of Connecticut State Agencies section 46b-215a-1(20).
The court finds that the "presumptive support amount" is the number contained in the guideline schedule, the dollar number, not the percentage number. See Worksheet line 20 "Presumptive current support amounts." Thus for Combined Net Weekly Income of $4,000 or more the "presumptive support amount" for two children is $636. The $636 is the presumptive support amount for this case. The 15.89% percentage in the guideline schedule for the Combined Net Weekly Income of $4,000 for two children is not the "presumptive support amount" despite the Wife's argument to the contrary.
On May 4, 2010 the Supreme Court discussed for the first time the effect of the Child Support Guidelines on parties whose Combined Net Weekly Income exceeds the maximum numbers and percentages in the schedules. Maturo v. Maturo, supra, CT Page 8832 297 Conn. 80. Maturo noted that the legislature, by the passage of the Child Support Guidelines, limited the "traditionally broad judicial discretion of the court in matters of child support." Id., 114 and 116. It found that the application of the child support guidelines by trial courts was mandatory, not directory ". . . we not only recognize, but emphasize, that trial courts must consider the statutory criteria as well as the guidelines when making child support awards." Id., 89, fn5. In addition, Maturo required "the rules, principles . . . and worksheet" contained in the child support guidelines must be applied to high asset/high income families even though the Combined Net Weekly Income exceed $4,000 and thus the schedule alone would not be applicable. Id., 117. Finally, the court spread throughout its majority decision the steps that trial courts in the future must take to render child support decisions in all matters, whether above or below the $4,000 weekly threshold. The panels' attempt to furnish future guidance to trial courts and litigants was well-stated by the two concurring opinions "Although it would, of course, be preferable to present a unified approach to guide the trial courts, I feel compelled to write separately to clarify what I am convinced is the correct approach for trial courts to use in determining support orders in above guidelines cases." Id., 126. (First concurring opinion.) "As attractive as the dissent's liberation from the principles of the child support and arrearage guidelines (guidelines) may be for the family bench and bar in cases where the net income of the parties exceeds the amount set forth in the schedule of basic child support obligations (schedule), I find the reasoning of the plurality opinion's adherence to the principles of the guidelines persuasive." Id., 137-38. (Second concurring opinion.)
Maturo involved a contested dissolution of marriage action tried by the Regional Family Trial Docket at Middletown after being transferred from the Superior Court, judicial district of Stamford-Norwalk at Stamford. The Maturos were married on May 21, 1988 and were parents of twin boys born on July 22, 1993. The defendant was a successful executive with Merrill Lynch working in the area of global equity markets. At the time of the dissolution he was earning an annual base salary of $200,000 and his bonuses for 2005, 2004 and 2003 were $489,449.50, $597,137.67 and $500,000 respectively. In 2000 and 2001 he had received a much higher annual bonus, in the range of $3,800,000. The parties' assets were also substantial, nearly $18,000,000. The trial court divided those assets: $10,650,000 to the plaintiff and $7,100,000 to the defendant. The plaintiff was awarded periodic alimony of $1,215 per week plus 20% of the defendant's annual net cash bonus and 20% of any future tax refund the defendant may receive. The plaintiff was awarded sole custody of the two minor children subject to a visitation and custody rotation plan. The court ordered the child support to the plaintiff of $636 per week "plus 20 percent of the defendant's annual net cash bonus and 20 percent of any future tax refund that the defendant might receive." Id., 86. The defendant was also ordered to pay 100 percent of the children's private school tuition as well as day care, summer camp, extracurricular activities and unreimbursed health care costs for the two minor children. In entering those final orders the trial court had considered "all of the statutory criteria set forth in . . . § 46b-84 as to support of a minor child, § 46b-251a-1 et seq. of the Regulations of Connecticut State Agencies, as to child support . . . and § 46b-82, as to the award of alimony . . ." Id., 87.
The trial court ruled that the Child Support Guidelines do not contain a schedule of payments when the Combined Net Weekly Income exceeded $4,000. The court entered a basic child support order of $636 per week, which is the presumptive amount of child support for Combined Net Weekly Income of $4,000. The court acknowledged that the court's order departed from the schedule contained in the guidelines "which does not address circumstances in which the combined net weekly income of the parties exceeds $4,000." Id., 87. The trial court then found that a deviation is needed because "of the defendant's substantial assets, the defendant's superior earning capacity, the extraordinary disparity in parental income and the significant and essential needs of the plaintiff including, but not limited to, the need to provide a home for the children." Id., 87. The trial court then entered the $636 per week and 20% of the defendant's annual net cash bonus and future tax refund as the child support order. The trial court did not use the 15.89 percent set forth in the guideline schedule. The judgment entered on June 12, 2006. The trial court applied the guidelines that were effective on August 1, 2005, the same guidelines currently in effect.
The Maturo Supreme Court's four to three decision was ninety pages of which the two 20% orders of child support consumed most of the decision. The division of assets of $18,000,000 only took five pages. Only the child support orders were reversed and remanded to the trial court for further proceedings on child support only. One justice wrote a concurring opinion but disagreed with the majority's analysis of the mandatory nature of the guidelines. Another justice concurred joining in the guidelines analysis of the majority but found that gross income instead of net income should be used for all child support determinations. Three justices dissented in a lengthy opinion.
The Maturo court attempted to give guidance to trial courts on how to apply the statutory factors, under Gen. Stat. § 46b-84, the guidelines and the deviation criteria in the guidelines to fashion an appropriate child support order for those families whose Combined Net Weekly Income exceeds $4,000. It took two years from the June 2006 judgment for the appeal to be prepared for argument. The Children's Law Center filed an amicus curiae brief. The appeal was argued on September 19, 2008 and the decision was published on May 4, 2010. When released on October 28, 2008 the Supreme Court's decision of Kerrigan v. Commissioner of Public Health, 289 Conn. 135 (2008), was touted as the longest deliberation period in Connecticut Supreme Court history, 17 1/2 months. Maturo apparently became the longest deliberated Supreme Court decision. The majority held that the trial court erred:
(1) It abused its discretion in ordering the defendant to pay 20 percent of his annual cash bonus since that award exceeded the 15.89% of the combined net weekly income and was inconsistent with the statutory criteria for setting child support awards.
(2) It abused its discretion since its 20 percent order was inconsistent with the principles expressed in the child support guidelines.
(3) The award was not based on the actual needs of the children.
(4) The award did not reflect a proper application of the criteria set forth in the child support guidelines for deviating from the guidelines under § 46b-215a-3.
(5) The court improperly deviated from the child support guidelines schedule.
(6) The four reasons stated by the trial court for deviation are not recognized deviation criteria.
(7) The court did not make a finding on the record why the guidelines were inequitable or inappropriate.
This court will not attempt to discuss all the various of legal holdings set forth by the four-justice majority. One comment will be made by this court on the income shares model and then this court, as it must, will abide by the holding by the four-justice majority, two of whom found it necessary to offer concurring opinions. "Our resolution of this issue is controlled by the plurality opinion in this court's recent decision, Maturo v. Maturo, 296 Conn. 80 (2010)." Misthopoulos v. Misthopoulos, supra, 297 Conn. 365. The Connecticut Child Support Guidelines are based on the Income Shares Model. ". . . the income shares model reflects the principle that spending on children as a percentage of household income actually declines as family income rises." Id., 93. "Consequently, the support payment for two children under the guidelines should presumptively not exceed 15.89 percent when the combined net weekly income of the family exceeds $4,000, and, in most cases, should reflect less than that amount." Id., 96. Families with increased income engage in major undertakings on behalf of their children. Some examples of this increased spending are expensive extracurricular activities such as equestrian activities, foreign vacations, extravagant spending for events and private school education. For example, assume a family earning the Combined Net Weekly Income of $4,000 with two minor children resulting in a presumptive support amount of $636 or a 15.89 percentage. Assuming at that level of income this lower Fairfield County family with two children send them to public schools. Assume now that the Combined Net Weekly Income increases to $6,000 a week, an increase of approximately $104,000 a year. The two children are college bound and the family can now consider sending both to a Connecticut boarding school for their secondary education. The actual costs for raising these two children has increased by $40,000 per child, plus extra clothing, transportation and social costs. At $4,000 per week applying $636 per week in the schedule, the two children cost that family each year $33,072, which is 15.89% of the Combined Net Weekly Income. At the newly earned $6,000 per week the family will spend the same $33,072 per year plus another $80,000 for the private boarding schools. $113,072 per year divided by $312,000 ($6,000 per week) is 36.24%. If only one child goes to boarding school the percentage reduces to 23.42%. Both scenarios deviate from the 15.89% by more than fifteen percent and represent a fairly common occurrence.
The Maturo decision mentioned various legal concepts throughout its plurality opinion. In its first review of the principles of Maturo in a high asset/high income case, the Appellate Court quoted three sections of the Maturo majority, which this court feels best summarizes the Maturo rule on high income child support cases. These quotes are contained in Turkman v. Turkman, supra, 122 Conn.App. 217, a January 8, 2009 dissolution judgment thus Maturo was not available for the Turkman trial court's use.
Neither this court, nor the trial court, is at liberty, where a particular family enjoys a relatively high income, to disregard the significant progress that has been made in standardizing child support awards since the advent of the guidelines. See 42 U.S.C. § 667(b)(2) (1988). Removing consideration of the guidelines from child support decisions deprives high income families of the fairness and consistency the guidelines require and leaves the trial and appellate courts adrift, unanchored to the core principles that guide support awards in cases falling within the guidelines' schedule.
Maturo v. Maturo, supra, 296 Conn. 113.
The legislature also has provided for a commission to oversee the establishment of child support guidelines, which must be updated every four years, to ensure the appropriateness of child support awards . . . General Statutes § 46b-215a . . . Moreover, the legislature has thrown its full support behind the guidelines, expressly declaring that [t]he . . . guidelines established pursuant to section 46b-215a and in effect on the date of the support determination shall be considered in all determinations of child support amounts . . . In all such determinations, there shall be a rebuttable presumption that the amount of such awards which resulted from the application of such guidelines is the amount of support . . . A specific finding on the record that the application of the guidelines would be inequitable or inappropriate in a particular case, as determined under criteria established by the [commission] under section 46b-215a, shall be required in order to rebut the presumption in such case. (Citation omitted; emphasis in original; internal quotation marks omitted.) General Statutes § 46b-215b(a).
Maturo v. Maturo, supra, 296 Conn. 90-91.
[A]n award of child support based on a combined net weekly income of $8000 must be governed by the same principles that govern a child support award based on a combined net weekly income of $4,000, even though the former does not fall within the guidelines' schedule . . . [A]lthough courts may, in the exercise of their discretion, determine the correct percentage of the combined net weekly income assigned to child support in light of the circumstances in each particular case, including a consideration of other, additional obligations imposed on the noncustodial parent, any deviation from the schedule or the principles on which the guidelines are based must be accompanied by the court's explanation as to why the guidelines are inequitable or inappropriate and why the deviation is necessary to meet the needs of the child.
Maturo v. Maturo, supra, 296 Conn. 95-96.
These three sections outline the majority's opinion in Maturo. This court was able to find eight principles in these three sections that can guide the bench and bar in dealing with child support for high asset/high income families.
On July 13, 2010 the Supreme Court released its decision in Misthopoulos v. Misthopoulos, supra, 297 Conn. 358. This case also originated in the Stamford/Norwalk J.D. and was referred to the Regional Family Trial Docket in Middletown and tried by the Maturo trial judge. This was a 1988 marriage with triplets born in 1996. The defendant's earnings at the time of the decree in July 2006 was a base salary of $150,000. He earned a performance bonus for 2004 $1,028,612.40 and for 2005 $565,740. The family assets could not accurately be determined from the Supreme Court decision but easily exceeded $3,000,000 plus vested stock options, vested restricted stock, unvested restricted stock and unvested stock options. Misthopoulos was a high income/high asset dissolution.
In July 2006 the trial court dissolved the marriage and ordered the defendant to pay $477 per week as child support based on his $150,000 annual salary plus 20 percent of his annual net cash bonus and 20 percent of his annual state or federal tax return that he might receive as additional child support. The guidelines schedule for three children is $477 per week based on Combined Net Weekly Income at $2,080 at 22.95%. This $477 per week child support order was based on the husband's $150,000 annual salary and the Combined Net Weekly Income of both parties was $108,160 annually ($2,080 per week). The Supreme Court held that the $477 per week award was consistent with the guidelines.
The Supreme Court found that the 20 percent of the defendant's net cash bonus and tax refunds as additional child support was in error in violation of the guideline principles. The court found, based on his net bonus, the additional 20 percent awards were $2,175 per month and this was four times the $477 weekly base award and in excess of the 17.16% allowed under the guidelines for three minor children at the Combined Net Weekly Income of $4,000. The child support order was reversed and the child support portion of the judgment was remanded to the trial court.
In Misthopoulos no justice dissented and no justice authored a concurring opinion. The five-Justice panel of Misthopoulos all sat on the seven-Justice panel of Maturo including two of the Maturo dissenting Justices and one of the concurring Justices.
Both Maturo and Misthopoulos were argued the same day, September 19, 2008. Maturo broke the Kerrigan record and Misthopoulos apparently now holds the record for the longest Connecticut Supreme Court deliberation, almost 22 months. Misthopoulos was thirty-three pages of which only five pages discussed the child support issue. "This court's conclusion in Maturo is dispositive of the defendant's claims relating to the trial court's child support order in the present case." Id., 368. "Consequently, under this court's holding in Maturo, child support payments for three children under the guidelines should presumptively not exceed 17.16 percent when the combined net weekly income of the family exceeds $4,000, and, in most cases, should reflect less than that amount." CT Page 8839 Id., 369. Maturo v. Maturo, supra, 296 Conn. 96. It is noted that Misthopoulos had three children, thus 17.16% is the maximum percentage and Maturo had two children, thus 15.89% is the maximum percentage.
The first question in this case is: How far up the income stream must a trial court apply the guideline percentages? The answer is that Maturo and its follow up case Misthopoulos does not "extrapolate any non-descending percentages for child support." The "rules, principles . . . and worksheet" contained in the Child Support Guidelines apply to all child support cases regardless of the amount of parental income. Maturo v. Maturo, supra, 296 Conn. 117. The presumptive support amount for Combined Net Weekly Income of $4,000 for the number of children is the presumptive support amount for all weekly income in excess of $4,000. The percentage "in most cases, should reflect less than that amount." Misthopoulos v. Misthopoulos, supra, 297 Conn. 369.
On the last day of the hearings, after all the evidence was submitted and half-way through oral argument, counsel raised the issue: How should the court treat the minor children's estate and income in determining whether or not to modify child support, and, if so, what should be the modified child support? Counsel called this an issue of first impression and this court agrees.
This is not an academic question since the evidence disclosed that the minor children's assets invested in custodial accounts and trusts for the benefit of the children as of the November 25, 2005 was in excess of $6,000,000. None of these custodial accounts or trusts were included as the parties' assets in the Wife's or Husband's financial affidavits. As of the date of the decree each of the four children, then ages 8, 12, 14 and 15 was approaching multi-millionaire status. Had the Great Recession not occurred, as of 2011 each no doubt would have had a net worth of over $2,000,000. According to the Husband's financial affidavit the total assets in the children's custodial accounts and children's trusts was just under $6,000,000 even after the payment of college education costs and $15,000 per child per year child support from these funds.
There are three family statutes that contain standards for division of property, periodic alimony and child support.
[S]hall 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, liabilities and needs of each of the parties and the opportunity of each for future acquisition of capital assets and income. The court shall also consider the contribution of each of the parties in the acquisition, preservation or appreciation in value of their respective estates.
Gen. Stat. § 46b-81(d) Assignment of Property.
[S]hall 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.
Gen. Stat. § 46b-82 Alimony.
In determining whether a child is in need of maintenance and, if in need, the respective abilities of the parents to provide such maintenance and the amount thereof, the court shall consider the age, health, station, occupation, earning capacity, amount and sources of income, estate, vocational skills and employability of each of the parents, and the age, health, station, occupation, educational status and expectation, amount and sources of income, vocational skills, employability, estate and needs of the child.
Gen. Stat. § 46b-84(d) Parents' Obligation for Maintenance of Minor Child.
Two other statutes reference payments on behalf of a minor child.
If the defendant is found to be the father of the child, the court or family support magistrate shall order the defendant to stand charged with the support and maintenance of such child, with the assistance of the mother if such mother is financially able, as the court or family support magistrate finds, in accordance with the provisions of subsection (b) of section 17b-179, or section 17a-90, 17b-81, 17b-223, the financial ability of the defendant, and to pay a certain sum periodically until the child attains the age of eighteen years or as otherwise provided in this subsection. If such child is unmarried and a full-time high school student, such support shall continue according to the parents' respective abilities, if such child is in need of support, until such child completes the twelfth grade or attains the age of nineteen, whichever occurs first.
Gen. Stat. § 46b-171(a)(1)(A) Support orders by Family Support Magistrate.
The court may not enter an educational support order pursuant to this section unless the court finds as a matter of fact that it is more likely than not that the parents would have provided support to the child for higher education or private occupational school if the family were intact. After making such finding, the court, in determining whether to enter an educational support order, shall consider all relevant circumstances, including: (1) The parents' income, assets and other obligations, including obligations to other dependents; (2) the child's need for support to attend an institution of higher education or private occupational school considering the child's assets and the child's ability to earn income; (3) the availability of financial aid from other sources, including grants and loans; (4) the reasonableness of the higher education to be funded considering the child's academic record and the financial resources available; (5) the child's preparation for, aptitude for and commitment to higher education; and (6) evidence, if any, of the institution of higher education or private occupational school the child would attend.
Gen. Stat. § 46b-56c(c) Education Support orders.
Neither the alimony or assignment of property statutes mentions children's "amount and sources of income" or "estate," directly or indirectly. Gen. Stat. §§ 46b-81, 46b-82. The Family Support Magistrate Statute does not mention "amount and sources of income" or "estate" of a child, either directly or indirectly. Only when the child is unmarried and a full-time high school student does a child's assets or income indirectly appear: "if such child is in need of support." Gen. Stat § 46b-171. The education support statutes include "the parents' income, assets" and also the "child's need for support to attend an institution of higher education or private occupational school considering the child's assets or the child's ability to earn income" as well as "the availability of financial aid from other sources, including grants and loans." Gen. Stat. § 46b-56c(c). On the other hand the child support statute contains two factors directed toward the minor child's financial situation: (1) "in determining whether a child is in need of maintenance" and (2) "amount and sources of income . . . estate . . . of the child." Gen. Stat. § 46b-84(d).
Both the earlier statute, Gen. Stat. § 46b-84(d), and the later guidelines statute, Gen. Stat. § 46b-215(a) et seq. must be considered. The guidelines statute made mandatory the consideration of the child support guidelines. "The child support guidelines established pursuant to section 46b-215a and in effect on the date of the support determination shall be considered in all determinations of child support amounts, including any past due support amounts, and payment on arrerages and past due support within the state." Gen. Stat. § 46b-215b(c). Maturo confirmed the mandatory, not directory, nature of the guidelines for combined net weekly income in excess of $4,000. On August 1, 2005 the Commission on Child Support Guidelines adopted the current Child Support and Arrearage Guidelines. These are the guidelines that this court must apply.
Pursuant to Gen. Stat. §§ 46b-215a and 46b-215a-5b, Regulations of Connecticut State Agencies, the Commission for Child Support Guidelines prepared a two-page Worksheet form; CCSG-1, Rev. 8-05. Both parties submitted separate completed Worksheets to this court. (#173.00, #174.00.) The Worksheet contains two columns where income must be considered: "Mother" and "Father." There is no column for child's income. The child's name, age and date of birth appear at the top of the Worksheet for informational purposes. The Worksheet requires no other information for the child. The two columns for Mother and Father continue down the entire front page and the top portion of the second page. There are eight sections of the Worksheet: Net Income, Current Support, Net Disposable Income, Unreimbursed Medical Expenses, Child Care Contribution, Arrearage Payment, Deviation Criteria and Recommended Orders. No column or section contains space for a child's income or assets to be disclosed. The deviation criteria section mentions five general categories of deviation criteria and none relate to the child's income or assets. There are a total of twenty-two boxes within the deviation criteria section that can be checked off and none relate to the child's income or assets. Those twenty-two deviation criteria are not exclusive since one may "attach additional sheets if necessary." None of the recommended orders mentions a child's income and assets.
The entire manual entitled Child Support and Arrearage Guidelines is silent as to the consideration of a child's income and assets. The only mention of a child's income are the exclusion of SSI payments received on behalf of a child, Section 46b-215a-1(11)(B)ii, and the inclusion of social security payments paid on behalf of a child whose support is being determined, Section 46b-215a-1(11)(A)(8). This leaves a trial court in a quandary since the trial court's consideration of the child support guidelines is mandatory. The submission of a Worksheet by the litigants is mandatory and the failure of the trial court to abide by the standards of the guidelines is grounds for reversal. Maturo v. Maturo, supra, 296 Conn. 94-95.
Due to the following circumstances of this case, the court is not going to consider either the child's "amount and sources of income" or the child's "estate" in considering a modification of child support. The recitation of these circumstances, applicable to the facts of this case, may furnish guidance on how a child's "amount and sources of income" and the child's "estate" will be considered in the future. These circumstances are:
(1) None of the children were represented by either an attorney or guardian ad litem throughout the entire dissolution process.
(2) None of the children were represented by an attorney or guardian ad litem throughout the pendency of motion #153 and #154.
(3) Neither party offered evidence of the amount and sources of any child's income.
(4) The court had only vague information on the children's assets as disclosed in the November 30, 2005 Separation Agreement (#129.10, Article 3.2, Schedule A and Article 5.2, Schedule A).
(5) The court had only vague information on the children's assets as disclosed in the September 9, 2010 Husband's financial affidavit (#177.00).
(6) Schedule A of the Separation Agreement contains account numbers of J.P. Morgan but those account numbers, even in the last four-digit redacted form, did not coincide with the Husband's financial affidavit. (#177.00.)
(7) The custodian of each of the accounts was not identified.
(8) The custodian of each of the accounts was not notified of the court proceedings on motions #153.00 and #154.00 and given an opportunity to participate or hire counsel.
(9) The trustee of each of the children's trusts was not identified.
(10) The trustee of each of the children's trusts was not notified of the court proceedings on motions #153.00 and #154.00 and given an opportunity to participate or hire counsel.
(11) The terms and conditions of the custodian accounts were not before the court, including any right to receive current income or the power to invade assets.
(12) The terms and conditions of the children's trusts were not before the court, including any right to receive current income or the power to invade assets.
(13) The nature, type and amount of the underlying investments held by the custodial accounts and children's trusts was not disclosed, so the court could not determine if any income could be earned and distributed and whether or not the assets were liquid.
(14) Schedule A of the Separation Agreement refers to four separate trusts in the RR Fox, LP account yet the Husband's financial affidavit refers to only one trust in the RR Fox, LP account.
(15) Schedule A in the Separation Agreement refers to RR Fox II, LP as a GRAT. Since there are four children, there is no indication whether the underlying instrument is one trust or four trusts. The Husband's financial affidavit does not refer to the RR Fox II, LP account as a GRAT.
(16) Schedule A of the Separation Agreement mentions four separate custodian accounts yet the Husband's financial affidavit refers to nine separate custodian accounts.
(17) There was no testimony or documentary evidence of which children's custodian accounts or trusts were used by the Husband to fund the $15,000 per minor child payment as per Article 3.2 of the Separation Agreement.
(18) There was no testimony or documentary evidence of which children's custodian accounts or trusts were used by the Husband, if any, to fund grammar, middle and high school expenses as per Article 5.1 of the Separation Agreement.
(19) There was no testimony or documentary evidence of which children's accounts or trusts that were used to fund the two older children's college expenses as per Article 5.2 of the Separation Agreement.
(20) No Connecticut appellate or trial court authority was furnished to the court on how a minor child's "amount and sources of income" and "estate" are to be dealt with by a trial court in rendering a child support order.
There are two trial courts that have mentioned a child's income in its decision: "The court finds that Alexis and Aaron are in need of maintenance. Aaron did work during the summer at Mercurio's in Fairfield for his own spending money." Toth v. Toth, Superior Court, judicial district of Fairfield of Bridgeport, Docket Number FA95-0326403 S (October 21, 1997, Bassick, J.T.R.). After these two statements the trial court in Toth immediately applied the child support guidelines and ordered child support as per the schedule. Aaron's summer earnings were not a factor in the eventual child support order. A more detailed discussion was engaged in by the second trial court deciding the effect of a $15,000 bond given to the minor child at her birth by her parental grandparents. The plaintiff argued that the maturation of the $15,000 bond negated the minor daughter's need or eligibility for child support. "Whether there might be merit to such an argument, he failed to seek a modification of child support in which he could ask the court to consider it." There was no further discussion or consideration of the child's income or assets. Lazrove v. Dutton, Superior Court, judicial district of New Haven at New Haven, Docket Number FA 96-03894678 S (October 27, 2006, Frazzini, J.)
(21) No Connecticut appellate or trial court authority was furnished to the court on how a minor child's "amount and source of income" and "estate" could be considered under the child support guidelines and the Worksheet.
(22) Neither party furnished legislative history to Gen. Stat. § 46b-84(d) "amount and source of income" and "estate" of child.
(23) Neither party furnished legislative history of the child support guidelines statute in relation to a child's "amount and sources of income" and "estate."
(24) Neither party furnished the history of the Commission for Child Support Guidelines in approving the August 1, 2005 guidelines without mentioning a child's "amount and sources of income" and "estate" nor of any deliberations of the Commission for Child Support Guidelines after August 1, 2005 on a child's "amount and sources of income" and "estate."
Section 46b-215a-3 "Deviation criteria" does not mention even indirectly any consideration of the "amounts and sources of income" of the minor child and/or the "estate" of the minor child. The trial court is required by Maturo v. Maturo, supra, 296 Conn. 95-96 to make detailed factual and legal findings in applying any deviation criteria. ". . . any deviation from the schedule or the principles on which the guidelines are based must be accompanied by the court's explanation as to why the guidelines are inequitable or inappropriate and why the deviation is necessary to meet the needs of the child." "The presumption requiring each such amount may be rebutted by a specific finding on the record that such amount would be inequitable or inappropriate in a particular case." Section 46b-215a-3(a). The recitation of criteria listed in section 46b-215a-3 of certain deviation criteria does not limit the court from considering "other equitable factors" section 46b-215a-3(a) Introduction and section 46b-215a-3(b) "Criteria for deviation from presumptive amounts." "(6) Special Circumstances" "(D) Other equitable factors." In addition the court is also required to apply the child's income and estate under the factors of Gen. Stat. § 46b-84(d).
The third novel issue posed by counsel and the evidence in this case is: How do the Child Support Guidelines consider a minor child's assets and income, factors in Gen. Stat. § 46b-84(d) but not factors mentioned in the Child Support Guidelines? It appears that the most efficient method of dealing with a child's income and estate is to consider these two statutory factors in Gen. Stat. § 46b-84(d) as deviation criteria. The trial court must first apply the guidelines and determine the presumptive support amount according to the schedule. Since the guidelines are silent as to the child's income and assets, the child's income forms no portion of that determination of the presumptive support amount. If the court wishes to enter a different child support order than the presumptive support award, either higher or lower, the court may apply the deviation criteria under section 46b-215a-3(b)(6) Special Circumstances (D) Other equitable factors and consider the "amount and sources of income" of the child and/or "the estate . . . of the minor child." Gen. Stat. § 46b-84(d). The court cannot consider the "amount and sources of income" of the minor child and/or "the estate . . . of the child" under Section 46b-84(d) without (1) complying with the deviation criteria procedures, (2) the court having detailed information on the child's income and assets, and (3) the minor child or children being represented by an attorney and/or guardian ad litem. Guille v. Guille, supra, 196 Conn. 268.
For the reasons stated the court is only going to consider the income and imputed income of both parents and not consider either the "amount and sources of income" or "estate" of either of the two minor children either as a statutory factor, a guideline consideration or a deviation criteria.
The court finds that the Husband's current annual earning capacity from employment is $1,327,721. The court finds that the Husband's annual earning capacity based on an imputed rate of return of 2.23339% on the Husband's investable assets of $30,530,634 is $682,024. The Husband's gross annual earning capacity from employment and earnings on his investable assets is $2,009,745. Since the periodic alimony is non-modifiable, the Husband's gross earning capacity of $2,009,745 is related only to child support. Child support orders shall be based on net income, not gross income. Ludgin v. McGowan, 64 Conn.App. 355, 358 (2001). The Wife's net weekly income on the two Worksheets provided by the parties remains the same: $5,390 per week gross income and $4,823 per week net income (#173.00, #174.00). All the Wife's income is a return on investments. Neither party provided a Worksheet for the Husband's annual gross income of $2,009,745.
The court has applied the net income computed by the Husband in his Worksheet, which contained gross annual income of $639,964 (#173.00). This placed the Husband in the maximum Federal/Connecticut income tax brackets. The court did not hear any evidence of the Husband's marital status and therefore assumes that he is filing single. Therefore his federal tax bracket for 2011 is 35% for all taxable income over $379,150. The Connecticut tax bracket is 6.5% for all taxable income over $500,000. The court assumes that there is no Alternative Minimum Tax, no tax credits, no further deductions than those already stated in the Husband's Worksheet and no other personal exemptions. Deductions for Social Security and Medicare taxes have already reached the maximum. The additional Connecticut income taxes are deductible on his federal taxes and thus this court will reduce the effective Connecticut income tax rate by the Husband's 35% federal tax bracket for an effective Connecticut income tax rate of 4.225%. Thus the Husband's federal taxes on $2,009,745 gross income is the $3,605 already on the Husband's Worksheet (#173.00) plus federal taxes of 35% on the additional $1,369,781 earning capacity not on the Husband's Worksheet ($2,009,745-$639,964 = $1,369,781). The federal taxes on this $1,369,781 at 35% is $479,423. The Connecticut income taxes on the additional $1,369,781 earning capacity at the 4.225% effective rate is $57,873. The additional net weekly income for the Husband over and above his Worksheet net income of $7,754 is $1,369,781 less $479,423 federal tax and $57,873 Connecticut tax for additional annual net income of $832,485 or weekly $16,009. The Husband's net weekly income is $23,763 ($7,754 plus $16,009).
The Husband's net weekly income for guideline purposes is $23,763 and the Wife's is $4,823 for a Combined Net Weekly Income of $28,586. The Husband's share is 83.13% and the Wife's 16.87%. The presumptive support amount for the Combined Net Weekly Income of $28,586 for two children is $636 per week. At an 83.13/16.87 division that child support order for the Husband would be $529 per week for both children. If the 15.89% percent found in the Combined Net Weekly Income of $4,000 for two children is applied to the $28,586 the result is $4,542 per week for both children. At an 83.13/16.87 division the Husband's child support order would be $3,776 per week for both children. It is noted that the $28,586 Combined Net Weekly Income is over seven times the maximum schedule amount of $4,000. The court is mindful of the following: "Consequently, the support payment for two children under the guidelines should presumptively not exceed 15.89 percent when the combined net weekly income of the family exceeds $4000, and, in most cases, should reflect less than that amount." Maturo v. Maturo, supra, 296 Conn. 96.
The court will now examine the needs of the children as reflected in the evidence and the financial affidavits before the court in order to determine if those needs are equal to, less than or exceed the above calculated child support order of $3,776 per week for both children.
The Wife's September 8, 2010 financial affidavit (#176.00) demonstrates monthly expenses of $51,658.30. Her affidavit does not fully allocate those expenses to either herself or the children. Some of the $51,658.30 is incurred for the benefit of the two children attending college. Children are mentioned in her affidavit in only five sections as monthly expenses; Clothing and Shoes: Children $3,740, Medical and Dental Expenses Children $1,782.67, Children's Expenses Educational expenses $3,383.33, Travel and vacation (including parties' children) $5,097 and Cash (including children's allowance and spending) $2,225. No documents were offered by either party showing an allocation of the Wife's $51,658.30 for the benefit of the two minor children. The parties did testify on that subject.
Timothy has a driver's license and drives a car that was purchased for his own use. The minor children live in the large family house in New Canaan, Connecticut owned by the Wife. John attends a private school New Canaan Country School. Timothy attends New Canaan High School, a public school. Both minor children are preparing for post-high school education. The Wife testified that the tuition, books, tutoring and ancillary education costs for both minor children is $40,600 per year, of which tutoring for both minor children is $10,600 annually. The Wife does not pay the college expenses and those college expenses are not included in the $51,658.30 per month. Although the Parenting Plan anticipates that the children will spend more time with the Husband, in actuality the Husband has the minor children with him for less time than contemplated by the Parenting Plan. This has increased the costs incurred by her for the minor children. The Wife owns a substantial interest in a house in Idaho where she spends time with the children for summer and part of the ski season. The minor children ski.
The Wife's home in New Canaan is worth $2,520,000. It is subject to a $479,000 first mortgage. The house is occupied full-time by the Wife and the two minor children. The two daughters live in the house when on vacation from college. The monthly costs for the New Canaan house including the mortgage, taxes, insurance, utilities, air conditioning, fuel, propane, security system, refuse collection, lawn maintenance, landscaping, tree work, septic system maintenance, swimming pool maintenance, sprinkler system operation and snow plowing is $13,882.03 per month. Plumbing, carpentry, painting and handyman costs contained in the affidavit in the Repairs and Help Sections add another $1,081/month to the shelter costs to bring the total to $14,963. That sum divided by the three full-time occupants is $4,988/month. If the two college students, who occupy part-time, are counted as one full-time occupant, the $14,963 divided by four is $3,741/month. The Wife spends for communication; $350/month cell phones, $170/month Direct TV and $68/month internet. This averages $118 per five full-time and part-time occupants although a larger allocation of these monthly communication expenses of $588 should be allocated to the two minor children.
Timothy is being treated by a medical specialist in Dallas, Texas. This requires the Wife and Timothy to travel to Dallas three times a year incurring travel, hotel, rental cars, and restaurant costs. All of this is in addition to Timothy's annual physician and medication costs. Timothy is accident prone and has incurred orthopedic treatment expenses. John is a member of the New Canaan Winter Club. The Wife testified that the family food costs $3,500/month and only 20% is allocated to her food costs. The Wife testified that if she lived in the house by herself she would not need a housekeeper. Thus she allocated the entire $1,600/month housekeeper to the two minor children along with the $357/month babysitter's costs.
She travels extensively with the children. The "Travel and vacation (including parties' children)" is $5,097/month. A larger portion of the $2,190 "Holiday/birthday presents" would be allocated to the two minor children. The Idaho residence costs $1,133.44/month should be divided by five (the Wife, two minor children and two adult children) resulting in an allocation for each minor child of $227/month. A large majority of the $2,225/mo "Cash (including children's allowances and spending)" should be allocated to the two minor children.
The court compiled and calculated the numbers contained in the Wife's financial affidavit taking into consideration the above mentioned facts. By these calculations, the court finds that the needs for both minor children is $24,297 per month. None of the $40,600 private school and tutoring costs are included in this total. The Wife is requesting a child support order of $6,963 per month per child as a child support order. This request is based on the Wife's own allocation of the costs to meet the needs of the minor children. Since this is a more accurate allocation than performed by this court, the court finds that the $6,963 per month per child are the needs of the minor children. This is not a lavish child support request not connected to the needs of the children Maturo v. Maturo, supra, 296 Conn. 104. "We recognize that children in high income families are accustomed to a more affluent lifestyle that should be maintained to the extent reasonably possible." Id., 104. "The trial court's supplemental support order ensures that the children will have the luxuries that they would have received if the family had remained intact." Id., 163 (Dissent). "Consistent with the newer approach, I would conclude that, on the basis of the extraordinary high income of the defendant in the present case, the trial court did not abuse its discretion in ordering him to pay 20 percent of his annual cash bonus as additional child support in order to furnish his children with the advantages that children of wealthy parents are entitled to . . ." Id., 169 (Dissent).
The court has found that the Combined Net Weekly Income is $28,586. The Wife's proposed child support order of $6,963 per month per child is $3,214 per week child support for the two minor children. This is 11.24% of the above stated Combined Net Weekly Income. This is much less than the 15.89% contained in the guidelines schedule for two children at $4,000 per week. Thus the principles of the guidelines and Maturo have been complied with by this new order of child support. Maturo v. Maturo, supra, 296 Conn. 96.
The court finds that the presumptive support award under the guidelines is $636 per week and that sum is wholly inequitable, inadequate and inappropriate. The court has delineated the needs of the children above at $6,963 per month per minor child and those needs meet the following deviation criteria: (1) Special circumstances: "Best interests of the child" section 46b-215a-3(6)(C), (2) Special Circumstances: "Other equitable factors;" section 46b-215a-3(b)(6)(D) and (3) "Extraordinary expenses for care and maintenance of the child" section 46b-215a-3(b)(2) including (B) and (C). Maturo v. Maturo, supra, 296 Conn. 80, fn.7.
The court has considered all the factors under the child support statute Gen. Stat. § 46b-84(d) except for the "amounts and sources of income . . . of the minor child" and "the estate of the minor child." The court is not required to make an express finding on each of the § 46b-84(d) factors, but it has considered each of the factors and the evidence offered on each of the factors Clark v. Clark, 127 Conn.App. 148, 156 (2011).
The child support orders entered by this court comply with Maturo v. Maturo, supra, 296 Conn. 80 and Misthopoulos v. Misthopoulos, supra, 297 Conn. 355 because:
(1) The rules, principles, worksheet and schedules of the Child Support Guidelines established pursuant to section 46b-215a and their effect on child support were considered in this court's determination of the child support amounts.
(2) The court applied a rebuttable presumption that the amount of such award which results from the application of such guidelines is the amount of support.
(3) After reviewing the Worksheets submitted by the parties, the court calculated the Combined Net Weekly Income of both parties using the guideline principles that govern a child support award and placed these findings in its Memorandum of Decision.
(4) Since such issues were in the case, the court determined earning capacity from employment and/or investments of both parties.
(5) The court did the tax calculations on the earning capacity it found necessary to comply with the guidelines Worksheet since the parties had not filed a Worksheet that contained the exact income of the parties using an earning capacity analysis.
(6) The court placed these tax calculations in its Memorandum of Decision.
(7) The court determined that the Combined Net Weekly Income of both parties exceeds $4,000 and thus did not fall within the guidelines schedule.
(8) The court stated that the presumptive support award for two children for the parties' Combined Net Weekly Income that exceeded $4,000 was $636.
(9) The court found that the presumptive support award and the application of the guidelines would be inequitable or inappropriate in this particular case.
(10) The court made specific findings in this Memorandum of Decision that the application of the guidelines would be inequitable or inappropriate.
(11) The court by making such findings rebutted the presumption that the guidelines schedule award, the presumptive support award, was the amount of support.
(12) The court exercised its discretion in order to deviate from the $636 presumptive support amount.
(13) The court determined under the circumstances of this case the needs of the minor children as to category and amount and stated those facts in its Memorandum of Decision.
(14) The court deviated from the scheduled presumptive support amount of $636.
(15) The court applied the deviation criteria of section 46b-215a-3 and stated the deviation criteria it was applying by name, statute and section number.
(16) The court determined the child support award using the deviation criteria.
(17) The court determined the percentage of that child support award based on the Combined Net Weekly Income and stated that percentage in the Memorandum of Decision.
(18) The court applied the factor of Gen. Stat. § 46b-84(d).
(19) The court determined the child support order based on the rules, principles, worksheet and schedule of the guidelines and the factors of Gen. Stat. § 46b-84(d).
The Wife is requesting an order of attorney fees and offered two affidavits in support (#180.00, #181.00). The affidavits furnished information on counsel's experience, hourly rate and legal efforts in the case and a chronological record of time spent. The Wife's counsel was available in court for cross-examination on those affidavits and the legal services performed. The Wife's counsel argued that this procedure complied with the standards of Smith v. Snyder, 267 Conn. 456, 477, 480 (2004). The court finds the hourly rates disclosed in the Affidavit of Services reasonable. (#181.00.) There were three motions presented, to this court, #153.00, #154.00 and #155.00, Motion #155.00 was marked off on the first day of the hearing and is not before this court. The court has reviewed the Affidavit of Services (#181.00) and finds that the reasonable time spent on motion #155.00 is as stated by the Wife, $8,023, and therefore the sum of $8,023 is disallowed. The disbursements of $1,839.05 are reasonable. The Affidavit of Services claims $108,820.55, including disbursements, through and including the first four hearing days. There were two more hearing dates, October 28, 2010, full day, and October 29, 2010, one-half day. Those additional 9 hours for October 28, 2010 and October 29, 2010 at $350 are $3,150. Therefore the total fees and disbursements claimed for both motion #153.00 and motion #154.00 is $111,970.55. The court notes that the Wife was not successful on motion #154.00 but was successful on motion #153.00.
"In any proceeding seeking relief under the provisions of this chapter . . . the court may order either spouse or, if such proceeding concerns the custody, care, education, visitation, or support of a minor child, either parent to pay the reasonable attorneys fees of the other in accordance with their respective financial abilities and the criteria set forth in section 46b-82." Gen. Stat. § 46b-62. This is the statutory authority for the Wife's claim for attorney fees on both the post-judgment motions for alimony and child support. This statute does not require the movant to be successful on the prosecution of the underlying motion as does the family contempt statute. Gen. Stat. § 46b-87. Gen. Stat. 46b-87 does not require a review of the parties' financial situation. The relevant financial factors applicable to post-judgment relief of attorney fees under Gen. Stat. § 46b-62 are: "the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities and needs of each of the parties," the property award made pursuant to Gen. Stat. § 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." Gen. Stat. § 46b-82(a). The "length of the marriage" and "the causes for the annulment, dissolution of the marriage or legal separation" are not proper post-judgment considerations for attorney fees, although Gen. Stat. § 46b-82 fails to exclude those factors. The court will not consider those two factors in awarding post-judgment attorney fees under Gen. Stat. § 46b-62.
"Where, because of other orders, both parties are financially able to pay their own counsel fees they should be permitted to do so. Because the defendant had ample liquid funds as a result of the other orders in this case, there was no justification for an allowance of counsel fees." Koizim v. Koizim, 181 Conn. 492, 501 (1980). The Wife's financial affidavit reveals that she has ample liquid funds with which to pay the claimed $111,970.50 attorney fees and disbursements. Both parties are financially able to pay the Wife's attorney fees.
The Wife has invoked an exception to the Koizim rule: An exception to the rule announced in Koizim is that an award of attorneys fees is justified even where both parties are financially able to pay their own fees if the failure to make an award would undermine its prior financial orders. Eslami v. Eslami, 218 Conn. 801, 820 (1991). "Whether to allow counsel fees, and if so in what amount, calls for the exercise of judicial discretion" Holley v. Holley, 194 Conn. 25, 33-34 (1984).
The court notes that the Wife was successful in the motion to modify child support. This money is for the direct benefit of the minor children although it is paid directly to the Wife. The child support is in actuality the children's money. Alimony on the other hand is the Wife's money. In this case the Wife incurred attorney fees of $111,970.50 to collect money from the Husband for her benefit and for the benefit of the minor children. To require the Wife to pay a portion of the attorney fees of $111,970.50 out of the increased child support would be to deprive the children of their just financial support. In effect ordering the Wife to pay attorney fees to collect increased child support, requires the child to pay for these attorney fees in the form of reduced child support. The court finds that ordering the Wife to pay attorney fees for an increased child support, undermines the child support orders.
In this case neither minor child was represented. No attorney for the minor children or guardian ad litem was ever appointed for the minor children in this litigation. "The minor child's right to parental support has independent character, separate and apart from terms of support obligations as set out in judgment of dissolution, and the court was without power to enter an order that would permanently restrict unrepresented children's rights." CT Page 8856 Flaherty v. Flaherty, 120 Conn. 266, 272 (2010); Guille v. Guille, supra, 196 Conn. 267-68. Furthermore, Gen. Stat. § 46b-62 makes no mention of a child being responsible for attorney fees. It only mentions "either spouse" and "either parent" as the payor. The statutory factors for an award of attorney fees under Gen. Stat. § 46b-62 and Gen. Stat. § 46b-82 make no mention of a child's income, estate or ability to pay. Gen. Stat. § 46b-82 only mentions the "amount and source of income . . . estate of each of the parties," and "order either of the parties." Thus only the two spouses/parents are considered under Gen. Stat. § 46b-82.
There is a statute that does mention the income and estate of the children: "amount and sources of income . . . estate . . . of the child." Gen. Stat. § 46b-84(d). Neither Gen. Stat. § 46b-62 nor Gen. Stat. § 46b-82, the two statutes that the court must consider in awarding attorney fees, mention even indirectly the children's estate and income as does Gen. Stat. § 46b-84(d). This is a further reason why the children's interest must be protected by appointed representation in order to make sure that the attorney fees incurred to obtain increased child support do not undermine the orders of child support.
Having found that requiring the attorney fees to be paid by the Wife would undermine the modified order of child support and finding that the Husband has ample liquid assets within which to pay those attorney fees, the court now considers the award of attorney fees. The Wife should pay for that portion of the incurred attorney fees related to her prosecution of the alimony motion since these increased alimony funds would have become her property and she has ample liquid assets with which to pay those attorney fees. The Husband should pay that portion of the $111,970.50 attorney fees and disbursements that relate to the prosecution of the child support proceedings. The court has reviewed the attorney fees affidavits carefully and its trial notes of the four days of hearings. The court finds that the Wife's legal efforts were approximately equally divided between motions #153.00 and #154.00.
The court hereby orders that the Husband pay the Wife $55,000 as counsel fees within sixty days of this order.
The Wife requests that the increased child support order be retroactive to May 21, 2009, the date the motion for modification of child support was served on the Husband (#142.01). "No 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 an alimony or support order from the date of service of notice of such pending motion upon the opposing party pursuant to section 52-50." Gen. Stat. § 46b-86(a). The Wife prepared and filed Plaintiff's Motion to Modify Child Support, Post-Judgment dated May 6, 2009 (#142.10 and #144.10). That motion, the order to show cause for a hearing on June 23, 2009 on that motion and three other motions filed by the Wife were served on the Husband on May 21, 2009, as per the State Marshal's return of service on file (#144.10). On June 23, 2009 all motions were marked off. All four motions were assigned on Short Calendar on July 13, 2009 and July 20, 2009 and marked off. On July 27, 2009 two of the four motions were granted, and the other two motions including Plaintiff's Motion to Modify Child Support, Post-Judgment dated May 6, 2009 (#142.10 and #144.10) were marked off. Motion #142.10/#144.10 was never assigned for a hearing and no order ever entered on motion #142.10/#144.10.
The wife prepared and filed Plaintiff's Motion to Modify Child Support, Post-Judgment dated December 21, 2009 (#153.00 and #158.00). This is the motion that is before this court. That motion, an order to show cause for a hearing on February 16, 2010 on that motion and two other motions filed by the Wife were served on the Husband on January 16, 2010, as per the State Marshal's return of service on file (#158.00). Motion #153.00 was assigned for a hearing on May 4, 2010 and May 5, 2010 but did not proceed. On September 9, 2010 the hearing on motion #153.00 commenced before the undersigned. The court is acting on #153.00 since #158.00 is identical and contains the Marshal's return of service.
The two motions (#142.10 and #153.00) are not identical and contain some similarities and differences. Both motions are addressed to Articles 3.1 and 3.2. The allegations of a substantial change since November 30, 2005 mention two of the same changes: increase in the Husband's assets and decrease in Wife's alimony. The May 6, 2009 motion alleges that "the value of the plaintiff's assets have substantially decrease" and this claim does not appear in the December 21, 2009 motion. The December 21, 2009 motion alleges for the first time a substantial decrease in the amount of income received by the plaintiff. The claims for relief also differ with May 6, 2009 asking for an increase in child support whereas the December 21, 2009 asks for modification of child support pursuant to statute and award of attorney fees.
Neither motion requests that the modification be retroactive to the date of service of the motion. The statute requires no such allegation or request. Gen. Stat. § 46b-86(a). The May 6, 2009 motion was never amended, heard or subject to hearing and order. The December 21, 2009 motion did not amend the May 6, 2009 motion and makes no mention of any previously filed motion to modify child support.
"Unless for good cause shown, no motion may be reclaimed after a period of three months from the date of filing." P.B. § 25-34(c). No court has declared motion #142.10 stale. That section of the Practice Book does not automatically void a motion older than three months. The Wife did not seek the court's permission to hear motion #142.10 beyond the three-month period. The court must assume that the Wife's counsel, aware of P.B. § 25-34(c), filed the nearly identical motion on December 21, 2009. The December 21, 2009 motion is before this court. (#153.00.)
The Wife is requesting an order retroactive to May 21, 2009. An order of retroactivity is addressed to the discretion of the court. Zahringer v. Zahringer, 124 Conn.App. 672, 688-89 (2010).
The Husband objects to the May 21, 2010 retroactively request claiming that the Wife has abandoned motion #142.10. The Husband notes that motion #142.10 was not argued before this court, that only motion #153.00 was argued and that pursuant to P.B. § 25-34(c) motion #142.10 is stale. The Husband admits that this court could order the modified child support retroactive to January 16, 2010, the date of service of motion #153.00 and acknowledges that the retroactivity decision on motion #153.00 is within the discretion of the trial court.
The court rejects to the Wife's claim for retroactivity of any new child support order to May 21, 2009 because: (1) the Wife has failed to show good cause why this court should hear motion #142.10 at this late date; (2) the Wife filed a nearly identical motion #153.00 which was intended to replace motion #142.10; and (3) the court exercises its discretion not to award child support retroactive to May 21, 2009.
The court grants the Wife's claim for retroactivity on the new child support order to January 16, 2010 on motion #153.00. The court finds that the provisions of Gen. Stat. § 46b-86(a) have been met and the court exercises its discretion in favor of modification of child support. Auerbach v. Auerbach, 113 Conn.App. 318, 330, cert. denied, 292 Conn. 901 (2009).
The Husband shall pay the retroactive child support orders within sixty days from the date hereof. The Husband shall be entitled to credit from all child support and minor child educational expenses paid by the Husband and/or the children's trusts and custodial accounts pursuant to the Separation Agreement after January 16, 2010. The court retains continuing jurisdiction to determine those payments, credits and allocations to either the Husband and/or the children's trusts and custodial accounts.
ORDER
After considering all the statutory factors set forth in Gen. Stat. § 46b-84 as to support of the minor children, including § 46b-84(d), § 46b-56 as to support of the minor children, § 46b-215a-1 et seq., Regs. Conn. State Agencies as to Child Support, § 46b-62 as to counsel fees, together with applicable case law, as well as the evidence, testimony, claims of law, and claims of fact presented here, the court hereby enters the following orders:
The court grants Plaintiff's Motion to Modify Child Support Post-Judgment dated December 21, 2009 (#153.00) and enters the following orders:
(1) The order entered on November 30, 2005 based on Article 3.1 of the November 30, 2005 Separation Agreement, that order is terminated.
(2) The Husband shall during his lifetime pay to the Wife the sum of Six Thousand Nine Hundred Sixty-Three ($6,963) Dollars per month per child for the support of the parties' two minor children, Timothy Fox, born January 16, 1993 and John Fox, born June 4, 1997.
(3) The Husband's obligation under paragraph (2) hereof with respect to each child shall end when the child attains age eighteen (18), or if a child is still attending high school, when he attains age eighteen (18), the Husband's obligations under paragraph (2) hereof shall continue until a child completes his high school education or attains age nineteen (19), whichever event shall first occur.
(4) The order entered on November 30, 2005 based on Article 3.2 of the November 30, 2005 Separation Agreement, that order is terminated.
(5) The order entered on November 30, 2005 based on Article 5.1 of the November 30, 2005 Separation Agreement, that order is terminated.
(6) The Husband shall pay eighty-three (83%) percent and the Wife shall pay seventeen (17%) percent of the children's middle school and high school tuition, tutoring and fees while the child is attending middle school and high school.
(7) The Husband's and Wife's obligation under paragraph (6) hereof with respect to each child shall end when the child attains age eighteen (18), or if a child is still attending high school, when he attains age eighteen (18), the Husband's obligations under paragraph (2) hereof shall continue until a child completes his high school education or attains age nineteen (19), whichever event shall first occur.
(8) All other November 30, 2005 orders and provisions of the November 30, 2005 Separation Agreement remain in full force and effect.
(9) The Husband shall pay to the Wife the sum of $55,000 as attorney fees to prosecute this Motion within sixty days from this order.
(10) The Husband shall receive credit against all of the above orders for all sums paid by the Husband and/or from the children's custodial accounts or children's trusts for the relevant minor child prior to the date of this order made pursuant to Articles 3.1, 3.2 and 5.1.
(11) The court retains continuing jurisdiction to determine those payments, credits and allocations to either the Husband and/or the children's trusts and custodial accounts.
(12) The Husband shall pay all arrears in the above-modified orders within sixty days from this order.
(13) These orders are retroactive to January 16, 2010.