Opinion
No. FA05-4002913S
July 1, 2010
MEMORANDUM OF DECISION
Background:
The thirty-seven and one-half-year marriage of the parties was dissolved by decree of this court on January 20, 2006, at which time a Separation Agreement (#106.10) of even date therewith was incorporated by reference therein. They are the parents of two children, both of whom had reached their majority at the time of the decree. The defendant husband ("husband") is 66 years old and described his health as "ok." However, he recited a litany of ailments, including two heart attacks, diabetes, arthritis, and constant back pain. He is a dentist who has maintained a practice in New York City for the past thirty years, while the plaintiff wife ("wife") is a homemaker and currently unemployed. She is 65 years old, and she, also, has her share of ailments including open heart surgery for a mitral valve condition and a form of polymyalgia. The husband has since remarried. Under the terms of the Separation Agreement, the wife will share in the proceeds from the sale of the husband's dental practice. Other than that asset, all other marital property has been divided. Both parties are eligible to receive Social Security benefits, but so far neither has elected to do so.
The matter comes before the court by way of multiple motions for modification and contempt, all post-judgment. For purposes of these pending motions, the salient portions of the Separation Agreement are contained in Article III, which calls for the payment of alimony, and Article V, which provides for life insurance to, in essence, provide financial security for the wife in the event the husband predeceases her. During the course of the post-judgment litigation, the parties entered into a Stipulation (#115.10) on January 30, 2009 (mis-dated "January 30, 2008") and filed with the court on February 2, 2009. This is also the subject of a motion for contempt. Each party has also asked the court to award them attorneys fees in connection with the litigation — the husband by way of Motions #139.00, #150.00, and #154.00; and the wife by way of Motion #155.00.
The court heard the parties and witnesses over the course of three days, including final argument. At the time of trial, the court heard and decided several motions in limine.
Alimony:
The husband's current alimony obligation under the terms of the Separation Agreement is $275,000.00 per annum, divided into monthly installments of $22,916.97, payable on the first day of each month. The parties had agreed in Article 3.3 that, "the amount of alimony is non-modifiable until September 9, 2008, except in the event that the Husband is unable to work due to injury, illness, incapacity, disability or loss of license." The husband's first Motion to Modify (#112) his alimony obligation was dated November 18, 2008, and was served on the wife on December 4, 2008. In it, he alleged a substantial change of circumstances due to a reduction in income as a result of the poor economy. He testified that he had a high-end practice, serving highly paid executives working in Manhattan. Shortly thereafter, the wife filed a Motion for Contempt (#114) dated December 30, 2008, in which she claimed that the husband had failed to meet his alimony obligation.
Subsequent thereto, the parties entered into a Stipulation (#115.10) dated January 30, 2009, which was filed with and approved by the court on February 2, 2009. Among other things, it placed a moratorium on the husband's right to pursue his pending modification until April 1, 2009, with the right to seek retroactivity to that date. The Stipulation also partially suspended, on a temporary basis, the husband's alimony obligation, and it set forth the payments made during November and December 2008.
The matter has taken so long to reach a hearing, in large part due to extensive discovery, that each side has filed additional motions. For his part, the husband has filed amendments to his original motion for modification. The first one, dated September 2, 2009 (#123.00/124.10) alleges additionally that the wife has an earning capacity, while the second motion (#148.00) dated April 27, 2010, alleges additionally that the husband's net assets have decreased. For her part, on November 16, 2009, the wife renewed her Motion for Contempt (#129.00), and on April 21, 2010, added another Motion for Contempt (#144.00) alleging that the husband failed to pay the three-months suspended alimony of $30,000.00, together with interest, pursuant to the Stipulation. For his part, the husband claims that he had, in fact, made payments toward said sum. However, the thrust of each party's positions has remained the same.
The husband testified at some length about his dental practice. He blames the bad economy for what he refers to as a less lucrative, "insurance-based" practice, where "profits are down and overhead is up." While any order must be based upon the net income of the parties, since gross income is the starting point for the calculation of net income, it is often instructive to view the gross income in order to get a snapshot of where the income is trending. Looking at the years following the dissolution, we see that there was a substantial decrease in the first year, but a relatively steady pattern in the years that followed. The wife countered the husband's testimony through the testimony of her expert, Mark Harrison, Esq., who told the court that, based upon his analysis, the husband's net income is virtually unchanged. Mr. Harrison testified at length, in essence, comparing the husband's net income for the years 2006 through 2008, to the net income reported on his initial financial affidavit filed in 2006, the year of the dissolution. Mr. Harrison based his opinion on, among other things, the husband's individual and business income tax returns and his financial affidavit. The court found this analysis useful. However, there was no credible evidence offered to show that the husband has stopped working, or that he has purposely depressed his earnings. In fact, the evidence shows that he also engages in consulting for a fee, on behalf of the claims departments of insurers. Nevertheless, while it is apparent that the husband's income has substantially decreased, it has remained fairly steady for the past several years, and the situation is not nearly as dire as he would have the court believe.
However, a more telling point for the court was the fact that the husband took two actions since the date of the dissolution that have significantly affected his financial picture. The first was the transfer of his interest in his real property in Westport and a boat to his current wife. Absent the value of his practice, which is unknown at this time, he has virtually no remaining significant assets. He told the court that the transfer was made for "business and estate planning purposes." However, he continues to fund the maintenance of the home through regular payments to his current spouse. Moreover, it is apparent that he has not significantly changed his lifestyle, as he continues to travel and maintains his club memberships. Secondly, he failed to properly report his business income for the years 2006 through 2008, and he has incurred a significant debt to the IRS. He has since hired a new financial advisor and has filed amended income tax returns for the years in question, which were offered in evidence. Accordingly, the evidence would support a finding that much of the husband's financial woe is self-created.
Retroactivity:
Since the beginning, the defendant has consistently claimed and acted to preserve the issue of a retroactive modification. He has asked in the alternative to grant retroactivity to April 1, 2009, or at the very least to the date of the service of his most recent Motion to Modify. The wife has consistently opposed any retroactive action by the court. Given the substantial change of circumstances, as well as the length of time the issue has been pending before this court without resolution, it would be equitable to make the order modifying the husband's alimony obligation retroactive to April 1, 2009.
Life Insurance:
At the time of the decree, the husband had several life insurance policies in place. Pursuant to Article V of the Separation Agreement, the husband is obligated to maintain life insurance in place having an aggregate death benefit of $880,000.00, naming the wife as beneficiary. At some point following the decree, the evidence indicates that the husband borrowed against one or more policies and reduced the aggregate death benefit by a nominal amount. Article 5.5 allows the husband to take such action provided the required aggregate death benefit is maintained. During the hearing, it became apparent to the court that the husband had, through a misunderstanding and a mistaken belief that sufficient coverage was in place between the cash value and the face amount of the policies at the time of his borrowing, when in fact, he had actually reduced the coverage by a modest amount. When the matter was brought to his attention, he and his counsel took immediate steps to rectify the situation. (Exhibits W and X.) Moreover, the court considered the, fact that Article 5.6 provides that in the event that the full coverage is not in place at the time of his death, the difference will be a charge against his estate. In addition, the husband has filed a Motion to Modify his Life Insurance Obligation (#149.00) dated April 27, 2010. In light of the court's order regarding the modification of alimony, it is equitable and appropriate to modify downward the obligation to maintain life insurance pursuant to Article 5.7 of the Separation Agreement.
Real Estate Lien:
At the time of the decree dissolving the marriage the husband was the co-owner of real property at 3 Norport Drive, Westport, Connecticut. He has since transferred his interest therein to his present spouse. By agreement of the parties, the wife has placed a lien thereon in the amount of $75,000.00, in order to secure the aggregate sum of $30,000.00 deferred alimony for the months of January, February, and March 2009, together with interest thereon. The husband has moved to discharge that lien (#138.00) by way of motion dated January 13, 2010. After considering the evidence, the court finds, after taking into account modified alimony obligation, retroactive to April 1, 2009, that the husband has in fact overpaid his obligation, and when applying the overage to the balance, there has been a reduction in that amount. Since a balance remains, there is no basis to fully discharge this lien. However, it would be equitable to reduce it commensurate with an amount appropriate to adequately secure the remaining balance.
FINDINGS
The Court, having heard the testimony of both parties, and having considered the evidence presented at hearing, as well as the factors enumerated in General Statutes §§ 46-62, 46b-82, 46b-86, and 46b-87 hereby makes the following findings:
1. That an award of periodic alimony may be modified upon the demonstration of a substantial change of circumstances, unless the order itself clearly precludes modification. General Statutes § 46b-86(a); Borkowski v. Borkowski, 228 Conn. 729, 737 (1994); Spencer v. Spencer, 71 Conn.App. 475, 481 (2002); Schorsch v. Schorsch, 53 Conn.App. 378, 382 (1999); that the burden of proof is on the moving party to demonstrate that there has been a substantial change of circumstances. Denley v. Denley, 38 Conn.App. 349, 355 (1995); that in the present case, alimony obligation is payable until the death of either party or the remarriage or cohabitation of the wife; that, under the terms of the Separation Agreement, the only limitation on modifiability was the preclusion of the husband to seek a modification prior to September 9, 2008; and that there has been a substantial change of circumstances, in that the husband's net income has substantially decreased since the date of the decree.
2. That once there has been a determination that there has been a substantial change of circumstances warranting a modification, the court considers the respective circumstances of each party in light of the provisions of General Statutes § 46b-82. Simms v. Simms, 283 Conn. 494, 505-06 (2007); that under all the facts and circumstances, it is equitable and appropriate to grant the husband's motion for modification; and that in light of the court's order regarding the modification of alimony, it is equitable and appropriate to modify downward the obligation to maintain life insurance pursuant to Article 5.7 of the Separation Agreement.
3. That where retroactivity is sought pursuant to General Statutes § 46-86(a), motions for modification of alimony must be served in accordance with General Statutes § 52-50. Cannon v. Cannon, CT Page 13814 109 Conn.App. 844, 849-50 (2008); that the purpose of that provision is to accord due process to the other party. Shedrick v. Shedrick, 32 Conn.App. 147, 151-52 (1993); that the parties stipulated and agreed that the husband shall have the right to seek a retroactive order, but to a date no earlier than April 1, 2009; that the Motion for Modification was served in accordance with General Statutes § 46-86(a); that the decision to enter a retroactive award is within the sound discretion of the court; and that under all the facts and circumstances, it would be equitable to make the order retroactive to April 1, 2009.
4. That under all the circumstances, the court does not find that the husband's failure to pay alimony constituted wilful contempt; and that, notwithstanding the lack of a finding of contempt, nevertheless, the court finds that the husband has not fully complied with the decree of this court.
5. That alimony and child support orders must be based upon the net income of the parties. Morris v. Morris, 262 Conn. 299, 306 (2003); Ludgin v. McGowan, 64 Conn.App. 355, 358 (2001).
6. That "in a case tried before a court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony . . . The credibility and the weight of expert testimony is judged by the same standard, and the trial court is privileged to adopt whatever testimony it reasonably believes to be credible." United Technologies Corp. v. East Windsor, 262 Conn. 11, 26 (2002).
7. That the net income of the husband, as shown on his financial affidavit (#160.00) dated April 24, 2010 is $23,079.41 per month.
8. That based upon the order herein, taking into account the retroactivity of this order, the husband's alimony obligation for the period April 1, 2009 through and including March 31, 2010, is $180,000.00; that his payments during that period amounted to $182,953.39; that there is no arrearage in the husband's monthly alimony payments as of March 31, 2010; and that applying the overage to the outstanding arrearage in the suspended alimony, including interest, of $31,500.00, leaves a balance due in the amount of $28,546.61.
The last full month of check statements offered in evidence was for March 2010. In the absence of any further payment, the alimony arrearage would increase by $15,000.00 per month or $45,000.00 (April through June) for which the wife would be entitled to a credit. Any payments during this period made would be a credit to the husband against this sum.
9. That a finding of contempt must be based upon a wilful failure to comply with a clear and unequivocal order of the court. Sablosky v. Sablosky, 258 Conn. 713, 718 (2001); that under all the facts and circumstances, the husband's actions in connection with his failure to pay alimony or to maintain life insurance obligation in full do not constitute wilful contempt; that, pursuant to General Statutes § 46b-62, where there is a breach of a court order, but no finding of contempt, it is within the discretion of the court to award reasonable attorneys fees, so long a party against whom they are assessed is given an opportunity to challenge the reasonableness of the fees. Dobozy v. Dobozy, 241 Conn. 490, 499-500, (1997); Sardilli v. Sardilli, 16 Conn.App. 114 (1988); Nelson v. Nelson, 13 Conn.App. 355 (1988); and that under all the facts and circumstances it would be equitable and appropriate that each party pay their own attorneys fees.
10. That the court may order a party to maintain life insurance to secure their obligation to pay alimony and support. General Statutes § 46b-84(f).
ORDER BASED UPON THE FOREGOING, IT IS HEREBY ORDERED THAT:
1. Plaintiff wife's Motions for Contempt #114, #129, and #144 are HEREBY DENIED;
2. Defendant husband's Motions for Modification #112.00, #123/124.10, and #148.00 are HEREBY GRANTED;
3. Commencing with the period effective April 1, 2009, and on the first day of each and every month thereafter, the husband shall pay to the wife the sum of $15,000.00 as and for periodic alimony, until the death of either party or the remarriage of the wife. In addition thereto, commencing July 1, 2010, and on the first day of each and every month thereafter, the husband shall pay the sum of $1,500.00 toward the arrearage as found until fully paid;
4. Plaintiff wife's Motion for Attorneys Fees #155.00 for attorneys fees are HEREBY DENIED; and the Defendant husband's Motions for Attorneys Fees #139.00, #150.00, and #154.00 are HEREBY DENIED.
5. For the reasons set forth herein, the plaintiff wife's Motion for Contempt (#152.00) for failure to maintain life insurance is HEREBY DENIED.
6. The defendant husband's Motion to Modify the Insurance Obligation (#149.00) is HEREBY GRANTED, and effective July 1, 2010, he shall be obligated to maintain life insurance having an aggregate face value of $500,000.00, naming Melinda Young as beneficiary under the same terms and conditions as set forth in the original decree.
7. For the reasons articulated herein, the husband's Motion to Discharge Lien (#138.00) is HEREBY GRANTED IN PART AND DENIED IN PART; and that from and including the date of this judgment, $35,000.00 of said lien should be discharged, with the balance in the amount of $40,000.00 to remain in place until such time as the underlying obligation in the amount of $28,546.61 is paid in full.
8. The Court hereby orders an Immediate Wage Withholding Order pursuant to General Statutes § 52-362(b) in order to secure the payment of the alimony order; and
9. There having been a contested hearing at which the financial orders were in dispute, the financial affidavits of the parties are hereby unsealed per P.B. § 25-59A(h).
10. Meaning and intending by this Order to modify Articles 3.2, 5.1, and 5.2 of the Separation Agreement, as modified by the Stipulation of the parties dated January 30, 2009, and that all other provisions of the Judgment shall remain in full force and effect according to its terms.