Articles

DOLLARS IN DIVORCE

The 2004 Appellate Court Cases Involving Support and Divorce

Mary Cushing Doherty, Esquire
High Swartz LLP
610-275-0700

In preparing the summary of the 2004 and late 2003 cases, it was expected that the new Support Guidelines would have issued, but we must be patient. Draft Guidelines were circulated for comment earlier this year. The comments were so substantial that the amended Rules will be different than the draft proposals. Nonetheless, below are comments as to the expected changes based on the first draft and the reactions of lawyers, judges and litigants. There are important cases to review from the past year. Probably the most important is the Supreme Court decision Colonna v. Colonna, which describes cases in which the dependent spouse may get child support even though the dependent spouse is the partial custodian. Most of the appellate decisions give us guidance regarding earning capacity, support modification and interpreting Property Settlement Agreements. All cases are from the Superior Court except for Colonna and Kripp. Read on for the highlights of the past year.

I. EARNING CAPACITY

Melton v. Melton, 831 A.2d 636 (Pa.Super. 2003). Husband, who had started a new business and moved himself to California was assigned his earning capacity based upon his last employment in Pennsylvania. The court assumed Pennsylvania state tax rates, not California rates.

Haselrig v. Haselrig, 840 A.2d 338 (Pa.Super. 2003). Father acknowledged that he had previously been working two full-time jobs in order to meet his obligations to his former and current families. Mother sought child support based on Husband's actual past earnings and his extraordinary work habits. The Superior Court found that the history of employment is not necessarily the realistic determination of earning capacity. Husband had cut back to working one full-time job, and the Superior Court reversed the decision of the Trial Court which based support on the past history when Father worked two full-time jobs.

Woskob v. Woskob, 843 A.2d 1247 (Pa.Super. 2004). During the marriage, Husband worked for his family's business. After the separation, Husband was no longer employed in the family business. Furthermore, it appeared that Husband had pulled money out of the business and called it income when really he was draining the company. Now that this opportunity was unavailable, Husband's earning capacity was based on his income capacity in the usual job market.

Ewing v. Ewing, 843 A.2d 1282 (Pa.Super. 2004). Husband was fired from AT&T, and the company objected to paying unemployment. Husband protested and was awarded unemployment compensation after the hearing before the Worker's Compensation Board. The support court was not bound by the Board's decision. Collateral estoppel did not apply because Wife did not participate in the litigation. Therefore the support court could consider whether Husband was fired for cause.

Dennis v. Whitney, 844 A.2d 1267 (Pa.Super. 2004). Wife objected that Husband had been allowed to pay support based on his earnings as a farmer, when in fact, Husband had a higher earning capacity due to his college degree in agricultural engineering. The trial court found that Husband had always made his living as a farmer, and he should be allowed to continue with that position and those earnings.

II. SUPPORT MODIFICATION

Isralsky v. Isralsky, 824 A.2d 1178 (Pa.Super. 2003). The Superior Court calculated child support without taking into consideration two of the provisions in the Support Guideline Rules. Recognizing that Mother, former Wife, could not afford to support herself on her income plus her alimony, the Court decided not to ascribe to Mother her alimony income in determining her share of the child support. Furthermore, the court found that the mortgage deviation would apply post-divorce, notwithstanding popular interpretation that this only applies to the marital home prior to divorce. The Superior Court noted that the purpose of the mortgage deviation is to allow the minor child(ren) to remain in the marital home and in the local school district. In order to create economic justice, Father was required to pay supplemental child support per the mortgage deviation calculation.

Kelleher v. Bush, 832 A.2d 483 (Pa.Super. 2003). The Superior Court scrutinized the limited right of the Support Trial Court to order support on an effective date other than the date of filing. It determined that the ability to deviate does not mean an Order may be effective prior to the filing date.

Maue v. Gilbert, 839 A.2d 430 (Pa.Super. 2003). The Superior Court issued another decision on the Rule for deviation from date of filing, when establishing retroactive modification of support. In this case, Father's failure to disclose a huge increase in income allowed the Court to enter a retroactive order as to arrears. This seems inconsistent with the common assumption that earlier retroactivity for an increase may be allowed if there was a failure to disclose increased income. The Rules now require disclosure of change of income, a practice which is widely ignored.

Samii v. Samii, 847 A.2d 691 (Pa.Super. 2003). In May, 1999, the support court established an Order for child and spousal support. In March, 2002, the parties reached an agreement to terminate spousal support/alimony and continue the child support. When Mother sought to modify support in October, 2002, she wanted the court to scrutinize change of circumstances from the last court determination of May, 1999. But Mother was limited to the change of circumstances earlier in 2002, and she was unsuccessful in proving cause for modification.

III. CUSTODIAL PARENT AS SUPPORT OBLIGOR

Colonna v. Colonna, 855 A.2d 648, (Pa. 2004). A lengthy decision issued from the Supreme Court of Pennsylvania on April 29, 2004. In an unusual case in which Mother had primary custody in the summer only, and was the income-dependent spouse, Mother sought support from Father, the custodial parent. The court found that since this was a case of significantly disparate income, equity and fairness required the income-superior parent should pay child support to the partial custodian. The case arose under Melzer (combined monthly net income over $15,000), but the decision said it should apply with guideline cases as well. The Supreme Court urged trial courts to use the deviation provisions in the Rules to create economic justice.

IV. FINAL EQUITABLE DISTRIBUTION/ALIMONY AWARDS

Melton v. Melton, 831 A.2d 636 (Pa.Super. 2003). In a case where the parties negotiated for alimony pendente lite on the basis that there would be consideration in equitable distribution, it was error for the trial court to reduce the equitable distribution award, dollar for dollar, based on the alimony pendente lite payments.

Radakovich v. Radakovich, 846 A.2d 709 (Pa.Super. 2004). In a case where marital property was used to fund a PATMA trust account for the benefit of minors, the court found that the account should not be subject to equitable distribution, notwithstanding the fact that marital funds were contributed. In effect, the gift removed the assets from the marital estate.

Mercatell v. Mercatell, 854 A.2d 609 (Pa.Super., 2004). Husband argued that he should get 60% of the marital assets because of Wife's higher earnings and non-marital assets. Wife showed that Husband was under-employed and had under-contributed to the marriage. (He lost 14 jobs in 19 years.) Rather, Husband depleted Wife's earnings and caused a drain on the marital estate. The Superior Court affirmed the trial court award of 60% of the marital assets to Wife.

V. GIFTS

Anzalone v. Anzalone, 835 A.2d 773 (Pa.Super. 2003). A fairly lengthy and detailed decision of the Superior Court scrutinized a number of issues, including the characterization of an insurance policy owned by Wife. The premium payments had been made by Wife's father, and the policy was owned by Wife alone. But Wife's father had filed a gift tax return stating there was a joint gift to Wife and her husband. It was recognized that the original premium payment to acquire the property in Wife's name alone was a non-marital asset, based on the gift from the father. The court overlooked the characterization as joint gift in the tax return. The court recognized that the increase in cash surrender value of the policy, in excess of the gifted premium payments, would be a marital component.

Nicholson v. Johnston, 855 A.2d 97 (Pa.Super. 2004). Fiancees decided to purchase property together. The property was purchased on the condition that they would marry. It was titled jointly with right of survivorship. The marriage never occurred. The non-occupant fiancee sought partition of the jointly titled property, claiming 50% of current equity. Instead, the court simply returned the original monetary contribution as a return of a gift. The Court determined that partition would not apply.

VI. PROPERTY SETTLEMENT AGREEMENTS

Sabad v. Fessenden, 825 A.2d 682 (Pa.Super. 2003). The parties signed a prenuptial agreement in which Wife waived her interest in Husband's pension. Then when the parties separated, Wife submitted that the pre-marital waiver of her claim to Husband's pension did not meet the requirements of ERISA. It is clear that under ERISA Regulations, spousal benefits can only be waived by a spouse. Therefore, premarital waiver of spousal benefits will not be binding if one party dies and the decedent's estate seeks to bind the spouse to the terms of the premarital agreement. The Superior Court pinpointed the ERISA right to the spousal death benefits. It was determined that although Wife had not effectively waived her spousal rights in the agreement, she was able to waive her equitable distribution rights to the pension. Since the parties were divorcing, spousal survivorship benefits would not apply, and the prenuptial agreement was found binding regarding equitable distribution rights.

Chen v. Chen v. Chen, 840 A.2d 355 (Pa.Super. 2003). The Superior Court found that the parties' child was a third-party beneficiary of a Property Settlement Agreement. The child of the marriage, who had reached age 18, sought to enforce the Property Settlement Agreement. The Agreement provided for automatic increases in support payments, as Father earned additional income. The child was allowed to claim that additional retroactive support was due, as she was found to have standing as the third-party beneficiary.

Kripp v. Kripp, 849 A.2d 1159 (Pa. 2004). The Supreme Court issued this decision May 27, 2004. The parties had signed a Divorce Settlement Agreement that called for termination of alimony upon cohabitation. When Husband discovered Wife was cohabiting with another woman, he stopped paying alimony. Wife sought to enforce the alimony provision. The trial court allowed extrinsic evidence, and Wife did not appear for trial. Husband testified that they had always discussed that the co-habitation ban would extend to Wife co-habiting with another female. The trial court found the right to alimony terminated. The Superior Court reversed based on the statutory definition of co-habitation involving a man and woman. The Supreme Court reversed the Superior Court, stating that it was appropriate to take extrinsic evidence and the statutory definition of co-habitation would not be inferred in the parties' Property Settlement Agreement.

Holz v. Holz, 850A.2d 751 (Pa.Super. 2004). In a case considered by the Superior Court after the decision Sabad v. Fessenden, it was determined that the divorce court was bound by the ruling of the federal court regarding interpretation of pension waiver language. The federal trial court ruled that the waiver of interest in pension benefits did not meet ERISA requirements and was void. The determination did not distinguish between the spousal survivorship benefits and equitable distribution benefits. Thereafter Sabad (above) issued. Since the matter had been adjudicated in federal court, the divorce court was bound, under res judicata, by the federal court determination.

VII. MISCELLANEOUS - CLOSED TRIAL/COUNSEL FEES/SPECIAL SUPPORT CASES

Zdrok v. Zdrok, 829 A.2d 697 (Pa.Super. 2003). The Superior Court balanced whether appropriate facts were established to close a trial to the public. Absent an important government interest, the court must weigh whether the individual's interest in secrecy outweighs the presumption of openness.

Marra vs. Marra, 831 A.2d 1183 (Pa.Super. 2003). An award of $177,000 for counsel fees was upheld. Husband had thwarted Wife's claims in the divorce and forced her to take appeals. The counsel fee award was found to be justified.

Seder v. Seder, 841 A.2d 1074 (Pa.Super. 2004). Father had won an order for custody. Even though Mother had absconded with the child, Father sought child support. It was determined that Father had a right to the award of child support, even though the child was not actually in his care, because it was Mother who was thwarting the custody order.

Ferguson vs. McKiernan, 855 A.2d 121 (Pa.Super. 2004). Father sought to enforce an agreement with Mother that he would never be obligated to support the child(ren), when he agreed to anonymously donate sperm to impregnate her. Mother was married at the time but had separated. She convinced Father that she would not need his support if he would donate his sperm. Mother submitted to invetro fertilization with Father's sperm. The Court found that public policy to protect the right to child support would supercede the valid agreement of no support. Therefore the volunteer sperm donor was obligated to support the twins that were born.

VIII. RULE CHANGES

Rule 1910.16-5(b)(8). As of September 24, 2003, the Support Court now shall consider the length of marriage when determining the length of alimony pendente lite/spousal support award. This opens the door for a Master or Judge to determine that this spousal benefit shall not be awarded for a disproportionately long time, particularly if the marriage is short and the litigation is unduly protracted.

Montgomery County Domestic Relations Procedure/Melzer Cases. Montgomery County DRO Supervisors recently spoke to family lawyers to advise of a specially trained Melzer unit at the Domestic Relations Office. Hearing officers will be prepared to consider reasonable expenses in determining the Melzer calculation for child support. Attached are the materials circulated to the Montgomery County Family Lawyers Section.

Amended Rules of Professional Conduct/Rule 1.17 Sale of Law Practice. For the first time, Pennsylvania Rules now allow for the sale of a solo law practice. Attached is the new Rule, effective January 1, 2005. One of the prior limits to valuing a law practice in Pennsylvania for equitable distribution was the recognition that practices could not be sold. Therefore valuing a practice based on an arm's-length transaction, was impossible. Although the sale of a solo law practice is anticipated in fairly limited circumstances, this will likely have an affect on the equitable distribution of a solo law practice hereafter.

New Guidelines. It was expected in the Fall of 2003, that by the Fall of 2004, we would be reviewing the 2004 Guideline changes. Proposed amendments to the Guidelines were circulated for comment early in 2004. Lawyers, judges, and support personnel commented on the proposed Rules. The comments were so extensive that the amended Rules have not been promulgated. The comments on the proposed Rules must be submitted to the Supreme Court which will consider whether to circulate another set of proposed Rule changes or promulgate amended Rules based on the recommendations of the Advisory Committee and the folks who commented to the first draft.

Since amendments to the Guidelines are based on statistical data, and the data being used for the upcoming amendments will not change, it appears inevitable that the basic support at the high-income families under the old Guidelines, (combined family income of $5,100 to $15,000 net per month), will go down. The Report of the Rules Committee is that Pennsylvania has had the highest basic support figures for those higher income families. In addition, the cap for the combined income within the Guidelines will raise to net income of $20,000 per month. The underlying assumptions which is basis for the data have been questioned by some. It is possible those numbers will be adjusted across the Board. This is because the statistical data for raising a family at each income level was based on an intact household.

Another significant change in the new Guidelines is the consideration given the partial custodian. Instead of the current cliff which gives consideration to the non-custodial parent who has the children more than 40% of the time, it is expected that any partial custodian who has an order for partial custody will see an adjustment in child support in consideration for that partial custody time. A further proposal gave the partial custodian consideration not only for overnight partial custody, but portions of the day. That was perhaps the most controversial addition to the Rules, and may not be reflected in the final version. At this point there is no deadline for the Supreme Court to issue the new Rules.