Articles

DOLLARS IN DIVORCE - 2003

The 2003 Appellate Court Cases Involving Support and Divorce

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

In 2003 and late 2002, trial lawyers and their accountants have incorporated recently developed case law in the day-to-day file management. In particular, in the summer of 2002, the Supreme Court had issued Mascaro, which provided the formula for calculating spousal support and alimony pendente lite in high-income cases. Attached to this outline is this practitioner's chart, used to explain to clients the interplay between Mascaro, and the long standing child support calculation in the high-income cases, Melzer vs. Melzer. As with every year, there are a few new cases that provide twists and turns. Some are predictable, some are not. Surprisingly, there are three appellate cases on counsel fees, which are also discussed below. Finally, practitioners look forward in anticipation of the new support guidelines expected in 2004 and pending legislation which will clarify some equitable distribution issues.

I. EQUITABLE DISTRIBUTION DEVELOPMENTS

Diament vs. Diament, 816 A.2d 256 (Pa.Super., 2003). The Superior Court found a post-separation personal injury award is non-marital. The spouse had been receiving therapy and treatment prior to separation. Her counsellors told her she must leave her family for their safety. Two years later she sued for this bad advice. Husband argued the malpractice occurred pre-separation, but the award received as a result of litigation instituted and concluded post-separation was not included in the marital estate. This seems to conflict with prior case law, but was affirmed on the basis the harm occurred when Wife left her family on the bad advice. See also the support issues raised in Diament as well.

Fishman vs. Fishman, 805 A.2d 576 (Pa.Super., 2002). The Superior Court agreed to handle the date of valuation of Husband's retirement as different from the date of valuation of the business interest. Wife's retirement assets included interest on her share of the marital portion from the date of separation until date of distribution. As for the business, Wife received 85% of the value as of date of separation. Here the Court found that even though current valuation is preferred, Husband no longer had his business interest, and in order to work economic justice, the Court awarded Wife 85% of the business value as of date of separation. Wife appeared to have gotten a great result, then she also asked for interest on the business value from date of separation to date of distribution. The Court found the assets are of different types, and Wife had no right to get interest on a business value, which unlike the pension assets, had not accrued interest.

Anderson vs. Anderson, 822 A.2d 824 (Pa.Super., 2003). In this case, the Wife failed to list her non-marital antiques on her pre-trial statement of assets and liabilities. This omission led to her being burned twice. The Court found Wife's statement should have disclosed marital and non-marital assets. The Court found that the antiques had appreciated, and therefore the non-marital antiques had a marital increase in value. Wife was caught by surprise at trial, and she was asked regarding estimates of value at date of marriage and currently, thirteen months after separation. The trial court calculated an increase in value to be charged to Wife in equitable distribution. The Superior Court upheld the decision of the trial Court. Wife's protest that the antiques should not have been a subject of equitable distribution since they were not on either side's pre-trial statement was disregarded. The Court found that Wife should not be rewarded for her lack of openness.

Oberg vs. Oberg, 2002 WL 31015277 (Pa.Super., 2002). Maternal father-in-law was allowed to intervene in equitable distribution proceedings to pursue his claim against his daughter and her husband. This appellate court makes a nice review of the Van Buskirk Supreme Court Decision in 1991 and the appropriate Pennsylvania Rules of Civil Procedure 2326, 2327(2), 2327(4). Joinder of Wife's father was found to be appropriate under Rule 1920.34. In this case, Wife's father had satisfied the parties' mortgage of $90,000, in exchange for the promise by Wife and her Husband to provide Wife's father with a home for the rest of his life. Further, the father did reside with the parties until separation. The court found that to deny intervention would allow the parties to be unjustly enriched, as clearly Wife's father would be losing his lifetime residence once the house was equitably divided.

Osial vs. Cook, 803 A.2d 209 (Pa.Super., 2002). In this case, the parties had reached a property settlement agreement and the Court found that it had the power to enforce this contract, giving effect to the parties' intent, but without the right to modify the agreement unless there has been fraud, accident or mistake. The Court will construe the words as written with no modification as to plain meeting. If language is ambiguous, the trial Court must resolve the conflicting parole evidence as to what was intended. In Osial the settlement clearly established a division ratio, with a formula to divide marital assets 58/42 to Wife and Husband, respectively. The marital estate was over $1.2 million, and Wife was due to receive over $700,000. She had already received over $650,000. An asset continued to be in Husband's control, and Wife filed to enforce and receive her proportionate share. Wife asked for 58% of that asset, but the Court disagreed and stated that Wife should receive a sufficient portion of asset to achieve the net distribution of 58% of the entire marital estate. See below that the Osial case also resulted in a determination on attorney's fees.

Hogg vs. Hogg, 816 A.2d 314 (Pa.Super., 2003). The parties entered into a property settlement agreement under which Husband agreed to be obligated for certain joint debts. After executing the property settlement agreement, Husband filed for bankruptcy. Due to the bankruptcy, he was discharged from the debts and Wife was remaining obligor. Wife failed to assert her interest in the bankruptcy proceeding, relying inappropriately on the terms of the divorce settlement. Therefore, when Wife sought enforcement of the divorce settlement agreement, after the bankruptcy decision, the divorce court could not require Husband to pay the financial obligations which had been discharged in the bankruptcy. Husband had sought to get 47% of the remaining liquid asset, asking the divorce court to ignore his discharged obligations. Although the trial Court did not offset Husband's claim to the asset against the discharged liabilities as requested by Wife, the Superior Court remanded so the trial Court would recalculate the total marital estate. Recognizing the liabilities had shifted to Wife the trial court should limit Husband's claim to the remaining asset, so he only received 57% of the entire marital estate, not 57% of the last asset.

II. SUPPORT DEVELOPMENTS

Diament vs. Diament, 816 A.2d 256 (Pa.Super., 2003). In addition to the personal injury award issue discussed under the equitable distribution cases, the Supreme Court discussed Husband's income from all sources, and found that his rental income and business loans should be treated as income for support purposes. Husband then asked for consideration that he had voluntarily paid support, using marital assets, which had then reduced the value of the assets available for equitable distribution. The Court disagreed, as his support obligation should have been paid from his income and earning capacity. He had no right to deplete the marital estate. [See also Middleton vs. Middleton, 812 A.2d 1241 (Pa.Super. 2002), in which the Husband was not given credit for having voluntarily paid Wife's mortgage during the separation.]

Fitzgerald vs. Kempf, 805 A.2d 529 (Pa.Super., 2002). In this case, the trial Court had ruled again and again in favor of Wife, but the Superior Court reversed on at least three grounds. The Appellate Court found it was excessive to attribute possible business income to Husband when he actually financed his accounts receivable by using the money collected by the corporation. Wife's expert had argued that he could have used a line of credit, but the trial Court erred in requiring him to do so. Furthermore, it was error for the trial Court to include in Husband's future income certain trust benefits that were scheduled to end in December, 2000. Finally, it was excessive to allow Wife to include in her Melzer budget the children's share of contributions to legal fees and charity.

L.S.K. vs. H.A.N., 813 A.2d 872 (Pa.Super. 2002). Stepparents beware. The Court ordered an in loco parentis defendant to pay child support. In this case, a former domestic partner (same-sex couple) had sought and won partial physical custody and shared legal custody of the children. Therefore, the trial Court found and the Superior Court agreed that someone in loco parentis who seeks partial custody also has a child support obligation. For years, stepparents had been relieved of paying child support for the child of the prior union, but query whether this domestic partner case will create exposure hereafter.

Sternlicht vs. Sternlicht, 822 A.2d 732 (Pa.Super., 2003). A familiar scenario is revisited, and the holding reaffirmed. Where Father was the custodian of PUTMA funds for the child, which Father had invested with his non-marital money, Father could not then use those PUTMA funds for a house down payment and the child's private school tuition. This reminds us of the Sutliffs, whose contentious divorce led to a series of opinions, including the one that states Father may not use the children's trust funds to meet Father's support obligations. On appeal, the Superior Court was not convinced that Mr. Sternlicht could afford private school tuition. Therefore, the case was remanded as to whether Husband had an ability to pay the private school tuition.

Maddas vs. Dehaas, 816 A.2d 234 (Pa.Super., 2003). The Superior Court affirmed the decision of the trial Court requiring retroactive support adjustment. The case also dealt with the application of the rules when the child receives derivative Social Security benefits. In this case, Mother's disability award led to derivative benefits awarded for the child. Since Mother did not advise Father of this, Father was unfairly paying more than his share of child support. The children's disability income is added to the total family income, and would offset in part Father's child support obligation. Although the general rule provides that support modification is effective as of the date of the request for modification, Mother's failure to disclose the disability income, led the Court to rule that a modification of Father's arrears should be retroactive to the change of circumstances. The presumptive date of modification is very strong, but this is a case in which it was overcome.

Dudas vs. Pietrzykowski, 813 A.2d 1 (Pa.Super., 2002). The Superior Court found that the trial Court had appropriately met the burden required to escrow ex-husband's assets for future payments of alimony. Due to ex-husband's history of failure to pay alimony, and due to ex-wife's refusal to consent to the commutation award, ex-husband's recovery of a post-separation worker's compensation award was escrowed. First the Court satisfied all outstanding arrears in the existing support matter. Husband sought to release from escrow the balance of the funds, but the trial Court's escrow continued to ensure that ex-Wife would continue to receive the $500 per month alimony. Also, the commutation award (post-divorce) represented income for alimony purposes.

Boullianne vs. Russo, 819 A.2d 577 (Pa.Super. 2003). A decision was issued in a support case, and the payor Husband did not take an appeal. Two months later he sought to reduce his support obligation, stating that his earnings continued to be lower than that which had been determined in the prior hearing. The petition to modify was rejected based on no change of circumstances. The Appellate Court agreed that this was a disguised way to avoid the expense of an appeal. If Husband felt the earnings and earning capacity had been incorrectly determined before, he had to take an appeal. He could not end-run this by filing for reduction.

III. COUNSEL FEES

Bowser vs. Blom, 807 A.2d 830 (Pa. 2002). In a child support case wherein the unwed Father agreed to allow the child receive government benefits, then required Mother to go to court for additional support, eventually the support was set, Mother then sought an award of counsel fees. The Supreme Court decision gives a thorough analysis of when and why counsel fees should be awarded. After going through a six-point checklist, the Court found that Ms. Bowser did not have a case for counsel fees against Mr. Blum, who was simply asserting his rights under the law. Although the proceeding was an expense for Mother, she did not prove she was unable to pay legal fees and the Court would not award counsel fees simply on the basis of request.

Osial vs. Cook, 803 A.2d 209 (Pa.Super., 2002). Although the Court acknowledged that one could make claim for counsel fees due to lack of compliance with an equitable distribution order by the other side, that did not mandate an award. In such instance that a party prevails, the trial Court may find that the person seeking fees has an ability to pay counsel themselves due to substantial assets received in equitable distribution. This view has been adopted by many trial Courts and Masters, who will not propose a counsel fee award in addition to equitable distribution in most circumstances.

Diament vs. Diament, 816 A.2d 256 (Pa.Super., 2003). When the trial Court reached the counsel fee claim, after resolving the support and equitable distribution claims, it found that an award was proper. Recognizing that the Wife's legal fees were $300,000, the counsel fee award was $30,000. Query whether that is what the petitioner had in mind?

IV. MISCELLANEOUS CASES

Wineburgh vs. Wineburgh, 816 A.2d 1105 (Pa.Super. 2002). Father was not afforded the protection he expected from his Property Settlement Agreement, which provided that Father, who agreed to pay for his son's college, "will have a say in the choice of college" selected by his son. Although the Court found that Father was not informed, this did not relieve him of the financial responsibility to pay support, as "a say" did not equate to a condition precedent. Such an affirmative duty to consult must be an express condition in order to relieve Father of his agreement to pay college costs.

Porreco vs. Porreco, 811 A.2d 566 (Pa. 2002). Husband overstated the value of Wife's engagement ring in a prenuptial agreement. The Supreme Court reversed the finding of fraudulent inducement, as Wife had possession of the ring before signing the prenuptial agreement and had every opportunity to have it appraised herself. The Court remanded for Superior Court review of the determination by the trial court that a confidential relationship existed. The Supreme Court was not asked to decide the extent of the "full and fair" disclosure rule of Simeone.

Stoner vs. Stoner, 819 A.2d 529 (Pa, 2003). A cryptic three sentence divorce settlement agreement was not put to the Geyer test for statement of statutory rights waived. The Geyer element of statutory disclosure was not derived from statutory or caselaw and was not adopted by the Court in Simeone or Stoner.

Rich vs. Acrivos, 815 A.2d 1006, (Pa.Super. 2003) When a litigant appeals to Superior Court, one's pro se status does not forgive failure to follow the Rules. If you represent yourself, you assume the risk of poor representation.

V. PRACTICE TIPS

In the past year this practitioner has had an opportunity to teach accountants, judges, domestic relations administrators, as well as the usual CLE courses for and with fellow lawyers. We also teach our clients. Attached is an outline provided to the Domestic Relations Administrators in the hopes that support conference officers would use a checklist to analyze the earnings issues involving self-employed parties. This is not the type of checklist one would expect a Master or a Judge to use, whose knowledge and resources exceed the experience of support hearing officers. Surely this audience of accountants understand all the steps outlined. Accountants could correct and improve on the outline. Yet consider that the presentation prepared for a client who is going to support court needs to highlight some if not all of these steps, when analyzing a tax return for Court. Accountants who prepare a tidy summary in a few lines or half-page have incorporated all these considerations on that summary. But if the steps are not clear to the reader, whether it is the client, the client's lawyer or the hearing officer, important interim steps may be overlooked and a different result will be reached.

Also attached is the analysis of the interplay between the Melzer calculation for child support and the Mascaro spousal support/alimony pendente lite claim. The goal of this chart was to brace both the payors and the recipient spouses for the possible results of litigation. The payor may be concerned about the potential support award after Mascaro, under which the dependent spouse gets to share income regardless of need. But the dependent spouse will likely realize the disposable income will usually be less after a support award, compared to the lifestyle pre-separation.