Articles

DOLLARS IN DIVORCE - 2002

The 2002 Appellate Court Cases Involving Support and Divorce

Mary Cushing Doherty, Esquire
High Swartz LLP
Norristown, PA 19404

In 2002, long-awaited opinions in two key support cases were issued by the Supreme Court of Pennsylvania. In Mascaro, the Supreme Court has provided us with a clean mathematical formula for calculating spousal support and alimony pendente lite in high-end cases. In Humphreys v. DeRoss, the Supreme Court addressed the definition of income and reminded trial courts of the authority to deviate from the guidelines. The discussion below will not only recite the holdings of these recent cases, but point out the issues that arise as a result.

I. CALCULATION OF SPOUSAL SUPPORT

Mascaro v. Mascaro, Supreme Court, August 20, 2002. A Montgomery County Opinion by the Honorable Rhonda Daniele was affirmed by the Superior Court, but reversed in this Supreme Court Decision. The trial court had considered Wife's request for spousal support where husband's extraordinary income pushed the family's income well beyond the $15,000 net per month Guideline level. The trial court and Superior Court considered the Wife's needs, but the Supreme Court found that the income-sharing formula should apply to the high-end cases. The income-sharing formula, described in the Guidelines will now be applied so Payor's net income, less child support payments and less dependent spouse's net income, will result in a net amount of which the dependent spouse will receive 30%. For fun, run the numbers in the Mascaro decision. Husband's income was extraordinary, but the Order issued provided for combined child support and alimony paid net of taxes, plus certain benefits provided directly by Husband or his company. The Mascaro formula will result in an amount allocated between child support and spousal support, with the spousal support subject to taxation. Clearly the formulaic approach will involve less testimony in the courtroom. But the Supreme Court was interpreting existing Support Guidelines. Those Guidelines are due for periodic review and revision, which may change the Rules on which the Mascaro decision was based.

II. EARNING CAPACITY IN SUPPORT CASES

Kersey v. Jefferson, Superior Court, January 31, 2002. The Father argued at the trial court level that his reduction in income to go to medical school was for the long-term benefit of his children. He continued to work while a student, but his income had dropped. The trial court found that Father had failed to absolve himself of the burden of proving that his earning capacity had reduced. Earning capacity cases are extremely subjective. These cases will be reviewed on a case-by-case basis. With tight economic times, we may see additional appeals and decisions in the next year or so.

Portugal v. Portugal, Superior Court, May 1, 2002. In this case Mother is a veterinarian. She had enjoyed a salaried position. In order to better improve her prospects for future income, she became self-employed vet and suffered a drop in income. Again, the Superior Court found that Mother was bound by her income based on her salaried position, and that earning capacity should control. (See below re: income issue.)

III. DEFINITION OF INCOME

Portugal v. Portugal, Superior Court, May 1, 2002. After determining Mother's earning capacity, (see above), the Court scrutinized the add-backs to Father's income. The Superior Court determined that the employer's contribution to Father's retirement account, in addition to the employee's voluntary contribution, must be included in gross income for the calculation of child support. The Superior Court looked to cases in Florida, Nebraska and North Dakota for guidance.

Humphreys v. DeRoss, Supreme Court, February 20, 2002. Just two weeks shy of the one-year anniversary of the argument, the Supreme Court reversed the decision of the trial court and the Superior Court. Father had inherited real estate from his mother, and that property was sold with proceeds of close to $84,000 distributed to Father. Mother filed a petition to increase support. The child was in her teens, and the trial court amortized the inheritance over the months remaining until the child was due to reach majority. To further complicate matters, during the pendency of the litigation, the legislature expanded the definition of income available for child support. The statutory definition now specifically includes bonuses, lottery winnings, award or verdicts and any form of payment due and collectible by an individual, regardless of source. The court considered the amendments to the statute, but did not agree with the trial court's definition of income. Among the prior statutory list of sources of income were "income in respect of a decedent" and "income from an interest in an estate or trust". The Supreme Court suggested that since income from a trust was included, the principal inheritance or trust logically should be excluded. If the legislature intended to include principal, a clear statement would have been required.

The Supreme Court also specifically noted that a substantial inheritance should affect the amount of support to which a child may be entitled. The Support Guidelines specifically allow for deviation where the trier of fact considers the assets of the parties, and the best interests of the child. Therefore, the trial court may find that the inheritance affects a payor's financial obligations by making more income available for support, justifying an upward deviation. This is surely the area in which the advocates for the dependent spouse will argue for more, and the advocates for the spouse with the inheritance must provide reasons to avoid deviation. Many feel that the decision implies that one could calculate the income the inheritance should generate, which income should be available for support. The Supreme Court also noted that the statute does not include "gifts" in the definition of income, so therefore the windfall from gifts or inheritance should not be treated as income.

OTHER SUPPORT CASES

Colonna v. Colonna, Superior Court, December 21, 2001. The dependent spouse had an order for partial custody of the children. Because of the extraordinary income of the primary custodian, the dependent spouse sought child support for the days when the children were in her care. The Superior Court rejected this argument, noting that the Mother in this instance had substantially less than 50% custodial time. This Court's decision implies that if a non-custodial parent has close to 50% of physical custody, such a support claim may be heard. In this case, Mother, had not even been asked by Father to contribute to child support. Even though Father's income was superior, an offset would have been calculated for Mother's child support obligation. This case reviewed the prior case of Little v. Little, 441 Pa. Super. 185, 657 A.2d 12 (April 10, 1995), but it was distinguished because in Little the dependent spouse had the child nearly 50% of the time.

Mazlo v. Kaufman, Superior Court, February 27, 2002. The Superior Court confirmed the logical consequences of ignoring a court appearance. Mother filed for modification of one aspect of the Support Order, then the hearing officer also allowed an increase of support. The no-show Father balked, but the court found that he had notice and took the risk of not responding to the court notice, so no sympathy was given.

Commonwealth v. Woods, Superior Court, February 28, 2002. In this decision, Husband's testimony in a support contempt hearing, inconsistent with other sworn testimony, led him to jail in Cumberland County. At long last we can point to one appellate court decision in response to our clients' complaint that perjury goes unpunished.

Chrysczanavicz v. Chrysczanavicz, Superior Court, April 5, 2002. The Superior Court overturned the trial court's dismissal of a Contempt Order. An Order had been issued, and the matter was re-listed. The Superior Court found that the Mother had not been given appropriate notice and the right to attend and argue her case. Father and counsel arrived in court and convinced the trial court that he was not in contempt. Mother appealed when the Contempt Order was dismissed. The Superior Court reinstated the Contempt Order pending further hearing, pointing out that Mother had the right to be present to explain the circumstances of Father's failure to pay support.

SPECIAL ECONOMIC CASES-FEDERAL TAX AND DISCOVERY

United States v. Craft, 122 S.Ct. 1414, April 17, 2002. The Supreme Court of the United States considered this appeal from the Sixth Circuit in the District Court for the Western District of Michigan. The wife of a delinquent taxpayer brought action against the United States to quiet title to proceeds in an escrow account containing one-half of the proceeds obtained from the sale of entireties real estate. The issue was whether a federal tax lien could attach to Husband's interest in property held as tenants by the entireties under Michigan law. (The parties agreed Wife was to receive all proceeds.) Since Pennsylvania also considers property titled jointly by Husband and Wife to be held by the entirety, and therefore immune from the claims of the creditors of only one party, US v. Craft must be heeded. The Supreme Court held that Husband's interest in real estate held by the entirety was "property" or "rights to property" to which the federal tax lien could attach. The Supreme Court found that the fact that Husband could not unilaterally alienate property held in tenancy by the entirety did not preclude him from possessing property and rights to property for the purposes of the federal tax lien statute. The interpretation of the federal tax lien statute is a federal question, and the Supreme Court found that it is not bound by a state courts' answers to similar questions involving state law. So beware. The entireties property protection from the creditors of one party will not apply when it comes to federal tax liens.

Diamond v. Diamond/Appeal of Attorney, Superior Court, February 13, 2002. Wife's Attorney appealed from the entry of the trial court's Order of Contempt an award of counsel fees. The Superior Court noted that in the underlying contentious divorce action, Husband had produced his original checks and bank statements for Wife's Attorney. Attorney advised Husband that her office's cleaning staff had accidentally discarded his financial documents. On May 4, 1999, the trial court ordered Attorney to order and pay for replacement documents. The Petition for Contempt was filed September 17, 1999, when the documents were not produced. A hearing on the Petition for Contempt was held on December 14, 2000. On December 21, 2000, the trial court found Attorney in contempt and ordered her to pay $560 of attorneys fees and costs. The record confirmed that Attorney had ordered and paid for the replacement documents the day before the contempt hearing, more than 19 months after the trial court's Order. Attorney appealed the Order of Contempt and the award of counsel fees.

The Superior Court confirmed that the trial court properly handled this as a matter of civil contempt, which would be reversed only upon a showing of a plain abuse of discretion. It is undisputed that Attorney did not comply with the May, 1999 Order until one day before the long delayed Contempt hearing. The Court found Husband had to incur undue cost to enforce the Order. The trial court decision was affirmed.

MISCELLANEOUS DIVORCE CASES

DeMarco v. DeMarco, Superior Court, December 13, 2001. The Superior Court was critical of the lower court for blending equitable distribution of a retirement asset based on offsetting a present value calculation, when it would have been much more logical to do a deferred distribution. The lower court also valued Husband's retirement assets on the basis of early retirement, even though Husband had passed the early retirement age and was continuing to work. The Superior Court found that normal retirement age should be the usual basis for valuation, if this is the most fair way to equitably divide the marital pension interests.

In re: Estate of Bullotta v. Bullotta, Superior Court, May 7, 2002. A Consent Order was read on the record which provided for entireties property to be conveyed: primary residence to Wife, second residence to Husband. Husband died before the deeds were signed or the divorce decree was issued. The Superior Court avoided the rigid application of the Rule of Abatement, and found that the Consent Order is binding, and the entireties property due to go to Husband would in fact go to his estate.

Pudlish vs. Pudlish, Superior Court, April 3, 2002. The Superior Court found that a workman's compensation award is not subject to equitable distribution notwithstanding that the facts giving rise to the claim arose pre-separation. The Superior Court found that the entitlement was won post-separation. The Superior Court also criticized the trial court which ordered Husband to purchase life insurance as an on-going alimony obligation to wife.

Foulk v. Foulk, Superior Court, December 17, 2001. This case is an example of poor "drafting" regarding the deferred distribution of the pension interests. The agreement on the record did not clearly state the start date as of which pension interests would be divided. The trial court had to go back and review what was logical. One of the issues on appeal is whether there was a final appealable order. The Superior Court found the order appealable and the issue worthy of discussion.

Nagle v. Nagle, Superior Court, May 16, 2002. The Superior Court found that the post-separation transfer to the parties' son, of stock in the business, should be ignored. However, the stock itself would be valued at date of distribution, not date of separation.

DeSanctis v. Pritchard, Superior Court, July 5, 2002. Pennsylvania now has a "Barney rule". The parties had signed a proported property settlement agreement which dealt primarily with the future of Barney, their dog. The Agreement provided that Barney was Wife's property and she would have full custody. Several months later, ex-Husband filed a Complaint in Equity seeking "shared custody" of Barney and claiming that Wife had breached the Agreement. The Superior Court has found that disposition of the dog is disposition of personal property. The Superior Court agreed with the trial court that seeking an arrangement regarding a dog is analogous a visitation schedule for a table or a lamp. The court confirmed that Barney and his social schedule belong exclusively to Wife.

OTHER ISSUES PENDING

As noted above, the Pennsylvania Support Guidelines are subject to automatic update every four years. Therefore, within the next year, proposed Rule Amendments, will likely cause a fairly dramatic change in the Support Guidelines, comparable to those enacted in April, 1999.

In addition, the legislature is considering amendments to the Divorce Code which result from a report from the Joint State Government Commission issued April, 1999. Highlights of those amendments are attached hereto. The most controversial amendments include reducing the separation period for a no-fault divorce from two years to one year; and requiring that pre-marital agreements be executed ninety days in advance of the wedding day. The Pennsylvania Bar Association has already objected to the mandatory 90-day prenuptial agreement, but there are no complaints from the lawyers regarding the reduction of the separation period. That legislation will be debated in the Senate this year, and will probably be addressed by the House in 2003.