Modification Actions for Decrease or Elimination of Periodic Alimony, Part 2
Pat and Mike were boyhood friends growing up in the late 1940s in a gloomy, industrial, but sports-oriented town in northeastern Ohio. Sensing the economic decline which would occur with the loss of great manufacturing centers and the advent of advanced technology, both moved in the early 1980s after college to greener pastures in the southeastern U.S.
Pat arrived first in Florida more than 20 years ago and has established a lucrative distributorship business in farming and agricultural equipment which he operates through a subchapter S corporation and as its sole stockholder.
Mike came to Florida 10 years later after being transferred by a Fortune 500 company where he had been employed since college. He is now an executive vice president and travels extensively with a substantial salary, good perquisites, and excellent retirement benefits.
Pat’s marriage to Mary ended some years ago with the emptying of the “nest.” He is paying permanent periodic alimony and is not at all happy about it.
Similarly, Mike’s marriage to Alice also ended because she wished to “do her own thing” and according to her, “he was never around anyway.” He also pays substantial permanent periodic alimony.
Both Mike and Pat are in good health and are approaching age 60. Further, each of their former spouses has no medical or psychological issues or disabilities.
Pat and Mike are “soured on women,” and don’t even date. Neither have any dependants now that their children are raised and through college.
Not having seen one another for awhile, they have a pre-arranged meeting at an Indians-Tigers spring training baseball game and afterwards adjourn to a sports bar to watch the second round of the ACC basketball tournament. After lifting a few and relaxing, their conversation now turns more serious. The following is a summary:
Pat, Alice is still pursuing her art and sculpturing career. She hopes someday to make the “big sale,” but has not done so yet. She has had attractive financial offers in advertising, art sales, and graphic art design, but has turned all of them down because she wishes to remain a self-employed independent. You know her — no one is going to tell her what to do. As a result, she is underemployed and is always frantic about her finances.
Mike, Mary is a freelance writer, but has now gotten into technical editing. She recently sold our old home deeded to her in the dissolution action and she has now moved in with Ned Brown, a lawyer and partner in a large law firm located near your home. She tells me she loves this arrangement, but will never marry again. He makes substantial money from what I hear. Additionally, I understand that Mary received a whopping profit on the sale and that this amount of money, together with her increased salary from the editing, will probably place me in good stead with the judge for a reduction or elimination of alimony.
Mike, I am thinking of expanding my business even though my children have no interest in it. I will have to cut down on my earnings to do so. It will certainly impact my standard of living, and I am seriously considering seeing a lawyer about reducing Mary’s monthly alimony, especially now that she has additionally a “live-in partner” to help her pay her living expenses and also who has substantially improved her prior standard of living.
Pat, I am giving serious thought to accepting an offer of early retirement. I will be 60 in 11 months and can walk away with a substantial lump sum payment plus approximately $85,000 per year in income. Alice and I once considered the issue of retirement benefits at the time of our dissolution and transferred assets in order to affect it. As I understand the law, the court cannot now reconsider my retirement benefits as a source of income to continue paying alimony once I am retired. I am going to see a lawyer about this matter and will probably wind up petitioning the court to reduce the alimony since I cannot continue to fund $7,500 per month for Alice as I have been.
Alice’s mother is in a nursing home. She is extremely wealthy and with Alice being the only child, I bet my life she has engaged in some sophisticated estate planning with her cousin who is a lawyer and recognized expert to make substantial annual or monthly monetary gifts to Alice or for her benefit. Also, Alice will receive an inheritance in the millions within a short time and considering her mother’s health, she cannot last much longer. These facts, together with my early retirement and reduced income, I believe, will place me in good stead with the judge for a reduction or even termination of the alimony obligation.
Mike, what concerns me and what should concern you is whether we are taking the proper steps at the present time by filing a petition for modification. After all, it is tax deductible and Uncle Sam is picking up part of the “tab.” Also, we do not wish to rush to judgment without “due diligence” as to the “true facts.” We are at risk if our ex-wives file a counter-petition for an increase in alimony and that is granted. We will then be much worse off than we are now and sorry for rushing to court to have our “financial head” handed to us.
Frankly, I am also very concerned about the cost and expense of petitioning for modification, but thinking ahead, I have budgeted and will take part of the subchapter S distribution this year and put it away in savings for this purpose. I suggest that you do the same with part of a lump sum early retirement payment you will receive.
Remember, however, Pat, one of the downsides in going back to court is since our standard of living has been elevated since the final judgment, we will now have to cut back on our living expenses in accordance with your plan to expand the business and mine for early retirement.
I don’t necessarily agree with the fact that each of us should go back to our original dissolution lawyers. Things change and perhaps we should look around for the best board certified marital and family lawyers we can find. I plan to interview several and I suggest you do the same.1
Within the next two weeks, Pat contacted his business lawyer and soon had at his fingertips the names of six board certified marital and family lawyers who were allegedly experts in modification actions for a decrease or elimination of alimony. Mike secured six other names through in-house counsel and a contact to the outside law firm representing his corporation.
Over the next six weeks, Mike and Pat interviewed each of these lawyers and finally made a choice.2
At their second interview, each signed a retainer agreement and was given the pertinent details for mandatory financial disclosure and completion of a financial affidavit. Each attorney told both Mike and Pat that before deciding what to do, the court file would have to be reviewed and if it was not available, then a contact would have to be made to prior counsel to obtain the office file for the dissolution action. Each attorney further explained that it was most important for he or she to review all assets and liabilities contested in the dissolution action as well as the respective income and expenses of each of the parties as enumerated in their respective financial affidavits.
Of equal importance, counsel must become thoroughly familiar with the fact finding process made by the trial court and specific findings of fact with reference to the gross and net salaries of the parties, the standard of living, and the calculations for alimony as set forth in the final judgment.
An appointment six weeks in advance was then set for each client, but in the meantime, counsel stated advice would be given at that time as to exactly how to proceed. Mike and Pat agreed to exchange the names of their lawyers, and they mutually decided that it may be beneficial for them to talk with one another since “two-heads” are always better than “one.”
Each attorney agreed to this arrangement and within the next 10 days met for lunch at a nearby restaurant to discuss their respective impressions of the two interviews. As the salad arrived, each remembered an article appearing in a recent Florida Bar Journal pertaining to this topic and set out to refresh their memories as to this subject before moving ahead.
Applicable Legal Standards
A strong showing must be made before a modification is granted if the party seeking it operates his or her own business. The standard is much stricter in this regard since the businessperson may easily record a drastic fluctuation in income or expenses or by voluntary choice defer orders, commissions, or sales.3
Proof in a modification action that the obligor abandoned a well-paying position in order to open his or her own business, and in order to keep it afloat, used savings and expanded credit card debt which invited bankruptcy, is unavailing to the court in order to terminate an alimony obligation because it is not a permanent situation. At most, the obligor is entitled only to a temporary reduction in alimony since he or she has not made a good faith attempt to obtain better employment and rectify the deterioration in financial circumstances.4 However, the practitioner must be aware that the court in considering modification will look to “all sources of income available to either party.”5
Again, there must be affirmative proof that the obligor is not deliberately seeking to avoid the payment of alimony, but on the other hand, is acting in good faith and employing a diligent search for comparable employment.6
In this regard, it is important to note that the obligor must show that the “clean hands” doctrine does not prevent the court from relieving him or her of a support obligation merely because the decrease in financial ability is brought upon voluntarily. This element of proof must also include evidence of good faith attempts to find other employment including multiple job contacts and association with a head hunter or other employment consultant.7
If alimony is set by an agreement of the parties, a heavier burden rests on the party seeking to reduce it.8
A change in the obligor’s income and employment must not be foreseeable or contemplated at the time of entry of the final judgment lest the obligor’s petition for modification be involuntarily dismissed. Similarly, where the evidence shows that the obligor’s standard of living has not declined nor has ability to pay changed in any significant manner, a denial of the petition will be upheld.9
The obligor is cautioned to seek a temporary modification when there has been a reduction in income. filing he or she evidences the exercise of good faith, and a non-showing of any deliberate intent to avoid paying the alimony obligation. This should be done as soon as possible to avoid retroactive arrearages.10
To terminate rather than reduce an alimony obligation, the payor must prove either a permanent inability to pay the amount ordered or an inability to pay any amount.11 In the alternative, the obligor must allege and prove that the payee or recipient is well able to support himself or herself through his or her own efforts or financial resources.12 The client is well-advised to plead both for a reduction and termination.13
Consistent with prior case law, F.S. 61.14(b)1, 2a–k, and 3 became effective July 1, 2005. This statutory change authorizes the court to reduce or terminate alimony based upon a finding that a “supportive relationship exists between the obligee and the person with whom the obligee resides.” The statute then goes on to enumerate many factors as already provided for by the case law. Unfortunately, it leaves many questions unanswered.14
The financial status of a successor spouse of an obligor is generally not relevant in an alimony modification proceeding.15 An exception exists, however, if it can be shown that the party responsible for the alimony obligations has deliberately limited his or her income for the purpose of avoiding or reducing such payments and is living largely from the income of a successor spouse.16
The Florida Supreme Court in Pimm v. Pimm, 601 So. 2d 534 (Fla. 1992), labeled a desire to voluntarily retire prior to age 65 as precluding a reduction or termination in alimony. Without more, the unilateral choice would place the obligee in dire financial circumstances.
The court must determine under all circumstances if retirement is voluntary or involuntary and is reasonable under all of the circumstances.17 Further coming into play, is the question of retirement assets as a source of income for alimony purposes once retirement has taken place.18
Alimony may be terminated or reduced depending upon the obligee’s receipt of substantial inherited property or funds.19 Further gifts made to the obligee which generate substantial income may also be considered in a modification of alimony action.20 Another interesting question to be considered is pass-through income from a subchapter S corporation which is not being distributed to the shareholder-former spouse, but is rather retained by the corporation for business purposes which, thus, does not constitute definable income within the meaning of F.S. §61.
Where the issue of the pass-through income being retained is contested, the shareholder has the burden of proving that such income was properly retained for corporate purposes rather than to avoid alimony obligations by reducing his or her amount of available income. The court should analyze the factors governing prior distributions, the history of the business, and past action of the corporation retaining such income.21
The first issue to be determined is whether there has been, or would be at the time of filing, a substantial unforeseen change in circumstances according to F.S. §61.14 (1)(a).
As to Pat: Why does he wait until almost 60 to expand his business? Since his children have no interest in running it and he will probably only wish to stay in this business market for another 10 years or less, is a sale then in the offing? Is the deferral of K-1 income designed to finance this endeavor? Is it a voluntary cutback in income or are there legitimate business objections that he can advance at trial? In the meantime, can he continue to maintain his present standard of living only by the salary he receives and the personal living expenses paid for by the corporation?22
Would the closing of the business prior to age 65 preclude modification by Pat based upon a Pimm argument? As to the issue of pass-through income, can Pat’s position be successfully upheld by a Zold v. Zold, 911 So. 2d 1222 (Fla. 2005), analysis? Would the receipt of a profit on the sale of the business prior to age 65 be enough to preclude a modification of alimony either in whole or part?
Is the receipt of a huge profit on the sale of the home by Mary a substantial change in circumstances or is this argument foreclosed by Jaffee v. Jaffee, 394 So. 2d 443 (Fla. 3d DCA 1981)? Does the recent amendment to the Florida statutes relating to a “supportive relationship” create a new cause of action for modification of alimony or is it merely a codification of preexisting case law?
At the time of the dissolution, weren’t Mary’s skills as a writer taken into account and is an increase in income through technical writing really a change in circumstances? Pat and his attorney poured over the court file, initial and trial financial affidavits, exhibits, the findings of fact made by the court at trial and in the final judgment, argued back and forth. In the end, both concluded the chances of a decrease in alimony were certainly worth the effort and that Pat by filing would not “lead with his chin.”
The result, however, was entirely different as to how Mike and his lawyer viewed his case as “below average” at the very best. For example, Mike had told counsel that his expected lump sum payout for early retirement would total approximately $1 million or more and thereafter he would receive $85,000 per year in retirement income. The lawyer then explained to a surprised client the rationale of the Supreme Court in Acker v. Acker, 904 So. 2d 385 (Fla. 2005). Also coupled with a Pimm argument and an especially needy ex-wife like Alice, it may be difficult to get by an involuntary dismissal at the conclusion of the former husband’s case.23 Furthermore, the voluntariness of Mike’s action in leaving his executive position may lead a court to impute additional income to him. While Mike certainly can show a change of circumstances if Alice is receiving substantial monthly gifts of money from her mother or her family, he has no proof to back up this claim at present and must walk into court with unsupported allegations based only upon speculation and guesswork.
Lastly, Alice has always worked in art and sculpturing. Even with a “de novo” determination as to the employability status of Alice,24 the chances are slim that a substantial change in circumstances can be shown or the court persuaded to the view that she is actually underemployed and, therefore, should have additional income imputed to her.
The lawyer candidly pointed out to Mike the time and expense that a present modification action would take. Mike was comforted in learning that “all was not lost” and that if he uncovered through detective work proof as to the amounts of annual or monthly gifts to Alice through her mother or family then he should immediately call for another appointment. Absent such proof, however, Mike should just wait, especially since he reasonably believes that Alice’s mother has left everything to her by a last will and testament or a living trust, and the mother does not have long to live.
Sixteen months later, Mike and Pat board an airplane to fly to Cleveland to watch the Browns play the Steelers. Pat is elated that his litigation experience is finally over. He enthusiastically discusses it with Mike and states that just three days before trial and at a third mediation, Mary finally settled and the monthly alimony has been reduced to a very reasonable level.
While the legal costs were not unsubstantial, Pat stated they were certainly cost effective. He cautioned Mike, however, against taking premature action against Alice before he had “all of the facts” relating to the inter vivos gifts to her or the extent and amount of the inheritance she would receive.
Mike smiled and listened closely to his good friend. He thanked him and then stated that he had already received some excellent legal advice and that he would wait for the facts to ripen and for the right opportunity to litigate.
1 This article does not concern itself with an award of rehabilitative alimony or defense to an action to increase, extend, or convert it to periodic alimony.
2 Thus, disqualifying the other five from representing their former wives.
3 Thomas v. Thomas, 589 So. 2d 944 (Fla. 1st D.C.A. 1991), and O’Brien v. O’Brien, 407 So. 2d 374 (Fla. 1st D.C.A. 1981).
4 Robinson v. Robinson, 928 So. 2d 360 (Fla. 3d D.C.A. 2006), and Jones v. Jones, 524 So. 2d 1070 (Fla. 2d D.C.A. 1988).
5 Yangco v. Yangco, 901 So. 2d 217 (Fla. 2d D.C.A. 2005); Smith v. Smith, 575 So. 2d 228 (Fla. 2d D.C.A. 1991); Fitzgerald v. Fitzgerald, 912 So. 2d 363 (Fla. 2d D.C.A. 2005); and Vriesenga v. Vriesenga, 931 So. 2d 213 (Fla. 1st D.C.A. 2006).
6 Austin v. Fernandez, 898 So. 2d 118 (Fla. 3d D.C.A. 2005).
7 Thomas v. Thomas, 589 So. 2d 944 (Fla. 1st D.C.A. 1991); Garone v. Goller, 878 So. 2d 430 (Fla. 3d D.C.A. 2004); Pitts v. Pitts, 626 So. 2d 278 (Fla. 1st D.C.A. 1993); and Dragland v. Dragland, 584 So. 2d 46 (Fla. 2d D.C.A. 1991).
8 Pimm v. Pimm, 601 So. 2d 534 (Fla. 1992), and Woolf v. Woolf, 901 So. 2d 905 (Fla. 4th D.C.A. 2005).
9 Chambliss v. Chambliss, 921 So. 2d 822 (Fla. 2d D.C.A. 2006).
10 Davis v. Davis, 528 So. 2d 34 (Fla. 5th D.C.A. 1988), and Dervishi v. Dervishi, 905 So. 2d 932 (Fla. 4th D.C.A. 2005).
11 Weiser v. Weiser, 657 So. 2d 1276 (Fla. 4th D.C.A. 1995).
12 McManus v. McManus, 638 So. 2d 1051 (Fla. 2d D.C.A. 1994).
13 See Greene v. Greene, 547 So. 2d 1302 (Fla. 2d D.C.A. 1989); Sabine v. Sabine, 834 So. 2d 959 (Fla. 2d D.C.A. 2003); Jennings v. Jennings, 353 So. 2d 921 (Fla. 4th D.C.A. 1978); Herbert v. Herbert, 304 So. 2d 465 (Fla. 4th D.C.A. 1974); Lopez v. Lopez, 920 So. 2d 1165 (Fla. 3d D.C.A. 2006); and Reno v. Reno, 884 So. 2d 462 (Fla. 4th D.C.A. 2004).
14 See Gladstone and Goldstein, Codifying Cohabitation as a Ground for Modification or Termination of Alimony — So What’s New?, 80 Fla. B. J. 45 (March 2006).
15 Condon v. Condon, 295 So. 2d 681 (Fla. 1st D.C.A. 1974).
16 Pratt v. Pratt, 645 So. 2d 510 (Fla. 3d D.C.A. 1994), and Harman v. Harman, 523 So. 2d 187 (Fla. 2d D.C.A. 1988).
17 Rogers v. Rogers, 746 So. 2d 1176 (Fla. 2d D.C.A. 1999); Weidman v. Weidman, 610 So. 2d 681 (Fla. 5th D.C.A. 1992); and Cleary v. Cleary, 743 So. 2d 1163 (Fla. 5th D.C.A. 1999).
18 Acker v. Acker, 904 So. 2d 384 (Fla. 2005), and approving Acker v. Acker, 821 So. 2d 1088 (Fla. 3d D.C.A. 2002). See also Robert M. Schwartz , Diffenderfer Revisited — Is the Double-Dipping Quagmire Still Alive?, 80 Fla. B. J. 46 (May 2006).
19 Selembo v. Selembo, 591 So. 2d 1112 (Fla. 2d D.C.A. 1992).
20 Rosen v. Rosen, 528 So. 2d 42 (Fla. 3d D.C.A. 1988), disapproved on other grounds, 696 So. 2d 697 (Fla. 1997).
21 Zold v. Zold, 911 So. 2d 1222 (Fla. 2005).
22 Fitzgerald v. Fitzgerald, 912 So. 2d 363 (Fla. 2d D.C.A. 2005).
23 Fla. R. Civ. P. 1.420(b) and Fla. Fam. R. P. 12.420(b).
24 Rosen v. Rosen, 528 So. 2d 42 (Fla. 3d D.C.A. 1988), disapproved on other grounds, 696 So. 2d 697 (Fla. 1997).