Opinion
No. FST FA 94-0138873 S
December 3, 2008
MEMORANDUM OF DECISION ON REMAND FROM THE SUPREME COURT OF THE STATE OF CONNECTICUT, ZAHRINGER V. ZAHRINGER, 262 CONN. 360 (2003)
Procedural History
This action claiming a dissolution of marriage came to the court on June 28, 1994. A judgment dissolving the marriage entered on August 28, 1994. (Harrigan, J.) Thereafter, pursuant to the separation agreement incorporated by reference in the judgment, the plaintiff filed a motion for modification dated April 8, 1999. A hearing on said motion for modification occurred on December 8, 9 and 10, 1999. Thereafter, on March 24, 2000, #307, the court (Harrigan, J.), granted the plaintiff's motion for modification. Whereupon the defendant appealed to the Appellate Court which affirmed the decision of the trial court, Zahringer v. Zahringer, 69 Conn.App. 251 (2002). The defendant then petitioned for certiorari to the Supreme Court which reversed the Appellate Court and remanded the case to "that court with direction to reverse the judgment of the trial court and the remand the case for a new hearing on the motion for modification." Zahringer, 269 Conn. 371. Upon remand, the trial court conducted hearings on the plaintiff's motion for modification dated April 8, 1999 and the defendant's motion for modification dated September 22, 2003.
Facts
The parties were married on December 5, 1981. At the time of the dissolution there were three children issue of the marriage, all minors, namely: George J. Zahringer IV born December 5, 1983, Killian C. Zahringer born November 8, 1985 and Lauren T. Zahringer, born October 6, 1987. The separation agreement executed by the parties on August 28, 1995, and incorporated by reference in the judgment provides, in relevant part to the issues presented on modification, the following:
3.3. Commencing January 15, 1996 for the month of January 1996, the Husband shall pay to the Wife the sum of $25,000 per month as unallocated alimony and child support, said order shall be non-modifiable as to amount through December 1998. In addition, commencing July 15, 1996, the Wife shall be entitled to one-third (1/3) of all amounts contributed by him to the Bear Stearns Capital Accumulation Plan between the period July 1, 1996 and June 30, 1999. The Wife's entitlement shall be limited to one-third (1/3) of the gross amounts contributed to the said Plan during the dates stated herein, together with all incremental increases (and subject to all incremental decreases) occasioned by the change in the value of Husband's units in the Plan. The Wife's share of the Plan shall not be deductible by him or taxable to her until distributions are received by the Husband. The Husband shall immediately pay to the Wife as deductible alimony one-third (1/3) of all distributions received by him on account of his participation in the Plan for the period July 1, 1996 through June 30, 1999, even if the Wife shall have remarried, cohabitated or died after June 30, 1999; but before the Husband goes into pay status for the CAP plan contributions made between July 1, 1996 and June 30, 1999. The Wife waives her right to participation in the CAP plan for any years other than these expressly provided to her in paragraph 3.3.
3.4. Alimony shall be modifiable after December 31, 1998, pursuant to Connecticut General Statutes Section 46b-86, including Section 46b-86b, and it shall terminate on the death of either party or the Wife's remarriage.
3.5. If alimony has not previously terminated by the occurrence of an event described in the preceding paragraph, then in such event either party may petition the Court for a review of the monthly unallocated alimony and support payment at any time after January 1, 1999. The Court shall at that time consider the totality of the financial circumstances of the parties and by application of the criteria set forth in Connecticut General Statutes Section 46b-82 determine whether the then existing unallocated alimony and support award should continue unmodified, should be increased, or should be reduced. Any modification shall be made retroactive to January 1, 1999.
Pursuant to paragraph 3.5, the plaintiff filed her April 19, 1999 postjudgment motion to modify #257. Said motion was the subject of the court's (Harrigan, J.), decision in March 2000 which was reversed in its entirety in Zahringer v. Zahringer, 262 Conn. 360 (2003). As such, the decision of the court in 2002 is void and of no moment. The decision exists only as the Appellate and Supreme Court make periphery reference to its holding in their decisions, references which both parties address in their present argument. As such, this court must address the 2000 trial court decision to provide the framework necessary for its decision. In addition, the court must interpret the meaning of paragraphs 3.3, 3.4 and 3.5 of the separation agreement.
The 2000 Decision
In the 2000 decision, the court compared the financial affidavits filed by the parties at the time of the dissolution in 1995 and those filed at the modification hearing in December 1999. The court found the defendant's annual income in 1995 was $1,339,503. His 1999 income was $2,227,000, an increase in income constituting a substantial change in circumstances. The court also found an increase in the needs and educational requirements of the children. The court declined to consider the "largesse" of the payee's parents, the plaintiff's access to her parents' funds for her use and the children's needs when fashioning its orders, citing Unkelbach v. McNary, 244 Conn. 350 (1998). The court then increased the unallocated alimony and child support from $25,000 per month to $50,000 per month retroactive to 1999, based on the comparison of the 1995 and 1999 affidavits.
On appeal, the Appellate Court affirmed the trial court on the basis that it had an inadequate record upon which to base its review, specifically;
"A determination of whether those contributions were gifts or loans is pivotal to our resolution of the defendant's claim. As our case law states, contributions in the form of gifts properly may be considered in setting financial orders. See Rubin v. Rubin, 204 Conn. 224, 238-39, 527 A.2d 1184 (1987). Contributions that are loans, and mandate repayment, however, are liabilities that are not considered to be assets. See Schmidt v. Schmidt, 180 Conn. 184, 188, 429 A.2d 470 (1980). We will not speculate as what the court meant by "largesse." As we often have stated: "Our role is not to guess at possibilities, but to review claims based on a complete factual record developed by a trial court." (Internal quotation marks omitted.) Fitzgerald v. Fitzgerald, supra, 61 Conn.App. 163. Because we do not know what the court considered the contributions to be, we cannot properly review the defendant's claim that the contributions qualify as income.
Because we cannot discern whether the court considered the contributions in question to be gifts or loans, we also are unable to review the defendant's second argument that the court was obligated to consider the payee's income under § 46b-82 in fashioning the new order."Zahringer v. Zahringer, 69 Conn.App. 251, 258 (2002).
On certification, the Supreme Court reversed, finding the record adequate for review and noted with approbation Judge DuPont's dissent.
As Judge Dupont aptly stated in her dissenting opinion in the Appellate Court, we interpret the trial court's statement as reflecting the court's conclusion that Unkelbach's holding is inapplicable if it is a payee's income that is enhanced. "The receipt of the money by the plaintiff, as a payee of the defendant's support obligation, therefore, according to the court, need not be considered. In other words, whether the word `largesse' was a finding of a gift would [have been] irrelevant, in the court's view, because the plaintiff received the sums as the payee rather than the payor of the support obligation." Zahringer v. Zahringer, supra, 69 Conn. 265 (Dupont, J., dissenting).Zahringer v. Zahringer, 262 Conn. 367.
The Supreme Court then cryptically stated the following in its.
$6,250.00 is the total amount for all three children.
fn2 Specifically, the plaintiff contends that "no state has ever held that loans with an obligation of repayment constitute income for purposes of support." She cites L. Morgan, Child Support Guidelines: Interpretation and Application (Sup. 2002) § 2.03[e][14] and [20][ii][B], as well as numerous cases from other jurisdictions, in support of that position. The defendant argues that there is no blanket rule but, rather, that courts examine the nature of the loan. The issue of whether any loan, regardless of whether it is the result of an arm's-length transaction and irrespective of its terms, properly may be considered by the trial court in fashioning financial orders is not yet ripe for our consideration in this case because the trial court made no finding in this regard. Following our remand, should the trial court determine that the fund was not a gift, the trial court may make the necessary findings in connection with that issue. We further note that on remand the trial court will have before it the issue of whether paragraph 3.5 of the settlement agreement approved by the court requires it to consider the funds, regardless of how they are characterized.
Zahringer, 262 Conn. 371.
As such, the court has rather overtly provided direction to the trial court on remand.
Interpretation of the Provisions of the Separation Agreement
a. 3.4.
3.4. is the precursor to 3.5 delineating when alimony shall be modifiable pursuant to Connecticut General Statutes § 46b-86 including § 46b-86b and it shall terminate on the death of either party or the wife's remarriage. (Emphasis added.) Clearly, the parties contemplate the modification of alimony pursuant to statute or contingent upon death or remarriage, of the wife. Significantly, termination of alimony is not mentioned compelling the conclusion that the 1995 agreement contemplated lifetime alimony.
b. 3.5
As to paragraph 3.5, the court has heard extensive argument, and reviewed and studied the briefs of both parties. The court concludes that the defendant's interpretation of section 3.5 tortures the language contrary to the rules of construction, ". . . the language used must be accorded its common, natural and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . ." Sutherland v. Sutherland, 107 Conn.App. 1 at 5-6 (2008) ". . . at any time after January 1, 1999" limits the time for filing a petition to a date after January 1st 1999, any modifications precluded between the date of dissolution, August 28, 1995 to December 31, 1998. "At that time" simply means at the time of filing the motion for modification. "Any modification shall be made retroactive to January 1, 1999" cannot mean as the defendant contends that a motion filed in 2003 and heard in 2007 would be retroactive to 1999. That argument is inconsistent with Conn. Gen. Stat. 46b-86a. The court concludes that if it finds that the plaintiff is entitled to a modification retroactive to 1999 then 1999 becomes the basis for the defendant's 2003 motion for modification. If the court finds no basis for the plaintiff's motion for modification, then the defendant's baseline for computation is August 1995.
Applying this interpretation to the plaintiff's postjudgment motion for modification dated April 1999, the court concludes that the proper baseline for consideration is from the date of dissolution in August 1995 to the date of hearing in December 1999 on the April 8th 1999 motion.
On August 24, 1995 Mr. Zahringer was employed as the senior managing director in private client services. His financial affidavit disclosed a gross monthly income of $83,393.00 per month or $1,000,716 dollars per year. Added to this amount were dividends, interest, and a finder's fee for a total of $1,158,437.00 per year or $96,536.00 per month. In 1995, Mrs. Zahringer's 1995 financial affidavit discloses court ordered income of $6,500.00 per month, monthly expenses of $43,346.00, liabilities of $118,130.53 and negative assets of $58,267.00.
The defendant's financial affidavit dated December 7, 1999 (Ex. B) discloses total gross monthly income from employment of $2,048,528.08 per year or $170,711 per month. The plaintiff's December 6, 1999 financial affidavit discloses gross monthly income of $25,000 unallocated alimony and child support, expenses of $50,541.21, liabilities of $272,290,14 and assets of $887,213.32. Included in the liability section is the sum of $230,000 identified as owing to Eugene Goldberg, the father of Celia Zahringer. The court is mindful of Judge Dupont's dissent, fn2 in Zahringer v. Zahringer, 69 Conn.App. 251, 267 (2002), relating to the February 1999 affidavit's failure to disclose the $230,000 as a loan or the subject of promissory notes to the father. This failure however, was corrected by the December 6, 1999 affidavit.
Critical to the court's decision, pursuant to paragraph 3.5 of the separation agreement of the parties is the language, "The court shall at that time, i.e., the filing of the motion for modification, consider the totality of the financial circumstances of the parties and by application of the criteria set forth in Connecticut General Statutes Section 46b-82, determine whether the then existing unallocated alimony and support award should continue unmodified, should be increased or should be reduced. Any modification shall be made retroactive to January 1, 1999."
The totality of the financial circumstances must include a determination of whether the sums advanced by Eugene Goldberg to his daughter constitute gifts or loans, section 3.5 cannot be read with any other meaning.
The defendant contends that the loans from Mr. Goldberg to his daughter, Celia Zahringer, are in essence, "a thin facade of a loan" citing a California case, In re Marriage of Smith, 2004 WL 90875 at *24 (Cal.App. 2004). Yet the court has heard the testimony of both the plaintiff and her father in reference to these "loans." It is undisputed from the testimony elicited that between August 1995 and December 1999, the plaintiff borrowed money from her father, beginning in 1998 because "funds were insufficient to maintain her lifestyle prior to the divorce." (T. 5/16 p. 41.) The plaintiff further testified that she thought if her modification were granted, she could repay her father. (T. 5/16 p. 41) (Ex. 2 3). She further testified that in 1999, the children had substantial changes in need. (T. 5/16 p. 70.) The plaintiff introduced as evidence notes marked as Exhibits A through K detailing notes payable to Mr. Goldberg with varying rates of interest in excess of one million dollars. (Ex. N.) Unlike the California case cited by the defendant, the plaintiff's father demanded and secured a mortgage on the plaintiff's property in Florida. (T. 5/16, p. 150, 174.)
To corroborate the plaintiff's testimony, Mr. Goldberg testified on May 17, 2008. This court had the full opportunity to observe Mr. Goldberg's demeanor while testifying. There is no doubt in the court's mind that Mr. Goldberg had no intention of giving his daughter a gift. He quite emphatically states; "I want my money back. I'll do anything I can to get it back. I don't want it to go in any other direction — other than to me, when I'm entitled to it. (Tr. 5/17/08 p .7.) He kept a record of all monies loaned. (Tr. 5/17/08 p. 5.) Interest was paid. He paid taxes on the interest. (Tr. 5/17/08 p. 6.) The monies were taken to maintain her family, he was her last resource. (Tr. 5/17/08 p. 9, 14.) The fact that the notes exceed the mortgage on the property was explained as his intent to keep the amount to what could be realistically collected. (Tr. 5/17/08 p. 26.) The idea of the mortgage was his. (Tr. 5/17/08 p. 26.) Mr. Goldberg further stated that it was not his place to give his daughter money. (Tr. 5/17/08 p. 31.) When questioned by the court, Mr. Goldberg reiterated quite strenuously that "I do not look upon myself as a source of income for my daughter." (Tr. 5/17/08 p. 31.) Mr. Kolfer, the CPA for both Mr. Goldberg and Celia Zahringcr testified that he had discussions with Mr. Goldberg in reference to the loans to his daughter and the tax implications arising therefrom. (Tr. 5/17/07 pp. 35-36.) Mr. Kolter further testified that Mrs. Zahringer did repay interest (Tr. 5/17/08 p. 44.) In addition, the mortgage was placed on the property to secure the debt. (Tr. 5/17/08 p. 42.)
Mr. Goldberg has presented credible evidence of bona fide loans to rebut "the thin facade of a loan." As such, under existing case law, loans mandating repayment are liabilities. Zahringer v. Zahringer, 69 Conn.App. At 258 citing Schmidt v. Schmidt, 108 Conn. 184, 188 (1980).
The court finds that the plaintiff has established a substantial change in circumstances justifying a modification of the unallocated alimony and support award. The defendant is ordered to pay to the plaintiff the sum of $50,000.00 per month unallocated alimony and support retroactive to January 1, 1999 pursuant to ¶ 3.5 of the Separation Agreement. Arrearages shall be paid on a monthly basis in the amount of $40,972.22 until paid in full.
The Defendant's 2003 Motion for Modification
On September 22, 2003 the defendant filed his motion for modification. The date of service on the plaintiff was October 15, 2003. The hearing on the motion for modification occurred on May 17, 2007 and then continued after the Bear Stearns collapse to March 6, 2008.
Evidence established a significant decline (roughly 50%) in Mr. Zahringer's retirement pension. (Tr. 3/6/08 pp. 24-26.) A number of his options were now worthless. (Tr. 3/6/08) p. 28.) However, the overwhelming evidence at that hearing confirmed Mr. Zahringer's financial wellbeing. The Bear Stearns statement of income ending on December 12, 2007 shows total earnings of $1,859,664.79 (Ex. 8.) The total earnings includes the CAP distribution of $1,224,158.42 for the year 2007. (Defendant's financial affidavits dated May 15, and 17, 2007.) Pursuant to § 3-3 of the separation agreement, the plaintiff waived the right to participate in the CAP plan after June 30, 1999. (Emphasis added.) She never waived her right to have monies distributed to the husband pursuant to said plan included as income to the husband. Indeed section 3.5 of the agreement, "the totality of the financial circumstances" compels the inclusion of the CAP plan in income. Testimony of Mr. Zahringer concerning loss in 2008 of one family's trading, inability to meet minimum income for draw (Ex. B, C, 4/28/08 hearing), loss of clients (Tr. 12/14/07 pp. 49-50) and downward market trend (Tr. 3/6/08 pp. 26-27) are too speculative to form an evidentiary basis sufficient to warrant a modification. In addition, there has been no evidence establishing any earning capacity of the plaintiff. Her financial situation has deteriorated precipitously. (Financial Affidavit 5/14/07) (criteria listed in Conn. Gen. Stat. § 46b-82). The court finds no statutory justification to terminate alimony.
Accounting for 8% of his total commissions.
The defendant however, is entitled to a modification based on the fact that all children have reached the age of majority, the first on December 5, 2001; the second on November 8, 2003 and the third on October 6, 2005. The court has considered the maximum support pursuant to the child support guidelines. This amount is inapplicable to this case given the deviation criterion. The court has considered the argument of both counsel and finds that an overall reduction of $25,000.00 per year or $6,250.00 per month to be fair and equitable.fn2 Said modification to be effective on the date of majority. The court therefore grants the defendant's motion for modification which is previously found to be retroactive to October 15, 2003.
CAP Overpayment
Judgment shall enter for the defendant in the amount of $115,000.00 plus interest at 8% from the date of the March 3, 2003 stipulation.
Attorneys Fees
Pursuant to Conn. Gen. Stat. § 46b-62, and a review of the respective financial affidavits of the parties, the court orders the defendant to pay the sum of $35,000.00 in counsel fees to the plaintiff.