Christine Schade v. Edgar Schade (2011)

MEMORANDUM OF DECISION

This postjudgment matter comes before the court on the defendant's motion to modify alimony dated and filed June 2, 2010 (# 216) and the plaintiff's motion for contempt dated June 18, 2010 and filed June 21, 2010 (# 217).   These parties are no strangers to the court.   This is a matter that has been the subject of significant litigation virtually all of which has been on the issues currently before the court.

A very brief summary will be sufficient to put this case in perspective.   The parties were divorced after an uncontested hearing on June 22, 2005.   Both parties were represented by counsel and a separation agreement was incorporated by the court as part of the dissolution decree.   That agreement, which ended the 22-year marriage of the parties, included a plan built on an alimony order of $120,000 per annum that was non-modifiable as to its twelve-year duration.   The non-modifiable clause even precluded the remarriage or cohabitation of the plaintiff wife from altering the term of the alimony order.   The alimony, however, was modifiable as to amount.   A safe harbor of earnings for the plaintiff of $50,000 per annum was created and no specific child support order was entered for the two minor children, all part of the alimony financial package.¹

Very shortly after the dissolution order entered, the financial circumstances of the defendant changed drastically.   Mr. Schade had been a founding partner of a very successful insurance company and was earning $325,000 yearly with many significant fringe benefits.   His tenure with that company, which had been in existence for over eleven years, ended rather abruptly early in September 2005 after it was determined by the other partners that Mr. Schade had been involved in fraudulent activity.   Despite his termination, Mr. Schade left the company owning approximately 14% of the company's shares which were valued at the time at about $2 million;  and the written shareholder/stock repurchase agreement provided for a buyout of that interest.

A motion to modify his alimony obligation was filed by the defendant in November 2005 seeking to reduce his alimony to $1 per year and for a specific child support order to be entered as an alternative.   That matter was tried to the court over several days and in a decision issued on August 11, 2006, the court (Epstein, J.) denied his modification, ruling that his change of financial circumstances was brought about by his own doings and that he continued to have an earning capacity significantly above his current income.   He was also held in contempt of the court's orders for his failure to pay the alimony obligation and was ordered to pay the plaintiff's legal fees.   The decision went into some detail regarding Mr. Schade's lack of effort to regain his former financial standing, as well as his lack of economizing, other than by not paying his court ordered obligations.   He was, however, given some temporary relief from the orders.  (Memorandum of Decision, # 170.10, August 11, 2006).

The following August the parties were back before the court (Epstein, J.) and things were looking a little better.   Mr. Schade's stock with his former company was being repurchased in an agreement that promised him between approximately $83,000 and $100,000 per year for a fifteen year period.   In addition, the defendant was now working successfully for a new insurance company.   The court, despite the improved financial picture, found the defendant to be a less than credible witness based on his testimony at the hearing on the plaintiff's motion to reinstate the original alimony order.   The court increased the alimony order although not to the original amount.   The matter was continued to a later date as had been previously arranged for final review of the orders.  (Memorandum of Decision, # 193.10, August 17, 2007).

The matter continued to be litigated repeatedly over the same issue-the alimony order was beyond the financial ability of the defendant and contempt motions for his failure to pay as ordered-until the present motions.²  The instant matter was tried over a period of eight days starting on October 5, 2010 and ending January 31, 2011.   The key issue remains:  Can the defendant continue to meet the original alimony obligation as called for in the separation agreement?   The plaintiff argues that she gave up significant assets in return for the alimony order as structured.   She contends that the defendant has not really altered his lifestyle and pays all of his bills except for his alimony obligation.   It is her belief that he is purposely keeping his reportable income as low as possible to escape his court-ordered alimony.   Mr. Schade presents himself as a man trying his best to rebuild his life after the devastation of losing his lucrative partnership position.   He argues that times are hard for his area of insurance and he is locked out of many clients due to his history with his former company.   He also points to some really bad luck such as his former partners reneging on the stock purchase deal by selling all of the company's assets and leaving only a worthless shell.   He also points to the fact that his newer arrangements with the Lighthouse Insurance Company have also ended with no fault on his part.   He is pursuing his claims against both companies;  one is actually in suit and the other in negotiations in an attempt to avoid litigation.   The court cannot totally accept either party's position.

The defendant's financial picture has been damaged significantly by the default of payments under the stock repurchase agreement.   That turn of events was clearly out of the defendant's control and has, at least temporarily, deprived him of a significant source of income.   His problems with Lighthouse are less clear, but the fact that a second source of income has been ended is without dispute.   The court, however, is still left with the impression that he is not trying very hard.

Interestingly, each side called as a witness an insurance agent who had suffered a significant financial setback and who now is doing quite well.   The plaintiff called as a witness Paul Himmelstein.   Mr. Himmelstein was certified by the court as an expert witness in insurance sales and brokerage.   He testified on the effort required to develop a new insurance practice and spoke of his own situation of having to start over again after a very significant setback.   The defense called Bruce Parmenter as one of their witnesses hoping to support their theory of the case.³  Mr. Parmenter testified that he too suffered significant loss of income over the period from 2005 through 2008, but estimated his income for 2010 to be about $250,000.   The success of both of these witnesses underscores the ongoing failure of Mr. Schade to make a meaningful recovery of his own.   Although identical circumstances do not exist between himself and Mr. Himmelstein or Mr. Parmenter, none of his testimony gave proof of any substantial effort on his part.   The defendant testified that he spends approximately 35 hours a week on his insurance sales and another 5 hours on his design business that he started with his present wife a year or two ago.   A 40-hour a week work schedule is hardly what one would expect from an individual attempting to rebuild an insurance practice to a level that would produce an annual income of a significant level.   It is the work schedule of a W-2 employee;  not that of a self-employed individual.   He testified at great length about the difficulty facing him in his given niche market, but he is also licensed to sell other kinds of insurance in many other markets.   Does it take a significant effort?   Yes it does, and he may never be earning $325,000 a year again, but his current efforts as he has described them do not meet the level necessary to support his position that he no longer has the earning capacity as was determined by the court in its August 2006 decision.   In addition, the evidence supports a conclusion that the defendant's lifestyle has not diminished significantly and he is meeting all of his other regular financial obligations.   Accordingly, the court declines to issue an order modifying the alimony order but will temporarily adjust the order based in part on the problems faced by the defendant in collecting on his stock repurchase agreement and the payment difficulties he is experiencing with Lighthouse Insurance Company.

A second issue that was litigated in this hearing revolves around expenses of the children, including what is covered by the dissolution judgment.   Currently, the parties do not have any minor children.   As of the date of judgment, the parties had two minor children, to wit:  Kellie (DOB 12/7/1989) turned 18 at the end of 2007, but did not graduate from high school until June of 2008 and Daniel (DOB 1/24/1992) reached 18 in 2010 and graduated from high school in June of 2010.   The judgment calls for the defendant to pay 75% of certain expenses “[i]n lieu of direct support payments ․” Those expenses are limited to medical expenses for the children as well as “extra-curricular activities, camps and special events ․” Other provisions required the defendant to provide the children with cell phones and gas cards if such benefits continued to be offered to all of the partners' children.   Since Mr. Schade was fired as of September 2005, this benefit ended.   The plaintiff argues that it should continue to be the defendant's obligation to provide cell phones and gas cards, but there is no basis for such a claim.   The court does not find that car-related expenses and cell phone-related expenses are the defendant's obligation under the terms of the judgment.   The judgment also requires the parties to discuss and agree on the expenditures and to exchange expenses quarterly, but given the litigious nature of these parties and their ongoing dispute over payments in general, the court finds it excusable that they did not meet these requirements and that holding them to a strict compliance of those terms would be unjust and unfair to both parties.   The divorce judgment also has the parties sharing college expenses on the same prorated basis, but only after the various college savings accounts are exhausted.   As there was no evidence given at the hearing that such funds were used, all college-related expenses including but not limited to college application fees, orientation fees and the like shall be eliminated from the requested reimbursement claim.   The court reaches no conclusion as to the merit of such claims, only that the required prerequisite actions have not been proven.   Each party is free to renew their respective claim once that is done.   In his proposed orders the defendant asks that his own expenses on behalf of the children be considered, but no substantive evidence of what those expenses might have been was offered to the court.

After reviewing the plaintiff's claims for reimbursement which total $22,120.50 for both children for the appropriate years, the court approves a reimbursement of $3,621.73 ⁴ In addition to eliminating the car, cell phone costs and all college-related costs, the court has also eliminated the expenses for the criminal defense of Daniel which falls outside of the judgment.   The court has allowed all medical expenses, all sports-related expenses, all senior activity expenses and summer school fees.

After reviewing all of the testimony given and the evidence offered during the hearing as well as a careful review of the court file in this matter, the court makes the following findings.

1. The defendant has not offered credible testimony of sincere and honest efforts to regain his former earning capacity.   He remains seriously under-employed;

2.  The defendant has suffered significant financial difficulties due to the alleged default of payments from his former partners and Lighthouse Insurance Company;

3.  The court does not make a finding that the defendant's failure to pay the alimony since the spring of 2010, was willful;

4.  The alimony arrearage regarding the payments due through the month of February 2011 is $83,000 after crediting the defendant for $7,000 in payments made during the course of the hearing;

5.  An insurance benefit of $937,500 would be sufficient to secure the defendant's remaining obligation to pay alimony to the plaintiff;

6.  The defendant has no obligation under the judgment to pay the cell phone or automobile expenses for the children during their minority;

7.  Until evidence of compliance with the payment terms as set forth in the judgment relating to college expenses for the children is shown, neither party has an obligation to pay any such expenses;  and

8.  No evidence relating to the defendant's claim for personal property as set forth in his motion for contempt (# 229) was offered to the court and is considered abandoned.

Having heard the parties and considered all of the applicable statutory criteria and in consideration of the findings enumerated above, the court HEREBY ORDERS:

1.  The defendant's motion to modify alimony (# 216) is denied;

2.  The plaintiffs motion for contempt against the defendant (# 217) is denied;

3.  The defendant's motion for contempt against the plaintiff (# 229) is denied;

4.  The defendant's motion to modify (# 230) is granted in part and denied in part.

a. defendant's life insurance obligation under the judgment may be modified so as to provide a death benefit of $937,500 instead of the original $1,250,000 amount;

b. the defendant is to pay the premium required to keep such life insurance current no later than 10 calendar days prior to the due date and at the same time to send to the plaintiff proof of such premium being paid;

c. the request as to the plaintiff contributing to the health insurance premium for the children is denied;  and

d. the request for the plaintiff to pay the cell phone expenses for the children is denied.

5. Defendant's alimony obligation is temporarily reduced effective March 1, 2011 to $5,000 per month through the month of February 2012.   The sum of $5,000 per month unpaid alimony shall accrue until that date so that the effective order of $120,000 per year remains unchanged;

6.  Commencing on March 1, 2012, the defendant shall pay against the elimination of the arrearage plus the additional arrearage that accumulates over the next twelve months, at the rate of $2,000 per month.   Said sum to be in addition to the restored alimony order of $10,000 per month for an effective order of $12,000 per month until the arrearage is paid in full;

7.  In the event that the defendant shall receive a lump sum settlement, judgment or any sort of relief regarding his legal claims regarding the repurchase of his stock in DCSR, Inc dba Stone Insurance and/or his claims against Lighthouse Insurance, he shall pay 75% of such sum, net of reasonable legal fees and court costs, toward the elimination of his alimony arrearage to the plaintiff which is $83,000 through and including the month of February 2011;

8.  The defendant shall pay to the plaintiff as reimbursement for children's expenses the sum of $3,621.73 on or before March 11, 2011;

9.  No attorneys fees are awarded to either party;

10.  The parties are to return to court to show compliance with the above-referenced orders on Monday May 16, 2011.

BY THE COURT,

Adelman, J.

FOOTNOTES

FN1. There was a third child of the marriage who had reached the age of majority at the time of the judgment..  FN1. There was a third child of the marriage who had reached the age of majority at the time of the judgment.

FN2. The litigation included an appeal to the Appellate Court which affirmed Judge Epstein's decision (# 210) and the denial of a petition for certification to the Supreme Court (# 211)..  FN2. The litigation included an appeal to the Appellate Court which affirmed Judge Epstein's decision (# 210) and the denial of a petition for certification to the Supreme Court (# 211).

FN3. Mr. Parmenter had been a client of this judge prior to his appointment to the bench.   Full disclosure of that prior relationship had been made on the record both at the start of testimony in October and again on the day the witness was called.   Both parties, on the record, indicated no concern regarding any sort of conflict..  FN3. Mr. Parmenter had been a client of this judge prior to his appointment to the bench.   Full disclosure of that prior relationship had been made on the record both at the start of testimony in October and again on the day the witness was called.   Both parties, on the record, indicated no concern regarding any sort of conflict.

FN4. This amount represents the defendant's 75% share of the total approved expenses for the children.   The gross amounts were $30,694.06 for all expenses claimed.   The $22,120.50 is the plaintiff's claim for 75% of that amount, including a calculation of $1,200 apparently contributed to Danny's legal fees by the defendant..  FN4. This amount represents the defendant's 75% share of the total approved expenses for the children.   The gross amounts were $30,694.06 for all expenses claimed.   The $22,120.50 is the plaintiff's claim for 75% of that amount, including a calculation of $1,200 apparently contributed to Danny's legal fees by the defendant.

Adelman, Gerard I., J.