Carol Werkhoven v. Dale Werkhoven (2012)

MEMORANDUM OF DECISION RE MOTION # 309 POST–JUDGMENT

The marriage of the parties was dissolved on February 17, 2011, by judgment of the court after eight days of trial.   Frazzini, J. At the time of the dissolution, husband was 63 years old and the wife was 52.   The court determined the husband's earning capacity to be $500 gross per week.   Prior to the divorce the husband had worked for the wife in her veterinarian practice in South Windsor as an office manager but was terminated around the time the divorce was filed.   The wife's income was found to be $3,164 gross per week and $2,096 net.   Based on those findings the court ordered the wife to pay the husband $500 per week in alimony for 12 years.   The court divided the marital assets in the following manner:  Wife received her business valued at $482,566;  mortgage note on business property valued at $139,300;  and $127,000 representing one-half of non-business assets.   From that amount she was ordered to pay the husband $30,709, which represented excess cash held by the wife's corporation.   Wife therefore received $718,157 as her share of the marital assets.   Husband received the marital home valued at $306,000;  $127,000 for his share of the nonbusiness assets;  $30,709 from the excess cash held by the business;  and $305,700 for the value of the business property on which the wife's veterinarian practice is located after calculating the value of the property as $445,000 minus the mortgage note to the wife of $139,300.   The total value of the husband's property after the dissolution was $769,409.

By granting the husband the business property, the court placed the husband in the position of being the wife's landlord for which he received a court acknowledged gross income of $729 per week after payment of the mortgage, tax expenses and life insurance payments on behalf of the couple's daughter.   Adding that sum to his $500 weekly earning capacity and receipt of $500 per week in alimony, the court ordered the husband to pay child support to wife in the amount of $125 per week.   Husband was also ordered to pay 40% of unreimbursed medical expenses and work-related child care expenses.

As part of its judgment the court gave the wife, for a period of six years from the date of the decree, an option to purchase the business property for the greater of either $305,200 less accrued interest on the mortgage debt owed to her or the property's fair market value less the amount owed to her.   Before the ink was dry on the judgment, the plaintiff wife exercised her option to purchase the business property consistent with the court's decision.   After further protracted litigation, numerous motions and court orders, the business property was transferred from the husband's limited liability company to the wife's wholly owned company.

Based on these circumstances the husband is seeking an upward modification of the alimony he receives and a reduction in his child support payments to his former wife, whom has primary residence of their child under a joint custody order.   He is also seeking retroactivity of any modification to the date of filing his motion on July 29, 2011.   The defendant husband argues that the sale of the business property and the cessation of rental income diminished his ability to support himself and maintain the present order of child support.   The wife acknowledges there should be a reduction in the child support order due to the court's inclusion of rental income for purpose of establishing child support but insists that no basis exists to increase her alimony payments to the husband based on the conversion of an asset into cash.   It is with this backdrop that the court tums to the present circumstances of the parties.

The court finds that notice has been given in accordance with the Connecticut General Statutes and Practice Book. The court finds it has jurisdiction in this matter.   The court held a hearing regarding the contested issues on December 19, 2011 and January 10, 2012.   Both parties were represented by competent counsel.   Both parties testified.   The parties filed proposed orders and post-trial briefs, the last being submitted on February 10, 2012.   The court has considered carefully all the evidence presented by both parties as well as the factors enumerated in General Statutes § 46b–56, 46b–84, 46b–86, and 46b–215a, including the Child Support and Arrearage Guidelines Regulation, (“Guidelines”) in rendering this decision.

In her financial affidavit filed December 19, 2011, based on actual income from the first three quarters of 2010, the wife, Dr. Rose, shows a gross income of $3,667 per week as her draw as the owner of South Windsor Veterinary Clinic.   Based on this information she has a yearly salary of $190,684.   After appropriate deductions her net weekly income is $2,139.   Having acquired the property on which the business is located from her former husband, Dr. Rose identifies an additional $248 per week in gross income which represents the difference between the rent she pays to her solely owned property management entity, RoseDoc Realty, and the amount she pays to the bank for principal and interest on the mortgage loan.   Minus taxes her net income from that source is $198 per week.   Her total gross income from all sources is $3,915.   Her net weekly income is $2,337.   This figure is substantially similar to the court's previous calculation of her income at the time of the dissolution.   This court fines Dr. Rose's testimony and financial documentation as being accurate and credible as representative of her present income.   Mr. Werkhoven requests that the court take into account alleged additional income to Dr. Rose of $500 per month in rent forgiveness to former wife's sister, whom resides in Dr. Rose's home.   Having considered all the equitable arguments the court declines to increase mother's income based on the evidence provided.   This sum actually represents payment to Dr. Rose's sister, Joanne Zak, for sister's inheritance share of the home from their father's estate.   If sister was not living in the home Dr. Rose would have to repay Ms. Zak approximately $36,500 as indicated on her financial affidavit and thereby increase her weekly liability expenses.   Ms. Zak in turn reduces her living expenses by residing with her sister.   This intra family agreement does not have the net effect of increasing mother's income by $500 per month.   In actuality it serves to only reduce a substantial debt without a cash transfer.

As stated previously, Dr. Rose's share of the court distributed property equaled approximately $718,157 as of February 17, 2011.   That amount included the sum of $437,000, the value of her business.   Presently, Dr. Rose indicates on her financial affidavit that her assets now stand at $848,048.   She represents the value of the property purchased from Mr. Werkhoven as being approximately $575,000.   She has a mortgage on the property with Rockville Bank for $440,000, giving her a net equity of $135,000.   She pays RoseDoc Realty, her limited liability corporation, the sum of $4,125 per month in rent.   Her principal and interest on the mortgage note is $3,047 per month, leaving her a gross weekly income of $248.   All other assets are, for the most part, equal to the schedule of distribution imposed by the court at the time of dissolution.

As to Mr. Werkhoven, his financial situation immediately following the divorce was as follows:

1.  Earning capacity of $500 gross per week.

2. Income from rental property of $729 gross per week.

3. Alimony of $500 per week.

These sums gave him a gross weekly income of $1,709 per week.   After deductions for state and federal taxes and other appropriate deductions the court calculated his child support as $125 per week.   Mr. Werkhoven was employed as a custodian at a local school.   He was actually earning less than the court determined earning capacity.   He was responsible for paying the mortgage on the marital home and all expenses associated with the business property.   Mr. Werkhoven also received a total financial package valued at $769,409 as a division of marital assets.   This sum included the value of the property on which the wife's veterinary business is located, approximately $306,000 after taking into consideration a mortgage note to the wife of $139,300.   He also was awarded the marital home valued at $306,000 after deducting a mortgage of $49,000.   The remainder of funds was in cash and stocks.

Presently, Mr. Werkhoven is not employed.   He lost his custodian's position for reasons not fully made clear to the court.   Having made a diligent but unsuccessful effort to locate new work he made the decision to apply early for social security having reached the threshold age for benefits.   He currently receives a gross payment of $1,304 per month or $303 per week.   After taxes his net income would equal approximately $250 per week.   He continues to receive $500 per week in alimony payments.   After taxes that net income is $420 per week.   He no longer has the benefit of the $729 gross per week rental income from the business property having sold it to the wife consistent with the judgment of decision.   His total net income is therefore approximately $670 per week.   He used some of the funds, about $50,000, from the sale of the property to pay off the mortgage on the marital home.   He also purchased a new vehicle with cash now valued at $28,000.   Mr. Werkhoven represents the value of the marital home as being $300,000, a substantial reduction from the dissolution value of $355,000.   He shows other cash and stock assets as totaling about $290,000.   He shows his personal expenses, which includes his child support payment of $125 per week, as being a somewhat inflated $1,000 per week

Based on this information Mr. Werkhoven is now requesting an increase in his alimony payment of an additional $500 per week and a reduction in his child support payments.   Having taken benefit of the court order to purchase the business property, Dr. Rose is in agreement that continued consideration of the rental property income to determine child support would be inequitable to the former husband.   In other words, she acquiesces to the existence of a substantial change in circumstances.   However, she argues that any child support figure should include not only his present social security and alimony payments, but also his court ordered earning capacity.   The court declines that request at this time.   Mr. Werkhoven is an out-of-work 64–year–old computer technician presently receiving social security benefits.   Although at the present he is allowed to earn up to $14,640 per year without it affecting his monthly social security benefits (see social security regulations), there is no indication that he has any job opportunities.   He has made the appropriate efforts to locate employment in various fields without success.   If he were still able to maintain employment he would not have had to apply for social security prior to obtaining his maximum benefits.   The court will therefore determine the child support payment without inclusion of an additional earning capacity.   Should he in the future find a job that augments his social security and alimony payments, an appropriate request to modify child support may be submitted to the court.

The other issue before the court is whether or not to increase Mr. Werkhoven's alimony payment from his former wife.   Mr. Werkhoven argues that the loss of income from the forced sale of the business property to the former wife and net effect of the difference between previous income as a janitor and social security creates a substantial change of circumstances that presents the need to adjust upward his alimony benefit.   Dr. Rose argues that although the loss of rent to the former husband should trigger a modification of child support it is not the basis for a modification of alimony.   Firstly, she claims the court, Frazzini, J., considered all possible options regarding the sale of the property to either Dr. Rose, consistent with the purchase option, or a third-party sale and the subsequent consequences.   The end result being the former husband has the funds from the sale of the property at his disposal.   Secondly, Dr. Rose claims no further increase is necessary given the present circumstances of Mr. Werkhoven.   She puts forth the proposition that the present weekly order of alimony of $500, social of $303, and an earning capacity of $500 gives Mr. Werkhoven sufficient funds to meet his living expenses.

“It is ․ well established that when a party ․ seeks a postjudgment modification of a dissolution decree ․ he or she must demonstrate that a substantial change in circumstances has arisen subsequent to the entry of [the dissolution decree or] the earlier modification.”  Borkowski v. Borkowski, 228 Conn. 729, 736 (1994).  “Once a trial court determines that there has been a substantial change in the financial circumstances of one of the parties, the same criteria that determines an initial award of alimony ․ are relevant to the question of modification.”  Id., 737, quoting Hardisty v. Hardisty, 183 Conn. 253, 258–59 (1981).   That criteria as set forth in General Statutes § 46b–82 provides that a trial court, in determining whether alimony shall be awarded and the duration and amount of the award, shall consider “the length of the marriage, the causes for the annulment, dissolution of the marriage or legal separation, the age, health, station, occupation, amount and sources of income, vocational skills, employability, estate and needs of each of the parties ․”

When considering a modification of child support the same principles apply as set forth in Connecticut General Statutes § 46b–84, however the court must additionally consider both General Statutes § 46b–215b and the “Guidelines,” as well as the factors set forth in General Statutes § 46b–84;  that child support orders must be based upon the net income of the parties.  Morris v. Morris, 262 Conn. 299, 306 (2003).

After careful consideration of relevant case law and post-trial briefs of the parties the court finds that a substantial change of circumstances does not exist that would warrant an increase in alimony even though the mother agreed to allow a change of the present child support payments.   The court, Frazzini, J., gave the former wife a six-year option to purchase the property for a set amount.   Mr. Werkhoven could have also sold the property to a third party if the wife declined to purchase consistent with her court ordered right of first refusal.   The court also mandated the amount of rent that Dr. Rose would pay during the period of holding the option to buy.   Dr. Rose could have purchased the property at any time after the dissolution of the marriage.   Instead she immediately set about of putting together the finances to acquire the property.   The speed of the transfer may have surprised the former husband however it was not unforeseen that Dr. Rose would not wish to maintain a landlord-tenant relationship with Mr. Werkhoven given the contentious divorce proceedings.

The net effect of any of the above scenarios would have left Mr. Werkhoven with approximately $305,000 from the sale of business property.   The fact that he received those funds from his wife in what he said was a forced sale is of no consequence.   This is simply a court approved conversion of an asset from potential value to actual cash.   Obviously Mr. Werkhoven has presently lost the rental income but he is free to purchase another piece of property with the funds he received and maintain a stream of income similar to what he was receiving from his former wife.   He is also free to use the funds as he sees fit which he has done by paying off his home mortgage and the cash purchase of a new vehicle.   If Mr. Werkhoven had chosen to sell the property to a third party for an amount equal to, or greater than, the option price, it is clear there would not have been a substantial change of circumstances.   That same rule applies here where the court established the parameters by which the former wife could purchase the property.   Furthermore a careful review of Mr. Werkhoven's present income and expenses does not warrant a modification of alimony.   Not taking into consideration the reduced child support order which this court will enter, Mr. Werkhoven's expenses are about $875 per week.   As stated previously this amount is somewhat inflated.   His present net income with alimony and social security is $670 per week.   With some minor modifications of his expenses and use of income from assets Mr. Werkhoven should not need to liquidate any assets for the purpose of paying normal expenses.   The difference does not equate to a substantial change of circumstances at this time.

ORDER

It is hereby ordered that:  The defendant husband's Motion for Modification of alimony is denied.   All parties shall be solely responsible for the payment of their respective attorney fees.

The motion to modify child support is granted.   Having applied the child support guidelines the court finds that based upon the net income of the parties, the presumptive basic child support is $376 per week;  and that the father's share is $34 per week.   Mother shall be responsible for 77% of unreimbursed medical and qualified child care expenses.   Father shall be responsible for 23%.   The new order of child support is effective July 29, 2011 since the motion was served on the former wife on July 21, 2011.   If Mr. Werkhoven has paid the previous child support order as has been represented to the court, Dr. Rose shall reimburse him the sum of $3,640 which represents the difference between the previous order of $125 and the new order of $34 multiplied by 40 weeks.   Payment is to be made within 30 days of this decision.

All other previous dissolution judgment orders remain in full force and effect.

BY THE COURT

SIMON, J.

JUDGE OF THE SUPERIOR COURT

Simon, Jorge A., J.