Quinn v. Quinn

Murphy, C.J., delivered the opinion of the Court. By decree of the Circuit Court for Montgomery County dated June 15, 1970, appellee Regina Quinn (the wife) was awarded a divorce a mensa et thoro from appellant John Quinn (the husband) on the ground of constructive desertion. The husband has appealed from that part of the decree (a) awarding alimony to the wife of $4,000 monthly, and (b) awarding a $15,000 counsel fee to the wife’s attorney. He claims that both awards were grossly excessive.

The parties, each now fifty-six years of age, were married in 1939. A son, the only child of the marriage, is now an adult. The parties separated in 1967. The wife filed her bill of complaint on July 7, 1967; the husband filed a cross-bill for divorce and a supplemental bill alleging desertion and voluntary separation.

The case ⁶⁴² was tried over a five-day period in September of 1969. Extensive testimony and documentary evidence was adduced by both parties. The Chancellor held the case sub curia until June 15, 1970 when he filed a written opinion in support of his decree. The husband entered an appeal from the court’s decree on July 14, 1970.

On the same day, he petitioned the Chancellor to modify the amount of the alimony and counsel fee awards. He claimed that after the trial, in January of 1970, he suffered a severe heart attack which left him permanently and totally disabled. A certificate to that effect from the husband’s physician was filed with the petition. The Chancellor refused to consider the petition on the ground that he was without jurisdiction because of the pendency of the appeal.

In so concluding, the Chancellor was in error since the pendency of the appeal does not divest the Chancellor of jurisdiction to modify the alimony award where there is a change in financial circumstances warranting that action. See Lewis v. Lewis, 219 Md. 313 ; Hornstein v. Hornstein, 195 Md. 627 ; Dougherty v. Dougherty, 187 Md. 21 . In any event, since neither party has urged that we remand the case to the Chancellor for reconsideration of the petition for modification, we shall consider the court’s decree in light of the evidence adduced at the trial, and give no consideration to the allegation that the husband is now totally and permanently disabled. Cf.

Garner v. Garner, 257 Md. 723 . The Alimony Award In contending that the alimony award of $4,000 per month was grossly excessive, the husband claims (1) that the Chancellor distorted the amount of his income by adding thereto the retained earnings of the corporation of which he was the sole stockholder; (2) that the award far exceeded the wife’s needs and thus permitted her to maintain a standard of living to which she had not been previously accustomed; (3) that the husband’s ability to work has been impaired, while the wife suffers from no such disability, and (4) that the Chancellor failed to ⁶⁴³ consider the fact that the wife’s conduct materially contributed to the fault which destroyed the marriage. Maryland Code, Article 16, Section 5, directs that the court not award alimony “unless it shall appear from the evidence that the wife’s income is insufficient to care for her needs.” It is thus altogether plain that alimony is not to be awarded as a punitive measure. Bowis v. Bowis, 259 Md. 41 .

Rather, it is an allowance to the wife in recognition of the husband’s common law liability to support her; it is an allowance of money payable at stated periods by the husband to the wife for her support during their joint lives so long as they live apart. Fairbank v. Fairbank, 169 Md. 212 . In other words, the sole object of the alimony award is to provide an allowance to the wife for food, clothing, habitation, and other necessities. Dougherty v. Dougherty, supra; Hood v. Hood, 138 Md. 355 .

It was held in Waters v. Waters, 191 Md. 436 , that in determining an award of alimony and whether, under the statute, the wife’s income “is insufficient to care for her needs,” the court should consider the husband’s wealth and earning capacity, the assets and income of the wife, the station in life of the parties, their age, physical condition, and ability to work, the length of time the parties lived together, the circumstances leading up to the divorce, and the fault which destroyed the home. To the same effect, see Burton v. Burton, 253 Md. 233 ; Newmeyer v. Newmeyer, 216 Md. 431 . The husband’s overall financial ability to support (and not merely his current income), and the wife’s need for support are controlling factors. Willoughby v. Willoughby, 256 Md. 590 ; Pet v. Pet, 238 Md. 492 ; Gosnell v. Gosnell, 208 Md. 179 ; Lopez v. Lopez, 206 Md. 509 .

In view of the variable factors to be considered in determining the alimony award, no fixed rule exists whereby the amount of the award is based on a percentage of the husband’s wealth or income. Bowis v. Bowis, supra. Because each factual situation in determining an award of alimony is unique, making inappropriate the application of any mechanical or rigid formula, the Chancellor is necessarily entrusted with wide discretion ⁶⁴⁴ which should not be disturbed on appeal unless it was arbitrarily used or his judgment clearly wrong. Blumenthal v. Blumenthal, 258 Md. 534 ; Willoughby v. Willoughby, supra.

The voluminous record in this case discloses that the husband is in complete control of John A. Quinn, Inc., a mechanical contracting corporation of ;which he owns all the stock. His assets were put at $2,489,565 by his wife’s accountant, while his own accountant put them at approximately 1.4 million. Much of the difference relates to the disputed value of the stock of the husband’s corporation. The wife’s accountant valued the corporation at $1,606,770; the husband’s accountant valued it at $537,-601.

As President of the corporation, the husband receives, and has received for the past three years, an annual salary of $65'000. A joint federal income tax return filed by the parties for 1968 showed, in addition to the husband’s corporate salary, dividends and interest income of $4,900 (none of it paid by the husband’s corporation), net rental income on jointly owned real property amounting to $22,909, and a taxable capital gain of $3,047. The adjusted gross income of the parties amounted to $55,497; it reflected a loss of $40,384 from a personal venture. After allowance for deductions and personal exemptions, a taxable income of $27,369 was computed upon which a federal tax of $7,388 was paid.

The husband’s corporation reported an after-tax net profit for each of the five years between that ending September 30, 1964 through that ending September 30, 1968 of, respectively, $70,090, $77,837, $71,318, $34,595, and $77,524. The corporation paid no dividends in 1964, 1966, 1967, or 1968. 1 Thomas O’Neil, the wife’s accountant, testified that the corporation’s reported net income for the years 1966, 1967, and 1968 should have been adjusted by adding ⁶⁴⁵ thereto certain of its joint venture (paper) losses, 2 and when this was done, the corporation had an average adjusted annual net income for the five-year period of $101,926 and an average annual net income of $113,656. 3 In calculating the husband’s “cash flow” for 1968, viz., the sources of all money “available” to him for his personal use, O’Neil included his estimation of the corporation’s average annual net income of $113,656, as well as the husband’s corporate salary of $65,000 and other reported income. O’Neil concluded that the husband’s total cash flow in 1968 was $252,817; reduced by the husband’s annual expenses, his net cash flow, according to O’Neil, was $144,493. 4 The husband’s accountant estimated the husband’s net annual cash flow in 1968 at $47,747. His computation did not include any part of the retained earnings of the corporation since none were actually paid to or received by the husband.

The wife’s assets consisted of stock and cash approximating $3,000 and her share of jointly owned real property, the total value of which, depending upon the method used to value the properties, was estimated at between $619,000 and $846,930, with encumbrances thereon between $214,000 and $241,130. In a schedule prepared by the wife prior to trial in preparation for a hearing on alimony pendente lite, she estimated her living expenses at $2,424.99 per month. This computation included estimated income taxes payable by the wife of $560 monthly. A compromise agreement was concluded between the parties calling for alimony pendente lite payments of $1,250 per month.

This amount was paid for twenty-one ⁶⁴⁶ months prior to trial. There was evidence that during this period the wife lived generally within this allowance, spending a total of $26,078. At the trial, the wife submitted a revised schedule of her living expenses. It claimed a need for $6,755 monthly or $81,060 annually.

This computation included estimated income taxes of $3,899 monthly, or $46,796 annually to be paid by her on that amount of income. The evidence showed that that part of the jointly owned real property held for rental purposes produced net rentals of $22,909 in 1968 but that because of the high curtailment on the mortgages, the properties would currently yield a net of only $2,500 annually. Although the husband had offered to sell all these properties and divide the proceeds with the wife, she refused to accept his offer. Among the jointly owned real estate was the marital home valued at $35,000 and a summer home valued at $24,000.

In addition to his corporate assets and real estate holdings, the husband’s other assets included $40,000 cash in the bank, substantial investments in stock and joint ventures, a pending small inheritance, and a $90,000 interest in a profit sharing trust of his corporation which would vest in him upon his retirement. The Chancellor did not, in his opinion, outline the method by which he arrived at the $4,000 monthly alimony award. He made it clear, however, that he was considering the husband’s “overall financial holdings” in determining his ability to pay alimony rather than merely his income. The Chancellor noted that in Schuman v. Schuman, 252 Md. 13 , an award of alimony amounting to slightly more than one-third of the husband’s income was approved, but stated “in this case a different set of circumstances exists” because the husband’s income “does not accurately reflect his financial ability.” He noted that the difference between the parties’ accountants concerning the husband’s net worth was “largely due to the fact that the husband has not included the assets of his business * * * to the extent of the wife’s estimate.” He noted ⁶⁴⁷ that the husband’s corporation “has done well and has earned substantial profits”; that the corporation’s net worth had increased at a rate of almost $175,000 a year; that the husband “is the sole owner of the corporate stock and makes all decisions in regard to disbursement of its funds, both in respect to his salary and dividends”; and that the husband “has at his disposal and makes use of the credit and funds of the corporation to defray many of his personal expenses.” The Chancellor observed that the wife had virtually no income and that while her interest in the jointly held real estate was substantial, the husband had not accounted to her for any of the income produced by the properties.

The Chancellor concluded that it would be “grossly unfair to deny the wife the advantages of the financial security to which she is entitled under the circumstances.” The husband contends that the Chancellor based his alimony award upon the combined amount of his personal income and that of the corporation. He argues that valid business reasons prevented him from receiving a salary greater than $65,000 per year or from declaring dividends from the corporation’s earnings; that the corporation is required to retain a high level of liquid assets in order to meet bonding company requirements; that any salary received by him in excess of $65,000 per year would be considered as a dividend by the Internal Reverme Service and, hence, not a deductible expense to the corporation. The husband further argues that by attributing the corporation’s retained earnings to him, the Chancellor improperly “pierced the corporate veil”; that while he owned all the corporation’s stock, and controlled its activities, it was not shown that the corporate form was adopted or used to perpetrate a fraud upon the wife, or that the corporation’s identity was ever ignored in carrying out its affairs. He claims that the Chancellor in effect awarded a portion of the earnings of the corporation to the wife and by so doing, gave the wife assets belonging solely to him, a practice specifically prohibited by the