Reynolds v. Reynolds

MATRICCIANI, J. Appellee, Valerie Lambíase Reynolds (“Wife”), sued appellant, John Beauchamp Reynolds, III (“Husband”), for absolute divorce on September 16, 2010, in the Circuit Court for Montgomery County, Maryland. Husband counter-sued for the same on November 12, 2010. Wife voluntarily dismissed her original suit on June 8, 2011, and then brought a new complaint for divorce on November 3, 2011, which sought alimony, child support, monetary award, and other relief. The trial court entered judgment on June 6, 2012, awarding Husband absolute divorce from Wife and disposing of all related claims.

Both parties filed motions to alter or amend, which the trial court heard on August 30, 2012. In a memo ²¹² randum opinion entered September 19, 2013, the trial court granted each motion in part and denied each motion in part. Husband and Wife then filed timely appeals and cross-appeals, respectively, from both the original and amended judgments. Questions Presented Husband presents six questions for our review, which we have re-ordered to comport with our discussion: I. Did the Circuit Court err in finding what Ms. Reynoldses] actual income was?

II

Did the Circuit Court err in finding that Mr. Reynoldses] payment of expenses for the partieses] adult children was not a reasonable expense?

III

Did the Circuit Court err in finding what Ms. Reynoldses] reasonable expenses are? TV. Did the Circuit Court err in its refusal to impute any employment income to Ms. Reynolds? V. Did the Circuit Court abuse its discretion in granting Ms. Reynoldses] Motion to Alter or Amend with respect to amending its findings to state that no portion of Warren Place[ 1 ] was marital?

VI

Did the Circuit Court abuse its discretion in granting Ms. Reynoldses] Motion to Alter or Amend with respect to rounding up Ms. Reynoldses] expenses to account for her purported state tax liability? In her cross-appeal, Wife presents four questions for our review, which we also quote, but re-order: [VII] . Whether the [Circuit] Court’s Consideration of Mr. Reynolds’[s] Post-Hearing Expenses, While Refusing to Consider Similar Expenses Paid by Ms. Reynolds, was an Abuse of the Court’s Discretion. [VIII] . Whether the [Circuit] Court’s Failure to Include As Marital Property Sums that Mr. Reynolds is Entitled to Receive as Refunds for Overpayment of Income Taxes Was Error. ²¹³ [IX] .

Whether the [Circuit] Court Abused its Discretion in Failing to Admit Evidence as to the U.S. Treasury Rate of Return and Award a Reasonable Rate of Return on Ms. Reynolds’[s] Pre-Marital Individual Retirement Account. [X] . Whether the [Circuit] Court’s Failure to Accept Ms. Reynolds’[s] Evidence as to Certain Claimed Expenses in the Absence of Any Contrary Evidence Was Clearly Erroneous. For the reasons that follow, we answer no to all questions presented both in Husband’s appeal and in Wife’s cross-appeal, and we affirm the judgment of the Circuit Court for Montgomery County. Factual and Procedural History Husband and Wife graduated from Yale Law School in the early 1980’s and took jobs with prestigious law firms in the Washington, D.C., area. 2 The parties were married in 1989, and the next year Wife became pregnant with twin boys and stopped working due to her medical complications.

The twins’ health problems continued after their premature birth, 3 so the parties decided that Wife would not return to practice and would instead raise their two children, who were joined by their younger brother in 1994. When Wife stopped working, she had been making approximately $120,000 per year. Husband continued to work in private practice and by 2010 was earning over $800,000 per year. 4 Not surprisingly, this ²¹⁴ afforded the parties an affluent lifestyle, which included a residence worth approximately $2 million at the time of trial, 5 household help, dinners out, private school for the children, two international vacations each year, 6 new model foreign cars, charitable donations to their alma maters, and substantial retirement savings. The price of Husband’s salary was as much as 2,700 hours of billable work per year, 7 and it apparently put a strain on the parties’ relationship that slowly drove them to minor violence against each other and, in time, completely apart.

By 2009, the parties were sleeping in separate parts of the house, and after attempts at counseling failed, the parties abruptly separated on July 29, 2010. 8 During their separation, Husband rented a four-bedroom home at the cost of $5,000 per month. Meanwhile, Wife purchased a $1.52 million home, known as ‘Warren Place,” jointly with her father, who also gave her over $100,000 between June of 2010 and April of 2011. In addition to these gifts, Wife received miscellaneous interest and dividend income, including monthly $8,000 checks from a minority interest in her family’s commercial real estate company. 9 Wife sued for absolute divorce on September 16, 2010, and Husband counter-sued for the same on November 12, 2010. The parties reached a custody agreement in April of 2011, giving them joint legal and shared residential custody of their ²¹⁵ youngest son, who was the only minor child at time (and who has since been emancipated by majority).

Wife voluntarily dismissed her original suit on June 8, 2011, but she then brought a new complaint on November 3, 2011, demanding alimony, child support, monetary award, and other relief. The court held five days of trial in March of 2012. There, Wife testified that she has rheumatic heart disease and will likely need valve replacement surgery as well as two leg surgeries, that she has difficulty sleeping, and that she requires psychiatric therapy. Wife also testified that she continues to employ a housekeeper, and that she spends an average of $908 per month on vacations and contributes $500 per month to a retirement savings account.

Wife admitted that she had not looked for work during the parties’ separation because of these divorce proceedings and due to her continued responsibility for the parties’ youngest son. Husband and Wife stipulated that the Warren Place property was worth $1.52 million, and the uncontested evidence showed that the net equity in the home was $478,559, the remaining amount financed by a mortgage with payments of $5,470 per month. Wife claimed that she had applied $190,478.61 of non-marital funds towards the $480,000 down-payment that she made on the Warren Place property. But the trial court found that Wife was unable to trace that $190,478.61 to the savings bonds that she claimed had been titled to her and her children, and liquidated to use for this purchase.

The court therefore found that the non-marital portion of Wife’s down-payment was 55.7%, with the remaining 44.3% owing to marital funds. The court then used that figure to determine the marital portion of Wife’s one-half interest in the property’s net equity, arriving at an ultimate marital property value of $106,000.82. Turning to alimony, the trial court noted that the only evidence it had of Wife’s earning capacity was her salary from over two decades ago, and that Husband had failed to introduce any evidence supporting his claim that Wife could earn between $30,000 and $40,000 per year. The court took the ²¹⁶ amount of Wife’s net unearned income from her 2011 federal tax return, finding that it was $69,758 per year, or $5,813.16 per month. 10 The trial court then examined Wife’s expenses and found that a portion of her housekeeping, vacation, mortgage, and retirement expenses were reasonable.

The trial court further found that although Wife failed to introduce evidence of her physical and mental health needs, Husband had stated that $200 per month for therapy and $193 per month in extraordinary medical expenses were “realistic” figures, which the court took as his admission that those amounts were reasonable. 11 The court concluded that Wife’s total reasonable expenses were $15,812 per month, leaving her with a financial deficit of $9,998.84 per month. Turning to Husband’s finances, the trial court conservatively estimated his monthly net income to be $46,421.83, a figure that neither party contests. The court found that Husband’s reasonably necessary expenses for himself and for the parties’ minor child totaled $14,935.72, leaving him with a surplus income of $31,486.11 per month. The circuit court convened a supplemental day of trial on May 7, 2012, in order to deal with three discrete issues, but it ruled that evidence was otherwise closed as of the last day of regular trial on March 30, 2012.

Despite this ruling, the court learned that Husband had received $70,000 of previously undistributed income from his former firm during the present proceedings. 12 But the court found that those funds had been spent on reasonable expenses, to wit, their minor child’s tuition and Husband’s attorneys, and therefore excluded the income from its marital property tabulation. ²¹⁷ With respect to Wife’s claim for alimony, the trial court based its award on Maryland Code (1984, 2012 RepLVol.), § ll-106(e) of the Family Law Article (“FL”), which authorizes an award of indefinite alimony, if the court finds that: (1) due to age, illness, infirmity, or disability, the party seeking alimony cannot reasonably be expected to make substantial progress toward becoming self-supporting; or (2) even after the party seeking alimony will have made as much progress toward becoming self-supporting as can reasonably be expected, the respective standards of living of the parties will be unconscionably disparate. (Emphasis added.) Because Husband’s income of $850,365 per year was so much greater than Wife’s income of $69,758 per year, the court found a gross disparity between them. Noting that this disparity alone is not determinative, the court focused upon the parties’ respective standards of living and decided that it “should attempt to alleviate the disparity with alimony.” The trial judge took note of Husband’s efforts to impute earned income to Wife, but concluded that the amount proffered ($30,000 to $40,000) “would do little to close the gap” or “to alleviate the unconscionably disparate lifestyles” of the parties. Accordingly, after considering the parties’ respective finances and needs, the court awarded Wife indefinite alimony of $13,400 per month. 13 Finally, the court entered a monetary award in favor of Wife for $14,970.09. 14 Both parties filed motions to alter or amend, each of which the court granted in part and denied in part on September 19, 2013.

First, the trial court increased the alimony award to ²¹⁸ $14,194 to account for Wife’s state tax liability, as shown in her 2011 federal tax return. Second, the court found that the entire down-payment for Warren Place was directly traceable to non-marital assets titled solely to Wife, and to distributions from the children’s trust accounts, which were also non-marital property. The court thus concluded that Warren Place was wholly non-marital and amended its monetary award, accordingly. 15 Third, the court refused to consider Wife’s evidence of additional funds that Husband had overpaid in taxes, as well as her evidence of the pre-marital rate of return on her IRA. Husband and Wife filed, respectively, appeals and cross-appeals from both the original and amended judgments, bringing the case before us.

Discussion Standard of Review Before examining the detailed contentions before us, we note that Husband’s arguments generally fail to distinguish between the law governing alimony and child support awards, which are authorized, respectively, by Titles 11 and 12 of the Family Law Article. 16 There are certainly similarities between the two awards, but they have distinct purposes and, as such, the same facts may lead to different results for each. We shall, nevertheless, do our best to account for these differences and similarities in the discussion that follows, a task made easier because a similar standard of review applies to both awards, as well as to the monetary award based on the allocation of marital property: we review the trial court’s ²¹⁹ factual findings for clear error, while each ultimate award is reviewed for abused of discretion. See Richards v. Richards, 166 Md.App. 263, 271-72 , 888 A.2d 364 (2005) (standard of review for monetary awards); Malin v. Mininberg, 153 Md.App. 358, 414-15 , 837 A.2d 178 (2003) (standard of review for alimony awards); Reuter v. Reuter, 102 Md.App. 212, 221 , 649 A.2d 24 (1994) (standard of review for child support awards). As to the court’s ultimate discretion, we have explained: “Abuse of discretion” is one of those very general, amorphous terms that appellate courts use and apply with great frequency but which they have defined in many different ways.

It has been said to occur “where no reasonable person would take the view adopted by the [trial] court,” In re Marriage of Morse, 240 Ill.App.3d 296 , 180 Ill.Dec. 563, 571 , 607 N.E.2d 632, 640 (1993), or when the court acts “without reference to any guiding rules or principles.” Long John Silver’s, Inc. v. Martinez, 850 S.W.2d 773, 775 (Tex.App.1993). It has also been said to exist when the ruling under consideration “appears to have been made on untenable grounds,” Halloran v. Town of North Canaan, 32 Conn.App. 611 , 630 A.2d 145, 147 (1993), when the ruling is “clearly against the logic and effect of facts and inferences before the court,” Shockley v. Williamson, 594 N.E.2d 814, 815 (Ind.App.1992), when the ruling is “clearly untenable, unfairly depriving a litigant of a substantial right and denying a just result,” Novak v. Novak, 2 Neb.App. 21 , 508 N.W.2d 283, 288 (1993), when the ruling is “violative of fact and logic,” Young v. Jangula, 176 Mich.App. 478 , 440 N.W.2d 642, 643 (1989), or when it constitutes an “untenable judicial act that defies reason and works an injustice.” Moore v. Bd. of Educ. of Fulton School, 836 S.W.2d 943, 948 (Mo.1992). North v. North, 102 Md.App. 1, 13-14 , 648 A.2d 1025 (1994). Thus, our primary considerations are whether the trial court’s factual findings were clearly erroneous, and whether its ultimate awards demonstrate an abuse of its equitable ²²⁰ discretion.

With these caveats and standards in mind, we turn to the parties’ arguments. I. Husband first argues that the trial court erred when it declined to impute any income to Wife. Technically, “imputed income” is a child support concept predicated on a finding of voluntary impoverishment, which asks the court to consider several facts about a party’s ability to work, including: (1) his or her current physical condition; (2) his or her respective level of education; (3) the timing of any change in employment or other financial circumstances relative to the divorce proceedings; (4) the relationship between the parties prior to the initiation of divorce proceedings; (5) his or her efforts to find and retain employment; (6) his or her efforts to secure retraining if that is needed; (7) whether he or she has ever withheld support; (8) his or her past work history; (9) the area in which the parties live and the status of the job market there; and (10) any other considerations presented by either party. Lorincz v. Lorincz, 183 Md.App. 312, 331 , 961 A.2d 611 (2008) (citations omitted).

Although alimony is a separate issue from child support, it similarly requires the court to consider “the ability of the party seeking alimony to be wholly or partly self-supporting” and “the time necessary for the party seeking alimony to gain sufficient education or training to enable that party to find suitable employment,” FL § ll-106(b)(l), (b)(2). Most, if not all, of the voluntary impoverishment factors will be relevant to alimony under FL § 11—106(b)(1) and (b)(2), and so a finding of voluntary impoverishment would ordinarily entail a finding, for purposes of alimony, that the impoverished party could support him or herself, but chooses not to. ²²¹ While alimony and child support awards are ultimately within the trial court’s discretion, Husband attacks their factual premises. Specifically, he argues that the trial court should have found that Wife can earn between $30,000 and $40,000 annually. Husband stresses Wife’s education and past earnings, but that evidence was more than two decades old; there was no evidence of what her present earnings would be, as a 56-year-old who has been unemployed for the latter half of her adult life and evidently has significant health issues.

The real question here is who had the burden of proof concerning Wife’s earning capacity, and did that party carry his or her burden? Normally, the burden rests with the party seeking alimony, Turner v. Turner, 147 Md.App. 350, 389 , 809 A.2d 18 (2002), thus making it Wife’s burden to establish her needs and inability to meet them. The trial court here was satisfied that Wife had met this burden, because the evidence demonstrated that she lacked the resources to pay her ongoing expenses, without additional income. As to her present ability to earn a reasonable living, the evidence showed that she had not practiced law for more than two decades and now suffered from health problems and advanced age, factors which would limit her employment prospects.

Because Husband did not then come forward with evidence to prove that she was still employable—as an attorney or in any other capacity—the trial court was left with merely his argument that Wife could earn at least $30,000 to $40,000 per year, presumably because she once earned three or four times as much. In our view, the trial court was not required to draw Husband’s proposed inference here because it would have been of little value to its indefinite alimony considerations. Even with $40,000 annually in earned income, it was apparent that the unconscionable disparity in the parties’ standards of living in the future could not be remedied. See Tracey v. Tracey, 328 Md. 380, 392-93 , 614 A.2d 590 (1992) (“[S]elf-sufficiency per se does not bar an award of indefinite alimony if there nonetheless exists an unconscionable disparity in the ²²² parties’ standards of living after divorce.”).

In the trial court’s conservative estimation, accounting for all of Husband’s reasonable expenses still leaves him with over $30,000 per month in disposable income, whereas Wife’s income was $5,813.16 and left her with a monthly deficit of nearly $10,000. And this was not a case where Wife was likely to progress in her career to a point where she would be self-supporting on a scale sufficient to meet her needs or bridge that income and lifestyle gap. 17 Moreover, the record supported Wife’s claim because there had been no expectation pre-divorce that she return to work, even after the children no longer required her full attention or her household responsibilities lessened. The final determination of alimony was a matter of the trial court’s discretion. This included whether Wife should be “required” to work, so that if she chose not to, what she could earn would count against her alimony award.

Stated differently, the trial court had the equitable discretion to determine how much progress toward becoming self-supporting could reasonably be expected of her. See FL § ll-106(c)(2). In light of what Wife did establish on the record—over twenty years of unemployment, continuing medical difficulties, and a luxurious standard of living for many years preceding this divorce—we cannot say that the trial court clearly erred or ²²³ abused its discretion by declining to impute earned income to Wife in its alimony award determination.

II

Second, Husband argues that the trial court erred when it calculated Wife’s actual monthly income. He advances two specific arguments on this point, both of which are factual questions that we review for clear error. Husband first contends that the court’s income calculation does not reflect payments that Wife received from part ownership of her family’s business, which were approximately $8,000 per month during the relevant evidentiary period. In defense of the trial court’s finding, Wife points to her 2011 federal tax return, which was prepared by a certified public accountant and admitted into evidence without objection.

The return shows that although Ms. Reynolds received approximately $95,000 from her family business that year, only $63,042 represented income, with the rest being drawn down from her capital account (which therefore was not income but rather depletion of a fixed asset). Rather than rebut the evidence of Wife’s income with evidence that the claimed deductions are materially false, counsel for Husband simply beats his drum and maintains that there was “absolutely no competent evidence” supporting the trial court’s findings. Husband has failed to persuade us that a certified public accountant’s estimation of business income—as opposed to withdrawals and distributions from capital stock—is insufficient evidence of a party’s income. 18 We therefore have no reason to reverse the trial court’s finding on this point. Second, Husband argues that when the trial court calculated Wife’s monthly income, it should have included the gifts that she received from her father over the course of these proceedings.

In its discretion, a court may—based on ²²⁴ the circumstances of the case—consider gifts as actual income when awarding child support. FL § 12—201 (b)(4)(iii); Petrini v. Petrini, 336 Md. 453, 462 , 648 A.2d 1016 (1994). Similarly, a court considering alimony must factor in “all income and assets,” FL § 11—106(b)(ll)(i), which can include gifts, Walter v. Walter, 181 Md.App. 273, 287 , 956 A.2d 255 (2008). In Petrini v. Petrini, 336 Md. at 467 , 648 A.2d 1016 , the Court of Appeals upheld a trial court’s child support award that counted gifts made on a “regular basis” towards the grantee’s income.

Importantly, the Petrini Court noted that the gifts in that case had no definite end, and if the grantor became “unable or unwilling to continue” them, then the grantee could petition the court for a modification of child support based on a “material change of circumstances” under FL § 12-104. Petrini, 336 Md. at 467 , 648 A.2d 1016 . Unlike the ongoing series of gifts in Petrini , the payments from Wife’s father in the present case had ceased abruptly, nearly a year before trial. From this, the court reasonably inferred that Wife’s father intended to assist her only while her finances were strained due to the divorce proceedings.

While this case presents the opposite of Petrini in that Wife stopped receiving payments from her father, the principle announced in that case still applies: the trial court considered that Wife’s father was “unable or unwilling to continue” the gifts to his daughter, and so it did not find that they represented a source of future income for her. Again, Husband does not rebut this reasonable inference with positive evidence to the contrary; he simply insists that two years of gifts proves a father’s indefinite intent to support his daughter. This argument does not persuade us. Wife’s father could, of course, make future gifts demonstrating that he is “willing and able” to continue supporting his daughter on a regular basis.

And in that case, Petrini, 336 Md. at 467 , 648 A.2d 1016 , tells us that Husband would have grounds to seek modification of alimony (or child support) because of a material change in Wife’s circumstances. See FL §§ 11-107 & 12-104. But, at present, Husband has given us no reason to hold that the trial court clearly erred in calculating Wife’s income. ²²⁵ III. Husband next argues that the trial court erred in its alimony award by finding that his payment of expenses for the parties’ adult children was not reasonable.

As Wife rightly points out, there is no general common law or statutory duty to support an adult child who is not “destitute” as defined in FL § 13-101(b). Corby v. McCarthy, 154 Md.App. 446, 482-83 , 840 A.2d 188 (2003). Husband nevertheless relies on Boemio v. Boemio, 414 Md. 118, 127-28 , 994 A.2d 911 (2010), in which the trial court had deducted tuition payments as reasonable expenses. But the issue of tuition payments was not