Walter v. Walter

DEBORAH S. EYLER, J. Robert J. Walter (“Robert”) challenges a ruling by the Circuit Court for Frederick County granting indefinite alimony, incident to a limited divorce, to Susan L. Walter (“Susan”), his wife, and awarding Susan attorneys’ fees. He poses four questions 1 for review, which we have consolidated and rephrased as follows: ²⁷⁷ I. Did the trial court err or abuse its discretion by granting indefinite alimony to Susan in a proceeding for limited divorce?

II

Did the trial court err or abuse its discretion by awarding attorneys’ fees to Susan? For the following reasons, we shall vacate the judgment of the circuit court on indefinite alimony and remand the case to that court for further proceedings not inconsistent with this opinion; and we shall vacate the attorneys’ fee award. FACTS AND PROCEEDINGS Robert and Susan were married on November 24, 1979. Their marriage produced two children: Alison, born in 1982, and Sophia, born in 1987.

Before marrying, the parties each had attended college and earned a bachelor of science degree in marketing. For the first eight years of their marriage, the parties moved from state to state, depending upon the job market. Robert had a number of jobs that he lost. Although Susan was working as well, Robert was earning more money than she was, so the couple’s moves usually were determined by Robert’s job opportunities.

Robert’s jobs first were in teaching and then were in chemical sales. In 1987, Robert’s job brought the family to Frederick, Maryland, where they settled and stayed. During some periods when the children were young, Susan remained at home; for the most part, however, she worked outside the home in marketing and furniture sales. She also worked in the insurance industry for a time.

In 1994, Robert formed his own company, AntiEntropics, Inc. Since the company’s inception, it has been run from the ²⁷⁸ family home. Robert spends most of his work time out of the house at clients’ work sites. 2 During the marriage, the parties lived a comfortable lifestyle. They purchased a house in a nice suburban neighborhood. They accumulated some stocks.

Each has an IRA, although the record is scanty on that point. The parties do not have any savings. It was undisputed that, in 1996, Susan accused Robert of abusing the children (then ages 14 and 9), and made a report to that effect to the local child welfare authorities. The authorities conducted an investigation and determined that there had been no abuse.

The abuse allegation against Robert was closed as “ruled out.” Susan acknowledged in her testimony that, from then on, there was a rift between the parties “that’s really never been cured.” In 2005, Robert admitted to Susan that he had had a number of extramarital affairs, beginning in 2001. He claimed to have started to engage in that behavior after Susan told him repeatedly that she did not want to stay married to him. Susan acknowledged in her testimony that the parties had discussed getting divorced on a number of occasions before they separated. On June 18, 2005, the parties separated, by agreement.

Susan moved to Logodi, Indiana, where she has extended family. She started working as a sales associate at Englert’s, a furniture store. She moved into a two-bedroom house, with a yard. Robert remained in the family home.

By then, Alison was 23 and no longer living at home. Sophia was 18. She chose to continue living in the family home with Robert. She moved out of the family home in September 2006.

On June 20, 2005, two days after moving, Susan filed a complaint for limited divorce on the ground of voluntary separation. She requested alimony pendente lite, indefinite ²⁷⁹ alimony, and attorneys’ fees. Robert filed a timely answer. The case proceeded through discovery.

Since the separation, Robert has paid the mortgage, taxes, and insurance on the family home and all of the expenses related to the home’s upkeep. That total cost is $2,534.97 per month. Prom June 2005 through March 2006, Robert sent Susan $500 per month. The parties sought to achieve an amicable divorce, by negotiation through counsel.

In March 2006, the parties reached an impasse in their efforts to achieve a settlement. Robert stopped sending money to Susan at that time. On November 9, 2006, the case went to a merits hearing on the issues of limited divorce, alimony, and attorneys’ fees. Both parties testified.

Only one witness was called to corroborate the parties’ voluntary separation. The parties each introduced into evidence a Rule 9-203(a) financial statement. In addition, Susan moved into evidence checking account statements for AntiEntropics, from January 1, 2005, through September 30, 2006; a typed list of deposits made into that account during the same time period; checking account statements for Robert from June 22, 2005, through September 20, 2006; a typed list of the deposits made into that account during that same time period; Susan’s pay stub from Englert’s for the week ending October 29, 2006; joint checking account statements for Robert and Susan from December 9, 2004, through January 10, 2006; and a typed list of the deposits made into that account during that same time period. After the evidence was closed and the lawyers had presented argument, the trial judge ruled from the bench.

She granted Susan a limited divorce, on the ground of voluntary separation; awarded Susan indefinite alimony of $1,500 per month, retroactive to April 6, 2006; established an alimony arrearage of $10,500, entered as a judgment against Robert; and awarded Susan $6,425.92 in attorneys’ fees. On December 2, 2006, the court entered a judgment memorializing its ruling. Robert noted a timely appeal. ²⁸⁰ We shall include additional facts as relevant to our discussion of the issues. DISCUSSION I. Alimony Robert challenges the trial court’s award of indefinite alimony to Susan on three bases: a) the court “erred as a matter of law” and made clearly erroneous factual findings when considering his financial resources and needs; b) the court erred and abused its discretion by awarding indefinite alimony incident to a limited divorce; and c) the court’s “unconscionable disparity” finding was clearly erroneous.

Because we agree with Robert’s first argument, that the court made certain clearly erroneous factual findings, we shall vacate the alimony award and remand the matter for further proceedings. We shall address Robert’s second argument for guidance on remand. The nature of the error we have found is such that we need not address the third basis for Robert’s argument. (a) Assertions of Clear Error Pursuant to Md.Code (1957, 2006 RepLVol., 2007 Supp.), section 11 — 106(b) of the Family Law Article (“FL”), in deciding whether to make an award of alimony and, if so, in what amount, a circuit court must consider “all factors necessary for a fair and equitable award,” including: (1) the ability of the party seeking alimony to be wholly or partly self-supporting; (2) the time necessary for the party seeking alimony to gain sufficient education or training to enable that party to find suitable employment; (3) the standard of living that the parties established during their marriage; (4) the duration of the marriage; ²⁸¹ (5) the contributions, monetary and non-monetary, of each party to the wellbeing of the family; (6) the circumstances that contributed to the estrangement of the parties; (7) the age of each party; (8) the physical and mental condition of each party; (9) the ability of the party from whom alimony is sought to meet that party’s needs while meeting the needs of the party seeking alimony; (10) any agreement between the parties; [and] (11) the financial needs and resources of each party, including: (i) all income and assets, including property that does not produce income; (ii) any award made under §§ 8-205 and 8-208 of this article; (iii) the nature and amount of the financial obligations of each party; and (iv) the right of each party to receive retirement benefits....

Id 3 Ever since the adoption of the Maryland Alimony Act in 1980, alimony may be awarded either for a fixed term (often called rehabilitative alimony) or for an indefinite term. When alimony is awarded, the law prefers that the award be for a fixed term. See Tracey v. Tracey, 328 Md. 380, 391 , 614 A.2d 590 (1992); Whittington v. Whittington, 172 Md.App. 317, 336 , 914 A.2d 212 (2007). The court has discretion, however, to award indefinite alimony in exceptional cases when one of the ²⁸² two circumstances described in subsection (c) of FL section 11-106 has been shown: (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.

See Solomon v. Solomon, 383 Md. 176, 195-96 , 857 A.2d 1109 (2004); Whittington, supra, 172 Md.App. at 337-38 , 914 A.2d 212 . In the case at bar, the court ruled from the bench and made findings with respect to all of the applicable FL section 11-106(b) factors. The particular findings that Robert contests on appeal, and that are pertinent to his argument, relate to factors (9) and (11). Specifically, Robert argues that, on the court’s own factual findings, he does not have the financial resources to enable him to take care of his own needs and pay the alimony that was awarded to Susan.

The evidence at trial was undisputed that Robert’s income from AntiEntropics is and was highly variable and not always sufficient to meet the family’s needs. For example, in 2000, the business did poorly, and in 2001 it did especially poorly, losing over $50,000. The latter year was so bad financially that the family had to “cut back” on a number of personal and household expenses and depend upon Susan’s income, which at that time was $33,000 annually. It also was undisputed that, although AntiEntropics performed well in 2003 and very early 2004, business “dried up” for the rest of 2004.

Performance improved in 2005 and 2006. The court found that the stresses of living with financial uncertainty contributed to the problems in the parties’ marriage. Robert testified that at the time of trial he was earning a little more than $30,000 per year from AntiEntropics. The judge rejected that evidence, upon a finding that, in order to be paying the $2,500+ per month in housing costs that he in ²⁸³ fact was paying, Robert had to be netting at least $30,798 per year in income; and that would mean he likely was grossing at least $48,000 in yearly income.

The court imputed an additional $26,000 in yearly gross income to Robert, above and beyond the $30,000+ annual gross income figure he had testified to, and found his current annual gross income from AntiEntropics to be $56,000. That figure translates into a monthly gross income of $4,667. The court found that Susan’s present gross income from her job in furniture sales is $21,400 per year. On that finding, Susan’s monthly gross income is $1,798. 4 There was no testimony about the amount of income Robert had earned in the years in which AntiEntropics performed well.

Robert was not asked questions about his past income on direct examination, cross-examination, or by the court. He testified that, in 2004, the company’s gross receipts were between $300,000 and $400,000. There was no evidence presented about the relationship between the company’s gross receipts and Robert’s earnings. During her ruling, the trial judge commented that the deposits into AntiEntropics’s checking account were $168,122.35, in 2005, and $127,280.94, in the first nine months of 2006.

On the expense side, the court found, as stated above and as was undisputed, that Robert pays slightly more than $2,500 per month for the debt, taxes, and upkeep for the family home, and will continue to do so during the period of limited divorce, however long that shall be. The court made no mention of any other expenses for Robert, nor did it reference his financial statement, which was in evidence, and which listed all of his monthly expenses. The court expressly considered Susan’s living expenses, which totaled $4,209 per month, as set forth in her financial statement, which also was in evidence. (Susan testified that some of her expenses were listed based upon what she actually was spending but some ²⁸⁴ were listed based upon what she used to spend.) The court eliminated or reduced several of Susan’s listed expenses.

For example, Susan’s financial statement estimated her food consumption at $600 per month. The court reduced that figure to $400 per month (which was the same figure Robert had given monthly for food in his financial statement). Several of the court’s FL section ll-106(b) findings are not challenged on appeal: that the parties had been married 27 years; that Robert is 49 and Susan is 50; that the parties are in good mental and physical health; that there was no agreement between the parties; that Susan’s present annual income of $21,400 makes her “partly self-supporting”; and that Robert made significant monetary and non-monetary contributions to the marriage and Susan made significant non-monetary contributions to the marriage. The court also found that Robert’s financial resources are such that he can afford to pay alimony of $1,500 per month (the amount requested by Susan’s counsel) while meeting his own needs.

Robert maintains that that finding was clearly erroneous. Apparently as part of its decision about the period of time in which to award alimony, if at all, the court made findings about the parties’ earnings potentials. Based upon Susan’s past earnings history, the court found that she has the potential to earn $40,000 per year, and that, with that income, she will be “largely self-supporting.” The court found that Robert has the potential to earn between $100,000 and $120,000 per year from AntiEntropies. Robert also challenges the latter finding for clear error. 1.

Robert’s ability to pay $1,500 in alimony per month to meet Susan’s needs while meeting his own needs. We agree with Robert that the court’s own calculation of his current yearly income did not support a reasonable finding that he is able to pay $1,500 per month in alimony to Susan and at the same time meet his own needs. As explained above, the court found, by imputation, that Robert was ²⁸⁵ earning $ 56,000 annually, which is a gross monthly income of $4,667, and that Susan’s current yearly income was $21,400, which is a gross monthly income of $1,798. It further found that Robert pays $2,500+ per month to maintain the family home, which is the parties’ primary marital asset.

Of Robert’s remaining approximately $2,167 in gross monthly income, the court ordered him to pay $1,500 per month in alimony to Susan. Robert’s remaining gross monthly income was $667. There was some evidence about the sources, other than AntiEntropics, of Robert’s deposits into his checking account, but none that would support a finding that he was regularly receiving income greater than the $56,000 determined by the court. Those income sources were money withdrawn from an IRA, a $8,000 home equity loan, and a gift of $10,000 from Robert’s father.

For purposes of this issue we shall assume that the trial court’s finding imputing a total yearly income for Robert of $56,000 was factually correct. As Susan points out, the court also found that some of Robert’s monthly expenses are paid for by his company, as they are in whole or in part business expenses. 5 Even excluding those expenses (such as the cost of gas, telephone, automobile, and other business-related expenses), however, on the court’s factual findings on income, Robert must meet all of his remaining ordinary living expenses — such as food, clothing, prescriptions — with $667 per month. And, again, that sum is a gross income amount that does not account for taxes. Viewed otherwise, the alimony award as fashioned by the court produced a $38,004 yearly gross income for Robert and a $39,576 yearly gross income for Susan.

At the same time, the court directed that Robert continue to bear full responsibility for paying $30,000+ per year to maintain the marital home. These figures make plain that the court’s finding that Robert can pay $1,500 in alimony to Susan per month and still meet ²⁸⁶ his needs is clearly erroneous. The competent and material evidence in the record does not support such a finding. 6 2. Robert’s potential future annual income of $100,000 to $120,000.

Robert also complains that the court clearly erred in finding as a matter of fact that he has the potential to earn ²⁸⁷ $100,000 to $120,000 annually. That finding was made in the course of the court’s ruling that the alimony award would be indefinite. We agree with this assertion of clear error as well. The court’s reasoning respecting Robert’s potential income was as follows.

As noted, the bank deposits for AntiEntropics were $168,122.35 for 2005 and $127,280.94 for the first nine months of 2006. The court extrapolated the 2006 deposits from 9 months to 12 months, and then roughly divided the yearly deposits for AntiEntropics by the present income figure it already had ascribed to Robert — $56,000 per year. On that basis, the court found that Robert annually earns in income approximately one-third of the amount of the money deposited to AntiEntropics in a given year. The court then applied that one-third percentage to the gross receipts Robert had testified about for 2004 (between $300,000 and $400,000), and arrived at an annual potential income figure for him of $100,000 to $120,000.

These findings, including the ultimate potential income finding, are flawed in several respects. First, there was no competent material evidence in the record to support the court’s threshold finding that, because Robert was paying expenses of $2,500+ per year, he could not be earning the $30,000 yearly he had testified to and he had to have been earning at least $48,000 yearly. The evidence established, as we have mentioned, that, during the pertinent time frame, Robert had certain non-recurring sources of income not connected to his earnings from AntiEntropics: a gift from his father; a withdrawal from his IRA; and the proceeds of a home equity loan. Any or all of those sources of income could account for Robert’s ability to pay the monthly $2,500 + expenses associated with the family home notwithstanding his stated income.

The finding the court relied upon to impute income to Robert beyond the $30,000 yearly income he was claiming was not supported by record evidence. Second, given the absence of factual support for that threshold finding about present income, the evidence could not rationally support the court’s further finding that Robert’s ²⁸⁸ yearly earnings equal about one-third of the sum that AntiEntropics receives annually in deposits. And, third, a projected income finding, as required for purposes of determining whether an alimony award shall be made indefinite, see Roginsky v. Blake-Roginsky, 129 Md.App. 132, 146 , 740 A.2d 125 (1999) (cited with approval in Solomon, supra, 383 Md. at 195 n. 15, 857 A.2d 1109 ), cert. denied, 358 Md. 164 , 747 A.2d 645 (2000) ),.is not necessarily equal to a party’s prior highest past earnings. The court was required to determine, based on the evidence and not on speculation, what Robert had earned in the past and was earning presently, and to project forward, using all of the past and present evidence, not by using only one part of it.

As we shall discuss in the next section of this opinion, we are remanding this case to the circuit court for further proceedings. At that time, the parties may introduce additional evidence on the issue of both of their earnings, past and present, including evidence that is up-to-date. If, from that evidence, the court can make findings about current and projected income for the parties that is not speculation or guesswork, then it may exercise its discretion to make an alimony award. It is incumbent that the party seeking alimony, whether rehabilitative or indefinite, move forward with evidence to allow the court to make the factual findings necessary to an alimony determination.

Francz v. Francz, 157 Md.App. 676, 692 , 853 A.2d 839 (2004); Turner v. Turner, 147 Md.App. 350, 389 , 809 A.2d 18 (2002). The state of the record in this appeal is not such as to support the trial court’s factual findings about current and projected or potential income for Robert. For this reason, and the reason discussed above in subsection 1, we shall vacate the court’s indefinite alimony award. (b) Indefinite Alimony Incident to the Grant of a Limited Divorce Robert argues that the trial court erred in granting indefinite alimony incident to a limited divorce.

As we shall ²⁸⁹ explain, we conclude that a circuit court is authorized to grant indefinite alimony incident to a limited divorce. We reject, however, Susan’s argument that not only may indefinite alimony be awarded incident to a limited divorce but also an award of indefinite alimony incident to a limited divorce continues, automatically, beyond the time of a later-granted absolute divorce, unless the recipient spouse makes a showing of hardship, as required to modify an alimony award. We hold instead that, when indefinite alimony is granted incident to a limited divorce, and the parties then obtain an absolute divorce, all issues of alimony, including the length of any award, must be decided de novo. In Maryland, divorce is and always has been a creature of statute.

Until 1841, only the General Assembly had the power to grant a divorce. That year, the legislature enacted the first law conferring authority upon the courts (specifically, equity courts) to grant divorces, both absolute and limited. 1841 Md. Laws, Chap. 263. 7 An absolute divorce (a vinculo matrimonii) terminates the marriage, severing all legal ties between the parties that are a function