Trial Court’s Reduction In Spousal Support Was ‘Inequitable’

A trial court’s order reducing an award of spousal support must be vacated because the reduced award was inequitable in light of all the circumstances, the Michigan Court of Appeals has ruled.

In Oulai v Oulai (Docket Nos. 356644 and 358385), the defendant argued the Kalamazoo County Circuit Court, upon reconsideration, erroneously reduced her spousal support award from $6,000 per month for seven years to $2,000 per month for six years.

The Court of Appeals agreed.

The defendant’s “property award as compared to plaintiff’s assumption of debt was far from sufficient to offset the vast disparity in the parties’ respective incomes,” the Court of Appeals said. “In focusing disproportionately on the distribution of debts and assets when ruling on plaintiff’s motion for reconsideration, the trial court failed to appropriately balance the incomes and needs of the parties, and the result was a spousal support award that was not just and reasonable under the circumstances.”

Judges Douglas B. Shapiro, Michael F. Gadola and Christopher P. Yates were on the panel that issued the unpublished opinion.

Background

The parties divorced in 2017. The plaintiff is an orthopedic surgeon who earned approximately $589,000 annually. The defendant has a doctorate in information systems and teaches at Western Michigan University, earning approximately $83,000 annually. The parties are both in their 60s.

During the course of divorce mediation, the  plaintiff indicated that he was no longer employed. The parties’ settlement agreement forever barred spousal support for the plaintiff while reserving the issue of spousal support for the defendant, pending the plaintiff’s re-employment. In February 2018, the Kalamazoo County trial court entered a divorce judgment incorporating the terms of the settlement agreement. The divorce judgment reserved the issue of spousal support pending the plaintiff’s re-employment and required the plaintiff to notify the defendant when he became employed.

In 2019, the defendant filed a motion to enforce the divorce judgment and for spousal support. She claimed the plaintiff obtained employment in September 2018 and, as of June 2019, was earning an annual salary of $589,503. The defendant also sought approximately $5,000 in attorney fees under MCR 3.206(D)(2)(a) and (b), arguing the plaintiff failed to disclose this information and she discovered it by hiring a private investigator. The defendant alleged that she incurred attorney fees to subpoena the plaintiff to obtain information about his employment.

The trial court conducted a hearing and addressed the spousal support factors set forth in MCL 552.23(1). The factors to be considered, on a case-by-case basis, include: (1) the past relations and conduct of the parties, (2) the length of the marriage, (3) the abilities of the parties to work, (4) the source and amount of property awarded to the parties, (5) the parties’ ages, (6) the abilities of the parties to pay alimony, (7) the present situation of the parties, (8) the needs of the parties, (9) the parties’ health, (10) the prior standard of living of the parties and whether either is responsible for the support of others, (11) contributions of the parties to the joint estate, (12) a party’s fault in causing the divorce, (13) the effect of cohabitation on a party’s financial status and (14) general principles of equity.

The trial court concluded that spousal support was warranted for the defendant. It awarded the defendant spousal support of $6,000 per month for seven years but denied her request for attorney fees.

The plaintiff moved for reconsideration of the spousal support award. On reconsideration, the trial court held that it erred in its evaluation of the spousal support factors, specifically Factor 4 and Factor 10. As a result, the trial court reduced the amount of spousal support to $2,000 per month for six years.

The defendant appealed.

Inequitable Award

On appeal, the defendant argued the trial court erroneously reduced the spousal support award. She contended the reduced award was inequitable because it did not account for the significant disparity in the parties’ incomes and the nonliquid nature of the assets she received and, as a result, unfairly allowed only the plaintiff to live a lavish lifestyle. She also asserted the trial court did not properly consider the interdependence of the property award and spousal support under the settlement agreement.

Looking at the factors in MCL 552.23(1), the Court of Appeals explained that spousal support is not determined by a “strict formula.” The panel also said the objective in awarding spousal support is to “balance the incomes and needs of the parties so that neither will be impoverished.”

In this case, after analyzing the circumstances, the trial court awarded the defendant $6,000 per month for seven years, the Court of Appeals observed. “Upon reconsideration, however, the trial court found palpable error in its conclusions regarding Factor 4 (the source and amount of property awarded to the parties) and Factor 10 (the prior standard of living of the parties). Regarding Factor 4, the trial court determined that its previous conclusion - that the property division had been roughly equal - was incorrect considering the parties’ debt. … Regarding Factor 10, the trial court reevaluated the parties’ standard of living and concluded that for much of the marriage plaintiff did not share his substantial salary with defendant. The trial court reasoned that defendant’s historical standard of living, therefore, did not include a share in plaintiff’s substantial salary and reduced the amount of spousal support to $2,000 per month for six years.”

According to the Court of Appeals, the trial court’s reduced spousal support award was not fair and equitable. “[W]hen determining the spousal support, the trial court gave the distribution of debt and assets disproportionate weight, resulting in an inequitable spousal support award. … Defendant does not have liquid assets at her disposal, and the property she received is not income-producing. The major asset she received is the marital home where she lives, she has a mortgage and home equity line of credit on the home, she earns approximately $83,000 annually, and she has debt of $180,667 arising from the marriage. In comparison, plaintiff enjoys a substantial earning capacity, with a current base salary of $589,000. Although defendant received more from the marital estate in the division of assets and debt, the division of assets and debt must be considered in light of the parties’ earning capabilities and the other circumstances of this case.”

When the trial court decided the plaintiff’s motion for reconsideration, it “failed to properly consider the parties’ significantly disparate incomes and the nonliquid, non-income-producing nature of the assets awarded to defendant,” the Court of Appeals wrote. “Considering plaintiff’s substantial annual salary compared to defendant’s relatively modest annual salary, the property received by defendant is not substantial, and the debt assumed by plaintiff, although relevant, is not dispositive in this case. Plaintiff assumed more debt, but given the parties’ widely disparate incomes and the nonliquid, non-income-producing nature of the assets received by defendant, the debt assumed by defendant poses a substantially greater hardship than the debt plaintiff assumed, and the assets she received are of little help in meeting her needs. … Although defendant received a ‘positive’ overall property award, the $70,000 property award is not sufficient to meet the current or future needs of someone nearing retirement age. Particularly given plaintiff’s substantial income, defendant should not be made to invade these relatively modest assets to support herself.”

The trial court wrongly ascribed to the defendant “a lesser standard of living” during the marriage because the plaintiff “spent more lavishly” on himself, the Court of Appeals said. “Plaintiff does not identify authority to support the theory that defendant should be ascribed a lower standard of living than plaintiff during the marriage because plaintiff consumed more of the marital resources. Such an assertion is contrary to the duty of support that spouses owe each other during marriage, contrary to the principles of equity that govern a divorce action, and would reward a spouse who consumed the greater share of the marital resources. Here, the parties’ considerable incomes supported them in an affluent lifestyle during the marriage, and it is this affluent lifestyle that should be considered for purposes of Factor 10.”

The reduced spousal support award was inequitable in light of all the circumstances, the Court of Appeals held. “The parties had a long-term marriage of 23 years, during which defendant contributed to the marital estate, and she is entitled to share equitably in the fruits of their labors. Defendant is in her early 60s, and although she earns a respectable salary, she is unlikely to approach plaintiff’s substantial earning capacity. The assets she received are nonliquid and of little help in meeting her needs. The trial court erred in assessing defendant as having a lower standard of living because plaintiff spent more lavishly on himself during the marriage.”

As a result, the Court of Appeals remanded the case, instructing the trial court to consider all the circumstances, “including the parties’ respective needs, the length of the marriage, their historical standard of living, the vast disparity in their incomes, and the nonliquid, non-income-producing nature of the assets received by defendant.”

Regarding the defendant’s claim for attorney fees, the Court of Appeals remanded that issue to the trial court for reconsideration. “The trial court should consider whether plaintiff in fact violated the divorce judgment by failing to provide the required notice of employment and whether, as a result of that violation, defendant incurred compensable attorney fees and expenses.”