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HomeMy WebLinkAbout212 S 1994BARBARA GRIFFITHS V. WILLIAM D. GRIFFITHS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 212 SUPPORT 1994 PASCES # 132000031 IN RE: EXCEPTIONS TO SUPPORT MASTER'S REPORT AND RECOMMENDATIONS BEFORE GUIDO, J. OPINION AND ORDER OF COURT Before us are cross exceptions to the Support Master's Report and Recommendations which led to the Interim Order of Court entered on March 20, 2003. We have reviewed the record, which includes hundreds of pages of testimony and dozens of exhibits presented to the Support Master, as well as the prior pleadings and orders at this term and number. We have also reviewed the lengthy briefs filed by each party and have heard argument thereon. For the reasons hereinafter set forth, this matter will be remanded to the Support Master for further action consistent with this opinion. Factual and Procedural Background While we expressly adopt the Support Master's Findings of Fact as set forth in his Report and Recommendations, we feel that a brief recitation of the factual and procedural background will help put this rather complicated case into perspective. Defendant is 51 years old. He graduated from high school in 1969 and received trade school training in the refrigeration field. In 1977 he and several co-workers left their employer to form their own company, Remco, Inc. (hereinafter Remco). NO. 212 SUPPORT 1994 PASCES # 132000031 Plaintiff and defendant were married on September 5, 1987. On September 7, 1989, the subject of this order, Brittany Jade, was born. The parties separated in November of 1991. Defendant commenced a divorce action in 1994. However, a final divorce decree was not entered until July 27, 1998. On June 25, 1998, the parties entered into a Divorce Settlement Agreement. The agreement purported to resolve all issues arising out of the marriage, including distribution of marital property, alimony, alimony pendent lite, etc. Pursuant to the agreement, plaintiff waived any interest she might have had in defendant's Remco stock. The agreement also referenced the instant support action which had been pending since 1994. The last court order entered prior to the Divorce Agreement was dated January 2, 1998. Based upon a net monthly income of $28,858, defendant was directed to pay $1550 per month for the support of his child. The Divorce Agreement provided, inter alia, that wife would withdraw her appeal pending in connection with the above order. It further provided that, barring a change in circumstances, the defendant's support obligation would increase to $1733.34 per month on September 1, 1998 and to $1950 per month on January 1, 1999. On February 17, 1999, the support order was amended to reflect the terms of the parties' agreement. No incomes or earning capacities were established in the revised order. Defendant had a net income of almost $350,000 in 1997.~ His 1998 tax return shows a gross income of over $500,000, with salary and other income from Remco exceeding $400,000. On July 1, 1999, Remco was sold to an entity known as ~ This figure was calculated using the net monthly earnings established by the Court before entering the January 2, 1998 order. NO. 212 SUPPORT 1994 PASCES # 132000031 GroupMAC.2 As part of that transaction, defendant received more than $830,000 in cash plus shares of GroupMAC stock valued at 1.3 million dollars. He also received a three year employment contract with a base salary of $100,000, plus the opportunity to earn bonuses. During the year 2000, the defendant sold more than $900,000 worth of his GroupMAC stock.3 In the same year he voluntarily quit his employment, thereby forfeiting the remaining balance of his employment contract.4 On January 22, 2002, the defendant filed a petition to reduce his support obligation. On March 8, 2002, the plaintiff filed a petition to increase the order. Legal Analysis We have examined the entire record as part of our review of the Master's Findings of Fact and his legal analysis of the issues. As noted above, we have adopted his findings of fact as our own. We are also satisfied that the Master has thoroughly and correctly analyzed the legal issues, except for the issues hereinafter discussed. The primary issue deals with the lump sum payments received by the defendant in connection with the sale of his Remco stock. The defendant argues that since he received the stock as part of the Divorce Settlement Agreement less then one year before its sale, : We note that despite its sale on July 1, defendant's 1999 tax returns indicate that he still received over $500,000 in income from his interest in and employment with Remco in 1999. 3 The remainder became virtually worthless as the successor to GroupMAC encountered serious financial problems. 4 One of the defendant's exceptions revolved around the Master's finding of fact that he voluntarily quit his employment. We have reviewed the record and are satisfied that this finding of fact is appropriate. Defendant testified that he had been in the refrigeration business long enough and that it was time to move on. In effect, he chose to retire from his occupation to pursue other interests because he was financially able to do so. That decision was his to make. However, it cannot serve as the basis to reduce his support obligation. NO. 212 SUPPORT 1994 PASCES # 132000031 the holding in Miller v. Miller, 783 A.2d 832 (Pa. Super. 2001) would exclude the sale proceeds from the calculation of his support obligation. In support of his position, defendant's counsel points to the following language: It is settled law that "money included in an individual's income for the purpose of calculating support payments may not also be labeled as a marital asset subject to equitable distribution." Rohrer v. Rohrer, 715 A.2d 463,465 (Pa. Super. 1998). We hold today that the reverse is also true. Money received from the sale of an asset awarded in equitable distribution may not be included in an individual's income for purposes of calculating support payments. The single caveat to this rule is that any gain realized in the sale of the asset may, indeed must, be included in the calculation of income. 783 A.2d at 835. (footnote omitted).5 We perceive a fatal flaw in defendant's argument, i.e. Miller applies only to marital assets. As the Miller court noted in explaining the rationale for its holding: The process of equitable distribution is an exercise in marshalling, valuing and dividing the marital pot in a fair manner .... (W)hether the property division is done by agreement of the parties or by court order, the goal is the same: to take the assets of the marriage and divide them in such a way as to effectuate economic justice between the parties. It is both illogical and inequitable to characterize any of these assets, or the proceeds from their sale, or the credit given as a result of a sale, as income. 783 A.2d at 835 - 6 (emphasis added). In the instant case, only a small portion, if any, of defendant's Remco stock could be classified as marital property. The Divorce Code defines marital property as "all property acquired by either party during the marriage, including the increase in value, prior to the date of final separation, of any nonmarital property acquired.., prior to See Defendant's Brief, p. 11. NO. 212 SUPPORT 1994 PASCES # 132000031 marriage...,,.6 Therefore, only the increase in value, if any, of the Remco stock during the four years from the date of marriage in 1987 until final separation in 1991 qualified as marital property subject to the Miller holding.? The business was started from scratch in 1977 and sold for millions in 1999. The vast majority of the cash payments received by defendant in 1999 and 2000 would be income under Pa.R.C.P. 1910.16-2 (a)(8).8 Consequently, under Pa.R.C.P. 1910.17(b) the defendant would have been obligated to report the sale to both plaintiff and the Domestic Relations Office. We are required to remand this matter to the Master to give the parties the opportunity to present additional evidence as to the value of the marital portion of the Remco stock.9 The parties may also present evidence regarding, and the Master shall address, the "most appropriate method" of dealing with the lump sum payments received for the Remco stock,l° 6 23 Pa. C.S.A. § 3501 (a)(1). ?The parties obviously recognized this fact when the Divorce Agreement was negotiated· The language of paragraph 4 is revealing: "Wife hereby waives .... any and all right .... she has, may have or which may have arisen, by virtue of the marital relationship of the parties or otherwise, in and to any shares of stock·. · or any other interest in... Remco, Inc .... "(emphasis added)· 8 Pa. R.C.P. 1910.16 -2 (a) (8) includes in the definition of income: other entitlements to money or lump sum awards, without regard to source .... and any form of payment due to and collectible by an individual regardless of source· 9 In this regard defendant shall be required to provide plaintiff with financial records of the company for the years 1986 through 1991. lo See Note to Pa. R.C.P. 1910.16-2 (a)(8) which provides: Note: The trial court has discretion to determine the most appropriate method for imputing lump-sum awards as income for purposes of establishing or modifying the party's support obligation. These awards may be annualized or they may be averaged over a shorter or longer period of time depending on the circumstances of the case. They may also be escrowed in an amount sufficient to secure the support obligation during that period of time. NO. 212 SUPPORT 1994 PASCES # 132000031 There is another legal issue we feel compelled to address, even though it was not raised before the Master. Defendant argues that the recent Superior Court case of Diamertt v. Diamertt, 816 A.2d 256 (Pa. Super. 2003) stands for the proposition that interest income received from assets distributed in equitable distribution may not be used in calculating a party's support obligation. The logical extension of that holding, he contends, would exclude any income received from Remco, or his partnership interests, in determining his income available for support. This contention is without merit. We have thoroughly reviewed Diamettt and are satisfied that defendant has misconstrued its holding. The Superior Court did not hold that income on equitably distributed property could not be used for support purpose. To the contrary, it recognized that such income must be considered for support purposes. The Diamettt court merely held that the interest income on the marital property in the case before it had been "over- valued" 816 A.2d at 277. Consequently, there is nothing in Daimertt which changes the holding in Miller to the effect that income from a capital asset received in equitable distribution "must be considered in calculating.., income" for support purposes, even though the asset itself may not. 783 A.2d at 836.~ ~ As noted in our discussion above, only a small portion, if any, of the assets in question in this case were marital property and subject to the holdings in Miller or Diamem. NO. 212 SUPPORT 1994 PASCES # 132000031 ORDER OF COURT AND NOW, this 23RD day of OCTOBER, 2003, this matter is remanded to the Support Master for further proceedings consistent with this opinion. The Master shall then make Revised Findings and Recommendations from which either party may appeal to this Court. Pending said proceedings, the interim Order dated March 20, 2003, shall remain in full force and effect. By the Court, /s/Edward E. Guido Edward E. Guido, J. Andrew C. Sheely, Esquire 127 South Market Street P.O. Box 95 Mechanicsburg, Pa. 17055 Theresa B. Male, Esquire 513 North Second Street Harrisburg, Pa. 17101 Michael Rundle, Esquire Support Master :sld