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HomeMy WebLinkAbout97-1268 civilELLEN M. LONERGAN, PLAINTIFF ROBERT P. LONERGAN, DEFENDANT · IN THE COURT OF COMMON PLEAS OF · CUMBERLAND COUNTY, PENNSYLVANIA · 97-1268 CIVIL TERM IN RE: ALIMONY PENDENTE LITE OPINION AND ORDER OF COURT BAYLEY, J., May 12, 1999:-- On March 12, 1997, Ellen M. Lonergan instituted this action in divorce against Robert P. Lonergan. The parties were married on June 29, 1965. Husband, age 59, and wife, age 55, separated on November 9, 1996. Wife has remained in the marital residence.~ Wife is a housewife. Upon separation, husband and wife entered into a private agreement for her support. Wife subsequently instituted this action for alimony pendente lite. Following a Domestic Relations conference, an order was entered on October 5, 1998, directing husband to pay $7,500 per month APL effective June 24, 1998. Husband filed an appeal from the order which was heard de novo. Husband is an orthopedic surgeon. He operates a medical practice as a sole practitioner. The information used to calculate his income at the hearing before the support officer and in this court was his 1997 financial data. Similar data had not yet been compiled for 1998, nor had husband's 1998 tax returns been filed. At the hearing before this court both parties called accountants who testified as to the income and cash flow of husband. Weighing the credibility of all of the witnesses we 1. The parties have three children ages 32, 29 and 20. The youngest child lives in the marital residence with her mother. 97-1268 CIVIL TERM find: (1) In 1997, defendant had net disposable income of $228,098.2 (2) The $228,098 included adding back $36,074 in depreciation. (3) The cost of medical insurance that covers both husband and wife was deducted in arriving at the $228,098. From the $228,098, husband purchased disability insurance in the amount Husband would have no income from his practice if he were to become (4) of $5,415. disabled. (5) From the $228,098, husband purchased life insurance in the amount of $6,500. Wife is the beneficiary on the life insurance. (6) Wife has no earnings from employment and husband does not claim at this time that she has an earning capacity. (7) Wife had marital investment income of $8,352 that went into a marital investment account. (8) Husband had marital investment income of $10,928 that went into the same marital investment account. The $10,928, was included in arriving at husband's net disposable income of $228,098. Husband argues that the $36,074 depreciation should not be included in 2. He had capital gains of $16,776. In calculating his earnings for APL based upon his annual income in 1997, we have not included this $16,776. It was a one time gain during a year that husband was privately supporting wife. Additionally, the funds were placed in a marital investment account. -2- 97-1268 CIVIL TERM determining his net disposable income for purposes of APL. In Labar v. Labar, 434 Pa. Super. 612 (1994), a majority of a three judge panel of the Superior Court of Pennsylvania stated that two questions must be answered in the affirmative before depreciation expenses may properly be excluded from the support of obligor's income. First, do the expenses represent an actual reduction in the obligor's income, and second, were the expenses underlying the reduction reasonable or were they an attempt to shelter income for the purpose of avoiding a support obligation. In making this determination, however, the majority noted with respect to depreciation (1) "[w]e must look at whether any such marginal income created through tax savings was reinvested in the business or distributed to the Husband directly," (2) "[t]his court has allowed only a portion of depreciation representing monies actually available to the defendant for personal use, to be considered when making a support award," and (3) support payments "[m]ust only be taken from the amount available to Husband personally, after the business has been taken into account? In McAuliffe v. McAuliffe, 418 Pa. Super. 39 (1992), the Superior Court stated that in computing income available for support when a payor owns his own business: [i]ncome must reflect actual available financial resources and not the often times fictional financial picture that develops as a result of depreciation deductions taken 3. The Supreme Court of Pennsylvania granted an allowance of appeal in Labar v, Labar to consider, inter alia, "[w]hether the Superior Court applied the correct standard to determine whether depreciation expenses were properly included in the respondent's income available for child and spousal support." 544 Pa. 37 (1996). The case has been argued and is pending. -3- 97-1268 CIVIL TERM against income as permitted by the federal income tax laws. Otherwise put, 'cash flow' ought to be considered and not federally taxed income. In the case sub judice, husband's investment in equipment has not been made in an attempt to reduce his APL obligation. To the contrary, his investment in equipment has been necessary for him to conduct his business, and there will be a continuing need for new and upgraded equipment so that he has the current technology available to treat his patients in his very successful orthopedic practice. Notwithstanding, $28,474 (the $36,074 in depreciation less $7,600 actually expended on equipment) was a large amount of cash flow generated by the deduction that was not reinvested in the business. Accordingly, for the purposes of APL we conclude that husband's net disposable income of $228,098 properly included the add back of the $36,074 in depreciation but it should be reduced by deducting the $7,600 that he actually expended for equipment that was placed on a depreciation schedule. Husband further argues that the $5,415 cost of his disability insurance should be deducted from his net disposable income for purposes of APL. Alimony pendente lite is defined in the Divorce Code at 23 Pa.C.S. Section 3013 as "An order for temporary support granted to a spouse during the pendency of a divorce or annulment proceeding." As set forth in Jayne v. Jayne, 663 A.2d 169 (Pa. Super. 1995), "Alimony pendente lite is designed to be temporary and is available to those who demonstrate the need for maintenance and professional services during the pendency of the proceeding." In the present case, the disability insurance is essential -4- 97-1268 CIVIL TERM to protect not only husband but wife from any decrease in his ability to earn income because of disability. Pa. Rule of Civil Procedure 1910.16-5(b)(6) specifically provides that net income for support purposes includes income from "temporary and permanent disability benefits." Accordingly, we will reduce husband's net disposable income by the $5,415 cost of his disability insurance for the purposes of APL. Husband argues that the $6,500 cost for life insurance on which his wife is a beneficiary should be deducted from his net business income for purposes of APL. In this case we agree. While wife would have an interest in husband's estate if he were to die, she would undoubtedly be in need of immediate funds." In this unique case where it is extremely important for wife to be protected by life insurance if her only source of income were to cease, and where husband has chosen to maintain her as a beneficiary on his policies, the cost of $6,500 will be deducted from his net disposable income for the purposes of APL. Lastly, the marital investment income of wife, $8,352, and of husband, $10,928, that went into a marital investment account is subject to equitable distribution. We therefore are not attributing this income to either party for the purposes of calculating APL. See Floher v. Roher, 715 A.2d 463 (Pa. Super. 1998). Accordingly, we will deduct the $10,928 from husband's net disposable income for the purposes of APL.~ 4. Her situation would be complicated because she cares for the twenty-year- old daughter who has Crohn's Disease. 5. If we were to include the $10,928 in husband income for the purposes of APL we would have to attribute the $8,352 as income to wife. -5- 97-1268 CIVIL TERM Pa. Rule of Civil Procedure 1910.16-1(a) provided that 'q'he amount of... alimony pendente lite to be awarded.., shall be determined in accordance with the support guidelines .... "Rule 1910.16-3 states that where there are no dependent children APL shall be forty percent of the difference between the obligor and obligee's net income. With wife having no income our calculation is as follows: Husband's net disposable income Minus: equipment purchases disability insurance life insurance investment income into marital account Total Husband's annual income'for calculating APL Percentage calculation APL-annual APL-per month For the foregoing reasons, the following order is entered. ORDER OF COURT AND NOW, this /~ day of May, 1999, IT IS ORDERED: $228,O98 $7,600 $5,415 $6,500 $10,928 $30,443 $197,655 .40 $79,062 $6,599 (1) The order of APL entered on October 5, 1998, is vacated and replaced with this order. (2) Robert P. Lonergan shall pay Ellen M. Lonergan APL in the amount of $6,599 per month effective June 24, 1998. -6- Edgar B. Bayle'~, J. [ 97-1268 CIVIL TERM Samuel L. Andes, Esquire For Plaintiff Sandra L. Meilton, Esquire For Defendant Rickie Shadday, Domestic Relations Officer :saa -7-