HomeMy WebLinkAbout1996-4561 Civil
ROXANNE BALKOVIC,
Plaintiff
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
vs.
96-4561 CIVIL
KENNETH 1. BALKOVIC,
Defendant
IN DIVORCE
CIVIL ACTION - LAW
IN RE: OPINION PURSUANT TO RULE 1925
The divorce of the parties became final in June of 200 1 when the Superior Court affirmed
the August 9, 2000, decision of the Cumberland County Court. That decision had awarded the
plaintiff fifty-five percent of all marital assets along with indefinite alimony of$10,000 per
month. This divorce case has again come before the court on the petition of the defendant to
terminate or reduce alimony. On September 29,2005, after a hearing, we granted the
defendant's petition, directing that, after January 1, 2006, Mr. Balkovic's monthly alimony
payment would be lowered from $10,000 to $6,000. The plaintiff has appealed our order
contending that the defendant has not demonstrated any material change in his financial
circumstances. The plaintiff also cites, as error, several areas in which we did not give proper
consideration of the financial circumstances of the parties.
Modification or termination of alimony is permitted upon a showing of "changed
circumstances of either party of a substantial and continuing nature...." 23 Pa.C.S.A. 3701(e).
The alimony statute must be applied in a non-mechanistic way so that a reasonable and
compassionate result is achieved in each case. Baker v. Baker, 861 A.2d 298 (Pa. Super. 2004).
Alimony is based on meeting the reasonable needs of the recipient, as measured in accordance
with the lifestyle and standard of living established by the parties during the marriage, as well as
the payor's ability to pay. Teodorski v. Teodorsk( 857 A.2d 194 (Pa.Super. 2004).
At the time of the parties' divorce in 2000, the defendant husband was earning, net of
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taxes, more than $500,000 per year. This income was derived from the operation of two
successful corporations involved in the cable television installation industry. The plaintiff wife
was not employed though she was prescribed an earning capacity of$1,500 per month.
Prior to the hearing on the defendant's petition, the parties had the opportunity to engage
in extensive discovery. We are satisfied that the defendant was forthcoming in providing
information to the plaintiff. Throughout there has been ample opportunity to challenge the
defendant's version of his alleged change in financial circumstances. His contentions have
withstood the scrutiny of discovery as well as vigorous cross-examination. We, therefore, accept
the defendant's version of the change in his financial circumstances as set forth in his brief filed
with the court.
Starting in late 2003, Husband's business suffered
a series of setbacks which eventually forced its
closing. Business in the industry in general had
tightened but, more significantly, Husband's
brother, who had been involved in the operation of
the business for many years, launched an
independent business of his own and took the
majority of business from Husband's corporations.
The brother not only took most of the cable
companies that were the customers of Husband's
business, but he also lured away the majority of the
subcontractors that performed the work for
Husband's business. Husband attempted to
salvage or resurrect the business, investing his
funds and efforts in the process. He was
unsuccessful and, by the spring of2004, when his
last loyal business associate left him, Husband was
forced to face reality and shut down the business.
He did that through the balance of2004, and at the
beginning of2005, took ajob with a former
business associate, as a computer programmer and
consultant. He now earns, from that job,
$40,000.00 per year.
Husband has sought other employment since the
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failure of his business. He testified that he had
submitted approximately twenty-five resumes to
prospective employers, had contacted three or
more employment agencies, had spoken to
numerous associates and friends within the
industry, and checked numerous various want ads
and advertisements for employment on a regular
basis. Despite those efforts, Husband has not been
able to find any employment other than the job
offered to him by his former business associate.
That is not surprising when you consider that
Husband's only employment since completing
college was his self-employment with the two
corporations that have now failed.
Fortunately, Husband's situation is not quite as
bleak as it first appears. During the last several
years his business was very profitable and he was
able to set aside, in annuity accounts intended for
his retirement, assets which have now grown to
have a value in excess of$7,000,000.00. Those
funds were intended for his retirement and he has
not, as yet, withdrawn any of them from the
annuity accounts in which they are held. In
addition to the potential income from these
accounts, Husband has interest and dividend
income, both taxable and nontaxable, from mutual
funds and other investments he accumulated before
the failure of his business. Nevertheless, even after
calculating income available to him from all of
these sources, it is clear that Husband's income has
declined significantly below that which he enjoyed
at the time the alimony order was entered.
We agree with the plaintiff that the defendant continues to be a man of great wealth. It is
for that reason that we have declined his invitation to vacate the alimony order altogether. We
did conclude, however, that a downward adjustment was appropriate give the change of
circumstances as outlined above. Taking exception, the plaintiff complains that we failed to give
due weight to the husband's significant wealth.
The bulk of the husband's monetary assets consist of annuity contracts. These are not yet
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in pay status but continue to be tax deferred assets, similar to IRAs. The income generated by
these annuities varies considerably from year to year and, in fact, there have been periods when
they have decreased in value. The defendant properly suggests that we should look to the
income generated by these annuities in gauging the income available to Mr. Balkovic each year.
While that income figure approximates $250,000, the amount available annually to Mr. Balkovic
is more like $200,000.1 The defendant also advances an alternative method of computing
income using a fixed annual interest rate. This method also results in an imputed income of less
than $200,000 per year. By either calculation, Mr. Balkovic is earning less than half of what he
was earning at the time the alimony order was set.
Support awards, generally, must be "fair, nonconfiscatory and attendant to the
circumstances of the parties." Calabrese v. Calabrese, 682 A.2d 393 (Pa.Super. 1996). We are
concerned that requiring the husband to liquidate his retirement assets and consume the principle
of those assets to pay alimony borders on confiscating those assets. By the same token, the
reality is that the husband has substantial cash assets which, while not immediately available,
will be available to him shortly. We have sought to balance these considerations and to set an
alimony figure which is fair to both sides.
Another of the matters complained of on appeal cites our failure to consider that
"husband made a voluntary decision to purchase these assets despite his known obligation to
wife." This argument is disingenuous. The husband purchased the annuity assets at a time when
his income approximated $500,000 per year. At no time has he argued that the purchase of
annuities was an expense to him which should have reduced his alimony obligation.
1 The defendant arrives at that figure by deducting the ten-percent early withdrawal penalty, federal income tax at
the rate of thirty percent, and Pennsylvania income tax at the rate of three percent.
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Finally, in several assignments of error, we are faulted for failing to properly consider the
wife's circumstances. Mrs. Balkovic claims that she has monthly expenses which exceed
$13,000. We agree with the husband's analysis, however, that these expenses are overstated.
Mrs. Balkovic makes substantial financial contributions to her mother and to her son, Adam, 2
neither of whom are beneficiaries of the alimony order. We agree, also, that certain of Mrs.
Balkovic's claimed credit card expenses are duplicative of other expenses. In short, we are
satisfied that the plaintiff could maintain a comfortable lifestyle on approximately $9,000 to
$9,500 per month.
The plaintiff is not without income from which she can defray her living expenses. Her
income and expense statement lists interest and dividend income of $31,000 per year. Like her
former husband, she also has retirement accounts. It would not be expected that she would
liquidate those accounts or even invade the principle. In his post-hearing memorandum, the
defendant properly notes that the wife's potential income, net of taxes, is at least $3,500 per
month. Also, in determining amounts available to the plaintiff, we cannot overlook the fact that
Judge Bayley, in his 2000 decision, determined that the wife has an earning capacity of$1,500
per month. This finding was acknowledged by both counsel at our recent hearing in the matter.
Weare satisfied that, even with a reduction in her alimony, the plaintiff s reasonable needs will
be met.
December 14, 2005
Kevin A. Hess, 1.
2 Adam is an adult and is employed.
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Howard B. Krug, Esquire
F or the Plaintiff
Samuel L. Andes, Esquire
F or the Defendant
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