Officially released March 24, 2020.
In Short: be careful when crafting definitions of income; proceeds from the sale of a marital asset may be distinct from income that is generated from an asset that has been purchased with the proceeds from sale of a marital asset. That is a very important distinction.
The parties were divorced in 2010 via separation agreement. The separation agreement provided for payment of unallocated support based on a formula. It defined “income” as total income referencing income that had “historically been listed on line 22 (or the equivalent) of their joint 1040 federal tax returns.” It specifically excluded dividend and capital gain income realized from assets divided as part of the property distribution.
In 2014, Wife filed (and amended) a motion for contempt arguing that Husband had underpaid unallocated support in various years. The trial court declined to find Husband in contempt, finding that any non-compliance was not willful. The trial court ordered Husband to include money from certain post-judgment investments (made with proceeds from assets divided in the dissolution) in the calculation of unallocated support. The trial court ordered statutory interest and directed the parties to agree as to a rate or return that issue to court, and they subsequently agreed upon a rate. Husband appealed.
On Appeal husband argued (1) that the separation agreement explicitly excluded certain post-judgment investments from the calculation of income for unallocated support, (2) that conversion of cash assets awarded at time of dissolution to shares of another asset does not create income for calculation of support, and (3) that equitable principles require the exclusion of those incomes.
If a contract is unambiguous, then consideration of the contract is limited to its four corners and interpretation is subject to plenary review. If it is ambiguous, extrinsic evidence may be admitted regarding the parties’ intent. The trial court initially excluded extrinsic evidence but opened the matter up to such evidence during the hearing. The Appellate Court determined that this meant the trial court found ambiguity in the contract, and the Appellate Court agreed with that determination as to ambiguity. Thus, the findings of fact were subject to the clearly erroneous standard of review.
The Appellate Court distinguished the actual proceeds from the sale of marital assets (which it determined were not income for these purposes) from income derived from assets that were purchased using proceeds from sale of marital assets (which it determined were income under the separation agreement). The Appellate Court found Dan v. Dan to be inapplicable to whether such income was includable under the separation agreement. The Appellate Court found no abuse of discretion in the trial court’s interpretation of the separation agreement.
