Merk-Gould v. Gould, 184 Conn. App. 512, 195 A.3d 458 (2018) (earning capacity and passive income; valuation based on purchase price).
Officially released September 4, 2018.
Short version: (1) it was clearly erroneous to base an earning capacity for passive income on assets that are awarded to the other party, (2) it was abuse of discretion to value assets based on price at time of purchase rather than value at date of dissolution.
Husband appealed the judgment of dissolution after an eight-day trial. The parties had been married about twenty-five years and had two adult children. Wife was sixty-four retired for health reasons. Husband was sixty-five and had been retired for more than a decade, meeting his expenses via passive income from his investments. The Court found Husband primarily at fault for the breakdown of the marriage. The Court found that Husband had an annual gross earning capacity of $200,000 and ordered alimony based on such income. The Court ordered Husband, inter alia, to transfer 60% of Husband’s assets to Wife and valued certain assets at the purchase price rather than valuing them at date of dissolution. The Court also ordered Husband to pay $220,000 for counsel fees.
Husband Appealed claiming that the trial court erred in (1) ordering tax-free alimony to Wife improperly, (2) finding Husband had a $200,000 annual earning capacity, (3) awarding 60% of Husband’s pretax pension to Wife, (4) valuing Husband’s interest in private equity companies based on purchase price rather than value at date of dissolution, (5) awarding Wife attorney’s fees, and (6) denying a motion for mistrial. The Appellate Court ruled in Husband’s favor as to the issues of earning capacity and valuation at purchase price instead of date of dissolution and did not reach the merits of the remaining claims on the basis of the mosaic doctrine. Tuckman v. Tuckman, 308 Conn. 194, 214, 61 A.3d 449 (2013). The matter was reversed and remanded with respect to all financial orders.
The Appellate Court held that the earning capacity finding of $200,000 was clearly erroneous and not supported by the evidence. There was nothing preventing the trial court from basing the earning capacity on investment income and no requirement that the trial court find that Husband had intentionally restricted his earnings. However, the trial court’s finding was premised on Husband’s passive investments, and the trial court awarded 60% of the assets used to generate such income to Wife. Husband could not be expected to generate the same investment income with only 40% of his investment assets.
The date of valuation of assets is the date of dissolution of marriage. Sunbury v. Sunbury, 216 Conn. 673, 676, 583 A2.d 636 (1990). The Appellate Court made short work of Wife’s argument that the trial court’s order was a means of preventing dissipation of assets and concluded that it was abuse of discretion to value the assets based on value at time of purchase rather than date of dissolution.