Boyd-Mullineaux v. Mullineaux, 203 Conn. App. 664 (2021) (contract interpretation of separation agreement; formula for payment of unallocated support based on definition of income)
Officially released April 6, 2021
In Short: The separation agreement provided a formula for calculation of unallocated alimony and child support based on a detailed definition of earned income, which definition excluded income from investments. Although Husband’s post-judgment investment was in an LLP that was related to his employment, the income derived from that investment was properly excluded from the definition of earned income in this instance.
The parties were divorced in 2013 by separation agreement. The separation agreement provided that Husband shall pay unallocated alimony and child support based on percentages of his “Gross Annual Earned Income from Employment” (“GAEIE”).
GAEIE was defined to include but was not limited to “[S]alary and bonus, contract payments, commission payments, severance payments, and voluntary payments made to qualified and [nonqualified] retirement plans for his benefit, and if applicable, disability benefits. All deferred compensation including, but not limited to, deferred cash compensation, stock grants, stock units, and stock options shall be deemed [earned income from employment] in the year in which [Husband] receives such items.’’ The separation agreement expressly excluded from GAEIE ‘‘[c]apital [g]ains, interest and dividends, and all other income earned by [Husband] due to his investment of assets distributed to him in connection with this dissolution proceeding. . . .’’
Throughout the relevant time period, Husband was employed as a managing director of an investment company, Liquidity Finances, LLC (“C-Co”) and earned commissions from C-Co. In 2014, Husband became a member of Liquidity Finances, LLP (“P-Co”). Husband paid approximately $624,000 for his interest in P-Co. Husband received distributions as a member of P-Co. Husband did not include distributions received as a member of P-Co in calculating his support obligation from GAEIE.
In 2018, Wife filed a post-judgment motion for contempt seeking an order of arrearage, arguing that she was entitled to a share of the distributions from P-Co because they were related to Husband’s employment, and, therefore, included in the definition of GAEIE. Husband filed an objection arguing that they were not earnings related to his employment and were properly excluded from GAEIE.
Following an evidentiary hearing, Judge M. Moore denied the motion for contempt, finding that Husband had expended significant funds to purchase his membership in P-Co and the distributions were not included in GAEIE.
Wife appealed. Wife argued that the distributions were paid to the Husband as a result of his membership interest in P-Co and must be included in GAEIE because the distributions arise from a source related to the services rendered by the defendant by way of past, current, or future employment. Wife did not challenge the trial court’s conclusion that Husband was not in willful contempt and did not claim that Husband manipulated his income and distributions to reduce his support obligations.
The Appellate Court first set forth the standard for interpretation of a separation agreement, that it be construed by the principles governing construction of contracts, and where the language of the contract is clear and unambiguous, it is to be given effect in accordance with its terms. Both parties agreed that the separation agreement is clear and unambiguous as to GAEIE but disagreed as to whether the P-Co distributions were to be included. Where the language of a contract is clear and unambiguous it is subject to plenary review as a question of law. The Appellate Court agreed that the language was clear and unambiguous. The Appellate Court found that the evidence at the hearing supported the trial court’s conclusion that the distributions from P-Co were not included in GAEIE because those earnings were solely by virtue of stock ownership and as a result of equity interest by deploying capital. There was no requirement that investors in P-Co be employed by C-Co and no evidence produced that Husband’s investment in P-Co affected his earnings from C-Co. In plain English, the distributions from P-Co were investment income, not earned income.
The Judgment was affirmed.
