Officially released October 29, 2019.
In Short: Take care to draft alimony provisions carefully when specifying what income will be included for a formula or true-up. The majority and dissent spar over what constitutes clear and unambiguous in provisions defining income.
Background Facts: The parties were divorced by separation agreement in 2013. In accordance with the language of the separation agreement, Husband was to pay alimony based on line one of his K-1 from his law firm where he had practiced for twenty years, from which all income had been reported on line 1 of his K-1. “The alimony payments … are based on . . . annual income from employment … which, for purposes of the alimony formula herein, is presently defined as Line 1 on [Husband’s] annual [K-1] from McCormick, Paulding & Huber LLP …”
Thereafter, Husband sold his interest in the law firm named in the separation agreement and became an owner in a new law firm during 2015. For tax year 2015, Husband received a K-1 from the firm named in the separation agreement and a K-1 from his new law firm. The majority of his income in 2015 was derived from line 4 of his K-1 in the form of “guaranteed payments.”
Wife filed a motion for contempt alleging Husband’s failure to true-up alimony inclusive of income from both K-1s including lines 1 and 4. The trial court found that the specific language of the separation agreement included only line 1 and declined to hold Husband in contempt. The trial court declined to award counsel fees to either party. Wife appealed the declination to find contempt and Husband cross-appealed the lack of counsel fee award for defending the contempt.
When a separation agreement is clear and unambiguous the court need not look beyond the four corners of the contract. Wife argued that the interpretation was flawed “because it rendered superfluous the ‘presently defined’ language” in the separation agreement as to definition of income for alimony. The Appellate Court held that the contract was clear and unambiguous that the true-up was limited to line 1 income. Husband’s line 1 income did not exceed the threshold for a true-up (even including both law firms) and therefore the trial court did not abuse its discretion in declining to hold Husband in contempt.
The Appellate Court found no abuse of discretion in failure to award counsel fees under § 46b-87. “[B]ecause the award of attorney’s fees pursuant to § 46b-87 is punitive, rather than compensatory, the court properly may consider the defendant’s behavior as an additional factor in determining both the necessity of awarding attorney’s fees and the proper amount of any award.” Pace v. Pace, 134 Conn. App. 212, 218 (2012).
Judge Bright dissented as to the finding that the contract was clear and unambiguous and would have remanded for a determination on the true up under an ambiguous contract. Judge Bright agreed that the ambiguity of the agreement could not support a contempt finding, but that this did not preclude remedial relief and that the trial court should have looked beyond the four-corners of the contract.