Oudheusden v. Oudheusden, 338 Conn. 761 (2021) (permanent non-modifiable alimony & abuse of discretion; double-dip of distribution of business value & alimony)
Officially released April 27, 2021
In Short: Alimony that is both non-modifiable and permanent is theoretically possible but will likely be found to be abuse of discretion where the facts support a potential change in circumstances in the future. The double-dip concept is dead when it comes to ordering a buy-out for the value of a business while simultaneously ordering alimony be paid based on the earnings of the same business. Fairness, not double-dipping, is the governing principle.
The parties were married thirty years and had three adult children. The dissolution case was tried over nine days and 199 exhibits in 2017. Husband was fifty-eight and self-employed. Wife was fifty-five and had been out of the workforce for thirty years, but did not testify that she was incapable of working. Husband was self-represented at time of trial. The primary assets of the marriage were Husband’s two businesses. The trial court valued the businesses at $904,000, found Husband’s annual income from the business to be $550,000, and found Husband at fault for the breakdown of the marriage.
The trial court awarded lifetime periodic alimony to Wife in the amount of $18,000 per month until death, remarriage, cohabitation, or civil union, non-modifiable as to duration and amount. Husband was ordered, inter alia, to pay to Wife $221,677 for 100% of the net equity in the home if all mortgages had been paid when they were due, $452,000 for half the value of the businesses, $223,398 for all Wife’s legal, expert and professional fees, and to be responsible for various other debts. The trial court clarified post-judgment that the finding of Husband’s income was not his earning capacity if he were to find other employment, but his actual gross earnings via his businesses.
The Appellate Court previously concluded that this was abuse of discretion and a double-dip by relying in part on the business as a source for alimony while also considering the value in dividing the assets.
Wife petitioned for certification to the Supreme Court arguing that the Appellate Court misapplied the double-counting test by treating a lump sum payment based on the business’s value as equivalent to transfer of ownership of that asset and impermissibly substituted its own judgment for that of the trial court regarding abuse of discretion. The Supreme Court granted certification on two issues:
1. “Did the Appellate Court correctly conclude that the trial court had erroneously engaged in ’double dipping’ by awarding the plaintiff alimony from income generated by the defendant’s businesses and also awarding the plaintiff a percentage of those businesses in its division of property?”
2. “Did the Appellate Court correctly conclude that the trial court had abused its discretion by failing to enter financial orders that equitably divided the marital estate?”
The Supreme Court agreed with the Appellate Court to reverse the trial court’s decision awarding Wife $18,000 per month in permanent, nonmodifiable alimony, as abuse of discretion. While non-modifiable and permanent alimony awards are permissible under the statute, no cases cited by either party included both elements together, and under the circumstances of this case the court failed to adequately consider all the statutory factors, including the age, health and future earning capacity of Husband. Because this issue impacted the financial mosaic, the matter was remanded for a new hearing on financial orders based on this finding alone.
The Supreme Court also reached the issue of whether it was “double counting” or “double-dipping” to consider the income generated by a business in entering an order of alimony while also dividing the assets which included such business. The Supreme Court determined this issue was likely to arise upon remand.
The Supreme Court disagreed with the Appellate Court and opined that, when it comes to a business, it is not double counting to consider the value as an asset and award alimony based on the income. “[A]ny rule against double counting does not apply when the distributed asset is the value of a business and the alimony is based on income earned from that business.” The Supreme Court opined that “double-dipping” is not a legislative concept but purely an equitable one. The Supreme Court indicated it was following the trend of other states to consider the specific issue of business valuation and double-dipping.
Double-dipping as a concept has, essentially, been reduced purely to the situation where an asset that is distributed to one spouse is explicitly to be relied upon by the other spouse who will not receive it as a source of funds from which to pay alimony. E.g., if an asset is distributed to Wife, that very asset cannot also be the source from which Husband is obligated to pay alimony. Property division and alimony awards are distinct, and, other than the very narrow impossibility of payment from an asset actually distributed to the other spouse, the concept of a double-dip is dead.
While the trial court is not prohibited from making a seemingly illogical and wrong-headed double-dip, particularly when it comes to a business retained by the alimony paying party, it is still free to rightly consider the equitable implications of its orders as to a business when entering orders of alimony.
[T]rial courts should—consistent with our statutory scheme—consider all required statutory factors and ensure that each award is consistent with its respective statutory purpose and that the awards as a whole are fair and equitable. This consideration might include ensuring that the property distribution of a portion of a business’ value to the non-owning spouse does not unfairly reduce the paying spouse’s ability to earn income from that business (resulting in the undercapitalization of the business, for example). As with any alimony or property distribution award, reviewing courts may consider how a business has been awarded (i.e., divided) in determining whether the alimony and distribution awards serve their statutory purposes and whether the award as a whole is fair.
The focus is to be “fairness” rather than rigid rules regarding double-dipping. In future, for a litigant looking at a double-dip such as this on a business, the only remedy is now abuse of discretion.
The matter was remanded for a new trial as to the financial issues.