High Income, Large Marital Estate, Equitable Distribution, and Alimony
February 26, 2020 § Leave a comment
I don’t know about other chancellors, but one of the most difficult tasks for me is to figure out whether there is truly a disparity requiring alimony after equitable distribution.
In the recent COA case, Descher v. Descher, decided January 14, 2019, the chancellor ordered Jeffrey Descher to pay his ex, April, $7,500 a month in periodic alimony, even though her equitable distribution, lump-sum alimony, and even child support, were substantial. The COA affirmed. Judge Lawrence’s majority opinion on the issue is chock-full of helpful authority and rationale, so here it is:
¶25. Finally, Jeff argues that the chancellor erred by awarding April permanent periodic alimony. “Alimony is considered only after the marital property has been equitably divided and the chancellor determines one spouse has suffered a deficit.” Castle v. Castle, 266 So. 3d 1042, 1053 (¶43) (Miss. Ct. App. 2018) (quoting Lauro v. Lauro, 847 So. 2d 843, 848 (¶13) (Miss. 2003)), cert. denied, 267 So. 3d 278 (Miss. 2019). This Court is bound to “consider the totality of the chancellor’s awards upon the divorced parties, including the benefit to the payee spouse and the concomitant burden placed on the payor spouse.” Id. (internal quotation marks omitted) (quoting Arrington v. Arrington, 80 So. 3d 160, 167 (¶23) (Miss. Ct. App. 2012)). “Our scope of review of an alimony award is familiar and well settled. Alimony awards are within the discretion of the chancellor, and his discretion will not be reversed on appeal unless the chancellor was manifestly in error in his finding of fact and abused his discretion.” Coggins, 132 So. 3d at 640 (¶8) (quoting Armstrong v. Armstrong, 618 So. 2d 1278, 1280 (Miss. 1993)).
¶26. Permanent periodic alimony serves an important purpose as a “substitute for the marital-support obligation.” Rogillio v. Rogillio, 57 So. 3d 1246, 1250 (¶11) (Miss. 2011). More specifically,
[t]he award of permanent periodic alimony arises from the duty of the husband to support his wife. We have also said that the husband is required to support his wife in a manner to which she has become accustomed, to the extent of his ability to pay. To update our language: Consistent with Armstrong, a financially independent spouse may be required to support the financially dependent spouse in a manner in which the dependent spouse was supported during the marriage, subject to a material change in circumstances.
Castle, 266 So. 3d at 1053 (¶43) (emphasis altered) (quoting Rogillio, 57 So. 3d at 1250 (¶11)). This duty, however, is not absolute. A spouse that seeks alimony must have “a deficit with respect to having sufficient resources and assets to meet his or her needs and living expenses.” Jackson v. Jackson, 114 So. 3d 768, 777 (¶22) (Miss. Ct. App. 2013) (emphasis added).
¶27. Without a periodic alimony award, April would have been forced to draw on her lump-sum award for the rest of her life. [Fn 9] That is not a “sufficient resource” that Jackson anticipated. Id. April still worked for the Descher corporation at the time of trial. The most money she ever earned was when she worked for the Descher corporation. According to her Rule 8.05 statement, when April worked at the Descher corporation, she earned $3,024.00 before taxes. After taxes, April earned $2,491.25. She listed $12,784.82 in total personal monthly expenses. In addition, her children’s expenses were listed as $3,402.33 each month. Because she received the home and her vehicle free and clear of any debt, April no longer has a mortgage payment or a car note in her monthly expenses. That means April’s personal monthly expenses, after the chancellor’s judgment, was $7,199.50. Jeff, on the other hand, was able to attend what McDonald’s calls “Hamburger University” and as a result qualified
to own and manage McDonald’s restaurants. The businesses he now owns are free and clear of any interest April held. Those businesses bring in over thirty-one million dollars per year in gross revenue. While the lump-sum alimony award was $856,794.98, which is certainly a large sum to most people, it does nothing to cure the fact that there is still a “significant income disparity” between Jeff’s and April’s incomes from the businesses, which were portions of the marital property. Jeff earns over $71,000 per month after taxes. April earns $2,491.25 per month after taxes if she is even still employed with the Descher business conglomerate. The lump-sum alimony award did not address this obvious income disparity.
[Fn 9] The dissent argues that the chancellor did not consider April’s $856,794.98 lump-sum alimony award as part of her “resources and assets” available to meet her expenses. Post at (¶46). The chancellor, however, specifically stated that “[i]n view of the significant income disparity following the equitable distribution of the marital estate, the lack of April having any meaningful potential future earnings potential, the length of the marriage, the parties’ accustomed standard of living, and the [c]ourt finding that it would be inequitable to require April to live exclusively off of the moneys she is to receive as the lump-sum alimony portion of the equitable distribution of the marital assets . . . this [c]ourt finds that April is entitled to an award of periodic alimony.” That indicates the chancellor did in fact consider the lump-sum alimony award as an asset.
¶28. The question now becomes whether $7,500 per month in permanent periodic alimony is excessive. Excessive awards of alimony by the chancellor have been overturned by this Court before. In Cosentino v. Cosentino, 912 So. 2d 1130 (Miss. Ct. App. 2005) (Cosentino I), this Court held that the wife was not entitled to $7,000 in permanent periodic alimony. Id. at 1131 (¶1). This Court reversed and remanded the case to the chancery court for a proper Ferguson and Armstrong analysis. [Fn 10] Id. at 1133 (¶12). When Douglas Cosentino again appealed the chancellor’s decision after remand, we reversed and rendered judgment for failure to justify the permanent periodic alimony award when the wife had received $2,615,815 as part of the marital estate. Cosentino v. Cosentino, 986 So. 2d 1065, 1066 (¶¶1-3) (Miss. Ct. App. 2008) (Cosentino II). The instant case is distinguishable from our decisions in Cosentino I and Cosentino II.
[Fn 10] Ferguson v. Ferguson, 639 So. 2d 921, 926 (Miss. 1994) (finding that awards of alimony are appropriate if after dividing the marital property there is still inequity between the two parties); Armstrong v. Armstrong, 618 So. 2d 1278, 1280-81 (Miss. 1993) (noting the twelve factors necessary for a chancellor to consider when entering a judgment for alimony).
¶29. In Cosentino II, we found that the chancellor’s failure “to provide any justification for the alimony award” was error. Id. at 1068 (¶8). Since “[t]he chancellor did not articulate any reason why Phyllis [Cosentino] needed more than the $2,615,815 that she was awarded,” this Court found that there was no evidence of a reasonable need for additional alimony. Id. at (¶9). Here, however, the record supports the chancellor’s finding that additional, permanent periodic alimony was necessary. The chancellor noted in his amended judgment that “April’s equitable distribution share of the marital estate [was] non-income producing” and that “even under the best of circumstances [any potential investment income] is not assured and pales in total insignificance when compared to the income historically received by Jeff.” The chancellor continued:
In view of the significant income disparity following the equitable distribution of the marital estate, the lack of April having any meaningful future earning potential, the length of the marriage, the parties’ accustomed standard of living, and the [c]ourt finding that it would be inequitable to require April to live exclusively off the moneys she is to receive as the lump-sum alimony portion of the equitable distribution of marital assets while Jeff receives $65,913.33 in monthly gross income [Fn 11] from his share of the marital estate, the [c]ourt finds that April is entitled to an award of periodic alimony.
(Emphasis added). The chancellor was not manifestly wrong in making this factual determination and did not abuse his discretion in addressing this obvious disparity.
[Fn 11] This figure is taken from Jeff’s Rule 8.05 statement and is not the recalculated, adjusted after-tax income that the chancellor found to be $71,377.66 per month. It is not clear why the chancellor resorted to $65,913.33 for purposes of this paragraph when he found the correct figure to be $71,377.66. Be that as it may, either figure (the one used by the chancellor in this paragraph or the corrected, recalculated figure as determined by the chancellor) showed a vast disparity in income between the parties from the marital businesses.
¶30. This Court’s recent holding in Castle is more analogous to the instant facts. When distributing the marital property in Castle, the chancellor found that the husband was at a greater benefit than the wife. Castle, 266 So. 3d at 1048 (¶22). To make the parties equitable the chancellor awarded the wife a “equalization payment” of $584,608.41. Id. On top of that, the chancellor also awarded lump-sum alimony in the amount of $1,600,00.00 and $6,500.00 a month in permanent periodic alimony. Id. This Court upheld the full award because “it [was] not difficult to understand how the chancellor recognized a deficit between [the husband] and [the wife] in their projected future ability to continue living in the style to which they became accustomed.” Id. at 1054 (¶47) (emphasis added).
¶31. The same can be said in this case. The chancellor specifically stated that the share of marital property awarded to April was non-income producing. More importantly, the record indicates that thirteen of the fourteen McDonald’s restaurants that Jeff owns were acquired during the marriage. Jeff admitted this in the following testimony:
Q. All of the entities described on Exhibit C — excuse me, 30, on Plaintiff’s Exhibit 30 that’s admitted into evidence, starting with No. 1 through No. 7 were acquired during your marriage to April?
A. That’s correct.
“The law presumes that all property acquired or accumulated during marriage is marital property.” Id. at 1049 (¶28) (quoting Stroh v. Stroh, 221 So. 3d 399, 409 (¶27) (Miss. Ct. App. 2017)). “Assets acquired or accumulated during the course of a marriage are subject to equitable division unless it can be shown by proof that such assets are attributable to one of the parties’ separate estates prior to the marriage or outside the marriage.” Hemsley v. Hemsley, 639 So. 2d 909, 914 (Miss. 1994). “Alimony and equitable distribution are distinct concepts, but together they command the entire field of financial settlement of divorce. Therefore, where one expands, the other must recede.” Ferguson v. Ferguson, 639 So. 2d 921, 929 (Miss. 1994). Truly, “the issues of property division and alimony are intertwined.” Ali v. Ali, 232 So. 3d 770, 774 (¶8) (Miss. Ct. App. 2017) (internal quotation marks omitted) (citing McKissack v. McKissack, 45 So. 3d 716, 723 (¶41) (Miss. Ct. App. 2010)).
¶32. If this Court were to agree with Jeff and reverse on the permanent-periodic alimony award, April would be forced to live off the lump-sum alimony award and potentially run the risk of eventually running out of funds from the lump-sum payment, while Jeff would continue to earn an estimated $71,377.67 in after-tax income each month. As the chancellor noted in his judgment,
April and the children are entitled to maintain their accustomed standard of living and the [c]ourt has attempted from the record before it not to go beyond what it believes is necessary [to] assure their accustomed standard of living. The [c]ourt further notes that Jeff’s income permits him to pay these sums and to continue his accustomed standard of living.
Every month of every year until he sells his interest in the businesses or dies, Jeff will make income from the thirteen McDonald’s restaurants and other businesses acquired during the marriage. April will make nothing. While Jeff draws income permanently, April would be forced to live on the dwindling lump-sum alimony if the chancellor had not awarded permanent periodic alimony.
¶33. The dissent complains that “Jeff’s substantial income is not, by itself, a sufficient basis for the chancery court’s award of $7,500 per month in permanent alimony.” Post at (¶48). Jeff’s “substantial income,” however, is part of, and derived from, the businesses acquired and formed during the marriage as part of the marital estate. The chancellor noted this fact in his findings of fact, and the parties agreed that it was true. Despite the fact that those assets and businesses were acquired during the course of the marriage, Jeff never associated April’s name with any of those assets or businesses. As a result of the divorce, April received $7,500 per month to alleviate the “significant income disparity” that the chancellor found to exist. The award of permanent periodic alimony was not based solely on April’s expenses or Jeff’s substantial income. The chancellor’s findings of fact with regard to the permanent periodic alimony are clearly articulated based on the evidence presented and are in accordance with the correct legal standards.
¶34. Finally, the dissent argues the chancellor abused his discretion in not considering April’s assets acquired after the divorce when he awarded her $7,500 per month in permanent periodic alimony. A review of Jeff’s income versus his monthly expenses indicates Jeff’s monthly income after taxes was $71,377.67. Jeff listed his Rule 8.05 monthly expenses at $24,829.11. At trial, Jeff admitted that $10,000 of that $24,928.11 in monthly expenses was actually paid by one of the Descher corporations he owned. Therefore, his actual out-of-pocket monthly expenses is $14,829.11. After his taxes and monthly expenses are paid, Jeff still has $56,548.56 left over each and every month as a result of the income produced by the businesses created during the marriage. The chancellor ordered Jeff to pay $7,500 a month in child support and $7,500 a month in permanent periodic alimony. After Jeff pays that court-ordered child support and alimony, as well as his monthly expenses, Jeff still has $41,548.56 left over each and every month. On the contrary, April has personal monthly expenses in the amount of $7,199.50 and presently collects $7,500 in alimony. Therefore, Jeff has $41,548.56 left over while April has $300.50 left over each month from the businesses that were part of the marital estate. [Fn 12] The chancellor attempted to lessen this disparity by his award of permanent periodic alimony coupled with the lump-sum alimony and the division of the marital estate. That finding by the chancellor is supported by the record and does not appear excessive or to be an abuse of discretion. Therefore, the order of alimony is affirmed.
12 This figure does not include the children’s expenses or the child support payment of $7,500 that Jeff was ordered to make each month. Further, this figure would not include any other expenses that April does not have if she is still employed by the Descher corporation.
Judge Jack Wilson wrote the dissent, joined by Judge Cory Wilson.