Dowd v. Dowd, 91-1750

• Decision Date: 26 February 1992
• Docket Number: No. 91-1750,91-1750
• Citation: 481 N.W.2d 504,167 Wis.2d 409
• Parties: In re the Marriage of James DOWD, Petitioner-Respondent, v. Ellen DOWD, Respondent-Appellant.
• Court: Wisconsin Court of Appeals

Page 504

481 N.W.2d 504

167 Wis.2d 409

In re the Marriage of James DOWD, Petitioner-Respondent, v. Ellen DOWD, Respondent-Appellant.

No. 91-1750.

Court of Appeals of Wisconsin.

Submitted on Briefs Dec. 18, 1991.

Opinion Released Feb. 26, 1992.

Opinion Filed Feb. 26, 1992.

On behalf of the respondent-appellant, the cause was submitted on the brief of Robert J. LaBelle and Roland J. Steinle, Jr. of Milwaukee.

On behalf of the petitioner-respondent, the cause was submitted on the brief of Kathleen A. Olk and John C. Curran, Curran Law Offices of Waukesha.

Before BROWN, ANDERSON and SUNDBY, JJ.

ANDERSON, Judge.

Ellen Dowd appeals from an order reducing maintenance payments to her from $500 to $150 a month. Because we conclude that this was an abuse of discretion, we reverse the trial court.

Ellen and James were married in 1960 and divorced in 1984. The judgment of divorce resulted in the children residing with James. At the time of the divorce, James' annual income was $62,250 and Ellen's annual income was zero. The parties stipulated that James was to pay maintenance of $1000 a month until he paid to Ellen her share of the property division, which was in excess of $109,500. Ellen's share of the property division was placed in a conservatorship. Subsequent to Ellen's receipt of the property division, the stipulation provided that James' maintenance obligation was to be reduced to $500 a month. At the time of the divorce, James had a pension and profit-sharing plan (fund) with a present value of $107,408. The stipulation also provided that the fund was part of James' share of the property division and James was required to make Ellen's health insurance payments.

In November 1990, James moved the trial court to terminate maintenance because of a substantial change in circumstances. James' income was reduced to $17,300 annually after he had a "negotiated leave taking" from his employer which was "not entirely voluntary." James was fifty-nine years old at the time of the hearing. The court found that Ellen's chronic manic-depressive condition made her unemployable. Ellen was drawing $800 a month from the trust and the trust principal was becoming depleted. The trust was depleted by approximately $71,000 since the trust was established. The court found that Ellen was living at a standard below that which she enjoyed during the marriage. The court found that the current value of James' fund was $300,000 and because of his retirement, he could withdraw any amount without incurring penalties.

In a decision dated February 1991, the trial court concluded that although there was a substantial change in circumstances, the financial condition of both parties did not justify any modification. The court stated that Ellen's need for maintenance outweighed James' change of circumstances. The court also stated that James did not establish that he would have to invade his property division to make the maintenance payments or to meet his own expenses. The court concluded that James did not meet his burden to show that he could not pay the monthly maintenance obligation. ¹

In March 1991, James moved the trial court to reopen the case for additional information on James' financial status. The court reopened the case and held a hearing. James' testimony presented four evidentiary matters to the court: (1) his income was $1442 a month and his expenses were $3679 a month; (2) his current wife had trust income available of approximately $1500 monthly; (3) the fund was now worth $325,000 and the annual interest on the fund was approximately $22,000; and, (4) he could withdraw the interest without reducing the principal and without penalties, but his financial planners advised him not to withdraw the interest in order to maximize the return.

The trial court wrote in its decision dated May 1991 that because of the failure of the trust to support Ellen, James is being asked to pay maintenance twice. The court believed that James should be given the opportunity to place himself in an "optimum financial situation." The court interpreted James' request as a "reprieve" and that such reprieve was appropriate.

The trial court reduced James' monthly maintenance payment to $150 and ordered him to continue Ellen's health insurance payments. The court ordered the financial conditions of both parties reviewed when James begins receiving social security benefits in 1993. The court stated that even though Ellen's assets were quickly depleting, James will be in a better position in the future to pay her maintenance.

The issue is whether the trial court abused its discretion when it reduced James' maintenance obligation on the basis that he should be able to place himself in an optimum financial position. The modification of a maintenance award involves the exercise of discretion. Poindexter v. Poindexter, 142 Wis.2d 517, 531, 419 N.W.2d 223, 229 (1988).

One of the relevant factors the trial court examines in a motion to modify maintenance is the payor's ability to pay. See id. at 530, 419 N.W.2d at 228. We must, therefore, determine to what extent James' fund, provided to him as part of the property settlement, may be used to determine his ability to pay. This involves a question of law which we review independently. See id. at 528-29, 419 N.W.2d at 228.

The Wisconsin Supreme Court broadly addressed this issue in Hommel v. Hommel, 162 Wis.2d 782, 471 N.W.2d 1 (1991). The court held that:

[I]nvestment income from assets awarded to a spouse as part of an equal division of property pursuant to a divorce settlement generally can be included in calculating that spouse's income for purposes of revising a maintenance award to the payee spouse in accordance with sec. 767.32, Stats.

Id. at 793, 471 N.W.2d at 5.

Although the Hommel court referred to investments generally, we conclude that its holding applies equally to the case before us. The fund was awarded to James as part of the property division. Neither party claims that the property division was unequal. James testified that the investment income of the fund is approximately $22,000 annually, that he can withdraw that amount without penalty, and that he can withdraw the interest without tapping into the principal. James has the option of either withdrawing from the fund or having the annual interest reinvested. There is nothing that distinguishes James' pension fund from other types of investments normally divided as part of a property division. Therefore, we conclude that Hommel controls and that the annual interest from James' fund may be included in calculating his income for maintenance modification purposes.

Allowing the fund's interest to be considered as income is consistent with the rule that all sources of income, ordinary and extraordinary, are to be considered when establishing or modifying maintenance. See Schinner v. Schinner, 143 Wis.2d 81, 104, 420 N.W.2d 381, 390 (Ct.App.1988). Our decision is also consistent with Hommel's policy concerns: to provide support to the payee spouse in accord with the needs and earning capacity of the parties, to encourage former spouses not to retire prematurely, and to ensure a fair and equitable financial arrangement between the parties. Hommel, 162 Wis.2d at 792-93, 471 N.W.2d at 5.

James argues that Pelot v. Pelot, 116 Wis.2d 339, 342 N.W.2d 64 (Ct.App.1983), should control. We disagree. The effect of Pelot's holding is that after the payor spouse receives the full value of a pension plan, as determined at the time of the divorce, any further pension benefits can be considered as income available for maintenance purposes. See Hommel, 162 Wis.2d at 789, 471 N.W.2d at 4. James argues that until he receives $107,408 from the fund, the fund cannot be considered income when modifying the maintenance obligation.

We conclude that Pelot does not apply to the facts of this case. In Pelot, the monthly pension benefits the payor was receiving were from the principal of the pension and were not a distribution of the annual interest earned on the principal. See Pelot, 116 Wis.2d at 341-42, 342 N.W.2d at 65-66. The court held that the pension itself cannot be considered income to determine the payor's ability to pay.

In this case, however, the fund itself is not being used to determine James' ability to pay. Nor is the increase in the amount of principal being used to determine his ability to pay. James retains the original $107,408, plus the $217,592 increase in principal. The amount used to determine his ability to pay in this case is limited to the interest the fund earns on a yearly basis. James is not being deprived of the full value of the plan awarded to him at the time of the divorce. Furthermore, the fund is not being jeopardized by keeping the principal intact and only withdrawing the interest. Therefore, Pelot does not apply. ²

We next must decide if the trial court abused its discretion in decreasing the maintenance payments to Ellen from $500 to $150 a month. An exercise of discretion must be based on the facts appearing in the record and the appropriate and applicable law, as well as being the product of a rational mental process. Poindexter, 142 Wis.2d at 531, 419 N.W.2d at 229. When modifying maintenance awards, the court must consider the same factors governing the original determination of maintenance set forth in sec. 767.26, Stats. Poindexter, 142 Wis.2d at 531, 419 N.W.2d at 229. We conclude that the trial court abused its discretion in modifying the maintenance obligation.

The basis for the trial court's decision to modify the maintenance obligation was to place James in an "optimum financial situation." The trial court believed that James' financial decision to reinvest the interest outweighed Ellen's deteriorating source of income and the fact that she had a standard of living below the standard she had while married. The court found that Ellen was chronically manic-depressive and unemployable. The court's...