Weinstein v. Weinstein

• Decision Date: 02 January 2007
• Docket Number: No. 17425.,17425.
• Citation: 911 A.2d 1077,280 Conn. 764
• Court: Connecticut Supreme Court
• Parties: Nancy WEINSTEIN v. Luke A. WEINSTEIN.

911 A.2d 1077

280 Conn. 764

Nancy WEINSTEIN v. Luke A. WEINSTEIN.

No. 17425.

Supreme Court of Connecticut.

Argued September 7, 2006.

Decided January 2, 2007.

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Lori Welch-Rubin, for the appellant (plaintiff).

Luke A. Weinstein, pro se, the appellee (defendant).

BORDEN, KATZ, PALMER, ZARELLA and SULLIVAN, Js.

SULLIVAN, J.

The plaintiff, Nancy Weinstein, appeals, following our grant of certification,¹ from the judgment of the Appellate Court reversing the judgment of the trial court. See Weinstein v. Weinstein, 87 Conn.App. 699, 867 A.2d 111 (2005). The trial court had increased the child support payments to be made to the plaintiff by the defendant, Luke A. Weinstein,² based, in part, on the imputation of greater investment income to the defendant than he actually had realized. The Appellate Court concluded that the trial court improperly had imputed investment income to the defendant in formulating its support orders because there was no evidence that the defendant had depressed unreasonably his investment income in order to evade his child support obligation or that the defendant's investment strategy was economically unreasonable. Id., at 706-707, 867 A.2d 111. On appeal, the plaintiff claims that the Appellate Court improperly concluded that she was required to prove that the defendant's investment income had been depressed unreasonably and deliberately or that his investment strategy was unreasonable, before the trial court properly could impute unrealized investment income to the defendant. We agree and, accordingly, reverse the judgment of the Appellate Court.

The opinion of the Appellate Court sets out the following relevant facts and procedural history. "The court, Higgins, J., dissolved the parties' marriage on May 12, 1998. The judgment included an agreement that the parties would share joint physical custody of their minor child, who was born on January 27, 1996, and that the amount of child support the defendant then was paying would be recomputed `at the guideline amount in September, 1998.' In November, 1998, pursuant to a September 26, 1998 agreement of the parties, the court, Arena, J., ordered the defendant to pay child support to the plaintiff in the amount of $125 per week and to pay the sum of $661 per month directly to the child's day care provider. In adopting the parties' agreement, the court noted that the amount of support to which the parties had agreed represented an acceptable deviation from the guidelines because the parties equally shared physical custody of their child. Subsequently, on April 30, 2001, the court, Parker, J., increased the defendant's child support obligation to $160 per week because of an increase in his income and in light of the parties' joint custody arrangement.³

"On April 17, 2002, the defendant filed a motion for a downward modification of child support, claiming a decrease of his income due to the termination of his employment. In turn, on December 9, 2002, the plaintiff filed a motion for an upward modification of child support, claiming that the defendant's financial circumstances had improved since the previous modification in April, 2001. Following a hearing on December 9, 2002, the court, Jones, J., issued a preliminary memorandum of decision on April 3, 2003, in which it found that the defendant had an annual earning capacity of $125,000 and the plaintiff had an annual earning capacity of $25,000. Additionally, the court scheduled a supplemental hearing to consider the computation of child support under the guidelines based on the parties' earning capacities and their passive incomes. Specifically, the court gave the parties an opportunity to be heard on the question of whether the calculation of the defendant's income should include capital gains realized on certain assets he held and on the question of how to determine the appropriate amount of capital gains and investment income to be included in the calculation of the defendant's income for purposes of establishing a child support order. That hearing took place on April 21, 2003." Id., at 701-702, 867 A.2d 111.

"At the April 21, 2003 hearing, the defendant produced his 2002 federal income tax return, which indicated that he had received $11,424 of income from an investment account valued at $1,025,000 and $1597 in interest from a money market account worth $25,000. Thus, this evidence showed that the defendant's total passive income in 2002 was $13,021." Id., at 703, 867 A.2d 111. Therefore, the actual annual return on the defendant's accounts, calculated by dividing the income of $13,021 by the total value of $1,050,000, was 1.24 percent.

During the hearing, the plaintiff adduced evidence establishing that five year treasury bills had an annual return of 2.96 percent as of April 14, 2003. She claimed that the court should impute the income on the investment and the money market account based on this interest rate instead of calculating the support order using only the defendant's actual income realized from these accounts.

"Subsequently, on July 3, 2003, the court denied the defendant's motion for a reduction in child support and granted the plaintiff's motion for an increase in child support, ordering the defendant to pay the sum of $285 per week. In reaching the amount of child support, the court considered its assessment of the parties' respective earning capacities and not their stated incomes from employment. Additionally, the court attributed the sum of $9724 as income to the plaintiff due to a distribution she received from a family partnership. As to the defendant, the court attributed to him an earning capacity based on his education and work history and also found that his annual income from investments and bank accounts amounted to $31,080." Id., at 702, 867 A.2d 111.

"In reaching this figure, the court stated: 'The income is imputed on the defendant's Schwab account ($1,025,000) and his checking account ($25,000) shown on his financial affidavit dated December 6, 2002. The interest rate is 2.96 percent, the five year [treasury] bill rate as of April 14, 2003.'" Id., at 703-704, 867 A.2d 111.

The defendant appealed to the Appellate Court, claiming that, in awarding an increase in child support, "the court improperly (1) imputed greater income to his investments and bank accounts than he actually realized, (2) imputed an unsubstantiated earning capacity to him, (3) failed to deviate from the child support guidelines to account for the parties' joint physical custody arrangement and (4) made an award of child support to the plaintiff that was, in reality, disguised alimony."⁴ Id., at 700-701, 867 A.2d 111. The Appellate Court concluded that, "for a court to impute additional investment income capacity to a party in formulating its support orders, the court must find that the party has unreasonably depressed investment income in order to evade a support obligation or that the party's investment strategy is economically unreasonable." Id., at 707, 867 A.2d 111. Because the trial court had not found that the defendant's investment income was unreasonably low, or that the defendant deliberately had suppressed his investment income, the Appellate Court concluded that the trial court had abused its discretion by substituting its investment preferences for the defendant's, thereby imputing a higher rate of return to the defendant's investments. Id., at 707-708, 867 A.2d 111. Moreover, the Appellate Court concluded that, "[b]ecause the court's determination of the defendant's passive income capacity was an integral part of its overall assessment of the defendant's income, its calculation of the defendant's total income was improper." Id., at 708, 867 A.2d 111. Accordingly, the Appellate Court reversed the judgment of the trial court and remanded the case to that court for a recalculation of the child support order without the imputed investment income. Id., at 708, 710, 867 A.2d 111.

On appeal, the plaintiff claims that the Appellate Court improperly concluded that a party moving for an upward modification of a support order must prove that investment income had been depressed unreasonably and deliberately, or that the investment strategy employed was unreasonable, before the trial court properly can impute unrealized investment income to the nonmoving party. Instead, the plaintiff claims that a court may impute an ordinary rate of return to an asset that yields less than an ordinary rate of return. We agree and, accordingly, reverse the judgment of the Appellate Court.⁵

As a preliminary matter, we set forth the appropriate standard of review. "When . . . the trial court draws conclusions of law, our review is plenary and we must decide whether its conclusions are legally and logically correct and find support in the facts that appear in the record." (Internal quotation marks omitted.) Duffy v. Flagg, 279 Conn. 682, 689, 905 A.2d 15 (2006). We must decide, therefore, whether the trial court was legally and logically correct when it decided, under the facts of the case, to impute an ordinary rate of return to an asset that yields less than an ordinary rate of return.

The plaintiff claims that the standard adopted by the Appellate Court for the imputation of investment income is both unsupported by prior case law and essentially impossible to prove. The plaintiff urges us to adopt the standard articulated by the American Law Institute, which provides in relevant part that "[i]n calculating a parent's income, the court may . . . impute an ordinary rate of return to an asset that yields less than an ordinary rate of return. An ordinary rate of return is the prevailing rate of return for secure investments. . . ." American Law Institute, Principles of the Law of Family Dissolution: Analysis and Recommendations (2002) § 3.14(4)(b). We agree and adopt this sensible approach to the imputation of investment income.⁶

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