Malkin v. Malkin

613 S.W.3d 122

Karen Abrams MALKIN

v.Reed Lynn MALKIN

No. W2018-01197-COA-R3-CV

Court of Appeals of Tennessee, Western Section, AT JACKSON.

June 19, 2019 Session

FILED October 7, 2019

Lori R. Holyfield, Memphis, Tennessee, for the appellant, Karen Abrams Malkin.

Robert A. Wampler and J. Luke Sanderson, Memphis, Tennessee, for the appellee, Reed Lynn Malkin.

Carma Dennis McGee, J., delivered the opinion of the court, in which J. Steven Stafford, P.J., W.S., and Thomas R. Frierson, II, J., joined.

Carma Dennis McGee, J.

This appeal involves a former husband's fourth petition to reduce or terminate his alimony in futuro obligation since the parties were divorced. When considering the appeal of husband's third attempt, in Malkin v. Malkin , 475 S.W.3d 252 (Tenn. Ct. App. 2015), this Court reversed the trial court's reduction of the award and reinstated the prior alimony obligation. We found that the husband's retirement was objectively reasonable and constituted a substantial and material change in circumstances, but we concluded that the husband failed to prove that the change in circumstances significantly diminished his financial ability to pay alimony or his former wife's need for it. Just months after the Tennessee Supreme Court denied the husband's application for permission to appeal, he filed his fourth petition to reduce or terminate his obligation. The wife filed a counter-petition to increase the award. The trial court granted the husband's petition, again, and reduced the award to less than half of its previous amount. The wife appeals. We reverse and remand for further proceedings.

I. FACTS & PROCEDURAL HISTORY

Reed Lynn Malkin ("Husband") and Karen Abrams Malkin ("Wife") were married in 1978. Prior to the marriage, Wife had worked as a professional ballet dancer and owned a dance studio for a few years. She also worked at a restaurant owned by her father. However, Wife spent a substantial amount of time out of the workforce during the marriage to serve as primary caretaker for the parties' two children. Husband worked as an attorney throughout the marriage. According to Wife, the parties traveled around the world, they bought whatever they wanted, and she never thought about money.

Wife filed for divorce in 1996. The chancery court held a two-day trial in March 1998, and a divorce decree was entered in April 1998. Husband admitted to inappropriate marital conduct. The parties' older child was at or near the age of majority, and Wife was awarded custody of the younger child. The divorce decree did not contain any findings regarding Husband's income, but it contained the following paragraph addressing alimony:

[T]he Court finds, after considering all of the relevant factors set forth in T.C.A. § 36-5-101, such as the length of the marriage, [Wife's] age, [Wife's] education, and other relevant factors, that she is so economically disadvantaged that rehabilitation is not feasible or possible, so that the Court awards [Wife] alimony in futuro in the sum of $3,500 per month, which shall be paid beginning April 1, 1998, and the first of every month thereafter until her death or remarriage[.]

Husband was also ordered to pay $1,500 per month in child support.

In April 2003, five years after the divorce decree was entered, Husband filed his first petition to reduce or terminate his alimony in futuro obligation. Husband alleged that "at the time of the divorce," he was earning a gross income from his "professional corporation" of $2,221,962, and the annual distribution to him from his professional corporation was $744,231. For the most recent tax year, 2002, Husband alleged that his professional corporation had received annual gross income of $882,650, and it distributed gross income to him in the sum of $157,298. Husband alleged that his taxable income had decreased from $736,009 in 1998 to only $90,969 in 2002, for a decrease of 88 percent. Husband argued that this constituted a substantial and material change in circumstances justifying a reduction or termination of his alimony in futuro obligation. He further alleged that Wife "was not fully employed" at the time of the divorce decree and that she had refused to work on a full-time basis since that date.

After a hearing, the chancery court entered an order addressing Husband's petition in January 2004. The trial court found that Husband had a sharp increase in income in 1998 due to the settlement of one case, but his income was not nearly that high in the years before or after that settlement. More importantly, however, the trial court found nothing in the record to indicate that the 1998 income figure was before the original chancellor at the time of the divorce trial in March 1998. The trial court found that Husband's taxable income in the two years prior to the divorce trial equaled $273,000 in 1997 and $271,000 in 1996, and this was the information the court had before it at the divorce trial when it made its original award.

Putting aside the anomaly that occurred in 1998, the trial court found that Husband's taxable income for the five years since the divorce (from 1999 to 2003) ranged between $157,000 and $281,000. Recognizing the "up and down" nature of a law practice, the trial court decided to calculate Husband's average taxable income for the past five years, which equaled $221,894. The trial court determined that this represented an 18 percent decrease in income for Husband from the $271,000 he earned around the time of the divorce.

The trial court also found that at the time of the divorce trial, Wife had shown her expenses to be approximately $6,250 per month. The trial court noted that Wife's current affidavit of income and expenses reflected only $4,705 in expenses, indicating a decrease of 25 percent. Considering Husband's decrease in income and Wife's decrease in expenses, the trial court reduced Husband's alimony obligation by 18 percent, from $3,500 to $2,870 per month effective February 1, 2004. However, the court also ordered Husband to pay a portion of Wife's attorney's fees.

Three years later, in 2007, Husband filed his second petition to reduce or terminate his alimony in futuro obligation. He alleged that Wife had been unemployed "during most if not all of the parties' marriage," at the time of the divorce, and at the time of the last hearing, and he claimed "it was not foreseeable that she would ever be employed." Husband alleged that Wife had recently obtained employment with a ballet school in Nashville and was believed to be earning at least $25,000 per year. He argued that this constituted a substantial and material change in circumstances warranting reduction or termination of his alimony obligation. Wife filed a counter-petition seeking an increase in her alimony obligation.

The second modification proceeding lasted three years. The matter was tried over the course of six days in late 2009. The trial court's order noted the "excessive amount of legal energy, talent, and expenses consumed and invested into this proceeding on both sides." The trial court found that Husband's average taxable income for the past five years was $265,397, nearly as much as he earned at the time of the original divorce hearing ($271,000).¹ The court also found that Wife had "relevant monthly expenses" of $6,200 per month, roughly the same amount she had at the time of the divorce. However, the court found her income to be approximately $1,300 per month, and it found that she was also qualified to receive some social security retirement benefits because she had reached the age of 64. Considering these additional sources of income now available to Wife, the trial court found that the existing alimony award of $2,870 per month should not be disturbed despite the increase in Husband's income and Wife's expenses since the last hearing. Both petitions to modify were denied pursuant to an order entered in April 2010.

Three years later, in May 2013, Husband filed his third petition to reduce or terminate his alimony in futuro obligation. This time, Husband alleged that he had retired in December 2012 and was only drawing social security and pension funds, so he could no longer afford to pay Wife alimony in futuro at the rate of $2,870 per month. After a very brief hearing in December 2013, with the entire transcript spanning only 88 pages, the trial court entered an order granting Husband's petition. The trial court found that Husband had retired at the age of 67 and that his income was limited to $8,000 per month, consisting of $5,500 from a retirement account and $2,500 from social security. The trial court found that "[Husband] was earning approximately $271,000.00 per year at the time of the previous modification of alimony setting that amount at $2,870 per month and he is now earning approximately $98,000.00 per year." As such, the court found that Husband "suffered at least a 2/3's decrease in income and therefore the alimony in futuro heretofore awarded should be modified to the sum of $1,035.00 per month effective January 1, 2014." Wife timely filed a notice of appeal to this Court.

On appeal, we began by examining the type of alimony awarded to Wife by the final decree of divorce:

This case involves an award of alimony in futuro. This type of alimony "is intended to provide support on a long-term basis until the death or remarriage of the recipient." Gonsewski [v. Gonsewski ], 350 S.W.3d [99,] 107 [(Tenn. 2011)] (citing Tenn. Code Ann. § 36-5-121(f)(1) ). Alimony in futuro can be awarded "when the court finds that there is relative economic disadvantage and that rehabilitation is not feasible." Tenn. Code Ann. § 36-5-121(f)(1). In other words, alimony in futuro is appropriate when one spouse "is unable to achieve, with reasonable effort, an earning capacity that will permit the spouse's standard of living after the divorce to be reasonably comparable to the standard of living enjoyed during the marriage, or to the post-divorce standard of living expected to be

...