Windisch, P. v. Windisch, J. ( 2020 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
PATRICIA L. WINDISCH, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
JERRY A. WINDISCH : No. 255 EDA 2020
Appeal from the Order Dated December 23, 2019
In the Court of Common Pleas of Lehigh County Civil Division at No(s):
2015-FC-1430
BEFORE: PANELLA, P.J., McLAUGHLIN, J., and McCAFFERY, J.
MEMORANDUM BY McLAUGHLIN, J.: Filed: November 25, 2020
Patricia Windisch (“Wife”) appeals from the trial court order modifying
the amount of alimony owed to her by Jerry Windisch (“Husband”). Wife claims
the trial court erred in granting the petition to modify, in calculating the new
alimony amount, and in failing to treat as income the debts that Husband
discharged in bankruptcy. We affirm.
Husband and Wife were married for 40 years before separating in 2015.
They reached a settlement agreement in 2017, in which Husband agreed to
pay Wife alimony for 11½ years and the parties agreed that the alimony
amount would be modifiable upon a “significant change in circumstances”:
Alimony – or APL will be modifiable based on a significant
change in circumstances in accordance with the law. And
upon modification, will be calculated in the manner as APL
is calculated under the Rules of Civil Procedure, that is, 40
percent of the difference in the parties’ net incomes. It is
understood that the parties are both nearing retirement
age. Husband is 64 and . . . [W]ife is 65. And they will stop
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working at some point in the foreseeable future. And that
would be a basis for modification at that time.
N.T., 9/18/17, at 9. Pursuant to the agreement, Husband assumed sole
responsibility for all unsecured marital debts, totaling $179,297. Id. at 5; Trial
Court Opinion, filed Feb 10, 2020, at 1 n.1 (“Rule 1925(a) Op.”). The parties
were divorced in June 2019, and the divorce decree incorporated the
settlement agreement.
In May 2019, Husband filed a petition for modification of alimony due to
a substantial and continuing change in income. A divorce master held a
hearing at which Husband testified that he had retired because he had reached
retirement age and his employer was eliminating his position. N.T., 7/31/19,
at 9. He also testified that he had filed for bankruptcy and he would receive a
discharge of the remaining debts he had assumed in the marital settlement,
which amounted to $126,230. Id. at 15-18. However, he said he had paid
down the debts before declaring bankruptcy, and had reaffirmed some debts
after the bankruptcy. Id. at 17-18. In addition, Husband testified that he had
formed a company “to look at opportunities in the future to do something,
although [the business] was primarily set up to help [his girlfriend].” Id. at
19. However, he said the business had not yet generated income. Id. at 29.
In October 2019, the Master recommended, and the trial court
approved, an order that granted Husband’s petition, and reduced Husband’s
monthly alimony to $370. The Master concluded:
Excluding the pension-derived income based upon its
characterization as equitable distribution, the parties’
respective incomes consist of Social Security benefits. Wife
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receives approximately $1,430.00 per month and Husband
receives approximately $2,860.00 per month in such
benefits. The parties then have deductions made for
Medicare benefits which result in net incomes of
approximately $2,150.00 for Husband and $1,225.00 for
Wife. Based upon the parties’ agreement that any
modification would utilize the formula set forth in the old
guidelines of forty percent (40%) of the net difference
between incomes and the fact that the parties’ agreement
regarding post-divorce alimony was made prior to January
1, 2019, it is concluded that Husband’s obligation should be
reduced to $370.00 per month effective June 1, 2019.
Order of Court, filed Oct. 22, 2019, at 1 n.1.
The Master also addressed the debts Husband had discharged in
bankruptcy:
Testimony offered by Husband at the time of the Hearing on
his Petition for Modification of Alimony seemed to lend
credence to the allegations that he in fact incurred
numerous expenses for a girlfriend he was involved with
prior to the parties’ separation. Thus, accepting
responsibility for debts in place at the time of separation
was not entirely benevolent on his part. However, the
parties certainly had truly martial obligations in place at the
time of separation and Husband assumed sole responsibility
for payment of same. While Husband in fact filed for
bankruptcy protection and discharged some of the debts
following the parties’ agreement, he paid a portion of the
debts prior to the bankruptcy filing and affirmed another
portion of the debts so that same in reality survive the
bankruptcy action.
Notwithstanding these debt issues, the parties equitably
divided their assets by agreement at the time of the Hearing
in September, 2017. In addition to division of assets and
liabilities, of paramount importance is the fact that Husband
stated on the record that based upon his age and the status
of his employment with his company at the time of the
Hearing, he anticipated a “forced” retirement in the near
future following that Hearing. Both Husband and Wife were
nearing retirement age at the time of the Hearing and so
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Wife could have been under no illusions that Husband would
likely have paid eleven and one-half (11½) years of
alimony. However, that term was agreed upon by the
parties in the event Husband continued some form of
employment in conjunction with further agreement as to
provision of health insurance coverage for Wife based upon
such employment.
Id.
Wife filed exceptions, which the trial court denied. It explained that the
Master “considered the fact that [Husband] filed for bankruptcy protection
which discharged some of the debts that he assumed as part of the parties’
equitably dividing their assets by agreement.” Order, filed Dec. 20, 2019, at
1 n.1. The trial court found Husband’s retirement provided a reasonable basis
for modifying the alimony amount and concluded that the Master appropriately
“determined the amount of alimony due to [Wife] to be $370.00 per month,
based on the parties’ incomes, which properly did not include [Husband’s]
debt discharged in bankruptcy.” Id. The court explained in its Rule 1925(a)
Opinion that in light of the totality of the circumstances, including the fact that
federal tax law does not treat the discharge of indebtedness in bankruptcy as
income, and because the parties agreed to the division of their assets and
liabilities in the settlement agreement, it did not include the Husband’s
discharged debts as income for purposes of calculating alimony. Wife filed a
timely Notice of Appeal.
Wife raises the following issues:
A. Did the trial court commit an error of law or abuse of
discretion in granting [Husband’s] petition for modification
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of alimony as the totality of the circumstances did not justify
a modification?
B. Did the trial court commit an error of law or abuse of
discretion in calculating the modified amount of alimony as
it failed to consider all relevant factors?
C. Did the trial court commit an error of law or abuse of
discretion in calculating the modified amount of alimony as
it failed to give appropriate consideration to [Husband’s]
discharge of over $125,000.00 in debt?
Wife’s Br. at 4.
Wife first argues that the court erred in granting the petition to modify.
She agrees that, pursuant to the agreement, alimony would be modifiable
based on a significant change in circumstances, and that the parties
anticipated Husband’s retirement. However, she argues that Husband’s
retirement should be viewed in light of the totality of the circumstances, and
that the court failed to consider Husband’s discharge of debt in bankruptcy or
his ownership of a joint business with his girlfriend. She argues that, when the
totality of the evidence is considered, including the joint business and
discharged debts, Husband failed to meet his burden to show a significant
change in circumstances that would justify a modification of the alimony
award.
When interpreting a marital settlement agreement, the trial court is the
sole determiner of facts and absent an abuse of discretion, we will not usurp
the trial court’s fact-finding function. Kraisinger v. Kraisinger, 928 A.2d
333, 339 (Pa.Super. 2007). When reviewing an order interpreting a marital
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settlement agreement, we must decide whether the trial court committed an
error of law or abused its discretion. Id.Because the parties agreed to an alimony award, 23 Pa.C.S.A. § 3105
governs. Egan v. Egan, 125 A.3d 792, 799 (Pa.Super. 2015). Section 3105
provides that “alimony agreements are ‘not [to] be subject to modification by
the court’ unless the agreement contains ‘a specific provision to the contrary.’”
Rosiecki v. Rosiecki, 231 A.3d 928, 933 (Pa.Super. 2020) (quoting 23
Pa.C.S.A. § 3105(c)).
Here, Wife agrees that the agreement permitted modification of the
alimony upon a change in circumstances, including Husband’s retirement.
However, she claims the court erred in finding a change in circumstances. In
its Pa.R.A.P. 1925(a) Opinion, the trial court explained that Husband’s
retirement and reduction in income was a significant change in circumstances,
and although Husband had started a consulting business, it had not yet
generated income:
[T]he evidence established that [Husband] voluntarily
retired from his employment on May 31, 2019. As a result
of [Husband’s] retirement, [Husband] began to receive
Social Security benefits in June 2019 in the amount of
$2,861.00 per month. Furthermore, although [Husband]
has a 50% interest in a consulting business, J&L Business
Consulting, LLC, this venture has not generated any income
to date. In light of the record evidence, this Court properly
found that [Husband] was retired and has no other
significant source of income other than Social Security
benefits. Consequently, this Court appropriately and legally
concluded that there was a significant change of
circumstances which formed the basis for granting the
petition to modify.
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Rule 1925(a) Op. at 4 (footnote omitted).
The court did not commit an error of law or abuse its discretion. Husband
retired, which constitutes a change in circumstances, and the court
permissibly found that his sole income was now his Social Security benefits.
In so finding, the court considered the totality of the circumstances, including
the marital settlement agreement, Husband’s discharge of some debts in
bankruptcy, and the fact that he had started a business through which he may
perform some work in the future but that had not yet provided him any
income.
Wife next claims the trial court erred in calculating the modified award
because it did not consider all relevant factors. She notes her arguments on
this issue are the same as her arguments in support of her claim the court
erred in granting modification, that is, the court failed to consider Husband’s
business with his girlfriend and his discharge of debt in bankruptcy.
23 Pa.C.S.A. § 3701 governs alimony and provides a list of factors a
court should consider when addressing alimony:
(b) Factors relevant.--In determining whether alimony is
necessary and in determining the nature, amount, duration
and manner of payment of alimony, the court shall consider
all relevant factors, including:
(1) The relative earnings and earning capacities of the
parties.
(2) The ages and the physical, mental and emotional
conditions of the parties.
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(3) The sources of income of both parties, including,
but not limited to, medical, retirement, insurance or
other benefits.
(4) The expectancies and inheritances of the parties.
(5) The duration of the marriage.
(6) The contribution by one party to the education,
training or increased earning power of the other party.
(7) The extent to which the earning power, expenses
or financial obligations of a party will be affected by
reason of serving as the custodian of a minor child.
(8) The standard of living of the parties established
during the marriage.
(9) The relative education of the parties and the time
necessary to acquire sufficient education or training to
enable the party seeking alimony to find appropriate
employment.
(10) The relative assets and liabilities of the parties.
(11) The property brought to the marriage by either
party.
(12) The contribution of a spouse as homemaker.
(13) The relative needs of the parties.
(14) The marital misconduct of either of the parties
during the marriage. The marital misconduct of either
of the parties from the date of final separation shall
not be considered by the court in its determinations
relative to alimony, except that the court shall
consider the abuse of one party by the other party. As
used in this paragraph, “abuse” shall have the
meaning given to it under section 6102 (relating to
definitions).
(15) The Federal, State and local tax ramifications of
the alimony award.
(16) Whether the party seeking alimony lacks
sufficient property, including, but not limited to,
property distributed under Chapter 35 (relating to
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property rights), to provide for the party's reasonable
needs.
(17) Whether the party seeking alimony is incapable
of self-support through appropriate employment.
23 Pa.C.S.A. § 3701(b).
As we explained in the preceding issue, the court properly considered
the totality of the circumstances, and did not abuse its discretion, when
modifying the alimony. We similarly conclude that the court did not abuse its
discretion in calculating the alimony amount. Contrary to Wife’s contentions,
the court considered all relevant factors, including Husband’s new business
and his discharge in bankruptcy. The court simply viewed those factors
differently than Wife contends it should have. However, because the new
business has not generated income yet, and federal law does not treat a
discharge in bankruptcy as income, we cannot say the court abused its
discretion or committed an error of law in setting the new alimony amount.
In her final claim, Wife claims the trial court erred in failing to consider
the debts Husband discharged in bankruptcy as income. She notes the court
did not consider the discharged debts as income to Husband and did not factor
it into the court’s analysis in modifying alimony. She argues that, although
the Internal Revenue Code states discharged debt is not included in gross
income for federal tax purposes, it does not govern whether it may be included
for purposes of determining an alimony obligation.
The court concluded it did not err in not including the discharged debt
as income for calculating alimony:
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[Wife] argues that the discharged debt in bankruptcy should
have been included as income attributable to [Husband] to
establish the modified amount of alimony. Specifically,
[Wife] contends that [Husband] should be attributed income
in the amount of $126,230.00, representing a discharge of
unsecured debt through a bankruptcy proceeding. This
argument has no legal merit.
In the within matter, the evidence established that at the
time of equitable distribution, [Husband] exonerated [Wife]
of all unsecured marital debt, namely $179,297.00. Of this
total debt, [Husband] paid off $53,067.00 prior to filing for
bankruptcy. In addition, [Husband] affirmed a portion of the
debts, effectively having those debts survive the bankruptcy
action. [The trial court] recognize[d] that discharge of
indebtedness due to insolvency for a Chapter 11
Bankruptcy, pursuant to Title 11 of the United States Code,
is not considered income by the Federal Internal Revenue
Service. [It] found, based on the fact that the parties agreed
to the division of their assets and liabilities at the time of
the Settlement Agreement, and that it would be inconsistent
with federal bankruptcy law to consider the discharge of
debt to be income, that the discharge of the debt was not
income for purposes of calculating alimony. In light of the
totality of the circumstances, [the court] appropriately
concluded that the discharged debt should not be included
in the calculation of the alimony obligation.
1925(a) Op. at 4-5.
Wife claims it was error to apply the federal income tax law in
determining the discharged debt was not income. She notes that federal tax
law is not “the [a]uthority in determining a Party’s income under the Domestic
Relations Code.” Wife’s Br. at 18.
Wife relies on Darby v. Darby, 686 A.2d 1346 (Pa.Super. 1996). There,
the Court was considering whether a substantial one-time payment that a
father received in settlement of a tort action was properly income for purposes
of determining the amount he owed in child support. Id. at 1348. The father
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had argued that the court should not consider the settlement as income for
support purposes because federal law did not treat it as income for tax
purposes. We pointed out that the statutory definition of “income” for
purposes of support explicitly included “discharge of indebtedness,” and
explained that tax law was not a basis for overriding that statutory definition:
We are not persuaded that the tax definitions of income are
controlling with regard to defining income for purposes of
support. Tax law contains many preferences and definitions
for fiscal and other purposes which have no relationship to
support. We specifically have held that taxable income is not
the same as net income used to determine support
obligations. See Flory v. Flory, 364 Pa.Super. 67, 527 A.2d
155 (1987) (it is actual income and not taxable income
which constitutes the basis for calculating support).
Moreover, the support law contains no reference to tax law.
Accordingly, we reject appellant's assertion that federal or
Pennsylvania tax treatment of personal injury awards is
persuasive with respect to classifying money for support
purposes.
Id. at 1348-49.
Unlike the court in Darby, here the court was determining an alimony
award, not a child support award, and the statutory definition of “income”
does not govern alimony. That definition appears in 23 Pa.C.S.A. § 4302,
which provides definitions for Chapter 43 of Domestic Relations Code,
“Support Matters Generally.” That chapter does not apply to alimony, as the
Divorce Code is in Chapters 31 through 39 of Title 23. See 23 Pa.C.S.A. §§
3101, 3701.
Moreover, here we are concerned with the application and enforcement
of a marital settlement agreement, and Wife has not identified anything that
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requires the court to consider the discharge of a debt as income for purposes
of modification of alimony. In this context, we do not find fault in the trial
court’s examination of the totality of the circumstances, including federal tax
law and the parties’ intention in dividing their assets and liabilities, to
determine not to include the discharged debts as income to Husband. See
Stamerro v. Stamerro, 889 A.2d 1251, 1261 (Pa.Super. 2005) (approving
trial court’s reference to “relevant Divorce Code provisions” and “purpose and
attendant circumstances” of marital settlement agreement, to determine
relevant sources of income for purposes of modification of alimony). The trial
court did not abuse its discretion in concluding the discharged amount was
not additional income, and, therefore, not including it in Husband’s income
when determining alimony.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 11/25/20
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