Mohen, T. v. Mohen, C. ( 2021 )

J-A01039-21
NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
TIMOTHY MOHEN, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
v. :
:
CHRISTINE MOHEN, :
:
Appellee : No. 835 EDA 2020
Appeal from the Order Entered February 3, 2020
in the Court of Common Pleas of Montgomery County
Civil Division at No(s): No. 2015-10855
BEFORE: BENDER, P.J.E., OLSON, J. and STRASSBURGER, J.*
MEMORANDUM BY OLSON, J.: FILED SEPTEMBER 21, 2021
Appellant, Timothy Mohen, (“Husband”) appeals from the February 3,
2020 order, which amended a January 8, 2020 order and decree that both
dissolved the marriage between Husband and Appellee, Christine Mohen,
(“Wife”) and provided for equitable distribution of their assets. For the
following reasons, we affirm, in part, and vacate, in part. Specifically, we
vacate the portion of the January 8, 2020 order that erroneously charges
Husband with $4,360,158.00 in unaccrued interest on marital assets Husband
fraudulently dissipated from the marital estate. Because this disposition of an
issue raised on appeal alters the overall calculations and distribution of the
equitable distribution award, we remand for the trial court to issue a new order
in accordance with this memorandum.
*Retired Senior Judge assigned to the Superior Court.
J-A01039-21
We provide the following overview of this case as derived from the trial
court’s opinion and certified record. The parties married in 1986 and had
three children together, all of whom are now adults. The parties separated
after 27 years and 9 months of marriage in December 2013. Subsequently,
Husband became engaged to Chelsea Hardy (“Fiancée”), with whom he lives
in Pennsylvania along with their three minor children. Wife resides in New
Jersey.
Both Husband and Wife have accounting degrees. In 1990, Wife left the
paid workforce due to an agreement between the parties that she would tend
to the family while Husband would be the wage earner. As such, Wife’s
present monthly earning capacity is only $1,071.79, while Husband’s monthly
net income is $64,000.00. During the marriage, Husband purchased and
operated various business entities and real estate companies. Between the
parties’ personal and business interests, they amassed marital assets worth
millions of dollars.
On October 4, 2011, Husband had the first of a series of meetings with
an estate attorney to create trusts for the parties’ children and update his
estate plan. Husband did not include Wife in the meetings. In August 2012,
Husband gave Wife a copy of his will, which he had newly executed on August
3, 2012. The will named Wife as the beneficiary of Husband’s estate.
Meanwhile, after a series of extramarital affairs with other women,
Husband began a relationship with Fiancée in mid-2012. In October 2012,
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Wife found suspicious emails and a bill regarding tutoring costs with Fiancée’s
name. Husband denied being in an extra-marital relationship with Fiancée
and told Wife he was helping a woman in Pennsylvania with her daughter’s
tutoring costs.
On October 5, 2012, Husband executed trust documents that
transferred common shares of stock from two of his multi-million-dollar
business entities into trusts for the benefit of the parties’ children, who were
21, 20, and 17 years of age at the time. The corpus of each of the three trusts
was approximately one million dollars. Husband named his business partner
as trustee.
The parties separated on December 1, 2013. According to Wife, she did
not learn about Husband’s creation of the trusts until after they separated.
Around February or March 2014, Wife discovered the trust documents in
Husband’s paperwork alongside a 2012 federal gift tax return, which Husband
filed individually. Wife found that to be unusual because Wife typically
prepared the parties’ taxes and filed them jointly.
On March 17, 2015, Husband changed his will to include Fiancée and
the three minor children he shared with her. Husband filed for divorce from
Wife on May 26, 2015.1 Wife filed an answer and counterclaim. On January
16, 2018, Wife filed a petition for special relief, seeking to set aside Husband’s
1 At some point, Husband filed a lawsuit in New Jersey, where Wife now
resides, in an attempt to declare Wife incapacitated due to her mental health,
but that lawsuit was dismissed.
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October 2012 transfer of marital assets into the three trusts. Wife argued
that Husband took these actions without her knowledge or consent as part of
divorce planning. She averred that the transfer was fraudulent and/or a
dissipation of their mutual marital assets, and the value of the trusts should
be charged against Husband in the parties’ equitable distribution scheme.
Husband filed an answer and counterclaim to the petition, claiming that he
told Wife about the trusts prior to their creation and Wife acquiesced in their
creation. He also asserted that he arranged for the trusts as part of estate
planning, not divorce planning. On April 10, 2018, the trial court conducted a
hearing on Wife’s petition. It deferred ruling on the petition until after the
master’s equitable distribution hearing.
On August 27, 2018, the parties stipulated to the values of certain
marital assets, including the trusts. The parties agreed that the trusts held a
combined asset value of $9,291,372.00. The master conducted a hearing on
December 11, 2018, and issued a report and recommendation on January 3,
2019. Wife timely filed exceptions and requested a hearing de novo before
the trial court.
Prior to the de novo hearing, the trial court granted Wife’s petition for
special relief. Specifically, by way of a June 6, 2019 order, the trial court
deemed Husband’s transfer of marital property into trusts for the children to
be fraudulent and void. As such, the court considered any funds owed or paid
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to the trusts as marital assets and chargeable against Husband in equitable
distribution.
The trial court conducted the de novo equitable distribution hearing on
June 17, 2019. It deferred its ruling until after the parties submitted proposed
findings of fact and conclusions of law. On September 20, 2019, the trial court
entered a divorce decree and equitable distribution order. Wife moved for
reconsideration of the order as to logistics of payment, the failure to explain
its reasoning, and the valuation amount. The trial court granted Wife’s motion
and vacated the September 20, 2019 order and decree.
On January 8, 2020, the trial court entered a new equitable distribution
order and accompanying findings of fact and conclusions of law. The trial
court determined the value of the parties’ total marital estate to be
$31,505,968.00, comprised of $24,418,964.00 in non-business-related assets
and $7,087,004.00 in business-related assets. It awarded Wife 57% of the
non-business-related assets, worth $13,918,809.00. The trial court charged
Wife and Husband with certain assets in their possession. Based on the earlier
finding that Husband dissipated assets from the marital estate, the trial court
charged Husband with $14,642,475.00, representing the stipulated value of
the trusts plus interest. The trial court determined Husband owed Wife
$9,292,283.00, to be paid in 60 days with (1) $3,292,283.00 coming from
Husband’s AXA Account; (2) $3,292,283.00 transferred from Husband’s
retirement account into a retirement account for Wife’s benefit via a qualified
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domestic relations order; and (3) $3,292,283.00 in a cash payment to Wife.
Finally, the trial court awarded Wife 30% of the parties’ business-related
assets, which amounted to $2,126,101.00. As many of the business-related
assets were not liquid, the trial court ordered Husband to pay Wife $17,717.00
in 120 equal monthly installments along with three percent interest.
Wife again moved for reconsideration, this time requesting that the trial
court expand the language of the order to permit Husband to make the
payments to Wife within 60 days from any source, not just the specified
accounts. On February 3, 2020, the trial court granted Wife’s motion and
amended the January 8, 2020 decree to specify that Husband needed to
satisfy the amount “via any accounts/funds necessary.” Amended Decree,
2/3/2020, at 1.
Husband timely filed a notice of appeal. Both Husband and the trial
court complied with Pa.R.A.P. 1925.
On appeal, Husband raises the following issues.
1. Did the lower court err in overriding this Court’s decision in
Balicki v. Balicki, 4 A.3d 654 (Pa. Super. 2010), and in
declining to deduct taxes associated with the sale of Husband’s
business and business real estate holdings?
2. Where Husband created trusts for his children as part of estate
planning that began at the suggestion of his estate planning
attorney [26] months before the parties separated, did the trial
court err in:
a. Concluding that Husband’s creation of trusts for the parties’
children constituted a fraudulent transfer and/or a
“disposition to defeat obligations” under 23 Pa.C.S.
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§ 3505(e) and charging Husband with receipt of the trust
assets in equitable distribution?
b. Valuing the trust assets at $14,642,475[.00] where the
parties had stipulated to a value of $9,291,372[.00] and
where the record contains no basis for the trial court’s
finding that additional interest of $4.36 million had accrued
on the trust assets from December 31, 2016 to April 2019?
c. Declining to deduct taxes from the value of the trust assets
where the [trial] court had charged Husband with receipt of
those assets and where it is undisputed that taxes will be
paid on the trust assets when distributed?
3. Did the [trial] court err in ordering Husband to pay Wife $9.8
million within [60] days despite finding that Husband did not
have even a third of that amount in cash and retirement assets
combined and in fashioning an overall equitable distribution
award that awarded virtually all of the non-business assets to
Wife and left Husband with illiquid and volatile business
interests and, after Husband turns over all of his cash and
retirement assets, a remaining $9 million obligation that is
impossible for him to satisfy?
Husband’s Brief at 6-8 (suggested answers omitted).
Husband challenges the trial court’s equitable distribution award. We
review such challenges using the following well-established principles.
A trial court has broad discretion when fashioning an award of
equitable distribution. Our standard of review when assessing the
propriety of an order effectuating the equitable distribution of
marital property is whether the trial court abused its discretion by
a misapplication of the law or failure to follow proper legal
procedure. We do not lightly find an abuse of discretion, which
requires a showing of clear and convincing evidence. This Court
will not find an abuse of discretion unless the law has been
overridden or misapplied or the judgment exercised was
manifestly unreasonable, or the result of partiality, prejudice,
bias, or ill will, as shown by the evidence in the certified record.
In determining the propriety of an equitable distribution award,
courts must consider the distribution scheme as a whole. We
measure the circumstances of the case against the objective of
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effectuating economic justice between the parties and achieving a
just determination of their property rights.
Moreover, it is within the province of the trial court to weigh the
evidence and decide credibility and this Court will not reverse
those determinations so long as they are supported by the
evidence.
Childress v. Bogosian, 12 A.3d 448, 455-56 (Pa. Super. 2011) (internal
citations and quotations omitted).
The Divorce Code instructs the trial court to divide marital assets
equitably “in such manner as the court deems just after considering all
relevant factors.” 23 Pa.C.S. §3502(a) (setting forth specific factors for
consideration). Marital property generally includes all property acquired by
either party during the marriage and the increase in value of certain
non-marital property during the marriage. See 23 Pa.C.S. § 3501(a).
Regarding valuation of assets, “[t]he Divorce Code does not set forth a specific
method for valuing assets, and consistent with our standard of review, the
trial court is afforded great discretion in fashioning an equitable distribution
order which achieves ‘economic justice.’” Mundy v. Mundy, 151 A.3d 230,
236 (Pa. Super. 2016) (citations omitted). “[I]n determining the value of
marital property, the court is free to accept all, part or none of the evidence
as to the true and correct value of the property.” Id.We also bear in mind that the Divorce Code provides full equity power
and jurisdiction to the court in matrimonial causes. 23 Pa.C.S. § 3323(f). It
authorizes the court to “issue injunctions or other orders which are necessary
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to protect the interests of the parties or to effectuate the purposes of this
part.” Id. The court may grant such “relief or remedy as equity and justice
require against either party” or against certain third persons. Id.
Issue 1: Tax Ramifications of Sale of Business Assets
In his first issue, Husband argues that the trial court disregarded
subsection 3502(a)(10.1) when it calculated the value of the business assets
awarded to Husband. Husband’s Brief at 31. In terms of governing the
equitable division of marital assets, the Divorce Code tasks the trial court with
considering “[t]he Federal, State and local tax ramifications associated with
each asset to be divided, distributed or assigned, which ramifications need not
be immediate and certain.” 23 Pa.C.S. § 3502(a)(10.1).
According to Husband, he could not meet the equitable distribution
payment schedule ordered by the trial court without liquidating his businesses.
Husband’s Brief at 34. Husband contends that liquidating the business assets
would have large tax implications, thereby reducing the value of these assets
by almost two million dollars. Id. He argues that case law requires the trial
court to consider the tax ramifications of a sale of an asset regardless of
whether a sale is likely. Id. at 35, citing Carney v. Carney, 167 A.3d 127(Pa. Super. 2017).
In its findings of fact following the de novo equitable distribution
hearing, the trial court offered the following analysis of Husband’s claim.
The court finds that the parties’ marital property in the form of
Husband’s business interests is illiquid and non-transferable to
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Wife. The court found credible and weighed Husband’s testimony
that there are no potential sales for the above-cited businesses,
and that, the real-estate associated with same is under long-term
lease, and therefore, unlikely to be sold. The court weighed
Husband’s partial interest or co-owner status in the businesses
and likewise weighed Husband’s testimony concerning his role in
said businesses as a chief negotiator with the banks, all of which
makes the sale of his interest in any of the businesses problematic
for equitable distribution purposes. The court likewise weighed the
undisputed fact that 3 of Husband’s 9 business ventures have
failed, and that 3 of the businesses are pass-through companies
when fashioning the equitable distribution award.
The court finds that it was not persuaded by the proposed tax
implications for sale of the businesses and/or associated real
estate given the speculative nature of any such sale, and given
the unknown tax rates at the time of any such future sale. Thus,
the court finds that any tax implications for the sale of any of the
businesses or real estate will not be factored into the value of the
property for equitable distribution.
Findings of Fact, 1/8/2020, at ¶¶ 28-29 (record citations omitted).
Recently, this Court recognized that pursuant to the Divorce Code,
consideration of the tax ramifications of marital assets is mandatory.
Llaurado v. Garcia-Zapata, 223 A.3d 247, 252 (Pa. Super. 2019), citing
Carney, 167 A.3d at 133. “However, as this Court has explained, ‘the statute
requires us only to consider the tax ramifications ... along with numerous
other listed factors, but the Divorce Code does not make a deduction for them
mandatory.’” Llaurado, 223 A.3d at 252, citing Carney, 167 A.3d at 133-134(quotation omitted).
As Husband recognizes, in Balicki and Carney, this Court determined
that the deduction of taxes would be equitable because of the illiquid nature
of one spouse’s award compared to the cash awarded to the other spouse. In
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Llaurado, however, this Court affirmed a trial court’s valuation of retirement
investment accounts, a marital asset, based upon the gross amounts without
deduction of taxes. In doing so, we observed that “[t]he trial court plainly
considered the tax ramifications,” but declined to deduct taxes based upon
the husband’s actions. Llaurado, 223 A.3d at 252. In Llaurado, the husband
unilaterally and prematurely liquidated his retirement investment accounts
without the knowledge or permission of the wife. Although the husband
claimed he did so because of financial dire straits and to meet his support
obligations, he did not demonstrate he made a good-faith effort to find
employment or that he used the proceeds to meet his support obligations.
Accordingly, this Court declined to disturb the trial court’s award. Id.
Likewise, we decline to disturb the trial court’s valuation of Husband’s
business assets in this case. The trial court was fully aware of the illiquid
nature of Husband’s business assets and the potential tax consequences of a
sale. Thus, the court considered the tax ramifications of a sale, as it was
required to do under the law, but elected not to deduct taxes. In a marital
estate as large and complex as this one, Husband has not convinced us that
we should interfere with the trial court’s ample discretion to value the assets.
See Mundy, 151 A.3d at 236. Accordingly, no relief is due.
Issue 2: Trusts
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Husband’s second issue relates to his contentions surrounding the trusts
he created for the parties’ adult children and contains three subparts. We
address each seriatim.
Issue 2a: Fraudulent Transfer
Husband first assails the trial court’s decision to grant Wife’s petition for
special relief and deem Husband’s creation of the trusts as a fraudulent
transfer pursuant to subsection 3505(e) of the Divorce Code. Section 3505
of the Divorce Code is entitled “Disposition of property to defeat obligations.”
23 Pa.C.S. § 3505. It contains a subsection entitled “Encumbrance or
disposition to third parties.” Id. at § 3505(e). That subsection provides that
“[a]n encumbrance or disposition of marital property to third persons who paid
wholly inadequate consideration for the property may be deemed fraudulent
and declared void.” Id.
In the instant case, Husband asserts the creation of the trusts was a gift
to the children in reliance upon the advice of his estate planning attorney that
had nothing to do with the parties’ eventual separation. Husband’s Brief at
37-39. Husband contends his attorney advised him to shelter some of his
assets from estate taxation based upon the prospect that estate tax
exemptions might be lowered. Id. at 41. According to Husband, Pennsylvania
cases construing subsection 3505(e) are inapposite because they involved
transfers made after the parties had separated or a divorce action was
pending, suggesting that the spouse intended to defeat an extant obligation
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to the other spouse.2 Id. at 44. In contrast, Husband stresses that he began
creating the trusts 26 months before the parties separated and completed the
process 14 months before the separation. Id. at 45. Husband emphasizes
that he retained no control over the assets, the trusts were gifts to his
children, and the transfer was a fraction of his substantial estate. Id. at 50.
Husband argues he did not have an equitable distribution obligation to Wife
throughout the marriage and the legislature did not intend courts to examine
retroactively all gifts and transfers made prior to separation. Id. at 51.
The trial court offered the following explanation for its ruling in its
Pa.R.A.P. 1925(a) opinion. The trial court gave great weight to the fact that
Husband had a series of meetings with an estate planning lawyer without Wife
present. Trial Court Opinion, 7/27/2020, at 10-11. The court also emphasized
that, by the time Husband executed the trusts, he had begun a relationship
with Fiancée. Id. at 12. After executing a new will and the trust documents,
Husband gave Wife a copy of the will but did not provide her a copy of the
trust documents. Id. at 11-12. The trial court was skeptical of Husband’s
excuses as to why he did not include Wife in meetings with the estate attorney
and found his testimony to be inconsistent. Id. at 9-11. Husband claimed
they had defined roles: Wife cared for the children while he covered business
duties. Husband believed Wife was not interested in business matters because
2
We observe that notwithstanding Husband’s statement, only one case cited
by Husband actually relies upon subsection 3505(e), and it is a
non-precedential court of common pleas case.
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she was too busy attending to the children. He also claimed that the estate
planning activities were too sophisticated for Wife and her mental capacity
was erratic. On the other hand, Husband admitted Wife was responsible for
handling the parties’ personal taxes, handled many matters pertaining to the
household and children, and was highly functioning in parts of her life. Id.
On several matters, the trial court credited Wife’s testimony instead of
Husband’s. It found Wife’s testimony credible that she did not learn about
Husband’s creation of the trusts until February or March 2014, when she
discovered a 2012 gift tax return filed by Husband individually. Id. at 7-8.
Husband insisted that he had told Wife about the trusts in June 2012 during a
five-to-ten minute walk back from a lunch in Wildwood, New Jersey. Wife
denied that any such conversation occurred, and the trial court found her
denial to be convincing. Id. at 7, 9. Husband also claimed he had a
conversation with Wife at a Houlihan’s Restaurant in 2013 wherein Wife
objected to the appointment of his business partner as trustee. Two of the
parties’ children also testified regarding this conversation. However, the trial
court credited Wife’s testimony that the conversation was about her opposition
to appointment of Husband’s business partner as executor of Husband’s will,
not anything to do with the trusts. Id. at 9-10.
After receiving evidence from both parties regarding the trusts, the trial
court found that Husband did not create the trusts for the purpose of estate
planning and instead created the trusts to dissipate the parties’ marital assets.
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Id. at 7, 11-12. The trial court found that Husband never discussed the trusts
with Wife. Id. Even if he had, in the trial court’s assessment,
[t]here was absolutely no evidence that Wife ever agreed to the
formation of the trusts. That is, even assuming that Wife knew
about the trusts, but opposed the choice of trustee, then Husband
still went forward and formed the trusts, and named that trustee
over Wife’s objection. After assessing and weighing credibility,
the trial court, as fact finder, properly determined that Husband
dissipated marital assets. The facts and equities of the case
mandate such a conclusion.
Id. at 12 (emphasis in original).
The premise of Husband’s argument is that the trial court abused its
discretion by declining to accept Husband’s testimony that he was engaged in
estate planning instead of divorce planning at the time he made the transfers.
The trial court’s analysis relies upon its decision to credit Wife’s testimony and
to reject Husband’s testimony. This credibility assessment is clearly within
the province of the trial court. This Court will not re-weigh the evidence and
disrupt credibility findings supported by the evidence. Childress, 12 A.3d at
456; accord Nagle v. Nagle, 799 A.2d 812, 819 (Pa. Super. 2002) (rejecting
argument that husband transferred his company stock to the parties’ son as
part of a valid estate plan because husband transferred stock without wife’s
knowledge or consent, and concluding that imposition of constructive trust
pursuant to Uniform Fraudulent Transfers Act was warranted).
Furthermore, Husband’s additional arguments are unpersuasive.
Husband maintains that he could not have intended to defraud Wife because
the three-million-dollar trusts paled in comparison to the 10.9 million dollars
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he intended to leave Wife as sole beneficiary of his will. Husband’s Brief at
50. Subsection 3505(e) places no limits on the value of the marital property.
Moreover, Husband’s argument invoking proportionate values ignores the
reality that the property at issue was not solely owned by him; it was marital
property to which Wife also had rights. Marital property includes all property
acquired by either party during the marriage regardless of how the title is
held. 23 Pa.C.S. § 3501(a), (b). Property which a party has sold, granted,
conveyed, or otherwise disposed of prior to the date of final separation must
have been sold, granted, conveyed, or disposed of in good faith and for value
to be excluded from marital property. Id. at § 3501(a)(5); see DeMasi v.
DeMasi, 530 A.2d 871, 885 (Pa. Super. 1987) (holding trusts husband
created for the parties’ minor children in good faith must be included as marital
property because husband did not establish the trusts in exchange for value).
Furthermore, it also does not matter that the beneficiaries of the trusts are
the parties’ children. For purposes of subsection 3505(e), children are “third
persons.” See 23 Pa.C.S. § 3505(e).
A closer question is whether subsection 3505(e) applies to any transfer
throughout the marriage or only post-separation transfers as Husband argues.
In considering the issue, we observe that subsection 3505(e) does not place
any temporal restriction on the declaration of an encumbrance or disposition
of marital property as fraudulent. In fact, the legislature’s use of nonspecific
sweeping terms in subsection 3505(e) suggests that invocation of the
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subsection falls within the trial court’s broad discretion to fashion an equitable
distribution award that effectuates economic justice and achieves a just
determination of the parties’ property rights. See Childress, 12 A.3d at
455-456. Moreover, Husband’s attempt to minimize the transfer as a casual
gift to his children for estate planning purposes long before he filed a divorce
action belies the trial court’s specific rejection of his professed intent. Simply
put, the trial court found that Husband concealed the transfer from Wife as
part of an overall plan to separate from Wife and to dissipate the assets
available to Wife upon their eventual separation.3 Accordingly, in lieu of
voiding the trust transfer, the trial court deemed the value of the trusts as
marital assets to be charged against Husband in equitable distribution. We
discern no abuse of discretion in this determination.
Issue 2b: Interest
Husband next questions the trial court’s valuation of the trusts by
including accrued interest. As discussed, at their creation in 2012, collectively
the trusts were worth approximately three million dollars. The parties
stipulated that on December 31, 2016, the value of the trusts was $9,291,372.
Stipulation, 8/27/2018, at ¶ 3. The trial court’s June 6, 2019 order directed
3 Spousal concealment was often deemed an important factor in adjudicating
the propriety of pre-divorce asset transfers in the cases cited in Husband’s
brief. Generally speaking, proof of concealment or the exclusion of a spouse
from the transfer process militated against finding that such transfers were
proper. Given the trial court’s precise factual assessment in this case, its
decision substantially aligns with the cited appellate precedents from our sister
states.
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that any funds owed and/or paid to the trusts should be considered marital
assets and charged against Husband in equitable distribution. Order,
6/6/2019, at 1. Accordingly, when calculating the amount to charge Husband,
the trial court included $990,945.00 that had been paid to the trusts between
December 31, 2016, and April 2019. Findings of Fact, 1/8/2020, at ¶ 40. The
trial court also found that “additional interest payments” had “accrued in the
amount of $4,360,158[.00], making the total value of the trusts as of April
2019[,] $14,642,475[.00].” Id.Husband asserts that the trial court erred by finding that the trusts had
accrued an additional $4,360,158.00 in interest as of April 2019. Husband
claims this valuation was not based on evidence of record and the trial court
should have applied the parties’ stipulated value without adding additional
interest. Husband’s Brief at 53-55.
The latter part of Husband’s argument is belied by the record. The
stipulation of the parties was simply as to the value of the trusts, not an
agreement that no further payments to or interest accrued on the trusts
should be assessed. See Stipulation, 8/27/2018, at ¶ 3. Pursuant to the June
6, 2019 order, any funds owed or paid to the trusts were to be added to the
value of the trusts. Accordingly, the trial court did not err or abuse its
discretion by not using the stipulated $9,291,372.00 figure.
Husband is correct, however, that the record does not support the trial
court’s addition of $4,360,158.00 in interest. In its Pa.R.A.P. 1925(a) opinion,
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the trial court offered no further explanation for its decision and referred this
Court to its findings of fact and conclusions of law. As noted supra, those
findings indicated that the court included $4,360,158.00 as “additional
interest payments” that “accrued … making the total value of the trusts as of
April 2019[,] $14,642,475.” Findings of Fact, 1/8/2020, at ¶ 40. To support
this finding, the trial court relied upon the following testimony of Wife’s
financial expert, Stephen Juska.
[Wife’s counsel:] With respect to the issue of monies paid to the
trust[s] or [their] beneficiaries, since the additional $482,901[.00
in interest paid to the trusts], have you done a calculation of that
amount?
[Juska:] I have done a calculation of the interest that was due to
the trust[s] from that date through April 2019, correct.
[Wife’s counsel:] And how much was that?
[Juska:] $990,945[.00].
***
[Wife’s counsel:] In addition, have you done a calculation of the
interest due to the trust[s] through maturity in 2035?
[Juska:] Yes, I have.
[Wife’s counsel:] And how much is that?
[Juska:] $4,360,158[.00].
N.T., 6/17/2019, at 16-17.
It is clear from Juska’s testimony that the $4,360,158.00 had not
accrued as of April 2019. Instead, that figure represented the amount of
projected interest that would accrue through the trusts’ maturity in 2035.
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Only $990,945.00 of interest had accrued between December 31, 2016, and
April 2019. Accordingly, we conclude that the trial court’s inclusion of
$4,360,158.00 of interest was manifestly unreasonable and an abuse of
discretion.
Issue 2c: Taxation of Trusts
The third subpart of Husband’s second issue concerns taxation of the
trusts. The trial court declined to deduct taxes from the value of the trusts,
finding that there would be no tax ramifications to Husband or Wife. Findings
of Fact, 1/8/2020, at ¶ 41.4 Husband disagrees, arguing that taxes will need
to be paid upon distribution of the assets regardless of who owns them, which
reduces the value of the asset. Husband’s Brief at 57-58. In his view, failing
to include taxes creates a windfall for Wife because the valuation of the asset
is inflated. Id. Husband maintains that once the court pulled the value of the
assets back into the marital estate and charged Husband the value of the
assets in equitable distribution, the trial court should have considered the
taxes associated with the assets. Id.
Upon review, we discern no abuse of discretion in the trial court’s failure
to deduct taxes from the valuation of the trusts. The trial court’s order did
not change the ownership of the trusts or divest the children of their interests.
Instead, to effectuate economic justice and right Husband’s wrong of
4 Alternatively, the trial court found that any tax ramifications would be too
speculative to address. Based on our disposition, we need not address this
alternate rationale.
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dissipating the assets of the marital estate to create the trusts, the trial court
simply made Husband live with the consequences of his decision to set up the
trusts unilaterally. Because Husband alone made the decision to deplete the
marital estate when he set up the trusts, the court charged Husband for the
value of the corpus of the trusts and any additional accrued value. The trust
distributions would be taxed to the beneficiaries whether Husband and Wife
stayed married or got divorced. Without an actual change of title, neither
Husband nor Wife would pay any taxes now or in the future regarding the
trusts. Accordingly, we affirm this portion of the trial court’s order.
Issue 3: Timing of Payments
In his last issue, Husband argues that because he only had three million
dollars in cash and retirement assets combined, the trial court erred and
abused its discretion by ordering him to pay Wife over three times that amount
— $9,876,849.00 — within 60 days. Husband’s Brief at 59-64. According to
Husband, even after he liquidates his retirement accounts and uses all his
cash, he still would be $6.8 million short. Id. Husband argues that because
the trial court found his minority business interests to be illiquid, it should
have recognized that he did not have the ability to liquidate those interests by
the deadline to pay Wife. Id.
The $9,876,849.00 owed to Wife was derived in part from the trial
court’s valuation of the trusts at $14,642,475.00, which, as discussed above,
erroneously included $4,360,158.00 in unaccrued interest. Our vacation of
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this portion of the decree reduces the amount Husband owes Wife and may
affect the structure of how the trial court ordered the distribution of the
equitable distribution award. Accordingly, Husband’s third issue is moot.
Conclusion
Based on the foregoing, we affirm in part and vacate in part. We vacate
the portion of the order that includes $4,360,158.00 in interest in the
valuation of marital assets Husband fraudulently dissipated and remand for
the trial court to issue a new order in accordance with this memorandum.
Order affirmed in part and vacated in part. Case remanded for issuance
of a new order in accordance with this memorandum. Jurisdiction
relinquished.
Judge Strassburger did not participate in the consideration or decision
of this case.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/21/2021
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