Stroud v. Stroud

542 N.W.2d 582, 450 Mich. 542

• Court: Michigan Supreme Court
• Decided: October 9, 1995
• Docket: Docket 99774
• Status: Published

Opinions

Per Curiam.

Eight years after the parties were divorced, the plaintiff sought a change in his alimony obligation. The circuit court denied the motion, but the Court of Appeals reversed. Because the circuit court did not err, we reverse the judgment of the Court of Appeals and reinstate the order of the circuit court.

i

The parties were married in 1957 and divorced in 1981. With the consent of the parties, the judgment contained the following provision regarding alimony:

It is further ordered and adjudged that during the joint lives of the parties, but only so long as the defendant shall not remarry, the plaintiff shall pay to the defendant for her support and maintenance the sum of three thousand four hundred dollars ($3,400) per month for a period of five (5) months commencing October 1, 1981 and ending February 28, 1982; and thereafter the sum of twenty-five hundred dollars ($2,500) per month beginning March 1, 1982. Commencing on January 1, 1983, alimony paid by the plaintiff to the defendant shall be increased in accordance with the percentage increase in the cost of living or the percentage increase in plaintiff’s income from his employment (including both annual wages and bonuses), whichever percentage increase is greater. The base year for computation of increase in cost of living, as computed and documented by the United States Department of Labor, Burear [sic] of Labor Statistics, and for computing increase in plaintiff’s income from his employment shall be 1981. All adjustments in alimony referable to the year 1982 shall be paid on a monthly basis in 1983, and thereafter year by year as such increases occur. In the event that the cost of living decreases from the previous year, or in the event that plaintiff’s income from his employment decreases from the previous year, there shall be no reduction to the alimony, and said monthly alimony shall remain the same as in the previous years. Provided, however, at no time after December 31, 1982 shall the total monthly payments exceed thirty per cent (30%) of plaintiff’s gross income from employment including both annual wages and bonuses.

For the purposes of illustration one or the other of the following formulas shall be used to determine increases in alimony:

FORMULA A

Amount of future monthly payment=$2,500 X Consumer price index for previous December

Consumer price index for December, 1981

—, where the consumer price index is the national index published by the United States Department of Labor, Bureau of Labor Statistics for Urban Households, (1967=100).

OR

FORMULA B

Amount of future Plaintiff’s gross income from

monthly payment=$2,500 X employment for preceding year

Plaintiff’s gross income from employment for 1981

—, where gross income from employment includes both annual wages and bonuses.

From and after December 31, 1982, the alimony payments to be made by the plaintiff shall be reduced by one dollar ($1.00) for each three dollars ($3.00) in excess of one thousand dollars ($1,000) per month that the wife may earn as gross income from employment or self-employment. Gross income received by the defendant on an irregular basis shall be attributed to the period during which it was earned or over which it was accrued. The defendant shall at least annually provide the plaintiff with a verified statement of her gross income from employment or self-employment.

If the defendant remarries, the obligation of the plaintiff to make the above payments shall cease on the date of the defendant’s remarriage, but the plaintiff shall be liable for any arrearage. The estate of the plaintiff shall be liable for any arrearage existing at the date of plaintiff’s death.

In 1989, the plaintiff moved for a reduction in his alimony obligation.¹ In the motion and in papers subsequently filed with the court, the plaintiff stated that he was making alimony payments far in excess of the defendant’s needs. For a number of years, the formulas in the alimony provision had yielded an annual payment obligation of $53,460, and his total alimony payments (including the projected amount for 1991) totaled $435,450.

The plaintiff asked the court to consider eleven matters that he characterized as "material changes in circumstances involving the parties”:

(a) the defendant’s financial needs are only slightly more than half the then-current $53,460 annual alimony obligation,

(b) the defendant has an earning capacity of $17,250, but has turned down full-time work in order to protect her alimony rights,

(c) the defendant’s earning capacity, together with her actual income from interest and dividends, comes close to meeting her financial needs,

(d) the plaintiff’s improved financial circumstances, since the time of the divorce, are not the product of the defendant’s recent contributions,

(e) the defendant has inherited money and property,

(f) the defendant has an annual income of $6,000 from savings and dividends that she did not have at the time of the divorce,

(g) since the divorce, the defendant has accumulated an estate worth approximately $262,000,

(h) the defendant has no minor children to draw on her financial resources,

(i) the plaintiff has remarried and now has two small children who need support and education,

(j) the plaintiff’s second spouse has suffered a severe illness that has caused large medical expenses, and

(k) federal tax reform measures have reduced the defendant’s federal tax burden and reduced the plaintiff’s alimony reduction benefit.

The plaintiff further explained that, at the time of the divorce, the parties contemplated that the defendant would need approximately $30,000 per year, and that the alimony formula would yield approximately that amount.

In response, the defendant denied many of the plaintiff’s representations, and argued that the parties intended from the outset that the alimony would somewhat exceed the defendant’s known financial needs.

After hearing the matter, the circuit court denied the motion for modification. In its oral opinion, the court found that it had discretion to modify the alimony agreement, but that such modification is appropriate only where there has been a substantial change of circumstances.

The court then went on to find that there had been such a substantial change, since the plaintiff’s income had doubled, and there had also 'been increases in both the defendant’s income and her wage-earning capacity. However, these changes did not persuade the court that the alimony obligation should be modified. The court stated that both parties "have means more than adequate to meet their respective needs” and that "[t]he continued enforcement of the alimony provision as consented to by the parties will work no undue hardship on the Plaintiff.” The court continued:

Further, considering the fact that the alimony provided at the time of the consent judgment was more than her needs in 1981, and the alimony provided at the time of the consent judgment represented approximately 30% of the Plaintiff’s income in 1981. And the alimony provided [by] the consent judgment represents approximately 25% of the Plaintiff’s present income.

And finally the parties having appeared to have originally agreed on what was in their judgment to be suitable maintenance, notwithstanding their needs, it is therefore the Court’s decision and judgment that the Plaintiff’s motion for reduction is denied, Plaintiff having failed to sustain his burden to grant either a reduction of the present alimony or find the escalator clause in the present judgment to be invalid.

The plaintiff appealed. In an unpublished opinion,² the Court of Appeals determined that the alimony formula was not against public policy, and that the circuit court had authority to modify the alimony award upon a showing of a change in circumstances.³ The Court of Appeals then explained its conclusion that the circuit court had erred:

Finally, we find that the plaintiff met his burden of showing new facts or changed circumstances arising after the divorce judgment to warrant consideration of modification of the alimony provision. [Citation omitted.] For example, in 1989, the amount of alimony was $53,460, almost double the defendant’s $27,000 in annual expenses. At the time of the divorce, the defendant was not working and had not been employed during the marriage. Since the divorce, the defendant has worked as a legal secretary and was offered a full-time position at an annual salary of $17,250. In addition, the plaintiff now has a new family and two young children. Thus, we find that the trial court clearly erred in finding that the plaintiff had failed to meet his burden of showing new facts or changed circumstances since the divorce judgment. On remand, the trial court should consider the defendant’s needs in determining the amount of alimony. [Unpublished opinion per curiam, issued March 9, 1994 (Docket No. 148641), slip op, p 2.]

The defendant has applied to this Court for leave to appeal.

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The Court of Appeals erred in setting aside the judgment of the circuit court. Toward the end of its analysis it stated, "we find that the trial court clearly erred in finding that the plaintiff had failed to meet his burden of showing new facts or changed circumstances since the divorce judgment.” Slip op, p 2. In fact, the circuit court explicitly found that

the pleadings, stipulations, evidence and arguments in this case clearly show there has been a substantial change in circumstances since the judgment was entered including but not limited to the Plaintiff’s income has doubled. The Defendant’s income and her ability to earn has increased.

The Plaintiff has incurred increased expenses. There are now tax ramifications. The cost of living has increased. . . .

[T]he circumstances that have not changed in this matter are the needs of the Defendant and the Plaintiff’s ability to pay.

In saying that the circuit court erred by failing to find "new facts or changed circumstances,” the Court of Appeals was focusing on the circuit court’s failure to find increased earning potential on the part of the defendant. However, that single aspect of the case does not warrant overturning the judgment of the circuit court. The original alimony formula is independent of the defendant’s earning potential, and it is far from remarkable that the defendant now has an earning potential of $17,000 per year. Absent a known impediment to wage-earning capacity or an obligation such as care-provider for young children, many (perhaps most) adults can earn that much money in a year.

As the circuit court observed, the alimony provision found in the original judgment of divorce was agreed upon by the parties. While the circuit court correctly observed that there have been changes in the circumstances of the parties, the original agreement clearly was written with future contingencies in mind. Even though the parties could not have foreseen the exact income levels that were reached during the 1980s, the changes were of a kind that fit neatly within the formulae upon which the parties agreed. Put another way, the changes were not unanticipated changes.

In 1982, the first full year following the judgment of divorce, the plaintiff’s total income was $115,347, and he paid $32,700 in alimony. This represented 28.3 percent of his income. In 1989, the year the plaintiff filed his motion to modify, his income was $362,012 and his alimony payments were $53,460.⁴ That is only 14.8 percent of his income. The projected figures for 1991 (the last year that is reflected in this record) were an income of $184,088 and an alimony obligation that remained at $53,460. This is 29 percent.⁵

Further, the changes of the 1980s were not disadvantageous to the plaintiff. Though the dollar amount of his alimony obligation rose during the 1980s, that increase occurred only as the result of the very favorable situation in which he found himself at his place of employment. While the plaintiff finds the current situation not to his liking, there is no sign that it is working a hardship on him, or causing him difficulties that could not readily have been foreseen at the time of the consent judgment.

It thus appears that the plaintiff’s 1989 motion was actually a tardy attack on the original judgment of divorce. That judgment was agreed to by the parties, and likely reflected a compromise of the parties’ respective positions at the time. For example, it is possible that the defendant accepted less property at the time of the judgment, relying instead on the promise of significant alimony in years to come.

The circuit court found that the financial situation of the parties had changed since 1981, but that those changes did not warrant a change in the alimony obligation. For the reasons above, we conclude that the circuit court did not err.⁶

Accordingly, we reverse the judgment of the Court of Appeals and reinstate the order of the circuit court that denied the plaintiff’s motion to modify. MCR 7.302(F)(1).

Brickley, C.J., and Riley, Mallett, and Weaver, JJ., concurred. Boyle, J., concurred in the result only.

1 Later, the plaintiff filed a first and second amended motion.

2 Unpublished opinion per curiam, issued March 9, 1994 (Docket No. 148641).

3 As explained in Pinka v Pinka, 206 Mich App 101; 520 NW2d 371 (1994). In light of the disposition of this case, we assume, without holding, that the alimony provision in this case is subject to modification. However, we need not elaborate upon that distinction.

4 Under the terms of the divorce judgment, the alimony obligation rises in response to changes in the plaintiff’s "income from his employment (including both annual wages and bonuses).” His total income includes various types of compensation that are not "wages and bonuses.”

5 The fluctuations in the plaintiff’s earnings are caused by the significant bonuses that were paid to him in the late 1980s, in connection with the Joint Operating Agreement. The plaintiff explained to the circuit court:

Because of the unusual facts surrounding the viability of The Detroit Free Press and The Detroit News in the Detroit market and the difficulty of ascertaining whether or not the Joint Operating Agreement would ever be put into effect, The Detroit Free Press established a special Joint Operating Agreement Retention Bonus Plan designed to keep key personnel (Stroud being one) at The Detroit Free Press during the troublesome and uncertain years involving the Joint Operating Agreement. Most of this special bonus was paid to Stroud, in 1988 and 1989.

6 In appellate review of a circuit court ruling in a divorce controversy of this sort, factual findings are upheld unless clearly erroneous, and dispositional rulings are upheld unless the appellate court is left with the firm conviction that the ruling was not fair and equitable in light of the facts. See Beason v Beason, 435 Mich 791, 805; 460 NW2d 207 (1990), Sparks v Sparks, 440 Mich 141; 485 NW2d 893 (1992), and Sands v Sands, 442 Mich 30, 34; 497 NW2d 493 (1993).