Saturday, October 8, 2016

Finicky Findings

Lourie v. Lourie, 2016 VT 57

By Amy E. Davis

Husband and Wife married in 1992, had two children together, and separated in 2012. At the time of the final divorce hearing, one child was over 18, and the younger was only a few months shy of her 18th birthday. Parties owned a flooring business together though most of their marriage.

Husband filed for divorce in March 2013, and, two months later, the parties entered into an agreement that addressed spousal support, child support, and business debts. The agreement included a provision that Husband would pay Wife $4,000 per month for support for five years after he paid all of the business and personal debt. This was never incorporated into a temporary order.

By the time the final hearing rolled around, the parties agreed on parental rights and responsibilities, but was divided on the issue of maintenance—mainly, how much support. Wife wanted the pre-divorce agreement of $4,000 per month, but noted that even if the court were to find this was the agreement, the court needed to make an equitable division. Husband did not object to paying support, but thought $4,000 per month was too much.

Following an evidentiary hearing on equitable distribution, the court gave the parties a divorce; awarded the marital homestead (which had no equity) to wife; gave each party the personal property in their possession; required husband to pay off the joint credit cards; ordered husband to turn over their business to wife; ordered husband to transfer a couple of life insurance policies; and finally, awarded wife maintenance of $4,000 per month for five years. The court also awarded wife, based on the separation agreement, an arrears judgment in the amount of $45,855.

Husband appeals claiming that the court abused its discretion by (1) incorporating the separation agreement; (2) awarding Wife an arrears judgment; and (3) awarding the Wife the bulk of the marital estate.

The big issue on appeal is whether the family court erred by incorporating the separation agreement in to the final divorce order without examining the relevant statutory factors. Husband contends that because the court did not conduct a statutory analysis, the court failed to consider his ability to pay the maintenance obligation in the separation agreement.

Husband relies primarily on this case, where the wife appealed the family court’s refusal to allow her to amend her divorce complaint in order to seek maintenance. In that case, the SCOV noted that the family court erred by not allowing the parties an opportunity to present evidence. Also, the family court has discretion to reject a stipulation if it is found to be unfair. The SCOV’s holding in that case notes that “it is imperative” that the family court provide findings as to why it accepts or rejects a stipulation.

In this case, the family court found that the subsequent events and Husband’s current financial circumstances made it difficult, “if not impossible,” for the Husband to comply with a $4,000 per month obligation. However, at the time the parties’ executed the agreement, it was fair, reasonable, and appropriate. The family court further stated that it would not conduct a separate analysis of the statutory factors in regards to maintenance, because it would likely lead to the same result.

The SCOV unanimously agrees that the family court failed to determined whether the parties’ agreement was fair and equitable and thus should incorporated into a final order. On remand, the family court needs to make this determination using the relevant statutory factors.

The SCOV goes on to add that the family court must also address the fact that the separation agreement included child support in the total monthly amount, given the fact that the youngest child was just two months shy of her eighteenth birthday. Because parties do not control a child support order in divorce cases, the family court must make the child support order, and separate it out from the amount of spousal maintenance.

In regards to the amount of arrearages, Husband challenges the award on the basis that the separation agreement was never incorporated into a temporary order by the court. Under this statute, the parties may apply for temporary relief after the divorce is filed, but Wife did not do so in this case. Wife responds by saying the separation agreement was so the parties could avoid litigating the issue of temporary maintenance. Requiring the parties to bring such an action, Wife argues, would undermine the policy of encouraging parties to reach agreements on their own.

The SCOV concludes that although the previously referenced case did not address arrears, the principles apply to the issue of arrears. The family court may not enforce an agreement made in anticipation of divorce without making an independent assessment of the agreement’s fairness under the relevant statutory criteria. Without this holding, a family court could potentially award arrearages on a past-due obligation under an agreement that was too unfair to incorporate into a final order.

In this case, the family court needed to determine if the agreement met the requirements of a contract, and if it was fair and equitable in light of the statutory criteria from the time it was made to the time of the final hearing. If those elements are met, then the agreement creates a debt from one spouse to another. The court found that the parties entered into an enforceable agreement that was “entirely reasonable” at the time it was executed, but also found that Husband could not pay Wife $4,000 per month. Therefore, the SCOV reverses so that the family court may determine at what point the agreement because unfair or inequitable, calculate the amount of debt at that point, and factor that sum into its maintenance and/or property awards. The family court must also determine what portion of that monthly obligation was actually child support, and not spousal maintenance.

Finally, Husband asks the SCOV to review the court’s property award. Husband does not appeal the incorporation of the parties’ agreement in regards to the property distribution. Also, the parties had few assets to divvy up—mostly debt. Nevertheless, the SCOV reverses because the family court can adjust the award based on the arrears determination

Thus, the SCOV reverses and remands for the family court to make additional findings. The only portion that survives the appeal is the decree of divorce.

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