Opinion
No. C3-99-1916.
Filed August 29, 2000.
Appeal from the District Court, Ramsey County, File No. F08825378.
Kathleen M. Picotte Newman, John A. Mack, Larkin, Hoffman, Daly Lindgren, Ltd., (for appellant)
William F. Forsyth, Henson Efron, P.A., (for respondent)
Considered and decided by Halbrooks, Presiding Judge, Davies, Judge, and Peterson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).
UNPUBLISHED OPINION
Appellant husband challenges the district court's order (1) denying his motion to terminate or modify his permanent spousal-maintenance obligation; (2) ordering a cost-of-living adjustment to his spousal-maintenance obligation; (3) requiring him to secure his spousal-maintenance obligation with life insurance or a lien against his estate; and (4) awarding respondent wife $15,000 in attorney fees. By notice of review, respondent wife argues that the district court erred by removing the cost-of-living-adjustment provision from the judgment. We affirm in part and reverse in part.
FACTS
In June 1989, the 28-year marriage of appellant-husband Garry A. Pistoria and respondent-wife Gail Diane Pistoria was dissolved by a stipulated judgment. At the time of the dissolution, husband's gross annual income as a vice-president at Harvest States, Inc., was $157,682, and his monthly living expenses were $5,354. Wife's annual income as a part-time sales consultant for Dayton's was $3,585, and her monthly living expenses were $4,378.
Pursuant to the judgment, each party received marital property valued at $423,465.60. Husband also received nonmarital property valued at $477,000. The parties also received equal interests in husband's Harvest States retirement plan, which were valued at $157,217 each. Wife was awarded $3,100 per month in permanent spousal maintenance, with a reduction to $3,000 per month in October 1991. The maintenance award was subject to cost-of-living adjustments and was to continue until wife's "death or remarriage, whichever shall first occur." The judgment also required husband to "maintain life insurance on his life with a minimum death benefit of $125,000.00, with [wife] named as beneficiary thereof." This obligation was "co-extensive only with the obligation of maintenance." Cost-of-living adjustments have increased the monthly maintenance award to $4,031.66.
In 1997, wife became eligible to receive monthly payments from the Harvest States retirement plan, and although she did not begin receiving benefits, husband moved to terminate or reduce maintenance on the ground that wife was eligible to receive the benefits. The district court found: "The retirement plan was an asset of the parties and designated property by the Decree. All divisions of real and personal property are final." The court concluded that there was no change in circumstances justifying a reduction of spousal maintenance and denied husband's motion. This court affirmed the district court in an unpublished opinion. Pistoria v. Pistoria, No. C3-97-1541 (Minn.App. Apr. 21, 1998).
After husband's 1997 motion, Cenex purchased Harvest States, and an option for a lump-sum distribution from the retirement plan became available as an incentive for senior management to retire. On December 31, 1998, husband retired from Cenex Harvest States and received a $2,444,094 lump-sum distribution from the retirement plan. From this amount, $26,184 was deducted for Medicare taxes, $219,192 was rolled into an IRA, and $100,000 was placed in a certificate of deposit. The remaining $2,098,718 was invested in an interest-bearing account. When he retired, husband was earning approximately $373,000 per year. Wife received a $646,284 lump-sum distribution from the retirement plan, which was placed in an IRA.
In July 1999, husband moved to terminate or reduce his maintenance obligation, arguing that his retirement constituted a substantial change in circumstances that rendered the maintenance obligation unreasonable and unfair. Husband also moved to eliminate his obligation to secure maintenance with life insurance and to eliminate the cost-of-living-adjustment provision from the judgment. Wife filed a responsive motion seeking attorney fees.
In support of his motion, husband submitted an affidavit detailing his monthly living expenses, which totaled $9,157 per month. He also submitted the affidavit of Thomas Harjes, a certified public accountant. Harjes's affidavit stated that husband's 1999 income, before paying spousal maintenance and taxes, would be approximately $140,000, which was an 11.1% decrease from his $157,062 income at the time of the dissolution and a 53% decrease from his income at the time of the 1997 modification motion. Harjes estimated that husband's net monthly income for 1999 would be $9,299.
Wife submitted an affidavit listing her monthly living expenses, which totaled $6,327 per month. She also submitted the affidavit of Richard C. Berning, a certified public accountant, stating that husband's 1999 income, before paying spousal maintenance and taxes, would be approximately $268,018. Berning estimated that husband's 1999 income after paying taxes and maintenance would be $150,888, or $12,547 per month. Berning estimated that wife's net income for 1999, including maintenance, would be $47,472, or $3,956 per month. Berning opined:
I have projected [wife's] net cash flow and use of her retirement assets. This schedule is based on the premise that she will not receive spousal maintenance and must begin to immediately invade her retirement assets to meet her monthly living expenses as proposed by [husband]. Based on the assumptions listed on that schedule, [wife's] retirement assets will be entirely depleted at age 72. Other than social security and a minimal amount of investment income, she would have no source of income after the age of 72.
The district court denied husband's motion to terminate or modify his spousal-maintenance obligation. The court ordered that husband's maintenance obligation "remain in the current amount of $4,031.66 until one of the triggering events set forth in the original Decree occurs or until further Order of the Court." The court denied any further maintenance increases by way of a cost-of-living adjustment and ordered that the provision of the decree requiring cost-of-living adjustments be deleted. The court also ordered that husband's obligation to maintain life insurance on his life with a minimum death benefit of $125,000 would continue, but permitted husband to convert this obligation to a lien against his estate in a form satisfactory to wife. Finally, the court ordered husband to pay wife $15,000 for her attorney fees.
DECISION
A. Modification of Permanent Spousal Maintenance
Generally, the decision whether to modify a spousal maintenance award is within the discretion of the district court. Claybaugh v. Claybaugh, 312 N.W.2d 447, 449 (Minn. 1981). "Maintenance awards are not altered on appeal unless the district court abused its wide discretion." Hecker v. Hecker, 543 N.W.2d 678, 680 (Minn.App. 1996) (quotation omitted), aff'd, 568 N.W.2d 705 (Minn. 1997). A reviewing court will find an abuse of discretion only if the district court reaches "a clearly erroneous conclusion that is against logic and the facts on record." Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984).
A spousal maintenance order may be modified upon a showing of substantially increased or decreased earnings of a party or substantially increased or decreased need of a party, either of which makes the terms unreasonable and unfair. Minn. Stat. § 518.64, subd. 2(a) (Supp. 1999). A party seeking modification of spousal maintenance has the burden of showing not only a substantial change in circumstances but also that the change makes the previous maintenance award unreasonable and unfair. Hecker, 543 N.W.2d at 709.
When courts consider a maintenance modification, the parties' stipulation carries great weight. Cisek v. Cisek, 409 N.W.2d 233, 236-37 (Minn.App. 1987) (district court should only reluctantly alter terms of stipulation governing maintenance), review denied (Minn. Sept. 18, 1987). In Beck v. Kaplan, 566 N.W.2d 723, 726-27 (Minn. 1997), the supreme court held that it was neither unreasonable nor unfair to hold the parties to their original, negotiated, permanent-maintenance agreement because at the time the agreement was reached, it undoubtedly balanced the parties' compromised interests. In Beck, the supreme court acknowledged that a stipulation for permanent maintenance does not, without an affirmative waiver, preclude a later modification. Id. at 726. But the Beck court emphasized:
When a stipulation fixing the respective rights and obligations of the parties is central to the original judgment and decree, the district court considering the modification motion must appreciate that the stipulation represents the parties' voluntary acquiescence in an equitable settlement. Claybaugh v. Claybaugh, 312 N.W.2d 447, 449 (Minn. 1981). In that regard, we have cautioned the district court to exercise its considerable discretion carefully and only reluctantly when it is faced with a request to alter the terms of an agreement which was negotiated by the parties. Claybaugh, 312 N.W.2d at 449 (citing Sieber v. Sieber, 258 N.W.2d 754 (Minn. 1977)); Kaiser v. Kaiser, 290 Minn. 173, 179, 186 N.W.2d 678, 683 (1971).
Id.
Husband makes several arguments why the district court abused its discretion by determining that the changes in the parties' financial circumstances were not substantial and that the changes did not render his existing maintenance obligation unreasonable and unfair. These arguments include that (1) husband's income has substantially decreased since the entry of judgment; (2) the district court erred when it found that husband has an earning capacity of more than $373,000 per year; (3) husband's expenses have substantially increased since the entry of judgment; (4) wife's income has substantially increased since the entry of judgment; (5) husband lacks sufficient means to pay spousal maintenance; (6) wife has sufficient means to meet her reasonable expenses; (7) income from the retirement plan is not yet available for consideration for spousal maintenance; and (8) the district court erroneously determined that a permanent maintenance award is not subject to modification.
Several of these arguments appear to be based on a failure to understand the rationale for the district court's decision or on a failure to understand that a maintenance modification is not required simply because a substantial change in circumstances has been demonstrated. The district court's basis for denying husband's motion to terminate or modify his maintenance obligation was not that husband failed to demonstrate a substantial change in circumstances. The district court, instead, found:
Nothing in the change of circumstances makes the terms of the original Decree unreasonable and unfair when one compares the parties' respective incomes and needs at the time of the original Decree with their present circumstances.
Given this finding, it does not matter that the district court did not explicitly determine whether the change in circumstances was a substantial change. Even when a substantial change in circumstances occurs, maintenance modification is only permitted when that change makes the terms of the existing maintenance order unreasonable and unfair. The district court's order describes, in detail, the changes in income and expenses that the parties have experienced since the dissolution. The court was simply not persuaded that these changes made husband's maintenance obligation unreasonable and unfair.
The district court's order was further based on the fact that the existing maintenance obligation "was the result of a stipulation at a time when both parties were represented by Counsel." The court went on to explain that the language of the decree provided for permanent maintenance that was to continue until [wife's] death or remarriage. There is no mention in that Decree as retirement of [husband] being designated as a triggering event for terminating spousal maintenance.
It is evident from this explanation that the court did not deny husband's motion because it believed permanent maintenance could not be modified. The court denied the motion to modify because the parties had agreed that maintenance would be paid until wife dies or remarries, and neither of these events had occurred. The court's order demonstrates that when considering husband's motion, the district court carefully exercised its considerable discretion with the reluctance that the supreme court cautioned district courts to use when faced with a request to alter the terms of an agreement the parties had negotiated.
The district court did not abuse its broad discretion when it concluded that the existing maintenance obligation is not unreasonable and unfair. Husband's circumstances changed when he retired. But the district court's findings indicate that the decision to retire was voluntary; nothing in the record indicated to the district court that husband could not have continued working at Cenex Harvest States if he had chosen to do so. The court found:
[Husband] did not exercise bad faith in seeking early retirement nor did he retire in order to avoid paying maintenance. He is, however, fully employable and capable of earning a salary at the level at which he was earning at the time of retirement.
The fact that husband did not retire for any improper reason does not alter the fact that his retirement was voluntary.
Husband argues that in denying his modification motion, the district court erroneously imputed $373,000 of income to him and that the decision to impute income is inconsistent with the finding that he retired in good faith. But the district court did not impute income to husband. The court found that husband could have continued working at Cenex Harvest States earning at least the $373,000 salary he was earning when he retired. This finding indicated that husband's retirement was voluntary. The court did not impute this salary to husband to find that his postretirement income is $373,000. The court found:
[Husband] can be expected to earn from his investments, by his own admission, in excess of $138,000.00, giving him a minimum combined gross income for 1999 and future years (excluding bonuses and other apparent one-time income) of at least $140,000.00. Counting bonuses and other income from cattle operations, sale of capital assets or real property, etc., [wife] believes that [husband's] income in 1999 will be in the area of $268,018.00 in 1999.
Husband argues that his expenses have increased substantially since the dissolution, and he lacks sufficient means to pay maintenance. The district court did not specifically find the amount of husband's expenses. But even if we subtract from husband's claimed expenses only those expenses that the district indicated it would not allow and acknowledge that husband cannot pay the maintenance award and all of his expenses with a $140,000 income, we cannot conclude that the district court abused its discretion under the standard set in Beck.
In Beck, during the 19 years since the dissolution, the maintenance obligor's income had greatly increased, the cost of living had increased 278%, and the $1,800 monthly maintenance award had never been increased. 566 N.W.2d at 726. On these facts, the supreme court held that the district court abused its discretion by increasing the permanent spousal maintenance award to $4,000 and adding a cost-of-living adjustment. Id. at 726-27.
In light of the fact that it was neither unreasonable nor unfair in Beck to hold the parties to their original negotiated agreement, the district court here did not abuse its discretion by concluding that it is neither unreasonable nor unfair to hold the parties to their original, negotiated agreement. Husband was aware of his maintenance obligation when he decided to retire. He, nevertheless, chose to retire to take advantage of a good opportunity. That was his choice to make, and the district court recognized that he made it in good faith. But having made that voluntary, informed decision, he cannot now claim that it is unreasonable or unfair to hold him to the maintenance agreement he made as part of the broader, negotiated, dissolution settlement.
When considering whether the district court abused its discretion, we also find it significant that reducing the maintenance award would force wife to begin using her retirement funds to meet her current expenses. This would require wife to change her plan to delay using her retirement funds until age 65 simply because husband decided to retire early. And, more significantly, the district court found that if wife began using her retirement assets as suggested by husband, she would run out of money by age 72.
Husband also argues that he has not yet received income from his retirement assets equal to the value of the retirement assets he was awarded by the judgment. Therefore, he contends, requiring him to use retirement assets to pay maintenance constitutes a redistribution of marital property, which is not allowed under Kruschel v. Kruschel, 419 N.W.2d 119 (Minn.App. 1988). In Kruschel, the judgment awarded the maintenance obligor the sole right to and interest in his pension plan, and several years later, the obligor began receiving monthly pension benefits. Id. at 120-21. The obligor argued that
[b]ecause the value of a vested pension plan is based entirely on the future stream of income it represents, * * * the effect of requiring him to pay maintenance out of his pension benefits is to modify the property award after the time for appeal of that award has expired.
Id. at 121. This court agreed and held that until the sum of the monthly benefits exceeded the value of the pension interest awarded in the dissolution judgment, the monthly benefits were considered to be a distribution of the property award. Id. at 123.
Unlike the obligor in Kruschel, husband has received a lump-sum distribution from his retirement plan. The value of this lump sum is not based entirely on the future stream of income it represents; the lump sum has a current value that is separate from the future stream of income it can produce. Because husband has not shown that it will be necessary to use a portion of the retirement assets he received in the dissolution to pay his current maintenance obligation, Kruschel did not require the district court to modify maintenance.
B. Securing Maintenance Award with Life Insurance
Husband also argues that the district court abused its discretion by ordering him to secure his spousal maintenance obligation with life insurance or a lien against his estate. But the district court did not consider a motion to require husband to secure his maintenance obligation; it considered husband's motion to eliminate an existing obligation to secure maintenance with life insurance. The original stipulated judgment required husband to "maintain life insurance on his life with a minimum death benefit of $125,000.00, with [wife] named as beneficiary thereof." The district court found that because the insurance husband used to secure maintenance had been obtained through his employer and was no longer available, it is appropriate to permit husband to instead secure maintenance with a lien against his estate.
In O'Brien v. O'Brien, 343 N.W.2d 850, 853 (Minn. 1984), the supreme court concluded that a maintenance award should be secured by life insurance where the maintenance obligee's employment prospects were poor and unlikely to improve and the dissolution decree provided that maintenance would terminate at the obligor's death. Because wife's prospects for meeting her expenses through employment income are poor, wife will not reach retirement age for several years, and the security provision was part of the parties' stipulated agreement, the district court did not abuse its discretion by continuing to require security for the maintenance obligation.
C. Cost-Of-Living-Adjustment
Husband argues that the district court abused its discretion by ordering a cost-of-living adjustment to the spousal-maintenance obligation, effective May 1, 1999. Wife argues that the district court properly allowed the May 1, 1999, cost-of-living adjustment, but by notice of review, she argues the court erred by removing the cost-of-living-adjustment provision from the original judgment without making sufficient findings.
To obtain a cost-of-living adjustment to a maintenance award, a maintenance obligee must serve notice of the application for an adjustment on the obligor. Minn. Stat. § 518.641, subd. 2(a), (b) (Supp. 1999). If the obligor fails to request a hearing on the issue of whether the adjustment should take effect, the adjustment may be made. Minn. Stat. § 518.641, subd. 2(c). If the obligor requests a hearing, the district court's discretion "is limited to determining whether all or part of the cost-of-living adjustment should not take effect." Braatz v. Braatz, 489 N.W.2d 262, 264 (Minn.App. 1992), review denied (Minn. Oct. 29, 1992). "The obligor has the burden of showing why a cost-of-living adjustment should be reduced." Id.
If, at a hearing pursuant to [Minn. Stat. § 518.641], the obligor establishes an insufficient cost of living or other increase in income that prevents fulfillment of the adjusted maintenance * * * obligation, the court may direct that all or part of the adjustment not take effect. If, at the hearing, the obligor does not establish this insufficient increase in income, the adjustment shall take effect as of the date it would have become effective had no hearing been requested.
Minn. Stat. § 518.641, subd. 3 (1998).
The district court's finding regarding husband's income indicates that the court could only find that husband's income was in a range that ran up from $140,000. Because the evidence presented to the district court did not permit the court to determine husband's income with any greater precision, husband failed to meet his burden of establishing an insufficient increase in income. The district court did not abuse its discretion by permitting the cost-of-living adjustment to take effect as if no hearing had been requested.
Wife argues that the district court erred when it ordered the cost-of-living-adjustment provision removed from the judgment without expressly finding that husband's occupation or income does not provide for a cost-of-living adjustment. We agree. Minn. Stat. § 518.641, subd. 1 (1998), requires that an order for maintenance include a biennial cost-of-living adjustment. A court may waive this requirement "if it expressly finds that the obligor's occupation or income, or both, does not provide for cost-of-living adjustment." Id. (emphasis added).
"Expressly" means, "In an express or a definite manner; explicitly." The American Heritage Dictionary of the English Language 647 (3d ed. 1992). "Explicit" means, "Fully and clearly expressed; leaving nothing implied." Id. at 645. The district court did not make an express finding as required by the statute. The court only found:
Further [cost-of-living] adjustments, in light of [husband's] retirement, do not appear either necessary or appropriate and the amount of future maintenance is fixed at the current amount of $4,031.66.
This finding does not explicitly address whether husband's occupation or income provide for a cost-of-living adjustment. Although the district court may have meant to imply that because husband has retired, he is no longer in an occupation that provides for a cost-of-living adjustment, a finding that only implies a meaning is not an express finding. We, therefore, reverse the removal of the cost-of-living adjustment from the judgment.
D. Attorney Fees
Husband argues that the district court erred by awarding wife $15,000 in attorney fees. We agree. Under Minn. Stat. § 518.14, subd. 1 (1998), the court shall award attorney fees, costs, and disbursements in an amount necessary to enable a party to carry on or contest the proceeding, provided it finds:
(1) that the fees are necessary for the good-faith assertion of the party's rights in the proceeding and will not contribute unnecessarily to the length and expense of the proceeding;
(2) that the party from whom fees, costs, and disbursements are sought has the means to pay them; and
(3) that the party to whom fees, costs, and disbursements are awarded does not have the means to pay them.
Nothing in this section precludes the court from awarding, in its discretion, additional fees, costs, and disbursements against a party who unreasonably contributes to the length or expense of the proceeding.
The district court is required to make findings on the statutory factors. Richards v. Richards, 472 N.W.2d 162, 166 (Minn.App. 1991).
The district court ordered husband to pay $15,000 of wife's attorney fees without finding that wife does not have the means to pay her attorney fees. And nothing in the court's findings indicates that the fees were awarded because husband unreasonably contributed to the length or expense of the proceeding. Because the district court did not make the required findings, we reverse the attorney fee award.