Callahan v. Callahan

         Argued April 18, 2019

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          Laura W. Ray, Hartford, for the appellant (plaintiff).

         Campbell D. Barrett, with whom were Jon T. Kukucka and, on the brief, Johanna S. Katz, Hartford, for the appellee (defendant).

         Alvord, Moll and Pellegrino, Js.

         OPINION

         ALVORD, J.

         [192 Conn.App. 637] In this postjudgment dissolution matter, the plaintiff, Jill Gilbert Callahan, appeals from the judgments of the trial court, rendered on remand from this court, granting a motion to modify alimony filed by the defendant, James Callahan, and issuing additional [192 Conn.App. 638] postjudgment orders. On appeal, the plaintiff claims that the court (1) erred in granting the defendant’s motion to modify alimony, (2) abused its discretion in modifying alimony retroactively, (3) lacked the legal authority to suspend the defendant’s alimony payments to her as a condition of granting her motion for a continuance, (4) erred in determining the effective date of financial orders that this court mandated be reinstated, (5) erred in ordering her to execute certain documents to transfer her interest in the companies owned by the parties, and (6) improperly concluded that it lacked subject matter jurisdiction to require the defendant to endorse two insurance checks. We dismiss as moot the plaintiff’s third claim regarding the suspension of alimony payments and affirm the judgments of the trial court in all other respects.^[1]

          The following facts and procedural history are relevant to our resolution of the appeal. The parties were married in 1987 and raised three children, all adults at the time of the dissolution trial. In 2009, the plaintiff filed a complaint seeking dissolution of her marriage to the defendant. The matter was tried to the court, Munro, J., in March, 2012. On May 8, 2012, the court issued a memorandum of decision rendering judgment dissolving the parties’ marriage on the ground of irretrievable breakdown, and entering property division and alimony orders (May, 2012 dissolution judgment). On June 15, 2012, the defendant filed a motion to open the judgment of dissolution and attendant financial orders, which was granted on November 6, 2012. The court then held an evidentiary hearing and, in a February 27, 2014 memorandum of decision, issued substitute financial orders (February, 2014 decision).

         [192 Conn.App. 639] Both parties filed appeals. This court, on May 5, 2015, issued a decision reversing the trial court’s granting of the motion to open the judgment and remanded the matter

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with direction to reinstate the May, 2012 financial orders. Callahan v. Callahan, 157 Conn.App. 78, 101, 116 A.3d 317, cert. denied, 317 Conn. 913, 116 A.3d 812 (2015), and cert. denied, 317 Conn. 914, 116 A.3d 813 (2015).

          Following this court’s resolution of the parties’ prior appeals, the plaintiff filed, among several motions, a motion for contempt dated July 6, 2015. In her motion, she argued, inter alia, that the defendant had refused to comply with the judgment in that he had failed to pay amounts set forth in the May, 2012 financial orders, plus interest, which she contended had begun accruing in 2012. On May 4, 2016, the court, Hon. Michael E. Shay, judge trial referee, issued a memorandum of decision declining to find the defendant in contempt, in which it concluded that "the effective date for the running of interest is September 8, 2015," the date that, the court determined, the defendant had exhausted all the appellate avenues that had been available to him.

          In November, 2016, the court, Hon. Michael E. Shay, judge trial referee, began hearing evidence on a motion to modify alimony originally filed by the defendant on May 19, 2014, and amended on October 15, 2015. In its memorandum of decision filed August 1, 2017, the court found that the defendant had established a substantial change in circumstances and granted his motion to modify alimony. On August 7, 2017, the plaintiff filed this appeal.

         While this appeal was pending, the court, Diana, J., heard additional motions filed by the plaintiff. On April 3, 2018, the court concluded that it lacked jurisdiction over the plaintiff’s motion requesting that the court order the defendant to endorse two Chubb property [192 Conn.App. 640] damage insurance checks.^[2] On April 10, 2018, the court denied the plaintiff’s motion for contempt regarding the documents necessary to transfer the plaintiff’s interest in companies owned by the parties and issued a remedial order. On April 20, 2018, the plaintiff filed an appeal challenging the April 3 and 10, 2018 orders, which this court treated as an amendment to the original appeal filed on August 7, 2017. Additional facts and procedural history will be set forth as necessary.

          I

         The plaintiff’s first claim on appeal is that the trial court erred in finding that the defendant had established a substantial change in circumstances justifying a modification in alimony. She argues that the trial court erroneously considered evidence showing a change in the defendant’s earnings only from the companies owned by the parties, whereas the dissolution court based its original alimony award on the defendant’s general earning capacity independent of his earnings from the companies. Thus, she argues that the trial court failed to compare "apples to apples ...."^[3] We disagree.

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          The following additional facts and procedural history are relevant to this claim. In 1995, the parties established three companies together, Pentalpha Group, LLC, [192 Conn.App. 641] Pentalpha Funding, LLC, and Pentalpha Capital, LLC. The plaintiff owned 51 percent of each of the three entities and the defendant owned 49 percent. In 2005, a fourth Pentalpha entity was created, Pentalpha Surveillance, of which 100 percent was owned by the defendant (collectively, the companies). The court found that the companies "work in various fields: as an investment advisor, as a trading and brokerage company, as a broker dealer and as an oversight company, all ostensibly in the loan market, particularly working with asset-backed debt."

         In its May, 2012 dissolution judgment, the court ordered the defendant to pay $60,000 per month in alimony, until the death of either party, the remarriage of the plaintiff, or as determined by the court, pursuant to General Statutes § 46b-86 (b). In so ordering, the court stated: "The alimony order is predicated on earnings, including member distributions to the defendant of up to $2,000,000 per year. The court notes that the plaintiff’s valuation expert, Barry Sziklay, concluded that a comparable compensation for the defendant, as a key person operating on Wall Street, would be at least in the [$1 million to $2 million] range annually. Ultimately, in the valuation model that he used, Sziklay attributed 50 percent of the pretax profits to the defendant. For 2010, that resulted in adjusted compensation of $1,976,312. As of the second quarter’s completion for 2011, that adjusted compensation attributed to the defendant was $684,880. The defendant provided no contrary evidence. The court finds this approach reasonable. No evidence was adduced of any increase in liabilities. Accordingly, finding earnings attributable to the defendant in the amount of $2,000,000 gross is conservative, the court adopts it as a finding of fact as to the present earning capacity of the defendant at Pentalpha."

          On May 19, 2014, while the parties’ prior appeals remained pending, the defendant filed a motion to modify his alimony. In that motion, he represented that the [192 Conn.App. 642] companies were "experiencing a cash flow crisis" and that the defendant’s earning capacity at the companies was no longer $2 million. The defendant argued that postjudgment misconduct of the plaintiff, on which the trial court relied in opening the dissolution judgment, had diminished the value of the companies, thereby reducing the earnings from which he pays alimony. The motion was not pursued while the parties’ prior appeals were pending. On October 15, 2015, the defendant filed an amended motion for modification of alimony, again arguing that his income had decreased since the date of dissolution.

          The court began hearing evidence on the defendant’s motion on November 8, 2016. The defendant testified that, taking the four companies together, the cash collected on an annual basis had decreased substantially since the May, 2012 dissolution judgment. As to the potential for other employment, the defendant testified that he did not believe it would be possible for him to leave the companies and get a new job. Specifically, he stated: "The market has taken an invention that I’ve devised— this surveillance, this oversight, to investor confidence. They’ve made me an insider on 140 deals. I can’t go show up and work at some Wall Street bank or some hedge

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fund; they would have to preclude me from the one thing that I know about because I’m the insider."

          Both parties presented expert testimony. The defendant presented the testimony of Attorney Mark Harrison. Harrison testified that he used the compensation methodology set forth in the May, 2012 dissolution judgment, pursuant to which 50 percent of the pretax profits of three of the companies (Pentalpha Funding, LLC, Pentalpha Group, LLC, and Pentalpha Capital, LLC) as shown in the companies’ audited financial statements, was attributed to the defendant as reasonable compensation. Harrison performed the same analysis for the [192 Conn.App. 643] years 2012-2015 to arrive at reasonable compensation attributable to the defendant in the amount of $210,000. He also performed the same analysis including profits from Pentalpha Surveillance, which was omitted from the calculations in the May, 2012 dissolution judgment, to arrive at reasonable compensation attributable to the defendant in the amount of $370,000. The audited financial statements for each of the four companies, on which Harrison relied, also were entered into evidence.

          Harrison testified that the defendant was not earning sufficient money to satisfy his alimony obligations. Specifically, he testified that in order to satisfy the defendant’s obligations pursuant to the May, 2012 dissolution judgment, he would be "not only taking the 50 percent of income out of the company, he’s taking it all out as well as withdrawing the excess capital that was valued in it to get the cash flow to be able to pay his obligations pursuant to the judgment and live his life."

          The plaintiff presented the expert testimony of Sziklay, whose formula attributing 50 percent of the pretax profits of the companies to the defendant was used by the court in the May, 2012 dissolution judgment to reach an earning capacity of $2 million. In his testimony during the hearing on the motion for modification, Sziklay agreed with the numbers used by Harrison to determine 50 percent of the pretax profits of the companies. He disagreed, however, with Harrison’s conclusion that the defendant had an earning capacity of $210,000. According to Sziklay’s December, 2016 testimony, the defendant’s earning capacity of $2 million, which was found by the dissolution court in May, 2012, remained reasonable.

          In its memorandum of decision filed August 1, 2017, the court determined that the defendant had established a substantial change in circumstances due to his lower [192 Conn.App. 644] earning capacity. The court credited Harrison’s testimony that the defendant had been using his personal assets to meet his marital obligations. Finding that Harrison had "used the same basic format that ... Sziklay used at the time of trial," the court relied on Harrison’s calculations using the profits of all four companies. The court found that the defendant had an earning capacity of $370,000 per year, as of January 1, 2016, and ordered the defendant to pay $12,000 per month in alimony until "the death of either party or the remarriage of the plaintiff, or the entry into a civil union by her, whichever shall sooner occur." The court found, with respect to the period of July 1, 2014 through December 31, 2015, that the defendant had an earning capacity of $850,000 per annum and a net income of $489,692. It determined the alimony due for that period to be $24,000 per month.

          On appeal, the plaintiff argues that the court was required to find the defendant’s earning capacity independent of the companies. We disagree.

          "We review the court’s judgment granting a motion to modify alimony payments

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under an abuse of discretion standard. An appellate court will not disturb a trial court’s orders in domestic relations cases unless the court has abused its discretion or it is found that it could not reasonably conclude as it did, based on the facts presented.... In determining whether a trial court has abused its broad discretion in domestic relations matters, we allow every reasonable presumption in favor of the correctness of its action."^[4] (Internal quotation marks omitted.) McRae v. McRae, 139 Conn.App. 75, 80, 54 A.3d 1049 (2012). "[T]he trial court’s findings [of fact] are binding upon this court unless they are clearly erroneous in light of the evidence and the pleadings in the record as a whole.... A finding of fact is [192 Conn.App. 645] clearly erroneous when there is no evidence in the record to support it ... or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." (Internal quotation marks omitted.) Steller v. Steller, 181 Conn.App. 581, 593, 187 A.3d 1184 (2018).

          "[General Statutes § ] 46b-86 governs the modification or termination of an alimony or support order after the date of a dissolution judgment. When, as in this case, the disputed issue is alimony ... the applicable provision of the statute is § 46b-86 (a), which provides that a final order for alimony may be modified by the trial court upon a showing of a substantial change in the circumstances of either party.... Under that statutory provision, the party seeking the modification bears the burden of demonstrating that such a change has occurred.... To obtain a modification, the moving party must demonstrate that circumstances have changed since the last court order such that it would be unjust or inequitable to hold either party to it. Because the establishment of changed circumstances is a condition precedent to a party’s relief, it is pertinent for the trial court to inquire as to what, if any, new circumstance warrants a modification of the existing order." (Citation omitted; footnote omitted; internal quotation marks omitted.) Olson v. Mohammadu, 310 Conn. 665, 671-72, 81 A.3d 215 (2013). In determining whether the moving party has established a substantial change in circumstances, the trial court is "free to credit or reject all or part of the testimony given .... On review, we do not reexamine the court’s credibility assessments." Zilkha v. Zilkha, 167 Conn.App. 480, 489, 144 A.3d 447 (2016).

         The plaintiff argues that the court erred in calculating the defendant’s earning capacity on the basis of the companies’ profits alone, rather than on the defendant’s [192 Conn.App. 646] earning capacity independent of the companies.^[5] "While there is no fixed

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standard for the determination of an individual’s earning capacity ... it is well settled that earning capacity is not an amount which a person can theoretically earn, nor is it confined to actual income, but rather it is an amount which a person can realistically be expected to earn considering such things as his vocational skills, employability, age and health." (Internal quotation marks omitted.) Fritz v. Fritz, 127 Conn.App. 788, 796, 21 A.3d 466 (2011).

         Bearing in mind that a party’s earning capacity is not calculated by reference to amounts the party can theoretically earn, nor is earning capacity fixed at any one moment in a career, we are unpersuaded that the court abused its discretion in grounding its finding of the defendant’s earning capacity on the profits of the companies. The court had before it the defendant’s testimony that he would not be able to obtain a job with a Wall Street bank or hedge fund because the nature of the companies’ business had made him an "insider," and the court found significant that the defendant had not worked on Wall Street in twenty years. Moreover, the transfer of the plaintiff’s interest in the companies [192 Conn.App. 647] to the defendant, which had been ordered by the court in the May, 2012 dissolution judgment, had not yet occurred, which the defendant testified prevented him from selling the companies. Thus, the court was not required to make its finding of the defendant’s earning capacity on the basis of what the defendant might theoretically earn were he to sell the companies he founded and ran for approximately twenty years to pursue limited opportunities for employment in the marketplace.

         We conclude that the court’s factual finding that the defendant’s earning capacity had decreased from $2 million at the time of dissolution to $370,000 at the time of the modification was not clearly erroneous. The court expressly credited Harrison’s testimony and accompanying exhibits showing 50 percent of the pretax profits of the companies as set forth in the companies’ audited financial statements, and the plaintiff’s expert agreed with the numbers used in Harrison’s calculations. Moreover, the court found the defendant’s earning capacity using the same formula that the court used in its May, 2012 dissolution judgment to calculate the defendant’s earning capacity. The court’s findings ...