COURT OF
APPEALS DECISION DATED AND
RELEASED January
11, 1996 |
NOTICE |
A party may file with the Supreme Court a petition to review an
adverse decision by the Court of Appeals.
See § 808.10 and Rule
809.62, Stats. |
This opinion is subject to further editing. If published, the official version will appear in the bound
volume of the Official Reports. |
No. 93-0913
STATE OF WISCONSIN IN
COURT OF APPEALS
DISTRICT IV
DEBRA
A. HOFFMAN,
Petitioner-Respondent,
v.
JOHN
C. HOFFMAN,
Respondent-Appellant.
APPEAL
from a judgment and an order of the circuit court for Sauk County: ANDREW P. BISSONNETTE, Judge. Affirmed in part; reversed in part and
cause remanded with directions.
Before
Eich, C.J., Gartzke, P.J., and Sundby, J.
SUNDBY,
J. Debra A. Hoffman began this divorce action January 2,
1992. The trial court entered judgment
ordering her former husband, John C. Hoffman, to pay Debra maintenance
indefinitely and to pay the parties' tax on their income from January 1, 1992,
to October 1, 1992. John moved the
trial court to reconsider its determinations.
The
court reduced John's maintenance obligation from $1,000 to $850 per month but
refused to reconsider its award of indefinite maintenance. The court also refused to reconsider that
part of the judgment requiring John to pay most of the 1992 income tax.
John
claims that the trial court erroneously exercised its discretion when it
ordered him to pay maintenance indefinitely and to pay the income tax. We conclude that the trial court properly
exercised its discretion when it awarded Debra indefinite maintenance. However, we further conclude that the trial
court erroneously exercised its discretion when it ordered John to pay most of
the parties' 1992 income tax. We
therefore reverse the judgment and order[1]
in this respect and remand the case to the trial court to redetermine the
income tax division. We do not preclude
the trial court from redetermining the property division if it concludes that
the fairness of this award is affected by its redetermination of the income tax
division.
MAINTENANCE
We first consider the
award of maintenance. The seminal
decision is LaRocque v. LaRocque, 139 Wis.2d 23, 406 N.W.2d 736
(1987). The objectives of an award of
maintenance are to support the recipient spouse in accordance with the needs
and earning capacities of the parties (the support objective) and to ensure a
fair and equitable financial arrangement between the parties (the fairness
objective). Id. at 32-33,
406 N.W.2d at 740. The LaRocque
court concluded that pursuant to § 767.26(6), Stats., "[t]he legislature ... has expressly declared
that the standard of living for maintenance is a standard of living comparable
to the one enjoyed during the marriage."
Id. at 35, 406 N.W.2d at 741. The LaRocque court recognized, however, that the
increased expenses of separate households may prevent the parties from
continuing at their pre-divorce standard of living, and that "both parties
may have to bear the sacrifices that the cost of an additional household
imposes." Id.
This
was a long-term marriage; the parties married August 16, 1975, the summer
before their senior year of college.
The trial court stated that it "does not see anything on the
horizon that would indicate that [Debra] would be in a position to provide for
herself the standard of living enjoyed by the parties during their marriage,
based on her income and the child support alone."
The
parties do not deny that their standard of living during the marriage was
"lavish." They were able to
sustain this standard of living through credit-card borrowing and an annual
gift by John's mother of $20,000. The
trial court concluded that despite its lavishness, the parties' standard of
living during the marriage was the standard to achieve, if feasible. John complains that the court erroneously
considered the mother's annual gifts because she ceased making those gifts
early in 1991. John argues that the
trial court erroneously exercised its discretion when it concluded that under LaRocque,
its target was the parties' standard of living during their marriage, because
the resources of the parties made that objective unrealistic.
However,
John does not contest the amount of maintenance the court ordered him to
pay, only the duration. John is
willing to pay Debra $850 per month for seven years. He argues that by then, Debra may have obtained her master's
degree in education and a teaching position which would pay her $35,000 to
$40,000 per year. At the time of trial,
Debra was working as an interior decorator at an annual salary of approximately
$18,000, with medical insurance coverage.
We
review a maintenance award for erroneous exercise of discretion. See LaRocque, 139
Wis.2d at 27, 406 N.W.2d at 737. We
conclude that the trial court did not erroneously exercise its discretion when
it awarded indefinite maintenance.
Limited-term maintenance is not appropriate in this case because it is
impossible to say that at a date certain in the future the income of the parties
will be such that either of them will enjoy a standard of living approaching
that enjoyed during their marriage. The
parties are relatively young and in good health. John may again receive periodic gifts from his family. The maintenance awarded Debra is modest
considering John's present and potential income.
The
fairness objective suggests that Debra may be entitled to share in the family's
largesse and John's probable increase in income. Of course, Debra's income may increase to the extent that, with
modest maintenance, her standard of living may approach the standard the family
enjoyed during the marriage.
Repeated
resort to the courts to increase or decrease maintenance is not healthy;
however, an award of limited-term maintenance is as subject to modification due
to changed circumstances as is an award of indefinite maintenance. Further, in either case, if Debra comes to
view the award as a life-time annuity and does not make a good faith effort to
earn up to her potential, she runs the risk that the court may substantially
reduce the maintenance award. We
conclude that the trial court did not erroneously exercise its discretion when
it awarded Debra indefinite maintenance.
PROPERTY DIVISION: INCOME TAX
With respect to the 1992
income taxes, the trial court allowed each party to keep his or her
refund. The trial court said that it
was going to "connect" the refunds:
[O]nly ... to the extent that [Debra] might find herself
with a liability beyond what she would normally expect in light of the
withholding. So we will protect her to
that extent. But beyond that, they can
each go their separate way. If they
each get a refund, that's fine. He's going
to keep his refund. She's going to keep
hers. That's by reason of the fact the
refund accrued during the period of time he was making payments twice a month. So I don't think the refund needs to be
split fifty-fifty. But I don't want
Debra ... to have to pay a lot of taxes because of all the complicated business
arrangements on the other side here.
On
reconsideration, the court refused to modify its previous judgment as to income
tax liability. The court stated:
During the separation, [Debra] did not have access to or
control of the various partnerships and family-owned businesses and therefore
really had no input as to whether they were sending in some type of quarterly
tax payments or what arrangements they were making for taxes. The Court wants to protect [Debra] from any
significant unforeseen tax consequences relating solely from those businesses
or other investments.
The
voluntary payments of $4,200 monthly to which the trial court referred were
made by John to Debra after they separated.
These payments were John's entire net pay from his law practice. He argues that the trial court's order is
contrary to the parties' agreement to divide the net marital estate equally and
treated their respective incomes during that period as if that income was
available only to him. John argues that
Hauge v. Hauge, 145 Wis.2d 600, 427 N.W.2d 154 (Ct. App. 1988),
establishes that the trial court erroneously exercised its discretion. In Hauge, the trial court
allocated an investment debt entirely to the husband because he had exclusive
control over the transactions that resulted in losses. Id. at 603, 427 N.W.2d at
155. We held, however, that it was
inappropriate for the trial court to allocate the entire debt to the husband
without a showing that he had squandered or destroyed part of the marital
estate. Id. at 604-05, 427 N.W.2d at 156.
John
argues that if the trial court intended to protect Debra from unforeseen tax
consequences, it should have directed its order to that contingency. Debra contends that the trial court properly
classified the parties's income tax liability as property subject to
division. Debra points out that
although they had stipulated to an equal property division, they specifically
reserved the issue of responsibility for the 1992 tax liability for decision by
the trial court. She argues that
therefore the court allocated the income tax liability equitably; the effect of
the court's order was to protect Debra from tax liability over which she had no
control. She distinguishes Hauge
because that case involved investment losses, not income tax liability. Debra argues that the trial court's order in
Hauge was intended to protect the wife from risky investment
losses, not income tax liability.
Income tax liability is foreseeable.
She argues that the purpose of the trial court's allocation of the
income tax liability was to protect Debra from John's possible lack of planning
which could lead to unexpected tax liability, and to protect John from Debra's
failure to have amounts withheld from her salary to pay her tax liability.
John
responds that under § 767.255, Stats.,
income tax liability must be divided equally, unless there is intentional
misconduct by one of the parties. He
argues that the trial court did not take into consideration that he had paid
most of his net income to his wife during the pendency of this action. Debra enjoyed the benefit of this income but
will not be liable for taxes on that income.
John argues that this is not equitable and is contrary to
§ 767.255.
Section
767.255(3), Stats., provides that
the court shall presume that all marital property is to be divided equally
between the parties, but may alter this distribution without regard to marital
misconduct after considering a number of factors, including the tax
consequences to each party. The problem
we have with the trial court's allocation of liability for income taxes is that
it attempts to protect against conduct and circumstances which may never occur. We do not believe this is an adequate reason
for departing from the requirement of equal division of the marital
estate. Upon remand the parties' tax
liability for this period and any income tax refund will be known and may be
considered by the court. We therefore
reverse this part of the judgment and order and remand for redetermination.
By
the Court.—Judgment and order
affirmed in part; reversed in part and cause remanded with directions.
Not
recommended for publication in the official reports.