In the recent case of Dolan v. Dolan, the Massachusetts Court of Appeals affirmed the longstanding rule for applying the two-prong analysis used in determining whether an applicant has demonstrated a material change in circumstances for the purpose of calculating alimony modification.
In the appellate case, Mr. Dolan appealed the ruling of Judge Gorman, who presided over the modification, asserting that she had incorrectly applied the two-prong analysis described under MGL ch.208 s49(e) and s53(b)-(c). The claimant asserted that the Judge should not have considered income derived from the sale of assets already divided in his divorce in determining the effective date of the reduction in his alimony obligation, because such income should have been precluded from consideration under MGL ch.208, s53(c)(1).
The Appellate Court, however, found that the Judge was correct in her interpretation of the law, and that there was no material change in circumstances unless there was a reduction in the payor, Mr. Dolan’s overall income. In this case, “overall income” did include the interest and dividend income derived from business assets that Mr. Dolan retained in his Massachusetts divorce.
The Facts of Dolan v. Dolan
The Dolans were married in 1988 and during the course of their marriage, Mr. Dolan was the primary income earner while Mrs. Dolan took care of their two children and managed the household. They maintained an “upper class lifestyle” funded primarily through Mr. Dolan’s earnings related to his business, of which he was both an employee and a 50% co-owner at the time of their divorce. As an employee, he received an annual compensation of $481,233.
The Dolans’ Massachusetts divorce judgment of June 6, 2016 required that Mr. Dolan pay unallocated support in the amount of $2,885 per week. Because the support was designated as unallocated in the divorce judgment, it could be used to benefit either Mrs. Dolan or the children. In awarding alimony, the court considered the following pursuant to s53(a):
- The marital lifestyle;
- The wife’s need for support; and
- The husband’s ability to pay.
The marital assets were divided, and each party received approximately $3.9 million. Part of Mr. Dolan’s share of the assets included the 50% ownership interest he had in his business, which was valued at $838,500 at the time of the divorce.
A little over a year later, in August of 2017, Mr. Dolan and his business partner sold the business and Mr. Dolan received two lump sum payments totaling nearly $2.5 million in addition to 24 installment payments of $4,166.67 through July of 2019, and an ongoing employee salary of $300,000 for at last two years. In September of 2017, Mr. Dolan filed a modification for a reduction in alimony.
Ultimately, the modification Judge found that Mr. Dolan would be entitled to a reduction in alimony payment, but only after the end of the installments payments he received from the sale of his share of his business because, as of the modification trial, he had not demonstrated a material change in circumstances. Mr. Dolan appealed this ruling, claiming the modification judge should not have used the income derived from the sale of his business in making its determinations.
Discussion 1: Consideration of Income from Assets Already Divided at the Time of Divorce
In its first discussion, the Appellate Court notes that Mr. Dolan primarily argues that the modification judge’s decision to treat his business sales proceeds as income available to continue the payment of the existing alimony order was not in accordance with the provisions of s53(c)(1).
Former Mrs. Dolan, however, argued that a downward modification of alimony involves a two-step process pursuant to the provisions set forth in s49(e) and s53(b)-(c). The two-step test the former Mrs. Dolan describes is as follows:
- The judge must make a threshold determination that the payor has met his or her burden of demonstrating a material change in circumstances, per s 49€; and then
- The judge must calculate the modified alimony amount pursuant to the parameters set forth under s53(b)-(c).
The Appeals Court agreed with Mrs. Dolan that Mr. Dolan too broadly interpreted s53(c)(1). Notably, Mr. Dolan argued that s53(c)(1) precludes income from assets allocated to him in the divorce, and therefore should not be considered when making the “threshold determination” of whether or not there has been a material change in his income warranting a change in the alimony amount.
The Appellate Court stated, that, in the first step of this two-prong alimony modification analysis, s49(e) does not contain any language that would expressly exclude Mr. Dolan’s capital gains income, dividend and interest income derived from his share of marital assets.
The court further noted that if the Legislature had intended the prohibition contained in s53(c)(1) to apply to the threshold determination in step one, it could have simply included language to that effect in s49(e). Instead, this s49(e) reflects the long-held rule that “[a] party seeking to modify an existing alimony award ‘must demonstrate a material change of circumstances since the entry of the earlier judgment.’”
Further, a judge must consider a totality of the payor’s financial circumstances in determining if the payor has met their burden of demonstrating that they have had a material change that would warrant the downward modification of their alimony obligation.
Accordingly, in their analysis of s53(c)(1) and s49(e), the Appellate Court ruled that the modification judge made no error in considering the income Mr. Dolan received from the sale of his business in making their threshold determination because said income is part of the “totality of circumstances.”
Discussion 2: Effective Date of Modification
In addition to finding that income from Mr. Dolan’s share of his divorce assets could be considered in determining whether or not he had demonstrated a material change in circumstances, the Appellate Courts also agreed with the effective date of the reduced payments set by the modification judge. Although Mr. Dolan filed his complaint for modification seeking a reduction in alimony in September of 2017, the modification judge found that Mr. Dolan was not entitled to make reduced alimony payments until August of 2019, which was when his periodic payments from the business sale ceased.
The modification judge found that Mr. Dolan had retained the ability to pay his original alimony obligation through the end of the installment payments received from the sale of his business. So, the reduced alimony payments were not to take effect until after August 1, 2019. Again, the bar for assessing Mr. Dolan’s ability to make payments was considered under a “totality of the circumstances.”
Conclusion
Mr. Dolan did receive a reduction in his alimony obligation, and ultimately was able to exclude the interest and dividends received through the sale of his business from his gross income in the recalculation of the amount he was obligated to pay for alimony. . Importantly, this protected income could not be precluded from the determination of whether or not he had experienced a material change.
The “Reader’s Digest” Version:
In Dolan, the Appeals Court confirmed that there is no ‘material change’ in circumstances unless there is a reduction in payor's overall income (which, in Mr. Dolan’s case, included the business interest asset he retained in the divorce). Clearly under 53(c), the income from Mr. Dolan’s divorce-divided asset (his business sale proceeds) cannot be used in calculating alimony.
So, we have a two-prong analysis:
- MGL ch,.208 s.49(e): Was the payor's income from all sources, including protected income from an asset divided in the divorce, reduced to a point that would support a "material change"; If not, then there is no material change in income and the payor must continue to pay the support amount;
- MGL ch,.208 s.53(c): Only after the first prong has been met, the second prong applies in determining how much the alimony should be reduced. In the second prong analysis, the payor is able to exclude interest or dividends from his asset received in the divorce.
The moral of this story? If you can't get through the threshold standard of Material Change, then a modification should not be filed until the payor's income from all sources, has actually gone down. Want to read the entire case? You can find it here.
By: Julia Rodgers, Esq.
Julia Rodgers is an attorney with Mavrides Law, in Boston, Massachusetts. Read her bio here.
To speak with Julia Rodgers, or a top divorce lawyer at Mavrides Law in Boston, MA about a prenuptial agreement, contact us. To schedule an in-depth initial consultation, call 617-723-9900 or contact the firm at [email protected]
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