Facts: This is the third appeal from this divorce where Wife was awarded alimony. I summarized the first appeal of the alimony award here. The second appeal did not involve alimony.
During this 25-year marriage, the parties lived a lavish lifestyle and accumulated a sizable marital estate.
At the time of divorce, Wife was 48 and earning $50,000 per year, while Husband was 50 and earning $400,000 per year.
After the first appeal, Wife was awarded alimony in futuro of $6000 per month.
While the second appeal was pending, Husband petitioned to modify or terminate his alimony obligation because various surgeries rendered him unable to practice dentistry. He claimed he could not pay alimony in futuro of $6000 per month.
At the time of the hearing on Husband’s motion, he received a monthly disability payment from a private insurer of $19,226 per month. Notably, this income was not subject to federal income taxes.
The proof also showed that Husband sold his dental practice and used the proceeds of $786,000 to pay off most of his debts, pay off the mortgage on his mother’s home, and contribute $250,000 to an investment account. He leased the building where the dental practice operated to generate income of $6000 per month.
Altogether, Husband’s income after he stopped practicing dentistry totaled $27,450 per month or $329,640 per year.
Husband argued this annual sum was about $170,000 less than what he’d been living on while practicing dentistry.
The trial court found that the reduction in Husband’s gross income was a material change in his ability to pay alimony. Husband’s alimony obligation was reduced to $3900 per month.
On Appeal: The Court of Appeals reversed the trial court.
In Tennessee, alimony in futuro remains in the court’s control, and may be increased, decreased, terminated, or otherwise modified upon showing a substantial and material change in circumstances.
If a substantial and material change in circumstances is established, the party seeking modification must demonstrate that the requested modification is appropriate, given the factors in Tennessee Code Annotated § 36-5-121(i).
A change in circumstances is “material” if it has occurred since the entry of the order awarding alimony and was not anticipated when the order was entered.
A change in circumstances is “substantial” when it significantly affects either the obligor’s ability to pay or the obligee’s need for support.
Tennessee courts must examine the obligor’s total income from all sources when determining whether there has been a substantial and material reduction in the obligor’s ability to pay alimony.
A significant decrease in income may not constitute a substantial material change if the obligor owns assets that can be liquidated, and the obligee’s need for the payments is not diminished.
The Court found that Husband’s ability to pay had not been significantly diminished:
The trial court . . . ultimately reduced Husband’s alimony obligation from $6000 per month to $3900 per month. . . . [B]y our calculation, the trial court reduced the alimony award by exactly 35%. However, the evidence presented does not suggest that husband’s reduction in gross income reduced his ability to pay alimony by 35%.
Husband [previously] paid an average of $150,204.80 per year in federal income taxes. . . . Husband will [now] pay federal income taxes of no more than $1380. . . . [Husband previously] had an after-tax income of around $356,000. [H]is after-tax income is [now] around $332,000. Using these numbers, it becomes clear that Husband’s disability has not significantly impacted his ability to pay nearly as much as suggested by Husband’s expert and his emphasis on gross income. The trial court also focused on the reduction in gross income without mentioning the huge disparity between Husband’s tax liability before and after his disability.
[W]e must examine Husband’s ability to pay alimony, not just his income. A decrease in income cannot be viewed in a vacuum, as the obligor’s expenses are another important factor for consideration.
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[Husband’s] expert testified that Husband had an average “disposable income” of $353,000 before the divorce and that he presently has an average “disposable income” of only $260,000. The obvious difference in these figures comes from the fact that his postdivorce disposable income calculation deducts $72,000 and alimony, while this sum is not deducted from the predivorce figure. In other words, the main difference between Husband’s disposable income now and before the divorce is the fact that he pays alimony. This cannot constitute a substantial and material change in circumstances for the purpose of alimony modification.
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The evidence presented by Husband simply does not establish that his disability has substantially affected his ability to fulfill his existing alimony obligation. To the contrary, the proof shows that Husband has continued to make substantial contributions to his personal investment account, financially support his parents, and purchase a larger home for himself and his current wife.
Ultimately, we find no factual basis in the record that would support a finding that Husband’s change in circumstances was substantial within the meaning of the alimony statute. Husband has failed to prove that his disability had a significant impact on his ability to pay alimony.
The trial court’s judgment was reversed, and the original alimony award of $6000 per month was reinstated. Wife was also awarded her reasonable attorney’s fees and expenses on appeal.