Permanent maintenance stipulation is modified

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Permanent spousal maintenance can be modified, even when it is based on a stipulation, the Court of Appeals held last week in a published opinion the appellant’s attorney called a “reiteration” of existing law.

The court reversed a Hennepin County District Court and stated that the District Court’s findings about the appellant’s income and resources were clearly erroneous. The case was remanded to allow the appellant to demonstrate her need for continuing monthly maintenance. Absent such a showing, the maintenance should be terminated, it said.

The Court of Appeals also stated that the District Court has discretion to make a modification retroactive to any reasonable date on or after the date of service of the motion.

“….{A}ppellant’s agreement to pay permanent maintenance does not preclude later modification or termination of maintenance. While permanent maintenance does not compel future self-sufficiency by the recipient, it also does not preclude an obligor from subsequently demonstrating that a recipient has, in fact, become self-sufficient,” said the court.

The 12-page decision is Kemp v. Kemp, Minnesota Lawyer No. CA-375-00. Judge Roger M. Klaphake wrote the decision.

A long-term marriage

The parties were divorced in 1991 after a 37-year marriage. The parties stipulated that appellant would pay permanent spousal maintenance of $900 per month, to terminate upon the death or remarriage of respondent, or the death of appellant.

At the modification hearing, respondent conceded that appellant had demonstrated that some reduction in maintenance was warranted. The court reduced the spousal maintenance to $500, observing that both parties were left with a shortfall of about $300 per month.

Appellant had income of $2,100 per month net, including $1,000 Social Security, and expenses of $1,955 at the time of the motion. Appellant had retired and had lost income of $2,914 gross per month when closely held corporations in which he held stock were sold.

The Court of Appeals observed that respondent did not calculate her income, but merely offered two paycheck stubs. The District Court calculated her income, based on her paycheck stubs, to be $1,940. Respondent stated her monthly expenses were $3,375 but the District Court found her expenses were $2,735.

Respondent also argued that dividend income of approximately $690 per month could not be used as “operating funds” because she used it to pay back a loan against her stock margin account.

A term of art

The Court of Appeals rejected the District Court’s analysis, which was to refuse to terminate maintenance because appellant had agreed that the obligation was permanent.

Instead, the Court of Appeals followed the 1993 case of Poehls v. Poehls and observed that “permanent maintenance” is a “term of art” that places the burden on the obligor to demonstrate a change in circumstances justifying a modification.

The court retains authority to consider whether changed circumstances warrant a modification unless it is divested of jurisdiction by the stipulation, wrote Klaphake.

“The stipulation identifies the baseline circumstances against which claims of substantial change are evaluated…When determining whether a substantial change has rendered the terms of the original decree unreasonable and unfair, the stipulation may be relevant if one party claims this change was not or could not have been anticipated,” the judge continued.

However, the agreement to pay permanent spousal maintenance was nondispositive on the question of a modification, wrote Klaphake.

“The stipulation anticipated appellant’s continued receipt of dividend income; even respondent has conceded that appellant’s loss of that dividend income represents a substantial change in his financial circumstances that warrants a reduction in maintenance,” explained the court.

A balancing act

Once an obligor establishes that he is entitled to modification, the needs of the spouse receiving maintenance must be balanced against the financial resources of the spouse providing maintenance, said Klaphake.

The District Court found that respondent was unable to meet her monthly needs based on her income. However, the Court of Appeals found the District Court’s findings to be clearly erroneous because it:

• failed to consider respondent’s dividend income from her margin account;

• based its income determination solely on two paycheck stubs and one deduction from standard tax tables, even though respondent itemized her deductions;

• rejected appellant’s calculations based on a 1997 tax return and a tax rate of 22 percent; and

• considered, without finding it was reasonable, respondent’s voluntary contribution of 19 percent of her gross income to a retirement plan.

The Court of Appeals also found that the District Court failed to adequately address appellant’s challenges to respondent’s expenses. The court remanded for a more detailed examination of respondent’s expenses.

In conclusion, Klaphake stated, “it is undisputed that appellant has little ability to pay maintenance, and it appears that respondent may have income available and resources to meet her reasonable monthly needs. Absent a demonstrated need, appellant’s continuing maintenance obligation should be terminated.”

Gregory J. Holly of St. Paul represented the appellant and Tsippi Wray, also of St. Paul, represented the respondent.