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Unambiguous Contracts Prevail Over Spousal Support Guidelines

Posted on Tuesday, May 21, 2019

In Gallagher v Gallagher, the Court of Appeals found that the parties’ unambiguous consent judgment of divorce demonstrated their intent to only modify spousal support in the event of a change of circumstances other than dissipation of the original property award.

Thirty-seven years after parties were divorced, Oakland Circuit Court Judge Valentine issued a post-judgment order requiring the defendant to pay $2,500 in monthly spousal support to the plaintiff. The defendant argued the award was not supported by the evidence and that the plaintiff did not demonstrate any change of circumstances “other than dissipation of assets received in the consent judgment of divorce.”

In the consent judgment of divorce, the order explained that alimony was reserved as to the plaintiff, but it explicitly stated that “dissipation of the assets received by Plaintiff . . . shall not constitute a change of circumstances warranting the payment of alimony.”

Spousal support awards must be reasonable under the circumstances and are meant to balance parties’ incomes and needs. Courts award spousal support a case-by-case basis under MCL 552.23(1). Typically, “where the question of alimony is reserved, no change of circumstances is required as a prerequisite to an award of alimony at a later time.” McCarthy v McCarthy, 192 Mich App 279, 283; 480 NW2d 617 (1991). However, courts must enforce unambiguous contracts absent illegality, fraud, or duress.

Here, no portions of the “contract”—meaning the consent judgment—conflicted, so the contract was unambiguous. The Court of Appeals found that the parties clearly and unambiguously intended “to require a change of circumstances before plaintiff could be awarded spousal support, unless the change entailed the dissipation of the assets plaintiff received.”

After holding that the plaintiff needed to show a change of circumstances other than dissipation of the original division of assets, the Court of Appeals found that the plaintiff did meet that burden. The plaintiff is now 81 and no longer working, and she relies on $2,254 in monthly pension and Social Security benefits. However, the Court of Appeals explained that this burden “was a fairly easy hurdle to jump,” and it found that spousal support would not be fair and equitable under these circumstances.

After the divorce thirty-seven years ago, the parties equally split the marital assets. The plaintiff was employed full-time for almost twenty years after the divorce, but she spent most of her savings on her current home. The plaintiff “received around $100,000 from the combined estates of her son and mother after their deaths.” She pays roughly $287 per month for her car with a sticker price of about $32,000.

The defendant had to stop working six years after the divorce “because he was battling cancer.” However, he invested his assets and his portfolio is “worth over $2,000,000.” He lives a frugal lifestyle and drives older cars, owns two small homes, and lives off $3,800 per month from Social Security, investments, and annuity.

The Court of Appeals thus found that Judge Valentine essentially “rewarded plaintiff for being a spendthrift and her failure to save for retirement” and “punished defendant for his investment skills and relative frugality.” Not only did the Trial Court decision ignore the parties’ contract, but it also awarded an inequitable distribution of the defendant’s assets. The Court of Appeals vacated the order, finding the award to be an abuse of discretion.

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