Opinion ID: 901900
Heading Depth: 2
Heading Rank: 2

Heading: John's ability to pay

Text: In assessing the obligor's ability to pay alimony, the court may evaluate the obligor's income in relation to his earning capacity to determine whether the obligor has attempted to avoid the alimony obligation by intentionally reducing his income. In doing so, the court may consider whether the obligor has either acted with the primary goal of reducing his gross income or has artificially reduced the net income available after expenses through exaggerating personal expenses or inflating overhead costs of a business owned, at least in part, by the obligor. Olson, 1996 SD 90, ¶ 12, 552 N.W.2d at 400 (emphasis added).
[¶ 37.] Conclusions of Law § 20(b) states: John Moore's health is good. He has an excellent education, has advanced degrees and is clearly very well employable at significant sums. However, Denice offered no evidence other than John's 2001 income as a measure of what significant sums he could receive. In 2001, John served as a Division Director in the South Dakota Department of Education, earning approximately $62,500 per year. Since 2001, he has not maintained his credentials or worked in any meaningful capacity outside of the home. [¶ 38.] John is now 60 years old and has been out of his profession for at least seven years. While his 2001 salary may have been relevant to his earning capacity in 2003, modification proceedings are concerned with changes that have occurred since the divorce. Denice presented no evidence that John's 2001 earning capacity is relevant to John's 2008 earning capacity. Therefore, his 2001 income is inadequate to establish his present earning potential. As the moving party, Denice carries the burden of proving John's earning capacity. She has not met this burden. Thus, Conclusion of Law § 30(e) is without a basis in evidence. e. [John's] employability [ ] exists now just as it did at the time of the original Decree of Divorce. [¶ 39.] John argues that he no longer has an earning capacity of $62,500 per year because he is not qualified to work in his prior position. He presented testimony that, due to his long unemployment, returning to educational administration would require at least one year's remedial education and recertification in Texas. Denice does not refute John's need for additional training or certification. [15] [¶ 40.] Furthermore, there is no indication that John's prolonged unemployment was to avoid the alimony obligation by intentionally reducing his income. Olson, 1996 SD 90, ¶ 12, 552 N.W.2d at 400. Given the financial circumstances of John's current marriage, there is no indication that he has intentionally reduced his gross income with the primary goal of avoiding alimony. Id. Since retirement, his income has consistently remained close to zero because he has had no need for other income to support himself or his obligation to Denice.
[¶ 41.] Absent evidence of John's present earning capacity as a measure of his income, Denice instead attempted to establish that John is able to and should pay increased alimony due to Luanna's income. The imputation of a new spouse's income to the alimony obligor's is without precedent. [¶ 42.] While the trial court's findings of fact and conclusions of law do not directly impute this income, because Denice failed to establish John's earning capacity, the repeated references to Luanna's income and assets and the suggestion of John's right to this income cause us to conclude that Luanna's financial position is the only basis used by the trial court to determine John's ability to pay. [¶ 43.] Conclusion of Law § 20(c) holds that John is well able to assist and consult with [Luanna] on her employment activities which creates her bonuses. We believe that conclusion is erroneous. It was based upon Denice's speculation and was not supported by any testimony or other evidence. The mere existence of his education and experience does not mean that he has assisted Luanna in her work, directly or indirectly resulting in income, or that he has the capacity to assist in her field, educational sales. Furthermore, simply because Luanna has a job that pays her well does not mean that John can receive similar compensation from her, or any other, employer. [¶ 44.] Conclusions of Law §§ 20(d) and (e) confirm our belief that Luanna's income was imputed to John. d. During the last four years, [John's] current wife has earned an average of approximately $270,000 per year and in the year 2005, earned over $500,000. e. [John] has access to earnings sufficient to pay increased alimony to Ms. Moore. [¶ 45.] Whether an alimony obligor's subsequent spouse's financial contributions may be included in determining the obligor's income is an issue of first impression. Neither party has cited any authority that suggests such an imputation is proper. [16] [¶ 46.] This Court has held that cohabitation may be considered in assessing the financial circumstances of the alimony recipient. See Paradeis, 461 N.W.2d 135. However, it should be recognized that a cohabitant of the receiving spouse may not be considered to increase the expenses of the recipient spouse. [17] While a new spouse's income might be considered to offset an obligor spouse's living expenses, thus freeing more of his or her income for alimony payments, we can find no authority in any jurisdiction in which the new spouse's income is used to supplement the obligor's income for alimony modification purposes. We conclude that an alimony obligor's subsequent-spouse's income may not be included as part of the obligor spouse's income. Without evidence of John's income or earning capacity as the source of John's ability to pay, the trial court has, in reality, required Luanna to pay Denice alimony. [18] This was an error of law.