Bailey v. Bailey, Record No 0981-15-4 (Va. Ct. Appeals 2016) (unpublished) involves a fun new opinion from our Virginia Court of Appeals. It involves an astronomical award of spousal support. It involves interpretation of a marital settlement agreement. It involves statutory interpretation. And it involves an appellate reversal!
Here are the facts: The parties entered into a settlement agreement on July 22, 2013 that included spousal support payable for 3 years in the amount of $22,500.00 per month and payable for an additional 12 years in the amount of $20,000.00 per month. The agreement added that the amount, but not the duration, of spousal support was subject to modification:
“. . . by a court of competent jurisdiction upon petition of either party in the event of a material change of circumstances in accordance with §§ 20-107.1 and 20-109 of the 1950 Code of Virginia, as amended. The parties agree that up to the first $80,000 of earned income for Wife shall not constitute a material change in circumstances warranting modification of spousal support herein.”
At the time of the agreement, the husband’s income was about $1,000,000.00 per year. Thereafter, his income fell to $850,000.00 in 2014 and to an estimated $668,710.00 for 2015.[1] All in all, the husband’s drop in income couldn’t have been too shocking to him. He had anticipated when he entered into the agreement that tough times might be ahead. He had just lost his biggest client, plus several other ones as well. His firm had also been a part of a merger as well that could cause some discord. Nevertheless, he did not anticipate the mass exodus of a number of his partners, the closing of a number of practice areas, another merger in the works causing more turmoil, and a complete reassessment of his compensation as a result.[2]
Unfortunately for the husband, the trial court denied his motion requesting a reduction in his support obligation on the ground that his drop in income “was something that could have been contemplated” and therefore the court was precluded from reducing his support obligation under Va. Code § 20-109(B). In other words, the trial court did not buy the husband’s argument that while he might have seen some possible storms ahead, he couldn’t have predicted that he’d be hit with a particular type of tornado, typhoon, and tsunami.
Husband appealed to the Virginia Court of Appeals. He argued that the trial court erred by finding that the husband’s drop in income was “reasonably in the contemplation of the parties when the [spousal support] award was made” per Va. Code § 20-109(B). He also argued that the trial court never even should have applied Va. Code § 20-109(B). He argued that the trial court should have either modified his support obligation after merely considering the factors under Va. Code § 20-107.1(E) or it should have simply considered whether the circumstances made it proper to modify support under Va. Code § 20-109(A). In other words, he argued that the court should have used code sections or subsections that don’t include anything about what the parties contemplated when support was last awarded.
Husband’s argument turned out to be too clever by half. Indeed, he argued that there is a distinction between spousal support ordered after trial and the court’s consideration of the factors under Va. Code § 20-107.1(E) (where the court “awards” support at the end of a trial) and spousal support ordered per the court’s adoption of an agreement pursuant to Va. Code § 20-109(C) (where the court directs the payment of support rather than “awards” support). He then argued that because his spousal support agreement was incorporated pursuant to Va. Code § 20-109(C), and was therefore not an “award,” his spousal support obligation could not be subject to Va. Code § 20-109(B) because that section specifically refers to modifying an “award” of spousal support. Thus, he was subject to Va. Code § 20-107.1(E) and/or Va. Code § 20-109(A) (which speaks to modifying spousal support rather than modifying an award of spousal support).
Bafflingly, the court gives this argument some credit. It concludes that the spousal support payments under the settlement agreement were not an “award” as used in the Virginia Code, even while correctly acknowledging that any normal reader would treat an “award” of spousal support as synonymous with an “order” of spousal support, “decree” of spousal support, “edict” of spousal support, etc. It also reaches that conclusion while conveniently ignoring that Va. Code § 20-109(A) actually refers to the power to modify spousal support “whether previously or hereafter awarded,” meaning the court casually ignores the fact that this section also contains the word “award,” though in their defense it was trickily hidden in the word “awarded.”
Thankfully, the court didn’t completely lose its mind. It wisely looked at other language under the code to determine that the agreement intended to use Va. Code § 20-109(B). First, the court noted that the agreement itself required proof of a material change in circumstances and the only code section that requires proof of a material change in circumstances was Va. Code § 20-109(B). Second, the court noted that the agreement provided a defined duration award of spousal support and the only code section that applies to defined duration awards is Va. Code § 20-109(B). Given this, the court held that subsection (B) was a better fit under the settlement agreement, even despite the court’s earlier nonsense about awards versus orders versus who knows what else.
Once the court determined that it had to use subsection (B), it quickly held that the trial court erred in holding that the husband’s loss of nearly 40 % of his income was “reasonably in the contemplation of the parties” at the time of the last order of spousal support. Indeed, the court held that while the parties knew that the husband’s income fluctuated, they did not anticipate the particular circumstances that later befell husband and his law firm. Thank goodness for you people without a set income!
So what did we learn? First, $22,500.00 is a ton of monthly spousal support. Second, our appellate courts continue to believe that our legislature actually thinks diligently about the particular words it uses in the code and the myriad ways clever lawyers/judges can spin said words in any direction they choose. Third, those with fluctuating incomes can breathe a slight sigh of relief.
[1] Husband was a partner at a major firm and specialized in intellectual property litigation.
[2] I’ve read this opinion a few times and still have no idea whether certain mergers happened, failed, or were still anticipated. Anyway, it’s safe to say that husband’s law firm was fraught with turmoil.