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Court of Appeals rejects further alimony reduction when family court determines husband’s income hadn’t decreased

In the December 12, 2012 opinion of King v. King, 400 S.C. 611, 735 S.E.2d 551 (Ct. App. 2012), the Court of Appeals affirmed the family court’s decision to deny Husband’s request to further reduce his alimony.

At the time of the parties’ divorce in 1999, Husband had a yearly base salary of $300,000 as chief operating officer of a textile company and Wife had no income.  The parties agreed to permanent alimony of $6,500 per month.

In 2004, Husband lost his CEO position and obtained work as a commissioned sales representative for one company.  He independently represented other companies so he created an unincorporated business through which these companies paid him commissions.  Meanwhile, Wife had obtained employment with a school district making $2,040 per month.

At the time of the 2005 trial, Husband represented his monthly income as $1,200.  The family court issued an order finding, “While it is certainly understandable that he may not be able to move immediately back . . . [to] earning $300,000 to $400,000 annually, as he did in the past, the Court finds that he, at a minimum, has a capability of earning approximately $100,000 annually.” It further found “one-half of [Husband’s] earning capability should go to [Wife] until he gets back to his former level of income,” and therefore lowered his alimony payment to $4,167 per month.

Between 2005 and 2009, Wife became disabled and was unable to continue her employment.  Meanwhile Husband, claiming his income was dropping further, filed a second alimony reduction action.  At the temporary hearing, Husband represented his income as $2,240 per month and the court temporarily reduced his alimony obligation to $2,000 per month.

At trial, the family court found that Husband still had a $100,000 annual earning capacity, denied his request for a permanent reduction in alimony, and ordered him to pay $26,004 in back alimony for the period of time his alimony was temporarily reduced.  He appealed.

The Court of Appeals affirmed.  It sustained the family court’s finding that Husband had under-represented his income.  Husband’s trial testimony on his 2009 income, which he claimed was $5,000 per month, differed from his August 2009 financial declaration.

Husband also appeared to be shielding income through his new wife.  He had set up company, Gold Medal Fabrics, which named his new wife as CEO.  That company opened a joint account into which he deposited commissions.  Husband failed to disclose the existence of another bank account, in his new wife’s name, and Husband was found to have moved funds from the Gold Medal Fabrics account into this hidden account.   Husband also claimed that some of the funds in the Gold Medal Fabrics account came from his new wife’s earnings but was unable to document this.  Thus, the Court of Appeals affirmed the family court’s determination that funds from the Gold Medal Fabrics account were all Husband’s income.  The Court of Appeals further held that the family court did not improperly “pierce the corporate veil” in attributing the funds in this account to Husband despite his new wife being the company CEO.

Including this account’s income with Husband’s other income led the Court of Appeals to conclude that Husband’s income for 2009 was more than $124,000.  The Court of Appeals noted that once the family court established that Husband was earning more than the $100,000 upon which his alimony was previously based, it did not have to determine what his actual income was to deny his request to modify alimony based on a claim of reduced income.

Husband also argued that the following language from the 2005 order meant that his inability to return to a $300,000 annual income was a change of circumstances: “one-half of [Husband’s] earning capability should go to [Wife] until he gets back to his former level of income.”  The Court of Appeals rejected this claim.

Husband further argued that the family court erred in not reviewing all the statutory alimony factors in rejecting his alimony reduction request.  The Court of Appeals held that in a modification case the family court was not required to review all the statutory alimony factors if none of the factors raised by Husband’s change of circumstances complaint would lead to a modification of alimony.

Ex-spouses seeking to reduce their alimony based upon reduced earnings have the burden of proving reduced income and earning capacity.  Misrepresenting income or hiding income are easy ways to see such requests denied.

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