Post Judgment Divorce Action, Court Determines that $1.2 Million Payment to Husband was Income, Not Liquidation of an Asset

In Post Judgment Divorce Action, Court Determines that $1.2 Million Payment to Husband was Income, Not Liquidation of an Asset

In a post judgment decision rendered, the Superior Court of Fairfield at Bridgeport addressed whether a payment that a husband received from his employer after the parties’ divorce constituted an asset or, alternatively, income.  The parties in this action obtained an uncontested divorce in 2008.  As part of their separation agreement, the husband was obligated to pay the wife child support in the amount of $1,600.00 per month.  At the time of dissolution, the husband was employed as a CEO earning approximately $150,000.00 gross per year.  He listed on his financial affidavit 400 shares of company stock, along with 240 stock options.  According to the parties’ separation agreement, the wife was entitled to receive 25% of the value of the shares upon their sale.

When the husband’s company was purchased in early 2012, he received approximately $80,000.00 from the sale of his stock.  The husband also received a payment of $1,200,000.00 from the proceeds of the sale, which the company described as an “award by way of thanks for employee efforts.”  At trial, a member of the husband’s company vaguely explained that the distribution was a way of recognizing value created by a job well done; however, a payroll record introduced as evidence listed the payment specifically as bonus/supplemental income.

The wife argued that the distribution should be considered bonus income and thus used to re-calculate child support.  The husband, on the other hand, argued that it was not income, but rather an asset previously awarded to him as part of the dissolution judgment.  Under the husband’s theory, the court would be precluded from awarding the wife any portion of the distribution as doing so would constitute an impermissible post judgment property distribution.

In reaching its decision, the court explained that the conversion to liquid form of an asset included in the equitable division at the time of dissolution does not constitute income for future determinations.  Hamlin v. Hamlin, Superior Court of Fairfield at Bridgeport, Docket No. FA074021468 (Sept. 10, 2012, Klatt, J.).  In other words, “[t]he mere exchange of an asset awarded as property in a dissolution decree for cash, the liquid form of the asset, does not transform the property into income.”  Denley v. Denley, 38 Conn. App. 349 (1995).  On the other hand, the court also explained that a “bonus” is defined as “an amount of money given in addition to normal pay, especially as a reward.”  Because the court found that the money was not listed as an asset at the time of dissolution, and because the husband testified that the money was an award given in appreciation of his skills, it ultimately deemed the distribution income and ordered the husband to set aside approximately 10% for the child’s future educational expenses.

The matrimonial attorneys in the Westport, Connecticut office of Maya Murphy, P.C. have extensive experience handling divorce and custody matters, and assist clients from Greenwich, Stamford, Darien, New Canaan, Norwalk, Westport and Fairfield.  For more information, please feel free to contact managing partner Joseph Maya at (203) 221-3100, or jmaya@mayalaw.com.