Jack Nelson Jones Professional Association

June 27 - July 3, 2016

Kelly v. Kelly, 2016 Ark. App. 272 (May 18, 2016)

This appeal comes from the Washington County Circuit Court, Honorable Joanna Taylor presiding. This case concerns modification of an alimony award in a divorce proceeding.

When Owen and Mandy Kelly were married in 1994, Owen was preparing to go to medical school and Mandy had completed two or three years of college. Early in the marriage, Mandy worked at Sam’s Club in the marketing department and then for Metropolitan National Bank as a vault teller making a salary in the low $30,000 range. After the birth of the couple’s eldest child, the parties agreed that Mandy would not continue to work outside the home. There were two children born of the marriage. Owen and Mandy divorced in 2014 and Mandy was awarded custody of the two children.

Owen, an orthopaedic surgeon since 2003, had a gross monthly salary of $35,000, but a net monthly take-home pay of $19,975 for the first three months of the year (when social-security takes were taken out of his paycheck) and $20,170 for the remainder of the year. He had monthly expenses of $10,665, which included mortgage payments on both the marital home and the residence he was then occupying. The marital home was on the market and, upon its sale, Owen and Mandy were to split the net proceeds equally. On her affidavit of financial means, Mandy calculated and the trial court agreed that Mandy needed $16, 659 per month for expenses. Owen was ordered to pay $7,528 in child support and $9,131 in alimony monthly beginning on April 1, 2014. The divorce decree additionally provided that when Owen’s child support reduces to $5,366 per month after the couple’s eldest child attained the age of majority, the $9,131 per month alimony amount would automatically increase to $11,293 per month, thereby keeping the total amount of support Owen was to pay to Mandy at $16,659. The decree further provided that when the couple’s younger child attained majority and child support ceased, Owen’s alimony obligation to Mandy would increase to the full $16,659 sum.

Also within the divorce decree, by prior agreement, Mandy was awarded $367,000 as an equal distribution of marital property, as well as all personal property currently in her possession and any personal property located in the former marital residence. Mandy was also awarded $12,220 as her marital share of two businesses: Owen’s medical practice and Leasing Services of Arkansas. Mandy admitted she had about $350,000 of the $367,000 division remaining; she further stated she would rather not spend that money but instead get alimony from Owen because that was all the money she had. She testified she had not looked into obtaining any type of employment from which to derive income. Owen appealed.

On appeal, Owen argued that the automatic “escalator clause” increasing his alimony payments to Mandy to maintain the level of total financial support he provided when his children were still living with Mandy was an abuse of discretion. The Court explained that modification of an alimony award must be based on a significant and material change in the parties’ circumstances, and the burden of showing such a change in circumstances is always on the party seeking the modification. On this point, Mandy argued the recent case of Jones v. Jones required the Court to affirm the trial court’s automatic increases of alimony. The Court, however, asserted that Jones did not mandate that an automatic increase of alimony be affirmed because the facts in that case were distinguishable from the facts in this case. In Jones, the parties had no savings or real property, and the trial court determined that Mrs. Jones was working at her highest and best use of her talents and resources. In Jones, Mr. Jones did not dispute that Mrs. Jones would be unable to meet her basic monthly needs of $3,388 on her $1,690 monthly income without assistance from him. In Jones, it was a certainty that Mrs. Jones would need additional alimony as child support abated; that was not the case here.

Mandy was awarded a large property settlement in the divorce, and she was a 44-year-old woman with no physical health problems. While the trial court found that she had no marketable skills and was not currently able to hold a job, Dr. Brad Diner, a psychiatrist hired by her own counsel to evaluate her, testified that, while it could be difficult for Mandy to hold a job at the moment, it would be helpful for her to find work and that she should be able to do so in three or four years. Dr. Diner said that would give her time to rehabilitate herself and retrain and educate herself.

According to the Court, the record established that there was no need for $16,659 in monthly expenses, and it was beyond speculation that Mandy would not need almost $17,000 per month to meet her needs when the children were no longer living with her. Accordingly, the Court held that it was an abuse of discretion for the circuit court to automatically increase Mandy’s alimony as child support abated. The circuit court’s approach, applying the “escalator clause” where no justification existed, ignored the fact that modifications in alimony require proof of a change of circumstances, and the burden of proof is on the party seeking to modify the alimony.

Without financial need established, by employing the use of the “escalator clause” to increase alimony as child support decreases and then abates, the circuit court relieved Mandy of her burden to prove that such an increase was necessary and justified. It disincentivized her, contrary to her psychiatrist’s opinion, to ever seek employment. If Mandy needed additional support as child support abated, she would be free to return to court to seek an increase in alimony. Likewise, if Owen’s financial situation changed, he would also be free to return to court to seek a decrease in alimony. Reversed and remanded.