COURT OF APPEALS OF VIRGINIA
Present: Judges Annunziata, Bumgardner and Clements
Argued at Alexandria, Virginia
HERBERT RINEHART
MEMORANDUM OPINION * BY
v. Record No. 2034-00-4 JUDGE RUDOLPH BUMGARDNER, III
JULY 10, 2001
NANCY M. RINEHART
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
R. Terrence Ney, Judge
Ann W. Mische (Paula W. Rank; Byrd Mische,
P.C., on briefs), for appellant.
Evelyn H. Sandground (Condo & Masterman,
P.C., on brief), for appellee.
Herbert Rinehart appeals the trial court's failure to
terminate or reduce substantially his spousal support payment to
Nancy M. Rinehart. He raises six issues 1 which restate in
* Pursuant to Code § 17.1-413, this opinion is not
designated for publication.
1
The husband presented these questions: (1) whether the
trial court erred in failing to include in the wife's income,
for the purposes of determining spousal support, the potential
stream of earnings attributable to her receipt of the $468,126
in retirement funds from the husband's retirement benefits; (2)
whether it erred in failing to annuitize the principal and
potential earnings on the wife's share of the retirement
benefits and impute such figures; (3) whether it erred in
determining that the receipt of the wife's share of the pension
does not constitute income; (4) whether it erred in including in
the husband's income, for support purposes, his share of the
marital pension benefits while excluding from the wife's income
receipt of her share; (5) whether it erred when interpreting the
property settlement agreement to contemplate only the husband's
income decrease; and (6) whether its interpretation of the
various forms his objection to the decision not to treat the
wife's pension distribution as current income when modifying
spousal support. Finding no error, we affirm.
The parties married October 21, 1991, separated April 30,
1997, and divorced July 24, 1998. It was the second marriage
for both and ended without children. At the time of divorce,
the husband was 58 years old and an airline pilot earning
$180,000 annually. The wife was 52 years old and a dog trainer
earning $20,000 annually.
The parties executed a property settlement agreement
setting spousal support for the wife at $3,500 per month. It
allocated the wife 50% of the marital share of the husband's
retirement and 401K plans. The final decree incorporated the
contract provisions and appropriate Qualified Domestic Relations
Orders completed allocation of the pension benefits between the
parties.
Medical problems ended the husband's flying career. He
took early retirement and elected to receive his pension
benefits as a lump sum. That election permitted the wife to
receive her share as a lump sum. American Airlines distributed
$2,064,000 to the husband and $468,126 to the wife. Both
parties deposited their distributions in Individual Retirement
____________________
agreement was unsupported by its language and the evidence
presented.
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Accounts, which defer income taxes on earnings until the owner
withdraws benefits. The husband began withdrawing $10,900 per
month. The wife continued to work and withdrew nothing from her
IRA.
The husband petitioned to "terminate/reduce" spousal
support. At the hearing on the petition, the husband's annual
retirement income was $156,000, but he no longer paid his first
wife $18,000 spousal support. The reduction in that spousal
support nearly offset his $24,000 reduction in income. The
wife's situation had not changed. She still earned $20,000
annually working as a dog trainer and incurred expenses similar
to those incurred when the parties executed the settlement
agreement.
While retirement had reduced his income, the husband did
not press that as the reason to decrease spousal support.
Primarily he contended the wife no longer needed spousal support
because she received a substantial cash distribution upon his
retirement. The main thrust of his presentation was the
testimony of a financial planner about the income potential of
the wife's pension. The husband's expert projected monthly
income of $3,500 for her life expectancy.
The trial court found that the husband's retirement
constituted a material change in circumstances warranting
modification of support. The reduction in his income warranted
a reduction in monthly spousal support from $3,500 to $3,010.
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In recalculating spousal support, the trial court considered the
husband's monthly withdrawals from his retirement account as
income. The trial court did not treat the wife's lump sum
payment as income and did not impute its income potential to
her. 2 The order provided that the wife's lump sum payment and
the earnings thereon "shall not be imputed as income to [the
wife] for so long as the funds remain in her IRA or other
nontaxable deferred income instrument similar in concept to an
IRA." The husband contends this was error.
The husband argues the wife received income when American
Airlines distributed her share of the pension benefit as a lump
sum. Under general equitable distribution principles, that
distribution was not income but the distribution of an asset
constituting part of her equitable distribution award. Ray v.
Ray, 4 Va. App. 509, 358 S.E.2d 754 (1987). In Ray, the wife
received an equitable distribution award in five annual
installments of $29,000. The trial court treated the payments
as income and considered them in fixing spousal support. "The
trial court erroneously considered the monetary award as income
rather than an asset constituting a part of wife's estate." Id.
at 513, 358 S.E.2d at 756. Likewise, the distribution in this
case was a distribution of an asset that constituted a part of
2
The husband presented no evidence of the actual earnings
generated by the wife's IRA.
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the wife's estate. As the trial court noted, the wife's receipt
of a lump sum payment "does not automatically amount to income
to her."
After concluding established precedent did not treat a
distribution of an asset as income, the trial court decided
whether the parties had elected to treat the pension benefit as
income to the wife in the property settlement agreement. The
trial court carefully analyzed the contract and concluded the
wife's receipt of her share of the husband's retirement benefits
in a lump sum was not receipt of income but distribution of an
asset. The trial court found:
At the outset, what is absolutely clear
is that by their Property Settlement
Agreement the husband agreed to make two
separate provisions for his wife. First, he
agreed to pay her spousal support at the
rate of $3500 per month. Second, he agreed
to give her her share of his pension. These
were not interdependent actions. Each stood
alone.
The trial court ruled the lump sum payment was not income under
the provisions of the contract.
The contract was unambiguous. Paragraph 10 addressed
spousal support. It set the amount, provided for modification,
and specified the facts that formed the basis for the monthly
payment. Those facts were: the husband's annual income of
$180,000, the alimony paid to his first wife of $18,000, and the
wife's annual earnings of $20,000. Paragraph 17 addressed the
wife's rights in the husband's retirement
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"assets/accounts/benefits." The contract did not link or
correlate the two provisions in any manner.
The contract treated spousal support and the pension
benefits as separate, distinct matters. Nothing suggested
allocation of the pension benefit would trigger a change in the
wife's income or suggested the parties intended that receipt of
her share of the pension would relieve the husband of the
support obligation. Under the provisions of that particular
contract, payment of her share by American Airlines did not
change its nature as an asset. As the trial court concluded,
"the pension benefit was plainly envisioned as a distribution of
property."
In various ways the husband argues the potential income
streams that the pension asset could produce should be treated
as income and imputed to the wife. His expert explained the
accepted methods for projecting streams of income and calculated
these using various assumed rates of return. The expert opined
the wife could withdraw annually $35,000 or $42,000 for the
balance of her life expectancy of age 83. The husband argues
such income potential supplanted the need for him to pay spousal
support. The wife's expert disputed the propriety of the
calculations because they did not address the wife's particular
needs, anticipate any inflation, or make provision if the wife
lived past age 83. He calculated the wife would out live the
projected payments and be destitute.
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A spouse is not required to deplete her assets to relieve
the husband of his support obligation. Klotz v. Klotz, 203 Va.
677, 127 S.E.2d 104 (1962), held, "[w]here the wife is possessed
of a sizeable estate in her own right, the law does not require
her to invade that estate to relieve the obligation of her
former husband" to pay spousal support. Id. at 680, 127 S.E.2d
at 106 (citation omitted). The evidence in this case showed
that withdrawing from the pension under the plans advocated by
the husband would force the wife to deplete her primary asset.
The trial court rejected the husband's argument that the
earnings potential of the pension benefits removed all or the
major part of the wife's need for spousal support. It stated:
"yet the wife did not receive 'income' from the pension but
rather a lump sum payment which does not automatically amount to
income to her. For her to convert it into income she must
invest it and hence over time deplete it." The projections left
her with nothing if she outlived her life expectancy. The trial
court rejected the plan that would "diminish significantly – if
not destroy – the wife's share of the marital property" and
characterized the result as "Draconian."
Once the trial court elected not to impute income to the
wife, it calculated the support based on the husband's reduced
retirement income. When it recalculated the support award, the
trial court carefully considered all the required factors under
Code § 20-107.1. It specifically considered the wife's
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retirement fund, which it described as her primary asset. The
trial court considered the husband's ability to pay based on his
income from all sources and the wife's needs as well as her
earning capacity. Given the trial court's finding that the
parties clearly contemplated two separate payments in their
contract, pension distribution and spousal support, neither of
which was conditioned upon the other, we find no error in the
trial court's ruling.
The wife seeks an award of legal fees incurred in this
appeal. We find the husband had a reasonable argument and,
accordingly, we deny the request for attorney's fees. See
Gayler v. Gayler, 20 Va. App. 83, 87, 455 S.E.2d 278, 280
(1995).
For the reasons stated, we affirm the decision of the trial
court.
Affirmed.
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