Your Spouse is Ready to Downsize from the Big Money Job. Will You Pay for That?

The facts of a Superior Court case decided November 19 speak to a lot of what is going on in today’s employment market and how it can have lasting effects on support and alimony obligations in Pennsylvania. Follow along as we tell the tale.

Jennifer and David Brosso are the classic dual income couple. They married in 2007 and separated in 2021. She is an accountant for Teva Pharmaceutical making a salary of about $250,000 a year. David also traveled in those waters and indications are that when he was “downsized” from his financial industry job during the 2008 recession he was earning close to $300,000 a year. But, when he was left unemployed back then the couple decided his highest and best use would be to develop real estate using his accounting and M.B.A. degrees. So, the couple formed DJB, LLC and a couple of other entities devoted to renting and developing real estate. We are missing some timeline kinds of detail but suffice to say that in early 2022 each sued the other for child support and alimony pendente lite (a form of spousal support). Along the way, it seems that Jennifer sued to have a receiver manage her husband’s business. The receiver was appointed in March, 2022 and in the first 11 months of management had imposed fees averaging $9,000 a month. The receiver indicated that Mr. Brosso had received no wages during the period because there were insufficient resources to pay him when other expenses (including the receiver’s fees) were considered. Mr. Brosso had collected just under $100,000 in 2022 from a variety of different business related sources. Some of these payments were one-time distributions. Brosso said that he had been looking for employment and that he was supposed to be receiving $6,000 a month from the businesses but the receiver indicated there wasn’t sufficient cash flow to pay that or any amount. The hearing officer decided to hold husband to $168,000 a year gross, the amount he reported as income before the receivership.

Wife’s argument was that in 2022 husband spent money as if he was making the same $300,000 as he had made in 2007 before he became self-employed. Husband really didn’t contest that point but testified that he had borrowed money to support himself while the case was going forward.

This is the classic 21^st century self employed support dispute. One spouse once made big money on a W-2 basis (i.e., as someone’s employee). But “circumstances” prompted the parties to head in a new direction as real estate investors. Meanwhile, the other spouse kept the day job which pays handsomely at $20,000 a month before taxes. Anyone who has had to decipher a tax return based on self-employed real estate income always faces myriad challenges. There’s depreciation expense and then the ticklish questions of whether telephones, snowplows, lawn care, utilities and maintenance are related solely to the business of renting properties or whether some of the bills being run through the business might be for the homestead. In this case, the hearing officer and the court avoided the deep dive into that well and held that husband was used to making $168,000 from the real estate so he would be held to that. Arguably this was still an adverse ruling for the husband as he was not getting any of the $6,000 a month in compensation he was supposed to get from the receiver. That’s probably because the receiver was getting that money instead.

The hearing officer ran the calculations for support based on $20,000+ a month gross for the missus and $14,000 a month for the mister. She then ran the numbers on a net basis. The parties had shared (50/50) physical custody. The result net of insurance costs and a mortgage deviation was wife was to pay $676 a month in child support plus $1,286 in alimony pendente lite. In short mother was to pay father $1,962 in monthly support-$23,544 a year.

This writer has been on both sides of this case. Mom is still living in 2007 when her husband was making $300,000 a year and she might have been earning $150,000. Of course she now wishes that she had demanded dad go back to the salt mines after the recession of 2008 ended and resume his $300,000 career. But that isn’t what they did. Instead, she let him try his hand at real estate and whether accurate or not, they signed joint returns which pegged his income at $168,000 a year. Now, she wants to jack dad back up to his old $300,000 so that she would be getting the support. Shifting over to dad’s side of the table, he’s saying yes, I did earn $168,000 from real estate but in 2022 I scrambled to make $100,000 and this receiver is now not paying me anything because he’s getting $9,000 a month to do what I used to. I have skills but my resume shows no outside employment for the last 16 years.

The hearing officer and the trial court in Montgomery County tried compromising both sides in assessing dad at his historic self employed earnings even though he is arguing that he has no present cash flow at that rate because of the receivership. Meanwhile Mom is the one taking the appeal to the Superior Court because she cannot believe that she has to pay support to a man who once made far more money than she did.

This appeal never got out of the starting blocks. Kids are 50/50. Mom is in the marital home and getting a subsidy because the mortgage exceeds the normal amount under Pa. R.C.P. 1910.16-6(e). In a word husband is getting less support because she kept the expensive marital home. Second is what we can call the smell test of child support and alimony. The court found wife’s net income as $15,579 a month. Her support payment is $1,962 or about 13% of her net income in a setting where husband’s assigned earnings are not real but imputed and it’s not a surprise that the receiver is costing dad’s business a lot of his cash flow. This is not to say that dad would have prevailed on appeal. The court would say to him: “Dude, we understand you got axed in 2007 when making $25,000 a month but once the recession ended and you saw that you were earning half of your old pay working for yourself, maybe you needed to step back into the “work for others” world and climb back closer to the $300,000 you used to make.”

Appellate courts don’t write like that, but they do think like that. As each opinion begins, their task is not perfection but to see if what the trial court did was plainly erroneous. The trial court had bad facts and effectively “split the baby.” Perhaps, mom needs to reconsider a house that requires a mortgage deviation and dad needs to consider whether, at age 56, he needs to re-tool and get back into the regular employment world, getting the receiver off the payroll along the way.

A part of this appeal by mom is an attack on the money dad spent in 2022 while the case was pending. Folks, just about everyone hemorrhages money in the first year of a divorce. Everyone wants to continue the lifestyle the couple had while “together” and to make certain there is no reduction in the children’s lifestyle, lest they “suffer.” Meanwhile, we have some new expense categories on the scene called two lawyers and a receiver to run the business. So, post separation expenses rarely affect a case unless they are indicative of unreported income. The more common problem these days is that wealthy parents are supporting their adult children in the divorce process. That has at times, merited a deviation from guideline support awards, but gifts or loans from parents are not income used to calculate support.

The lesson here is that absent a forensic analysis showing personal expenses or non-reported cash being paid out of the business to support those expenses, lengthy diatribes about lifestyle and potential earnings are not going to carry the day in an appeal. And yes, your spouse who earned $125,000 a year a generation ago at KPMG is still smart and could return to the workforce. But a 10-20 year “hole” in a resume is not easily filled with hyperbole about earning capacity. It does not matter whether that “hole” came about because of a management decision of the last employer or a decision to stay at home or choose self-employment. The appellate panel notes in its ruling that this appeal was long on argument and short on facts in a world where appellate intervention comes about only when the trial court plainly erred on facts in the record or interpretation of the law. The clear message here which many litigants in divorce don’t seem to get is that just because your spouse once earned big money is not a measure of that person’s present earning capacity.