Decision Appears to Limit Trial Court’s Discretion

By Attorney Gregg Herman
January 7, 2008

This is the second in a series of three articles discussing the recent Wisconsin Court of Appeals decision in Wright v. Wright, No. 2006AP2111 (Wis. Ct. App. Dec. 4, 2007) (recommended for publication).

As discussed in the previous article, the appellate court affirmed most of the trial court’s rulings on property division, holding that the trial court properly excluded certain gifted property from the marital estate, with the exception of one relatively minor asset.

The more interesting part of the decision, and therefore the portion warranting additional articles in this column, is the portion which reversed the maintenance order and remanded for reconsideration.

‘Consideration’ of Income Sources

At trial, the court ordered maintenance paid from the income from some of Charles’ business entities, but not from other entities. The trial court gave three reasons for excluding these entities, as summarized by the court of appeals:

“(1) [T]hese entities are not currently making money and therefore including them in the maintenance income consideration would be speculative; (2) any future earnings from these sources will constitute a return on capital, not a source of income; and (3) counting income from these entities would constitute ‘double counting’ because the value of the companies was included in the property division.”

The appellate court disagreed with all three reasons.

Regarding the first reason, the court held that, “… the fact that a potential source of income, which has produced in the past, is not currently producing income, should not eliminate it as a source of income in a maintenance determination. The general rule is that the trial court is obligated to consider all sources of income when establishing maintenance.”

The question that arises from this analysis is that it appears that the trial did consider these entities in its maintenance order, but decided not to include income from them in its maintenance order. If trial courts are supposed to have discretion in determining maintenance, then why did the appellate court reverse the trial court for appearing to exercise its discretion to not include income from these companies? If the appellate court is saying that all potential sources of income must be included, no matter whether they are currently producing income or not, then a trial court would actually have no discretion at all.

After all, shouldn’t part of a trial court’s discretion include excluding certain income, if appropriate under the circumstances? A maintenance award is always subject to modification pursuant to Wis. Stats. §767.59, upon showing of a substantial change in circumstances, if the entity does start producing income. It is not clear in the appellate court decision why the ability to bring such an action would not protect Linda in the future if these companies should turn around. It is hoped that this decision is not applied in the future to mean that the trial court cannot ever make similar orders in other cases.

Disturbing the Trial Court’s Discretion

Also troubling is a directive from the decision where the appellate court seems to limit the trials court’s discretion on remand by ordering: “If the entities earn income, Linda should receive 50 percent of what Charles receives.”

Presumably, the appellate court is fitting any future income of these entities into the trial court’s overall maintenance order. Otherwise, it appears that the appellate court is formulating the trial court’s order after remand — which would not only reverse the trial court’s exercise of discretion at trial, but also, not let it exercise discretion on remand, either.

The case was complicated enough that the trial court’s decision was 121 pages and contained 1,062 findings of fact. Notwithstanding numerous appellate cases that have held that the test on appeal is whether the trial court misused its discretion, and not whether the appellate judges would have reached the same decision, the trial court was reversed. In doing so, the Court of Appeals decision does not make clear where the trial court overstepped the bounds of its discretion — or whether such bounds are far more narrow than previously thought.

Next week, we will look at another ground for reversal, the sometimes confusing issue of double-counting.

Attorney Gregg Herman is a founding partner of Loeb & Herman, LLC in Milwaukee, WI. He practices family law exclusively, and can be reached via e-mail or by calling (414) 272-5632.