Family Law Update for May 2020

In this Issue …

A Word from Gregg Herman
A few thoughts …

Wisconsin Courts Updates
Wisconsin Courts Updates: Supreme Court life insurance case and unpublished (but citeable) Court of Appeal cases on a constructive trust for under reporting income, stipulation excluding bonus from child support and shirking allegation.

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A Word from Gregg Herman …

Well, at least there are a few new cases, so while this will not be type of FLU you are used to, I figure it would be helpful to get this out. During my years of practice, I’ve seen unusual times (e.g., immediately following 9/11), but nothing that compares to what is happening today.

As scary as the health dangers are, the future of the legal system is very much up in the air. For one thing, the whole concept of modifying support will be different as the unspoken assumption a couple of months ago that if someone is working it’s their fault. The future will be an assumption that no one has any income, or at least has had a substantial reduction. For my thoughts on this, see my recent article in the Wisconsin Law Journal.

Then, what happens when courts reopen? See the following, also from the Wisconsin Law Journal:

“The Milwaukee County Circuit Court is drawing up a post-pandemic recovery plan to help the courts safely return to normal operations and work through an expected three- to four-year backlog of cases.” [emphasis added]

Three to four years? Yikes!

What is most frustrating is that there is nothing we can do about it and no one knows when this is going to end.

In the interim, I’ll send out a FLU when there is something new to report.

Hope everyone stays safe and well!

Gregg

Wisconsin Courts Update

Editor’s Note: The following case is not recommended for publication, but may be cited for its persuasive value under Wis. Stat. 809.23(3).

On April 14, 2020, the Supreme Court of Wisconsin issued their opinion in Pulkkila v. Pulkkila, 2020 WI 34 (2018AP712).

In an MSA accepted the court in 2009, James committed to keep a $250,000 life insurance policy in effect with his children as beneficiaries until they reached adulthood. In 2014, while still having at least one minor child, he changed the beneficiary designation to his new wife and then died a year later. While James’ former wife, Joan, was entitled to a lien against James’ estate, his estate was worth only $5,600. Joan requested a constructive trust on behalf of the children, which the trial court denied. She appealed and the Court of Appeals reversed holding that the equities of the case mandating the creation of a constructive trust in favor of the children in order to accomplish the intent of the MSA.

The Supreme Court reversed the court of appeals and remanded for further findings. While holding that the lien provision in the MSA was not an exclusive remedy, imposing a constructive trust requires a fact-intensive inquiry which the trial court failed to do. Therefore, the SC remanded to the trial court to conduct such a fact finding inquiry and determine whether to impose a constructive trust.

Justice Rebecca Grassl Bradley dissented. She would hold that the parties were restricted to precise terms of the MSA since it was a contract. The MSA provided only for a lien (as meaningless as it turned out to be) and such remedy is mandatory and exclusive. She was not bothered in the least by the fact that the MSA, to which she would strictly hold the parties, did not state that a lien was the “sole” remedy – or for that matter, that James had willfully violated a court order to the detriment of his children, who had no part in negotiating the terms of the MSA.

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Editor’s Note: The following case is not recommended for publication, but may be cited for its persuasive value under Wis. Stat. 809.23(3).

On April 14, 2020, the District III Court of Appeals issued their opinion in Gilbert v. Gilbert, No. 2018AP2312, which affirmed the order rendered by the Honorable Edward F. Vlack III (St. Croix County).

Mark Gilbert appealed from an order requiring him to pay $28,117.63 to his former wife, Theresa, in her ole as trustee for a constructive trust which the court had previously imposed as a remedial sanction after finding Mark in Contempt.

At the time of divorce, in 2005, Mark reported an income of $62,145, resulting in paying Theresa $1,000 per month in child support. In 2009, Mark filed a motion to revise his child support (that may not have been his smartest move), which resulted in Theresa getting his 2005 tax return which reported income of $424,785, which almost seven times the income Mark represented. Theresa started a contempt action, seeking retroactive child support as sanction. The circuit court found Mark in contempt, but rather than order retroactive child support, the court created a $119,397 constructive trust on Mark’s real estate for the benefit of the childrens’ post high school education. This order was affirmed in Gilbert v. Gilbert No. 2011AP1905, unpublished sl. op. (WI App Mar. 6, 2012).

After failing on two prior occasions to enforce the trust provisions, on her third try, the circuit court ordered Mark to pay Theresa, as trustee, the sum of $28,117.63 based on her accounting for the children’s unpaid college expenses and that she should begin providing future accounting which Mark would have to pay until the sum of $119,397 was paid or the youngest child reached the age of 25.

The Court of Appeals rejected Mark’s arguments, including that the court lacked jurisdiction to order post-majority support of adult children (relying on Griffin v. Reeve, 141 Wis. 2d 699), that he had already purged the contempt due to the constructive trust (despite not making any payments) and that Theresa is estopped from pursing the payments (an argument he waived by no responding to Theresa’s brief on the subject).

Other arguments by Mark were also rejected, with the appellate court holding that the constructive trust was an appropriate remedy under Tikalsky v. Friedman, 2019 WI 56, 386 Wis. 2d 757, 928 N.W. 2d 502.

Editor’s Note: The following case is not recommended for publication, but may be cited for its persuasive value under Wis. Stat. 809.23(3).

On April 16, 2020, the District IV Court of Appeals issued their opinion in Reed v. Pappathopoulos, No. 2019AP80, which reversed and remanded the order rendered by the Honorable Ellen Berz (Dane County).
At the time of the divorce, the parties agreed that only base salaries from primary employment would be used to calculate child support. Any bonuses or side jobs would not be considered.

When Sarah’s bonuses increased substantially, Christopher took her back to court for modification. The trial court dismissed his motion, finding that he was equitably estopped since he had stipulated to excluding bonuses from child support calculations.

The court of appeals reversed, finding that the stipulation applied only to the time of divorce and was not intended to apply to any post judgment procedures. The court did not have to resolve the question of whether a stipulation to exclude certain income from future modifications would be enforceable since that was not the stipulation in the instant case.

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