FT - Greco v. Greco (5/11/2004)

[Riser Adkisson LLP]

Greco v. Greco,
2004.CT.0000238 (Conn.App. 05/11/2004)

THE COURT OF APPEALS OF THE STATE OF CONNECTICUT

AC 22797

2004.CT.0000238

May 11, 2004

EILEEN N. GRECO
v.
GEORGE GRECO ET AL.

(Appeal from Superior Court, judicial district of Ansonia-Milford, Cutsumpas, J.)

James R. Greenfield, with whom was Kelly P. Lutz Mai, for the appellant (named defendant).

William F. Gallagher, with whom, on the brief, was Barbara L. Cox, for the appellee (plaintiff).

Lavery, C. J., and DiPentima and Stoughton, Js.

The opinion of the court was delivered by: Lavery, C. J.

Argued November 18, 2003

Opinion

The defendant George Greco*fn1 appeals from the judgment of the trial court dissolving his
marriage to the plaintiff, Eileen Greco. On appeal, the defendant claims that the court, in
fashioning its financial orders, (1) overvalued the defendant's stock in Greco's Auto Parts,
Inc., (2) improperly awarded the plaintiff 98 percent of the parties' marital assets, (3)
improperly relied on gross income, rather than net income, in determining the defendant's alimony
obligation, (4) improperly ordered the defendant to pay alimony and other expenses that exceed
his available income, and (5) abused its discretion in awarding the plaintiff $100,000 in
attorney's fees. We agree with the defendant's third and fourth claims, which are interrelated,
and, accordingly, reverse the judgment of the trial court.*fn2

The following facts and procedural history are relevant to our resolution of the defendant's
claims. The plaintiff and the defendant were married on September 28, 1974. It was the second
marriage for both parties. At the time of the marriage, the defendant had custody of his five
children from his prior marriage and the plaintiff had custody of a child born during her prior
marriage. In 1997, DNA testing revealed that the defendant is that child's biological father. The
parties also had a child together born during their marriage.

Before the parties were married, the defendant owned and operated a gasoline service station.
After they were married, the defendant sold the service station and opened an auto parts
business. The defendant's five children from his prior marriage were all involved in operating
the auto parts business, Greco's Auto Parts, Inc., as was the parties' first child. The defendant
also formed and controlled a partnership called LDGG Limited Partnership. Throughout the
marriage, the plaintiff was a full-time homemaker, caring for the children and managing the
household.

In February, 2000, the plaintiff brought this dissolution action by a one count complaint,
claiming an irretrievable breakdown in the marital relationship. She sought the dissolution of
the parties' marriage, an equitable distribution of the parties' property, alimony and attorney's
fees. On September 25, 2001, the plaintiff filed a three count third amended complaint. The first
count was directed against the defendant and was identical to the one count in the original
complaint. The second count was directed against the defendant, the defendant's five adult
children from his prior marriage, two "spray trusts" established for the parties' two children
and the LDGG Limited Partnership. That count alleged that the defendant's transfers of certain
assets were fraudulent in violation of the Uniform Fraudulent Transfer Act, General Statutes § 52-
552a et seq., and, therefore, they should be set aside and the assets returned to the marital
estate.*fn3 The third count essentially was identical to the second count.

On October 11, 2001, the defendant filed an answer and a counterclaim for dissolution of
marriage. On October 30, 2001, the defendant's five children from his prior marriage filed an
answer, special defenses and a four count counterclaim.*fn4 They also filed a claim for a jury
trial. On that same date, the LDGG Limited Partnership and the trustee of the two trusts filed
their answers and special defenses. On November 8, 2001, the plaintiff filed an answer and
special defenses to the counterclaims of the defendant's five children from his prior
marriage.*fn5

After a lengthy trial, the court dissolved the parties' marriage on January 11, 2002, on the
basis of irretrievable breakdown. The court also determined that the plaintiff failed to prove
her "fraudulent transfer claims by the requisite clear and convincing evidence."*fn6 The court,
however, stated that although it would not set aside the transfers or include the assets involved
in the marital estate, it would consider the defendant's removal of those assets from the marital
estate in fashioning its financial orders.

In its orders, the court ordered the defendant to pay to the plaintiff $710 per week in alimony
until the death of either party, the plaintiff's remarriage or her cohabitation. It also ordered
the defendant to maintain his life insurance for the plaintiff's benefit and to provide health
insurance for her for three years. The court further ordered the defendant to transfer to the
plaintiff his interest in the marital residence at 24 Sunbrook Road in Woodbridge. In addition,
the court ordered the defendant to transfer to the plaintiff his stock in Greco's Auto Parts,
Inc., or, alternatively, the value of that stock, which the court found to be $250,000. Finally,
the court ordered the defendant to transfer to the plaintiff his individual retirement account,
which was valued at approximately $9900, and to pay to the plaintiff $100,000 in attorney's fees.
The defendant now appeals from those orders.

We address the defendant's third and fourth claims together because they are interrelated. The
defendant claims that the court improperly relied on gross income, rather than net income, in
determining the defendant's alimony obligation. The defendant also claims that the court
improperly ordered him to pay alimony and other expenses that far exceeded his available net
income. We agree with both claims.

Initially, we set forth our standard of review. "We review financial awards in dissolution
actions under an abuse of discretion standard.... In order to conclude that the trial court
abused its discretion, we must find that the court either incorrectly applied the law or could
not reasonably conclude as it did." (Internal quotation marks omitted.) Evans v. Taylor, 67 Conn.
App. 108, 111, 786 A.2d 525 (2001). "In making those determinations, we allow every reasonable
presumption... in favor of the correctness of [the trial court's] action." (Internal quotation
marks omitted.) DiVito v. DiVito, 77 Conn. App. 124, 130, 822 A.2d 294, cert. denied, 264 Conn.
921, 828 A.2d 617 (2003). Mindful of those principles, we now turn to the issue of whether the
court incorrectly applied the law by basing its financial orders on the parties' gross incomes.

"It is well settled that a court must base... alimony orders on the available net income of the
parties, not gross income." Morris v. Morris, 262 Conn. 299, 306, 811 A.2d 1283 (2003); see also
Ludgin v. McGowan, 64 Conn. App. 355, 358, 780 A.2d 198 (2001).

In the present case, although the court, in its memorandum of decision, did not "affirmatively
and expressly" state that it relied on the parties' gross incomes in determining its alimony
order; see Morris v. Morris, supra, 262 Conn. 306; it did find that the defendant had "a $73,840
annual income from the auto parts business...." That amount is equal to the defendant's gross
income as stated in his financial affidavit. In addition, in its financial orders, the court
ordered the defendant to pay to the plaintiff $710 per week in alimony, which is precisely 50
percent of the defendant's gross income. Both parties submitted financial affidavits in which
they stated their net income. The court, therefore, had before it evidence of the parties' net
incomes, but failed to mention such income and, instead, focused on the defendant's gross
income.*fn7

The court's reliance on the gross incomes of the parties in fashioning its financial orders is
further evinced by the fact that the court ordered the defendant to pay alimony and other
expenses that far exceeded his available net income.*fn8 The court ordered the defendant to pay
alimony in the amount of $36,920 per year, life insurance premiums for the plaintiff in the
amount of $12,480 per year and health insurance premiums for the plaintiff in the amount of
$5972.16 per year. Those payments, when deducted from the defendant's gross income, as found by
the court, leave the defendant with $18,467.84.*fn9 The court also required the defendant to pay
$20,000 per year toward the plaintiff's attorney's fees,*fn10 which leaves the defendant with a
yearly gross income deficit.*fn11 Moreover, because the court awarded the plaintiff $720,936.56
out of the parties' $731,870.21 total marital assets, the defendant has virtually no assets that
can be used to meet his annual deficit or to provide for his ordinary living expenses.

In addition, in light of the court's findings with respect to the defendant's age, health and
ability to work,*fn12 it is clear that the defendant's ability to earn income is entirely
dependent on his control of Greco's Auto Parts, Inc.,*fn13 and the source of that control is his
sixty-five shares of stock in the corporation, which represent 53.3 percent of the total shares
having voting power.*fn14 In its orders, however, the court ordered the defendant to transfer to
the plaintiff his stock in Greco's Auto Parts, Inc., or, alternatively, to pay to the plaintiff
the value of that stock, which the court found to be $250,000. If the defendant retains the
stock, the court gave him two payment options (1) a lump sum of $250,000 paid within ninety days
or (2) a "promissory note in the amount of $250,000, providing for interest of 7 percent per
annum, payable monthly over a ten year period, with adequate security." Thus, the court's order
transfers control of Greco's Auto Parts, Inc., to the plaintiff or, alternatively, requires the
defendant to pay funds to the plaintiff, which, in light of the court's other orders and
findings, he does not appear to have.*fn15

The court's order, therefore, in effect, requires the defendant to transfer control of the
closely held corporation to the plaintiff, which gives her control over the defendant's
employment and his only significant source of income. Accordingly, the court's taking the
corporation into account in both the property division and in the award of alimony and other
payments is, in essence, "double dipping" and inequitable because the corporation provides the
only significant stream of income by which the defendant can meet his alimony and other court
ordered payment obligations. See Dunleavy v. Dunleavy, Superior Court, judicial district of
Danbury, Docket No. 334546 (September 11, 2000); Cardillo v. Cardillo, Superior Court, judicial
district of StamfordNorwalk, Docket No. 114248 (June 10, 1992); see also Krafick v. Krafick, 234
Conn. 783, 804-805 n.26, 663 A.2d 365 (1995).

We conclude that the court incorrectly applied the law by basing its financial orders on the
parties' gross incomes and that it abused its discretion by ordering the defendant to pay alimony
and other expenses that far exceed his available net income.*fn16 We further conclude that the
court's award, in practical effect, equates to "double dipping" and, therefore, is inequitable.
Accordingly, we reverse the judgment with respect to all the financial orders. See Morris v.
Morris, supra, 262 Conn. 307; Ludgin v. McGowan, supra, 64 Conn. App. 359.

The judgment is reversed as to the financial orders only and the case is remanded for a new
hearing on all financial issues in accordance with law.


Opinion Footnotes

*fn1 Also named as defendants were George Greco's five children from a previous marriage, two
trusts George Greco established for two children he fathered with the plaintiff and the LDGG
Limited Partnership in which he has an ownership interest. Because only George Greco has
appealed, we refer to him as the defendant.

*fn2 On the basis of our disposition of the defendant's third and fourth claims, we need not
address the defendant's other claims on appeal.

*fn3 Between 1998 and 1999, the defendant transferred to his children, either directly or via
trust, the majority of his stock in Greco's Auto Parts, Inc., and title to various parcels of
real estate related to that business. Those assets were worth more than $1 million.

*fn4 One of the defendant's children, George Greco, Jr., subsequently passed away and the
administratrix of his estate was substituted as a party. On November 27, 2001, the administratrix
filed an answer to the plaintiff's third amended complaint.

*fn5 On May 14, 2001, the court ordered that "the issues of the dissolution of marriage, property
and alimony and other claims together with the counts on fraudulent conveyances and the special
defenses of the defendant children will be tried to the court. After the court decides these
issues and enters judgment, the court will address the issues relative to the defendant
children's counterclaims."

*fn6 We note that the court's finding that the transfers were not fraudulent is not an issue in
this appeal.

*fn7 The court found that "[d]espite testimony about some income from [the plaintiff's] porcelain
doll hobby or business, no income capacity is assigned to the [plaintiff]...."

*fn8 We note that our jurisprudence requires the court to consider the statutory criteria set
forth in General Statutes § 46b-82 in determining whether alimony shall be awarded, and the
duration and amount of the award. Those criteria are "the length of the marriage, the causes for
the... dissolution of the marriage... the age, health, station, occupation, amount and sources of
income, vocational skills, employability, estate and needs of each of the parties and the award,
if any, which the court may make pursuant to [General Statutes §] 46b-81...." General Statutes §
46b-82.

*fn9 Because the court did not make any finding with respect to the defendant's net income, there
is no evidence as to what the defendant's after tax net income would be after making the alimony,
life insurance and health insurance payments; however, it certainly would not be more than and
likely would be less than his gross amount. In his financial affidavit, the defendant stated that
his net income is $53,872 per year. If that figure is used, the defendant already is left with a
deficit after making only those payments to the plaintiff.

*fn10 Specifically, the court ordered the defendant to pay to the plaintiff $100,000 in
attorney's fees at a rate of $20,000 per year.

*fn11 We note that although the court made no specific findings with respect to the defendant's
unpaid attorney's fees, if factored in, that expense would certainly increase the defendant's
deficit. Also, although the court found that the defendant gambles extensively, it did not find
that the defendant's winnings exceeded his losses, thereby, serving as an additional source of
income for the defendant.

*fn12 In it memorandum of decision, the court stated in relevant part: "[The defendant] is sixty-
four years of age, completed the eighth grade... and has been engaged in the auto repair and
parts business throughout his life. His health is very poor. He suffers from angina and other
related health problems which commenced in 1988. After numerous surgical procedures, he remains
under the care of various physicians, takes nine different medications and is depressed. It would
appear that his ability to work has been seriously compromised."

*fn13 Although the court found that the defendant "receives regular cash gifts of up to $500 from
at least one of his children," it is doubtful that those contributions will continue if the
defendant no longer controls Greco's Auto Parts, Inc. Indeed, in its articulation, the court
stated: "The inescapable conclusion in the instant case is that reserving voting control [in
Greco's Auto Parts, Inc.] was the [defendant's] way of preserving control over his children in
the event they did not do things his way." Furthermore, in his closing argument, the plaintiff's
counsel stated in relevant part: "[The defendant's] income dramatically increased.... Your Honor,
that doesn't happen because you're doing nothing, it happens because you have control, and it
happens because you can impose your will on those around you to pay you those moneys. * * * "[W]
hen [the defendant] transferred his interest in the corporation [to his children], he didn't give
them a controlling interest, he didn't give them all of it. I asked him why. He doesn't know....
But, I think I can draw a reasonable inference why he didn't, Your Honor. I think the reason he
didn't was because he had to have that control. You don't get a $20,000 raise over two years when
you're doing nothing because your children are being generous to you." (Emphasis added.)

*fn14 In its articulation, the court stated in relevant part: "It became abundantly clear to the
court that while the [defendant] transferred virtually the entire equity in the business, he
cunningly retained voting control. In the court's estimation, voting control of a small
corporation is often more important than equity interest-such is the case in Greco's Auto Parts,
Inc. Voting control has the ultimate power to elect directors, in effect elect officers,
determine policy, set compensation, hire and fire employees, and in numerous other ways dictate
the direction of the company. The inescapable conclusion in the instant case is, that reserving
voting control was the [defendant's] way of preserving control over his children in the event
they did not do things his way."

*fn15 The terms of the promissory note would require the defendant to pay to the plaintiff
approximately an additional $34,832.52 per year for ten years.

*fn16 The plaintiff contends that the court's "award of alimony and insurance was reasonable in
light of the [defendant's] underreported income" and that the court could have based its award on
the defendant's earning capacity rather than on his actual net income. Although the court stated
that the defendant's testimony frequently lacked credibility and his financial affidavit had to
be amended several times during the trial to conform to the testimony, its memorandum of decision
is devoid of any specific finding with respect to the defendant's alleged unreported income or
his earning capacity. "This court cannot find facts or draw conclusions from primary facts found,
but can only review such findings to determine whether they could legally, logically and
reasonably be found and whether the trial court could thereby conclude as it did." (Internal
quotation marks omitted.) Parkview Paving Co. v. New Haven, 13 Conn. App. 574, 575, 537 A.2d
1049, cert. denied, 207 Conn. 810, 541 A.2d 1240 (1988). Accordingly, the plaintiff's contention
is without merit.