Marriage of Kruschel v. Kruschel

OPINION LANSING, Judge. Upon retirement, appellant William Krus-chel moved to modify the spousal maintenance provision of a dissolution decree entered five years earlier while he was still employed. He appeals the trial court’s denial of that motion. We reverse and remand. FACTS In 1982, the parties’ 34-year marriage was dissolved by a decree which required William Kruschel to pay Dorothy Kruschel $1,000 per month spousal maintenance to continue until the remarriage of Dorothy Kruschel, the death of either party, or any other material change in circumstances. The decree also effected a roughly equal division of the parties’ marital property: William Kruschel received real and personal property worth around $83,882, including sole right to and interest in his pension plan, then valued at $61,312; Dorothy Kruschel received real and personal property worth approximately $81,275, including the parties’ homestead, which had a net equity of $61,175. In May 1987, at age 62, William Kruschel voluntarily retired from his employment as an engineer for 3M. While at 3M, he had *121 earned a monthly base salary of $3,380 plus profit sharing, for a net monthly income of about .$1,981. After retirement, his monthly income consists of $1,900 in pension benefits and $671 from social security, for a net monthly income of $2,045. In addition, William Kruschel has at all relevant times received veteran’s disability benefits of $386 per month. Now age 62, Dorothy Kruschel is unemployed and, aside from maintenance payments, her current monthly income is limited to $117 in social security benefits. Physical and emotional problems make her future employment unlikely. After retiring, William Kruschel moved to modify the maintenance award, arguing that Dorothy Kruschel’s recent sale of her house and some stock had left her with substantial cash assets; that his monthly expenses had increased; that Dorothy Kruschel had become eligible for social security payments and her monthly expenses had decreased; and that requiring him to pay maintenance out of his pension benefits was inconsistent with the award to him of sole right to the pension. Although the trial court adopted William Kruschel’s assertions on changes in income and expenses, it nonetheless concluded that he had failed to meet his burden of proving that there had been a change of circumstances which would make the original maintenance award unreasonable and unfair. William Kruschel appeals. ISSUE Did the trial court abuse its discretion in determining there had been no substantial change of circumstances which would make the original maintenance award unreasonable or unfair? ANALYSIS The maintenance provisions of a dissolution decree may be modified upon a showing of * * * (1) substantially increased or decreased earnings of a party; [or] (2) substantially increased or decreased need of a party * * * which makes the terms unreasonable and unfair. * * * Minn.Stat. § 518.64, subd. 2 (1986). An award of maintenance should be modified only upon clear proof of facts showing a substantial change of circumstances from those existing at the time of the dissolution. Peterson v. Peterson, 304 Minn. 578, 580 , 231 N.W.2d 85, 86 (1975); Wiese v. Wiese, 295 N.W.2d 371, 372 (Minn.1980). A trial court’s discretion to modify an award should be exercised cautiously, and this court will not interfere with the exercise of that discretion unless it has been abused. Abuzzahab v. Abuzzahab, 359 N.W.2d 329, 332 (Minn.Ct.App.1984). If only the increase or decrease in cash flow and expenses were considered, those changes would not be so substantial as to make refusal to modify an abuse of discretion: William Kruschel’s monthly net receipts actually increased slightly, from $1,981 to $2,045 (excluding veteran’s benefits), while Dorothy Kruschel remains unemployed and receives only $117 per month social security. William Kruschel’s monthly expenses have increased from $1,523 to $1,680, and Dorothy Kruschel’s monthly expenses have decreased from $1,701 to $1,405. However, William Kruschel also argues that it is error to require him to pay maintenance out of his pension benefits, because he was awarded sole interest in his pension in the original property distribution. Pension benefits are property to be considered by the trial court in dividing property or awarding maintenance. Taylor v. Taylor, 329 N.W.2d 795, 798 (Minn.1983). Because the value of a vested pension plan is based entirely on the future stream of income it represents, William Kruschel argues that the effect of requiring him to pay maintenance out of his pension benefits is to modify the property award after the time for appeal of that award has expired. See Minn.Stat. § 518.64, subd. 2 (1986) (“all divisions of real and personal property provided by section 518.58 shall be final”); Arzt v. Arzt, 361 N.W.2d 135, 136-37 (Minn.Ct.App.1985) (trial court does not have authority to modify property division after time for appeal of original decree has expired). *122 Although no Minnesota appellate court has squarely addressed this issue, there is support for William Kruschel’s argument that the pension should be viewed as property or income, but not both. For example, in Faus v. Faus, 319 N.W.2d 408 (Minn. 1982), the trial court awarded the respondent maintenance until the appellant retired, and gave her a 50 percent interest in future pension benefits which had vested during the marriage. In affirming this aspect of the decree, the supreme court noted that although the respondent would continue to receive payments after the appellant’s retirement, those payments would actually be “in recognition of her interest in appellant’s pension benefits,” rather than maintenance. Id. at 413 . Other cases confirm this distinction. See Elliott v. Elliott, 274 N.W.2d 75, 78 (Minn.1978) (pension rights are to be considered as property rights and social security benefits as income in determining property division and alimony); Sward v. Sward, 410 N.W.2d 442, 444 (Minn Ct.App.1987), pet. for review granted (Minn. Sept. 30, 1987) (although military disability benefits may not be divided as a marital asset, they can be considered as income in setting maintenance awards); O’Brien v. O’Brien, 343 N.W.2d 850, 852 (Minn.1984) (if the valuation of property awarded is based on the capitalization of an income stream, that income is properly excluded in determining maintenance). Finally, in Hellerstedt v. Hellerstedt, 409 N.W.2d 65 (Minn.Ct.App.1987), pet. for review denied (Minn. Sept. 30, 1987), this court upheld an order for temporary maintenance which apparently had to be paid from pension benefits previously awarded to the appellant as part of his property award. In affirming, the court relied on the fact that the maintenance order required that the temporary payments be repaid with interest, implying that the maintenance would otherwise have improperly modified the property award. Id. at 67 . Addressing a similar issue, the Wisconsin Court of Appeals has held that the trial court abused its discretion in failing to exclude pension benefits from income for maintenance purposes until the total benefits received equal the value of the fund awarded in the property division. Pelot v. Pelot, 116 Wis.2d 339, 342-43 , 342 N.W.2d 64, 67 (Wis.App.1983). Although the court recognized that the pension fund, considered as property, could have been considered in awarding maintenance, it nonetheless concluded that it was “arbitrary” to consider the pension both as property for property division purposes and also as income for maintenance purposes. Id. Dorothy Kruschel argues that the motion to modify was properly denied because the same factors are to be considered in dividing property and awarding maintenance, and the court which entered the original decree knew that William Kruschel would be retiring soon and made its decree in light of that knowledge. No language in the original dissolution decree supports the argument that anything other than a roughly equivalent division of marital assets was intended. If William Kruschel’s pension benefits are considered equivalent to employment income for maintenance purposes, then Dorothy Kruschel will in fact receive a greater proportion of the marital assets. If, as Dorothy Kruschel appears to suggest, the trial court intended to give her an interest in the pension benefits, it could have done so explicitly. See Faus, 319 N.W.2d at 413 . Although William Kruschel’s monthly cash receipts have not changed substantially since his retirement, those receipts are now derived primarily from property rights previously awarded to him. This shift constitutes a substantial change of circumstances. To the extent that the original maintenance award would require William Kruschel to deplete his property award to pay maintenance, it is subject to modification under Minn.Stat. § 518.64, subd. 2. In determining the propriety and amount of continued maintenance, the trial court must consider Dorothy Kruschel’s total financial resources, including any income from her own marital property award, Minn.Stat. § 518.552, subds. 1(a) and 2(a). Conjointly, William Kruschel’s *123 total financial resources must be considered in evaluating his ability to meet his own needs. Minn.Stat. § 518.552, subd. 2(g). If the court determines that William Kruschel has the financial resources to meet his own needs and Dorothy Kruschel does not, it may order continued maintenance out of William Kruschel’s non-pension income. However, maintenance may not be ordered to be paid from William Kruschel’s pension payments until he has received from the pension an amount equivalent to its value as determined in the original property distribution. DECISION On remand, William Kruschel’s pension benefits should not be used as income for maintenance purposes; however, his property interest in the pension may, along with Dorothy Kruschel’s own assets, be considered in determining the propriety or amount of future maintenance payable from non-pension income. Reversed and remanded.