Attorney Carmela M. Miraglia uses a recent case to examine the rare situations in which a surviving alimony agreement can be modified in Massachusetts.
The devil is in the details, and divorce is no exception. After a divorce judgment, portions of the separation agreement survive the decree, while others merge into the decree. The difference is not purely academic—there are real repercussions to which provisions survive and merge. Back in 2015, we explored the difference between merging and surviving agreements in a blog entitled, “Merger vs Survival in Massachusetts Divorce Agreements – What’s the Difference?” The crux of that blog was that provisions of a divorce agreement that survive cannot be modified, while those provisions that merge can be modified at a later date by a party who demonstrates a material change in circumstances.
A recent Massachusetts Appeals Court case highlights the difference between merging and surviving alimony clauses, with a specific focus on the exceedingly narrow circumstances in which a surviving alimony agreement can be modified at a later date.
Agreements vs. Judgments in a Divorce Case: What Can be Modified?
Before launching into an analysis of merger vs. survival, it is important to note the important difference between agreements made by the separating spouses in a signed separation agreement vs. determinations made by a judgment of the court after a trial.
In the alimony context, the critical difference between mutually-consented agreements and court-ordered judgments is that a separation agreement represents a contract between the separating spouses, which provides for a broader range of outcomes, while a divorce judgment made after trial tends to be more constrained by the limits of the law. Separation agreements have an added legal force to them: They are the result of a “meeting of the minds” between the spouses who signed the agreement and represent the kind of bargained-for exchange that arises out of fundamental legal principals such as freedom to contract and voluntary waiver.
Alimony Agreements Can Survive, But Alimony Judgments Merge
As we detailed in our merger vs. survival blog, parties entering a divorce agreement have the choice between making an alimony provision merge or survive, while judge-made alimony decisions always “merge”:
It is important to note that a surviving (i.e. non-modifiable) alimony provision can only be accomplished through a written agreement of the parties. If alimony is determined by a judge following a trial, the resulting order automatically merges, and is subject to modification. This is because survival is strictly a creature of contract law. A judgment entered after trial is not a contract.
This means that an agreement entered by the parties that is incorporated into the divorce decree and survives the judgment of divorce, does not become “merge” with the judgment—but rather, stands separate and independently enforceable from the decree, and cannot be modified. In the context of alimony agreements, this means that a surviving provision stands on its own as a contract and can (almost) never be modified by a party following the entry of judgment. Alimony judgments, on the other hand, are always modifiable.
(Author’s Note): (I have placed the last several paragraphs of this section in parenthesis, for my “word nerd” readers who seek to understand merger vs. survival on a deeper level. For most of the world, it will be enough to understand that “merged” generally means “modifiable” while “surviving” generally means “unmodifiable” in the context of divorce orders. For those who want to dig for deeper meaning, please read on!
Do judge-made alimony decisions truly “merge” with the Judgment of Divorce? No! At least not technically. As discussed below, family law attorneys and judges frequently use “merged/surviving” and “modifiable/unmodifiable” interchangeably, since merging agreements are, by definition, modifiable, and surviving agreements are unmodifiable. Still, the word-obsessed among us like to point out that it is somewhat sloppy to describe all judge-made alimony decisions “automatically merging with the judgment of divorce”.
What do we mean when we say an alimony provision “merges” with the Judgment of Divorce? Here’s the starting point: every divorce agreement is a contract that must be incorporated in the Judgment of Divorce. The agreement is signed by the parties, but it must be reviewed and approved by a judge, and only the judge can incorporate the agreement into the Judgment of Divorce. A provision of an agreement can either “merge” with the Judgment, and thus be modifiable as if the provision were made by the judge himself or herself after trial, or the judge can “survive” separately from the Judgment, where it is enforceable as an independent contract.
In short, if we are really being accurate, the terms “merger” or “survival” only truly apply when there is an agreement between the parties. Without an agreement, there is nothing to “merge” with the Judgment or “survive” independent from the judgment. Thus, if a divorce goes to trial and a judge enters a final Judgment of Divorce – without any written agreement – the terms “merger” and “survival” are technically inapplicable. Of course, this doesn’t stop judges and attorneys from describing the modifiable provisions of judge-made decisions, such as those affecting modifiable issues such as alimony, child support and child custody as “merged”. Nor does it stop attorneys and judges from saying that a judge’s asset division “automatically survives, “even when the case went to trial and no agreement was entered.
The reason for the imprecision is understandable. In an effort to make the concepts of “merger” and “survival” easier to comprehend, judges and lawyers often describe “merged” provisions as being modifiable and “surviving” provisions as being modifiable. In 99% of situation, this conflating of terms is not only fine, but probably helpful. Of course, the word nerds among us cling to the 1% - i.e. those rare moments when only a precise application of the terminology is appropriate!)
Does Child Support Always Merge and the Asset Division Always Merge?
Massachusetts attorneys and judges often use “merger” vs. “survival” as short-hand for the portions of a divorce agreement that are modifiable vs. non-modifiable. When you drill down, however, using these terms too interchangeably can lead to confusion. When it gets down to it, the terms “merged” vs. “surviving” are best applied to alimony orders, which can be either modifiable or unmodifiable under Massachusetts law. In contrast, it is better to think of child-related provisions as modifiable (rather than “merged”) and property division orders as unmodifiable (rather than surviving). I will explain why below.
In Massachusetts, most orders pertaining to the care, custody and maintenance (i.e. child support) of children are always modifiable. In theory, parents can try to make a child-related provision of their divorce agreement survive, but the Massachusetts child custody and child support statutes for married and unmarried parents expressly state that these child-related issues must be subject to modification under the “best interest of the child” standard. (In theory, a court might be more reluctant to modify a “surviving” child-related provision, but our cases say that parents are not permitted to permanently waive rights that are based on the best interests of the children rather than the parents’ own needs. (In the end, the practical impact of parents attempting to enter a “surviving” agreement for child-related issues tends to be frustration, since the Court is compelled to perform a modification analysis, regardless of the terminology agreement.)
Because child-related judgments are modifiable as a matter of law, it is common to hear judges and attorneys describe child-related agreement provisions as “merging.” Indeed, it is technically correct to say that such provisions are “merged” with the Judgment of Divorce, to the extent that the parties entered an agreement with child-related provisions that was incorporated in a judgment of divorce, and which merges with the Judgment for the purposes of future modification. However, confusion can arise when using “merger” and “survival” to describe child-related provisions, since parties lack the authority to made surviving child-related provisions truly unmodifiable, the way they can with alimony.
Similar confusion surrounds the use of “survival” and “merger” to describe the division of marital assets. Under Massachusetts law, the division of marital assets is never modifiable. Most judges would not approve a divorce agreement that sought to “merge” the division of assets and make it modifiable at a future date. Even if parties did manage to sneak “merger” language into their asset division provision, such language would likely be unenforceable. In the alimony context, parties have the choice to make their alimony agreement modifiable or unmodifiable by designating the alimony provision as “merging” or “surviving”.
Ultimately, the portion of a divorce agreement that provides for the division of assets will always be unmodifiable, regardless of merger or survival. Invariably, Massachusetts judges and attorneys will continue to say that the division of assets provisions of a divorce agreement “shall survive and shall not be modifiable” in the future. Only you, dear reader, will know the truth: that division of assets is always unmodifiable by operation of law, regardless of whether the parties choose to designate the asset division as “surviving” as an independent contract with independent legal significance.
In short, the notion that parties can determine which parts of their agreement are modifiable at a later date versus – i.e. “merging” vs. “surviving” – is slightly off the mark. In practice, spouses entering a divorce agreement really only have the power to control the modifiability of alimony through merger and survival. Although child-related provisions are frequently referred to as “merging” because they are modifiable, in truth, child-related provisions are always modifiable. Similarly, even as asset division provisions are often referred to as “surviving” because they are unmodifiable, the truth is that the division of assets is always unmodifiable, regardless of the intent of the parties.
(Author’s Note): (Although the division of assets is not modifiable under Massachusetts law, we would be remiss if we did not mention that Massachusetts courts will divide undiscovered or undisclosed assets many years after the final Judgment of Divorce, if such assets are discovered for the first time at a later date.)
Becker v. Phelps: Can a Surviving Alimony Agreement Ever be Modified?
A recently-decided unpublished opinion by the Massachusetts Appeals Court, Becker v. Phelps (2018), highlights the important differences between surviving and merged alimony provisions, while illustrating the extreme difficulty faced by former spouses seeking to modify a surviving alimony agreement.
Becker involved a divorce in which, midway through the trial, the parties “executed a hand-written agreement that was read into the record and later memorialized in writing signed by both parties.” The original divorce trial took place in Middlesex Probate and Family Court. The appeal arose of a Complaint for Contempt filed by the husband, which was heard by Hon. Theresa A. Bisenius. The Appeals Court summarized the relevant terms of the divorce agreement, which was entered on November 9, 2010 as follows:
Pursuant to paragraph two of the agreement, both parties waived their right to receive periodic alimony payments from the other. In consideration of the husband's alimony waiver, the wife agreed to pay the husband $1 million in two lump sum payments on or before December 1, 2013, and December 1, 2018. In addition, the wife agreed to pay annually to the husband "an amount of alimony equal to four percent of the outstanding indebtedness" on any unpaid amounts of the lump sum. The wife asserted that she planned to make these payments using money she earned through her business.
Notably, the 2010 agreement to make the Wife make two $500,000 lump sum payments until 2013 and 2018, respectively. Also notable was that the 4% annual payments that the Wife owed to the Husband started immediately in 2010. Likewise, it is relevant that the $1 million in lump sum payments would be a part of the division of marital property (i.e. tax free to the husband), while the 4% annual penalty would be paid as alimony, which would be taxable to the husband and tax deductible to the Wife. Finally, the agreement survived the divorce decree and was not modifiable.
In 2012, one year before the first $500,000 payment became due, the now-ex-wife’s business floundered. Strapped for cash and with her alimony buyout obligations looming, she petitioned the court for a modification to the decree. The Court determined that neither the 4% annual payments nor the $1 million lump sum payments were modifiable. The Wife appealed that decision, leading to a 2014 appeal, which the Appeals Court summarized as follows:
On August 22, 2014, this court held that the four per cent interest payments identified in the agreement constitute alimony that is not modifiable under the Alimony Reform Act because the parties agreed that those provisions survived the judgment of divorce. Becker v. Phelps, 86 Mass. App. Ct. 169, 172 (2014) (Phelps II). By contrast, the lump sum payments were part of the overall division of marital property and were not modifiable because the judge found the agreement to be "fair and reasonable."
Before, during and after the 2014 Appeals Court decision, additional litigation swirled between the parties, including a 2013 Complaint for Modification by the Wife, a 2013 Complaint for Contempt by the Husband, and separate Complaints for Modification by the Wife in 2014 and 2015. In January of 2015, the lower court dismissed Wife’s final Complaint for Modification. The Wife appealed.
The Doctrine of Countervailing Equities: 40 Years of Strict Enforcement
When petitioning to modify an alimony provision that merged with the Judgment of Divorce, the party seeking the change must prove that there has been a significant and material change in circumstances that warrants the modification. When an alimony agreement survives, however, it may only be modified if a party can satisfy an extraordinarily difficult legal standard known as “countervailing equities.” The doctrine of countervailing equities originally emerged more than forty years ago in the landmark case, Knox v. Remick (1976).
In Knox, the Supreme Judicial Court held that a surviving alimony order could only be modified in extremely rare circumstances:
Where … the Probate Court judge determines that one spouse is or will become a public charge, the judge may order support pursuant to his statutory authority, not specifically enforcing the separation agreement to the point where the separation agreement would be used to impose support obligations on the taxpayers of the Commonwealth. As indicated above, there may be other situations where a Probate Court judge will conclude in his discretion to deny the equitable relief on specific enforcement. For example, specific performance of an agreement concerning support payments might be denied where the plaintiff had not complied with some other provision in the separation agreement. (Citations omitted).
To be clear, to “become a public charge” in the context of Knox, is generally understood to have meant being eligible for welfare (transitional assistance) payments or quite literally homeless.
In the 40 years that have passed since the Knox decision, Massachusetts courts have been remarkably reluctant to expand the list of “countervailing equities” beyond the original “public charge” language in the 1976 opinion. A Google Scholar search for “countervailing equities” reveals approximately 5 pages of results, most of which cite the Knox decision. In 1982, the SJC in Stansel, reaffirmed Knox, while noting:
This court has noted two possible grounds on which a judge reasonably might rely in refusing specific performance of a properly pleaded separation agreement: that the spouse seeking the modification is or will become a public charge, or that the party raising the separation agreement as a bar has not complied with the provisions of that agreement. The two grounds discussed in Knox are perhaps not the only grounds on which a probate judge may base a refusal to specifically enforce a separation agreement in a modification proceeding. We hold, however, that any "countervailing equities" interposed by the party seeking to avoid the effect of the separation agreement must be at least as compelling as these two grounds if that party is to prevail. Only in extreme circumstances should a litigant who has properly raised a separation agreement as a bar to Probate Court modification proceedings be forced to bring a separate suit in another forum in order to vindicate his rights under that agreement. (Citations omitted.) (Emphasis added.)
In 1994, the SJC revisited the doctrine in Larson, this time holding:
We recognize that a party seeking modification of an alimony provision in a surviving separation agreement has a heavy burden. Something more than a material change of circumstances must be shown. A showing is required that, without modification, the spouse seeking modification will otherwise become a public charge, that the other party has not complied with the provisions of the agreement, or that there are countervailing equities “at least as compelling as [those] two grounds”. (Citations omitted).
In 1997, the Appeals Court touched on “countervailing equities” in Broome. The Broome decision summarized the decisional history surrounding the doctrine until that point, including several important details”
Countervailing equities include situations where one spouse is or will become a public charge, or where there has been a failure to comply with the agreement. Countervailing equities may also be found on other grounds "at least as compelling as" those discussed in the Knox decision. We note that "[a] party seeking modification of an alimony provision in a surviving separation agreement has a heavy burden. Something more than a material change of circumstances must be shown."
Once a judge "determines that one spouse is or will become a public charge, the judge may order support pursuant to his [or her] statutory authority, not specifically enforcing the separation agreement to the point where the separation agreement would be used to impose support obligations on the taxpayers of the Commonwealth." Here, the judge ruled that if the modification agreement was specifically enforced, the wife would become a public charge. The husband challenges the judge's ruling, arguing that there was no evidence to support the judge's finding that the wife either is a public charge or will become one unless she receives support from the husband.
No evidence was produced regarding the eligibility criteria for any public assistance programs in Connecticut, where the wife resides, or whether the wife will even qualify for assistance under any such programs. The lack of evidence is important because in recent years there have been significant changes, nationwide, in the welfare standards.
[T]here is no question that the wife's income at the time of the trial was marginal at best. In these circumstances, we think that the best course to follow is to remand the matter to the Probate Court for further hearings on the question of whether the wife is or will be a public charge.
In a recent decision, it was held that a judge may consider the spouse's prospects for employment and his or her earning capacity in determining whether a spouse may become a public charge.
Further, "a court should override [the alimony] provisions" of a surviving separation agreement "only to the extent necessary to prevent a former spouse from becoming a public charge." Here, although the judge purported to fashion an award to meet the wife's basic needs, the size of the tax free award ($39,000 a year for life) coupled with the judge's findings concerning the wife's earning capacity, suggest that the judge was actually seeking to secure a solid middle-class lifestyle for the wife, something that exceeds the amount that properly could be ordered. (Citations omitted throughout.)
Becker v. Becker: Could the Wife Show Countervailing Equities?
In her Complaint for Modification, the Wife in Becker claimed that due to the failure of her business she “lacked the financial resources to make the alimony payments called for in the agreement” and that she would “become a public charge if required to pay the husband $1 million.” The court, however, found the wife to have significant assets including, among other things, the former marital home, a vehicle, and a retirement account, thereby,drastically undercutting her claim that she would be on welfare if the obligation were not modified.
Perhaps more importantly, the Appeals Court distinguished between the $1 million in lump sum payments – which were property division payments – and the 4% annual alimony payments. The Court reasoned that even if the Wife would become a public charge as a result of paying the $1 million, the Wife’s obligation to make such payments could not be modified, even under the countervailing equities doctrine. In other words, an agreement to make property division payments cannot be modified, even under the countervailing equities standard, which only applies to alimony.
Unable to prevail under the doctrine of countervailing equities, the Wife raised several contract-based arguments, including that the agreement was impossible to perform and unconscionable.
However, the Appeals Court held that the Wife “was aware of [her company’s] precarious financial position before she entered into the agreement,” and she assumed the risk that the agreement would not turn out in her favor:
[A] contracting party cannot be excused where the only ‘frustration’ consists in the fact that known risks assumed by [her] turn out to [her] disadvantage.
The Court similarly rejected the unconscionability argument, holding:
Under Massachusetts law, ”[t]o prove that the terms of a contract are unconscionable, a plaintiff must show both substantive unconscionability (that the terms are oppressive to one party) and procedural unconscionability (that the circumstances surrounding the formation of the contract show that the aggrieved party had no meaningful choice and was subject to unfair surprise).“
The court found there was no unconscionability present where “the wife sought the lump sum payment provision in order to negate periodic alimony.” Further, the Court held:
[T]he wife was represented by counsel, she understood the agreement, she was satisfied with its terms under all circumstances, and she signed it of her own free will. Thus, ‘[o]n this record, there is no viable claim of unconscionability.’
Ultimately, the Appeals Court held that Wife was unable to meet the countervailing equities standard:
Even assuming arguendo that the lump sum payments could be modified on the basis of countervailing equities, which we do not suggest, dismissal of the wife's modification complaint would still have been proper. To be entitled to relief on this ground, the wife's complaint must support an inference that (1) the wife is or will become a public charge, (2) the husband has not complied with the provisions of the agreement, or (3) there exists some other countervailing equity "at least as compelling as these two grounds."
The wife's complaint does not allege that the husband has failed to comply with the provisions of the agreement. While it does allege that the wife will become a public charge if required to pay the husband $1 million, this conclusory allegation is not borne out by the factual allegations or the wife's March 24, 2014, financial statement. … The wife's allegations simply do not support an inference that there has been "a deterioration in the economic situation of the more dependent spouse which renders that spouse unable to meet basic needs, so that public support is likely to be required in behalf of the dependent spouse and children in turn dependent upon her or him." (Citations omitted).
What Does Becker Tell Us About Countervailing Equities?
As noted above, it is common for Courts to refer to the asset division provisions of a separation agreement as “surviving” and therefore unmodifiable. The Becker decision illustrates how this is “survival” and property division do not quite fit together, however. A surviving alimony agreement is modifiable in those rare instances that a party can demonstrate the existence of countervailing equities. A party cannot modify a property division agreement, even if the party can prove countervailing equities.
In addition, Becker reaffirms the reality that meeting the countervailing equities requires a former spouse to prove, to the point of near certainty, that he or she is about to be destitute to the point of being “unable to meet basic needs, so that public support is likely to be required” for the spouse. Meanwhile, as Broome makes clear, it is important to remember that even if a former spouse can prove countervailing equities, the Court is permitted to modify alimony only to the extent “only to the extent necessary to prevent a former spouse from becoming a public charge.” In other words, the modification to alimony should be just enough to prevent the party from becoming a public charge, but not more.
Finally, a Word on the “Inability to Pay” Defense
In closing, it is worth noting that one area of law that was not covered in the Becker decision was the defense of inability to pay. The inability to pay defense, which is covered in detail in this blog, is available to alimony payors who are unable to pay their surviving alimony obligation. Such individuals often find themselves in a legal grey zone, in which they simply lack the money to pay the surviving orderbut are not so destitute that they meet the countervailing equities standard. For these individuals, the defense of “inability to pay” may provide temporary protection, but they can never truly escape the debt that hangs over them (a good analogy is owing a very large tax debt).
It is fairly common for parties to agree to a surviving waiver of alimony, which virtually guarantees that one or both parties will never be required to pay alimony. As Becker shows, a surviving agreement in which one party guarantees that he or she will pay a fixed amount of alimony through a surviving provision is a much riskier proposition. A merging alimony agreement, which can be modified if financial disaster strikes, is almost always the more prudent option.
About the Author: Carmela M. Miraglia is a Massachusetts divorce lawyer and Cape Cod family law attorney for Lynch & Owens, located in Hingham, Massachusetts and East Sandwich, Massachusetts. She is also a mediator for South Shore Divorce Mediation. Harold A. Mazzio of Suffolk University Law School contributed to this blog.