Holly L. Pavlesich, v. Timothy J. Pavlesich

Holly L. Pavlesich, v. Timothy J. Pavlesich

Civil Action-Family Law-Divorce-Equitable Distribution-Credibility-Payments Under Installment Sales Agreement-Marital Debt-Tax Liability-Alimony Pendente Lite-Cohabitation with Paramour

Before the Court are Exceptions filed by both of the parties to the Order adopting the Report and Recommendation of the Special Master equitably dividing the marital estate after nearly four (4) years of marriage.  The parties argue that the Special Master erred and/or abused his discretion by awarding credit regarding payments made during the marriage upon the installment sale of a cabin owned by Timothy J. Pavlesich’s (“Husband’s”) uncle, holding Husband solely responsible for payment of taxes owed as a result of his failure to report income during the marriage, retroactively modifying the established alimony pendente lite (“APL”) amount and affording Husband a credit for APL payments made under an Order while Holly L. Pavlesich (“Wife”) was residing with a paramour.   

1.  Although only advisory, the Report and Recommendation of the Special Master is to be given the fullest consideration. 

2.  The Special Master, who found the testimony of Wife to be more persuasive than the testimony of Husband, has the discretion to render credibility determinations regarding litigants.

3.  In determining the propriety of an equitable distribution award, the court must consider the distribution scheme as a whole with the objective of effectuating economic justice between the parties.

4.  Monies paid by the parties during the marriage toward a $20,000.00 purchase price for a cabin owned by Husband’s uncle is an investment that is part of the marital estate that will be awarded to Husband in light of the fact that Husband exclusively occupied the cabin for years after installment payments toward the purchase of the cabin ceased.

5.  Marital property and debt are to be divided without regard to marital misconduct. 

6.  Joint tax liability resulting from Husband’s failure to report business income to the Internal Revenue Service is a marital debt that will be allocated between the parties in favor of Wife based upon Husband’s long-term dissipation of the marital estate by failing to pay taxes owed.

7.  Title 23 P.S. § 507 provides that no petitioner shall be entitled to receive an award of alimony where that petitioner has entered into cohabitation with a person of the opposite sex who is not a member of the petitioner’s immediate family.

8.  However, APL, unlike alimony, may be awarded even if the receiving spouse is cohabitating with another individual.

9.  Cohabitation is relevant when assessing a spouse’s ability to pay his or her expenses.

10.  Where the record is not clear that the contribution of Wife’s paramour exceeded her needs during the divorce pendency, Wife will be directed to reimburse Husband one-half (1/2) of all APL paid by Husband since Wife began to reside with her paramour. 

L.C.C.C.P. No. 2020-20199, Opinion by Bradford H. Charles, Judge, November 3, 2023.    

IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY, PENNSYLVANIA

CIVIL ACTION – LAW – DIVORCE

HOLLY L. PAVLESICH                                         :

                                                                                                : No. 2020-20199

            Plaintiff                                                                      :

                                                                                                :

                          v.                                                                   : 

:  

TIMOTHY J. PAVLESICH                                                :

            Defendant                                                                  :

                                                                                                : 

ORDER OF COURT

AND NOW, this 3^rd day of November, 2023, upon consideration of the recommendations of the Special Master, upon consideration of the arguments proffered by Holly L. Pavlesich (WIFE) and Timothy J. Pavlesich, (HUSBAND), and in accordance with the attached Opinion, it is ordered and decreed as follows:

1. The marital assets with a value of $77,067.54 consist of the following:

a. Marital portion of WIFE’s SERS   Defined Benefit  Plan	$12,332.47
b. 401(k) cashed by HUSBAND post-separation	$5,000.00
c. Wells Fargo joint checking account	$4,696.70
d. Wells Fargo joint savings account	$1,000.00
e. Cash in safe	$3,500.00
f. Yamaha Rhino Side-by-Side	$5,000.00
g. 3 Four wheelers	$3,000.00
h. Personal property	$13,200.00
i. Cadillac sold by HUSBAND post-separation	$4,250.00
j. Trade-in for the Chevrolet Suburban	$11,168.37
k. Cabin Investment	$13,920.00
TOTAL	$77,067.54

• The marital assets in the possession of HUSBAND with a value of $53,566.70 consist of the following:

a. 401(k) cashed by HUSBAND post-separation	$5,000.00
b. Wells Fargo joint checking account	$4,696.70
c. Wells Fargo joint savings account	$1,000.00
d. Cash in safe	$3,500.00
e. Yamaha Rhino Side-by-Side	$5,000.00
f. 3 Four wheelers	$3,000.00
g. Personal property	$13,200.00
h. Cadillac sold by HUSBAND post-separation	$4,250.00
i. Cabin Investment	$13,920.00
TOTAL	$53,566.70

• The marital assets in the possession of WIFE with a value of $23,168.37 consist of the following:

a. Trade-in for the Chevrolet Suburban	$11,168.37
b. Marital portion of SERS Defined Benefit Plan	$12,332.47
TOTAL	$23,500.84

• The marital assets total $77,067.54. Fifty-two percent (52%) shall be awarded to WIFE or $40,075.12 and forty-eight percent (48%) or $36,992.42 shall be awarded to HUSBAND.
• The marital assets in the possession of HUSBAND as set forth above of $53,566.70 shall be awarded to him, and the marital assets in the possession of WIFE as set forth above in the amount of $23,500.84 shall be awarded to her.  HUSBAND has more in marital assets than the 48% to which he is entitled by $16,574.28.  HUSBAND will be required to pay this to WIFE.
• The parties’ joint debt to the Internal Revenue Service will be assessed differently than the remaining marital debts.  Consistent with the attached Opinion, WIFE will be responsible to pay 25% of the debt to the IRS, or $3,562.81.  Because WIFE has already paid $10,286.00 of this debt, we will direct that HUSBAND reimburse her for the excess she paid over the percentage she should have paid, or $6,723.19.  In addition, HUSBAND shall be exclusively responsible for paying any additional amounts owed to the IRS.  HUSBAND shall indemnify and hold harmless WIFE from any responsibility to pay any additional amounts toward the IRS debt.
• Other than the IRS debt, the parties owed the following marital debts:

a. Wells Fargo credit card	$3,553.53
b. PSECU credit card	$4,433.68
c. Cabela’s credit account	$2,331.99
d. Capital One Wal-Mart	$4,423.93
e. Chevy Suburban loan	$19,547.00
f.  Rhino debt	$2,547.50
TOTAL MARITAL DEBTS	$36,837.63

• WIFE has already paid or is obligated to continue paying the following marital debts:

a. Wells Fargo credit card	$3,553.53
b. PSECU credit card	$4,433.68
c. Cabela’s credit account	$2,331.99
d. Capital One Wal-Mart	$4,423.93
e. Chevy Suburban loan	$19,547.00
f.  Rhino debt	$2,547.50
TOTAL MARITAL DEBTS	$36,837.63

• WIFE should be responsible for paying 48% of marital debts, or $17,682.06.  WIFE has and will pay marital debts totaling $36,837.63, which exceeds the 48% she is obligated to pay by $19,155.57.  HUSBAND shall therefore be responsible for reimbursing WIFE in the amount of $19,155.57.
• In accordance with the above, HUSBAND shall owe to WIFE the following:

a. $16,574.28 reflecting the difference of marital assets possessed by HUSBAND in excess of those possessed by WIFE;

b. $19,155.57, which represents the excess marital debts WIFE has paid over her 48% share of marital debt responsibility;

c. $6,723.19, which represents the excess amount WIFE paid toward the marital IRS debt over what we have determined to be appropriate.

TOTAL owed by HUSBAND to WIFE: $42,453.04.

1. WIFE shall reimburse HUSBAND for $1,000.00 of APL payments made by HUSBAND since she began residing with a paramour in September of 2022.  In addition, HUSBAND shall be entitled to a credit for excess payroll funds deposited in the parties’ joint account totaling $18.23.  Thus, HUSBAND is entitled to net credit of $1,018.23 from WIFE.
2. Deducting the net credit to which HUSBAND should be entitled from the total amount owed by HUSBAND to WIFE as outlined above, yields a total net payment owed by HUSBAND to WIFE of $41,434.81.
3. HUSBAND shall be afforded with the option to pay WIFE the sum of $600.00 per month for two (2) years.  Of this amount, $550.00 per month will be applied toward HUSBAND’s balance owed^[1] so that after twenty-four (24) months, the balance he owes to WIFE will be $28,234.81.  Said amount is to be paid in a lump sum to WIFE within twenty-six (26) months of today’s date.
4. Each party shall sign any and all documents necessary to effectuate the terms of the Order as outlined above.
5. The claim of WIFE for Alimony is DENIED.
6. Within sixty (60) days, HUSBAND is to reimburse WIFE for counsel fees in the amount of $1,000.00.
7. The fees and costs for the Special Master shall be divided equally between the parties.
8. If no appeal is filed from this Order, the parties shall be considered to be divorced from the bonds of matrimony effective on December 3, 2023, pursuant to Section 3301(d) of the Divorce Code.

BY THE COURT:

                                                                                    __________________________J.

                                                                                    BRADFORD H. CHARLES

BHC/pmd

cc:        Max J. Smith, Esq.// 11 East Chocolate Ave., Suite 300, Hershey PA 17033

Greer Anderson, Esq.// 

            Keith Kilgore, Esq.//

            Court Administration

IN THE COURT OF COMMON PLEAS LEBANON COUNTY

PENNSYLVANIA

CIVIL ACTION – LAW – DIVORCE

HOLLY L. PAVLESICH                                         :

                                                                                                :           No. 2020-20199

            Plaintiff                                                                      :

                                                                                                :           IN DIVORCE

                          v.                                                                   : 

:  

TIMOTHY J. PAVLESICH                                                :

            Defendant                                                                  :

                                                                                                : 

APPEARANCES

Max Smith, Esq.        For Plaintiff 

Greer Anderson, Esq.                                               Defendant

Keith Kilgore, Esq.                                       Special Master

OPINION BY CHARLES, J.,  November 2, 2023

             Before us are numerous exceptions to the report and recommendation of a Special Master in Divorce (SM).  Although we will address all exceptions, we consider two to be more legally consequential than the others.  The questions presented by these two exceptions are:

(1) When parties reach an agreement to purchase property under a long-term installment agreement that is then derailed by a divorce, how should a Court treat the payments that were made before the transaction was consummated?; and

(2) When Alimony Pendente Lite (APL) is awarded based upon the premise that the obligee spouse is supporting herself, and it is later learned that the obligee is being supported by a paramour, should an SM order the obligee to return the APL? 

These two significant issues, and others, will be addressed in more detail within this Opinion.

I.     FACTS and PROCEDURAL BACKGROUND

             Holly Pavlesich (hereafter WIFE) and Timothy Pavlesich (hereafter HUSBAND) married on June 4, 2016.  They separated on April 11, 2020.  We became familiar with the Pavlesich family during custody litigation that was resolved after a trial via an Opinion and Order entered on April 23, 2021. 

            A Complaint in Divorce was filed on August 25, 2020.  An SM was appointed to hear and decide economic issues pertaining to the parties’ marriage.  On May 22, 2023, the SM filed a report and recommendation.  HUSBAND filed Exceptions on June 9, 2023 raising the following issues:

1. Whether the SM erred in awarding WIFE credit for payments pertaining to a cabin owned by HUSBAND’s uncle?
2. Whether the SM erred in determining HUSBAND owes WIFE for unpaid taxes of HUSBAND’s business?
3. Whether Special Master erred in determining the value of the personal property in HUSBAND’s possession?^[2]

WIFE filed counter Exceptions on June 23, 2023 raising the following issues:

1. Whether the SM erred in not awarding WIFE proper credit for marital obligations solely paid by her post-separation?
2. Whether the SM erred by not properly and consistently applying 52/48 percentage split of marital assets?
3. Whether the SM erred improperly recommending a credit to HUSBAND for APL payments made by HUSBAND to WIFE?
4. Whether the SM erred by improperly limiting the award of attorney fees to WIFE?

We issue this Opinion in order to address the issues raised by the parties.

II.     SCOPE OF REVIEW

            The SM’s Report and Recommendations, although only advisory, is to be given the fullest consideration. Childress v. Bogosian, 12 A.3d 448, 455–456 (Pa. Super. Ct. 2011). While it is within the province of this Court to weigh the evidence and decide credibility, we will not reverse the SM’s determinations so long as they are supported by the evidence. Id.  This Court will not find an abuse of discretion unless the law has been overridden or misapplied or the judgment exercised was manifestly unreasonable, or the result of partiality, prejudice, bias, or ill will, as shown by the evidence in the certified record. In determining the propriety of an equitable distribution award, we must consider the distribution scheme as a whole, with the objective of effectuating economic justice between the parties. Schultz v. Schultz, 184 A.3d 168, 174 (Pa. Super. 2018).

III.     DISCUSSION

Before we embark upon a discussion of the parties’ various exceptions, we need to acknowledge in advance that the SM has the duty and ability to render credibility decisions regarding litigants.  In the case of ­­­Smith v. Smith, 43 A.2d 371 (Pa. Super. 1945), the Superior Court emphasized that credibility is best determined by a finder of fact who is able to eyeball a witness.  In Smith, the Superior Court stated:          

“Although we are not concluded by a master’s findings upon credibility, his judgment upon that vital factor is entitled to the fullest consideration, and especially in a contested case.  He possesses an advantage not granted to us.  He sees the parties and their witnesses face to face and observes their appearance and demeanor as they testify.  We are restricted to the cold type of the record from which temperament and personality have been subtracted.  Yet the demeanor of witnesses is the very touchstone of credibility; in the absence of reactions produced by other applicable tests, the appearance and demeanor of witnesses are the litmus by which the presence of truth is revealed.  They are trifles light as air, imponderables, but for all that they are luminous integrants which in electable enter into the calculation by which trustworthiness is appraised.  The spontaneous gesture, the lifting of an eyebrow, the shrug of the shoulders, the intonation of the voice, the flash of an eye, the facial expression – these are a few of the vital and influential indicia of credibility which the master observes and by which he is guided.  The mental and psychological impact of these inarticulate expressions experienced by a master form the basis for a conclusion which, to borrow the telling phrase of an anonymous master, “will depend upon a judgment or intuition more subtle that can be objectively demonstrated.”  Frequently, they speak more eloquently and possess greater significance than the verbal utterance which they accompany, yet they cannot be reproduced upon the record submitted to the reviewing court.

In this case, the SM made it a point to declare that he found WIFE to be more credible than HUSBAND.  At Page 13 of his report, the SM wrote:

“It has been the undersigned’s experience it is necessary to determine the persuasiveness of conflicting testimony in most proceedings.  In this case, the testimony of both parties was diametrically opposed to the other on almost every issue.  As a result of Husband’s failure to report income in excess of $34,000.00 earned from self-employment on the joint Federal Income Tax Return after marriage resulting in a tax liability in excess of over $14,000.00, the failure of Husband to provide appraisals of the personal property in dispute in his possession, his failure to provide documentation regarding the value of his 401(k) plan, and failure to complete a monthly expense statement as requested by the Special Master, the undersigned finds Wife’s testimony to be more persuasive than that of the Husband.”

By virtue of the above, we will begin our analysis with the recognition that WIFE was found to be more generally credible than HUSBAND.  All of our decisions will be viewed through this lens. 

A. The Cabin

            During the marriage, HUSBAND and WIFE entered into discussions with HUSBAND’s uncle regarding a cabin.  The SM determined that a “handshake agreement” was reached between the parties and HUSBAND’s uncle.  That handshake agreement was in the nature of a long-term installment agreement of sale.  According to the SM, HUSBAND’s uncle agreed to sell the cabin to the parties once they paid $20,000.00 in installments.  At the time of the separation, the parties had paid a little more than one-half of this amount.  Additional installment payments were made for three (3) months following separation.  Then the parties ceased making any additional payments.  As a result, the cabin remains in the name of HUSBAND’s uncle. In total, the parties paid $13,920.00 toward the purchase of the cabin. 

            The SM afforded WIFE with a credit for $13,920.00 in payments that were made pursuant to the aborted installment sales arrangement.  HUSBAND disagrees with this decision.  HUSBAND argues that the amounts paid by him and WIFE during the marriage were essentially forfeited when they stopped making installment payments in 2020.  WIFE points out that HUSBAND has been residing in the cabin following separation.  She believes that the amounts contributed by her and HUSBAND toward purchase of the cabin will eventually be applied by HUSBAND’s uncle to a new purchase price arrangement that will be entered into after the divorce is finalized. 

            We could find no legal precedent to address what should happen in a situation such as the one presented by the parties.  Most long-term installment agreements of sale include provisions that mandate what should occur in the event of a default.  Such provisions are absent in this case.  Moreover, never once have we encountered a situation where a party in default of an installment agreement is permitted to continue to occupy the structure for years following the default.  Without question, we cannot ignore the reality that HUSBAND and his uncle are members of the same family and that the parties’ payments of $13,920.00 have and will continue to afford HUSBAND with an ability to leverage purchase terms that simply would not exist in an arms-length transaction. 

            The SM likely recognized the dynamic outlined above.  In his report, the SM emphasized that HUSBAND continued to live in the cabin even after the parties stopped paying pursuant to the installment agreement.  Employing a “rough justice” approach to the situation, the SM declared that WIFE should be afforded a credit for one-half of the $13,920.00 that was invested into the cabin. 

The dilemma is to discern a legal paradigm by which $13,920.00 can be considered as part of equitable distribution.  The parties do not own the cabin.  The parties no longer owe any money to HUSBAND’s uncle, and thus nothing about the cabin can be construed as a marital debt.  With the exception of a small amount paid over three months, none of the amount invested by the parties into the cabin was paid after separation, so the payments do not create a prototypical “credits” analysis.  All of the above acknowledged, the fact that we cannot pigeonhole the $13,920.00 paid by the parties neatly into a legal theory should not and does not prevent us from simply ignoring the investment made by the parties during their marriage. 

Had a handshake deal not been reached with respect to the cabin, HUSBAND would not be residing there at this point in time.  Essentially, HUSBAND has received a benefit by virtue of the amounts he and WIFE invested into the cabin during the marriage.  While this benefit may not be accompanied by a title or even a written contract, it is nevertheless tangible.  In light of everything presented, we will consider the amount paid by the parties relative to the cabin to be an investment.  Because HUSBAND has enjoyed the exclusive benefit of this investment, we will consider the investment to be a part of the marital estate that will be awarded to HUSBAND.

B. Tax Liability

In 2017, HUSBAND earned $34,747.07 from a business he operated.  HUSBAND did not report this income to the IRS.  As a result, the Federal government imposed a tax liability of $14,251.24 upon both HUSBAND and WIFE.  Following separation, WIFE was entitled to receive stimulus benefits totaling $10,286.00.  The Federal government withheld these stimulus benefits and applied them toward the parties’ joint tax debt of $14,251.24. 

The SM imposed the entire burden to pay $14,251.24 upon HUSBAND.  The SM reasoned that HUSBAND was responsible for failing to report the income he received and that he should bear the entire burden of paying the consequences of his decision.  As a result, the SM ordered that HUSBAND repay to WIFE the sum of $10,286.00 that was withheld from her as a result of the delinquent tax liability. 

HUSBAND challenges the SM’s decision to impose the entire responsibility of paying the tax liability upon him.  He characterizes the tax liability as a “joint debt” that should have been divided equally between him and WIFE.  WIFE basically argues: “This was all his fault” and seeks to have the SM’s decision affirmed.

We will begin our analysis by recognizing the statutory precept that “marital property [and therefore also marital debt] is to be divided without regard to marital misconduct.”  See, 23 Pa.CSA § 3502(a).  In addition, we recognize the reality that the untaxed funds earned by HUSBAND became a marital resource that was used by both parties at a time when they still resided together as a family unit.  Thus, WIFE received some pecuniary benefit by virtue of the untaxed income HUSBAND received in 2017. 

Given the above, we tend to agree with HUSBAND that imposing 100% of the delinquent tax burden upon him is not consistent with either equity or Pennsylvania law.  That said, this Court retains the authority to divide specific marital assets in a manner different than it chooses to divide the entirety of the marital estate.  See, 23 Pa.CSA § 3502(a) (“The court may consider each marital asset or group of assets independently and apply a different percentage to each marital asset or group of assets.”); see also 23 Pa.CSA § 3502(a)(10.1) (Federal, state and local tax ramifications of each asset is a relevant fact to consider in equitable division); Carney v. Carney, 167 A.3d 127, 133-34 (Pa. Super. 2017)  In this case, we will declare the joint tax liability to be a marital debt, but we will not divide that debt in a 52-48 percent fashion as suggested by HUSBAND.  Because “dissipation” of marital assets is a factor that we can consider, and because we consider HUSBAND’s non-payment of taxes to be a long-term “dissipation” of the marital estate, we will impose upon HUSBAND the responsibility to pay 75% of the tax delinquency obligation of $14,251.24.  Seventy-five percent of $14,251.24 is $10,688.43.  Our Order will require HUSBAND to pay this percentage of that particular marital debt.

WIFE has already paid $10,286.00 of this marital debt.  This represents $6,723.19 more than we have determined she should have paid.  We will order HUSBAND to reimburse WIFE for this amount that she paid in excess of what she should have paid.  We will also order HUSBAND to pay any additional balance still owed to the IRS. 

C. PERSONAL PROPERTY

HUSBAND claims that the SM erred by adopting WIFE’s itemized list of personal property and estimation of value.  He states that some of the items were not marital property, and he states that WIFE’s estimate of valuation was inflated. 

As stated at the outset of our discussion, the SM determined that HUSBAND and WIFE provided differing testimony regarding almost every issue in dispute.  Because of this, the SM made it a point to declare that WIFE was generally more credible than was HUSBAND.  Because the issue pertaining to the parties’ personal property is grounded almost entirely upon credibility, we will affirm the SM’s decisions regarding personal property and will deny HUSBAND’s exception pertaining to those decisions. 

D. ALIMONY PENDENTE LITE REIMBURSEMENT

The SM awarded HUSBAND with a credit of $1,033.20 as reimbursement for APL that HUSBAND paid while WIFE resided with a paramour.  Although the SM did not include a detailed discussion of why this decision was rendered, we glean from what the SM did write and from the parties’ arguments that the SM determined that WIFE began residing with a paramour on September 1, 2022, and that WIFE’s paramour contributed more to her monthly expenses than the amount HUSBAND was asked to pay in APL.  WIFE believes that the SM erred by retroactively modifying APL and by affording HUSBAND with a credit for what he was required to pay pursuant to a Court Order. 

Because the record contained in the Divorce action regarding this issue was sub-optimal, we obtained and reviewed the file from the Lebanon County Domestic Relations Office.  That file reveals the following:

• April 27, 2020 – WIFE filed a Complaint for Child and Spousal Support;
• August 6, 2020 – An Order was entered requiring HUSBAND to pay Child Support.  WIFE’s request for Spousal Support was denied without prejudice to her right to file for APL;
• August 28, 2020 – WIFE filed a Complaint seeking APL;
• October 29, 2020 – After a conference was conducted, a Domestic Relations Hearing Officer (DRHO) determined that HUSBAND should pay $147.60 per month in APL.  Nothing was contained in the record of this determination with respect to cohabitation by WIFE, or receipt by WIFE of funds from a paramour;
• February 12, 2021 – A review hearing was conducted before a DRHO.  In lieu of a hearing, HUSBAND and WIFE agreed that HUSBAND should continue to pay $147.60 per month in APL.  Once again, nothing is contained in the record about WIFE’s cohabitation;
• April 4, 2023 – HUSBAND filed a Motion for Modification of Support based upon the fact that he now enjoyed joint physical custody of the parties’ child;
• May 11, 2023 – An Order was entered retroactive to April 4, 2023, that required HUSBAND to pay $138.47 per month to WIFE as APL.  Nothing was contained in the record of this proceeding with respect to whether WIFE was cohabitating with another individual.

Our review of the Domestic Relations file also revealed that HUSBAND paid all of the amounts he was directed by Court Order to pay.^[3]  Most pertinent to our discussion today, the file revealed that HUSBAND paid $2,002.49 in APL after WIFE began to cohabitate with a paramour on September 1, 2022. 

We will begin our analysis of the APL issue by addressing the authority of the SM to award reimbursement to HUSBAND of APL paid to WIFE.  As HUSBAND points out, the Pennsylvania Divorce Code contains the following provision:

“No petitioner shall be entitled to receive any award of alimony where such petitioner has entered into cohabitation with a person of the opposite sex who is not a member of the petitioner’s immediate family…” 23 Pa.C.S.A. § 507.

Notwithstanding this provision of Pennsylvania law, our Appellate Courts have long recognized that there is a difference between APL and alimony.  The former is designed to enable a spouse to maintain or defend a Divorce action, while the latter is designed to provide ongoing financial assistance to a spouse who does not have the capability of fully supporting himself/herself.  The different public policy foundation for alimony and APL was recognized as a reason why APL can be awarded even if the receiving spouse is cohabitating with another individual.  In Miller v. Miller, 508 A.2d 550 (Pa. Super. 1986), the Superior Court specifically stated:

“This provision [§ 507 of the Divorce Code] refers to a spouse’s entitlement to alimony; it does not establish a bar to the receipt of APL.  An award of APL is designed to enable the dependent spouse to maintain or defend the action in divorce.”  Id at page 437.

            The principle articulated in Miller was recognized in the case of Melton v. Melton, 831 A.2d 646 (Pa. Super. 2003).  There, as in this case, the trial court afforded a husband with a credit for all of his APL payments.  The Superior Court determined that this decision “effectively thwarted the purpose of granting APL in the first place”.  It therefore remanded the case with instructions that the trial court should not afford a dollar-for-dollar reimbursement of APL.  Similarly, in Childress v. Bogosian, 12 A.3d 448 (Pa. Super. 2011), a husband asked the court to terminate APL because his wife cohabited with a boyfriend.  The Superior Court held that APL cannot be totally denied based exclusively upon cohabitation.

            On the other hand, in Schenk v. Schenk, 880 A.2d 633 (Pa. Super. 2005), the Superior Court upheld a trial judge’s decision to deny APL to a wife because resided with a boyfriend who was paying her expenses.  In its decision, the Superior Court in Schenk emphasized that cohabitation is not a bar to receiving APL, but it can be relevant in establishing a spouse’s financial needs during the pendency of a divorce. 

            From the above, we conclude that a spouse’s cohabitation with a paramour does not act as an automatic bar to an award of APL.  However, cohabitation is relevant when assessing the spouse’s ability to pay his/her expenses.  An award of APL that is entered without consideration of the financial contributions afforded by a paramour should not be sustained. 

            In this case, the SM determined that WIFE’s paramour contributed $300.00 per month toward her expenses.   Because the $300.00 per month contributed by the paramour exceeded the amount of the APL award, the SM determined that WIFE’s financial “needs” were completely met and that APL should not be awarded. 

While we understand the SM’s analysis, we cannot adopt it completely because we are unwilling to definitively declare that the paramour’s $300.00 per month contribution exceeded WIFE’s financial needs during the pendency of the divorce.  We are aware that the formula used by the Domestic Relations Office to calculate HUSBAND’s APL obligation is predicated on income and not “needs”.  We are also aware that HUSBAND’s payment of child support is weighed heavily in determining APL.  In fact, HUSBAND’s monthly obligation to WIFE is hundreds of dollars less than his obligation would have been had child support not been a factor. 

            Divorces are expensive.  Litigation of divorce also creates inconvenience that could be financially impactful.  The primary purpose of APL is to enable a financially dependent spouse to litigate the divorce “on a par” with the spouse with greater resources.  No factual finding exists anywhere in either the Divorce file or the Domestic Relations file that would enable us to reach any definitive conclusion about this key question. 

            In an ideal world unencumbered by cost of litigation, we would remand the decision regarding APL to the Domestic Relations Office for further proceedings consistent with this Opinion.  However, we are loathe to do this because the cost of litigating the issue would greatly exceed the amount in controversy.  At the risk of engaging in some speculation, but with the desire to minimize costs and promote finality, we will somewhat arbitrarily direct that WIFE reimburse HUSBAND for $1,000.00 of the APL he has paid.^[4]  Going forward, if an appeal is filed, HUSBAND will be required to pay $68.00 per month in APL so long as WIFE continues to reside with a paramour.

E. POST-SEPARATION CREDITS

The SM determined that the marital estate should be divided 52% to 48% with WIFE to receive the slightly greater share.  Neither HUSBAND nor WIFE filed an exception with respect to this decision.  However, when the SM tallied credits due and owing to both parties, he utilized the same 52%-48% percentage, with WIFE receiving 48% of credit and HUSBAND receiving 52%.  WIFE argues that the SM erred by not affording her with a credit for 100% of amounts she paid post-separation.  She argues that some of the credits to which she is entitled were based on payments that benefited only HUSBAND.  As such, WIFE believes that she should be entitled to a 100% reimbursement of credits.  Alternatively, WIFE posits that the SM reversed the percentage of credits to which each party should be entitled by awarding HUSBAND with 52% of the net credit and herself with only 48%.

This Court has authored several Opinions in the last year that decried the practice of awarding significant credits in a divorce proceeding.  See, e.g. Tobias v. Tobias, Leb.Co., 2019-20625 (Charles, J., Aug. 7, 2023)and Raugh v. Raugh Leb.Co., 2020-20396 (Charles, J., Sept. 12, 2023)We reasoned that when the amount of credits becomes significant, property can end up largely being divided via credits instead of an analysis of the equitable distribution factors set forth in Pennsylvania’s Divorce Code.  Although we stopped well short of rejecting the concept of credits, we clearly expressed a preference that the equitable distribution factors of the Divorce Code should take precedence when dividing a marital estate.^[5]

It is also becoming increasingly obvious that divorce litigants and practitioners seem to be conflating marital debts with entitlement to credits.  In reality, distribution of marital debts is separate and distinct from entitlement to credits.  Generally speaking, amounts owed by spouses to third parties at the time of separation should be considered marital debts.  Like marital assets, the debts must be distributed based upon consideration of all of the statutory equitable distribution factors.  Credits, on the other hand, represent one party’s entitlement to reimbursement for amounts paid by one party for the benefit of the other, usually after a separation has occurred.  Thus, for example, a mortgage balance on a marital home as of the date of the separation should be considered as a marital debt.  However, periodic payments made by one spouse toward satisfaction of the mortgage after separation can be the subject of an award of credits. 

As is obvious from other aspects of our decision, we will not be awarding all of the credits that were determined by the SM.  For example, we have determined that the parties’ joint 2017 tax liability is a marital debt that we have divided in a 75-25 fashion.  We have thus shifted the tax liability amount from a credits analysis to one governed by the equitable distribution factors.  Similarly, we have determined that the amount owed for the Chevy Suburban vehicle and the credit card balances represent marital debts that should be addressed via equitable distribution and not credits. 

After shifting many of the amounts identified by the SM from “credits” to “marital debts”, we are left with only two items for which we will be awarding credits: (1) WIFE’s reimbursement to HUSBAND for excess APL paid; and (2) the excess amount received by WIFE from post-separation direct deposits into the marital checking account.  Together, the amounts generated by the above total $1,018.23.  As it relates to these amounts, we agree with WIFE that a dollar-for-dollar credit for 100% of these amounts should be afforded.  We will therefore direct that HUSBAND receive a total credit of $1,018.23. 

F. COUNSEL FEES

The SM determined that HUSBAND should pay $1,000.00 of WIFE’s counsel fees.  The SM stated in his report:

“Section 402 of the Divorce Code permits the court to allow reasonable counsel fees and expenses.  The Wife has requested that her counsel fees and expenses in the amount of $4,959.00 be totally paid by the Husband.  The issue of an award of counsel fees is always a difficult one.  There is no set standard except that fees shall be reasonable.  Consideration must be given to the husband’s ability to pay and the wife’s necessity.  In addition, consideration must be given to the extent of the wife’s separate assets.  The purpose of counsel fees is to ensure a financially dependent spouse can participate on an equal footing in a divorce proceeding with a more financially secure spouse.”

Based upon this reasoning, the SM determined that HUSBAND should pay $1,000.00 of WIFE’s counsel fees. 

            The SM’s decision was premised upon the fact that WIFE earned roughly $58,000.00 in 2022 and HUSBAND earned roughly $75,000.00.  According to WIFE, this disparity of income justifies an award of counsel fees even greater than what the SM awarded.  We disagree. 

            While WIFE does earn less than HUSBAND, she still earns roughly 50% more than the median income-earner in Lebanon County.  Moreover, WIFE is slated to receive a robust wage increase when she completes her training program.  In addition, WIFE will receive in excess of $40,000.00 from HUSBAND as an equitable distribution award.  Based upon all of these factors, we do not believe the SM erred by awarding “only” $1,000.00 in counsel fees to WIFE.  We will therefore deny WIFE’s exception that sought a greater award of counsel fees.           

VI.       CONCLUSION

             The job of an SM is difficult.  Always, the SM must review copious documents implicating a multitude of different numbers, valuations and periods of time.  Often, the SM must confront starkly different testimony from people who have very different perspectives about what has occurred.  Then, surrounded by hundreds of pages of transcripts and documentation, the SM must come up with a decision that effectuates economic justice for both parties.  The challenge faced by SMs is always a daunting one.

            Our role as a reviewing court is only slightly less difficult.  While we do have the benefit of a foundation created by the SM’s credibility decisions, we are presented with the same confusing documentary record as was the SM.  Moreover, we also have to consider sometimes esoteric legal arguments submitted by the parties’ counsel.  Sometimes, those briefs and legal arguments create complications that even an SM was not required to confront. 

            In the end, our goal is to build on the decisions of the SM in order to reach a decision that effectuates economic justice for the spouses before us.  We must also remember that if or when we alter one aspect of an SM’s decision, sometimes that will require us to change other aspects as well in order to reach a decision that is fair.  In other words, we cannot simply limit our analysis to a piecemeal evaluation of each decision rendered by the SM; we must also ensure that the overall conclusion we have reached is fair to all involved. 

            In this case, the parties did not challenge the most important decision of the SM – the decision to divide assets and debts 52% to 48%.  Moreover, we are in agreement with the SM regarding the two most controversial legal issues, the ones involving the parties’ cabin investment and reimbursement of APL.  We are not in agreement with the SM’s decision to characterize marital debts as “credits”, and we have shifted many of the amounts in controversy from being considered as credits to their rightful place as marital debts.  Building on the SM’s decision to award marital assets in a 52% – 48% fashion, we have divided the marital debts by imposing responsibility upon HUSBAND to pay 52% and WIFE with the responsibility to pay 48%. 

            One marital debt will be treated differently.  The joint obligation owed by the parties to the IRS was created exclusively as a result of HUSBAND’s misfeasance or malfeasance.  Because this debt was created exclusively by HUSBAND and without the knowledge of WIFE, we consider HUSBAND’s actions to be in the nature of “dissipation” of the marital estate.  As such, we have decided to divide that particular marital debt by imposing a 75% obligation upon HUSBAND to satisfy it.

            Consistent with all of the above, our recapitulation of equitable distribution will be as follows:

Value of marital assets awarded to HUSBAND	$53,566.70
48% of marital assets to which HUSBAND should be entitled	$36,992.42
Excess amount possessed by HUSBAND that should be reimbursed to WIFE	$16,574.28

Total marital debts paid or assumed by WIFE	$36,837.63
48% of marital debts that should have been paid or assumed by WIFE	$17,682.06
Difference	$19,155.57

Total credits to which HUSBAND is entitled

$1,018.23

Amount owed by HUSBAND to WIFE pertaining to marital assets	$16,574.28
Amount owed by HUSBAND to WIFE as reimbursement for payment or assumption of marital debt	$19,155.57
Amount owed by HUSBAND to WIFE pertaining to IRS debt	$6,723.19
Less credit to which HUSBAND is entitled	$1,018.23
TOTAL AMOUNT OWED BY HUSBAND TO WIFE	$41,434.81

The amount HUSBAND owes to WIFE is not insubstantial.  It will take time in today’s economy for HUSBAND to save or procure debt to pay the amount owed to WIFE.^[6]  Therefore, we will afford HUSBAND with time that he may need to pay the amount he owes.  For twenty-four (24) months, we will afford HUSBAND with the option of paying WIFE the sum of $600.00 per month toward satisfaction of the amount he owes.  $550.00 of this amount will be applied toward the principal amount of HUSBAND’s debt.  At the end of 24 months, HUSBAND’s total debt to WIFE will be reduced by $13,200.00.  The remaining balance will then have to be paid in full within an additional sixty (60) days following expiration of 24 months. 

            Of course, if HUSBAND wishes to take out a loan immediately to pay the amount he owes to WIFE, he certainly has that ability.  The choice as to whether HUSBAND pays $600.00 per month or whether he pays in full from his resources or via the acquisition of debt will be up to HUSBAND alone. 

            A reality governing this case is that HUSBAND has retained most of the marital assets and WIFE has assumed the obligation to pay most marital debts.  We are unsure about precisely why this dynamic arose, but it very clearly did.  Because of this, the only way for us to effectuate economic justice between the parties would be to require HUSBAND to pay a sum of money to WIFE.  Given the relatively meager nature of the marital estate, we were somewhat surprised by the amount HUSBAND will have to pay to reimburse WIFE.  However, as we moved beyond our sticker shock at the amount, we quickly realized that HUSBAND’s own decisions placed him in the position he is now in.  Had HUSBAND taken control of fewer marital assets, or if he had stepped to the plate to pay more marital debts, the amount he would now owe to WIFE in order to effectuate economic justice would be far less.  As it is, the amount set forth in the Opinion is necessary to effectuate economic justice between the parties.

            A Court Order to effectuate what we have written above will be entered today’s date.

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[1] $50.00 per month will be considered interest.

[2] HUSBAND initially submitted another Exception related to health insurance, but he later withdrew that Exception.

[3] Although HUSBAND did have an arrearage balance, that arrearage balance arose by virtue of a retroactivity provision that established HUSBAND’s obligation retroactive to a date before a wage attachment could be entered.

[4] This represents reimbursement of roughly one-half of all APL paid by HUSBAND.

[5] In many instances, the facts that give rise to credits can be considered within the umbrella of one or more of the equitable distribution factors.  Stated differently, instead of awarding dollar-for-dollar “credits”, the Court could award a spouse with a greater percentage of the marital estate. Especially when credits are extensive and confusing, the approach that prioritizes consideration of the equitable distribution factors may be the one that best effectuates economic justice for the parties.

[6] We are cognizant of the practical reality facing those who wish to borrow money in today’s economy.  In stark contrast to the rates available in the financial marketplace five years ago, interest rates for personal loans now exceed 7%.  As a direct result, the availability of financing has decreased, just as the cost of financing has significantly increased.  Given these realities of the financial marketplace, we do not want to set HUSBAND up for failure by requiring him to pay $40,000.00 in a lump sum within a limited period of time.  By affording HUSBAND with two (2) years to organize his own financial circumstances and investigate availability of loans, we have established a reasonable timeframe for HUSBAND to accomplish payment of the amounts he owes to WIFE.