Janice McNutt v. John D. McNutt , 188 A.3d 202 ( 2018 )

MAINE SUPREME JUDICIAL COURT Reporter of Decisions
Decision: 2018 ME 86Docket: Lin-17-439
Submitted
On Briefs: April 25, 2018
Decided: July 3, 2018
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
JANICE MCNUTT
v.
JOHN D. MCNUTT
MEAD, J.
[¶1] John D. McNutt (Dan) appeals from the judgment of the
District Court (Wiscasset, Raimondi, J.) finding him in contempt of the parties’
earlier divorce judgment and increasing his spousal support obligation to
Janice McNutt. 19-A M.R.S. § 951-A(4)-(5) (2017); M.R. Civ. P. 66(d). Dan
contends that the court clearly erred by finding that he is now able to pay
increased spousal support and abused its discretion by ordering a temporary
increase of that support to $1,750 each month. He further asserts that it was
error for the court not to address an ambiguity in the divorce judgment
concerning whether he has a personal obligation to pay Janice the difference
between the net proceeds from the sale of the marital properties and the
$180,000 value of Janice’s interests in the marital real estate as established in
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the divorce judgment. He contends that because the court failed to resolve that
ambiguity and imposed a lien in Janice’s favor that was not provided for in the
original decree, the order has prevented him from refinancing one of the
properties and rendered him unable to purge his contempt.
[¶2] We conclude that ample competent evidence in the record supports
the court’s findings that Dan was in contempt of the property disposition
provisions of the divorce judgment and that he has enjoyed a substantial
increase in income due to his disregard of the court’s order to sell or refinance
the two marital rental properties. The lien, as applied to the proceeds of the
sale or refinancing of the individual properties, is consistent with the terms of
the divorce judgment. We affirm the judgment.
I. BACKGROUND
[¶3] On March 31, 2014, the court (Billings, J.) issued a divorce judgment
that incorporated the parties’ settlement agreement to the extent not
inconsistent with the judgment and awarded Janice $1,000 in general spousal
support payable each month until she received two lump sum payments for her
interests in the marital rental properties. The divorce judgment specifically
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provided for spousal support until the rental properties were refinanced or
sold:
4. Spousal Support. As and for general spousal support, [Dan]
shall pay to [Janice] the sum of $1,000.00 per month, commencing
with the month of April, 2014. The spousal support provision shall
remain in place until [Dan] has paid all of his obligations to [Janice]
under the terms of this Judgment, including $150,000 for the
Oak/Howard Street property, $30,000 for the McClintock Street
and Townsend Avenue properties, the debts and attorney’s fees as
set forth below, and the spousal support itself. Spousal support
shall terminate once [Dan] has paid [Janice] in full. [Janice] shall
have a lien against all three parcels of marital real estate to secure
the spousal support obligation of $1,000 per month, and she shall
be paid what she is owed at the time of the closing on any given
property.
[¶4] During their marriage, the parties owned two rental properties (the
McClintock and the Oak properties) in Boothbay Harbor.1 The divorce
judgment set apart both of those properties to Dan and ordered that Janice was
to receive two lump sums, as noted above, upon the sale or refinancing of the
properties. Throughout these proceedings, Dan has resided in an owner’s unit
in one of the rental properties.
[¶5] Pursuant to Section 3 of the divorce judgment, which relates to real
estate, Dan was to pay Janice the first $30,000 of the net proceeds from the
1 As recited by the court in its order, and noted in the divorce judgment’s reference to “three
parcels of marital real estate,” the McClintock property consists of two residential structures. For the
purposes of clarity, we will refer to both of them together as the McClintock property.
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refinancing of the McClintock property by December 31, 2015; if after that date
Dan had not refinanced or paid Janice, he was to sell the property to the first
person to make a “commercially reasonable offer” and pay Janice the $30,000
out of the proceeds from that sale. As for the Oak property, the court ordered
it placed on the market “within five days from the date of th[e] judgment and
sold for the first commercially reasonable offer,” at which time the first
$150,000 of the net proceeds was to go to Janice. Each of the two provisions in
the divorce judgment relating to the sale of the real estate concluded with
virtually identical language:
[Janice will or shall] be paid the first [$30,000 or $150,000] from
the net proceeds of sale . . . plus any amounts due her [pursuant to
or under] her liens against the property for the debts, attorney’s
fees and spousal support obligations as set forth below.[2]
[¶6] Nearly two and a half years after the court issued the divorce
judgment, Dan still had not sold the Oak property; had failed to refinance the
McClintock property by December 31, 2015; and had subsequently failed to list
the latter property for sale. On September 27, 2016, Janice filed three motions,
asking the court to (1) increase her monthly spousal support to $3,000;
(2) enforce the divorce judgment, see M.R. Civ. P. 120; and (3) find Dan in
2 The “obligations as set forth below” consisted of Dan’s obligation to pay $1,000 per month as
general spousal support, his obligation to pay certain specified marital debts, and the requirement
that he pay Janice’s attorney fees.
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contempt for failing to refinance or sell the McClintock property, allowing the
Oak property’s listing to lapse, and refusing to proceed in good faith with the
sale of the properties. See M.R. Civ. P. 66(d).3
[¶7] After a hearing on the motions, the court (Raimondi, J.) found by
clear and convincing evidence that Dan was in contempt of the divorce
judgment because, despite his ability to comply, he allowed the Oak property
listing to lapse; refused to pay Janice $30,000 although his attorney held that
exact sum for him in escrow; and had not refinanced or listed the McClintock
property for sale. The court’s order, dated July 31, 2017, imposed a suspended
term of incarceration, remedial sanctions requiring Dan to comply with the
unfulfilled divorce decree mandates, and an award of attorney fees to Janice.
[¶8] On Janice’s motion to modify her spousal support, the court found
that her financial circumstances were substantially worse than at the time of
the divorce, in large part because she had received none of the lump sum
compensation for her interests in the rental properties. Dan, on the other hand,
had benefitted from rental income generated from the two properties, neither
of which he had refinanced or sold in order to pay Janice. Thus, the court
3 On September 27, 2016, Janice personally, and not through counsel, filed a motion for contempt
that was not properly served on Dan. She then filed a nearly identical motion for contempt on
April 10, 2017. Dan does not contest that Janice served him with the more recent contempt motion.
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ordered a temporary increase in general spousal support to $1,750 each month,
with all support to cease after Dan fully paid his debts to Janice. The July 31
order reaffirmed the liens on the parties' real estate that were created in the
divorce judgment for the monthly spousal support, attorney fees, and certain
marital debts, but also created a new lien in Janice’s favor, something that the
divorce judgment had not imposed, “on [both parcels of] the formerly marital
real estate . . . to secure the property settlement obligations,” i.e., the first
specified amounts of the net proceeds from each property’s refinancing or sale.
[¶9] On August 7, 2017, a little over a week after the final order on
Janice’s motions, the Oak property was sold, netting $116,867 in proceeds that
were paid to Janice. That same day, Dan released the $30,000 held in escrow to
Janice and moved for the court to make further findings relating to its July 31
Order. See M.R. Civ. P. 52(b). Two days later, he moved for the court to grant
him a new trial or amend the judgment to clarify his personal liability for the
deficiency in the Oak property’s sale proceeds. The court denied the motions,
deeming that the issue of Dan’s personal liability for any shortfall in the total
proceeds from the rental properties was not properly before the court. Dan
timely appealed. See M.R. App. P. 2B(c).
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II. DISCUSSION
[¶10] Dan does not take issue with the court’s judgment finding him in
contempt of the property disposition provisions of the divorce judgment or the
court’s finding that Janice had an increased need for spousal support since the
divorce. He asserts, rather, that the court abused its discretion by ordering an
increase in spousal support as a remedial contempt sanction and he contests
the finding that he now has a substantially greater ability to pay more in spousal
support. He further contends that it was error for the court to decline to
address the divorce judgment’s apparent ambiguity regarding his personal
liability to Janice for any shortfall in the net proceeds from the Oak property’s
sale, and that it was error for the court to modify the property division terms of
the divorce judgment by imposing an additional lien against both marital
properties to secure the individual lump sum payments.
A. Increased Spousal Support and the Remedial Sanctions
[¶11] We quickly dispense with Dan’s first argument, that the court’s
increase in spousal support was somehow an impermissible form of remedial
contempt sanction, because it is apparent from the judgment that the increase
in spousal support was not imposed as a sanction. Maine Rule of Civil
Procedure 66(d)(3) governs the remedial contempt sanctions imposed in this
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case. We have interpreted that Rule as requiring an alleged contemnor to
“comply to the fullest extent possible” with a court judgment or order to avoid
being found in contempt. Efstathiou v. Efstathiou, 2009 ME 107, ¶ 13,
982 A.2d 339 (quotation marks omitted). Further, as Rule 66(a)(2)(C)
provides, the function of remedial sanctions is “to coerce the termination of an
ongoing contempt or to compensate a party aggrieved by contempt.” We
review the factual findings underlying the contempt order for clear error and
the remedial sanctions imposed for an abuse of discretion. See Sullivan v.
Tardiff, 2015 ME 121, ¶¶ 17, 20, 124 A.3d 652.
[¶12] Here, the court properly found that the divorce judgment
unambiguously required Dan (1) to list the Oak property and maintain the
listing until it sold for the first commercially reasonable offer; and (2) to
refinance the McClintock property by December 31, 2015, or immediately
thereafter list and sell it for the first commercially reasonable offer. As of the
June and July 2017 motion hearings, it was undisputed that Dan had allowed
the Oak property listing to lapse for several months in 2016 and had not
refinanced or listed the McClintock property; furthermore, the court found
Dan’s excuses for his noncompliance unpersuasive. Accordingly, the court’s
finding, based upon clear and convincing evidence, that Dan violated the
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provisions of the divorce judgment despite having the ability to comply, is well
supported by the evidentiary record. See Efstathiou, 2009 ME 107, ¶¶ 11,
13-14, 982 A.2d 339.
[¶13] The court imposed remedial sanctions giving Dan the choice to
either (1) serve a sentence of fifteen days’ incarceration; or (2) release the
$30,000 held by his attorney in escrow; take immediate steps to apply for
refinancing of the McClintock property with at least three lending institutions;
actually refinance them by March 1, 2018, or list them for sale immediately
after that date; and pay Janice the attorney fees incurred in prosecuting her
contempt motion. See M.R. Civ. P. 66(d)(3). The court’s order, however,
contains no indication that it intended the increased spousal support obligation
to serve as a contempt sanction. To the contrary, the order independently
analyzed and reached completely separate conclusions regarding the contempt
and spousal support issues. All of the sanctions imposed serve to ensure that
Janice receives the lump sum settlement payments that Dan had
contemptuously withheld. The court’s imposition of sanctions did not
constitute an abuse of discretion. See Murphy v. Bartlett, 2014 ME 13, ¶ 18,
86 A.3d 610; Efstathiou, 2009 ME 107, ¶¶ 14-15, 982 A.2d 339.
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B. Increase in Spousal Support
[¶14] Dan next challenges the sufficiency of the evidence supporting the
court’s findings that since the 2014 divorce judgment he now earns more and
can afford to pay Janice $1,750 each month in support. We review for clear
error a court’s findings regarding a payor spouse’s income, see Efstathiou v.
Aspinquid, Inc., 2008 ME 145, ¶ 48, 956 A.2d 110, and for an abuse of discretion
a court’s modification of spousal support, see McLeod v. Macul, 2016 ME 76, ¶ 6,
139 A.3d 920. Title 19-A M.R.S. § 951-A(4) grants the court authority to modify
spousal support upon finding “a substantial change in circumstances affecting
the payor’s ability to pay spousal support and the payee’s need for spousal
support.” McAllister v. McAllister, 2011 ME 69, ¶ 12, 21 A.3d 1010 (quotation
marks omitted).
[¶15] The court found that as of the 2014 divorce judgment, Janice “had
virtually no debt” but had nearly depleted all of the funds left in her checking
account. By the time of the motion hearing, however, Janice had accumulated
approximately $16,000 in debt, part of which was unpaid taxes on her spousal
support, and she had an annual income of $15,600. She qualifies for Medicaid
and food stamps. Regarding Dan’s income and earning potential, the court
found that in 2016 the rental properties generated nearly $55,000 more in
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gross rent than in 2014, and Dan received all of that rent because he had neither
refinanced nor sold those properties.4 The court did not find credible Dan’s
assertion that he finds himself with “virtually no income” after taxes. The court
was not required to accept Dan’s asserted lack of income, see Handrahan v.
Malenko, 2011 ME 15, ¶ 14, 12 A.3d 79; instead it could rely on the competent
evidence in the record supporting a finding that Dan now has a substantially
increased ability to pay spousal support. Thus, the court acted well within its
discretion when it ordered a temporary increase in spousal support.
See 19-A M.R.S. § 951-A(4)-(5); McCarthy v. Goroshin, 2016 ME 98, ¶ 15,
143 A.3d 138.
C. Ambiguity in the Divorce Judgment and the Added Lien
[¶16] Dan finally contends that it was error for the court to decline to
address the divorce judgment’s apparent ambiguity regarding any personal
liability on his part to pay Janice for the shortfall in the net proceeds from the
Oak property’s sale. He further contends that the court erred by impermissibly
4 More specifically, the court found that Dan had paid down nearly all of the $25,000 of marital
debt assigned to him by the divorce judgment, save for $4,000-$5,000 of his son’s student loans;
invested $500,000 in “cash outlay and sweat equity” into the rental properties; paid $8,000 of his
post-judgment attorney fees; made all of his spousal support payments; and still had adequate
income to avoid having to apply for food stamps.
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modifying the divorce judgment when it imposed an additional lien against the
marital properties to secure the lump sum payments.
[¶17] The original divorce judgment did not establish a lien with respect
to the allocation of the proceeds from selling or refinancing the rental
properties. It required Dan to pay Janice's share first out of the net proceeds
from the sale or refinancing of the particular properties. Each allocation of a
portion of proceeds is specifically designated to be taken from the proceeds of
one or the other of those specific property transactions, not both. The express
language of the divorce judgment with regard to those provisions does not
establish liens upon those properties. See Lien, Black’s Law Dictionary
(9th ed. 2009). The divorce court’s simple allocation of the sale proceeds
created no legal encumbrance upon the properties themselves—it did so only
with the other three obligations (the spousal support, attorney fees, and marital
debt). The sole enforcement mechanism for Janice’s right to the first share of
proceeds was the motivation provided by the fact that the monthly spousal
support obligation would continue until all sums due were satisfied.
[¶18] The July 31 order confirmed the liens established in the divorce
judgment and created new liens on the existing property settlement
obligations:
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[Janice] shall have a lien on the formerly marital real estate
as identified in the Divorce Judgment to secure the spousal support
obligation, the property settlement obligations, and liability for past
and present attorney's fees or any other obligations owed by [Dan]
to [Janice].
(Emphasis supplied.)
[¶19] The lien placed by the court in its order on Janice's motions is
explicitly directed to "the property settlement obligations," and thus invokes
the provisions of the divorce judgment that created two separate obligations:
Dan was to pay specific amounts to Janice from the net proceeds of each
particular property’s sale or refinancing. The terms of the divorce judgment do
not explicitly require Dan to take proceeds from the sale of one property to
make up a shortfall on the net proceeds of the other’s sale or refinancing.5
Accordingly, the imposition of a lien upon a particular property to secure
Janice’s entitlement to the first proceeds of the sale or refinancing is fully
consistent with the terms of the divorce judgment, imposes no additional legal
5 Dan asked the court to resolve what he characterizes as an ambiguity in the divorce judgment:
whether he is personally obligated to make up the difference between the amount designated to
Janice upon the sale of either of the properties and the actual net proceeds. The answer to that
question may turn on the question of whether the amounts of proceeds, $150,000 and $30,000
respectively, are deemed a form of spousal support or property division. See McAllister v. McAllister,
2011 ME 69, ¶¶ 8-10, 13, 21 A.3d 1010. The court declined to address that issue because no sale had
taken place by the date of the hearing or decision; that question may properly be addressed in future
proceedings. The court may, at a future proceeding, also address the issue of Dan’s claimed inability
to purge his contempt, which purportedly resulted from actions by Janice subsequent to its contempt
order.
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obligation, and does not otherwise modify the terms of the property settlement
obligations. Cf. Wardwell v. Wardwell, 458 A.2d 750, 752-53 (Me. 1983).6
The entry is:
The July 31, 2017, order of the District Court is
affirmed.
Clarke C. Hambley, Esq., Miller Law and Mediation, LLC, Portland, for appellant
John D. McNutt
Sarah Irving Gilbert, Esq., Camden Law LLP, Camden, for appellee Janice McNutt
Wiscasset District Court docket number FM-2012-82
FOR CLERK REFERENCE ONLY
6 “In the absence of statutory authorization to modify a judgment dividing marital property, the
courts are without jurisdiction to do so.” Wardwell v. Wardwell, 458 A.2d 750, 752 (Me. 1983).
Although 19-A M.R.S. § 951-A(4) (2017) authorizes the modification of a judgment’s spousal support
provisions, there is no similar statutory authority to modify the final property disposition of a divorce
decree. See McAllister, 2011 ME 69, ¶ 8, 21 A.3d 1010. Motions to modify spousal support “do[ ] not
give the court authority to amend or modify the division of marital property in [the divorce]
judgment,” even upon finding a substantial change in circumstances. See Bonner v. Emerson,
2014 ME 135, ¶ 12, 105 A.3d 1023.