Grace v. Grace

Opinion

No. 81-458

IN THE SUPREME COURT OF THE STATE OF MONTANA 1982

IN RE THE MARRIAGE OF: PHILLIP A- GRACE, Petitioner and Appellant, and PAULINE K. GRACE, Respondent and Respondent.

Appeal from: District Court of the First Judicial District, In and for the County of Lewis and Clark Honorable Arnold Olsen, Judqe presiding.

Counsel of Record:

For Appellant:

Herron, Meloy and Llewellyn, Helena, Montana For Respondent :

Small, Hatch and Doubek, Helena, Montana

Submitted on briefs: March 3, 1982 Decided :

M r . J u s t i c e J o h n Conway H a r r i s o n d e l i v e r e d t h e O p i n i o n of t h e Court.

T h i s i s a n a p p e a l from a j u d g m e n t o f t h e D i s t r i c t C o u r t o f t h e F i r s t J u d i c i a l D i s t r i c t , S t a t e o f Montana, i n and f o r t h e C o u n t y o f L e w i s and C l a r k , a r i s i n g o u t o f a m a r i t a l d i s s o l u t i o n .

A t t h e t i m e of t h e i r d i v o r c e , P h i l l i p and P a u l i n e Grace e n t e r e d i n t o a p r o p e r t y a g r e e m e n t , d a t e d S e p t e m b e r 26, 1 9 7 9 . This

a g r e e m e n t was a p p r o v e d b y t h e c o u r t and e n t e r e d i n t o t h e d e c r e e

o f d i s s o l u t i o n o f t h e m a r r i a g e on t h e same d a t e , S e p t e m b e r 26, 1979. Under t h e terms o f t h e p r o p e r t y a g r e e m e n t , among o t h e r p r o v i s i o n s , t h e a p p e l l a n t husband p r o m i s e d : ( 1) to pay one-ha1 f

o f t h e income t a x l i a b i l i t y f o r t h e y e a r of 1 9 7 7 ; ( 2 ) t o p a y oneh a l f o f t h e r e a l p r o p e r t y t a x e s f o r y e a r 1 9 7 8 o n t h e f a m i l y resi-

d e n c e l o c a t e d a t 556-1/2 S o u t h Rodney, H e l e n a , Montana; ( 3 ) to r e l i n q u i s h t o r e s p o n d e n t w i f e , a b o a t and e q u i p m e n t and t o e x e - c u t e a l l d o c u m e n t s n e c e s s a r y t o e f f e c t t h e t r a n s f e r and t i t l e o f same; and ( 4 ) t o a s s i s t r e s p o n d e n t i n r e f i n a n c i n g a s e c o n d

mortgage on t h e f a m i l y r e s i d e n c e .

D u r i n g t h e f o l l o w i n g y e a r , t h e r e s p o n d e n t was u n a b l e t o p a y o f f t h e s e c o n d m o r t g a g e a g a i n s t h e r r e s i d e n c e b e c a u s e t h e IRS

had f i l e d a t a x l i e n a g a i n s t a l l of t h e p r o p e r t y s h e r e c e i v e d u n d e r t h e p r o p e r t y s e t t l e m e n t a g r e e m e n t b e c a u s e of a p p e l l a n t ' s

f a i l u r e t o p a y h i s s h a r e o f t h e 1 9 7 7 f e d e r a l income t a x . In

a d d i t i o n , t h e a p p e l l a n t f a i l e d to p a y h i s s h a r e of t h e 1 9 7 8 p r o -

p e r t y t a x e s as p r o v i d e d by t h e a g r e e m e n t and f a i l e d to t u r n o v e r t h e b o a t t r a i l e r t i t l e and c e r t a i n b o a t i n g e q u i p m e n t to t h e

respondent.

The r e s p o n d e n t f i l e d a p e t i t i o n i n t h e D i s t r i c t C o u r t r e q u e s t i n g t h a t t h e a p p e l l a n t be found i n c o n t e m p t and r e q u i r e d

t o p e r f o r m as a g r e e d t o u n d e r t h e d e c r e e . In a d d i t i o n , s h e asked f o r a t t o r n e y f e e s and c o s t s f o r h a v i n g to b r i n g t h e s e m a t t e r s before the court. A show c a u s e h e a r i n g w a s h e l d o n J u l y 1 6 ,

1 9 8 1 , and t h e c o u r t o r d e r e d on S e p t e m b e r 1 7 , 1 9 8 1 , t h a t t h e appellant: (1) i m m e d i a t e l y pay h i s one-half of t h e 1978 r e a l e s t a t e property taxes against the family residence located a t 556 and 556-1/2 S o u t h Rodney, t o g e t h e r w i t h p e n a l t y and a c c r u e d

i n t e r e s t thereon; ( 2 ) e x e c u t e and d e l i v e r t i t l e to t h e b o a t

t r a i l e r and c e r t a i n o t h e r b o a t i n g e q u i p m e n t to t h e r e p o n d e n t ; ( 3 )

p a y t h e r e s p o n d e n t t h e sum o f $ 1 , 1 1 8 . 6 4 t h a t s h e had i n c u r r e d i n

a d d i t i o n a l i n t e r e s t b e c a u s e o f t h e t a x l i e n which encumbered h e r

p r o p e r t y f r o m O c t o b e r 1980 t o J u n e 1 9 8 1 ; and ( 4 ) p a y t h e

r e s p o n d e n t ' s a t t o r n e y f e e s i n t h e amount o f $705. From t h i s

o r d e r t h e husband a p p e a l s .

T h r e e i s s u e s are p r e s e n t e d f o r c o n s i d e r a t i o n :

1. W h e t h e r t h e w i f e f a i l e d to make a showing t h a t t h e

award o f a t t o r n e y f e e s was n e c e s s a r y and t h e D i s t r i c t C o u r t ,

t h e r e f o r e , e r r e d i n awarding a t t o r n e y f e e s under s e c t i o n

40-4-110, MCA.

2. W h e t h e r t h e w i f e was e n t i t l e d to damages f o r l o s s o f

i n t e r e s t when h e r a c t i o n s ( o r l a c k t h e r e o f ) were t h e p r o x i m a t e

c a u s e o f h e r damages and t h e c o u r t e r r e d i n a w a r d i n g same.

3. W h e t h e r t h e c o u r t e r r e d i n r e f u s i n g to s e t a s i d e t h e

p r o p e r t y agreement of t h e p a r t i e s on t h e b a s i s of a r e c e n t United

S t a t e s Supreme C o u r t r u l i n g e x c l u d i n g m i l i t a r y p e n s i o n s from

marital estates.

A p p e l l a n t a r g u e s t h a t u n d e r o u r r e c e n t case l a w and u n d e r

s e c t i o n 40-4-110, MCA, r e c o v e r y of a t t o r n e y f e e s and c o s t s is

b a r r e d u n l e s s t h e r e s p o n d e n t makes a showing of n e c e s s i t y , c i t i n g

Whitman v . Whitman ( 1 9 7 4 ) , 1 6 4 Mont. 1 2 4 , 519 P.2d 966; I n re

M a r r i a g e o f Gohner ( 1 9 8 0 ) , Mont. , 609 P.2d 288, 37

St.Rep. 6 1 3 ; I n re M a r r i a g e o f Brown ( 1 9 7 8 ) , 1 7 9 Mont. 417, 5 8 7

P.2d 361; I n r e M a r r i a g e o f McLean ( 1 9 8 0 ) , Mont . , 609

P.2d 282, 37 S t . R e p . 589. I t is a p p e l l a n t ' s p o s i t i o n t h a t i n a s -

much as t h e w i f e p r e s e n t e d no p r e s e n t f i s c a l s t a t e m e n t showing

h e r p r e s e n t f i n a n c i a l s i t u a t i o n t h a t t h e c o u r t e r r e d i n awarding

h e r a t t o r n e y f e e s and c o s t s .

S e c t i o n 40-4-110, MCA, c o v e r i n g c o s t s and a t t o r n e y f e e s

came i n t o o u r Code w i t h t h e p a s s a g e o f C h a p t e r 5 3 6 , Laws o f 1 9 7 5 ,

w h i c h p r o v i d e d f o r t h e f a m i l y law o f t h i s s t a t e . This section was new t o o u r law and p r o v i d e s :

" C o s t s - - A t t o r n e y ' s f e e s . The c o u r t from t i m e t o t i m e , af ter consideri n s the f i n a n c i a l resources o f b o t h p a r t i e s , may o g d e r a p a r t y t o p a y a r e a s o n a b l e amount f o r t h e cost to t h e o t h e r p a r t y of m a i n t a i n i n g o r defending any proceeding u n d e r c h a p t e r s 1 and 4 o f t h i s t i t l e and f o r a t t o r n e y ' s f e e s , i n c l u d i n g sums f o r l e g a l serv i c e s r e n d e r e d and c o s t s i n c u r r e d p r i o r to t h e commencement o f t h e p r o c e e d i n g o r a f t e r e n t r y o f judgment. The c o u r t may o r d e r t h a t t h e amount b e p a i d d i r e c t l y t o t h e a t t o r n e y , who may e n f o r c e t h e o r d e r i n h i s name." S i n c e t h e a d o p t i o n of t h i s p r o v i s i o n of o u r code t h i s C o u r t h a s a p p r o v e d t h e award o f a t t o r n e y f e e s i n a number of cases. S e e I n re t h e M a r r i a g e of Brown ( 1 9 7 8 ) , 1 7 9 Mont. 4 1 7 ,

587 P.2d 361; I n re t h e M a r r i a g e o f Kaasa ( 1 9 7 9 ) , Mont. 1

5 9 1 P.2d 1 1 1 0 , 36 S t . R e p . 4 2 5 ; I n re t h e M a r r i a g e o f H o u t c h i n s

(1979)1 Mont. -- , 592 P.2d 1 5 8 , 3 6 S t . R e p . 5 0 ; A l l e n v. A l l e n ( 1 9 7 8 ) , 1 7 5 Mont. 5 2 7 , 5 7 5 P.2d 7 4 ; E a s t o n v. E a s t o n ( 1 9 7 8 ) , 1 7 5 Mont. 4 1 6 , 574 P.2d 989. I n a d d i t i o n , n o t e 6 9 ALR3d 152. W e w i l l n o t d i s t u r b t h e lower c o u r t ' s d i s c r e t i o n w h e r e

s u b s t a n t i a l e v i d e n c e is found i n t h e r e c o r d to s u p p o r t t h e a w a r d .

I n r e v i e w i n g t h i s r e c o r d w e f i n d s u b s t a n t i a l e v i d e n c e to s u p p o r t t h e award. R e s p o n d e n t s u p p o r t s h e r s e l f by w o r k i n g a s a

telephone operator. A p p e l l a n t ' s f a i l u r e to p a y h i s s h a r e o f t h e f e d e r a l t a x e s as o r d e r e d i n t h e p r o p e r t y s e t t l e m e n t c a u s e d a t a x

l i e n t o be l e v i e d a g a i n s t t h e p r o p e r t y p r e v e n t i n g r e s p o n d e n t from

p a y i n g o f f t h e second mortgage on h e r r e s i d e n c e . As a result,

r e s p o n d e n t i n c u r r e d a d d i t i o n a l i n t e r e s t a c c r u i n g a t $4.74 a day p l u s penal ties. I n a d d i t i o n , r e s p o n d e n t ' s c r e d i t r a t i n g s were

damaged w h i c h c o u l d a f f e c t h e r a b i l i t y t o o b t a i n l o a n s i n t h e future. W e u p h o l d t h e D i s t r i c t C o u r t ' s award o f a t t o r n e y f e e s .

The n e x t i s s u e is d i r e c t e d to w h e t h e r t h e w i f e w a s

e n t i t l e d t o damages f o r l o s s o f i n t e r e s t and w h e t h e r h e r a c t i o n s o r l a c k t h e r e o f were t h e p r o x i m a t e c a u s e o f t h o s e damages.

The a p p e l l a n t a r g u e s t h a t as p a r t o f t h e p r o p e r t y s e t t l e -

m e n t a g r e e m e n t he a g r e e d t o p a y o n e - h a l f o f t h e c o u p l e ' s income

t a x f o r 1977. H e f a i l e d t o d o so. However, h e a l l e g e s t h a t t h e

4

w i f e ' s f a i l u r e to r e f i n a n c e t h e second m o r t g a g e s o a s to a v o i d a

b a l l o o n payment d u e s e v e r a l months a f t e r t h e p r o p e r t y s e t t l e m e n t a g r e e m e n t was s i g n e d , c a u s e d t h e damages t h a t s h e a l l e g e d .

A p p e l l a n t a r g u e s t h a t r e s p o n d e n t w a i t e d some f i f t e e n m o n t h s , u n t i l O c t o b e r 1 9 8 0 , b e f o r e making any e f f o r t to r e f i n a n c e t h e

s e c o n d m o r t g a g e , a t which time s h e d i s c o v e r e d t h a t s e v e r a l weeks

e a r l i e r t h e I n t e r n a l Revenue S e r v i c e had p l a c e d a l i e n o n h e r p r o p e r t y b e c a u s e o f a p p e l l a n t ' s f a i l u r e to pay t h e t a x e s .

A p p e l l a n t a r g u e s t h a t i f r e s p o n d e n t had f u l f i l l e d h e r

o b l i g a t i o n w i t h i n a r e a s o n a b l e t i m e t h e r e would have b e e n no l o s s o f i n t e r e s t d u r i n g t h e p e n d e n c y of t h e r e m o v a l of t h e t a x l i e n . T h e r e f o r e , r e s p o n d e n t is a s k i n g a p p e l l a n t to pay damages which

c o u l d e a s i l y have b e e n a v o i d e d had s h e c a r r i e d o u t h e r o b l i g a t i o n t o r e f i n a n c e t h e p r o p e r t y w i t h i n a r e a s o n a b l e t i m e a f t e r t h e prop e r t y s e t t l e m e n t was s i g n e d . Having f a i l e d to do s o , r e s p o n d e n t

c a n n o t now t a k e a d v a n t a g e of h e r own f a i l u r e by r e q u i r i n g a p p e l l a n t t o pay i n t e r e s t from t h e d a t e o f r e f i n a n c i n g to t h e d a t e t h e t a x l i e n was removed.

A p p e l l a n t fs argument begs t h e q u e s t i o n . The t r i a l j u d g e found: (1) t h a t t h e a p p e l l a n t f a i l e d t o pay t h e o n e - h a l f of t h e f e d e r a l income t a x f o r 1977 a s he had a g r e e d ; ( 2 ) o n March 8 ,

1 9 8 0 , t h e IRS p l a c e d a l i e n a g a i n s t a l l r e s p o n d e n t ' s p r o p e r t y ; ( 3 ) t h a t t h e l i e n p r e v e n t e d t h e r e s p o n d e n t from c l o s i n g a l o a n

w h i c h would have e n a b l e d h e r to pay t h e s e c o n d m o r t g a g e a g a i n s t

h e r home d u e on October 1 5 , 1 9 8 0 ; ( 4 ) t h a t t h e l i e n r e m a i n e d u n t i l June 8 , 1 9 8 1 ; and ( 5 ) t h a t t h e r e s p o n d e n t became o b l i g a t e d f o r t h e i n t e r e s t on t h e s e c o n d m o r t g a g e i n t h e amount o f $4.74 a

d a y from O c t o b e r 1 5 , 1 9 8 0 , t o J u n e 8 , 1 9 8 1 , f o r a t o t a l sum of $1,118.64.

A p p e l l a n t ' s argument concerning avoidance does not a p p l y

to t h i s case. Under t h e p r o p e r t y s e t t l e m e n t a g r e e m e n t , r e s p o n - d e n t was c o m p e l l e d t o assume i n d e b t e d n e s s a g a i n s t t h e r e s i d e n c e ,

and when s h e became o b l i g a t e d to r e f i n a n c e t h e second m o r t g a g e

s h e was p r e v e n t e d from s e c u r i n g a l o a n b e c a u s e of a t a x l i e n t h a t had b e e n f i l e d a g a i n s t t h e p r o p e r t y . A p p e l l a n t f a i l e d to p a y h i s

p o r t i o n o f 1 9 7 7 income t a x and t h a t f a i l u r e c a u s e d t h e t a x l i e n t o be f i l e d , c a u s i n g r e s p o n d e n t to p a y c o n s i d e r a b l e i n t e r e s t . A p p e l l a n t ' s f a i l u r e t o make t h e t a x payment w a s a v i o l a t i o n of t h e a g r e e m e n t , and t h e c o u r t p r o p e r l y so h e l d .

The t h i r d i s s u e is w h e t h e r t h e c o u r t e r r e d i n r e f u s i n g to s e t a s i d e t h e p r o p e r t y s e t t l e m e n t agreement on t h e b a s i s of a

r e c e n t U n i t e d S t a t e s Supreme C o u r t case e x c l u d i n g m i l i t a r y pens i o n s from marital estates.

A t t h e t i m e t h e p e t i t i o n to d i s s o l v e t h e m a r r i a g e was

f i l e d , t h e w i f e a s k e d f o r , among o t h e r t h i n g s , i n t h e d i s t r i b u - t i o n of t h e marital estate a one-half i n t e r e s t i n h e r husband I s

nondisability military retirement. D u r i n g a recess i n t h e d i s s o -

l u t i o n h e a r i n g r e s p o n d e n t t s a t t o r n e y c o n t a c t e d t h e a p p e l l a n t and h i s a t t o r n e y and p r o p o s e d a s e t t l e m e n t a w a r d i n g t h e e n t i r e marit a l e s t a t e to t h e r e s p o n d e n t . She i n t u r n would r e l i n q u i s h h e r claim t o h i s military retirement. A p p e l l a n t now a r g u e s t h a t he

a g r e e d t o t h i s s e t t l e m e n t on t h e a s s u m p t i o n t h a t r e s p o n d e n t had a m a r i t a l estate i n t e r e s t i n h i s m i l i t a r y r e t i r e m e n t on t h e b a s i s o f t h e C a l i f o r n i a d e c i s i o n i n I n re F i t h i a n ( 1 9 7 4 ) , 111 C a l . R p t r .

369, 1 0 C.3d 5 9 2 , 517 P.2d 4 4 9 , and t h i s C o u r t ' s d e c i s i o n i n I n r e M a r r i a g e o f Miller ( 1 9 8 0 ) , Mont -

- . , 6 0 9 P.2d 1 1 8 5 , 37 St.Rep. 556.

The r e s p o n d e n t f i l e d h e r p e t i t i o n o n A p r i l 1, 1 9 8 1 , t o enforce the property settlement. A p p e l l a n t f i l e d a m o t i o n to q u a s h and s e t a s i d e t h e o r i g i n a l p r o p e r t y s e t t l e m e n t a g r e e m e n t o n t h e b a s i s o f t h e U n i t e d S t a t e s Supreme C o u r t d e c i s i o n i n McCarty v . McCarty ( 1 9 8 1 ) , U.S. , 1 0 1 S.Ct. 2 7 2 8 , 6 9 L.Ed.2d 589.

T h a t case r e v e r s e d t h e C a l i f o r n i a Supreme C o u r t and h e l d t h a t m i l i t a r y r e t i r e m e n t pay i s n o t p a r t of t h e marital a s s e t s t h a t c o u l d be d i s t r i b u t e d i n s t a t e d i v o r c e p r o c e e d i n g s . After a joint h e a r i n g w a s h e l d on t h e m o t i o n t o q u a s h and t h e p e t i t i o n f o r

e n f o r c e m e n t , t h e t r i a l c o u r t d e n i e d a p p e l l a n t t s m o t i o n to q u a s h

a n d o r d e r e d , among o t h e r t h i n g s , t h a t h e p a y t h e r e s p o n d e n t t h e sum o f $ 1 , 1 1 8 . 6 4 f o r a d d i t i o n a l i n t e r e s t s h e had become o b l i g a t e d f o r on t h e n o t e . A p p e l l a n t now a r g u e s t h a t i n view of t h e

h o l d i n g i n McCarty v . McCarty, s u p r a , t h e p r o p e r t y s e t t l e m e n t a g r e e m e n t is u n f a i r t o him and s h o u l d be s e t a s i d e and t h e prop e r t y d i s t r i b u t i o n redetermined.

W e f i n d McCarty d i s t i n g u i s h a b l e i n a number o f areas.

First, Mr. McCarty c o n s i s t e n t l y t o o k t h e p o s i t i o n t h a t o n l y h e was e n t i t l e d t o h i s m i l i t a r y p e n s i o n . He took t h a t p o s i t i o n a l l

t h e way t o t h e U n i t e d S t a t e s Supreme C o u r t , h a v i n g l o s t i n t h e state court. A p p e l l a n t , i n t h i s case, e n t e r e d i n t o an agreement, o r a c o n t r a c t , w i t h h i s w i f e b e f o r e t h e d e c i s i o n i n McCarty. At

t h e t i m e he made t h e a g r e e m e n t he w a s n o t c o e r c e d by t h e c o u r t i n t o any p r o p e r t y s e t t l e m e n t agreement. He w a s r e p r e s e n t e d by c o u n s e l and a r r i v e d a t t h e a g r e e m e n t t h r o u g h n e g o t i a t i o n s w i t h

t h e respondent.

Appellant chose t o settle the property d i s t r i b u t i o n i s s u e by contractual r e l a t i o n s with the respondent. The a g r e e m e n t b e t -

ween t h e p a r t i e s was e n t e r e d i n t o o n S e p t e m b e r 26, 1 9 7 9 , a p p r o v e d

b y t h e c o u r t and i n c o r p o r a t e d i n t o i t s d e c r e e o n t h a t d a t e . McCarty was n o t d e c i d e d u n t i l J u n e 26, 1 9 8 1 , some t w e n t y - o n e

months l a t e r . I n t h e m e a n t i m e , t h e a p p e l l a n t had d i s o b e y e d t h e p r o v i s i o n s of t h e agreement, causing t h e respondent c o n s i d e r a b l e expense. W e f i n d no b a s i s t o o v e r r u l e t h e D i s t r i c t C o u r t i n i t s

f i n d i n g s o f f a c t and c o n c l u s i o n s o f l a w i n t h i s m a t t e r .

The e v i d e n c e c l e a r l y shows t h a t a p p e l l a n t f a i l e d to k e e p h i s agreement. The c o u r t was a c t i n g e n t i r e l y w i t h i n i t s p r e r o g a -

t i v e and a u t h o r i t y i n e n f o r c i n g t h e terms o f t h e a g r e e m e n t by o r d e r i n g t h e a p p e l l a n t to p a y t h e u n p a i d p o r t i o n o f t h e 1 9 7 8 p r o - p e r t y t a x e s , t o d e l i v e r t h e b o a t i n g e q u i p m e n t t h a t he was s t i l l h o l d i n g , and to p a y t h e a d d i t i o n a l i n t e r e s t o n t h e s e c o n d mortgage during t h e t i m e t h a t the t a x l i e n foreclosed t h e c l o s u r e of r e s p o n d e n t ' s l o a n t o p a y o f f t h e s e c o n d m o r t g a g e . In

a d d i t i o n , we f i n d t h a t t h e c o u r t ' s o r d e r awarding a t t o r n e y f e e s

t o r e s p o n d e n t c a u s e d by h e r h a v i n g to s e e k t h e e n f o r c e m e n t d e c r e e was p r o p e r .

W a f f i r m the D i s t r i c t Court and r e t u r n t h i s m a t t e r to the

e

t r i a l c o u r t f o r s e t t i n g reasonable a t t o r n e y f e e s and c o s t s on

t h i s appeal.

I

'

W concur: e

, '