Nichols v. Nichols

391 S.E.2d 623, 182 W. Va. 710, 1990 W. Va. LEXIS 20
CourtWest Virginia Supreme Court
DecidedMarch 9, 1990
DocketNo. 18914
StatusPublished

This text of 391 S.E.2d 623 (Nichols v. Nichols) is published on Counsel Stack Legal Research, covering West Virginia Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nichols v. Nichols, 391 S.E.2d 623, 182 W. Va. 710, 1990 W. Va. LEXIS 20 (W. Va. 1990).

Opinion

BROTHERTON, Justice:

Dr. Carl Edwin Nichols, a practicing obstetrician and gynecologist, and Tamara [711]*711Leigh Nichols, a registered nurse, were married on September 7, 1979. They had one child, a son, who was born on November 8, 1980. The Nichols were granted a divorce on grounds of irreconcilable differences by order of the Circuit Court of Wood County entered on October 26, 1984. The divorce order provided that Mrs. Nichols would receive $1,000 per month alimony for two years, retroactive to July 1, 1984, and $500 per month alimony for an additional two years, after which alimony would cease, unless she should remarry, in which case alimony would terminate immediately. Dr. Nichols was also ordered to pay $650 a month for child support.

The crux of the case now before this Court is a counterclaim Dr. Nichols made during the divorce proceedings. Dr. Nichols sought judgment against his wife in the amount of $71,000, which represented the default balance due on a note for a domestic corporation known as “For Kids Only, Inc.”, a children’s apparel store operated by Mrs. Nichols, who was its sole shareholder. “For Kids Only, Inc.” was financed principally by an $84,500 loan from the Wood County Bank. Both the corporation, as maker, and Mrs. Nichols, as first endorser, failed to discharge the defaulted note when it was accelerated, and Dr. Nichols was called upon as second endorser to pay off the balance of the note indebtedness, a total of nearly $75,000, with interest, to the Wood County Bank.

Dr. Nichols’ counterclaim was set for trial on November 9, 1984. However, the parties compromised the counterclaim in an Agreed Order entered on December 11, 1984. Dr. Nichols took judgment against his wife in the amount of $37,500, with interest at the rate of 10% per annum from November 9,1984, until paid. This amount represented approximately one-half of the balance then due on the “For Kids Only, Inc.” note. Dr. Nichols states that, on the advice of counsel, he did not pay alimony, but credited each unpaid alimony installment against the judgment his ex-wife owed to him.

On January 7, 1985, Mrs. Nichols filed a petition in contempt, alleging $9,250 in alimony and child support arrearages. In an answer to the contempt petition filed on February 4, 1985, Dr. Nichols admitted an arrearage but raised his statutory and equitable right to setoff as an affirmative defense. In reply, Mrs. Nichols objected to Dr. Nichols’ claim that he was entitled to a setoff and argued that setoff is not a matter of absolute right in West Virginia, but is subject to the Court’s discretion. Furthermore, Mrs. Nichols argued that case law from other jurisdictions supports the principle that “setoff against alimony payments is generally frowned upon.” Mrs. Nichols also stated that permitting the set-off would deprive her of support and maintenance, and she suggested that any recovery upon Dr. Nichols’ $37,500 judgment against her should be forestalled until she completed the period of rehabilitation envisioned by the Circuit Court of Wood County’s initial award of rehabilitative alimony.

A hearing on the contempt petition was held on February 8, 1985, and the parties stipulated to arrearages in the amount of $8,000. Although the matter was submitted for decision on February 28, 1985, no further action was taken on Mrs. Nichols’ original contempt petition.

On January 16,1986, Mrs. Nichols filed a voluntary Chapter 13 bankruptcy petition, in the United States Bankruptcy Court for the Southern District of Ohio, Eastern Division. Among the debts in her schedule of liabilities, Mrs. Nichols listed the unsecured $37,500 debt she owed to her ex-husband. The bankruptcy court confirmed Mrs. Nichols’ debtor’s plan on March 12, 1986. Under the plan, Mrs. Nichols was required to pay $140.00 per month for approximately forty-three months to her unsecured creditors.

Dr. Nichols subsequently filed a proof of claim as an unsecured creditor in the amount of $37,500, plus accrued interest, for a total sum of $41,622.92. Dr. Nichols also appeared by counsel in the bankruptcy court proceedings, asking that the court abstain from deciding the setoff issue and modify the automatic stay that was in effect pursuant to 11 U.S.C. § 362(a)(1) (1982) of the Bankruptcy Reform Act of 1978 (the [712]*712Bankruptcy Code), and to permit the parties to proceed in state court on the setoff claim because (1) reciprocal debts existed between the parties; (2) said debts arose out of the divorce proceeding in the Circuit Court of Wood County, West Virginia; and (3) the issue of the setoff of the parties’ reciprocal debts had been briefed to the West Virginia court, submitted for decision, and should be decided by the West Virginia court. In the alternative, Dr. Nichols asked that he be permitted to set off the balance due upon his $37,500 judgment against his entire alimony obligation to Mrs. Nichols.

The bankruptcy court refused to abstain, but instead found that it was the proper forum in which to decide the matters at issue because the issue was properly before the court, it affected property of the estate, and it determined the amount of various claims between the parties. Then, on July 8, 1986, the bankruptcy court sustained Dr. Nichols’ motion for relief from the stay for the purposes of setting off the claims. Finding that “mutuality exists between the debtor and the creditor Carl Nichols,” the court authorized a setoff of Dr. Nichols’ $41,622.92 claim against the $18,000 in alimony that he owed Mrs. Nichols as of January 16, 1986, the date Mrs. Nichols filed her bankruptcy petition. However, the court ruled that after this setoff, the $18,500 balance Mrs. Nichols owed to Dr. Nichols would be paid through her Chapter 13 debtor’s plan at ten cents on the dollar over a forty-three month period. The bankruptcy court specifically stated that this ruling “does not alter or affect Carl Nichols’ current ongoing obligation to pay alimony and child support as it accrues post petition. The debtor [Mrs. Nichols] must seek relief in the Wood County, West Virginia Domestic Relations Court to enforce post-petition obligations.”

On November 21, 1986, Mrs. Nichols filed an amended petition in contempt in the Circuit Court of Wood County, alleging that arrearages of $8,900 had accrued since January 16, 1986. In his amended answer and an original modification petition, Dr. Nichols again asserted his right to a setoff, stating that the equities favored his position, and, absent a setoff, he was entitled to the termination of his alimony obligation or, in the alternative, the reduction of that obligation from $500 to $50 monthly, based upon the intervening bankruptcy petition.

A year passed in which the original trial judge in this case retired. Finally, on April 20, 1988, further proceedings were held and arguments were heard on the parties’ respective petitions. On April 28,1988, Dr. Nichols’ prayer for setoff was granted and his judgment was declared satisfied in full. Mrs. Nichols’ amended petition in contempt and Dr. Nichols’ modification petition were then both dismissed.

In an order dated July 15, 1988, the bankruptcy court granted Mrs. Nichols a discharge in bankruptcy, finding that her plan had been confirmed by the court and that all payments provided for under the plan had been completed. The order explained that one of the effects of the discharge was to discharge the debtor, Mrs.

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391 S.E.2d 623, 182 W. Va. 710, 1990 W. Va. LEXIS 20, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nichols-v-nichols-wva-1990.