Sutherlin v. Sutherlin

• Court: Supreme Court of Georgia
• Decided: June 26, 2017
• Docket: S17F0613
• Status: 200

Opinion

301 Ga. 581 FINAL COPY

S17F0613. SUTHERLIN v. SUTHERLIN.

GRANT, Justice.

In this post-divorce contempt action, we granted Appellant’s application

for discretionary appeal to review the trial court’s order finding Appellant in

contempt of three separate provisions of the parties’ divorce decree.1 We affirm

the trial court’s findings as to two of these provisions and reverse as to the third.

Brian and Maria Sutherlin (respectively, “Husband” and “Wife”) were

divorced by a final judgment and decree entered in November 2012. The

divorce decree incorporated a Separation and Property Division Agreement

previously executed by both parties. Among other things, the Agreement

provided for the division of the marital estate.

1 We note that, because Wife filed her application and notice of appeal prior to the January 1, 2017 effective date of the Appellate Jurisdiction Reform Act, this Court — not the Court of Appeals — has jurisdiction over this case. See Ga. L. 2016, p. 883, §§ 3-1, 6-1 (c) (as of effective date, shifting subject matter jurisdiction over “[a]ll divorce and alimony cases” from this Court to the Court of Appeals). In November 2015, Wife filed a motion for contempt, contending that

Husband had failed to comply with various provisions of the Agreement.

Following a hearing, the court issued an order adjudging Husband in willful

contempt of the divorce decree. Specifically, the trial court determined that

Husband had violated the decree by (1) failing to make timely mortgage

payments on the parties’ former marital residence; (2) failing to indemnify Wife

for liabilities incurred with regard to past-due taxes owed by a family business

awarded to Husband in the divorce settlement; and (3) failing to designate Wife

as the beneficiary on a life insurance policy as required to secure Husband’s

buyout obligations under the decree. In granting Husband’s application for

discretionary review, we asked the parties to address the merits of the first two

of these determinations and to address whether Husband was afforded sufficient

notice to be held in contempt with regard to the life insurance beneficiary

designation.

“The trial court in a contempt case has wide discretion to determine

whether [its] orders have been violated.” Kaufmann v. Kaufmann, 246 Ga. 266,

268 (3) (271 SE2d 175) (1980). The court is not authorized to modify a

2 previous decree in a contempt order, but it is always empowered to interpret and

clarify its own orders. Id. If there is any evidence to support a trial court’s

determination that its order has been willfully violated, this Court must affirm

that determination on appeal. West v. Barnes, 254 Ga. 21, 21 (1) (328 SE2d

367) (1985). However, where a contempt action turns on the meaning of terms

in an incorporated settlement agreement, construction of those terms is a

question of law that is subject to de novo review on appeal. See OCGA § 13-2-

1; Knott v. Knott, 277 Ga. 380, 381 (2) (589 SE2d 99) (2003).

I.

As part of the marital property division, the Agreement grants Husband

“the sole right to occupy and enjoy” the parties’ former marital residence and

further provides that

Husband shall be solely responsible for any and all indebtedness secured by that residence, as well as ad valorem taxes, insurance premiums and utility bills associated with that residence, and shall indemnify and hold Wife harmless as to the same.

The undisputed evidence adduced at the contempt hearing established that the

mortgage on this residence was solely in Wife’s name. Wife also presented

evidence that Husband had been late making the payments on this mortgage on

3 multiple occasions in 2015 and 2016. Husband did not then, and has not ever,

contested this fact. Nonetheless, Husband contends that he should not have

been held in contempt because the language of the agreement requires only that

he “be solely responsible” for the mortgage payments and that such

responsibility does not encompass an obligation to make payments in a timely

manner. We disagree. See, e.g., Floyd v. Floyd, 291 Ga. 605, 610 (2) (732

SE2d 258) (2012) (enforcing obligation that, though not expressly stated in

divorce settlement agreement, was clearly implied from agreement’s express

terms); see also Ziyad v. El-Amin, 293 Ga. 871, 873 (750 SE2d 337) (2013)

(same). Husband’s responsibility to make mortgage payments clearly

encompasses the duty to make those payments on time, an implication that is

made even more certain by Husband’s obligation to indemnify Wife.

Accordingly, inferring a duty to make the mortgage payments in a timely

manner did not constitute an improper modification of the Agreement on the

part of the trial court. Floyd, 291 Ga. at 610.

II.

4 As another facet of the parties’ property settlement, the Agreement

provides for the ownership and control of three family-owned businesses

established during the parties’ marriage, requiring Husband to buy out Wife and

then retain full ownership of the businesses’ assets. Specifically, the Agreement

requires Husband within a three-year period to pay Wife 30% of the “net value”

of two of the three businesses — Sutherlin’s Carpet Care and Pressure Washing,

Inc. and Just Plumbing, Inc. — as assessed by a specified accountant at a

particular point in time. In exchange, Wife waives all claims to “any funds or

assets of each of the corporations on any basis and under any theory.”

Regarding the third business, Wife similarly “waives any claim to any of its

assets and income.” And, as will become more relevant in the following

section, Husband was required to maintain a $250,000 life insurance policy with

Wife as beneficiary until he paid her the sums required to buy out her interests

in the businesses. Also included within this section of the Agreement is the

following provision:

Husband shall also indemnify and hold Wife harmless as to any corporate income tax liability for any of the three corporations named above, as Wife has had nearly no access to the financial records of those corporations until very recently, while Husband has

5 had open access to the records and to the corporate accounts and funds.

More than two years after the entry of the divorce decree in November

2012, the Internal Revenue Service (“IRS”) attempted to collect unpaid payroll

taxes owed by the carpet care business for tax periods in 2013. At the contempt

hearing, Wife testified that in April 2015 she received a notice of intent to levy

from the IRS, which notified her of a payroll tax debt owed by the business —

a subchapter S corporation under the federal tax code, see 26 USC § 1361 et seq.

— in the amount of $44,705.38. Corporations electing “S corporation” status

under the federal tax code are not taxed on their profits at the corporate level,

and instead pass their profits and resulting tax liabilities through to shareholders.

See 26 USC §§ 1362, 1366 (a) (1) (A); see also OCGA § 48-7-21 (b) (7) (B).

Because Wife remained a shareholder of the carpet care business until Husband

completed the buyout requirements, the IRS apparently determined that she was

liable for a share of the company’s payroll tax debt. As a result, the IRS

garnished Wife’s 2014 federal income tax refund and Wife ultimately was

forced to hire counsel and negotiate a monthly installment payment plan for the

balance.

6 In her contempt motion, Wife claimed that, by failing to satisfy the

company’s payroll tax obligations such that Wife was then held responsible,

Husband had violated that portion of the Agreement that required him to hold

Wife harmless as to the “corporate income tax liability” of the family

businesses. Husband does not dispute the payroll tax delinquency. Still,

Husband contends that the Agreement did not require him to assume sole

responsibility for the company’s payroll taxes because that debt does not fall

within its “corporate income tax liability.” The trial court, however, concluded

that the payroll taxes in question were encompassed within the company’s

“corporate income tax liability,” and ordered Husband to reimburse Wife for the

sums she had already paid on this debt, as well as to assume responsibility for

the remaining balance.

A.

In determining whether this conclusion was proper, we must decide

whether the trial court’s construction of the term “corporate income tax liability”

was a reasonable clarification of the Agreement or instead was so contrary to its

apparent intention as to constitute an improper modification. See Kirkendall v.

7 Decker, 271 Ga. 189, 191 (516 SE2d 73) (1999) (distinguishing a permissible

clarification of a divorce decree from an improper modification). “The cardinal

rule of construction is to ascertain the intention of the parties. . . .” OCGA § 13-

2-3; Knott v. Knott, 277 Ga. 380, 381 (2) (589 SE2d 99) (2003). Where the

language in a contract is unambiguous, that task is often a straightforward one.

Here we are not so lucky. Contrary to Husband’s contention, the phrase

“corporate income tax liability” does not on its face so clearly evince the

intention of the parties that our inquiry begins and ends with those four words

on the page. See OCGA § 13-2-3 (where parties’ intent “is clear and it

contravenes no rule of law and sufficient words are used to arrive at the

intention, it shall be enforced irrespective of all technical or arbitrary rules of

construction”). Nor is the term defined in the Agreement.

To be sure, for some corporations, the term “corporate income tax” would

have a plain meaning. But here, due to Sutherlin’s status as an S corporation,

the corporation as an entity has no “corporate income tax liability.” See 26 USC

§ 1366 (a) (1) (A); OCGA § 48-7-21 (b) (7) (B). Husband asserts that the term

refers only to the tax owed by each corporation on its own income. However,

8 none of the corporations owes any income taxes; instead, their shareholders do.

As the trial court recognized, construing the term to mean what Husband claims

it means would render it essentially without meaning, thus violating the maxim

that “[t]he courts ‘should avoid any construction that renders portions of the

contract language meaningless.’” Horwitz v. Weil, 275 Ga. 467, 468 (569 SE2d

515) (2002); see also Floyd, 291 Ga. at 610, n. 8 (“‘[i]t is axiomatic that

whenever possible, a contract should not be construed in a manner that renders

any portion of it meaningless’”); Paul v. Paul, 235 Ga. 382, 384 (219 SE2d 736)

(1975) (“‘that construction will be favored which gives meaning and effect to

all of the terms of the contract over that which nullifies and renders meaningless

a part of the language therein contained’”).

In the face of this ambiguity, we must look to the entirety of the

Agreement to determine the intent of the parties. Indeed, “[i]t is axiomatic that

contracts must be construed in their entirety and in a manner that permits all of

the terms contained therein to be consistent with one another.” Schwartz v.

Schwartz, 275 Ga. 107, 108 (1) (561 SE2d 96) (2002); accord Horwitz, 275 Ga.

at 468. Thus, “the entirety of the agreement ‘should be looked to in arriving at

9 the construction of any part.’” Horwitz, 275 Ga. at 468 (quoting OCGA § 13-2-

2 (4)). Here, review of the Agreement as a whole clearly reflects the intent of

the parties regarding disposition of the family businesses: Husband would

retain ownership of them, and receive the income generated by them, and Wife

would relinquish her rights in them except for whatever wages she earned from

any employment agreement reached between Husband and Wife. Between one

and four years after entry of the divorce decree, Husband would pay Wife thirty

percent of the two businesses’ value; at that point, Wife would no longer be a

shareholder in either of them. But until the payment was made, Wife would be

shielded from personal responsibility for the businesses’ corporate tax liabilities.

Nothing in the Agreement indicates any intent to treat the businesses’ payroll

tax liabilities any differently than their other tax liabilities, all of which are

“corporate” in nature.2

2 This interpretation is strengthened by another portion of the Agreement, which states that Husband shall indemnify and hold Wife harmless as to any and all liability for personal income taxes for any tax year as to which they have filed jointly, because in each such year, Wife had sufficient funds withheld from her income and paid to the Internal Revenue Service and Georgia Income Tax Division so that she would owe no taxes for any such years. There is no reason to suspect that this failsafe, which was put in place for the years

10 Accordingly, rather than construing “corporate income tax liability” as

referring to a liability that cannot exist, we construe that term to mean those tax

liabilities that flow from the corporation. See Knott, 277 Ga. at 381 (declining

to adopt construction of divorce agreement that would have rendered certain

provisions meaningless); Horwitz, 275 Ga. at 468 (rejecting literal construction

of agreement that would have rendered certain language meaningless and

contravened intent of the parties); Hayward v. Lawrence, 252 Ga. 337, 337 (312

SE2d 609) (1984) (construing the word “or” to mean “and,” where doing so

would effectuate the clear intent of the parties and avoid rendering certain

provision meaningless).

To be sure, this Agreement could have been more clearly drafted, and we

caution parties to a divorce to ensure that their intentions are plainly expressed.

But here, the complete text of the Agreement demonstrates that the parties

intended for Husband to assume all tax liabilities of the businesses. We

therefore conclude that the trial court’s construction of “corporate income tax

when the parties were married and filing jointly, would be removed so that Wife would be responsible for corporate taxes after the parties were divorced.

11 liability” constituted a reasonable clarification of that term rather than an

improper modification of the Agreement.

B.

Our agreement with the trial court’s construction of the term, however,

does not end the analysis regarding the adjudication of contempt on this point.

Because our interpretation stems from an explicit finding of ambiguity in the

Agreement, we cannot find that the term in question is so clear and definite that

Husband’s failure to comply with his obligations constitutes a willful violation

of the Agreement. See Coppedge v. Coppedge, 298 Ga. 494, 498-499 (1) (783

SE2d 94) (2016) (given ambiguity in provision of divorce decree, trial court

abused its discretion by holding husband in contempt of that provision); Morgan

v. Morgan, 288 Ga. 417, 419 (1) (704 SE2d 764) (2011) (“[a] party may not be

held in contempt for violation of a court order unless such order inform(s) him

in definite terms as to the duties thereby imposed upon him” (punctuation

omitted)). Thus, the trial court did err in holding Husband in contempt, and we

must reverse its order to the extent it imposes specific requirements for

remedying Husband’s failure to indemnify Wife and hold her harmless from

12 future payments on the payroll tax liability. Given our affirmance of the trial

court’s interpretation of this provision of the Agreement, however, Husband is

now on notice of his obligations to Wife with respect to the payroll tax liability,

the violation of which may subject him to future liability for contempt.

III.

Another of the grounds Wife asserted in her contempt motion related to

Husband’s failure to conduct the valuation required under the buyout provision.

In the course of cross-examining Husband on that subject, Wife’s counsel asked

Husband about a component of the buyout provision requiring Husband to

maintain a $250,000 life insurance policy, with Wife designated as beneficiary,

until the amount due to Wife under the buyout was paid. Husband’s counsel

objected to questioning on this topic, and the trial court overruled the objection.

Responding to those questions — and to follow-up questions from the trial

judge — Husband testified that he had obtained a $250,000 life insurance policy

on which Wife was initially the named beneficiary, but had subsequently

changed the beneficiary designation, naming the parties’ sons instead of Wife.

13 On redirect examination by his own counsel, Husband stated that he did not

object to the trial court considering the issue of the life insurance policy, and

that he could reinstate Wife as beneficiary if necessary:

Q: Okay. So, if necessary, you could put [Wife] back on as beneficiary? A: Yes. Q: Okay. And you don’t have any objection, should the Court find that this life insurance policy plays a role in today’s hearing? A: No.

In its contempt order, the court found Husband in willful contempt for failing

to maintain Wife as the named beneficiary on the life insurance policy pending

payment of the amounts owed under the buyout provision. The court ordered

Husband to immediately comply with this requirement and to provide Wife with

proof of his compliance within 30 days.

In spite of his apparent consent to the court’s consideration of his failure

to follow the Agreement’s directives on designating Wife as a life insurance

beneficiary, Husband now asserts that the trial court erred in holding him in

contempt on this issue, claiming that he was not afforded sufficient notice of this

particular ground for contempt. See Brown v. King, 266 Ga. 890, 890 (1) (472

SE2d 65) (1996) (party charged with contempt must be afforded reasonable

14 notice of the charges he faces in advance of a hearing on the charges); Barnes

v. Tant, 217 Ga. 67, 72 (4) (121 SE2d 125) (1961) (notice must afford

reasonable time for accused to prepare defense to contempt charge).3 The court

stated in its order that its contempt finding was proper because the issue was

“directly related to” the allegation of contempt regarding Husband’s failure to

comply more generally with the terms of the buyout provision.

Under the circumstances presented here, we agree that contempt was

available. To begin, the life insurance provision was part of the overall buyout

scheme, which was clearly at issue in the contempt proceeding. This is not a

case where Husband had no advance notice that contempt was under

consideration. Cf. Barnes, 217 Ga. at 72 (reversing contempt determination

made, without advance notice, during course of trial of habeas action seeking a

modification of child custody). Nor is it a case where the contempt finding

3 At least in some circumstances, however, “[a] trial court may sua sponte raise an issue of contempt” without prior notice. Chatfield v. Adkins-Chatfield, 282 Ga. 190, 194 (3) (646 SE2d 247) (2007) (affirming trial court’s contempt finding regarding husband’s violation of pre-trial order, even though finding was rendered based on evidence presented at the parties’ divorce trial rather than at a separate contempt hearing). Accord Tafel v. Lion Antique Cars & Investments, Inc., 297 Ga. 334, 340 (5) (773 SE2d 743) (2015) (dictum).

15 arose from a provision entirely separate from those on which the contempt

allegations were grounded.

But even pretermitting the question of notice, Husband conceded that he

had no objection to reinstating Wife as beneficiary of the insurance policy as

required by the terms of the Agreement. Husband effectively invited any error

and is estopped from challenging it now. See, e.g., Hammond v. Hammond, 290

Ga. 518, 519 (722 SE2d 729) (2012) (“party will not be heard to complain of

error induced by [its] own conduct, nor of error expressly invited during the

course of trial”). In short, because Husband affirmed on the record that he had

no objection to doing what the trial court ultimately ordered, we find no error

in the trial court’s adjudication of contempt on this issue.

Judgment affirmed in part and reversed in part. All the Justices concur,

except Melton, P. J., and Boggs, J., who concur in judgment only as to Division

II (B), and Blackwell and Peterson, JJ., who concur in judgment only as to

Division II.

Decided June 26, 2017.

16 Domestic relations. Gwinnett Superior Court. Before Judge Tate, pro hac

vice.

David A. Powell, for appellant.

Browning & Smith, Austin R. C. Buerlein, Courtney M. Gilkinson, for

appellee.