Janice McNutt v. John D. McNutt

MAINE SUPREME JUDICIAL COURT Reporter of Decisions

Decision: 2018 ME 86

Docket: 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.