Opinions, Dec. 29, 2016: You Say Tomato, I Say Contractual Alimony

Happy new year from the Houston Family Law Appeals Blog!

The First District Court of Appeals released its memorandum opinion in Barger v. Barger, No. 01-15-00659-CV this morning which concerns the interpretation of multiple contractual alimony agreements.

Cari and Keith Barger divorced in 2007. At the time they had two minor children. Their agreed decree included provisions for Keith to pay contractual alimony. The contractual alimony provisions also provided for the termination of alimony if Cari remarried or cohabitated with somone “in a conjugal relationship.” In 2009, the parties renegotiated the contractual alimony and signed a Binding Informal Settlement Agreement which included a schedule by which Keith would pay Cari $815,000 over time. This amount would represent the total amount of child support, college payments for their children, and contractual alimony. On March 3, 2010, the trial court entered a reformed order which was based on the settlement agreement. The reformed order did not include a remarriage or cohabitation clause.

In April 2010, Cari remarried, though Keith claimed he learned of the remarriage a year later.

Keith made payments of $3,000 per month from May 2010 until May 2014. In July 2014, Cari filed an enforcement action against him. In March 2015, the trial court heard Cari’s enforcement, and, after comparing the original decree to the reformed order, found the contractual alimony provisions of the reformed order were ambiguous. The trial court then held an evidentiary hearing to determine what the parties’ intention was in omitting the marriage or cohabitation provision from the reformed order.

At issue is the marriage or cohabitation clause (which provided for the termination of the contractual alimony) which was in the original decree but was not in the reformed order. Keith argued that the provision was still valid because the reformed order stated “All other terms of the prior orders not specifically modified in this order shall remain in full force and effect” and the reformed order did not mention the marriage/cohabitation clause. Cari argued that the marriage or cohabitation clause was a terminating event in the original decree specifically modified by the reformed order.

The trial court found that the parties did not intend for the marriage or cohabitation clause to be of continued validity in the reformed order and clarified the reformed order. The reformed order had stated that its intent was to “restructure the contractual alimony provisions set forth in the Agreed Final Decree of Divorce dated October 19, 2007; which shall be reformed as set forth herein.” The trial court revised the reformed order to clarify that “these modifications shall reform and restructure all the provisions contained in the Agreed Final Decree of Divorce dated October 19, 2007, as relates to contractual alimony.” In other words, the marriage/cohabitation clause was no longer in effect because it was not in the reformed order.

Keith appealed, alleging three issues.

First, he argued the trial court erred by not issuing findings of fact and conclusions of law. The Court of Appeals held that the trial court did err by not issuing FF/CL, but the error was harmless because the lack of FF/CL did not prevent Keith from presenting his legal challenge alleging a lack of ambiguity in the reformed order or the propriety of the trial court’s clarification of that order.

In his second issue, Keith argued the trial court erred by concluding the reformed order was ambiguous. The test for ambiguity, the Court of Appeals noted, is whether there is more than one reasonable interpretation of the contract. The Court of Appeals observed that Cari’s interpretation of the reformed order was reasonable but pointedly did not reach whether or not Keith’s interpretation was reasonable because the result was the same either way: 1) If Keith’s interpretation was unreasonable, then the trial court did not err by applying the unambiguous reformed order in Cari’s favor. 2) If Keith’s interpretation was reasonable, then the trial court did not err in finding after an evidentiary hearing that the parties intended to remove the marriage or cohabitation clause.

In his third issue, Keith argued the trial court erred by substantively changing the parties’ agreement because, according to Keith, the parties agreed the reformed order would not supersede the marriage/cohabitation clause. The Court of Appeals held that because the trial court found that the parties intended to remove the marriage or cohabitation clause, it did not err in clarifying the order.

The trial court was affirmed.

Opinions, Dec. 13, 2016: Receivers, Forfeiture, and Enforceable Language

This morning the First District Court of Appeals released a published opinion in Perry v. Perry, No. 01-16-00156-CV which concerns appointing a receiver to sell the marital residence where the underlying decree lacked enforceable language to do so. I found the opinion somewhat confusing and wonder if I am missing something (always a likely bet).

William and Vickie were divorced in 2012. Their decree included two provisions about their house: one typed in the body of the decree and one handwritten by the parties. The typed portion read:

The Court ORDERS that the Husband is awarded (gets) the [House], and the Wife is divested of (doesn’t get) any interest, title or claim she may have to the [House].

Wife IS ORDERED to sign any deeds or documents needed to transfer [the House] to the Husband. Husband is responsible for preparing the documents.

The handwritten portion read:

William Perry agrees to grant Vickie Perry 50% of the profit of the [sale] of the currently community property of [the House.]

If you’re like me, your Slavin meter went off in your head.

Several years later William filed a pro se enforcement petition, alleging Vickie violated the decree by failing to sign a deed transferring her interest in the house to him. William requested the trial court order Vickie to transfer her interest in the house to him because her failure to convey her interest was preventing him from selling the house.

Vickie counterclaimed for a clarifying order, requesting the trial court determine the parties’ rights and duties under the order and clarify any ambiguity in the division of the house. Vickie alleged that William had told her that he was going to sell the house but was not going to give her one half of the profits.

Vickie also requested the trial court appoint a receiver to sell the house, alleging the house was at risk of being foreclosed, but did not present any evidence in support of this allegation. William did not file a response to the motion.

The trial court held two hearings. At the first, William, still pro se, told the court he opposed a receiver because the house was not in danger of being foreclosed. The trial court suggested the parties prepare an agreed order requiring the proceeds of the sale to be paid into an escrow account until the parties or the court could determine how they should be distributed. The record does not indicate William agreed to such an order.

At the second hearing, William, now represented by counsel, objected to the appointment of a receiver because appointing a receiver would improperly modify the decree because the decree did not order William to sell the house. The trial court stated that appointing a receiver would benefit both parties and recalled that at the first hearing William agreed to sell the house. The Court of Appeals emphasized that, in fact, there is no evidence of this in the record (but it should be pointed out that it was William who originally brought the enforcement suit requesting the trial court order Vickie to sign conveyance documents because her failure to do so was preventing him from selling the house; so while William may not have agreed on the record to sell the house at the hearings, his pleadings evidently expressed a desire to do so).

After the second hearing, the trial court signed an order appointing a receiver and ordering the receiver to “take charge and possession” of the house if William failed to sell it by a date certain. If he had failed do so, the order authorized the receiver to “manage, control, and dispose” of the house as he saw fit “in his sole discretion… upon terms and conditions determined by him.”

William appealed and, in three issues, argued the trial court abused its discretion by entering the receivership order because: 1) neither the receiver nor Vickie were required to post a bond; 2) the order improperly modified the decree’s division; and 3) a receivership to sell the house is not a remedy available under CPRC 64.001. However, William did not assert his first and third issues in the trial court so the Court of Appeals did not consider them.

On appeal, Vickie argued that William failed to preserve his second issue because he did not object to the appointment of a receiver in the trial court. The Court of Appeals found otherwise, pointing to William stating at both hearings that he objected to the appointment of the receiver because he said the house was not at risk for foreclosure.

Under CPRC 64.001, a trial court may appoint a receiver under six different circumstances, including cases “in which a receiver may be appointed under the rules of equity.” The Court of Appeals cited case law which says a receiver should not be appointed if another remedy exists.

William argued that the receivership order improperly modified the decree because the decree does not require or order him to sell the house; it merely provides that if, in his discretion, he sells the house, Vickie gets half the proceeds. Vickie responded by arguing that William’s agreement in the decree to give her half the proceeds “directly implies” that the house must be sold.

Applying contract law, the Court of Appeals found that the decree awards the house to William and divests Vickie of her interest in it, save the 50% proceeds of sale. “But the provisions do not specify by when or for how much the House must be sold.” Under the rules of contract construction, when construing an agreement to avoid forfeiture, the court may “imply terms that can reasonably be implied.” The outcome of the case turns on the Court of Appeal’s use of this concept. To my mind, there is a question as to whether there was any risk of forfeiture, as William and Vickie presented conflicting stories on whether or not the house was at risk for foreclosure. Indeed, the Court of Appeals specifically noted that Vickie did not present evidence in support of this allegation. Nonetheless, the Court of Appeals evidently concluded there was some risk of forfeiture, perhaps in an effort to preserve as much of the trial court’s order as possible.

Thus, if a divorce decree orders that property be sold, but fails to specify a price, “the law presumes that the parties . . . intended a reasonable price.” Seabourne v. Seabourne, 493 S.W.3d 222, 230 n.9 (Tex. App.—Texarkana 2016, no pet.). Likewise, if the decree fails to specify a time for performance, “the law implies a reasonable time . . . .” Noyes v. Noyes, No. 04–08–00627–CV, 2009 WL 2520972, at *4 (Tex. App.—San Antonio Aug. 12, 2009, no pet.) (mem. op.) (holding that divorce decree that did not specify date by which husband was required to sell house required husband to sell house “within a reasonable amount of time”).

Because the decree does not provide a date by when or for how much the house must be sold, “the law provides these two missing terms: The House must be sold at a reasonable time and for a reasonable price,” the Court of Appeals concluded. In other words, William is right that the decree does not specifically order him to sell the house, but the handwritten provision regarding the split of the proceeds contemplates a sale which is evidently enough to justify the court supplying missing material terms in the name of avoiding forfeiture.

Turning to the receivership order issued by the trial court, the Court of Appeals approved the appointment of the receiver, but did not approve the language which permitted the receiver to sell the house “in his sole discretion… upon terms and conditions determined by him…” Rather, the Court of Appeals held, it should have ordered the receiver to sell the house at a reasonable time for a reasonable price. As such, the Court of Appeals held the receivership order improperly modified the decree, sustained William’s second issue, and remanded.

As mentioned above, the Court of Appeals employed the “risk of forfeiture” contract interpretation maxim to read terms into the decree that were not there. The Court of Appeals also stated that Vickie failed to present evidence that indicated the house was at risk of foreclosure and William specifically disputed this. Thus under this opinion it would appear that a party requesting a receiver would not need to present evidence of a forfeiture to summon the court’s ability to supply material terms to sell the property.  This strikes me as a strange outcome.

Opinions, Dec. 1, 2016: Don’t Forget to Prove Up Appellate Fees at Trial!

Last Thursday (it’s been a busy few days), the First District Court of Appeals released its memorandum opinion in Davenport v. Davenport, No. 01-15-01031-CV, in which the Court of Appeals largely affirmed the trial court’s modification order after a jury trial. However, the case provides an important reminder about putting on evidence in support of appellate fees at trial–or risk losing a $20,000 award.

Erica and Chris had a child in 2004 and divorced in 2005. A modification order was entered in 2012. In the 2012 order, the parents were named JMC with neither appointed as primary. Instead, they had alternating weeks of possession during the school year and alternating two week periods during the summer. Both parents had the independent right to make medical, psychological, and educational decisions for the child after consultation with the other parent. Neither parent was ordered to pay child support but Chris was ordered to provide the child’s health insurance.

In 2015, Erica filed a modification petition in which she requested SMC or, in the alternative, JMC with primary; to make educational and legal decisions for the child and to consent to medical, dental, psychiatric, psychological and surgical treatment involving invasive procedures. She also requested Chris have a SPO and that he pay monthly child support. In his counter-petition, Chris sought JMC with him as primary, to make educational and legal decisions concerning the child, to consent to medical, dental, psychiatric, psychological, and surgical treatment involving invasive procedures, and that Erica be ordered to pay child support. But as to possession, Chris requested that if Erica was appointed SMC or JMC, the 2012 order remain in effect but if he was appointed SMC or JMC, then Erica be granted a SPO. Both parties requested attorney’s fees and the jury trial began in July 2015.

The jury found that Erica should be appointed JMC with primary (with a geographical restriction), that Chris should pay Erica’s attorney’s fees, and that $35,000 was a reasonable fee for trial representation and $100,000 was a reasonable fee for representation through the appeal (!!!).

On August 17, 2015, the trial court ordered Erica had primary and the right to make legal and educational decisions for the child; Erica and Chris each had the right to consent to medical, dental, psychological, and psychiatric treatment, as well as surgical procedures, for K.D. after conferring with the other parent; the P&A would remain as it was under the 2012 order with a minor change to the summer possession; Chris was ordered to pay $1,000/mo in child support and provide medical and dental insurance; and Chris was ordered to pay $35,000 in fees to Erica within 90 days, and $100,000 in fees on the date Chris filed a notice of appeal.

On August 28, Chris filed a motion to disregard the jury’s findings, arguing that some of the findings were not supported by evidence. Erica filed a request for FF/CL on September 3, 2015, and a notice of past due FF/CL on September 25.

The trial court amended its August 17 ruling, ordering Chris to pay $1,496/mo in child support and reducing the fees to $26,000 in trial court and $20,000 in appellate fees. P&A stayed the same. The final order was signed on November 17, 2015. Erica filed a notice of appeal on December 9, 2015 and Chris filed his on February 2, 2016 (and evidently did not pay the $20,000 award when he appealed).

In her first issue, Erica contended the trial court erred in failing to enter a SPO and by maintaining the 50/50 schedule. Specifically, she argued that Tex. Fam. Code § 153.252 imposes a rebuttable presumption that required the trial court to enter a SPO. The Court of Appeals held, on the contrary, that the rebuttable presumption of § 153.252 is a guide to the courts, as stated in § 153.251.

Erica also argued (apparently under her first issue) that the trial court erred by not filing FF/CL and that the trial court’s failure to state the reasons it deviated from the SPO constituted a presumed harm. The Court of Appeals found that the trial court is “only required to make findings on ultimate controlling issues, not on mere evidentiary issues.” Here, the trial court’s order included a finding of fact that it was in the best interest of the child to divide the time equally. This, the COA held, “expressly addressed the ultimate or controlling fact essential to the claim and necessary to the judgment. Any other findings would be merely evidentiary.” Further, the COA found there was sufficient evidence which supported the jury’s verdict and the trial court’s decision to maintain the 50/50 schedule.

In her second issue, Erica argued the trial court erred in granting both parties the right to make medical and psychological decisions for the child because, she claimed, the evidence supported granting her the exclusive right to make these decisions. Erica pointed to evidence in support of her position (she and Chris do not get along, Chris’s new wife does not like her, the child does not trust adults, Chris’s greater wealth allowed him to harass Erica with litigation, and Chris hired a private investigator to follow Erica). The Court of Appeals pointed to other evidence (that Chris took the child to therapy sessions during his possession that he paid for, that the therapist testified that she preferred to have weekly sessions with the child, but Erica refused to cooperate during her possession). This, the COA concluded, was sufficient evidence to support the trial court’s decision it was in the best interest of the child to grant both parents the independent right to consent to medical and psychological treatment for the child after consultation. The issue was overruled.

In her third issue, Erica argued the trial court erred in reducing the fee awards. A jury’s findings regarding fees are not binding on a trial court but merely advisory. The COA of appeals affirmed the $26,000 award because there was evidence presented of Erica’s attorney’s fees prior to and during trial.

In her fourth issue, Erica argued the Court of Appeals lacked jurisdiction over Chris’s cross-appeal challenging the fee award to Erica because Chris failed to pay the fees when he filed his notice of appeal. The COA held it was not aware of any authority “for the proposition that the payment of attorney’s fees is a prerequisite to a party’s right to appeal” or that failure to pay the fees could deprive the Court of jurisdiction. The issue was overruled.

But as to the appellate fee award (which was also Chris’s first issue in his cross-appeal), the COA found that no evidence was presented at all at trial of reasonable and necessary attorney’s fees and that the trial court erred in granting any appellate fee award. Thus the Court of Appeals modified the trial court’s order to strike the appellate fees and affirmed the trial court’s judgment as modified. Because Chris’s first cross-issue was sustained, it did not need to address his remaining cross-issues.