Cabral v. Debbie Ann Silveira Cabral. Debbie Ann Silveira Cabral

• Decision Date: 10 December 2013
• Docket Number: Record Nos. 0694–13–1,0713–13–1.
• Citation: 751 S.E.2d 4,62 Va.App. 600
• Parties: Julio Fernando CABRAL v. Debbie Ann Silveira CABRAL. Debbie Ann Silveira Cabral v. Julio Fernando Cabral.
• Court: Virginia Court of Appeals

62 Va.App. 600

751 S.E.2d 4

Julio Fernando CABRAL

v.Debbie Ann Silveira CABRAL.

Debbie Ann Silveira Cabral

v.Julio Fernando Cabral.

Record Nos. 0694–13–1, 0713–13–1.

Court of Appeals of Virginia,

Richmond.

Dec. 10, 2013.

Kevin E. Martingayle (Bischoff Martingayle, P.C., Virginia Beach, on briefs), for Julio Fernando Cabral.

Christy L. Murphy (James A. Evans; Kaufman & Canoles, P.C.; Evans & Bryant, PLC, Virginia Beach, on briefs), for Debbie Ann Silveira Cabral.

Present: FELTON, C.J., KELSEY, J., and BUMGARDNER, S.J.

KELSEY, Judge.

In these consolidated appeals, Julio Fernando Cabral contends the trial court erred by reopening a divorce case that had been closed since 2009 and by making an equitable distribution award and an award of attorney fees to his former wife, Debbie Ann Silveira Cabral. She also appeals, claiming the trial court erred by undervaluing a disputed asset and by awarding some, but not all, of her attorney fees. Because the trial court erred by reopening the case in the first place, we reverse the awards of equitable distribution and attorney fees.

I.

After thirteen years of marriage and two children, Julio and Debbie Cabral filed for divorce in 2007. Represented by experienced counsel, the parties entered into a “Final and Permanent Separation, Custody, Support and Property Settlement Agreement” that resolved all contested issues in the case. The trial court entered a final decree in 2009 that ratified, confirmed, and incorporated by reference, but did not merge, the settlement agreement. The preamble of the seventeen-page agreement states its intent, among other things, to “fully satisfy all obligations which each of the parties now has or might hereafter have toward the other” and “to finally determine and settle their property rights” arising out of the marriage. App. at 24.

The settlement agreement thereafter divides between the parties a considerable number of assets, including the marital home, a beach house, two undeveloped lots in Williamsburg, a condo in Portugal, property in the Azores, and equity interests in several businesses. Based upon this agreed division of assets, both parties agreed to “waive any right or entitlement to seek an award of equitable distribution from the other.” Id. at 30–31.

Immediately following this waiver, however, is a curious caveat: “The parties acknowledge that all assets have been disclosed and they are referred to in this Agreement. Any undisclosed or omitted assets shall be subject to an equitable distribution hearing and this matter may be reopened as to such property.” Id. at 31. The agreement also includes a provision awarding attorney fees to the prevailing party under certain conditions in later litigation arising out of the agreement.

The trial court reopened the proceeding in 2010 at the request of Debbie Cabral, who sought to enforce various provisions of the settlement agreement. While the matter remained on the court's docket, Debbie Cabral filed a “Motion for Equitable Distribution.” R. at 294.¹ She claimed her former husband committed “multiple fraudulent misrepresentations” and failed to disclose an asset during the negotiations preceding the settlement agreement. Id. “In fact,” she alleged, “Husband lied during the divorce litigation in an attempt to hide the undisclosed asset.” Id. at 295. The asset Julio Cabral allegedly failed to disclose was a $1.85 million “account receivable” owned by Sunset Development, LLC, a real estate holding company in which he had a 50% interest. Id. The account receivable was created when the company loaned $1.85 million to another member who owned the remaining 50% interest.

In 2011, the trial court entered an order specifically reinstating the case to the docket to address the equitable distribution motion. At the hearing on the motion, Debbie Cabral's counsel withdrew the allegation of fraud and argued instead that, even if non-fraudulent, Julio Cabral's failure to disclose the account receivable triggered the settlement agreement's provision authorizing the trial court to reopen the case for equitable distribution of the asset.

In response, Julio Cabral argued that he merely owned a 50% interest in Sunset Development, LLC. He had no ownership interest in the account receivable owned by the company, and thus, as a matter of law, it could not be considered a marital asset subject to equitable distribution. Even if it could be considered a marital asset, he continued, the court had no authority to reopen the case to distribute the asset because the divorce decree ending the case had long since become final under Rule 1:1.

The trial court agreed with Debbie Cabral, reasoning that “it didn't really matter per se whether it was an LLC or a corporation or a sole proprietorship. It's still a marital asset because people accumulate wealth, and they put that wealth in different entities.” App. at 431. Based upon this reasoning, the court held that Julio Cabral failed to “disclose a marital asset, to wit: an account receivable ... owned by Sunset Development, LLC, of which entity [Julio Cabral] owned 50% at the time of the parties' divorce.” Id. at 439. That conclusion, the court added, made the “account receivable of Sunset Development, LLC” subject to equitable distribution. Id.; see also id. at 2019 (describing the asset as “an account receivable of Sunset Development, LLC”). After hearing evidence on valuation, the court made an “equitable distribution award” of $329,000 to Debbie Cabral. Id. at 2020. The court also awarded her $60,000 in attorney fees, id., based upon a provision in the settlement agreement authorizing an award of attorney fees to the prevailing party in further litigation of the agreement.

II.

Both parties appealed the trial court's final order. Julio Cabral challenges both the trial court's equitable distribution award and the award of attorney fees. He contends the trial court violated Rule 1:1 and thereby acted outside its subject-matter jurisdiction, misinterpreted the language of the settlement agreement, established an incorrect valuation date, and misvalued and erroneously distributed the asset. Debbie Cabral appeals her equitable distribution award and her award of attorney fees, claiming the trial court in both instances awarded less than what she was entitled to receive.

While each of these arguments implicates a cascading series of issues, we find one line of reasoning to be dispositive: Because Sunset's account receivable was not a marital asset, it was not subject to equitable distribution. The trial court erred in concluding otherwise, and, by doing so, it acted outside its lawful authority. It necessarily follows that the court likewise erred in making an award of attorney fees to Debbie Cabral.

A. Rule 1:1 & Subject–Matter Jurisdiction

With certain exceptions not relevant here, Rule 1:1 provides that such orders “shall remain under the control of the trial court and subject to be modified, vacated, or suspended for twenty-one days after the date of entry, and no longer.” This rule governs final divorce decrees no less than any other final order of the circuit court. See, e.g., Rook v. Rook, 233 Va. 92, 95, 353 S.E.2d 756, 758 (1987); Zhou v. Zhou, 38 Va.App. 126, 132, 562 S.E.2d 336, 339 (2002).

Though sometimes called a limitation on “subject matter jurisdiction,” Kelley v. Stamos, 285 Va. 68, 79, 737 S.E.2d 218, 224 (2013), Rule 1:1 serves only as a mandatory procedural precondition to the trial court's lawful exercise of its authority.² In Virginia, procedural rules of court are solely the pronouncements of the judiciary. SeeVa. Const. art. VI, § 5 (authorizing the Virginia Supreme Court to promulgate rules of practice and procedure); Code §§ 8.01–3, 16.1–69.32, 17.1–403, 17.1–503. Judicially created procedural rules cannot expand or contract the subject-matter jurisdiction of the courts.

Subject-matter jurisdiction is about power, not simply the proper use of it. Courts are not self-conceived and, thus, do not create their own judicial power. Only the Constitution and the legislature can do that. SeeVa. Const. art. VI, § 1 (providing that, subject to constitutional limits, “the General Assembly shall have the power to determine the original and appellate jurisdiction of the courts of the Commonwealth”); see also Bd. of Supervisors v. Bd. of Zoning Appeals, 271 Va. 336, 344, 626 S.E.2d 374, 379 (2006); Shelton v. Sydnor, 126 Va. 625, 629, 102 S.E. 83, 85 (1920); Swalef v. Anderson, 50 Va.App. 100, 106 n. 4, 646 S.E.2d 458, 461 n. 4 (2007). Nor can courts claim they are powerless to exercise judicial power properly delegated to them. Because the very “existence of the jurisdiction creates an implication of duty to exercise it,” Howlett v. Rose, 496 U.S. 356, 373, 110 S.Ct. 2430, 2441, 110 L.Ed.2d 332 (1990) (internal quotation marks omitted), courts have a “strict duty to exercise the jurisdiction” conferred upon them, Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716, 116 S.Ct. 1712, 1720, 135 L.Ed.2d 1 (1996), unless extraordinary circumstances warrant otherwise.

It is true that we treat orders in violation of Rule 1:1 as “void ab initio.” Burrell v. Commonwealth, 283 Va. 474, 480, 722 S.E.2d 272, 275 (2012). We do so not because the court issuing the order acted outside its subject-matter jurisdiction but because “the mode of procedure used by the court was one that the court ‘could not lawfully adopt.’ ” Kelley, 285 Va. at 75, 737 S.E.2d at 222 (quoting Singh v. Mooney, 261 Va. 48, 51–52, 541 S.E.2d 549, 551 (2001)). This is simply another way of saying that, at some point, an unlawful exercise of judicial power becomes so palpable that it can be considered void ab initio and challenged by anybody in any forum at any time.³ While very few judicial orders deserve this disapprobation, a violation of Rule 1:1 is one of them.

B. Rule 1:1 & Equitable Distribution

Even these distinctions are swept aside, however, when the legislature enacts specific...