Carter v. Carter

• Citation: 215 Va. 475,211 S.E.2d 253
• Court: Virginia Supreme Court
• Decision Date: 20 January 1975
• Parties: Frances M. CARTER v. Edwin R. CARTER, III.

Page 253

211 S.E.2d 253

215 Va. 475

Frances M. CARTER v. Edwin R. CARTER, III.

Supreme Court of Virginia.

Jan. 20, 1975.

John C. Lowe, Charlottesville (F. Guthrie Gordon, III, Lowe & Gordon, Charlottesville, on brief), for appellant.

Robert P. Boyle, Charlottesville (Boyle & Wood, Charlottesville, on brief), for appellee.

Before I'ANSON, C.J., and CARRICO, HARRISON, COCHRAN, HARMAN, POFF and COMPTON, JJ.

COCHRAN, Justice.

Frances M. Carter and her husband, Edwin R. Carter, III, were divorced by final decree of the trial court entered February 15, 1972. This decree approved and incorporated therein a settlement agreement between the parties dated September 14, 1971, which provided that Frances should have custody of their minor children, a son and two daughters, and that Edwin should pay to her a specified sum each month 'in lieu of alimony and as further support and maintenance of said children.'

In July, 1973, because of Frances's health problems, Edwin took custody of the two children who were still unemancipated, and, in a separate proceeding, petitioned the court for their permanent custody and for termination of his monthly payments to Frances. By order entered August 13, 1973, temporary custody of the children was awarded to Edwin. At a subsequent hearing on the merits the chancellor found the settlement agreement to be ambiguous, heard evidence as to the intent of the parties, and, in an oral opinion, held that they intended one-fourth of the monthly payments to Frances to survive the transfer of custody of the children from Frances to Edwin, and further held, without objection by Frances, that custody of the children should be continued in Edwin. Frances appeals that portion of the order entered on December 26, 1973, pursuant to the chancellor's opinion, that reduced Edwin's payments to her.

The two paragraphs of the agreement that gave rise to the present controversy read as follows:

'(15) As payment in lieu of alimony and as further support and maintenance of said children, Husband agrees to pay to Wife during the balance of the year 1971, the sum of $300 per month. Husband delivers to Wife six (6) postdated checks of $150.00 each to provide cash over the period until December 31, 1971, in satisfaction hereof. During the year 1972, as payment in lieu of alimony and as further support and maintenance for said children, Husband agrees to pay Wife the sum of $900.00 per month, commencing January 1, 1972, and thereafter the sum of $600.00 per month, commencing January 1, 1973, said payments to continue until the death or remarriage of Wife, or the emancipation, by attainment of majority or otherwise, of all of said children, whichever first occurs. (Emphasis added.)

'All payments of alimony shall cease if at any time any court decrees any increase in payments for the support and maintenance of said children over those provided herein, but otherwise the payments provided in this paragraph shall constitute and be an obligation of the estate of Husband and this agreement shall be binding upon his heirs, executors, administrators, successors and assigns. (Emphasis added.)

'(16) The parties recognize that the income of Husband is irregular in nature and agree that such fact shall be reasonably considered in enforcement of this agreement. The parties further recognize that Husband intends to make additional voluntary payments to Wife for the support and maintenance of Wife and said children as his circumstances from time to time permit and agree that any such payments shall not be construed as evidence of the financial condition of Husband. Should either party hereto desire to change this agreement in respect to child custody, or support and maintenance of said children, the party desiring such change shall first make an honest and sincere effort to negotiate with the other in respect thereto as a condition precedent to applying to any court for such change.' (Emphasis added.)

Other paragraphs contained further provisions by Edwin for the benefit of Frances and the children. Under paragraph (8) of the separation agreement Edwin agreed to convey to Frances his interest in the residence of the parties, subject to assumption by Frances of the outstanding deed of trust indebtedness thereon. Frances agreed, during the minority of the children, not to sell or further encumber the property unless all proceeds of the sale or encumbrance were applied toward the purchase or improvement of residential property for the use of Frances and the children. By paragraph (9) Edwin agreed to pay necessary medical and dental expenses for Frances and the children (except expenses incurred for treatment of mental or emotional disorders of Frances after December 31, 1972), the liability of Edwin for such expenses of Frances to terminate upon her death or remarriage and for such expenses of the children to terminate upon their becoming emancipated or attaining the age of 21 years. In paragraph (13) Edwin agreed to pay all expenses incident to the education of the children in public or private schools, including college and graduate schools, and this obligation, in the event of his death, was made binding upon his estate.

The evidence shows that Edwin wished to continue the marriage, that Frances, expecting to marry another, had sought the divorce, but that after the divorce Edwin, and not Frances, had remarried. The agreement, drafted by Edwin, an attorney, was revised and completed after conferences with Frances's attorney, Thomas J. Michie, Jr. The language of paragraph (15) was carefully chosen to make the payments to Frances taxable to her and deductible by Edwin, by deliberately avoiding apportionment of the payment as between alimony and child support, pursuant to principles enunciated in Commissioner of Internal Revenue v. Lester, 366 U.S. 299, 81 S.Ct. 1343, 6 L.Ed.2d 306 (1961). There, it was held that payments made by a husband for support of his former wife and children were deductible from the husband's gross income and taxable to the wife unless the agreement fixed with 'specificity' an amount to be used as child support.

Frances testified that while she did not understand the agreement, she realized that it was designed to effect income tax savings. It was her testimony that she believed that the payments were, in part, for her benefit rather than entirely for the benefit of the children. Her attorney, Michie, testified that the agreement as to payments was a compromise, that Edwin was willing to pay only for Frances's necessities and that even these payments would terminate 'when the youngest child reached majority.' He considered a portion of the payments to be alimony and, as he recalled the agreement, the payments were, for tax reasons, treated therein as entirely alimony.

Edwin testified that he intended no part of the payments to be alimony for Frances, as evidenced by provision in the agreement for termination of the payments upon emancipation of the children or upon their attaining their majority. However, he maintains that, if the agreement was ambiguous, the trial court could properly determine what portion of the payments was intended to constitute child support.

Edwin testified that he agreed to pay Frances $900 a month for the year 1972, because she expected to receive, and did receive, a Master's degree in School Psychology in order to qualify for a position in the public school system. The payments were to be reduced to $600 a month after 1972. Edwin conceded that the additional $300 a month which he paid to her during 1972 could be considered as for her benefit.

The evidence shows that Frances became mentally ill and was hospitalized in August, 1972. When she was again hospitalized in the summer of 1973, it became necessary for Edwin to take the two unemancipated children into his home. Because of her recurring health problems, Frances was not employed in public education at the time of the hearing, but was employed in a lower salaried position as a proof reader for a publishing company.

Both Carters testified that they never contemplated that custody of the children would ever be changed from Frances to Edwin. Nevertheless, the agreement provided in paragraph (16) a procedure whereby a change in child custody could be effected either throuth negotiation or court action.

Frances argues that no thought was given to the possibility that the monthly payments to her would be apportioned. However, she admitted that she understood the payments to be part alimony and part child support. Moreover, paragraph (16) implicitly authorizes allocation of payments by providing for changes in child support payments, and paragraph (15) anticipates the possibility of increases in such payments by providing that 'payments of alimony shall cease' if any court should order increases in child support.

Edwin testified that, in drafting the agreement, he considered reducing the $600 monthly payments by one-fourth to exclude any alimony for Frances. He left the full amount undisturbed, however, in order that support for the family unit would not be...