Durlach v. Durlach, 25823.

• Citation: 359 S.C. 64,596 S.E.2d 908
• Decision Date: 17 May 2004
• Docket Number: No. 25823.,25823.
• Parties: Marcus R. DURLACH, III, Appellant, v. Sherry T. DURLACH and Daniel O. Legare as Sequestrator, Respondents.
• Court: United States State Supreme Court of South Carolina

359 S.C. 64

596 S.E.2d 908

Marcus R. DURLACH, III, Appellant, v. Sherry T. DURLACH and Daniel O. Legare as Sequestrator, Respondents.

No. 25823.

Supreme Court of South Carolina.

Heard February 18, 2004.

Decided May 17, 2004.

Michael A. Molony and Lea B. Kerrison, both of Young, Clement, Rivers & Tisdale, of Charleston, for Appellant.

Jack D. Cordray, of Cordray Law Firm, of Charleston, and Samuel H. Altman, of Derfner, Altman, & Wilborn, of Charleston, for Respondents.

Chief Justice TOAL:

Marcus R. Durlach, III (Husband) appeals the family court order holding him in civil contempt, sentencing him to serve not more than six months in jail, suspended on payment of $292,953.86. We affirm the contempt order but reduce the amount owed to $248,890.26, finding that the family court erred in awarding pre-judgment interest.

FACTUAL/PROCEDURAL BACKGROUND

On March 1, 1996, Husband filed for divorce from Respondent Sherry T. Durlach (Wife). Wife counterclaimed and was granted a divorce on grounds of physical cruelty by order dated April 16, 1998. The parties have engaged in legal battles concerning the marital property ever since.

Upon divorce, the marital property was divided equally. Among other things, Wife was awarded King at Market LP (KAM), a business formed during the marriage of which Wife was an original limited partner. KAM's business purpose is the ownership and management of historic buildings located in the heart of Charleston's retail and hospitality district. A retail clothing and accessories business incorporated by Wife three and a half years before the marriage is located in one of the buildings.

According to the April 16, 1998 divorce decree, KAM was to be transferred to Wife effective December 10, 1997, the last day of trial. The transfer was to include, "all current assets, records, cash, receivables, prepayments, deposits, rents and all other assets," including any management agreements with KAM held by Husband. The decree also provided that "[a]ny arrearage, discrepancy, damage (including damages to or changes in the assets), debt, or other charge on the [KAM] partnership or its assets shall be subject to review by this Court...." Finally, the decree specified that "the outstanding loan to Wachovia Bank in the amount of $892,500 is secured by the Husband's interest in Parkshore" and therefore "Husband shall also be responsible for that debt."

Husband appealed several provisions of the divorce decree.¹ During the time the appeal was pending, Husband and Wife entered into a consent order (the Parkshore² Order) dated October 15, 1998, which was approved by the Charleston County Family Court. The primary purpose of the Parkshore Order was to give Husband the authority to re-finance a piece of marital property "to preserve the marital estate." In addition, the Parkshore Order provided the following:

a. [Husband] continues to manage [KAM], but makes Wachovia payments separately from his other funds. Only ordinary, normal, reasonable expenses shall be paid from the [KAM] account and all other [KAM] funds shall be kept in the [KAM] account.

...

c. All issues concerning management, oversight and control of marital property pending resolution of the various appeals shall be in the jurisdiction of the Family Court, with hearing only after meaningful mediation efforts. These issues are designated herein by the parties as local issues.

The Parkshore Order also gave Wife the authority to hire an agent to oversee the KAM accounts and management.

Approximately six months later, Wife contended that Husband had mismanaged KAM affairs. In response to Wife's claims, the family court judge appointed a sequestrator (Legare) to manage and control KAM in every respect. The appointment was prompted after the court discovered canceled checks drawn on the KAM account for payment of the Wachovia debt,³ which directly contradicted the terms of the divorce decree and the Parkshore Order. The judge also found that there was an improper accounting of the KAM funds and "enjoined and restrained [Husband] from making any withdrawals or disbursements from the accounts of [KAM]." Accordingly, in addition to managing KAM, Legare was directed to investigate whether KAM assets had been mismanaged.

In his investigation, Legare found that Husband diverted funds from KAM totaling $160,100.83. Subsequently, Wife and Legare petitioned the court for a rule to show cause, seeking reimbursement of the funds Husband diverted (plus pre-judgment interest, Legare's fees, and Legare's attorney's fees), and requesting that Husband be held in contempt for violating court orders. Husband filed a return and counterclaimed.

After a hearing on December 6, 2001, the court found Husband in contempt, sentencing him to serve not more than six months in jail, suspended on payment of $292,953.86, which represents the amount of KAM funds diverted, pre-judgment interest, and fees owed to Legare and his attorney. Husband raises the following issues on appeal:

I. Did the family court properly hold Husband in contempt?

II. Did the family court properly order Husband to pay pre-judgment interest?

III. Was Husband denied due process?

LAW/ANALYSIS

STANDARD OF REVIEW

When reviewing the factual findings of the family court, this Court may take its own view of the preponderance of the evidence. Woodall v. Woodall, 322 S.C. 7, 10, 471 S.E.2d 154, 157 (1996). But if the evidence is in dispute, the appellate court should give the trial judges findings broad deference. Id.

More specifically, this Court should reverse a decision regarding contempt "only if it is without evidentiary support or the trial judge has abused his discretion." Stone v. Reddix-Smalls, 295 S.C. 514, 516, 369 S.E.2d 840 (1988); see also Henderson v. Henderson, 298 S.C. 190, 197, 379 S.E.2d 125, 129 (1989)

("A finding of contempt rests within the sound discretion of the trial judge.").

I. CIVIL CONTEMPT

Husband argues that the family court erred by holding him in contempt. We disagree. Courts have the inherent power to punish for contempt. In re Brown, 333 S.C. 414, 420, 511 S.E.2d 351, 355 (1998). Willful disobedience of a court order may result in contempt. In re Brown, 333 S.C. at 420, 511 S.E.2d at 355. A willful act is one done voluntarily and intentionally, with the specific intent of doing something the law forbids. Id.

Civil contempt must be proved by clear and convincing evidence. Poston v. Poston, 331 S.C. 106, 113, 502 S.E.2d 86, 89 (1998) (citation omitted). "The purpose of civil contempt is to `coerce the defendant to do the thing required by the order for the benefit of the complainant.'" Id. at 111, 502 S.E.2d at 88.

In the present case, the family court judge held Husband in contempt for the following: (1) using KAM funds to make payments on the Wachovia debt in 1998 and 1999 in the amount of $140,040.41; (2) writing checks from KAM funds to his attorney in the amounts of $4069 and $1900; (3) paying the Commissioner of Public Works $148.67 from KAM funds for another, non-KAM property; (4) failing to pay KAM $69,383 in unpaid rent and late charges for Durlach Associates office space; (5) bartering rent with Louis's Restaurant, providing space at KAM in return for a food-and-beverage credit of $350 per month, owing KAM $9,800; (6) bartering rent at KAM for legal services related to the divorce, owing KAM $11,980; (7) bartering advertising with Charleston Business Journal, owing KAM $7,000; and (8) paying himself commissions from the KAM account in the amount of $15,879.32.

In sum, the judge found that Husband "made repeated payments of the funds of KAM for obligations of his own or obligations of other entities. He willfully and knowingly violated the requirements of the orders of this court." Based on these findings, Husband was ordered to pay $292,953.86, representing the amount of misused KAM funds, pre-judgment interest, and professional fees for Legare and his attorney.

On appeal, Husband does not dispute that he made the payments and agreements delineated in the contempt order. Instead, he contends that his actions did not violate court orders. We disagree. The following orders and their relevant mandates were effective throughout this litigation:

(1) August 19, 1996 Supplemental Order:"Both parties are enjoined and restrained from in any manner mortgaging, selling, secreting, pledging, encumbering, destroying, damaging, giving away, or in any other manner disposing of any real or personal property marital of the parties, pending the final hearing on the merits."

(2) September 11, 1997 Ex Parte Restraining Order: "[Husband] or any other entity or institution holding martial property is hereby enjoined and restrained from in any manner mortgaging, selling, secreting, pledging, encumbering, destroying, damaging, giving away, or in any other manner disposing of any real or personal marital property of the parties, pending the final hearing on the merits."

(3) September 24, 1997 Pre-trial Order:"[P]rior to the initiation of any transaction involving the buying, selling, refinancing or leasing of real property by [Husband] of any of [Husband's] entities, the terms of the said transaction shall be fully disclosed to [Wife] and the proposed transaction shall require her consent."

(4) April 16, 1998 Final Order, Decree of Divorce, and Judgment:"Because the outstanding loan to Wachovia Bank... is secured by the Husband's interest in Parkshore, Husband shall be responsible for that debt." The order also transfers KAM to Wife effective December 10, 1997.

(5) October 15, 1998 Consent Order as to Parkshore Refinancing: States that "[Husband] continues to manage [KAM] but makes Wachovia payments separately from his other funds."

First, Husband violated the divorce decree and the Parkshore Order when he used KAM funds to make payments on the Wachovia debt in 1998 and 1999. The April 16, 1998 divorce decree specifically stated that Husband was personally responsible...