Flanagan v. Dumont
| Decision Date | 04 November 2016 |
| Docket Number | No. 15-466,15-466 |
| Citation | 159 A.3d 99 |
| Court | Vermont Supreme Court |
| Parties | Edward F. FLANAGAN v. Nancy DUMONT (Flanagan) |
Peter G. Anderson of Anderson & Associates, Stowe, for Plaintiff-Appellee.
Cynthia L. Broadfoot of Broadfoot, Attorneys at Law, Burlington, for Defendant-Appellant.
PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.
¶ 1. This appeal arises from a dispute regarding the parties' obligations with respect to several tax liens discovered post-divorce in light of two hold-harmless provisions in a final divorce decree. Wife contends that the trial court abused its discretion by failing to enforce the hold-harmless and indemnification provisions and failing to address the parties' respective obligations with respect to the tax liens. We agree, and accordingly reverse and remand so the trial court can address wife's claims under Article 13 of the parties' divorce decree.
¶ 2. The parties' final divorce decree, entered on March 26, 2013, was based on a partial settlement agreement and the court's order resolving the remaining contested matters after a contested hearing. Articles 8, 11, and 13 are particularly relevant to this appeal.
¶ 3. Article 8 awarded wife "sole use, ownership, and possession" of a property on Taber Hill Road in Stowe, Vermont (the property) free of any marital interests of husband. Wife was obligated to refinance the outstanding mortgage loan on the property to remove husband from any liability by February 26, 2014. In connection with this refinance, husband was obligated to "execute and deliver appropriate documents of conveyance to [wife] to convey all right, title and interest in the property." If wife was unable to refinance, then she was required to immediately sell the property at a price agreeable to both parties. In the event that wife failed to make any mortgage loan payments on the property, after ten days husband was authorized to make the outstanding loan payment and offset any sums owed to wife for spousal maintenance and child support.
¶ 4. Article 11 gave husband sole ownership of his business, The Dayboat Fish Company LLC. Husband was solely responsible for "all liabilities in connection with the business," and was required to "hold [wife] harmless and indemnify her against the payment of any monies and obligations or expenses in connection [with the business] which [wife] shall be obligated to pay to third parties by virtue of [husband's] failure to comply with the terms of this paragraph, including reasonable counsel fees and costs."
¶ 5. Finally, Article 13 allocated various debts of the parties. In addition to specifically addressing certain outstanding debts, it included the following general provisions:
The provision did not mention any outstanding tax obligations.
¶ 6. The trial court found that the events giving rise to this particular dispute began in February 2014, when wife was unable to refinance the outstanding mortgage on the property and accordingly listed the property for sale. Wife entered into a purchase and sale agreement with a buyer in September 2014 at a sale price of $220,000. This sale price would have been sufficient to discharge the outstanding mortgage and provide wife with net proceeds of about $31,000. The closing for the purchase and sale of the property was to take place in November 2014. However, during the title search of the property, the buyers discovered that both the IRS and the State of Vermont Tax Department had outstanding tax liens on the property.
¶ 7. The first IRS lien was recorded in the Stowe land records on November 25, 2013, in the amount of $10,841 for alleged underpayment of 2011 income taxes. The second was recorded on January 1, 2014, in the amount of $3949 for alleged underpayment of 2010 income taxes. Both IRS liens were recorded as against husband only. The family division noted that the parties filed their federal taxes jointly for the 2010 tax year, but that it was not clear how they filed in 2011. As for the state tax liens, the first was recorded on May 15, 2014, in the amount of $9237, and the second was recorded on August 29, 2014, in the amount of $1055. Both of the Vermont tax liens were against "[husband]/Dayboat Fish Co LLC" and were for sales and use taxes allegedly not paid or underpaid by husband's business.
¶ 8. The family division found the record to be "murky and inconclusive" regarding whether wife knew previously about the IRS tax claims. Wife testified at the hearing that she looked at the land records when she originally listed the property, but that it did not occur to her that she should be looking for outstanding liens on the land. The family division noted that wife's claim she was "totally ignorant" of at least the 2010 tax lien was not credible because she filed an application for "Discharge of Property from Federal Tax Lien" in January 2014, and had filed with the IRS a "Request for Innocent Spouse Relief" as to the 2010 tax deficiency in September 2013. However, it also found that husband did not inform wife about the existence of any of the liens and did not inform wife that he was having tax issues, even though he had admitted the state deficiencies and entered into a payment plan with the Vermont Department of Taxes in June 2014. In any event, husband was not able to clear the tax liens in September and October of 2014, thus preventing the closing and sale of the property.1
¶ 9. Because of the difficulties surrounding the attempted sale of the property, including the need for wife's tenants to move out and the consequent loss of her rental income, wife missed some mortgage payments. Husband eventually made some payments on the mortgage, and he deducted those payments from the child support and spousal maintenance payments he owed to wife as permitted by the final divorce decree. The proper accounting for these deductions was one of the issues before the trial court below.
¶ 10. Husband's deductions from child support and spousal maintenance payments and wife's inability to sell the property due to tax liens prompted wife to file with the family division a motion to enforce the final divorce decree and for attorney's fees. Wife pointed to the debt allocation and indemnification provisions in the final divorce decree, and explained that the likely loss of this buyer put her in a vulnerable position economically. She requested that the court order husband to immediately pay the tax obligations or otherwise arrange for discharge of the liens so that the home could eventually be sold. In addition, wife requested that the court order husband to assume wife's obligation to pay the mortgage, taxes, and all other carrying costs of the property until the liens were removed and the property sold.
Wife further asked the court to suspend the provision in the final decree that allowed husband to offset his mortgage payments from his spousal and child support obligations. Finally, wife requested that the court order husband to hold wife harmless and indemnify her for any damages she suffers from the attachment of his tax liens to the property.
¶ 11. Husband opposed the motion and cross-moved for contempt and enforcement against wife. He argued that because the trial court had awarded the property to wife before the tax liens attached, the tax liens were inoperative and wife's time would be better spent seeking confirmation from the IRS that the liens are inoperative. He took the position that any indemnification obligations he had under the final order "do not arise until such time as [wife] is actually obligated to pay monies to a third party" and are not triggered by the tax liens. And he argued that wife was attempting to modify the final order concerning property division by requesting that he become responsible for the mortgage and any taxes and carrying costs associated with it. Husband sought a contempt finding against wife for her failure to pay the mortgage. He further requested that the court order wife to reimburse him for all costs and expenses incurred by him in paying the past-due mortgage.
¶ 12. The family division held a contested hearing on the motions on April 23, 2015, and July 8, 2015.2 With respect to the financial issues, the court concluded that the only issue before it and capable of resolution was "whether the accounting for [the] mortgage payments not made by [wife], and deductions (or credits) taken by [husband] against his combined spousal maintenance and child support payment, is accurate." The trial court found on the basis of the record before it that husband owed wife a total of $94.30. With respect to the tax liens, their effect on wife's ability to sell the property, and wife's request to suspend the offset of husband's child and spousal support obligations on account of his mortgage payments, the trial court wrote:
As to the larger issue of [wife's] inability to sell [the property], the court is unable to force any effective resolution until the tax liens are resolved, and lifted from the land records. The latter is essentially undoable on this record because either [husband] does not have the wherewithal to do so, or the court under this docket number does not have the authority to adjudicate their respective liabilities. No contempt order, or monetary sanction is going to have any practical...
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...B. , supra note 8.13 Gomez v. Gomez , 303 Neb. 539, 930 N.W.2d 515 (2019).14 See Bayne , supra note 9.15 See, e.g., Flanagan v. duMont , 203 Vt. 503, 159 A.3d 99 (2016) ; Gardner v. Gardner , 294 P.3d 600 (Utah App. 2012) ; Long , supra note 1; Eaton , supra note 2.16 See, e.g., Flanagan , ......