Marriage of Barrett, Matter of

• Decision Date: 25 November 1994
• Citation: 886 P.2d 1,320 Or. 372
• Parties: In the Matter of the MARRIAGE OF Barbara M. BARRETT, nka Barbara M. Young, Respondent on Review, and Daniel E. Barrett, Petitioner on Review. CC D8608-65792; CA A72437; SC S41173.
• Court: Oregon Supreme Court

Page 1

886 P.2d 1

320 Or. 372

In the Matter of the MARRIAGE OF Barbara M. BARRETT, nka Barbara M. Young, Respondent on Review and Daniel E. Barrett, Petitioner on Review.

CC D8608-65792; CA A72437; SC S41173.

Supreme Court of Oregon.

Argued and Submitted Sept. 2, 1994.

Decided Nov. 25, 1994.

Mark A. Johnson, of Findling & Johnson, Portland, argued the cause and filed the petition and brief for petitioner on review. With him on the brief was Jacqueline L. Koch, of Gevurtz, Menashe, Larson, Kurshner & Yates, P.C., Portland.

John Paul Graff, of Graff & O'Neil, Portland, argued the cause and filed the brief for respondent on review.

Before CARSON, C.J., and GILLETTE, VAN HOOMISSEN, FADELEY, UNIS and GRABER, JJ.

FADELEY, Justice.

This civil contempt matter arises in the aftermath of the dissolution in 1986 of the parties' 27-year marriage. Husband challenges the trial court's finding that he is in contempt for failure to provide wife with medical insurance that he was ordered to provide by the judgment of dissolution. His challenge is based on wife's failure to seek and obtain a job that provides her with medical insurance. Husband contends that wife had (and continues to have) an implied or "good faith" obligation under the marital settlement agreement, signed by the parties, to get a job that provides medical insurance through her employer and that, because wife has failed to meet that obligation, he is excused from meeting his.

When husband determined in 1989 that wife was not seeking employment, husband advised her by letter that he would stop providing health insurance coverage or paying one-half of her uninsured medical bills at the end of 1989 because of her "not returning to work." A year or so after husband terminated payment of wife's health insurance and other medical bills, wife instituted this proceeding for contempt.

The trial court found husband in contempt, stating in part:

"It is not the policy of the law and it's certainly never desirable for legal principles to evolve which empower parties to make unilateral decisions when there are written documents and orders as to the rights of the parties. The law disfavors scenarios in which one party gets to decide what his or her rights and obligations are."

Broadly stated, the issue is whether, when husband unilaterally stopped providing health insurance for wife, husband had been excused from compliance with part of the dissolution judgment by reason of wife's asserted noncompliance with other parts of that judgment and could, because of that excuse, terminate those benefits. The Court of Appeals concluded that husband could not do so and upheld the judgment of contempt against him. Barrett and Barrett, 126 Or.App. 62, 867 P.2d 540 (1994). We affirm the decision of the Court of Appeals.

In 1986, husband and wife entered into a stipulated dissolution judgment that ended their 27-year marriage. The stipulated judgment expressly incorporated the parties' marital settlement agreement (agreement) and ordered both of them to abide by its terms. The judgment "ordered, adjudged and decreed":

"The Marital Settlement Agreement of the parties, dated October 10, 1986, effective upon approval by the Court, is hereby ratified, approved and incorporated by reference herein in its entirety, and the parties are ordered to abide by its terms and conditions." ¹ (Emphasis added.)

The agreement contemplated that wife would obtain further education and that husband would pay for wife's education for three years following the dissolution. Paragraph 1 of the agreement provided, in part:

"The parties intend that Wife will obtain further education during approximately the next three years and will then be able to earn approximately $17,000 to $22,000 per year on a full time basis."

Paragraph 10 provided:

"Husband agrees to provide all tuition and book fees necessary for Wife to attend either full time or part time, any state-supported college or university, or any business or trade school of her choice within the State of Oregon for a period of three (3) years from the date the Decree of Dissolution is signed. The parties intend that Husband's payment of books and tuition fees is property settlement and not spousal support."

The agreement also provided that husband would furnish health insurance to wife and pay one-half of her uninsured medical costs until she was employed and received health insurance through her employer. Section 11 of the agreement provided, in part:

"Husband agrees to provide health insurance coverage for Wife, equivalent to what Wife now has, through his employer for eighteen (18) months from the date the Decree of Dissolution is signed. Thereafter, Husband agrees to furnish or pay for equivalent health insurance coverage for Wife until such time as Wife is employed and has health insurance provided through her employer. Husband further agrees to pay one-half of all of Wife's medical, dental and optical costs not covered by insurance, now owing or hereafter incurred, until Wife has her own health insurance coverage. * * * The parties intend that Husband's payment of health insurance premiums, and all medical, dental, optical and psychological payments provided for in Section 11 are property settlement and not spousal support."

As can be seen, unlike section 10, the paragraph concerning medical costs assistance contains no mention of a time period for automatic termination of the agreed assistance. Also, the agreement expressly provides that the payment of wife's insurance and other medical costs were part of the property settlement between the parties, not spousal support. Because the parties and the trial court have dealt with the medical assistance payments as part of the property settlement, we do so also for purposes of this case. ²

On reconsideration, the Court of Appeals decided that the "discrete order" contained within the judgment--that the parties are ordered to abide by the terms of the agreement--allowed wife to maintain the contempt proceeding based on husband's failure to provide health insurance as he was directed by that order to do. Barrett, supra, 126 Or.App. at 66-68, 867 P.2d 540. Thus, in effect, the Court of Appeals decided the case on a basis that did not involve the agreement or its status. The court further decided that wife's alleged breach of her "good faith" obligation to seek employment did not relieve husband of his duty to comply with the discrete court order to abide by the agreement. ³ Id. at 67-68, 867 P.2d 540. Accordingly, the Court of Appeals affirmed the judgment of contempt. Id. at 68, 867 P.2d 540.

Under the statute in effect at the time husband was found in contempt, former ORS 33.010(1)(e) (1989), ⁴ a prima facie case of contempt is shown by proof of: "(1) the existence of a valid court order; (2) the contemnor's knowledge of the order; and (3) voluntary noncompliance with the order." Couey v. Couey, 312 Or. 302, 306, 821 P.2d 1086 (1991). Although "willfulness" does not appear in the text of former ORS 33.010(1)(e), "this court has long recognized the requirement of 'willfulness.' " Id. at 304, 821 P.2d 1086. Husband does not dispute the existence of a valid court order and does not dispute that he had knowledge of the order. However, husband argues that he is not in contempt for a variety of reasons.

First, husband argues that a required finding of fact as to his mental state is lacking. He argues that the trial court must make a finding of "bad intent" before it may find him guilty of contempt. He further argues that, when he stopped paying for wife's health insurance, he acted in good faith. The trial court rejected husband's argument and found him in "willful contempt." As stated in Couey, "a finding of willful disobedience of a valid court order is a finding that the contemnor acted with bad intent and is sufficient to support a judgment of contempt." Id. at 306, 821 P.2d 1086 (emphasis in original). Thus, the trial court's finding of willful violation of the known court order is sufficient to supply the mental state required to support a judgment of contempt.

Husband next argues that he is relieved from his obligations under the dissolution judgment, because wife's asserted failure to fulfill her implied obligation to seek employment under the judgment constituted a material breach of contract, thereby discharging his duty to perform his part of the contract related to that breach (i.e., to provide health insurance). Husband cites Waterman v. Armstrong, 291 Or. 551, 633 P.2d 774 (1981); Finlay-Wheeler v. Rofinot, 276 Or. 865, 556 P.2d 952 (1976); and Carothers v. Carothers, 260 Or. 99, 488 P.2d 1185 (1971). He relies on those cases to argue that the agreement has not merged into the judgment of dissolution and, therefore, that wife must sue on the contract (the promises in the marital settlement agreement) rather than proceed against him for contempt for disobeying the judgment.

Under the "merger" doctrine, once a claim is reduced to a judgment, the claim is extinguished because it is "merged" into the judgment and rights upon the judgment are substituted for the former claim. Waterman v. Armstrong, supra. Accordingly, when a claim arising from a contract is held to have merged into a judgment, a party cannot maintain an action on the contract for those claims, but may enforce the judgment only, Rigdon v. Rigdon, 219 Or. 271, 276-79, 347 P.2d 43 (1959) (enforcing in Oregon a Nevada divorce decree); Ryckman v. Manerud, 68 Or. 350, 361, 136 P. 826 (1913) (holding that original demand for money "upon which the judgment is based is merged in the judgment," and claimant may only enforce the judgment).

The merger theory, and its no-merger result argued for in this case by husband, is important to husband because it is a necessary part of his argument that the contract, not the dissolution judgment, is what wife is attempting to enforce. If husband were able to establish that...