Whetstone v. Whetstone, 1867

• Decision Date: 19 February 1992
• Docket Number: No. 1867,1867
• Citation: 309 S.C. 227,420 S.E.2d 877
• Court: South Carolina Court of Appeals
• Parties: Betty Fogle WHETSTONE, Respondent, v. Michael K. WHETSTONE, Patricia W. Carter, Gayle W. Hagins, Michael K. Whetstone, Jr., Cynthia W. Tobin, Ronald O. Whetstone, Sr., Commodity Engineering Company, Tristeel Corporation, and Division V Company, of whom Michael K. Whetstone, is, Appellant. . Heard

Page 877

420 S.E.2d 877

309 S.C. 227

Betty Fogle WHETSTONE, Respondent, v. Michael K. WHETSTONE, Patricia W. Carter, Gayle W. Hagins Michael K. Whetstone, Jr., Cynthia W. Tobin, Ronald O Whetstone, Sr., Commodity Engineering Company, Tristeel Corporation, and Division V Company of whom Michael K. Whetstone, is, Appellant.

No. 1867.

Court of Appeals of South Carolina.

Heard Feb. 19, 1992.

Decided Aug. 10, 1992.

Rehearing Denied Sept. 23, 1992.

Certiorari Denied July 28, 1993.

Randall M. Chastain, Columbia, for appellant.

Kermit S. King, of King & Vernon, Columbia, for respondent.

James R. Barber, III, Columbia, for receiver.

BELL, Judge:

This is a divorce action brought by Betty Fogle Whetstone against Michael K. Whetstone. In a consent order, the family court appointed a trustee to help the Whetstones divide the marital property. The court substituted a Receiver for the trustee when the parties could not agree on the property division. After several more hearings, the court ordered the Receiver to propose and submit a plan for the final division of the marital estate. The court approved the Receiver's plan. Mr. Whetstone appeals. We affirm.

In 1982, Mrs. Whetstone first filed for a divorce. That action was settled and the settlement agreement was embodied in a Consent Order. The Consent Order provided for the distribution of the marital assets on a 50/50 basis. The Consent Order also required Mrs. Whetstone to institute a new divorce action naming as parties Mr. Whetstone, the parties' children, and the three corporations in which the family members were stockholders.

The Consent Order required the three family businesses-- Commodity Engineering, Tristeel Corporation, and Division V Company--to be liquidated and the assets divided according to the parties' stock ownership. The Consent Order also provided for the appointment of a trustee. The trustee's duties included overseeing the operation of the businesses and assuming control of all property owned by the parties and the business entities so as to allow for the orderly distribution of the assets. Each party was ordered to cooperate with the trustee. The Whetstones, as managers of the businesses, and the trustee were to meet to discuss the implementation of the court's order. However, Mr. and Mrs. Whetstone could never agree on a meeting date.

On October 28, 1983, the trustee resigned because of the lack of cooperation between the Whetstones. Thereafter, the court replaced the trustee with a Receiver. In addition to all the powers of the trustee, the Receiver was to have total control of the operation of the businesses.

In July, 1984, the parties met to negotiate. After ten hours, they reached a settlement. On August 9, 1984, Mr. Whetstone's attorney drafted a nineteen page letter containing the parties' agreement. Mrs. Whetstone and all of the children signed the letter. Mr. Whetstone refused to sign. Mrs. Whetstone sought a court order to have Mr. Whetstone comply with the agreement. After a three day hearing, the parties again reached a settlement of their dispute. The trial judge approved the settlement and decreed the terms and conditions of the August 9th letter constituted the parties' agreement with certain modifications.

Thereafter, the Whetstones were divorced, remarried, separated, reconciled, and separated. During this time, they both filed motions to dismiss the Receiver. Mrs. Whetstone later withdrew her motion. Mr. Whetstone's motion was denied on April 13, 1987. Mrs. Whetstone then sought to have the receivership terminated. The trial court ordered Mr. Whetstone either to return or to account for corporate property and monies. The judge also ordered the Receiver to do whatever was necessary to complete his duties.

After discovery, a hearing was held to identify which marital assets were to be within the control of the Receiver and what steps the Receiver should take to implement the prior orders of the court. The court required the Receiver to submit a plan to end the receivership and distribute the marital assets. Mr. Whetstone was found guilty of contempt and sentenced to 175 days suspended on condition he not obstruct the Receiver in implementing the court's orders. The court also charged Mr. Whetstone with all the litigation costs and fees as compensatory contempt. In accordance with the court's order, the Receiver submitted a proposed plan to the court. A hearing was held to determine if the court should approve the plan. Mr. Whetstone filed objections to the Receiver's plan. However, the judge approved the plan and made it the order of the court.

I.

Mr. Whetstone asserts several deficiencies in the Receiver's plan. After reviewing the record in detail, we find none of them have merit. They fall into two main categories: objections that are not supported by the evidence and objections to items in the Receiver's accounting that are incomplete because Mr. Whetstone himself prevented the Receiver from carrying out the accounting for and marshalling of assets of the marital estate.

A.

Mr. Whetstone accuses the Receiver of failing to safeguard the rights of third parties who have invested in Commodity Engineering's inventory. These "investors" are relatives of Mr. Whetstone who have not themselves asserted any interest in the business. Mr. Whetstone admits he induced them to participate in a scheme by which he attempted to deceive the Internal Revenue Service. There is no evidence, other than Mr. Whetstone's unsupported, conclusory testimony, that these investments ever existed.

Mr. Whetstone also asserts assets of a Seven Stones Trust were erroneously incorporated into the marital estate. The trial judge found that no trust had been created and incorporated the assets of the Seven Stones Holding Company into the marital estate.

In order to prove the existence of a trust, the law requires the following elements to be shown: a declaration creating the trust, a trust res, and designated beneficiaries. See, Finch v. Honeycutt, 246 N.C. 91, 97 S.E.2d 478 (1957). Where trust property includes realty, the declaration of trust must be in writing. See, Beckham v. Short, 298 S.C. 348, 380 S.E.2d 826 (1989).

The evidence does not establish the existence of a trust. There was no executed trust agreement. There was no initial trust res. The trustees never controlled the trust. ¹ Mr. Whetstone retained total control even though he was not a named trustee. The trust supposedly was to pay the expenses of Mr. Whetstone's grandchildren's college education, but at trial the uncontradicted testimony was that none of the grandchildren would have reached college age before the trust terminated and the assets reverted to Mr. Whetstone.

B.

Mr. Whetstone failed to account for monies he received even after the court ordered him to do so. Accordingly, the Receiver charged these amounts against Mr. Whetstone as liabilities in the final plan he submitted to the court. Mr. Whetstone contends he was erroneously charged with these liabilities.

After the Receiver was appointed, Mr. Whetstone sold a custom-made tank to V.B. Hook. Hook paid Commodity $56,515 for the manufacturing of the tank. The Receiver had no knowledge of the sale of the tank until the court hearing. The Receiver listed the tank as inventory on the corporate income taxes. After the hearing, he had to amend the corporate tax returns to report the additional income. Mr. Whetstone cashed the check and refused to account for the proceeds even after the court ordered him to do so. The Receiver charged these proceeds against him.

Mr. Whetstone also received $500 a month rent on 1114 Bryan Street, a piece of property allocated to Mrs. Whetstone in a prior court order. He has not accounted for these funds. The Receiver charged Mr. Whetstone with the total amount of these funds. Mr. Whetstone claims the Receiver has not offset amounts he spent on behalf of the corporation against this amount. Notwithstanding these allegations, Mr. Whetstone has not delivered to the Receiver any receipts where he made these payments.

Mr. Whetstone contends the Receiver did not regain corporate property in the possession of Mrs. Whetstone. The court directed the parties to agree upon the value of the items Mr. Whetstone contended were in Mrs. Whetstone's possession. If the parties could not agree, the items were to be appraised. The parties did not agree on a value, but no appraisal was ever done. Accordingly, the Receiver did not charge the value of these items against Mrs. Whetstone.

In each of these cases, Mr. Whetstone's own obstructive conduct prevented the Receiver from making a more precise accounting. He who seeks equity must do equity. See, Shumaker v. Shumaker, 234 S.C. 421, 108 S.E.2d 682 (1959). As we discuss more fully below, Mr. Whetstone has consistently engaged in contumacious and dilatory actions in defiance of court orders governing distribution of the marital property. The courts will not hear one who engages in open defiance of judicial orders complain that others who have made a good faith effort to comply are guilty of some technical default. This is especially true when the recalcitrant's own conduct has prevented the one acting in good faith from fulfilling his duties.

II.

Mr. Whetstone next contends the family court erred in finding him in contempt and charging him with all costs and fees.

A.

A determination of contempt is within the sound discretion of the trial judge, but is subject to reversal where based on a finding that is without evidentiary support or where there has been an abuse of discretion. Spartanburg County Department of Social Services v. Padgett, 296 S.C. 79, 370 S.E.2d 872 (1988). Wilful disobedience of a court order will justify a finding of contempt. Id. In order to sustain a finding of contempt, the record must be clear and specific as to the acts or conduct upon which such finding is based. Id. This record supports the judge's finding of contempt. ...