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Sutherlin v. Sutherlin

Supreme Court of Georgia

June 26, 2017

SUTHERLIN
v.
SUTHERLIN.

          GRANT, Justice.

         In this post-divorce contempt action, we granted Appellant's application for discretionary appeal to review the trial court's order finding Appellant in contempt of three separate provisions of the parties' divorce decree.[1] We affirm the trial court's findings as to two of these provisions and reverse as to the third.

         Brian and Maria Sutherlin (respectively, "Husband" and "Wife") were divorced by a final judgment and decree entered in November 2012. The divorce decree incorporated a Separation and Property Division Agreement previously executed by both parties. Among other things, the Agreement provided for the division of the marital estate.

         In November 2015, Wife filed a motion for contempt, contending that Husband had failed to comply with various provisions of the Agreement. Following a hearing, the court issued an order adjudging Husband in willful contempt of the divorce decree. Specifically, the trial court determined that Husband had violated the decree by (1) failing to make timely mortgage payments on the parties' former marital residence; (2) failing to indemnify Wife for liabilities incurred with regard to past-due taxes owed by a family business awarded to Husband in the divorce settlement; and (3) failing to designate Wife as the beneficiary on a life insurance policy as required to secure Husband's buyout obligations under the decree. In granting Husband's application for discretionary review, we asked the parties to address the merits of the first two of these determinations and to address whether Husband was afforded sufficient notice to be held in contempt with regard to the life insurance beneficiary designation.

         "The trial court in a contempt case has wide discretion to determine whether [its] orders have been violated." Kaufmann v. Kaufmann, 246 Ga. 266, 268 (3) (271 S.E.2d 175) (1980). The court is not authorized to modify a previous decree in a contempt order, but it is always empowered to interpret and clarify its own orders. Id. If there is any evidence to support a trial court's determination that its order has been willfully violated, this Court must affirm that determination on appeal. West v. Barnes, 254 Ga. 21, 21 (1) (328 S.E.2d 367) (1985). However, where a contempt action turns on the meaning of terms in an incorporated settlement agreement, construction of those terms is a question of law that is subject to de novo review on appeal. See OCGA § 13-2-1; Knott v. Knott, 277 Ga. 380, 381 (2) (589 S.E.2d 99) (2003).

         I. As part of the marital property division, the Agreement grants Husband "the sole right to occupy and enjoy" the parties' former marital residence and further provides that

Husband shall be solely responsible for any and all indebtedness secured by that residence, as well as ad valorem taxes, insurance premiums and utility bills associated with that residence, and shall indemnify and hold Wife harmless as to the same.

         The undisputed evidence adduced at the contempt hearing established that the mortgage on this residence was solely in Wife's name. Wife also presented evidence that Husband had been late making the payments on this mortgage on multiple occasions in 2015 and 2016. Husband did not then, and has not ever, contested this fact. Nonetheless, Husband contends that he should not have been held in contempt because the language of the agreement requires only that he "be solely responsible" for the mortgage payments and that such responsibility does not encompass an obligation to make payments in a timely manner. We disagree. See, e.g., Floyd v. Floyd, 291 Ga. 605, 610 (2) (732 S.E.2d 258) (2012) (enforcing obligation that, though not expressly stated in divorce settlement agreement, was clearly implied from agreement's express terms); see also Ziyad v. El-Amin, 293 Ga. 871, 873 (750 S.E.2d 337) (2013) (same). Husband's responsibility to make mortgage payments clearly encompasses the duty to make those payments on time, an implication that is made even more certain by Husband's obligation to indemnify Wife. Accordingly, inferring a duty to make the mortgage payments in a timely manner did not constitute an improper modification of the Agreement on the part of the trial court. Floyd, 291 Ga. at 610.

         II.

         As another facet of the parties' property settlement, the Agreement provides for the ownership and control of three family-owned businesses established during the parties' marriage, requiring Husband to buy out Wife and then retain full ownership of the businesses' assets. Specifically, the Agreement requires Husband within a three-year period to pay Wife 30% of the "net value" of two of the three businesses-Sutherlin's Carpet Care and Pressure Washing, Inc. and Just Plumbing, Inc.-as assessed by a specified accountant at a particular point in time. In exchange, Wife waives all claims to "any funds or assets of each of the corporations on any basis and under any theory." Regarding the third business, Wife similarly "waives any claim to any of its assets and income." And, as will become more relevant in the following section, Husband was required to maintain a $250, 000 life insurance policy with Wife as beneficiary until he paid her the sums required to buy out her interests in the businesses. Also included within this section of the Agreement is the following provision:

Husband shall also indemnify and hold Wife harmless as to any corporate income tax liability for any of the three corporations named above, as Wife has had nearly no access to the financial records of those corporations until very recently, while Husband has had open access to the records and to the corporate accounts and funds.

         More than two years after the entry of the divorce decree in November 2012, the Internal Revenue Service attempted to collect unpaid payroll taxes owed by the carpet care business for tax periods in 2013. At the contempt hearing, Wife testified that in April 2015 she received a notice of intent to levy from the IRS, which notified her of a payroll tax debt owed by the business-a subchapter S corporation under the federal tax code, see 26 USC §§ 1361 et seq.-in the amount of $44, 705.38. Corporations electing "S corporation" status under the federal tax code are not taxed on their profits at the corporate level, and instead pass their profits and resulting tax liabilities through to shareholders. See 26 USC §§ 1362, 1366 (a) (1) (A); see also OCGA § 48-7-21 (b) (7) (B). Because Wife remained a shareholder of the carpet care business until Husband completed the buyout requirements, the IRS apparently determined that she was liable for a share of the company's payroll tax debt. As a result, the IRS garnished Wife's 2014 federal income tax refund and Wife ultimately was forced to hire counsel and negotiate a monthly installment payment plan for the balance.

         In her contempt motion, Wife claimed that, by failing to satisfy the company's payroll tax obligations such that Wife was then held responsible, Husband had violated that portion of the Agreement that required him to hold Wife harmless as to the "corporate income tax liability" of the family businesses. Husband does not dispute the payroll tax delinquency. Still, Husband contends that the Agreement did not require him to assume sole responsibility for the company's payroll taxes because that debt does not fall within its "corporate income tax liability." The trial court, however, concluded that the payroll taxes in question were encompassed within the company's "corporate income tax ...


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