Thomas v. Thomas

On December 15, 2011, Stacey L. Thomas (the ‘Wife”) petitioned the Family Court for a divorce from Calvin B. Thomas (the “Husband”), which was granted on February 16, 2012. Thereafter, the Family Court rendered final decisions on several ancillary matters. The Husband raises six issues in this appeal: first, the Family Court erred by not equally dividing the marital property; second, the Family Court erred by determining that the Wife was dependent and therefore entitled to alimony; third, the Family Court erred by applying a 2.5 percent interest rate to calculate the Wife’s income from her inheritance, instead of some higher interest rate; fourth, the Family Court erred when it refused to retroactively modify the amount of the interim alimony award; fifth, the Family Court imposed an impermissible punitive fine when it found the Husband in contempt of its interim alimony order; and sixth, the Family Court *1141 erred when it awarded the Wife a portion of her attorney’s fees.

We have concluded that the Family Court erroneously applied the alimony statute in making its final award. We have also determined that the other issues raised by the Husband are without merit. Therefore, the judgment of the Family Court is affirmed, in part, and reversed, in part. The matter is remanded to the Family Court for further proceedings in accordance with this opinion.

Facts

The Husband is an independent contractor for Schmidt Baking Company, "with an income that the Family Court found to be approximately $60,000 per year. The Wife works two part-time jobs at an hourly wage-, with a total income of $16,700 per year. On March 8, 2012, the Wife filed a motion for interim alimony. In her motion, the Wife acknowledged that she had inherited $450,000.

The parties agreed that the inheritance was considered to be separate property under 13 Del. C. § 1513(b)(1) and it was not divided as a marital asset. On that basis, the Husband argued, in his answer, that the Wife’s motion for interim alimony should be denied because “[the Wife] is not dependent upon respondent for support when she has $500,000 in the bank that could be used for that purpose.” On April 30, 2012, the Family Court awarded the Wife interim alimony of $2,018 per month, a calculation that was based, in part, on interest income earned on an inheritance valued at $450,000 at an interest rate of 2.2 percent.

The Husband filed a motion for reargument on May 7, 2012. In the motion, the Husband pointed out that when the Wife filed her Rule 16(c) financial report, she disclosed that she actually had $629,359 in that account, as well as $5,115 in a different account. The Husband requested, among other things, that the Family Court recalculate the interim alimony based on this new amount, because the additional $184,474 would generate more interest income. The Family Court denied the motion on May 30, 2012, noting that “[t]his figure was not available to the Court at the time the Order was issued” and that “the Court has no information regarding the source of these funds.”

On August 23, 2012, the Wife filed a rule to show cause petition because the Husband stopped making his interim alimony payments. The Family Court held a hearing on the final distribution of marital assets and the rule to show cause petition on February 7, 2013. Both the Husband and the Wife testified at the hearing. During his testimony, the Husband admitted that he was living with and paying all of the expenses for his girlfriend, who had been out of work. These expenses included the mortgage, utilities, and the cost of five cats.

The Family Court entered its final order on alimony and the division of marital property on May 6, 2013. The Family Court divided the marital property 60/40 in favor of the Wife, because the marital residence was a gift from the Wife’s parents and the Husband had a higher income. The Family Court also determined that— despite her sizeable inheritance — the Wife was dependent on the Husband, and ordered the Husband to make alimony payments of $949 per month. The money from the inheritance was in a money market account, so the Family Court used a 2.5 percent interest rate to calculate that the Wife would receive $15,725 in interest income each year from the inheritance, or about $1,310 per month.

The Family Court also held the Husband in contempt of the April 30, 2012 order and ordered the Husband to pay the *1142 Wife the outstanding balance of $10,126. The Family Court refused to retroactively modify the amount of the temporary alimony award, even though it determined in the final order that the amount of the interim award was more than the Husband was able to pay. Finally, the Family Court ordered the Husband to pay the Wife’s attorney’s fees and costs associated with the April 80, 2012 order. 1 The Husband filed a motion for reargument on May 16, 2013, which the Family Court denied on July 22, 2013.

Marital Property

The Family Court has broad powers under 13 Del. C. § 1513 to distribute property following a divorce, arid under 13 Del. C. § 1512 to determine what, if any, alimony is to be awarded. 2 The usual standard of review of an alimony award is whether the Family Court abused its discretion. 3 The scope of the review “extends to a review of the facts and law as well as to a review of the inferences and deductions made by the Trial Judge.” 4 The Family Court’s rulings “will not be disturbed on appeal if: (1) its findings of fact are supported by the record; (2) its decision reflects due consideration of the statutory factors found in section 1512; and (3) its explanations, deductions and inferences are the product of a logical and deductive reasoning process.” 5

In the Family Court, the Wife argued that the marital property should be divided 70/30 in her favor, and the Husbarid argued that the marital property should be divided 60/40 in his favor. The parties’ principal asset was their marital residence, which was worth $221,000. The Wife’s father purchased the marital residence in 1990, and initially, the deed was in the Wife’s parents’ names and the parties’ names. The Wife’s parents transferred the property to the Wife and the Husband in 1996, and then it was deeded jointly. The parties never had to make mortgage payments on the property. Because of the Wife’s parents’ contribution to the purchase of this asset and because of the Husband’s greater income, the Family Court determined that a fair and equitable division of the marital property, including the marital residence, would be 60/40 in the Wife’s favor. 6

On appeal, the Husband argues that the Family Court abused its discretion and should have divided the marital property equally. The Husband argues that the Wife’s parents’ contribution of the marital residence was not a reason to depart from a 50/50 split because it was gifted to them both equally or, alternatively, that the *1143 Husband’s higher income was not a reason to depart from a 50/50 split because of the Husband’s inferior economic position once the Wife’s inheritance is taken into account. 7

Section 1513 of Title 18 excludes certain property from the definition of marital property that is subject to equitable distribution, but the statute does not exclude property that was jointly acquired by gift. 8 Because the home was jointly gifted to both the Husband and the Wife, the home was held as a tenancy by the entirety. Generally, upon the dissolution of a marriage, a tenancy by the entirety devolves as a matter of law into a tenancy in common between the former spouses, with each owning a one-half interest. 9

But 13 Del. C. § 1513(a) provides that “upon request of either party, [the Family Court shall] equitably divide, distribute and assign the marital property between the parties without regard to marital misconduct, in such proportions as the Court deems just.” 10 “Under [13 Del. C- § 1513(c) ], the Family Court is empowered to divide and assign marital property regardless of how title is held_” 11 The Family Court is instructed to consider “all relevant factors,” including eleven that are specifically listed. 12 Thus, the Family Court is not required to award half of the marital property to each party, and may *1144 determine that it is more equitable to divide the marital property in unequal percentages, so long as its decision is supported by the factors contained in § 1513(a) and any other relevant factors. 13

One of the factors listed in the statute that the Family Court is directed to consider when it is deciding how to equitably distribute property is “[w]hether the property was acquired by gift.” 14 The statute does not provide any additional guidance about whether or how to consider the identity or intent of the giver, or even whether the gift was given jointly such that it immediately became marital property or separately such that it only later became marital property through transmutation. 15 When determining the equitable distribution of marital assets, Delaware courts have given extra weight to the party whose family contributed the gift, in-eluding by increasing the percentage of the asset that is allocated to that party. 16 Because the statute instructs the Family Court to consider “all relevant factors” and then explicitly instructs the Family Court to consider “whether the property was acquired by gift,” and because Delaware courts have routinely made similar considerations in the past, the Family Court did not abuse its discretion by considering the fact that the marital residence was a gift from the Wife’s parents when determining how to equitably divide the marital property. Although the Family Court should not reflexively look behind the titling of a joint gift to spouses, here, the relevant factual record supported the Family Court’s decision to make a moderate adjustment in favor of the Wife because the gift seemed to have been motivated primarily by the desire of the parents of the Wife to help *1145 her spend more time on her own parental duties and to help their grandchildren live in better circumstances. And by making only a moderate adjustment, the Family Court gave heavy weight to the joint nature of the gift.

Alimony Award

The Husband also argues that the Family' Court should not have determined that the Wife was entitled to alimony, because she does not meet the statutory requirement of dependency. The Husband notes that the Wife possesses more than $629,000 in liquid assets from an inheritance. The parties agree that the inheritance itself is not a marital asset that should be equitably distributed, but they disagree about whether the inheritance disqualified the Wife from dependency for alimony purposes. The Husband phrased this issue as “not the amount or duration of alimony Wife may be entitled to but whether she is entitled to any alimony at all, given the fact that she has a bank account that contains $629,000 that is available to her for her own support.” 17

In order to be awarded alimony, the Wife must demonstrate by a preponderance of the evidence 18 that she “[i]s dependent on the [Husband] for support” and that she “[l]acks sufficient property, including any award of marital property made by the Court, to provide for [her] reasonable needs.” 19 The Wife bears the burden of proof to show that she is dependent and that she is unable to support herself. 20 Dependency is not defined by the statute, but-it “has been defined as a relative matter.” 21 We have also interpreted dependency to mean “more than a minimal existence or subsistence level.” 22 The meaning of dependency must be “measured against the standard of living established by the parties during their *1146 marriage.” 23 The Family Court found here that “[t]he parties enjoyed a middle class standard of living during their marriage.” 24

When setting an order for alimony, 13 Del. C. § 1512(c) instructs the Family Court to consider “all relevant factors,” including “[t]he financial resources of the party seeking alimony, including the marital or separate property apportioned to him or her, and his or her ability to meet all or part of his or her reasonable needs independently.” 25 The Family Court is also instructed to consider “[a]ny other factor which the Court expressly finds is just and appropriate to consider.” 26 Therefore, “[e]vidence that the spouse seeking support has independent resources adequate to maintain his or her lifestyle can demonstrate the absence of a need for maintenance.” 27

Section 1512(c) does not define what “financial resources” are to be considered when determining dependency, beyond broadly stating that it includes “the marital or separate property apportioned to him or her.” This includes an inheritance, which is defined as separate property under § 1513(b). 28 Nevertheless, the Family Court decided in this case that it would not require the Wife to dissipate the inheritance, and therefore it would not count the principal of the inheritance toward the Wife’s financial resources. Instead, the Family Court only included the interest income from the inheritance toward the Wife’s financial resources when calculating whether the Wife was dependent. 29 In *1147 doing so, the Family Court committed legal error by adding an exception to the statute that does not exist.

The fact that inheritances were carved out of the marital property subject to equitable division in § 1513(b) demonstrates that the General Assembly treats inheritances differently when it so desires. But the General Assembly did not craft any provisions that would remove certain assets from the “financial resources” that should be included when calculating alimony under § 1512. As other cases have recognized, Delaware courts may consider “both the principal and income of such inheritances under various provisions of § 1512(c) in fixing the amount of alimony” because § 1512(b)(2) and (c)(1) do not draw a distinction between principal and income. 30 Indeed, Delaware courts have included the full value of an inheritance when calculating whether a party is dependent and entitled to receive alimony. 31 Moreover, Delaware courts have not excluded the full value of an inheritance when calculating a party’s ability to pay alimony. 32

The relationship between the two provisions further illustrates that it is important not to extend the exception for inheritances contained in the provisions regarding distribution of marital property in § 1513 to the alimony calculations in § 1512. “Generally equitable distribution should be considered [before alimony]. It would be difficult to determine the needs of the recipient-spouse or child and the supporting spouse’s ability to pay before a tentative equitable distribution award has been determined.” 33 The $600,000 inheritance was not equitably distributed because it was not considered to be marital property subject to division under § 1513. In other words, the Husband already was not entitled to receive a 50/50 share of the inheritance equal to $300,000, or even a 60/40 share equal to $240,000 — money that the Husband could have used to pay alimony. But for the Family Court to extend that exclusion of the inheritance through the alimony calculations performed under § 1512 would essentially apply the exclusion a second time, because that inheritance also would not be counted toward the Wife’s financial resources, which she could use to support herself.

Moreover, when dependency is examined as a relative matter, the Wife appears to have sufficient property to meet her needs independent of alimony from the Husband. The Wife earns an annual in *1148 come of $16,700 and the Family Court found that she had annual expenses of approximately $36,050. A 50-year-old woman is expected to live for 33 years, or until age 83. 34 If the Wife, who is currently age 50, withdrew $19,350 per year from her inheritance to make up the difference, the principal would last over 32.5 years, even if she earned no interest at all. With interest included, even at only the 2.5 percent interest it is currently earning in a money market account, her inheritance would last even longer. It would be inequitable to require the Husband to pay alimony to the Wife while those assets remain untouched. This is particularly true where those alimony payments put the Husband in a situation where he can barely cover his own expenses. 35

The statutory rationale for considering the full amount of the inheritance— not merely the interest income — in the dependency calculation is amplified by the record in this ease, where the inheritance consists of liquid assets in a money market account. If the inheritance had been set up as a trust, under terms where the Wife was only to receive the interest income during her lifetime, then it would be logical not to include the principal in the dependency calculation, because the Wife would not be able to access it. But here, the Wife has ready access to over $629,000 in cash.

The Family Court improperly excluded any consideration of the principal of the inheritance from the Wife’s financial resources. The complete exclusion of those substantial funds from the calculation of the Wife’s dependency was contrary to the alimony statute and constituted an error of law. Therefore, this matter must be remanded to the Family Court for further proceedings in accordance with this Court’s opinion. 36

Contempt Sanction

On April 30, 2012, the Family Court ordered the Husband to make interim alimony payments of $2,018 to the Wife. The Husband paid the full amount from May 2012 through July 2012. After that time, the Husband paid $1,000 37 in some months, but nothing for at least three months. 38 On August 23, 2012, the Wife filed a rule to show cause petition. The Family Court held a hearing on both the final distribution of marital assets and the rule to show cause petition on February 7, 2013. The Husband claimed that he could not afford to make the payments. But during his testimony, the Husband admitted he was living with and paying all of the expenses for his girlfriend, who had been out of work. These expenses included the mortgage, utilities, and the cost of five cats. The Family Court issued a final order on May 6, 2013, that found the Hus *1149 band to be in contempt and determined that the Husband owed the wife $10,126 in total.

The Husband argues that he should not be held in contempt because he was not able to pay the full amount of the alimony payments. The Husband notes that the final alimony order determined that he was only able to pay $948 per month, or a total of $8,532. Because the Husband paid more than $8,532 in interim alimony, he argues that he was not in contempt of the order. The Husband also argues that the Family Court should have retroactively modified the interim alimony order to match the final alimony order, so that he would not be in contempt of the order.

This Court has explained that “[t]hree criteria must be met to support a finding of contempt: 1) there must exist a valid ... order; 2) the [respondent] must have had the ability to abide by the valid ... order; and, 3) the [respondent] must have, in fact, disobeyed the ... order_[The petitioner] must show a violation ... by clear and convincing evidence.” 39 In this case, it is undisputed that the Family Court entered an interim alimony order on April 30, 2012. It also is undisputed that the Husband failed to make sufficient alimony payments to the Wife as of the date of the hearing. Thus, the only question is whether the Husband had the ability to abide by the order. This Court has noted that “inability to pay may be a defense, but that the respondent has the burden of proving his inability to pay.” 40

Furthermore, the Husband’s argument that the interim order was incorrect because the payments were too high is unavailing. “[T]he court will not listen to an excuse for the contemptuous action based upon an argument that the order in question was imperfect or erroneous.” 41 In other words, the Husband cannot simply stop making payments because he thought that the payments were too much — especially where he stopped making payments before the Family Court made a final determination of the amount that would be due.

Rather, if he genuinely could not pay, the Husband should have informed the court of that, made an appropriate motion to modify, and paid as much as he was able. The Husband appears to have met part of this responsibility by moving to modify the interim order, but was unable to get that motion considered by the Family Court before the hearing on the final award itself. 42 The Husband also *1150 seems to have tried to pay what he could for some time after arguing to the Family Court that he could not afford to pay the full amount the Family Court ordered as interim monthly alimony.

But rather than continue to pay what he could, the Husband failed to pay anything at all for three months. Although a different judge might have concluded otherwise, the Family Court was within its discretion to conclude that this self-help was inconsistent with the Husband’s responsibilities to honor a court order. Accordingly, the Family Court properly exercised its discretion when it found that the Husband was in contempt of the interim alimony order, refused to retroactively modify the award, and required the Husband to pay the Wife the overdue payments.

The record reflects that the Family Court ordered the Husband to pay the $10,126 in interim alimony that was owed to the Wife. The Husband argues that this sanction for civil contempt was an impermissible punitive fine. This Court has explained that “whether a contempt is civil or criminal turns on the ‘character and purpose’ of the sanction involved.” 43 “[A] contempt is civil in character when ‘instituted to preserve and enforce the rights of private parties to suits, and to compel obedience to orders and decrees made to enforce the rights and administer the remedies to which the court has found them to be entitled.’ ” 44 Here, the sanction was not a fíne but was the amount due to the Wife under the interim alimony order. Contrary to the Husband’s arguments, the sanction was not designed to “punish” him for his failure to pay, but rather, it was only intended to compel him to obey the order, make the payments, and bring the account current.

Attorney’s Fees Award

The Family Court ordered the Husband to pay the Wife’s attorney’s fees and costs associated with the April 30, 2012 interim alimony order. 45 ' The Husband argues that the Family Court abused its discretion when it ordered him to pay the Wife’s legal fees because it did not properly consider the Wife’s financial resources, including her substantial inheritance.

The Family Court has broad discretion in deciding whether to award attorney’s fees and costs. 46 13 Del. C. § 1515 provides:

The Court from time to time after considering the financial resources of both parties may order a party to pay all or part of the cost to the other party of *1151 maintaining or defending any proceeding under this title and for attorneys’ fees, including sums for legal services rendered and costs incurred prior to the commencement of the proceeding or after the entry of judgment. 47

The purpose of § 1515 is “to provide a financially disadvantaged spouse with the financial resources to prosecute or defend a [divorce] action.” 48 The Family Court will consider whether a party’s excessively litigious conduct had an adverse financial effect on the other party. 49 Family Court Civil Rule 88 also permits the Family Court to assess a party the reasonable counsel fees of any other party “where there is a legal or equitable basis therefor.” 50 An award of attorney’s fees and costs “must not be made arbitrarily and must be supported by the evidence.” 51

In this case, the Family Court ordered the Husband “to pay Wife’s counsel fees and court costs associated with Wife’s requests for interim alimony and enforcement thereof.” 52 But in that same paragraph, the Family Court stated: “[a]s to the balance of Wife’s legal fees, she has substantial assets out of which she can pay those expenses.” 53 In Mays, this Court upheld an award of attorney’s fees because the Family Court had determined that the “excessively litigious conduct” of one spouse had an “adverse financial effect” on the other. 54 In this case, as in Mays, the Family Court looked to the litigious aspects of the Husband’s conduct that led to the finding of contempt for failing to pay interim alimony 55 but determined that the Husband and Wife would pay their own attorney’s fees for the remaining aspects of the litigation. 56 This reasoning reflects that the Family Court properly exercised its discretion in awarding the Wife a portion of her attorney’s fees and costs.

Conclusion

The judgment of the Family Court is affirmed, in part, and reversed, in part. This matter is remanded for further proceedings in accordance with this opinion.