Opinion
Record No. 0722-93-2
Decided: July 5, 1994
FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY, D. W. Murphey, Judge Designate
Affirmed.
William F. Etherington (Theodore M. Galanides; Beale, Balfour, Davidson, Etherington Parker, P.C., on briefs), for appellant.
Donald W. Lemons (Richard P. Kruegler; Durrette, Irvin, Lemons Fenderson, P.C., on brief), for appellee.
Present: Judges Koontz, Eld, and Senior Judge Cole
Pursuant to Code Sec. 17-116.010 this opinion is not designated for publication.
Faye Pond Wheeler seeks reversal of an order of the Circuit Court of Chesterfield County that denied her motion for arrearage in spousal support from Richard Kenneth Wheeler, her former husband, and her motion to compel the assignment of a life insurance policy to her by Mr. Wheeler pursuant to the terms of the parties' separation agreement. She contends that the chancellor erred in determining that (1) the term "draw" as used in the separation agreement did not include Mr. Wheeler's entire income from the practice of law, but referred only to funds derived from his partnership share with a particular law firm, and (2) laches and waiver barred her claims. For the reasons that follow, we affirm the result reached by the chancellor.
Initially, we recite the general factual background to this appeal. Additional facts are recited where appropriate to explain our analysis. The twenty-nine year marriage of Mr. and Mrs. Wheeler began to dissolve formally when they separated in September, 1982. At that time, as he continually had been since graduating from law school in 1963, Mr. Wheeler practiced law with the Richmond law firm of Hunton Williams, where as a partner he received $9,000 in monthly income at the time of the couple's separation.
The parties entered into a separation agreement dated January 24, 1984, in settlement of their marital property rights and their spousal support rights and obligations. The pertinent provisions of this agreement provide as follows:
Whereas, the parties desire to be governed by this Agreement rather than the payment provisions of any order or decree of court . . . the parties covenant and agree as follows:
* * * * * * *
3. Periodic Spousal Support
Husband shall pay to wife annually $42,000 per year so long as they shall be live and she remain unmarried, by paying $3,500 on the first day of each month commencing with the month of February, 1984. However, Husband shall pay initially to wife $3,225 as periodic spousal support.
If husband's draw, which is now $9,000 per month is increased, he shall pay to wife 25% of such increase (for example, if the draw is increased to $10,000 per month, wife shall receive in addition to the $3,500, 25% of $1,000 or $250, making the monthly payment $3,750).
If there is a reduction in Husband's draw, not due to his voluntary act, choice or decision, the periodic spousal support shall be proportionately reduced (for example, if the draw is decreased from $9,000 to $8,000 per month when the periodic spousal support is $3,500 per month, the decrease shall be 11% of $1,000 or $110 making the monthly spousal support $3,390.
* * * * * * *
Upon Husband attaining the age of sixty (60) years and retiring from his professional practice or employment, if spousal support has not terminated earlier by force of the other provisions of this Agreement, the parties will negotiate in good faith, based upon the circumstances and conditions at the time, to fix the amount of spousal support the wife is entitled to, if any.
If by reason of death or accident, Husband should be disabled and unable to work, the parties will negotiate in good faith to fix the amount of spousal support Husband is to pay wife in accord with their financial circumstances at the time.
* * * * * * *
4. Life Insurance
[Husband agrees to purchase a $300,000 life insurance policy on his life, to assign the policy to the wife with her as the irrevocable primary beneficiary, to pay the premiums so long as the wife lives, and to furnish wife evidence annually that the premiums have been paid and the policy is in full force and effect].
* * * * * * *
8. Additional Spousal Support on Bonus and Compensation received by Husband.
Husband shall pay to Wife 25% of the amount he received in excess of his draw, which is now $9,000 per month, commencing with the year 1987.
(Emphasis added.)
The circuit court entered a final decree of divorce dissolving the Wheeler's marriage on April 16, 1984. That decree, in part, provides that the parties' separation agreement is "ratified, affirmed and incorporated in this decree and pursuant to the terms thereof, [Mr. Wheeler] shall pay to [Mrs. Wheeler] initially $3,225 as periodic spousal support and shall pay commencing with (sic) February 1, 1984 $3,500 per month as periodic spousal support to be increased and decreased, as the case may be, as provided by the Agreement." (Emphasis added.)
Mr. Wheeler paid the required spousal support, with appropriate increases and decreases according to the formula in the agreement, until late in 1987. At that time, under an agreement with Hunton Williams initiated at the firm's request, Mr. Wheeler ceased to be an active participant in the firm's practice. In return, the firm awarded Mr. Wheeler a life-time annual benefit of $48,000. Under this arrangement, Mr. Wheeler was free to practice law with another firm or pursue other interests so long as his income, including his benefit from Hunton Williams, did not exceed $75,000 annually. In the latter event, the firm would reduce the benefit dollar-for-dollar for income in excess of $75,000 per year.
The record does not contain the formal agreement between Mr. Wheeler and Hunton Williams. However, Mrs. Wheeler does not assert that this agreement, resulting in a considerable reduction in his monthly income from the firm, resulted from Mr. Wheeler's "voluntary act, choice or decision."
Mr. Wheeler advised Mrs. Wheeler of these circumstances and, although asserting that their agreement did not require him to do so, he offered to pay support of $2000 per month beginning in February, 1988. This amount was approximately $1800 per month less than the amount Mrs. Wheeler received in support prior to Mr. Wheeler's separation from Hunton Williams and approximately $1275 more per month than their agreement would have entitled her to if Mr. Wheeler's sole source of income was the benefit provided by Hunton Williams after his separation from the firm, if that benefit constituted his "draw." Mrs. Wheeler accepted payment of $2000 per month at least through August, 1992.
Shortly after his separation from Hunton Williams, Mr. Wheeler resumed the practice of law with another firm, earning an annual salary of $27,000, the precise amount he could earn without jeopardizing his benefit from Hunton Williams. He maintained the required life insurance policy, but he did not assign it to Mrs. Wheeler as its owner.
In May, 1992, Mrs. Wheeler instituted a proceeding in the circuit court seeking an alleged arrearage in spousal support from 1988 forward based upon calculations from Mr. Wheeler's total income from the practice of law rather than from his income from Hunton Williams alone. She also sought to have the life insurance policy in question assigned or transferred to her as the owner. The chancellor heard evidence ore tenus and issued a letter opinion on December 3, 1992. In that opinion the chancellor held that (1) the parties recognized and acted upon the term "draw" as used in the agreement as the monthly pay received by Mr. Wheeler from Hunton Williams and Mr. Wheeler had complied with that agreement since its inception, (2) Mrs. Wheeler was "guilty of laches" to the prejudice of Mr. Wheeler by her delay in asserting her alleged rights, and (3) Mrs. Wheeler "waived her rights, if any existed, by failing to make a timely claim." The final order entered by the chancellor on March 15, 1993 incorporated these holdings. This appeal followed.
A brief recitation of the parties' contrasting assertions concerning the calculation of support under the formula in the settlement agreement brings into focus the principal claim made by Mrs. Wheeler in her 1992 complaint and marks the beginning point of our analysis. However, because they are not dispositive of this appeal, we address those assertions only in general terms and intentionally avoid the detailed calculations submitted to the chancellor by the parties alleging various changes in support paid or payable over a number of years.
In this context, Mrs. Wheeler's assertions may be summarized in the following way. She initially asserts that the term "draw" as used in the parties' agreement is ambiguous. She maintains that this term has no ordinary dictionary meaning consistent with the parties' intentions, nor does the agreement define the term or mention Hunton Williams as the sole source of the draw. Thus, she asserts that the term, properly interpreted, means "income from the practice of law" rather than "income Mr. Wheeler receives from Hunton Williams." On this basis, she further asserts that during the years in question her monthly spousal support ought to derive from Mr. Wheeler's annual law practice income of $75,000 rather than the $48,000 he received from Hunton Williams.
In contrast, Mr. Wheeler's position is that the only "draw" he has ever received was as a partner in Hunton Williams. He asserts that income from his present corporate law firm is "salary." Accordingly, Mr. Wheeler asserts that his support obligation derives only from the benefit he receives each year, if any, from Hunton and Williams.
The resulting financial significance of these contrasting assertions is dramatic. Mrs. Wheeler's assertions result in a monthly support obligation of approximately $2,650 and an accumulated arrearage of approximately $57,000 at the time she filed the proceeding in the circuit court in 1992. In contrast, Mr. Wheeler's assertions result in a monthly support obligation of approximately $725 and an overpayment of $71,000 based on the $2,000 he paid during the years in question.
The parties agree that Mr. Wheeler received no bonuses during the years in question and that other sources of income are not to be used in the calculation of the spousal support obligation in dispute.
It is readily apparent that the resolution of the conflict between these calculations and their dramatic contrasting results lies in the parties' agreement and the effect of the ratification, affirmation, and incorporation of that agreement in the final divorce decree of April 16, 1994. See Code Sec. 20-109 (providing, in part, that no decree directing the payment of spousal support shall be entered except in accordance with a contract of the parties filed in the proceeding); Code Sec. 20-109.1 (providing, in part, that such a contract that is "ratified, affirmed and incorporated" in the court's decree becomes a term of the decree and enforceable as such). We turn then to the parties' contrasting positions on this point.
Building upon her initial assertion that a proper interpretation of the agreement contemplates spousal support calculated on all income from Mr. Wheeler's practice of law ($75,000), Mrs. Wheeler further asserts that this interpretation of the agreement became a term of the court's decree in 1984. Thus, she reasons that the monthly payments of $2,000 made by Mr. Wheeler did not comport with the term of the court's decree requiring a monthly payment of $2,650. Moreover, she further asserts that because the arrearage resulted from a failure to comply with a term of the decree, an equitable defense of laches or waiver is not applicable to her claim. As a general proposition, Mrs. Wheeler's position finds support in well established principles. See, e.g., Taylor v. Taylor, 14 Va. App. 642, 645, 418 S.E.2d 900, 902 (1992); Richardson v. Moore, 217 Va. 422, 423-24, 229 S.E.2d 864, 866 (1976) (holding that the equitable defense of laches is not a defense to the failure to comply with the terms of a support decree); see also Cofer v. Cofer, 205 Va. 834, 838, 140 S.E.2d 663, 666 (1965); Newton v. Newton, 202 Va. 515, 519, 118 S.E.2d 656, 659 (1961) (holding that the obligated spouse must comply with the terms of the support decree and the court is without authority to modify past due installments that have become vested as they accrue under the terms of the support decree).
Mr. Wheeler asserts that the general rule barring use of equitable defenses for failure to comply with the spousal support terms of a court decree is not applicable to the facts of this case. He reasons that because no "definite and discrete amounts of periodic support" appear in the 1984 decree but, rather, only a "formula" which the parties were to utilize in following their agreement, the court has allowed the terms of the agreement, not the decree, to govern increases and decreases in the amount of the monthly support. He finds support for this reasoning in the provisions of the agreement providing that "the parties' desire to be governed by this Agreement rather than the payment provision of any order or decree of court" and the provisions of the 1984 decree providing that "spousal support to be increased or decreased, as the case may be, as provided by the Agreement." Thus, because the parties derive and determine their rights and obligations through the agreement on private contract principles, Mr. Wheeler asserts that equitable defenses are available to him. See generally Gazale v. Gazale, 219 Va. 775, 778-79, 250 S.E.2d 365, 367 (1979) (holding in the context of statutory change in the age of minority that the contractual intent of the parties is applicable to child support orders incorporating the parties' agreement, unless such agreement is "supplanted" by subsequent court orders); cf., Doherty v. Doherty, 9 Va. App. 97, 99-100, 383 S.E.2d 759, 760 (1989) (recognizing that not all marital agreements that are incorporated in a decree are "merged" therein, so that the parties may enforce their rights by suing on the agreement rather than on the judgment of the decree).
Our review of the provisions of the parties' agreement and the court's decree leads us to conclude that the effect of the incorporation of the agreement was to leave the rights and obligations of the parties with respect to spousal support under the control of the agreement. The decree expressly provides that the spousal support of Mr. Wheeler is "to be increased or decreased, as the case may be, as provided by the Agreement." This provision merely directs the parties to comply with their agreement and does not supplant or alter the support provisions of the agreement. The decree directs the payment or receipt of no definite amount of periodic support and does not address the termination or modification of that support in the event of Mr. Wheeler's attaining the age of sixty and retiring from his professional practice or employment or in the event of his disability. Thus, the terms of their agreement determine the parties' rights and obligations.
A separation agreement is a contract between the parties, enforceable as such. Parra v. Parra, 1 Va. App. 118, 128, 336 S.E.2d 157, 162 (1985). Such agreements "are subject to the same rules of construction and interpretation applicable to contracts generally." Fry v. Schwarting, 4 Va. App. 173, 180, 355 S.E.2d 342, 346 (1987). The cardinal rule of contract interpretation is that the intent of the parties as expressed in the contract controls. Bender-Miller Co. v. Thurwood Farms, Inc., 211 Va. 585, 588, 179 S.E.2d 636, 639 (1971); see also Seaboard Air Line Railroad Co. v. Richmond-Petersberg Turnpike Authority, 202 Va. 1029, 1033, 121 S.E.2d 499, 503 (1961). The parties may modify a written contract by parole agreement. Warren v. Goodrich Strip Screen Co., 133 Va. 366, 388-89, 112 S.E. 687, 693-94 (1922).
These well established principles guide us to the conclusion that at the time the agreement was executed in January 1984, the parties intended that Mr. Wheeler's spousal support obligation would be determined upon the amount of his monthly income from the law firm of Hunton Williams. Cf. Gerst v. Gerst, 514 N.Y.S.2d 587, 587 (N.Y.Sup.Ct. 1987) (holding that "Partnership draw is nothing more than a form of compensation whereby partners, pursuant to an agreement, take money from a partnership drawing account on a periodic basis as salary or as a share of profits from the enterprise" in the context of a partner in a law firm). The provision in the agreement that "Husband's draw, which is now $9,000 per month" supports no other conclusion. The inclusion of the word "now" clearly refers to Mr. Wheeler's then-current income from Hunton Williams and negates an intent to include future income from another law firm. Accordingly, the chancellor properly determined that by using the term "draw" the parties meant income received by Mr. Wheeler as a partner at Hunton Williams.
On that basis, Mr. Wheeler asserts that his support obligation became fixed at $725 per month in late 1987 when his annual draw became fixed at $48,000 and that his payments of $2,000 monthly actually exceeded that obligation. We disagree. At that time, Mr. Wheeler's active partnership at Hunton Williams ended. The agreement does not specifically address this event. It speaks specifically only to such an event in terms of Mr. Wheeler attaining the age of sixty years and retiring or becoming disabled. In those events, the agreement required a good faith renegotiation of Mr. Wheeler's monthly spousal support obligation. In late 1987, Mr. Wheeler was neither sixty years of age nor disabled.
Mr. Wheeler's separation from Hunton Williams in late 1987 then becomes critical to our analysis of this appeal. Mr. Wheeler's testimony, as the prevailing party below, concerning the events that followed this termination is of particular significance. That testimony may be fairly summarized in the following manner. As a result of his separation from the firm, Mr. Wheeler's income fell from $10,417 per month to $4,000 per month. He calculated that, based upon the formula in the agreement, this reduction would result in Mrs. Wheeler receiving $725 per month in spousal support rather than the then-current $3,853 per month. Mr. Wheeler "was double shocked" and "worried" about himself and Mrs. Wheeler. The parties talked about this situation. Mr. Wheeler told Mrs. Wheeler that he intended to find employment with another law firm and that he wanted to be "fair with himself and fair to her too." After reviewing his other financial obligations, he concluded that he would "be able to give [Mrs. Wheeler] $2,000 per month." Mrs. Wheeler considered that offer and agreed that "we will just have to live with it." Mrs. Wheeler accepted these payments beginning in February, 1988 until she instituted the present proceedings in the circuit court in May, 1992. Relying upon their agreement of spousal support payments of $2,000 monthly, Mr. Wheeler subsequently remarried and purchased a home. Upon these facts, the chancellor determined that Mrs. Wheeler was "guilty of laches" to the prejudice of Mr. Wheeler by her delay in asserting her "alleged" rights and that she "waived her rights" by failing to make timely claims.
For the reasons that follow, we hold that the doctrine of equitable estoppel, rather than the equitable doctrines of laches and waiver is applicable here.
"Estoppel is the doctrine by which a 'party is prevented by his own acts from claiming a right to [the] detriment of [the] other party who was entitled to rely on such conduct and has acted accordingly.' Black's Law Dictionary 551 (6th ed. 1990); see also American Mutual Liab. Ins. Co. v. Hamilton, 145 Va. 391, 407, 135 S.E. 21, 25 (1926). 'The elements necessary to establish equitable estoppel are (1) a representation, (2) reliance, (3) change of position, and (4) detriment, and the party who relies upon estoppel must prove each element by clear, precise, and unequivocal evidence. Because the doctrine of estoppel prevents the showing of the truth, it is applied rarely and only from necessity.' Princess Anne Hills v. Susan Constant Real Estate, 243 Va. 53, 59, 413 S.E.2d 599, 603 (1992) (citation omitted)." Webb v. Webb, 16 Va. App. 486, 494-95, 431 S.E.2d 55, 61 (1993).
In contrast to equitable estoppel, "[l]aches has been defined as an omission to assert a right for an unreasonable time and unexplained length of time, under circumstances prejudicial to the adverse party." Finkel Outdoor Products, Inc. v. Bell, 205 Va. 927, 933, 140 S.E.2d 695, 699 (1965). The doctrine of laches applies to the enforcement of an equitable right and not to a legal right. Id. See also Motley's Adm'r v. Carstairs, McCall Co., 114 Va. 429, 432, 76 S.E. 948, 949 (1913) (holding that "a legal right . . . is not subject to the equitable doctrine of laches").
"A waiver . . . may be generally defined as a voluntary abandonment of some known legal right, advantage, or privilege, or such conduct as warrants an inference of the abandonment of such right, or the intentional doing of an act inconsistent with claiming it, all of which is usually dependent upon the peculiar circumstances of the case."
The Covington Virginian, Inc. v. Woods, 182 Va. 538, 547, 29 S.E.2d 406, 410 (1944).
We recognize that courts frequently use these principles as if they were interchangeable. See 31 C.J.S. Estoppel Sections 59, 61 (1964). However, estoppel, waiver, and laches are discreet doctrines having differing elements. Accordingly, on the facts of a particular case, the choice of doctrine can lead to differing results. For example, the facts here do not support a conclusion that Mrs. Wheeler is guilty of laches in failing to assert her claim that their agreement obligated Mr. Wheeler to pay her spousal support in an amount in excess of the $2,000 monthly she received beginning in February, 1988. With the passage of each succeeding month from that time until she filed for an arrearage in May, 1992, the length of time that she failed to assert her rights lessened. Thus, her claim for the months immediately preceding May, 1992 did not involve a failure or omission to assert a right for an unreasonable time. In short, the doctrine of laches could only be applicable, if at all, to a part of her claim rather than to its entirety because her right to support was ongoing. Cf. Bennett v. Commonwealth Dep't. of Social Services, 15 Va. App. 135, 144, 422 S.E.2d 458, 463 (1992). ("Because of the ongoing nature of a spousal support order, no time limitation is placed upon the obligee spouse within which to obtain a judgment for accumulated arrearages.")
Similarly, waiver is not applicable to the facts of this case because acquiescence is insufficient to establish the waiver of a right. A waiver requires the intentional unilateral act of the party against whom the waiver is asserted. "Waiver focuses on the intent of the party against whom the waiver is asserted; estoppel focuses on the reaction of the party to the conduct of the party against whom the estoppel is asserted." Sink v. Commonwealth, 13 Va. App. 544, 548, 413 S.E.2d 658, 660 (1992). Because Mr. Wheeler solicited the change in the parties' agreement, Mrs. Wheeler's response in accepting that alteration could not be deemed a unilateral "waiver."
The record, however, supports a determination that equitable estoppel applies to Mrs. Wheeler's claim for arrearage. She was fully aware of the facts surrounding Mr. Wheeler's termination at the Hunton Williams law firm in late 1987. She did not then or now contest the accuracy of Mr. Wheeler's account to her of his reduction in income from that law firm. When viewed in the context of her conduct in accepting the $2,000 payments made by Mr. Wheeler for approximately four years, the facts in the record are consistent with the chancellor's acceptance as a fact that Mrs. Wheeler represented to Mr. Wheeler that she would "just have to live" with those payments. In reliance on that representation, Mr. Wheeler has in the intervening years substantially changed his financial and personal positions. He purchased a home and remarried in reliance upon a reasonable belief that the parties had modified their agreement to provide for $2,000 monthly spousal support payments. The record supports a finding that this reliance and subsequent change in position was ultimately detrimental to Mr. Wheeler's overall financial position in light of Mrs. Wheeler's subsequent attempt to disclaim the reformation of their agreement. Each of the elements necessary for equitable estoppel is present on the facts before us. Accordingly, we hold that Mrs. Wheeler is equitably estopped from asserting that an arrearage in spousal support exists under the parties' separation agreement. See Emrich v. Emrich, 9 Va. App. 288, 294, 387 S.E.2d 274, 276-77 (1989) (holding equitable estoppel applicable where one person by statements, conduct, or silence induces another to rely upon such in good faith to believe in the existence of a state of compatible facts and acts thereon, then the former party will not be allowed to assert a different statement of facts, if the other person has changed his position to his detriment).
For these reasons, we hold that the chancellor properly determined that no spousal support arrearage existed under the parties' January 24, 1984 agreement or the final decree of April 16, 1984, at the time Mrs. Wheeler filed her claim in May 1992.
We express no opinion on the amount of Mr. Wheeler's monthly obligation subsequent to May 1992. Our opinion here merely establishes the amount of that obligation until and unless a provision of the agreement altering that amount becomes operable or the parties again modify their agreement.
Finally, the same analysis guides our resolution of the insurance policy dispute in this case. The record clearly supports a determination that Mr. Wheeler has maintained the life insurance policy on his life required by the parties' agreement. The record further supports the determination that the parties modified their agreement to permit Mr. Wheeler to remain the owner of that policy without assigning it to Mrs. Wheeler as the owner, thereby enabling him to negotiate the most advantageous premium charges. Mr. Wheeler has undoubtedly relied upon that modification in much the same way as he relied upon the modification made to spousal support. Accordingly, Mrs. Wheeler is equitably estopped to deny that she agreed to the modification.
For these reasons, we affirm the result reached by the chancellor in finding no arrearage in spousal support due Mrs. Wheeler and no failure to transfer the insurance policy.
Affirmed.