Civil Docket No.: CL08-2443-03
Jeffrey L. Marks, Esq. KAUFMAN & CANOLES, P.C. 2101 Parks Avenue, Suite 700 Virginia Beach, Virginia 23451 Barry Dorans, Esq. WOLCOTT RIVERS GATES 200 Bendix Road, Suite 300 Virginia Beach, Virginia 23452
Jeffrey L. Marks, Esq.
KAUFMAN & CANOLES, P.C.
2101 Parks Avenue, Suite 700
Virginia Beach, Virginia 23451 Barry Dorans, Esq.
WOLCOTT RIVERS GATES
200 Bendix Road, Suite 300
Virginia Beach, Virginia 23452 Dear Counsel:
Today the Court rules on the Motion to Vacate and Motion to Reconsider the Court's October 9, 2015, Order (the "Order") filed by Defendant Mark Hartley. The Order found Mark Hartley in contempt of court for failing to comply with the parties' stipulation agreement, which was incorporated into their final decree of divorce, to make payments to Jennifer Hartley that were associated with the sale of certain real property. Unbeknownst to the Court, Mark Hartley had filed a bankruptcy petition prior the Court's entry of the Order. Jennifer Hartley subsequently had the related automatic stay annulled by the bankruptcy court.
In his Motion to Vacate, Mark Hartley claims that Jennifer Hartley failed to comply with a previous order of the Court, which required her to satisfy certain prerequisites prior to filing a petition to show cause against him. In his Motion to Reconsider, Mark Hartley presents new documents—apparently available but not offered at the August 25, 2015, hearing that led to the Order—and asks the Court to reconsider its ruling based on these documents and related argument. In response to a December 23, 2015, conference call with counsel during which the Court inquired whether the Court had jurisdiction to vacate or reconsider the Order, Mark Hartley filed a Brief Regarding Finality, claiming that: (1) the Order is not a final order; and (2) the twenty-one-day period during which the Court could modify the Order was stayed by his pending bankruptcy proceeding. The Court finds that the Order is a final order and that the Court lacks jurisdiction to vacate or reconsider the Order. The Court therefore DENIES the Motion to Vacate and DENIES the Motion to Reconsider.
Mark Hartley ("Husband") and Jennifer Hartley ("Wife") were divorced on June 9, 2008. On November 21, 2007, prior to the Court entering the final decree of divorce ("Final Divorce Decree"), the parties entered into an agreement entitled "Stipulation and Agreement Pursuant to Title 20, §§ 109 and 109.1 of the Code of Virginia of 1950, as Amended" (the "Stipulation Agreement"). The Stipulation Agreement addressed, among other things, disposition of marital assets, including certain real property. The Stipulation Agreement was incorporated into the Final Divorce Decree, which ordered the parties to comply with the Stipulation Agreement.
On April 6, 2011, the Court entered a Dismissal Order related to a Show Cause proceeding that ordered, inter alia, that "in the event [Wife] moves to refile a Petition for Show Cause . . . , [Wife] will appear with notice to [Husband] before the Court to provide prima facie evidence to support her pleadings, prior to the issuance of a Show Cause." (Apr. 6, 2011, Order.)
Wife subsequently filed a Petition for Rule to Show Cause against Husband on November 20, 2014, alleging that Husband did not comply with terms of the Stipulation Agreement related to certain real property. An Order to Show Cause was entered by the Court on November 25, 2014. After multiple discovery disputes and continuances, a hearing (the "Hearing") on the Order to Show Cause was eventually held on August 25, 2015. The Court granted the parties leave to file post-Hearing briefs, and the Court issued a Letter Opinion and accompanying Order on October 9, 2015.
Husband elected to file a post-hearing brief; Wife did not.
Without notifying the Court, Husband filed a voluntary Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Virginia, Norfolk Division (the "Bankruptcy Court"), on September 24, 2015, which was after the Hearing and prior to entry of the October 9, 2015, Order. The Court was notified of Husband's bankruptcy filing by counsel for Wife subsequent to the Court's issuance of its October 9, 2015, Order; Husband never notified the Court—and apparently also did not notify Wife—of his bankruptcy filing prior to Wife's discovery of the filing. On December 8, 2015, counsel for Husband filed a Motion to Vacate and a Motion to Reconsider the Order, stating in a cover letter to the Clerk of Court that he had "confirmed with Mr. Hartley's bankruptcy counsel that it is not a violation of [the] automatic stay for us to file the attached motions."
The bankruptcy proceeding was converted to a Chapter 7 bankruptcy case on October 19, 2015.
Wife filed a Motion for Relief from Automatic Stay Provisions of 11 U.S.C. § 362(a) ("Motion for Relief from Stay") with the Bankruptcy Court on December 17, 2015. The Bankruptcy Court subsequently entered an Order (the "Bankruptcy Order") on January 7, 2016, that: (1) granted relief from the automatic stay; (2) found that cause exists to "annul the automatic stay for the limited purpose of ratifying, validating, and enforcing the [October 9, 2015, Order]"; and (3) annulled the automatic stay. (Jan. 7, 2016, Bankr. Order 3.) The Court conducted a hearing on the Motion to Vacate and Motion to Reconsider on January 19, 2016.
Positions of the Parties
Husband asserts that the Order is not a final order because although it awards attorney's fees to Wife, it "did not resolve [Wife's] request for attorney's fees." (Mot. to Reconsider ¶ 2.) According to Husband, the Order "stated that [Husband] was to pay costs and reasonable attorney's fees to [Wife], but did not award the amount of attorney's fees," which he argues is not a ministerial act. (Br. Regarding Finality 3.) He argues that his Motions to Vacate and Reconsider therefore were timely filed.
Husband also takes the position that, even if the Order were a final order, his Motions to Vacate and Reconsider the Order still are timely. He asserts that although the Bankruptcy Court granted relief from the automatic stay, the twenty-one-day finality period expressed in Rule 1:1 of the Rules of Supreme Court of Virginia did not start to run until the Bankruptcy Order was entered on January 7, 2016. (Id. at 2.)
Husband contends that the Court should vacate the Order because Wife failed to comply with the Court's April 6, 2011, Order by "not appear[ing] before the Court, with notice to [Husband], to provide prima facie evidence to support her pleadings prior to the issuance of the show cause at the time she filed the request for the show cause order." (Mot. to Vacate ¶ 4.) In other words, Husband claims that Wife did not seek leave from the Court prior to filing the Petition for Show Cause that led to the Order. Husband also argues that the Court should reconsider the Order because the additional documentation he attached to his motion clearly demonstrates that the amount the Court ordered Husband to pay Wife is incorrect.
Wife asserts that the Order is a final order that cannot be modified after twenty-one days of when it was entered on October 9, 2015, pursuant to Rule 1:1 of the Rules of Supreme Court of Virginia. She argues that the Court therefore does not have jurisdiction to vacate or reconsider the Order.
Wife asserts that the annulment of the automatic stay by the Bankruptcy Court not only validated the Order, but also removed any impediment from the normal running of the twenty-one-day finality clock. She takes the position that the Order's finality period ended prior to Husband filing his Motions to Vacate and Reconsider and that the Court therefore does not have jurisdiction to alter the Order.
Wife further asserts that even if the Order is not final, Husband either is estopped from relying on, or waived his right to rely on, the April 6, 2011, Order, as Husband never raised this issue prior to the entry of the October 9, 2015, Order. She claims that the Motion to Vacate therefore should be denied. Wife argues that Husband's Motion to Reconsider also should be denied because it asks the Court to reconsider its decision in light of documents that were available at the time of the Hearing but that Husband elected not to present previously.
"All final judgments, orders, and decrees, irrespective of terms of court, shall remain under the control of the trial court and subject to be modified, vacated, or suspended for twenty-one days after the date of entry, and no longer." Va. Sup. Ct. R. 1:1.
"[A] final order or decree is one that disposes of the entire matter before the court, giving all the relief contemplated and leaving nothing to be done by the court except the ministerial execution of the court's order or decree." McLane v. Vereen, 278 Va. 65, 70, 677 S.E.2d 294, 297 (2009).
The filing of a bankruptcy petition imposes an "automatic stay" that halts actions by creditors, with certain exceptions, to collect debts from the bankruptcy debtor. 11 U.S.C. § 362. Initiation or continuation of a collection-related action subsequent to the filing of a bankruptcy petition is a violation of the automatic stay. Id. § 362(a).
A bankruptcy court may grant relief from the automatic stay, "such as by terminating, annulling, modifying, or conditioning such stay" for cause. Id. § 362(d). The power to annul "permits the order to operate retroactively, thus validating actions taken by a party at a time when he was unaware of the stay. Such actions would otherwise be void." Easley v. Pettibone Mich. Corp., 990 F.2d 905, 910 (6th Cir. 1993) (quoting 2 Collier on Bankr. § 362.07); see also In re Siciliano, 13 F.3d 748, 751 (3rd Cir. 1994) ("[T]he power to annul authorizes the court to validate actions taken subsequent to the impressing of the section 362(a) stay." (quoting Sikes v. Global Marine, Inc., 881 F.2d 176, 178 (5th Cir. 1989)).
The Court has considered the pleadings, oral argument at the January 19, 2016, hearing, and applicable authorities.
A. The Court's October 9, 2015, Order is a final order.
The Court's October 9, 2015, Order addresses the Court's earlier "Order to Show Cause regarding Defendant Mark Hartley's alleged failure to make payments to Plaintiff for 50% of the distributions from the sale of [certain real property] pursuant to [the Stipulation Agreement], which was affirmed, ratified, and incorporated by reference into the Court's June 9, 2008, Final Decree of Divorce." (Oct. 9, 2015, Order, at 1.) The Court ruled in the Order that, inter alia: "[Husband] willfully failed to make payments to which [Wife] was entitled"; "[Husband] is held in civil contempt of court as a result of his willful disobedience of the Court's June 9, 2008, Final Decree of Divorce"; "a civil judgment is awarded to [Wife] and against [Husband] in the amount of $190,900, with prejudgment interest of $152,808.73 . . . , for a total judgment amount of $343,708.73"; and "[Husband] is required to pay costs and reasonable attorney's fees to [Wife]." (Id. at 2.) The amount of the attorney's fees is not specified.
As noted above, "a final order or decree is one that disposes of the entire matter before the court, giving all the relief contemplated and leaving nothing to be done by the court except the ministerial execution of the court's order or decree." McLane, 278 Va. at 70, 677 S.E.2d at 297. Husband claims that because "the determination of attorney's fees is not a ministerial matter," the Order necessarily is not a final order. (Br. Regarding Finality 3.)
Virginia appellate courts have addressed this issue and, although there may have been some doubt in the past regarding the outcome, it now is clear that an order awarding attorney's fees without specifying the amount—and lacking specific language in the order retaining jurisdiction—is a final order. In evaluating the broader issue of not having ruled on motions for attorney's fees, the Virginia Court of Appeals held in Carrithers v. Harrah as follows: "The fact that the trial court did not rule on the parties' motions for attorneys' fees and costs in its . . . order does not negate the fact that the . . . order was indeed a final judgment on the merits of the case." 60 Va. App. 69, 75 n.1, 723 S.E.2d 638, 641 (2012). In Carrithers, the trial court ruled on a child support matter and remanded the case to the juvenile and domestic relations district court for all matters pertaining to child support. Id. at 72, 723 S.E.2d at 639. The trial court issued a letter to the parties on the same day, directing them to file briefs regarding their respective motions for attorneys' fees and costs, and the court subsequently ruled on those motions—after the expiration of the twenty-one-day finality period. Id. The court held that the trial court's letter "did not affect the finality of the trial court's order entered that same day disposing of the merits of the case." Id. at 73, 723 S.E.2d at 640.
Compare Mina v. Mina, 45 Va. App. 215, 609 S.E.2d 622 (2005) (finding that an order indicating that "the parties 'may' present their arguments for attorney's fees and costs at a later date" did not dispose of the issue of attorney's fees and therefore constituted a final order), with Carrithers v. Harrah, 60 Va. App. 69, 75 n.1, 723 S.E.2d 638, 641 (2012) (holding that "a mere indication that the trial court intends to rule on pending motions is insufficient to negate the finality of an order rendering a final judgment on the merits of a case" and noting that to the extent that Mind's holding was contrary to this, it was superseded by Virginia Supreme Court precedent).
The Carrithers court relied on language used by the Virginia Supreme Court:
[W]hen a trial court enters an order, or decree, in which a judgment is rendered for a party, unless that order expressly provides that the court retains jurisdiction to reconsider the judgment or to address other matters still pending in the action before it, the order renders a final judgment and the twenty-one day time period prescribed by Rule 1:1 begins to run.Id. at 73-74, 723 S.E.2d at 640 (quoting Johnson v. Woodard, 281 Va. 403, 409, 707 S.E.2d 325, 328 (2011)).
The cases on which Husband relies in his Brief Regarding Finality for the proposition that the absence of an attorney-fee amount precludes the finality of the order are easily distinguishable. (See Br. Regarding Finality 4-5.) The Virginia Supreme Court in Williamsburg Peking Corp. v. Kong simply held that a trial court has jurisdiction to hear a motion for sanctions during the twenty-one-day finality period after entry of a final nonsuit order. 270 Va. 350, 355, 619 S.E.2d 100, 102 (2005). The Supreme Court in Johnson v. Woodard held that a nonsuit order was not a final order where the order included language specifically stating that the trial court retained jurisdiction to consider the motion for sanctions. 281 Va. 403, 409-10, 707 S.E.2d 325, 328 (2011).
Here, the Order specifically ordered Husband to pay attorney's fees and did not contain language retaining jurisdiction to address the specific amount of attorney's fees or anything else. Under the circumstances, the absence of a specific fee amount in the Order does not preclude it from being a final order.
B. In light of the Court's October 9, 2015, Order and Husband's bankruptcy proceeding, the Court does not have jurisdiction to consider Husband's Motions to Vacate or Reconsider the Order.
Husband filed a petition in bankruptcy on September 24, 2015, and failed to notify the Court—and apparently Wife—of his filing. The petition date was after the August 25, 2015, Hearing and before the Court issued its related Order on October 9, 2015. Pursuant to the United States Bankruptcy Code, the filing of a bankruptcy petition imposes an immediate automatic stay that ceases actions by creditors, with certain exceptions, to collect debts from the debtor. 11 U.S.C. § 362. The Court's imposition of a judgment against Husband—the bankruptcy debtor—via its October 9, 2015, Order therefore violated the automatic stay. Wife subsequently moved the Bankruptcy Court for an annulment of the automatic stay with respect to this Court's Order, and the Bankruptcy Court granted the motion.
As noted, the Court was unaware of Husband's bankruptcy filing when it issued its Order on October 9, 2015.
Section 362(d) of the Bankruptcy Code expressly permits the Bankruptcy Court to annul the automatic stay. 11 U.S.C. 362(d) (indicating that the automatic stay may be "annulled, terminated, modified, or conditioned" under certain conditions, including for cause). "The power to annul authorizes the court to validate actions taken subsequent to the impressing of the § 362(a) stay." Sikes, 881 F.2d at 178. Stated differently, an annulment retroactively validates actions taken by a creditor who may have been unaware of the existence of the automatic stay. Easley, 990 F.2d at 910. The situation here arguably is exactly what the annulment provision in the Bankruptcy Code was designed to address; it therefore is unsurprising that the Bankruptcy Court granted Wife's annulment request.
The U.S. District Court for the Eastern District of Virginia in Khozai v. Resolution Trust Corp. clarified the distinction between an order annulling the automatic stay and an order terminating the stay:
In addition to the obvious power to "terminate" the stay, § 362(d) also gives the bankruptcy court the power to "annul" the stay. The difference between the two is that an order annulling the stay could operate retroactively to the date of the filing of the petition which gave rise to the stay and thus validate actions taken by the party at a time when he may have been unaware of the existence of the stay. On the other hand, an order terminating the stay would be operative only from the date of its entry.177 B.R. 524, 526-527 (E.D. Va. 1995) (citing 2 Collier's Bankruptcy Manual § 362.06 (3d ed. 1983)); see also In re Soares, 107 F.3d 969, 976 (1st Cir. 1997) ("The only plausible distinction between the two verbs in this context is that terminating the stay blunts it prospectively, from the moment the court's order enters, whereas annulling the stay erases it retrospectively, as of some date prior to the entry of the court's order (reaching as far back as the date when the debtor filed the bankruptcy petition, if the court so elects).").
The purpose of annulling the automatic stay clearly is to retroactively validate actions taken in violation of the stay, typically in situations in which the entity seeking the annulment was unaware of the bankruptcy proceeding. On its face, however, this only indirectly answers the question of when the validated action is deemed to occur for purposes of establishing finality of the related order.
Black's Law Dictionary defines "annulment" as "[t]he act of nullifying or making void." Annulment, Black's Law Dictionary (10th ed. 2014). Annulment of the automatic stay therefore implies that the stay is deemed to never have existed with respect to the matter for which it was annulled. See id (providing the example that "[a]n annulment establishes that the marital status never existed" (emphasis added)). This is consistent with terminology used by bankruptcy courts when discussing annulment of the stay. See, e.g., In re Soares, 107 F.3d at 976 (referring to lifting the stay, setting aside the stay, and erasing the stay). Hence, once the automatic stay is annulled, the post-petition action is retroactively validated as if the stay never existed, i.e., as of the date the action originally was taken. Upon annulment of the automatic stay here, this Court's Order therefore was validated as of October 9, 2015, the date the Order was entered. See Vick v. Commonwealth, 201 Va. 474, 476, 111 S.E.2d 824, 826 (1960) (holding that "orders speak as of the day they were entered"). With no bankruptcy stay, the twenty-one-day finality clock began to run at the same time. See Va. Sup. Ct. R. 1:1. Any motions filed after the finality period ended twenty-one days later on October 30, 2015—including Husband's Motions to Vacate and Reconsider the Order, which were filed on December 8, 2015—therefore are untimely, as the Court no longer has jurisdiction to entertain such motions. See id.
Husband asserts that although the Bankruptcy Order validated this Court's October 9, 2015, Order, the October 9 Order is effective as of the date of the Bankruptcy Order—January 7, 2016—and not as of October 9, 2015, and that the twenty-one-day finality clock therefore began to run on January 7, 2016. Husband also argued at the Hearing that there is no substantive difference between annulment and termination of the automatic stay under the Bankruptcy Code. Husband's position is fundamentally flawed for at least three reasons. First, equating annulment and termination ignores the plain meaning of the terms, as discussed supra. Second, the use of both "terminating" and "annulling" in Section 362(d) of the Bankruptcy Code indicates that the two terms have separate meanings. See Soares, 107 F.3d at 976 ("In drafting the law, Congress chose to include both the power to terminate the stay and the power to annul it. When construing this language, we must try to give independent meaning to each word."). Third, if annulment of the automatic stay resulted in lifting the stay as of the date of the Bankruptcy Order—as termination of the stay would—the stay still would have been in effect when the October 9, 2015, Order was entered, thereby precluding the desired result of retroactively validating the October 9, 2015, Order. There simply is nothing to support Husband's argument that annulment of the automatic stay somehow resulted in the October 9, 2015, Order becoming effective on January 7, 2016, when the Bankruptcy Order was entered.
In light of the retroactive nature of an automatic stay annulment, it might initially appear inequitable to simultaneously annul the stay and declare the finality period extinguished. As Husband acknowledged in his letter to the Clerk of Court, however, the stay—which was in effect prior to the annulment—did not preclude him from filing his Motions to Vacate and Reconsider. In fact, he filed those motions prior to Wife's Motion for Relief from Stay was filed with the Bankruptcy Court. Husband therefore was free to file his motions within the twenty-one-day finality period subsequent to the Court's entry of its Order on October 9, 2015, but he chose not to do so. Husband therefore has no equitable grounds on which to complain that the imposition of the automatic stay—which only he controlled—somehow prevented him or prejudiced him from timely filing his motions.
Husband appears to have made this argument in his Brief Regarding Finality: "Had the bankruptcy court granted retroactive relief, it would have divested this court of jurisdiction to amend the order within 21 days and divest the appeals court of its authority to hear an appeal." (Br. Regarding Finality 2-3.)
Husband filed his motions on December 8, 2015, and Wife filed her motion in the Bankruptcy Court on December 17, 2015.
Husband contends that had he filed his motions within twenty-one days of October 9, 2015, this Court would not have had jurisdiction to amend the Order in light of the automatic stay. (Br. Regarding Finality 3.) Assuming the Court became aware of the bankruptcy proceeding—from Husband or otherwise—the Court could have either vacated the Order—as Husband acknowledges (id. at 3)—or suspended the Order during the twenty-one-day finality period. Va. Sup. Ct. R. 1:1.
In light of the Court's holdings that the Order is a final order and that Husband's Motions to Vacate and Reconsider the Order were untimely filed, the Court need not—and indeed cannot—vacate or modify the Order. Even if the Court had jurisdiction to do so, arguendo, vacation or modification of the Order is not warranted under the circumstances present here.
The Court's April 6, 2011, Order—on which Husband relies in his Motion to Vacate—essentially requires Wife to seek leave of Court, with notice to Husband, prior to filing a Petition to Show Cause against Husband. (See Mot to Vacate Ex. A.) As noted in Husband's motion, Wife failed to comply with this requirement. (Id. ¶ 4.) Nevertheless, Husband failed to raise this issue: (1) in response to the Order to Show Cause issued by the Court on November 25, 2014; (2) at the Hearing on August 25, 2015—nine months later, (3) in his post-Hearing brief filed on September 17, 2015; or (4) at any time prior to the Court's entry of its October 9, 2015, Order. The Court therefore finds that, under the circumstances, Husband is judicially estopped from raising the issue for the first time belatedly and in light of his prior inconsistent actions. See Lofton Ridge, LLC v. Norfolk S. Ry. Co., 268 Va. 377, 380-81, 601 S.E.2d 648, 650 (2004) (opining that "judicial estoppel forbids parties from 'assuming successive positions in the course of a suit, or series of suits, in reference to the same fact or state of facts, which are inconsistent with each other, or mutually contradictory'" (quoting Burch v. Grace St. Bldg. Corp., 168 Va. 329, 340, 191 S.E. 672, 677 (1937)). Alternatively, to the extent that Husband intentionally failed to bring this issue to the attention of the Court earlier, he has waived any right to raise it for the first time now. See Baumann v. Capozio, 269 Va. 356, 360, 611 S.E.2d 597, 599 (2005) (opining that waiver "is the voluntary, intentional abandonment of a known legal right, advantage, or privilege" (quoting Fox v. Deese, 234 Va. 412, 425, 362 S.E. 2d 699, 707 (1987)).
Husband's request for the Court to reconsider its ruling in the Order is not based on newly discovered evidence or any other recognized basis for reconsideration. Rather, Husband presents—by way of hearsay documentation attached to his Motion for Reconsideration—copies of bank statements, checks, a corporate balance sheet, and a letter between counsel with an attached accounting spreadsheet. These documents either were presented or referenced at the Hearing or were available to Husband at the time of the Hearing and for some reason were not offered into evidence. It simply would be inappropriate for the Court to consider such documentation at this time and provide Husband the proverbial "second bite at the apple."
Of note, Husband failed to even appear in person at the Hearing. --------
For the foregoing reasons, the Court finds that the October 9, 2015, Order is a final order and that the Court no longer has jurisdiction to vacate or reconsider the Order. The Court therefore DENIES the Motion to Vacate and DENIES the Motion to Reconsider.
The Court directs counsel for Plaintiff to prepare and circulate an Order consistent with the ruling in this Opinion and submit it to the Court for entry within fourteen days.
David W. Lannetti
Circuit Court Judge DWL/bih