Divorce_incorporated settlement agreement_declaratory judgment action_subject matter
jurisdiction
The district court lacked subject matter jurisdiction over a declaratory judgment action
seeking an interpretation of the parties' obligations arising from their separation agreement that
was incorporated into a consent divorce judgment. A consent judgment is not one of the
instruments a court can interpret pursuant to a declaratory judgment action; however, there may
be a remedy through a contempt proceeding.
Lucy R. McCarl for plaintiff-appellee.
Nick Galifianakis & Associates, by Nick Galifianakis and David
Krall, for defendant-appellant.
ELMORE, Judge.
Francine Maria Francis was married to Walter James Fucito for
nearly twenty-four years before the two voluntarily signed a
separation and property settlement agreement on 30 September 1992.
As of 10 March 1993, the parties' agreement was incorporated into
their divorce judgment. This case involves the trial court's
interpretation of a distributive award provision in that
incorporated agreement.
Within the agreement Mr. Fucito and Ms. Francis expressly
waived alimony, noting “that he or she is not dependent upon or in
need of maintenance and support from the other party,” and alsoentered into a property settlement “for the purpose of dividing the
marital property consistent with the concept of equitable
distribution, and pursuant to the provisions of the North Carolina
General Statutes, Section 50-20(d)[.]” The couple's consent
divorce judgment states that Mr. Fucito shall have possession of
the marital home and be responsible for the mortgage payments,
utilities, maintenance, and ad valorem taxes from the date of the
agreement. According to the property settlement section of the
agreement entitled “Real Property,” within 48 hours of Ms. Francis
moving from the marital home, Mr. Fucito:
shall pay to [Ms. Francis] the sum of
$125,000.00, which represents the first
installment pursuant to the marital property
distribution plan . . . [in the distributive
award section] of this Agreement. After all
the terms of said plan have been fully
complied with, [Ms. Francis] shall execute a
warranty deed conveying her interest in said
residence to [Mr. Fucito], vesting sole
ownership of said residence in [Mr. Fucito]
alone.
The agreement further provides for a distributive award to Ms.
Francis. This award provision reiterates that the first
$125,000.00 payment to Ms. Francis shall be made within 48 hours of
her vacating the residence, and then Mr. Fucito will make scheduled
payments toward achieving full ownership of the property.
(a) The sum of $125,000.00 (the first
$125,000.00 installment of this distributive
award) shall be paid to [Ms. Francis] within
48 hours of her moving from the marital
residence, or on January 7, 1993, whichever
first occurs.
(b) Thirty-six monthly payments shall be paid
to [Ms. Francis] in the amount of $1,500.00
per month, beginning on the month [Ms.Francis] moves from the residence, or
beginning in January, 1993, whichever occurs
first. Said payments are payable on the first
day of each month.
(c) After the thirty-sixth payment has been
paid to [Ms. Francis], the Wife shall elect in
writing one of the two following options:
(i) [Mr. Fucito] shall, on the first
day of the month following the
thirty-sixth payment, pay to [Ms.
Francis] an additional sum of
$125,000.00 (the second $125,000.00
installment of this distributive
award), or
(ii) [Mr. Fucito] shall continue to
be obligated to make monthly
payments of $1,500.00 per month to
[Ms. Francis] until one of the
following shall occur:
(A) [Ms. Francis]
instructs [Mr. Fucito] to
immediately pay her the
second $125,000.00
installment as mentioned
above, or
(B) [Ms. Francis] dies .
. ., or
(C) [Mr. Fucito] dies . .
. .
According to the agreement, should Ms. Francis die before receiving
the second $125,000.00 installment, any of the thirty-six monthly
installments of $1,500.00 remaining would be paid to Ms. Francis's
estate and the second $125,000.00 installment would be immediately
payable upon completion of the last monthly payment. Should Mr.
Fucito die before payment of the second $125,000.00 installment,
and should Ms. Francis receive at least a $200,000.00 life
insurance benefit payable to her as a beneficiary by reason of Mr.Fucito's death, then “[Mr. Fucito's] estate is not liable for the
payment of any balance due to [Ms. Francis] under this distributive
award.” However, in the event that Ms. Francis did not receive at
least $200,000.00 in life insurance proceeds, then Mr. Fucito's
“estate shall be liable for the payment of any balance due to [Ms.
Francis] under this distributive award.”
Mr. Fucito paid the first $125,000.00 installment in October
1992. He also completed payment of the thirty-six monthly
installments of $1,500.00 on 13 September 1995. Just prior to
receiving her thirty-sixth monthly payment, Ms. Francis wrote a
letter to Mr. Fucito electing to forego immediate payment of the
second $125,000.00 installment and instead continue receiving the
$1,500.00 monthly installments. Realizing that as of January 2003
he would have paid Ms. Francis a second $125,000.00 in $1,500.00
installments, in December 2002 Mr. Fucito sent a warranty deed to
Ms. Francis for her to sign pursuant to the settlement. Ms.
Francis refused, stating that the plain language of her election
obligated Mr. Fucito to continue making payments until she
requested a $125,000.00 payment or one of them died. Since none of
those triggering events had happened, she was not obligated to sign
the deed.
On 2 June 2003 Mr. Fucito instituted a declaratory judgment
action asking the district court to interpret the parties' rights
and obligations under the incorporated settlement agreement. He
contended that he had fully paid the distributive award and was now
entitled to have Ms. Francis sign the deed. He further argued thatany interpretation to the contrary, in particular Ms. Francis's
interpretation of his obligation, was contrary to law, the parties'
intent, and inconsistent with the settlement agreement as a whole.
He asked the court to determine whether the distributive award had
been paid in full; whether he had fully complied with the
conditions set out in the “Real Property” section of the agreement;
whether Ms. Francis had a duty to sign a deed to him transferring
her interest in the former marital home; and whether he had a
continuing duty to pay the distributive award. In turn, Ms.
Francis filed a motion for summary judgment, a motion to dismiss
for failure to state a claim upon which relief could be granted,
and a motion for judgment on the pleadings.
In its order entered 24 June 2004, the district court
interpreted the parties' incorporated agreement and agreed with Mr.
Fucito. The district court found that if the parties intended the
monthly payments to be a distributive award_thus having no tax
consequences_and also intended to waive alimony, then Ms. Francis's
election to receive a monthly payment of $1,500.00 must be read as
spreading the second $125,000.00 installment over a number of
months rather than having it paid all at once. The district court
found that under Ms. Francis's interpretation of the agreement the
monthly payments were indefinite, were not necessarily related to
her interest in the home, and under North Carolina law could not be
considered a distributive award. Since the parties agreed to waive
alimony, agreed to a property settlement “consistent with the
concept of equitable distribution”, intended to have no adverse taxconsequences, and also intended to have the agreement interpreted
according to the laws of this state, then the only interpretation
consistent with the parties' intent was that the continued monthly
payments were credits toward the second $125,000.00 installment.
Accordingly, the district court found that Mr. Fucito had paid a
total distributive award of $304,000.00 and that was the extent of
his obligation under the settlement agreement. Further, the
district court denied all of Ms. Francis's motions and ordered her
to convey her interest in the former marital home to Mr. Fucito
within ten days. Ms. Francis appeals.
Since Ms. Francis raises the issue that the district court
lacked subject matter jurisdiction to hear the declaratory judgment
action, we will address it first. She argues that when the
separation agreement, a contract, was incorporated into the consent
divorce judgment, the resulting judgment could not fall under any
category enumerated in section 1-254, which lists the subject
matters of which a court may hear a declaratory judgment action.
While a “contract or other writings constituting a contract”
is enumerated as one of the instruments a court can interpret
pursuant to a declaratory judgment action, Ms. Francis is correct
that a consent judgment is not so listed.
Any person interested under a deed, will,
written contract or other writings
constituting a contract, or whose rights,
status or other legal relations are affected
by a statute, municipal ordinance, contract or
franchise, may have determined any question of
construction or validity arising under the
instrument, statute, ordinance, contract, or
franchise, and obtain a declaration of rights,
status, or other legal relations thereunder.
N.C. Gen. Stat. § 1-254 (2003). However, our Supreme Court has
long held that “a judgment by consent is but a contract between the
parties put upon the record with the sanction and approval of the
Court . . . .” Yount v. Lowe, 288 N.C. 90, 96, 215 S.E.2d 563, 567
(1975). In fact, in Hemric v. Groce, this Court held that a
consent judgment is a contract and a party to a consent judgment
may file an independent action for a declaratory judgment regarding
the interpretation of the contract underlying the judgment. 154
N.C. App. 393, 397-98, 572 S.E.2d 254, 257 (2002) (citing Home
Health and Hospice Care, Inc. v. Meyer, 88 N.C. App. 257, 262, 362
S.E.2d 870, 873 (1987)); see also Ibele v. Tate, 163 N.C. App. 779,
782, 594 S.E.2d 793, 795 (2004). But the facts of this case
involve a consent divorce judgment with an incorporated settlement
agreement, a situation set out as an exception to the general rule
noted in Hemric. See id., 154 N.C. App. at 397 n.3, 572 S.E.2d at
257.
In Walters v. Walters, 307 N.C. 381, 386-87, 298 S.E.2d 338,
342 (1983), for practical considerations, our Supreme Court
fashioned a “one-size fits all” rule applicable to incorporated
settlement agreements in the area of domestic law, holding that
when parties present their separation agreement to the court for
approval, the agreement will no longer be considered a contract
between the parties, but rather a court-ordered judgment. Ms.
Francis argues that since their settlement agreement is a court-
ordered judgment, the district court did not have jurisdiction to
“modify” it under the auspices of a declaratory judgment action. Instead, Mr. Fucito should have sought an action for contempt. See
Walters, 307 N.C. at 386, 298 S.E.2d at 342 (enforcement shall be
by contempt).
While we may disagree with Ms. Francis that the district court
“modified,” in the legal sense, any aspect of the parties'
agreement rather than “interpreted” it, we nonetheless agree with
her claim. In Doub v. Doub, 68 N.C. App. 718, 719-20, 315 S.E.2d
732, 734 (1984), aff'd as modified, 313 N.C. 169, 326 S.E.2d 259
(1985), this Court reviewed a breach of contract action and held
that although Walters did not apply to the parties' incorporated
separation agreement, even if it did, plaintiff still had an
election under Walters to bring independent actions under contract.
Our Supreme Court affirmed the holding of Doub in a per curiam
opinion but disavowed the language regarding an election of
remedies under Walters. Instead the Court stated, “[t]he parties
to a consent judgment controlled by Walters do not have an election
to enforce such judgment by contempt or to proceed in an
independent action in contract.” Doub v. Doub, 313 N.C. 169, 171,
326 S.E.2d 259, 260-61 (1985) (emphasis in original). Rather,
“[t]hese court ordered separation agreements, as consent judgments,
are modifiable, and enforceable by the contempt powers of the
court, in the same manner as any other judgment in a domestic
relations case.” Id. at 170-71, 326 S.E.2d at 260 (quoting
Walters, 307 N.C. at 386, 298 S.E. 2d at 342). While the Court did
not specifically exclude the remedy of a declaratory judgment
action, we find the Court's language persuasive. The Supreme Court in Doub specifically prohibited “independent
action[s] in contract.” This Court in Hemric and Ibele referred to
a declaratory judgment action as “an independent action,” one that
arises out of contract. See Hemric, 154 N.C. App. at 398, 572
S.E.2d at 257; Ibele, 163 N.C. App. at 782, 594 S.E.2d at 795; see
also Home Health, 88 N.C. App. at 262, 362 S.E.2d at 873 (1987) (“A
declaratory judgment is a separate and independent action to have
the court 'declare rights, status, and other legal relations,
whether or not further relief is or could be claimed.'” (quoting
N.C. Gen. Stat. § 1-253 (2003)). Were we to allow Mr. Fucito to
bring an independent declaratory judgment action to “interpret” the
parties' consent divorce judgment, at best we would be adding an
unnecessary nuance to a now settled area of the law, and at worst
we would violate the mandate of the Supreme Court in Doub.
Thus, Mr. Fucito can bring an action for contempt, arguing
that according to the judgment Ms. Francis is under an obligation
to sign the deed. However, on these specific facts, it is unclear
if that remedy will be adequate for the parties. For if the
previous judgment of the court is ambiguous, as Mr. Fucito
contends, then
the law with respect to ambiguous judgments is
not very well-developed in our State. What
little law there is can be summarized as
follows: Where a judgment is ambiguous, and
thus susceptible to two or more
interpretations, our courts should adopt the
interpretation that is in harmony with the law
applicable to the case.
Blevins v. Welch, 137 N.C. App. 98, 101-02, 527 S.E.2d 667, 670
(2000) (citation omitted). And further, “[i]f the prior order isambiguous such that a defendant could not understand his respective
rights and obligations under that order, he cannot be said to have
'knowledge' of that order for purposes of contempt proceedings.”
Id. at 103, 527 S.E.2d at 671.
Nonetheless, in light of Walters and Doub, we are compelled to
resolve some ambiguity regarding the power of the court on contempt
proceedings to construe or interpret a prior consent divorce
judgment in Mr. Fucito's favor. This Court held in Home Health
that a court had no authority on contempt proceedings to construe
or interpret a prior consent judgment. 88 N.C. App. at 262, 362
S.E.2d at 873 (“A declaratory judgment action may not be commenced
by a motion in the cause, any more than can an action to modify or
reform a consent judgment.”) (citing Holden v. Holden, 245 N.C. 1,
95 S.E.2d 118 (1956)). However, in Blevins the Court seemingly
rejected a similar argument.
[D]efendants contend the trial court
impermissibly transformed the contempt action
that was before it into a declaratory judgment
action by considering whether the easement
awarded in the 1983 judgment included both the
Mountain and Center roads. We find this
argument to be without merit. A contempt
proceeding requires willful violation of a
prior court order or judgment. Hancock v.
Hancock, 122 N.C. App. 518, 523, 471 S.E.2d
415, 418 (1996). As such, an interpretation
of the prior court order in this case was
required.
Blevins, 137 N.C. App. at 100-01, 527 S.E.2d at 670. With the
limitation of remedies stated in Walters and Doub for disputes
arising from settlement agreements incorporated into consent
divorce judgments, we agree with the Court in Blevins and hold thatthe trial court has the authority under those circumstances to
construe or interpret an ambiguous consent judgment. When doing
so, however, it is appropriate to consider normal rules of
interpreting or construing contracts. See Holcomb v. Holcomb, 132
N.C. App. 744, 513 S.E.2d 807 (1999); 3 Suzanne Reynolds, Lee's
North Carolina Family Law § 14.32e (5th ed. 2002).
Having determined that the district court lacked subject
matter jurisdiction over a declaratory judgment action to interpret
the parties' obligations arising from their incorporated settlement
agreement, we vacate the district court's order. We note, though,
that the parties are not without further remedy regarding their
perceived obligations under the agreement.
Vacated.
Judges CALABRIA and GEER concur.
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