Court of Appeals holds alimony agreement not ambiguous

In the December 28, 2012 opinion in Gaffney v. Gaffney, 401 S.C. 216, 736 S.E.2d 683 (Ct. App. 2012), the South Carolina Court of Appeals reversed the family court’s determination that the parties’ Marital Separation Agreement (MSA)was ambiguous and terminated husband’s alimony obligation completely.

The parties were divorced in 2009.  Their divorce decree approved an MSA that provided for husband to pay wife a set and limited amount of alimony of $7,000 per month in alimony, with a maximum of one hundred twenty payments.  Moreover, the parties agreed:

This alimony shall be offset dollar for dollar for any interest income Wife receives from her share of the note receivable from [the LLC]. If [the LLC] ever reduces the principal on the debt due to Wife for the note receivable, then in such event Husband’s alimony obligation to Wife shall automatically reduce proportionate to the reduction made in the principal obligation.

The agreement further contained an amendment which concluded: “to the extent Wife is compensated under the employment agreement with [the LLC], any such compensation shall be credited against husband’s alimony obligation owed to Wife by the terms of the [MSA].”

Husband then made 22 alimony payments of $7,000 ($154,000 total) when Wife received $888,120.58, which was the principal balance owing on her half of the parties’ loan to the LLC.  Husband then stopped making alimony payments and Wife filed a rule to show cause.

At a hearing on June 24, 2011, the family court determined the alimony provision of the MSA was ambiguous and received testimony from the parties as to their intent. Husband testified they had agreed to divide the interest payments from the LLC of $12,000 per month evenly between them.  He denied they intended for Wife to receive no more than $6,000 from the interest payments, explaining any additional alimony he paid would have come from his half of the interest payments because they were his only source of income at the time.  However, he admitted the LLC issued a Form 1099 to each party reflecting income of $72,000 per year, or $6,000 per month, and that under the amendment to the MSA, Wife received the remaining $1,000 per month in alimony through her status as an employee of the LLC. Husband stated he did not believe “there was really any concern” about the source of his alimony payments, as long as he ensured Wife received the full $7,000 each month.

Wife testified the $6,000 per month in interest payments she received from the LLC was credited toward Husband’s alimony obligation.  Furthermore, she understood that when the LLC reduced the principal owing on the loan, any corresponding automatic reduction in alimony would apply only to the $6,000 portion of alimony that was paid directly to her in the form of loan interest.

The family court expressed concern that the MSA did not directly state full payment of the loan by the LLC would negate Husband’s alimony obligation.  In its written order, it found Husband was not in compliance with the divorce decree and the MSA, but declined to find his non-compliance contemptuous.  In reviewing the parties’ intent when they executed the MSA, the family court found they had “intended that the automatic reduction available to [Husband] in the event of the payoff of the Note [was] proportionate to the total alimony obligation.  Therefore the payoff of the Note results in a $6,000 per month reduction in total alimony obligation for Husband,” leaving him owing Wife $1,000 per month.  Husband appealed.

The Court of Appeals found the agreement was “clear and unambiguous.”  It determine that Husband’s maximum alimony obligation was $840,000 ($7,000 per month for 120 months) and that the $888,120.58 from the LCC was unambiguously to be credited to this obligation.  Since his total alimony payments exceeded $840,000, the Court of Appeals ended any further alimony obligation.

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