Court of Appeals opinion resolves numerous minor legal issues regarding contempt

Posted Thursday, December 2nd, 2021 by Gregory Forman
Filed under Contempt/Enforcement of Orders, Of Interest to Family Court Litigants, Of Interest to Family Law Attorneys, South Carolina Appellate Decisions, South Carolina Specific

The December 1, 2021, Court of Appeals opinion in Campione v. Best, 435 S.C. 451, 868 S.E.2d 378 (Ct.App. 2021), resolves a number of interesting minor issues that frequently recur during contempt cases.

Campione and Best divorced in 2008 with two property settlement agreements being made court orders as part of that process. One provision of those agreements required Husband to provide Wife the first $50,000 per year he made from payments he received from patents, trademarks, and licensing agreements. This was to be paid at a rate of $12,500 per quarter. In 2009, Husband sold the patents in return for a note that paid him $375,000 per quarter through June, 2023. Seven years later he stopped paying Wife these funds. He received advice from a patent lawyer that, since he no longer owned the patents, the sale proceeds were no longer subject to the quarterly payment provision.

In the divorce, Husband further agreed to pay $12,000 per month in alimony via direct deposit. He initially paid his alimony by directly depositing his social security check into Wife’s account, together with a second payment for the balance. Husband’s social security benefit increased over time, but he never reduced the amount of his second payment, resulting in an overpayment of alimony to Wife.

In the divorce, Husband also agreed to maintain Wife as the irrevocable beneficiary for two specific life insurance policies. Husband subsequently substituted his company as the beneficiary for one of these policies but simultaneously named Wife as beneficiary of a new policy with a similar benefit amount.

Wife eventually filed a rule to show cause over Husband’s failure to make the quarterly payments and the change in beneficiary on the life insurance policy. Husband filed his own rule for the overpayment of alimony (it is unclear what allegations he made that Wife was not following the order).

At trial, the family court found the quarterly payments provision was broad enough to encompass the note payments. It did not find Husband in contempt on this issue because Husband was relying upon the advice of counsel. It ordered him to pay $75,000 plus interest in missed payments. It found him in contempt for removing Wife as the beneficiary on the designated policy. It did not find Wife in contempt for the overpayment of alimony. It did grant Husband a setoff of $26,025 for the alimony overpayments. Finally it awarded Wife $60,000 in attorney’s fees and costs. Both sides appealed.

The Court of Appeals initially addressed the standard of review, finding some confusion in the law–which I frankly don’t see–as to whether the proper standard for contempt actions is abuse of discretion or de novo. However it found the standard of review would not affect its resolution.

It affirmed the finding that Husband was required to make the quarterly payments, finding the agreement was broad enough to encompass proceeds he received from the sale of the patents. It noted Husband “could have structured the 2009 sale to receive the entire sale price that same year and had that happened he would not have had to pay [Wife] from those funds beyond that date. But that is not what happened.”

It reversed the finding that Husband was not in contempt for failing to make the quarterly payments. It noted Husband continued to make the quarterly payments for seven years after the sale. It noted him boasting “that after he signed the provision, he never read it again until this contempt action arose. This curious admission sinks [Husband’s] claim that he sought the advice from patent counsel before stopping the payments and the contempt action began. It also puts to bed any idea [Husband] was acting in good faith.”

It further rejected Husband’s argument that his reliance on counsel was a defense to the contempt allegation, holding “advice of counsel not a defense to contempt but may be a mitigation…We decline to permit the mere advice of counsel to immunize parties from claims of contemptuously disobeying plain and explicit court orders.”

The Court of Appeals found Husband acted in bad faith in justifying the contempt finding:

We acknowledge a party who attempts in good faith to comply with a court order should not be held in contempt. But the record discloses [Husband’s] contempt was not paved with good faith but with cunning. For instance, [Husband] insisted the stream of payments from Char-Broil he has received since the 2009 sale were not earnings from his patents but from “the note.” In the contempt context, failure to obey is not excused just because a party dons blinders and convinces himself a court order does not mean what it plainly says.

Husband argued that switching life insurance policies did Wife no harm and therefore he could not be held in contempt. Husband said he made the switch to save on premiums but the Court of Appeals held this “provided no license to disobey the court order.” It further noted Wife was harmed by this switch. “The record reverbs with concrete proof of the anxiety she endured and the needless time and energy she spent trying to restore the financial security the life insurance provision was designed to provide her.”

On appeal, Wife objected to the setoff of Husband’s alimony overpayment. She first claimed that Husband failed to plead setoff as an affirmative defense. However, as the setoff arose from Husband’s contempt claim, he was not required to. Wife also alleged equitable estoppel, arguing Husband “failed to monitor the amount of his social security benefit, causing her to rely on the additional alimony.” The Court of Appeals noted equitable estoppel requires intent to mislead and Husband’s “conduct was more akin to inattention than intent.”

Finally both sides appealed the attorney fee award. The Court of Appeals affirmed the family court’s finding that Wife’s requested fees of $110,000 “far exceeded the range of reasonableness for the issues tried.” The family court apparently applied general family court attorney fee factors, which also include the financial impact of the award, rather than the ones for civil contempt, which don’t. However both standards consider “the reasonableness of the fees sought and the benefit obtained.” Because the family court considered those factors, the Court of Appeals affirmed the fee award.

Campion addresses numerous issues that frequently recur in contempt proceedings. I am prosecuting contempt cases right now in which two of the issues below were being raised in defense. Of particular note are:

• On the burden of proof, I believe Stoney v. Stoney, 422 S.C. 593, 595–96, 813 S.E.2d 486, 487 (2018) established that all substantive family law issues are subject to de novo review on appeal. Earlier this year, Taylor v. Taylor, 434 S.C. 307, 863 S.E.2d 335 (Ct. App. 2021) cited a de novo standard of review for contempt. But perhaps the issue is not as settled as I thought.
• While it was clear a party in contempt could challenge a fee claim by arguing it is unreasonable, it is nice that Campion provides an explicit successful example.
• Folks often try to defend contempt allegations by citing their reliance on advice of counsel. Prior to Campion no family law opinions rejected that argument. Assuming Campion remains good law, advice of counsel is not a defense to contempt but may be a mitigation.
Campion establishes that equitable estoppel cannot be created through inattention.

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