Fantle v. Fantle

KRAUSER, Judge. We are asked to resolve the issue of whether voluntary overpayments of alimony may be applied to subsequent underpayments of alimony that were in violation of the parties’ property settlement agreement and the court order incorporating that agreement. In this case, appellant, Jeffrey Fantle, voluntarily made overpayments of alimony to his former wife, appellee, Judy Fantle, and then, when his. financial circumstances deteriorated, reduced his payments to an amount less than that required by the parties’ property settlement agreement and. ordered by the Circuit Court for Montgomery County. Five months after appellee demanded that appellant resume making the full payments originally ordered by the court, appellant filed a petition to modify alimony, and appellee countered by filing a motion to hold appellant in contempt for the underpayments of alimony.

In granting appellee’s motion in part, the circuit court held that appellant could not lawfully apply overpayments in alimony to subsequent arrearages, as there had been no formal “court order or agreement” modifying the parties’ property settlement agreement to “satisfy a reduction in the amount of [appellant’s] arrearage.” It therefore entered a judgment in favor of appellee and against appellant in the amount of $16,400 in underpaid alimony. From that judgment, appellant noted this appeal. Appellant presents the following issues, which we have reworded and reordered to facilitate our review: I. Whether the circuit court erred in holding that appellant was not entitled to apply prior overpayments of alimony to later underpayments of alimony.

II

Whether appellee’s agreeing to or acquiescencing in appellant’s request to lower his monthly alimony pay ⁶⁸¹ ments precludes appellee from later claiming an arrearage during that period of acquiescence.

III

Whether appellee failed to establish by clear and convincing evidence that appellant’s excess alimony payments to appellee were “gifts.” IV. Whether the circuit court erred in prohibiting appellant from testifying as to why he overpaid alimony from September 1995 through December 1997. For the reasons that follow, we shall vacate the judgment of the circuit court because it erred in concluding, as a matter of law, that in the absence of a formal “court order or agreement” it had no discretion to apply prior overpayments of alimony to subsequent underpayments and because it erroneously prohibited appellant from testifying as to his reasons for making those overpayments. That testimony would no doubt have shed light on whether the overpayments were intended as a gift or otherwise.

Because we shall vacate the circuit court’s judgment on those grounds and remand this case for further proceedings consistent with this opinion, we shall not address the remaining issues, except to the extent we believe it will be helpful to do so for the guidance of the circuit court. BACKGROUND Appellant and appellee were married on January 14, 1973, and separated seventeen years later on February 23, 1990. The parties subsequently entered into a property settlement agreement (“Agreement”). That Agreement required appellant to pay appellee monthly alimony of $2,500 from March 1994 through August 1995.

On April 11, 1994, the Circuit Court for Montgomery County granted the parties a Judgment of Absolute Divorce. Their property settlement agreement was incorporated but not merged into that decree. Beginning September 1995, the Agreement reduced appellant’s alimony payments to $2,000 per month for the remainder of appellant’s payment obligation. ⁶⁸² Despite this reduction, appellant continued to pay appellee $2,500 per month from September 1995 through November 1997, resulting in an overpayment of $13,500. 1 According to appellant, he had overpaid his alimony obligation because “Judy needed the money, and ... [h]e was making enough money” at that time to do it. At the hearing on this matter, however, appellant was denied the opportunity to expand on this explanation by the court.

According to appellant, his financial "circumstances began to deteriorate in February 1997, and in August 1998 appellant requested that appellee permit him to reduce his monthly alimony obligation from $2,000 to $1,000. Appellant testified that appellee “was unhappy, but she agreed to [the reduction].” Beginning August 1998, appellant reduced his payments to $1,000 per month. In a letter dated April 23,1999, to appellant, appellee wrote: I agreed to accommodate your cash flow needs for a period of time because you willingly paid me $500 more each month for a year or so shortly after the divorce to help me through a financially difficult time. So I extended the same courtesy to you.

However, as I explained to you last week, I can no longer afford to do this because of the financial strain it is causing me. In that letter, appellee demanded that appellant resume making alimony payments of $2,000 per month. Despite appellee’s demand, appellant continued to pay only $1,000 per month. On October 7, 1999, appellant filed in the Circuit Court for Montgomery County a petition to modify alimony, and on December 13,1999, appellee filed a motion to hold appellant in ⁶⁸³ contempt for having failed to pay his $2,000 monthly alimony obligation since August 1998.

On June 2, 2000, after finding that appellant had suffered an “approximately 60 percent” reduction in income, the circuit court granted appellant’s petition to modify alimony and reduced his monthly alimony obligation from $2,000 to $1,200. The court, however, denied appellee’s motion to hold appellant in contempt, explaining: “I do not find that Mr. Fantie’s actions have been contemptuous. I think he showed good will in paying more money when he had it and feels that he did not have the money to maintain the $2,000.00, and I cannot find that that is contemptuous.” Nonetheless, the court granted a judgment in favor of appellee in the amount of $16,400, representing the alimony appellant had underpaid from August 1998 through May 2000. DISCUSSION Appellant argues that the circuit court erred in ruling that he was not entitled to apply overpayments of alimony to later underpayments of alimony.

In so ruling, the circuit court stated that, in the absence of a formal “court order or agreement” modifying the parties’ Agreement, appellant could not lawfully apply the overpayments to subsequent arrearages and that it lacked the discretion to find otherwise. The trial court further explained, “unless there is a written agreement modifying [the parties’ agreement], I think any payments over and above what appellant was required to make would not be recouped in this type of action.” As the court did not believe it had the discretion to retroactively apply overpayments to past due underpayments of alimony, it did not consider the arguments advanced by appellant for doing so, namely, that appellee had either agreed to the reduction or at least acquiesced to it or had in effect waived her claim to the difference between the reduced payment and the court-ordered payment. Nor did the court consider, we should add, appellee’s claim that the overpayments were intended as a gift. ⁶⁸⁴ We begin our analysis by noting that this Court recently held that Maryland statutory law does not “bar modification of alimony retroactive to a date preceding the filing of a request.” Langston v. Langston, 136 Md.App. 203, 222 , 764 A.2d 378 (2000), cert. granted, 363 Md. 661 , 770 A.2d 169 (2001). And the retroactive modification of alimony is “a matter for the trial court in the exercise of its discretion.” Id.

In Langston , this Court considered whether Dr. Langston could, without a court order but allegedly in accordance with his separation agreement, unilaterally reduce his alimony payments to Mrs. Langston, because of a diminution in income. We also considered the larger question of whether Maryland law permits a court to modify retroactively alimony payments to a date preceding the filing of a request for modification. In that case, we held that the language of the Langstons’ separation agreement contemplated court approval of any change in the amount of alimony. As for the trial court’s right to reduce pre-petition alimony, we held that not only does Maryland law not prohibit such a reduction but in fact the trial court possessed the discretion to do so under Maryland Code (1984, 1996 Repl.Vol., 2000 Supp.), § 11-107(b) of the Family Law Article.

That provision provides that “[s]ubject to § 8-103 ... the court may modify the amount of alimony awarded as circumstances and justice require.” We further held that although the parties’ separation agreement “does not provide for modification of alimony retroactive to the date when [Dr. Langston] first sustained a decrease in income,” id. at 227, 764 A.2d 378 , the court may exercise its discretion and retroactively modify an alimony obligation. We cautioned, however, that because such a modification could “cause extreme hardship to the payee spouse,” for whom it was “too late ... to cancel or adjust expenses already incurred,” id. at 234-35 , 764 A.2d 378 , the trial court “should be wary of permitting” retroactive modification of alimony. Indeed, we added that “principles of equity require compelling circumstances to justify such a request.” Id. at 234 , 764 A.2d 378 . As in Langston , there is nothing in the parties’ Agreement that would prohibit a retroactive modification of alimony. ⁶⁸⁵ Paragraph 12(c) of the Agreement addresses the question of modification by simply stating that “[a]limony as set forth herein shall be modifiable technically, but shall not be subject to extension.” Nor, as we observed