Smith v. Smith

BISHOP, Judge. This appeal and cross-appeal arise out of: a “Motion to Determine Arrearages”, filed by appellant, Kathleen Smith (“Kathleen”), on unallocated alimony and child support payment which she was to receive under a property settlement agreement; and a “Counter-Motion to Determine Arrearages”, filed by appellee, Frederick D. Smith, (“Frederick”), to determine his entitlement to certain credits allegedly due for direct costs incurred by him for the support of the parties’ minor children. After taking testimony and receiving other evidence on the issues, the Circuit Court for Anne Arundel County (Thieme, J.) issued an order which determined that, although a judgment of approximately $27,365 in arrearages was due Kathleen, no money would be awarded because Frederick was entitled to credits, by way of recoupment, in the amount of approximately $28,000, and the arrearages and the credits cancelled each other. Kathleen appealed that order, and Frederick filed a cross appeal.

The issues before this Court are: ⁶⁵⁴ I. Whether the circuit court judge erred in calculating the amount of the arrearages due Kathleen at $27,365.

II

Whether the non-modification clause in the parties’ support agreement precluded the trial judge from granting Frederick any credit for the payments made by him in support of the children.

III

Whether, assuming that the court ordered recoupment does not violate the parties’ express agreement against modifications, Frederick is otherwise entitled to a credit for direct payments, made in support of the minor children, against the arrearages due under the agreement.

IV

Whether, assuming that Frederick was entitled to a credit against the amount of arrearages, the circuit court judge erred in determining that Frederick was entitled to a credit of $28,000. FACTS For purposes of this opinion we adopt the circuit court judge’s findings of fact: Frederick ... and ... Kathleen ... were married on May 14, 1966. Two children, Lisa and Frederick, Jr., were born to their union.

The parties first separated on December 22, 1982. Shortly thereafter, the parties entered into a Voluntary Separation and Property Settlement Agreement on April 16, 1983 (hereinafter referred to as “agreement”). The parties finally separated on October 21, 1983 and were divorced on January 6, 1986. [The terms and conditions of the Agreement were incorporated but not merged into the Judgment of Final Divorce.] Pursuant to paragraph eleven of the Agreement, it was stipulated that [Frederick] ... would pay to [Kathleen] ... on or before the first of each month the sum of One Thousand Four Hundred Fifty Three Dollars ($1,453.00) in unallocated alimony and child support. On January 25, 1984, the Agreement was amended by mutual consent to state that [Frederick] ... would pay $1,545.00 in unallocated alimony and child support.

Subsequent to this ⁶⁵⁵ amendment, [Frederick] ... unilaterally withheld $300.00 per month for approximately eight months [(April 1 to December 1, 1985) ], totaling $2,550.00. [Frederick] ... admits that the total payment amount was reduced by $300.00 when one of the minor children, Lisa, commenced living with [him]____ [Frederick later increased the amount withheld per month to an average of over $900 for the period January 1, 1986 until March 1988.] 1 II. PROCEDURAL HISTORY.... On January 6, 1986, the Circuit Court entered a Final Judgment of Divorce. [As part of the judgment,] the trial Court modified the unallocated alimony and child support payments,____ [Kathleen appealed the judgment on the ground that it violated the parties’ agreement not to modify the unallocated support payments.] On January 29, 1987, the Court of Special Appeals [, in Kathleen Smith v. Frederick D. Smith, No. 540, September Term 1986, filed January 29, 1987 (per curiam),] reversed the Circuit Court’s decision and held that the trial Judge erred in modifying paragraph eleven of the Agreement. The Appellate Court further ruled that the trial judge erred in retroactively modifying, by cancelling the accumulated arrearages, the portion determined to be child support.

On September 29, 1987, [on remand from the Court of Special Appeals] the Circuit Court entered a judgment in favor of [Kathleen] ... for $2,550.00, representing arrearages due and owing for the period from April 1, 1985 until December 1, 1985. [Kathleen then] ... filed a “Motion to Determine Arrearages” for the period of January 1, 1986 through September 1, 1987. [ (This motion is the basis for the instant appeal.) ] ... [Frederick] ... later [, on January 26, 1988,] filed a “Counter Motion ⁶⁵⁶ to Determine Arrearage and Establish Payment Amount” [under the Agreement. In his “motion” Frederick claimed] ... a credit in the establishment of an arrearage for amounts paid to ... [Kathleen] directly, and paid on behalf of the minor children of the parties to third parties ____ Subsequently, on March 14, 1988, [Kathleen] ... filed an Amended Motion to Determine Arrearages ... through March 1988. Following a hearing on the “motions”, the court awarded Kathleen a judgment of $27,365 for the arrearages accumulated from January 1986 until March 1988. The court then allowed Frederick a credit of $28,000 for money spent directly by him for the support of the children during 1985, 1986 and 1987.

I. Amount of Arrearages The circuit court judge determined that, as stipulated by the parties, the amount of arrearages due Kathleen under the agreement is $27,365 for the period April 1, 1985 through March 1988. According to the stipulated facts, however, this amount includes the arrearages of $2,550 for the period April 1, 1985 through December 1, 1985, for which Kathleen was granted a previous judgment on September 29, 1987. If the amount has been paid, in granting Kathleen a judgment for the arrearages which accrued prior to December 1, 1985, the court allowed her a double recovery of the $2,550. We hold that the chancellor was “clearly erroneous”, Md.Rule 8-131(c), in calculating the arrearages due under the present judgment at $27,365 and we reduce that amount by $2,550 to $24,815 unless the $2,550 has been paid.

II

Effect of the Non-Modification Clause In our previous decision, Smith v. Smith, No. 540, September Term 1986, filed January 29, 1987 (per curiam), ⁶⁵⁷ we expressly determined that “the support provision of paragraph eleven [, which relates to payment of unallocated alimony and child support,] is not subject to court modification.” Kathleen asserts that the circuit court, in allowing Frederick to recoup 2 certain expenses made for child support, has, in effect, “modified” the terms of the Agreement and thereby “exceeded this Court’s mandate” in Smith and ⁶⁵⁸ also subverted the rule enunciated in Quarles v. Quarles, 62 Md.App. 394 , 489 A.2d 559 (1985), that the courts may not modify an unallocated award for alimony and child support where that award, by its terms, is non-modifiable. We do not agree. 3 Recoupment occurs when “the defendant seeks compensation from the plaintiff for damages resulting from the same transaction upon which the plaintiffs claim is based ..First National Bank of Maryland v. Shpritz, 63 Md.App. 623, 638 , 493 A.2d 410 (1985), and the court, upon a finding of damage to both parties, orders a credit to the defendant for the damage caused by the plaintiff. As such, a recoupment does not effect the terms of the Agreement or any future performance made thereunder. A “modification” to a contract, in contrast to a “recoupment,” is made by the parties themselves, and not the courts, see, e.g., Taylor v. University Nat.

Bank, 263 Md. 59 , 282 A.2d 91 (1971); Thomas v. Hudson Motor Car Co., 226 Md. 456 , 174 A.2d 181 (1961), as the court is restricted to enforcing the terms of the contract as written by the parties and may not add or delete terms, Hasten Construction Co. v. Rod Enterprises, 268 Md. 318, 328-329 , 301 A.2d 12 (1973). Furthermore, a modification results in “an abandonment of the original contract and a creation of a new contract.” Linz v. Schuck, 106 Md. 220, 234 , 67 A. 286 (1907). Given this explanation, it is evident that the circuit court’s actions in this case effectuated a recoupment and not a contractually prohibited modification. The “credit” allowed Frederick against Kathleen’s judgment has no impact upon their future conduct under the Agreement.

Indeed, if Fred ⁶⁵⁹ erick should continue to make direct support expenditures for Lisa, rather than making the agreed payments to Kathleen, Kathleen would still have the right to sue under the Agreement to force Frederick to make the agreed payments under paragraph eleven and Frederick could not rely on the judgment sub judice as a defense to a claim for future arrearages. Accordingly, we hold that the circuit court, in allowing Frederick a credit against the arrearages, did not violate our previous mandate in Smith in which we determined that, under the terms of the Agreement sub judice, the court could not modify the unallocated support payment provision. Additionally, our finding a recoupment valid under the facts of this case does not subvert our holding in Quarles that the courts may not modify an unallocated support award for alimony and child support which, by its terms, is non-modifiable. In Quarles , the father was required under the support agreement to pay $800 in unallocated alimony and child support for his former wife, the custodial parent, and the parties’ two minor children.

He made the specified payments for two years and then unilaterally reduced the payments. In response to the former wife’s subsequent petition for contempt he filed a petition to modify the support on the ground that the oldest child had reached majority. This Court affirmed the circuit court’s denial of the requested modification and held that the parties had agreed that the payments were non-modifiable and there was no indication in the terms of the agreement that this restriction was to be excused in the event that either child attained their majority. We explained that our intent was merely to enforce the parties’ intent as embodied in their agreement.

Id. 62 Md.App. at 407 , 489 A.2d 559 . Unlike the situation in the case sub judice, the custodial parent in Quarles fully performed her agreed responsibility to raise both of the parties’ minor children. Kathleen, however, did not fully abide by the terms of the Agreement; she failed to provide for Lisa. It is this breach by Kathleen which allows Frederick to recoup his expenses.

See ⁶⁶⁰ Shpritz, supra. There having been no breach by the custodial parent in Quarles , no recoupment could have resulted from the custodial parent’s action there to enforce the support agreement. See id.

III

Recoupment Given that a recoupment did not violate the express terms of the Agreement, we now consider whether the circuit court erred in its determination that that defense was available under the facts sub judice. Preliminarily, we note that Frederick, in his brief, “concedes that credit should not be allowed for payments made to or on behalf of Frederick, Jr.” Accordingly, we reverse that portion of the circuit court’s order which allowed Frederick credit for such expenses and confine our discussion to the credit allowed for Frederick’s expenditures for Lisa. In Coffman v. Hayes, 259 Md. 708, 716 , 270 A.2d 808 (1970), wherein “the court was called upon to grant a credit toward arrearages arising under a separation agreement,” the Court held that: a “ compulsion of circumstances ” coupled with express or implied consent on the part of the mother to a mode of payment other than that prescribed in a decree may serve as a basis for giving credit to the father for the period of time that he actually cared for the children. 259 Md. at 716 , 270 A.2d 808 (quoting Bradford v. Futrell, 225 Md. 512, 518-519 , 171 A.2d 493 (1961), a case involving support payments made pursuant to a divorce decree rather than a separation agreement). 4 The Court explained that a “compulsion of circumstances” arises when the custodial parent “voluntarily abandon[s],” id. at 716, 270 A.2d 808 , a ⁶⁶¹ child but not where the father acts as “a volunteer,” id., in caring for a child. The evidence in the matter sub judiee, considered in light of the facts discussed in Coffman , justifies the circuit court’s finding that Frederick was entitled to a credit for the amounts which he spent on Lisa’s support and maintenance during the period of January 1, 1986 through March of 1988 — the period covered in Kathleen’s complaint.

Kathleen herself testified that, in April of 1985, she “made ... [Lisa] go live with her father” and there is no indication in the record that Lisa ever returned to her mother’s care. This direct admission by Kathleen indicates that Frederick assumed care of Lisa under a “compulsion of circumstances,” 259 Md. at 716 , 270 A.2d 808 , and that he did so with the “express or implied ... consent ... of the mother,” id.; White v. White, 34 Md.App. 635 , 368 A.2d 1061 (1977). As noted, supra, however, the evidence only justifies the credit allowed Frederick for the expenses he incurred from January 1, 1986 through March of 1988; it does not support the credit which the chancellor allowed Frederick for support payments made prior to 1986. By the consent judgment of September 29, 1987, Frederick, in effect, waived any defense he may have had, by way of recoupment or otherwise, to the arrearages accrued prior to 1986.

The chancellor was, therefore, clearly erroneous, Md. Rule 8-131(c), in his determination that Frederick was entitled to $10,789 for the support payments he made in 1985. This finding, as Kathleen states, is not supported by the evidence in the record. 5 ⁶⁶² Furthermore, to allow a recoupment under these circumstances would be inconsistent with the purposes underlying that equitable principle: Recoupment is sometimes spoken of as a rule of strict justice, or as based on the principle that it is just to settle both sides of a transaction at once. It is a method of preventing circuity of action, and rests on a principle that to avoid circuity and multiplicity of actions a defendant should be allowed, at his election, to give in evidence matters growing out of the same transaction by way of defense, instead of being required to file a cross action, when this can be done without violation of legal principles or great inconvenience in practice. The doctrine of recoupment does not allow one transaction to be offset against another, but only permits a transaction which is made the subject of suit by the plaintiff to be examined in all its aspects and a judgment to be rendered that does justice in view of the transaction as a whole.

Recoupment exists in equity as well as at common law, and has been said to be equitable in nature. It reduces the claim affirmatively urged so far as in reason and conscience it ought. 20 Am.Jr.2d Counterclaim, Recoupment and Setoff § 6 (1965); see also State v. Hogg, 311 Md. 446, 465-66 , 535 A.2d 923 (1988). To allow Frederick credit for payments made prior to 1986 does not prevent “circuity of action,” id., as the issue of the 1985 arrearages was the subject of a consent judgment between