Christopher David McGinnis v. Nadine Anne McGinnis , 69 Va. App. 572 ( 2018 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Beales, O’Brien and Malveaux
Argued at Richmond, Virginia
PUBLISHED
CHRISTOPHER DAVID McGINNIS
OPINION BY
v. Record No. 0678-18-2 JUDGE RANDOLPH A. BEALES
DECEMBER 11, 2018
NADINE ANNE McGINNIS
FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY
Timothy J. Hauler, Judge
Alexandra D. Bowen (Bowen Ten Cardani, PC, on brief), for
appellant.
Sarah J. Conner (Rick A. Friedman, II; Mary Ashby Brown;
Jillian M. Smaniotto; Friedman Law Firm, P.C., on brief), for
appellee.
Christopher David McGinnis (“husband”) appeals the final decree of divorce of the
Circuit Court of Chesterfield County awarding Nadine Anne McGinnis (“wife”) a lump sum
award of $150,000 in “equitable restitution.” On appeal, husband contends that the circuit court
erred in making this monetary award because of “the absence of any legal authority for such an
award incidental to a divorce.”
I. BACKGROUND1
On appeal, we are required to view the facts in the light most favorable to wife because
she was the prevailing party before the trial court on this issue. See Wright v. Wright, 61
Va. App. 432, 451, 737 S.E.2d 519, 528 (2013). So viewed, the evidence shows that husband
and wife were married on April 20, 1996. Two children were born to the marriage – one in 2010
and one in 2012. Wife, a graduate of Virginia Commonwealth University with a fine arts degree,
worked as a graphic designer until 2010 when the parties’ oldest child was about three months
old. Husband was the sole shareholder of a profitable printing business named “Digital Ink.”
The parties separated in June 2013, and wife filed for divorce on July 15, 2013, alleging
that husband had committed adultery. After the filing, the parties litigated issues relating to the
divorce, child custody, child support, and spousal support at various hearings for the next several
years.
On September 27, 2017, the parties appeared before the Circuit Court of Chesterfield
County with the intention of resolving and finalizing all the outstanding matters relating to the
divorce. At the time of the hearing, both husband and wife had filed for bankruptcy. Husband’s
printing business, Digital Ink, had suffered a financial downturn, and the assets of that business
had been acquired by a business named “BMST,” where husband stated that he was working as
an employee. The marital residence had been foreclosed upon (and later purchased by one of
BMST’s investors and his wife). As a result of these and other changed circumstances, the trial
judge stated at the beginning of the hearing, “I don’t have any proposed schemes of equitable
1
The record in this case was sealed. Nevertheless, the appeal necessitates unsealing
relevant portions of the record for purposes of resolving the issues raised by appellant husband.
Evidence and factual findings below that are necessary in order to address the assignments of
error on appeal are included in this opinion. Consequently, “[t]o the extent that this opinion
mentions facts found in the sealed record, we unseal only those specific facts, finding them
relevant to the decision in this case. The remainder of the previously sealed record remains
sealed.” Levick v. MacDougall, 294 Va. 283, 288 n.1, 805 S.E.2d 775, 777 n.1 (2017).
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distribution and I’m assuming [that is] because there’s nothing but debt to distribute.” Wife’s
counsel then informed the circuit court that, as a result of the lack of marital assets and the
parties’ bankruptcies, wife was “not asking the Court to hold onto equitable distribution or
reserve it.” Wife’s counsel stated that wife was, in fact, “waiving equitable distribution.”
Most of the September 27, 2017 hearing consisted of counsel’s arguments on the amount
of spousal support that the circuit court should award to wife. Both attorneys relied on the
depositions of the parties and other witnesses taken in August and September 2017 to support
their contentions. Wife’s counsel requested both a periodic and lump-sum award of spousal
support. She argued that, since the separation, husband had spent an “exorbitant amount of
money on jewelry” and expenses for other women. Wife’s counsel also argued that husband was
essentially an owner of BMST and that he had access and permission to use company money and
assets as his own. Husband’s counsel argued that the transaction between Digital Ink and BMST
was legitimate, and defended husband’s use of company funds. Husband’s counsel also claimed
that wife was voluntarily unemployed and therefore that income should be imputed to her. Upon
completion of the arguments at trial, the judge informed the parties that he would rule after he
had the opportunity to review the transcript from the proceeding and the parties’ respective
written submissions.
On December 13, 2017, the parties returned to the circuit court, and the judge announced
that he would read to the parties the letter opinion that he had prepared after the September 27,
2017 hearing.2 On the issue of spousal support, the judge recited each factor listed in Code
§ 20-107.1(E). After stating each factor, he listed the facts that he found relevant to each factor.
On the last factor, however, in Code § 20-107.1(E), factor 13, he stated, “There was no evidence
2
A letter opinion was never entered. Instead, the circuit court incorporated its oral
findings of fact into the final decree of divorce entered on March 26, 2018.
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presented as to Factor 13.” After considering and discussing each of these factors, the circuit
court awarded wife $4,000 per month in spousal support.
The judge then told the parties:
Now, in addition, in addition, the Court awards
Ms. McGinnis a lump sum award of rehabilitative alimony of
$150,000.00. In conjunction with the factors specified in the Code
of Virginia, Section 20-107.1, the Court considered
Ms. McGinnis’s need for a lump sum award.
Mr. McGinnis has failed to pay pendente lite support,
demonstrating his future unwillingness to pay. Furthermore,
Ms. McGinnis displays an immediate need for such an award in
order to maintain herself.
The lump sum rehabilitation alimony award is distinct and
separate from the spousal support award. The Court views this
award as equitable restitution for unjust enrichment by, of
Mr. McGinnis, occasioned by his gross waste and dissipation of
marital assets in this matter.
The judge then recited fourteen findings of fact that led him to make the “equitable
restitution” award. These facts included specific findings regarding husband’s spending on other
women, his apparent ownership-type interest in BMST, his use of that company’s assets, his sale
of the Digital Ink building – a marital asset – for $1.25 million (of which he received $244,174
and wife received $0), and his failure to pay the mortgage on the marital home resulting in its
foreclosure.
On March 23, 2018, the parties again appeared before the circuit court to address
husband’s objections to the circuit court’s oral ruling – specifically, the $150,000 lump sum
award. During argument regarding the appropriateness of the $150,000 award and how and
when the award should be made, counsel for wife stated, “I think the Court made it absolutely
clear this [the $150,000 lump sum award] is spousal support.” At the conclusion of the
arguments, however, the judge corrected her, stating:
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All right. Okay. This issue of equitable restitution I would
suggest to you it is not something that came to me in a dream.
First of all, there is case law supporting that concept, and there is a
Virginia case that discusses that concept. Now, has it been
accepted across the Commonwealth? I don’t know the answer to
that, and in that regard, Ms. Bowen [husband’s counsel], I think
that in accordance with this other -- I think you have laid out
essentially what I call a cornucopia of appellate issues, much better
suited for the Court of Appeals than for me . . . . Now, I
understand the printing business went upside down for
Mr. McGinnis, and I don’t know that that was his fault that the
printing business turned itself upside down, and I’m not suggesting
it is, but what I am suggesting is there is a lot of unexplained asset
disappearance in this case, and therefore this Court felt that the
term which was taken from the case law of equitable restitution
was very appropriate in this case. If the Court of Appeals thinks
I’m wrong, then so be it. That’s what they are there for. If the
parties choose to negotiate among themselves with regard to the
payment of those funds, I don’t have any problems with that, that
those funds be separated in six-month intervals if that’s what they
want to do. But it’s not support money for Mrs. McGinnis. It’s
exactly what it is termed to be. It’s equitable restitution for assets
that should have been transferred to her at some point in time that
just went poof and disappeared.
(Emphasis added.)
The judge told the parties that he was relying on two court opinions in making the award
– Palmer v. Palmer, 21 Va. Cir. 112 (1990), from the Circuit Court of Fairfax County and
Hubbard v. Hubbard, 603 P.2d 747 (Okla. 1979), from the Supreme Court of Oklahoma.
Husband’s counsel then sought confirmation from the judge that the award was not
spousal support. Husband’s counsel and the judge participated in the following exchange:
MS. BOWEN: So, Your honor, just for clarification, are you
re-characterizing the $150,000 as equitable restitution and not
spousal support?
THE COURT: I’m saying it’s restitution of - - to Ms. McGinnis.
MS. BOWEN: So it is not spousal support?
THE COURT: It wasn’t this Court’s intent to make it spousal
support.
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Counsel for husband then explained to the judge that both parties had prepared draft
orders and that both of the orders had characterized the lump sum award as spousal support
because that was what they understood the award to be. The judge told counsel, “Well, it’s not”
and agreed that the draft final order should be revised in order to “re-characterize it [the lump
sum award] as equitable restitution and eliminate reference to spousal support.”
On March 26, 2018, the circuit court entered the final divorce decree granting the parties
a divorce on the grounds of separation for more than one year. The order “incorporate[d] [the
circuit court’s] findings of fact as recited ore tenus on December 13, 2017.” The final order
states that husband “shall pay [wife], equitable restitution in the total amount of One-Hundred
and Fifty-Thousand ($150,000) dollars” in three annual installments of $50,000. It also states
“that there are no assets in the marital estate to equitably divide, and accordingly, there is no
equitable distribution.”3
II. ANALYSIS
In husband’s first assignment of error, he contends that the circuit court erred in awarding
wife the $150,000 because it lacked the statutory authority to make an award of “equitable
restitution.” This issue presents a question of law, which we review de novo. See Lewis v.
Lewis, 53 Va. App. 528, 542, 673 S.E.2d 888, 894 (2009).
Husband’s argument is predicated on his conclusion that this award of “equitable
restitution” was neither equitable distribution nor spousal support made under a different name.
On appeal, wife argues that although “the trial court obfuscated matters” with its language, it
3
The final order also states that wife shall pay husband $583 monthly in child support as
husband has sole physical and legal custody of the children. Therefore, the final order requires
husband to pay wife $3,417 per month ($4,000 per month in spousal support minus the $583 per
month wife owes to husband in child support). The final order also notes that custody and
visitation were resolved by a prior consent order entered on October 6, 2017. Those matters are
not before this Court in this appeal.
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intended the award to be spousal support made in “reliance upon factor thirteen (13) of Virginia
Code § 20-107.1(E).” Therefore, we must first decide if the “equitable restitution” award was
equitable distribution, spousal support, or an award of an entirely different nature.
The final divorce decree states “that there are no assets in the marital estate to equitably
divide, and accordingly, there is no equitable distribution.” (Emphasis added.) “Virginia law
recognizes a rebuttable presumption that ‘trial courts speak only through their written orders.’”
Dir. of the Dep’t of Corr. v. Kozich, 290 Va. 502, 511, 779 S.E.2d 555, 559 (2015) (quoting
McMillion v. Dryvit Sys., 262 Va. 463, 469, 552 S.E.2d 364, 367 (2001)). The final divorce
decree in this case is clear that the $150,000 award was not an award of equitable distribution
because there was no equitable distribution ordered in the divorce.
We also cannot conclude that the award in this case was spousal support. The final
divorce decree does not expressly state that the award is not spousal support. However, at the
end of the March 23, 2018 hearing, the judge agreed that the parties needed to redraft their
proposed orders to characterize the award as equitable restitution – not spousal support. In the
final order itself, the equitable restitution award follows the award of periodic spousal support,
and it is based on “additional finding[s]” separate and apart from the findings supporting the
award of spousal support. Furthermore, contrary to wife’s argument that the award was made
pursuant to the thirteenth factor in Code § 20-107.1(E), the judge specifically stated that “[t]here
was no evidence presented as to Factor 13,” and that finding was incorporated into the final
divorce decree. Although at the December hearing the circuit court initially characterized the
$150,000 as “rehabilitative alimony,” the judge’s statements at the later March hearing clearly
dispel that notion. At the March hearing, the judge informed the parties that “[i]t wasn’t this
Court’s intent to make it spousal support.” That intent is reflected in the language of the final
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order, and, as noted supra, a court speaks through its orders. Therefore, we certainly cannot
conclude that the award was simply spousal support under another name.
Having determined that the award in this case was neither equitable distribution nor
spousal support, we are left with the question of whether the trial court possessed the authority to
make an award of “equitable restitution.” In Reid v. Reid, 245 Va. 409, 429 S.E.2d 208 (1993),
the Supreme Court recognized that the authority of a trial court in a divorce action is not without
bounds. In that case, the Supreme Court held that a trial court lacked the authority to award
restitution to a spouse for spousal support paid pursuant to an order that was later reversed. Id. at
419, 429 S.E.2d at 211. The Court stated, “The many limitations, both in respect to jurisdiction
and procedure, placed upon divorce suits by the statute, differentiate the divorce case from
ordinary suits in equity and render it a chancery case sui generis.” Id. at 413, 429 S.E.2d at 210
(quoting McCotter v. Carle, 149 Va. 584, 593, 140 S.E. 670, 673 (1927)). Thus, the jurisdiction
of a circuit court in divorce matters is “entirely statutory and limited.” Id. at 415, 429 S.E.2d at
211 (quoting McCotter, 149 Va. at 592, 140 S.E. at 673). See Wroblewski v. Russell, 63
Va. App. 468, 478, 759 S.E.2d 1, 5 (2014) (stating that “precedent does not support the notion of
an extra-statutory reservoir of authority for courts to draw from in divorce cases that would
enable a court to grant relief based on a stricken pleading”). See also Watkins v. Watkins, 220
Va. 1051, 1054, 265 S.E.2d 750, 752 (1980) (“As we have often said, jurisdiction in divorce
suits is purely statutory.”); Anthony v. Skolnick-Lozano, 63 Va. App. 76, 90-91, 754 S.E.2d 549,
556 (2014) (“Because ‘the jurisdiction of a court in equity is “entirely statutory and limited” in
divorce matters,’ we conclude that in the context of the equitable distribution proceeding, the
circuit court was limited to application of equitable distribution principles and did not have the
authority to declare a resulting trust . . . .” (quoting Reid, 245 Va. at 414-15, 429 S.E.2d at 211)).
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We find no statutory authority supporting the circuit court’s award of equitable
restitution. That term is absent from the statutory scheme governing divorce and its ancillary
proceedings. Moreover, the opinions cited by the trial court do not authorize the making of an
award of equitable restitution. First, Palmer v. Palmer, 21 Va. Cir. 112 (1990), a Virginia case
from the Circuit Court of Fairfax County, is not binding precedent for this Court. Furthermore,
even if Palmer were binding authority, the opinion does not support the making of such an
equitable restitution award. In Palmer, the circuit court awarded Mrs. Palmer a lump sum award
that the court referred to as “reimbursement alimony.” Id. at 118-19. However, it was clear in
that case that the award was a lump sum award of spousal support made pursuant to Code
§ 20-107.1. Id. at 119. The trial judge found that award “appropriate to balance the equities”
after considering Mrs. Palmer’s need and Mr. Palmer’s ability to pay, where Mrs. Palmer had
contributed both financially and non-financially during the marriage in order to allow Mr. Palmer
to obtain the education necessary to obtain his dental license. Id. Second, Hubbard v. Hubbard,
603 P.2d 747 (Okla. 1979), the opinion from the Oklahoma Supreme Court cited by the circuit
court judge, is neither binding on Virginia courts nor helpful in the resolution of this case
because Oklahoma courts are, of course, not interpreting the Code of Virginia or limited by the
statutory authority granted to Virginia circuit courts in divorce cases. Because the circuit court
lacked the statutory authority to make the equitable restitution award made in this case, we find
the circuit court erred in awarding wife $150,000 in “equitable restitution.”4
4
Husband’s brief contains three assignments of error – each relating to the $150,000
lump sum award. Because we agree with husband that the trial court lacked the authority to
award wife “equitable restitution,” we do not address his additional assignments of error also
arguing why the $150,000 lump sum award was error.
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III. CONCLUSION
In short, in deciding divorce cases, circuit courts are limited to the authority granted to them
by statute. The circuit court itself noted that the award made here was neither equitable distribution
nor spousal support. Instead, the circuit court fashioned a remedy of “equitable restitution” – a
remedy which it had no authority under statute to make in the context of a divorce proceeding.
Therefore, for all of these reasons, we reverse the circuit court and vacate the award of $150,000 in
“equitable restitution” to wife. The matter is remanded to the circuit court for entry of an order
consistent with this opinion.
Reversed, vacated in part, and remanded.
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