Aither v. Estate of Aither

Aither v. Estate of Aither (2005-369); 180 Vt. 472; 913 A.2d 376

2006 VT 111

[Filed 09-Nov-2006]


       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 2006 VT 111

                                No. 2005-369


  Karen Aither                                   Supreme Court

                                                 On Appeal from
       v.                                        Windham Family Court


  Estate of Jeffrey Aither                       May Term, 2006


  Katherine A. Hayes, J.

  Walter G. French and Jodi P. French, Law Clerk (On the Brief), West
    Dummerston, for Plaintiff-Appellant. 


  PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

       ¶  1.  REIBER, C.J.   Wife Karen Aither appeals a family court
  decision denying her motion to enforce an initial temporary order barring
  husband Jeffrey Aither from disposing of any marital asset during the
  pendency of their divorce. Husband replaced wife as beneficiary of his life
  insurance policy in violation of the order, and then died before a final
  divorce decree was entered.  The family court concluded that it lacked
  jurisdiction to enforce its injunctive order after husband's death, and
  accordingly dismissed wife's motion as moot.  We reverse and remand.

       ¶  2.  The following facts are not disputed.  On February 11, 2005,
  wife filed for divorce from husband.  On February 14, the family court
  issued an initial temporary order barring both parties from selling,
  conveying, concealing, or encumbering "any marital asset," which was
  defined to include "whole life insurance policies," among other things. 
  When the order was issued, husband had a universal life insurance policy in
  the amount of $100,000 that named wife as primary beneficiary.  The parties
  do not dispute that the universal life policy was subject to the order's
  prohibition; universal life insurance is a type of whole life insurance. 
  Cf. Gleed v. Noon, 614 N.E.2d 676, 678 (Mass. 1993) (holding that probate
  court order not specifically prohibiting insurance beneficiary changes but
  restraining decedent from "withdrawing, transferring, conveying, assigning,
  spending encumbering, pledging, bequeathing, or otherwise divesting . . .
  any assets" subject to division in probate did not bar beneficiary change).
  On March 1, however, husband removed wife as beneficiary and replaced her
  with husband's father and sister.  Husband then died on March 27.  On the
  following day, March 28, wife notified husband's life insurer of his death
  and learned of the change in beneficiaries.  Wife then moved the family
  court to enforce the initial order and to find husband in contempt of that
  order.  After a hearing on the enforcement and contempt motion, the family
  court enjoined disbursement of the proceeds from husband's life insurance
  policy pending disposition of wife's motion. (FN1)  On April 12, the family
  court appointed a volunteer guardian ad litem, Gary Carrier, to represent
  husband's interests.  Mr. Carrier attended the oral argument on this
  appeal, and we thank him for his service.           
   
       ¶  3.  The family court issued a decision on wife's enforcement
  motion in June 2005.  The court concluded that the life insurance policy
  was an "asset of the parties" and therefore subject to the initial order's
  prohibition on transfer, but that under Estate of Ladd v. Estate of Ladd,
  161 Vt. 270, 272-74, 640 A.2d 29, 30-31 (1994), the divorce had been abated
  by husband's death.  PC 3.  Accordingly, the family court determined that
  it was "without jurisdiction to issue any relief" for a claimed violation
  of its order, and dismissed wife's motion as moot.  Wife appeals.
  ¶  4.  On appeal, wife argues that husband's death did not divest
  the family court of all jurisdiction to enforce its order.  She contends
  that the court retained authority to enforce the order by contempt or, in
  the alternative, based on more general equitable principles.  Whether the
  family court-after a divorce proceeding is abated by a party's
  death-retains residual jurisdiction to enforce an order it issued before
  the death is a question of first impression for this Court.  We review the
  family court's dismissal for lack of jurisdiction de novo.  Jordan v.
  Agency of Transp., 166 Vt. 509, 511, 702 A.2d 58, 60 (1997).
   
       ¶  5.  The family court is a creature of statute, 4 V.S.A. §§
  451-459, and consequently has only the limited jurisdiction established
  thereby.  See Allen v. Allen, 161 Vt. 526, 530-31, 641 A.2d 1332, 1335
  (1994) (Dooley, J., concurring and dissenting) (citing cases).  The family
  court has jurisdiction over seventeen types of proceedings, including
  divorces.  4 V.S.A. § 454(4).  In cases over which the family court
  properly has jurisdiction, the court also has "all of the equitable and
  other powers of the superior court . . . except as specifically limited by
  statute." Id. § 453(a).  We have held, as have many other states, that a
  party's death while a divorce is pending abates the divorce action because
  the marriage is dissolved by operation of law at the time of death.  Ladd,
  161 Vt. at 273, 640 A.2d at 30-31; accord, e.g., Hook v. Hook, 519 N.E.2d 687, 689 (Ohio Ct. App. 1987); Estate of Hackler v. Hackler, 602 S.E.2d 426, 434 (Va. Ct. App. 2004); Pratt v. Pratt, 665 P.2d 400, 402 (Wash.
  1983); Pettygrove v. Pettygrove, 393 N.W.2d 116, 119 (Wis. 1986).  In such
  cases the family court no longer has jurisdiction because "the object
  sought to be accomplished by the final decree, . . . the dissolution of the
  marriage relation, is already accomplished by the prior death." Hook, 519 N.E.2d  at 689 (citation omitted).  We have also held, however, that a
  pre-abatement settlement agreement incorporated into the final divorce
  decree survives abatement.  Ladd, 161 Vt. at 274-77, 640 A.2d  at 32-33.

       ¶  6.  The question of whether the death of a party strips the family
  court of all jurisdiction over matters relating to the abated divorce, even
  violations of its own pre-abatement orders, is not a simple one.  As
  appellant argues, there are two theories under which the family court could
  enforce the order: (1) under that court's contempt power, established by
  statute, 4 V.S.A. § 453(a), 12 V.S.A. § 122, and further expounded by Rule
  16 of the Vermont Rules for Family Proceedings; or (2) through the court's
  inherent equitable power over matters in its jurisdiction.  Although we
  agree with the family court that contempt is not available against a
  deceased contemnor, we conclude that the family court did have the
  equitable power to award the insurance proceeds to wife, the party
  protected by the court's initial order.

                                     I.
   
       ¶  7.   Wife first argues that the family court could have exercised
  its contempt powers to remedy husband's change of beneficiaries.  Wife
  argues that the family court could, pursuant to the family court contempt
  statutes, 4 V.S.A. § 453(a) and 15 V.S.A. § 603, and the general contempt
  statute, 12 V.S.A. § 122, made applicable by § 603, cause this case to be
  brought back onto the family court docket despite its earlier abatement. 
  However, wife has cited no authority for the proposition that the ensuing
  contempt proceeding could go forward against a dead person, nor can we find
  any such authority.  See Hackler, 602 S.E.2d  at 437 (holding that the trial
  court erred in ordering conservator of deceased husband's estate to pay
  wife in order to "purge [the deceased husband] of contempt"); see also
  Socha v. Socha, 515 N.W.2d 337, 339 n.2 (Wis. Ct. App. 1994) (noting that
  contempt is not available when the putative contemnor is dead; citing
  cases).  Further, the sanctions provided by Rule 16(c) of the Vermont Rules
  for Family Proceedings are inadequate to compel compliance from a deceased
  person; as the Reporter's Notes to that rule make clear, even the
  "additional remedies" allowed by Rule 16(c)(4) include only those remedies
  "provided by statute" (e.g., escrow orders to secure payment of child
  support arrearages, 15 V.S.A. § 796, or civil penalties for willful
  arrearages, id. § 797).  The family court correctly concluded that contempt
  provides no adequate remedy here. 

                                     II.
   
       ¶  8.  Other courts  are divided on the question whether a divorce
  proceeding's abatement also divests the trial court of equitable
  jurisdiction to enforce orders entered before the abatement.  Several
  states follow the rule that abatement also divests the trial court of the
  equitable power to enforce its pre-abatement orders.  See, e.g., Am. Family
  Life Ins. Co. v. Noruk, 528 N.W.2d 921, 923 (Minn. Ct. App. 1995) ("[W]hen
  one party dies . . . a temporary restraining order has no effect and the
  court's jurisdiction to enforce it ends."); Hackler, 602 S.E.2d  at 437
  (holding that trial courts do not have jurisdiction to remedy violations of
  injunctions when divorce has been abated by a party's death).  Other courts
  have determined that the abatement of a divorce by a party's death does not
  divest the trial court of jurisdiction to enforce pre-abatement orders. 
  See, e.g., Cent. States, Se. & Sw. Areas Pension Fund v. Howell, 227 F.3d 672, 675-76 (6th Cir. 2000) (applying Michigan law); Candler v. Donaldson,
  272 F.2d 374, 377 (6th Cir. 1959) (applying Michigan law); Webb v. Webb,
  134 N.W.2d 673, 674-75 (Mich. 1965) ("Transfers of property in violation of
  an injunction are invalid and may be set aside by the party to a divorce
  suit, and the subsequent death of the injunction violator does not prevent
  the court from exercising such power."); Lindsey v. Lindsey, 492 A.2d 396,
  398 (Pa. Super. Ct. 1985) (holding that, even after the death of a party,
  "the lower court had the authority to void the disposal of any marital
  property in violation of its injunction"); Schwalbe v. Dent, 755 P.2d 802,
  805 (Wash. 1988) (holding that a trial court had equitable power to enforce
  its preliminary injunction prohibiting a change in insurance beneficiaries,
  despite the death of the violator).  A federal district court, similarly,
  has noted that transfers in violation of temporary injunctions, while not
  per se void, may be voided based on a balancing of equities.  Valley Forge
  Life Ins. Co. v. Delaney, 313 F. Supp. 2d 1305, 1309 (M.D. Fla. 2002)
  (citing Wilharms v. Wilharms, 287 N.W.2d 779, 784 (Wisc. 1980), in which
  the Wisconsin Supreme Court remanded for an evidentiary hearing to consider
  relevant equitable factors affecting validity of transfer in violation of
  pre-abatement temporary order). (FN2)
   
       ¶  9.  We conclude that the latter line of cases represents the
  better reasoning.  Although the death of one party to a divorce does abate
  the divorce action itself, we agree with the Schwalbe court that "a
  mechanistic application" of that rule would frustrate the larger purpose of
  ensuring that courts have the power to enforce their own valid orders to
  avoid unjust results.  Schwalbe, 755 P.2d  at 805.  We have previously
  declined to strictly apply the abatement rule where doing so would have led
  to unjust results.  Ladd, 161 Vt. at 274-77, 640 A.2d  at 32-33 (applying
  contract principles to avoid unjust result that strict abatement would have
  required).  We agree with the Wilharms and Delaney courts, however, that a
  per se rule voiding all transfers in violation of initial orders would also
  have undesirable results.  Such a rule would give temporary orders the
  effect of final distributions of property, thereby unnecessarily creating
  property rights in parties protected by such initial orders.  Delaney, 313 F. Supp. 2d  at 1308-09.  Because temporary orders are intended only to
  preserve the status quo pending a final disposition that may not mirror the
  terms of the order, a per se rule voiding transfers in violation of initial
  orders would be insufficiently flexible to respond to the myriad factual
  scenarios that might arise.  Wilharms, 287 N.W.2d  at 783.  A rule requiring
  equitable balancing in such situations provides sufficient flexibility for
  the family court to provide complete relief to the parties before it, and
  is consistent with that court's limited statutory jurisdiction.  
   
       ¶  10.  In the instant case, the family court's initial restraining
  order was an exercise of its equitable power. 4 V.S.A. § 453(a) (family
  court has "all of the equitable and other powers of the superior court as
  to civil matters within its jurisdiction, except as specifically limited by
  statute"); see Soucy v. Soucy Motors, Inc., 143 Vt. 615, 617, 471 A.2d 224,
  225 (1983) (once invoked, "equity retains jurisdiction over the entire
  action to see that complete relief is administered").  The purpose of the
  initial order, as its language makes plain, was to preserve the status quo
  pending the family court's final determination of the parties' respective
  rights to the marital assets.  Accord Libow v. Freeport Drug Shop, Inc.,
  218 N.Y.S.2d 897, 898 (Sup. Ct. 1961) ("The purpose of a temporary
  injunction is to preserve the status quo pending the trial . . . .").  To
  hold that the order does not bar husband from changing his life-insurance
  beneficiaries-unless he remains alive to be proceeded against in
  contempt-would be to deprive that portion of the order of much, if not all,
  of its force.  The remedy of contempt is no remedy at all in this context;
  it evaporates the instant it is needed.  Accord Nw. Mut. Life Ins. Co. v.
  Hahn, 713 N.W.2d 709, 712 (Iowa Ct. App. 2006) ("If [now-deceased husband]
  were free to change the beneficiary designations, the very purpose of the
  temporary order would be undermined."). 

       ¶  11.  As the Lindsey court noted, "[i]t is axiomatic that a court
  must have the power to enforce its own orders."  492 A.2d  at 398; see also
  United States v. United Mine Workers of Am., 330 U.S. 258, 331 (1947)
  (Black & Douglas, JJ. concurring in part and dissenting in part) (noting
  that courts "must have power to act" to remedy "disobedience of an
  affirmative court order" in order to ensure "orderly judicial
  proceedings").  If that power is not to be illusory, it must include the
  equitable power to order a return to the status quo when the party
  violating a temporary order has died.  It is a well-worn maxim that "equity
  regards as done that which should be done"; it is no less true that "the
  hand of equity has two sides. . . . it [also] wipes away that which was
  attempted but should not have been."  Johnson v. Johnson, 645 P.2d 911, 915
  (Kan. Ct. App. 1982). 

       ¶  12.  We draw further support for our holding from Rule 16 of the
  Vermont Rules for Family Proceedings, which was promulgated in recognition
  of the fact that "[e]fficient enforcement [of court orders]. . . is
  critical to Family Court proceedings, and ultimately must depend upon the
  court's most effective weapon, the contempt sanction."  Reporter's Notes,
  V.R.F.P. 16.  While contempt may be the family court's "most effective"
  enforcement tool, id., it is not the only tool available, as the explicit
  statutory grant of "all of the equitable and other powers of the superior
  court as to civil matters within its jurisdiction" makes clear.  4 V.S.A. §
  453.  If the family court's interim orders in divorce proceedings are to
  have meaningful force with respect to life insurance beneficiary
  changes-and thereby contribute to the efficient enforcement "critical" to
  family court proceedings-that court's jurisdiction must extend to
  post-abatement enforcement of those orders when equity requires it.
   
       ¶  13.  Because husband's change in the beneficiaries of his life
  insurance policy was in violation of the family court order, wife may be
  entitled to a return to the status quo the order was intended to preserve. 
  The record before us, however, is insufficient to make that determination. 
  On remand, in order to facilitate the development of an adequate factual
  record and to ensure that all interested parties are before the court in a
  properly adversarial process, the family court should provide notice to the
  current named beneficiaries of husband's life insurance policy.

       ¶  14.  We conclude that the family court erred in dismissing wife's
  motion for enforcement, and therefore reverse the family court's decision
  on that motion and remand for the family court to determine whether wife is
  entitled to equitable relief.

       Reversed and remanded for further proceedings consistent with this
  opinion.



                                       FOR THE COURT:



                                       _______________________________________
                                       Chief Justice


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                                  Footnotes


FN1.  Husband's life-insurance carrier filed an action for interpleader to
  obtain judicial determination of the rightful beneficiary or beneficiaries
  of the policy; after depositing the full amount due under the policy into
  the court, husband's insurer was dismissed as a party.  The policy proceeds
  remain on deposit pending this appeal.

FN2.  One federal circuit court holding that the trial court had no power to
  enforce a pre-abatement order expressly rested that holding on the fact
  that the putative violator of the order had no knowledge of it; this, the
  court noted, distinguished the case from Webb, Candler, and their ilk. 
  Briece v. Briece, 703 F.2d 1045, 1047-48 (8th Cir. 1983) (applying Illinois
  law).