The recent case of Miller v. Miller raises interesting issues for the family law practitioner. Generally, the Miller case pertains to a postnuptial agreement entered between the parties, which included a provision that the husband should pay for the mortgage, taxes and insurance on the marital residence until the marital residence was sold.
The facts of Miller are as follows: The parties married in 1979, had four children, resided in a jointly owned marital residence and divorced in 1994. The parties entered into a postnuptial agreement that was incorporated but not merged into the divorce decree, as noted in the opinion. Neither party disputes the validity of the postnuptial agreement. The agreement provided under paragraph 3.1 that the husband shall be solely responsible for payment of the mortgage, taxes and insurance on the marital residence and in the event the marital residence was sold, the parties would equally share in the expenses of the sale and net proceeds, and husband would be reimbursed for his payment toward the mortgage.
After the parties divorced, the wife and the children continued to reside in the marital residence and husband continued to pay the mortgage, taxes and insurance thereon until about October 1996, as noted in the opinion.
The wife filed a child support action against the husband in August 1996, and a hearing officer entered an interim order following a Sept. 30, 1996, support hearing directing the husband to pay child support. The interim order also provided that the wife was to pay the mortgage on the marital residence from the child support she received beginning Oct. 1, 1996. Neither party filed exceptions to the interim order.
Beginning Oct. 1, 1996, the husband stopped making payments on the marital residence. The opinion, in a footnote, indicates that the husband argued that the term "mortgage" included tax and insurance payments, though the wife disagreed and focused on the point that the interim order was silent as to taxes or insurance payments. After the master's hearing, there were two subsequent hearings that modified the interim order retroactive to Aug. 12, 1996. Interestingly, the modified order was silent as to the mortgage payment obligation "or any other obligations regarding the marital residence." The wife paid the mortgage payments from Oct. 1, 1996, until the mortgage was paid off in January 1999. "However, real estate taxes on the marital residence became delinquent," according to the opinion.
In July 2005, the township and school district sued the husband and wife, asserting a tax lien against the marital residence. The husband and wife filed cross-claims against each other. After the husband paid his proportionate share of the taxes due, the township and school district dismissed its claim against the husband.
On Nov. 15, 2005, the wife filed a petition seeking enforcement of the agreement and requested that the court "compel husband to pay all outstanding real estate taxes and reimburse her for all of her post-separation payments made on the marital residence (i.e., mortgage, tax, and insurance payments)." The husband filed a motion for summary judgment against the wife seeking damages in excess of $113,000 "for inter alia her alleged failure to pay the mortgage, taxes, and insurance on the marital residence in accordance with the Interim Order."
In his motion, the husband claimed that the interim order directing the wife to pay the mortgage from his child support payments superseded the agreement and "relieved him of his contractual obligation." The wife filed a motion for partial summary judgment in response, "which asserted that the Interim Order did not supersede the Agreement and husband's cessation of making payments on the marital residence constituted a breach of the Agreement." The trial court denied the husband's motion and granted the wife's partial summary judgment motion, finding that the husband breached his obligation under the agreement and ordered another hearing before another hearing officer to determine the wife's damages as a result of husband's breach.
The hearing officer issued a temporary order on damages in the following amounts: $80,650.95 for the mortgage, tax and insurance payments made by the wife and $17,335 for the wife's attorney fees and expenses. The husband filed exceptions to the hearing officer's damages order, and the trial court dismissed said exceptions and adopted the hearing officer's temporary order in its entirety. As a result thereof, the husband filed a timely appeal raising three issues:
• "Whether the [Interim O]rder – [directing] that wife pay the mortgage beginning Oct. 1, 1996, from the husband's child support — became final by operation of law when wife failed to file an exception."
• "Whether Wife's claim for reimbursement of payments she [had] made [toward the marital residence] over four years before she filed her [P]etition for Enforcement are barred by the four-year statute of limitations applicable to a contract action."
• "Whether §3502(e) of the Divorce Code … provides a statutory basis for an award of counsel fees as compensatory damages in an action for breach of a post-nuptial agreement."
A layered analysis was applied to the husband's first claim on appeal. First, it appears that the husband's challenge was defective because of local procedure. According to the opinion, Allegheny County local rule provides that "[n]o exceptions may be filed to a recommendation of a hearing officer labeled 'interim.'" Therefore, the parties could not file exceptions to the interim order under the local rule. The Superior Court noted that neither of the modified orders (that were retroactive prior to the interim order) included a provision directing the wife to pay the mortgage from the husband's monthly child support payments. The husband argued that the subsequent orders modified only the amount of his support and did not supersede the wife's obligation under the interim order to pay the mortgage and other payments regarding the marital residence from his child support payments. The husband pointed to Rule 1910.16-6(e), which provides: "[t]he Guidelines assume that the spouse occupying the marital residence will be solely responsible for the mortgage payments, real estate taxes and homeowners' insurance." He also argued that the trial court's damage award improperly granted the wife "double recovery," since "husband had already made these payments on the marital residence" through his monthly child support payment.
The Superior Court pointed to the fact that the husband assumed the responsibility to make the payments on the marital residence in the agreement until the house was sold, and that the agreement remained in full force at all times during the parties' child support case and "is valid and binding to this day."
The Superior Court also noted that the wife complied with the interim order and paid the mortgage payments on the marital residence from husband's child support. The Superior Court further stated: "The trial court in a child support action could not modify the contractual obligations that husband previously had assumed under … the Agreement." Under §3105(c) of the Divorce Code, unless there is a specific provision appearing in an agreement stating to the contrary, the agreement cannot be subject to modification by the court regarding property rights and interest between the parties. The agreement at issue did not contain a provision permitting the court to modify the parties' disposition of the marital residence (a property right and obligation). In an alternative argument, the husband argued that the mortgage provision constituted a child support obligation therefore making it available to be modified by the trial court. The Superior Court found that argument to be without merit, as well. Accordingly, the Superior Court rejected the husband's first argument on appeal.
The husband's second argument on appeal, regarding the four-year statute of limitations, was found to be meritless by the Superior Court. The Superior Court reminded the practitioner that property settlement agreements constitute a continuing contract. In cases where there is a continuing contract, the statute of limitations generally does not run. The husband argued that each time he failed to make a payment on the mortgage, taxes and insurance, pursuant to the agreement, a separate cause of action accrued, thereby triggering the limitations period, and the wife filed after the four-year period. However, the Superior Court disagreed with that argument. The husband also argued that when a contract is continuing, "the statute of limitations will run from either the time when the breach occurs or when the contract is in some way terminated." The Superior Court responded by stating: "Here, however, husband continued to owe payments on the marital residence, an obligation that he had expressly assumed under … the Agreement. Accordingly, the statue of limitations had not begun to run on husband's continuing payment obligations."
Lastly, the husband argued that the trial court erred in applying §3502(e) in awarding counsel fees for the breach of the agreement. The husband argued that the agreement between the parties was not an agreement of equitable division of marital property, thereby rendering §3502(e) inapplicable to the present case. Section 3502(e) provides: "If … a party has failed to comply with an Order of Equitable Distribution … or with the terms of an agreement as entered into between the parties … the court may…award counsel fees and costs." Section 3105 of the Divorce Code provides, in part, as follows: "A party to an agreement regarding matters … under this part, whether or not the agreement has been merged or incorporated into the decree, may utilize a remedy or sanction set forth in the Code to enforce the agreement." The Superior Court held that the parties "unequivocally expressed their intentions that the agreement was the instrument that would exclusively govern the distribution of their marital property." Further, though the agreement did not contain a provision regarding the award of counsel fees, the Superior Court found that the trial court had the authority to award the wife counsel fees under §3502(e)(7) via §3105(a).
This case is important for the family law practitioner. It reminds the family law practitioner that regardless of whether a property settlement agreement is incorporated in a divorce decree or contains a provision for attorney fees, if a party breaches the agreement, attorney fees may be ordered. It also reminds the practitioner of the importance of provisions pertaining to the payment of expenses related to marital property. Further, under this case, mortgage payments can be deemed independent of support obligations and held to be non-modifiable if contained in an agreement construed to be in the nature of property rights and obligations.
Michael E. Bertin is an associate in the Philadelphia law firm of Obermayer Rebmann Maxwell & Hippel. He is co-chairman of the custody committee and a member of the executive committee of the family law section of the Philadelphia Bar Association, and a member of the executive committee and council of the family law section of the Pennsylvania Bar Association.
This article is reprinted with permission from the December 8, 2009, issue of The Legal Intelligencer. © 2009 Incisive Media US Properties, LLC. Further duplication without permission is prohibited. All rights reserved
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