Nancy Powell–Ferri v. Paul John Ferri, Jr. (2013)

MEMORANDUM OF DECISION REGARDING MOTIONS FOR CONTEMPT # 194 and # 212, and, OBJECTIONS THERETO # 219 and # 221

There are two motions for contempt pending in this matter.   They both address pendente lite conduct related to the automatic orders applicable to all dissolution of marriage actions.   Both motions were vigorously prosecuted and defended.

I

Motion for Contempt for Failure to Comply Dated September 14, 2012, Pendente Lite (# 194) and Objection Thereto (# 219)

In this motion, the plaintiff, Nancy Powell–Ferri, asks the court to find the defendant, Paul John Ferri, Jr., in contempt of court for failure to provide a complete financial affidavit within thirty (30) days as required by General Statutes § 25–5(a)(3).   The defendant objects thereto, and further defends based upon the “unclean hands” doctrine.

The gravamen of the plaintiff's complaint is that the defendant's disclosure of value of his business interests on his sworn financial affidavits at issue was insufficient.   He estimated his business values in a summary value on two of the affidavits.   There are multiple businesses.   He never provided a specific value as to each.   His reason that he did not do so was that though he thought he could compute the value, he was going to rely on expert valuation;  he has not, however, at any of the relevant times sought the expert valuation.   The reason for this is that he did not want values attached that were too remote in time to the trial of this matter.

The standard for a finding of contempt is stated below.   Based upon the evidence presented, the court does not find the conduct of the defendant willful and so contempt does not lie.   Therefore, the court need not address the “unclean hands” defense.   On the other hand, the plaintiff is left with the necessity of performing an independent valuation of all of the defendant's business interests since she cannot determine whether she wants to challenge such assertion of value.   The plaintiff has a right to rely on the statements of value by the defendant in deciding her own course of action.   Accordingly, if the defendant intends to present evidence as to the value of his respective business interests, he must provide the plaintiff fair notice of the same.   Therefore, the court orders the defendant to show cause why he should not be compelled to provide such values within sixty (60) days.   Such show cause hearing is set for July 23, 2013 at 10 A.M.

Attorneys fees are not ordered for either party.

II

Motion for Contempt for Violation of Automatic Orders, Pendente Lite (# 212) and Objection Thereto (# 221)

The questions before the court in this motion and objection are whether, under the facts of this case, it is a violation of the automatic orders for a party to fail to initiate a legal action to recover an asset of the marriage, and if so, does the failure to do so result in a finding of contempt.   The facts necessary to resolve these issues are largely not in dispute.

The defendant during all relevant times leading up to the commencement of this dissolution of marriage action was the beneficiary of a trust, known commonly as the “1983 Trust.”   By the terms of the trust and by virtue of the defendant's age, the defendant had an irrevocable vested interest in 75 percent of the corpus of the 1983 Trust at the commencement of this action.   During the time that this action has existed pendente lite, his irrevocable, vested interest aged into 100 percent of the corpus of the 1983 Trust.

This matter was returnable to court on November 16, 2010.   On or about March 28, 2011, the trustees of the 1983 Trust, the defendant's brother Michael Ferri and Anthony Medaglia, decanted the overwhelming majority of the 1983 Trust assets into a new trust, commonly known as the 2011 Trust.   The 1983 Trust assets are assets subject to the jurisdiction of this court under General Statutes § 46b–81 to the extent that they are vested.   The terms of the 2011 Trust are such that the defendant has no control over the assets which are managed entirely by the trustees for the defendant's benefit, solely as the trustees see fit.

Based on the evidence presented at the hearing on the motion for contempt before the court, and for purposes of that motion only, the court finds that the plaintiff did not prove that the defendant knew that his 1983 Trust assets were going to be removed from his control or the jurisdiction of the court until after it happened, when his brother Michael Ferri told him that it had been accomplished.

The defendant has declined to take any legal action to challenge what the trustees have done.   He does not want to sue his family.   Also, he thinks that the trustees acted in his best interest;  he does not think his wife should share in any of the Trust assets, either the 1983 or 2011 Trusts.

The defendant understands that the trustees decided to take the action they did because the plaintiff withheld tax refund checks made out to her and the defendant jointly.   Traditionally those checks were turned over to the 1983 Trust, since the Trust paid their tax liabilities.   The plaintiff did turn the funds over after a skirmish about it occurred.   Therefore, she ultimately withheld no funds that were traditionally a part of the trust.

In a separate declaratory judgment action, the trustees have sought a declaratory judgment validating their actions regarding the trusts.   The parties in this dissolution of marriage action are the defendants in the declaratory judgment action.   The plaintiff has challenged the propriety of the trustees' action and also pending in the civil action are cross motions for summary judgment regarding the sought declaratory rulings.   The defendant has not challenged the propriety of the trustees' actions in the civil matter.   The plaintiff is also asserting a counterclaim in the civil matter, which is the subject of a pending motion to strike.   The defendant has brought no action against the trustees in the civil matter.

The automatic orders provide in relevant part:  “Neither party shall sell, transfer, exchange, assign, remove, or in any way dispose of, without the consent of the other party in writing, or an order of a judicial authority, any property, except in the usual course of business or for customary and usual household expenses or for reasonable attorneys fees in connection with this action.”   The orders further provide that “neither party shall conceal any property.”   The automatic orders also provide:  “Failure to obey these orders may be punishable by contempt of court.”  Practice Book § 25–5.

The question of whether these orders, under the facts of this case, require the defendant to take an affirmative action to protect his interest in the 1983 Trust is a difficult one.   While the parties put on conflicting evidence as to the value of that trust before it was decanted, under either scenario, it was more likely than not one of the most significant assets of the marriage prior to the decanting.

There is no case law on point in Connecticut or any other jurisdiction.   Several other states have enacted automatic orders very similar to ours.   However, there is no reported case law relevant to the issues before the court.   There are, however, several cases worthy of distinction.

South Dakota has statutorily enacted a restraint against the transfer, encumbering, concealing, dissipating, or disposing of any marital asset during the pendency of a divorce action.  S.D. Codified Laws § 25–4–33.1. There, the high court considered whether the transfer from the wife to a straw person and then back to herself to break a joint tenancy was a violation of that restraining order.   In that matter, In the Matter of the Estate of Cheryl D. Hoffman, 653 N.W.2d 94 (2002), the South Dakota court determined that such a conveyance did not violate the restraining order.   The unique fact of that case was that the wife knew she was dying of cancer, and the surviving husband claimed she had acted to deprive him of the benefits of joint tenancy that would have accrued to him upon her demise.   In allowing the straw transfer, the South Dakota court cited with approval the law of several other jurisdictions interpreting similar restraining orders in finding that the purpose of automatic orders was not to freeze a party's estate planning but instead to prevent a dissipation of assets.  Id., 99.   While it is worthy of note that there was this distinction as to purpose, the court was not considering whether the order mandated a party to act;  instead, it was contemplating whether an action taken was permissible.   Therefore, the court must consider, as a case of first impression, the questions before it.

The legal standard for a finding of contempt is well established.  “In order to constitute contempt, a party's conduct must be willful.  Connolly v. Connolly, 191 Conn. 468, 483, 464 A.2d 837 (1983).   The contempt remedy is particularly harsh ․ and may be founded solely upon some clear and express direction of the court ․ One cannot be placed in contempt for failure to read the court's mind.”  (Citations omitted;  internal quotation marks omitted.)   Blaydes v. Blaydes, 187 Conn. 464, 467, 446 A.2d 825 (1982).   A good faith dispute or legitimate misunderstanding of the terms of an alimony or support obligation may prevent a finding that the payor's nonpayment was willful.   This does not mean, however, that such a dispute or misunderstanding will preclude a finding of willfulness as a predicate to a judgment of contempt.   Whether it will preclude such a finding is ultimately within the trial court's discretion.   It is within the sound discretion of the court to deny a claim for contempt when there is an adequate factual basis to explain the failure to honor the court's order.  Marcil v. Marcil, 4 Conn.App. 403, 405, 494 A.2d 620 (1985).”  (Internal quotation marks omitted.)  Eldridge v. Eldridge, 244 Conn. 523, 529, 710 A.2d 757 (1998).

“[T]he movant has the burden of establishing, by a preponderance of the evidence, the existence of a court order and noncompliance with that order.”   Statewide Grievance Committee v. Zadora, 62 Conn.App. 828, 832, 772 A.2d 681 (2001).   The movant must also establish “whether the underlying order constituted a court order that was sufficiently clear and unambiguous so as to support a judgment of contempt.”  In re Leah S., 284 Conn. 685, 693, 935 A.2d 1021 (2007).

The movant has not met her burden to prove that an order of the court was breached by the defendant.   Nowhere in the automatic orders is there a duty to act.   The duties throughout the automatic orders are injunctive in nature, prohibiting conduct that would disturb the status quo, essentially.   This extension of the automatic orders that the plaintiff seeks, to require something further, namely to contemplate that the orders embrace a requirement that a party pursue litigation to recover a marital asset removed from his control and title ownership by a third party, is certainly novel.   By its very definition then, it cannot be a part of a clear and unambiguous court order.   Accordingly, contempt will not lie.

The question then, is whether relief of any sort should be ordered absent a finding of contempt.   The authority to do so is well established.  “Similarly, such ambiguity is one of the factors for a reviewing court to take into account in determining whether the trial court abused its discretion.   We emphasize also that, even if the court determines that because of such an ambiguity contempt would not be warranted, it may nonetheless enter an appropriate order of payment based on its interpretation of the judgment.”  Sablosky v. Sablosky, 258 Conn. 713, 723, 784 A.2d 890 (2001).

The court declines to provide any relief to the plaintiff under this motion.   It is a far reach for this court to find that the automatic orders require every party who loses control of an asset to pursue legal action to try to regain control of the asset.

Whether any relief is available to the plaintiff under the facts of this case is not immediately clear.   The defendant has taken no affirmative action to prevent the loss of this asset to the marital estate;  and it is precisely the lack of affirmative action of which the plaintiff complains.   Whether that meets the present definition of asset dissipation in the marital context is unclear.  “Generally, dissipation is intended to address the situation in which one spouse conceals, conveys or wastes marital assets in anticipation of a divorce.   See 2 B. Turner, Equitable Distribution of Property (3d Ed.2005) § 6:102, p. 539.   Most courts have concluded that some type of improper conduct is required before a finding of dissipation can be made.   Thus, courts have traditionally recognized dissipation in the following paradigmatic contexts:  gambling, support of a paramour, or the transfer of an asset to a third party for little or no consideration.   Well-defined contours of the doctrine are somewhat elusive, however, particularly in more factually ambiguous situations.”  Gershman v. Gershman, 286 Conn. 341, 346–47, 943 A.2d 1091 (2008).

Notably, all of the dissipation cases, both in Connecticut and other jurisdictions that are discussed in Gershman involve the consideration of conduct taken by a party, not a lack of conduct.   One jurisdiction has considered the failure to act and whether that resulted in dissipation that should be considered by the court in fashioning final judgment orders.   In the matter of Long v. Long, Tennessee Court of Appeals, Docket No. M2006 02526 COA R3 CV (Tenn.Ct.App. July 30, 2008), the Tennessee Court of Appeals, was confronted with a matter in which a wife had failed to agree to the sale of certain jointly held stock and related options.   The husband was sure that the stock and related options were going to decline steeply in value.   The husband had sought, by way of relief, that the wife be required to compensate him for one-half of the loss of value of the stock and related options.   The court declined finding that it was inappropriate to hold the wife to a reliance on his conjecture.   In reaching this conclusion, the court primarily focused on whether the wife's inaction constituted “dissipation” of marital property and noted that the “concept of dissipation is based on waste.”  Id. Moreover, “[i]t has been described as one spouse's use of marital property frivolously and without justification, for a purpose unrelated to the marriage and at a time when the marriage is breaking down and characterized as involving intentional and purposeful conduct that has the effect of reducing the funds available for equitable distribution.   One factor to be considered in determining whether a spouse has dissipated marital property is whether the allegedly dissipating spouse intended to hide, deplete, or divert a martial asset.”  (Internal quotation marks omitted.)  Id. Although the court ultimately found that the wife's failure to agree to the sale of stock and related options did not constitute dissipation, the court did, however, cite with approval to the American Law Reports that considers whether failure to engage in conduct, for instance paying a mortgage, is dissipation.  Id., 9, citing L. Russ, annot., “Spouse's Dissipation of Marital Assets Prior to Divorce as a Factor in Divorce Court's Determination of Marital Property,” 41 A.L.R.4th 416, 436 § 11 (1985) (Supp.2006) (citing cases in which inaction amounts to dissipation, as in failure to make mortgage payments on marital home, resulting in foreclosure).

Whether inaction is tantamount to a “factually ambiguous situation” alluded to in Gershman is not before the court presently.   That shall wait until either the final hearing or a motion addressing the same.¹  It is not inherent in a motion for contempt for violation of the automatic orders.   Accordingly motion # 212 is denied.

Attorney fees are not awarded to either party.

By the Court,

Munro, J.

FOOTNOTES

FN1. Gershman goes on to describe elements necessary to be proven where there is a claim of dissipation:“The conclusion in these cases comports with the view expressed in leading treatises on domestic relations law, which generally provide that a harmful or selfish expenditure of marital assets undertaken for a nonmarital purpose is required before one spouse can be found to have dissipated marital assets.   See, e.g., 2 B. Turner, [Equitable Distribution of Property,] [3d Ed.2005] §§ 6102 and 6:107, 24 Am.Jur.2d, Divorce and Separation §§ 560–62 (1998).   We conclude that, at a minimum, dissipation in the marital dissolution context requires financial misconduct involving marital assets, such as intentional waste or a selfish financial impropriety, coupled with a purpose unrelated to the marriage.”   Gershman v. Gershman, supra, 286 Conn. 350–51.   Furthermore, the court in Gershman noted:  “Many authorities also have found a temporal element to be an essential component of dissipation.   Specifically, many courts have found dissipation only where the financial misconduct occurred at a time when the marriage was in jeopardy or in anticipation of divorce.   See, e.g., Herron v. Johnson, 714 A.2d 783, 785 (D.C.1998) (dissipation occurs ‘where one spouse uses marital property for his own benefit and for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown’);  In re Marriage of Charles, 284 Ill.App.3d 339, 343, 219 Ill.Dec. 742, 672 N.E.2d 57 (1996) (noting that dissipation occurs ‘at a time that the marriage is undergoing an irreconcilable breakdown’ [internal quotation marks omitted] ).   Neither party in the present case has raised or addressed a temporal element and we therefore do not address it.”Gershman v. Gershman, supra, 350–51 n.10..  FN1. Gershman goes on to describe elements necessary to be proven where there is a claim of dissipation:“The conclusion in these cases comports with the view expressed in leading treatises on domestic relations law, which generally provide that a harmful or selfish expenditure of marital assets undertaken for a nonmarital purpose is required before one spouse can be found to have dissipated marital assets.   See, e.g., 2 B. Turner, [Equitable Distribution of Property,] [3d Ed.2005] §§ 6102 and 6:107, 24 Am.Jur.2d, Divorce and Separation §§ 560–62 (1998).   We conclude that, at a minimum, dissipation in the marital dissolution context requires financial misconduct involving marital assets, such as intentional waste or a selfish financial impropriety, coupled with a purpose unrelated to the marriage.”   Gershman v. Gershman, supra, 286 Conn. 350–51.   Furthermore, the court in Gershman noted:  “Many authorities also have found a temporal element to be an essential component of dissipation.   Specifically, many courts have found dissipation only where the financial misconduct occurred at a time when the marriage was in jeopardy or in anticipation of divorce.   See, e.g., Herron v. Johnson, 714 A.2d 783, 785 (D.C.1998) (dissipation occurs ‘where one spouse uses marital property for his own benefit and for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown’);  In re Marriage of Charles, 284 Ill.App.3d 339, 343, 219 Ill.Dec. 742, 672 N.E.2d 57 (1996) (noting that dissipation occurs ‘at a time that the marriage is undergoing an irreconcilable breakdown’ [internal quotation marks omitted] ).   Neither party in the present case has raised or addressed a temporal element and we therefore do not address it.”Gershman v. Gershman, supra, 350–51 n.10.

Munro, Lynda B., J.