Edward F. Flanagan
v.
Nancy duMont (Flanagan)
On
Appeal from Superior Court, Chittenden Unit, Family Division
Dennis R. Pearson, J.
Peter
G. Anderson of Anderson & Associates, Stowe, for
Plaintiff-Appellee.
Cynthia L. Broadfoot of Broadfoot, Attorneys at Law,
Burlington, for Defendant-Appellant.
PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton,
JJ.
ROBINSON, J.
¶
1. This appeal arises from a dispute regarding the
parties' obligations with respect to several tax liens
discovered post-divorce in light of two hold-harmless
provisions in a final divorce decree. Wife contends that the
trial court abused its discretion by failing to enforce the
hold-harmless and indemnification provisions and failing to
address the parties' respective obligations with respect
to the tax liens. We agree, and accordingly reverse and
remand so the trial court can address wife's claims under
Article 13 of the parties' divorce decree.
¶
2. The parties' final divorce decree, entered on March
26, 2013, was based on a partial settlement agreement and the
court's order resolving the remaining contested matters
after a contested hearing. Articles 8, 11, and 13 are
particularly relevant to this appeal.
¶
3. Article 8 awarded wife "sole use, ownership, and
possession" of a property on Taber Hill Road in Stowe,
Vermont (the property) free of any marital interests of
husband. Wife was obligated to refinance the outstanding
mortgage loan on the property to remove husband from any
liability by February 26, 2014. In connection with this
refinance, husband was obligated to "execute and deliver
appropriate documents of conveyance to [wife] to convey all
right, title and interest in the property." If wife was
unable to refinance, then she was required to immediately
sell the property at a price agreeable to both parties. In
the event that wife failed to make any mortgage loan payments
on the property, after ten days husband was authorized to
make the outstanding loan payment and offset any sums owed to
wife for spousal maintenance and child support.
¶
4. Article 11 gave husband sole ownership of his business,
The Dayboat Fish Company LLC. Husband was solely responsible
for "all liabilities in connection with the business,
" and was required to "hold [wife] harmless and
indemnify her against the payment of any monies and
obligations or expenses in connection [with the business]
which [wife] shall be obligated to pay to third parties by
virtue of [husband's] failure to comply with the terms of
this paragraph, including reasonable counsel fees and
costs."
¶
5. Finally, Article 13 allocated various debts of the
parties. In addition to specifically addressing certain
outstanding debts, it included the following general
provisions:
[Wife] shall be solely responsible for any and all debts or
obligations, including credit cards debts [sic], which are in
her name alone.
[Husband] shall be solely responsible for any and all debts
or obligations, including credit cards debts [sic], which are
in his name alone.
Neither party shall incur or contract any debt, charge,
obligation or liability whatsoever for which the other party,
his or her legal representatives or his or her property or
estate is or may become liable, and shall indemnify and hold
the other party harmless of all loss, expenses (including
reasonable attorneys' fees) and damages in connection
with or arising out of a breach of the foregoing.
The
provision did not mention any outstanding tax obligations.
¶
6. The trial court found that the events giving rise to this
particular dispute began in February 2014, when wife was
unable to refinance the outstanding mortgage on the property
and accordingly listed the property for sale. Wife entered
into a purchase and sale agreement with a buyer in September
2014 at a sale price of $220, 000. This sale price would have
been sufficient to discharge the outstanding mortgage and
provide wife with net proceeds of about $31, 000. The closing
for the purchase and sale of the property was to take place
in November 2014. However, during the title search of the
property, the buyers discovered that both the IRS and the
State of Vermont Tax Department had outstanding tax liens on
the property.
¶
7. The first IRS lien was recorded in the Stowe land records
in November 25, 2013, in the amount of $10, 841 for alleged
underpayment of 2011 income taxes. The second was recorded on
January 1, 2014, in the amount of $3949 for alleged
underpayment of 2010 income taxes. Both IRS liens were
recorded as against husband only. The family division noted
that the parties filed their federal taxes jointly for the
2010 tax year, but that it was not clear how they filed in
2011. As for the state tax liens, the first was recorded on
May 15, 2014, in the amount of $9237, and the second was
recorded on August 29, 2014, in the amount of $1055. Both of
the Vermont tax liens were against "[husband]/Dayboat
Fish Co LLC" and were for sales and use taxes allegedly
not paid or underpaid by husband's business.
¶
8. The family division found the record to be "murky and
inconclusive" regarding whether wife knew previously
about the IRS tax claims. Wife testified at the hearing that
she looked at the land records when she originally listed the
property, but that it did not occur to her that she should be
looking for outstanding liens on the land. The family
division noted that wife's claim she was "totally
ignorant" of at least the 2010 tax lien was not credible
because she filed an application for "Discharge of
Property from Federal Tax Lien" in January 2014, and had
filed with the IRS a "Request for Innocent Spouse
Relief" as to the 2010 tax deficiency in September 2013.
However, it also found that husband did not inform wife about
the existence of any of the liens and did not inform wife
that he was having tax issues, even though he had admitted
the state deficiencies and entered into a payment plan ...