Stoney v. Stoney

Citations: 819 S.E.2d 201; 425 S.C. 47Docket: Appellate Case No. 2011-203410; Opinion No. 5593

Court: Court of Appeals of South Carolina; August 29, 2018; South Carolina; State Appellate Court

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Lori Dandridge Stoney (Wife) appealed two family court orders in a marital litigation case against Richard S.W. Stoney Sr. (Husband). Initially, the appeals led to the reversal of several family court findings and a remand for a new trial (Stoney v. Stoney, 417 S.C. 345, 790 S.E.2d 31). Both Husband and Theodore D. Stoney Jr. (Brother) sought a writ of certiorari, which was granted by the supreme court, leading to a reversal and remand for de novo review (Stoney v. Stoney, 422 S.C. 593, 813 S.E.2d 486). 

The couple married on October 12, 1996, after signing a prenuptial agreement and having one child. During their marriage, they opened the successful restaurant Boathouse at Breach Inlet (BHBI), which financed further business ventures by Husband, who eventually ceased practicing law. They opened several other restaurants, including Boathouse at East Bay Street (BHEB) and Boathouse at Lake Julian (BHLJ), both of which incurred significant financial losses. 

Husband and Brother jointly owned the property for BHEB, which was closed in January 2009 due to poor financial performance, and BHLJ also closed after accumulating substantial debt. The couple purchased another restaurant, Carolinas, which was later sold for profit. Following their separation, Husband received insurance proceeds from the fire at the Boathouse at Ellis Creek (BHEC) but used these funds to settle existing debts rather than rebuild the restaurant. Throughout the trial, Husband indicated he was managing extensive debts and began new business ventures shortly after the divorce filing.

On April 23, 2009, Wife initiated divorce proceedings, requesting sole custody of Child, child support, alimony, and equitable division of assets. A consent order on May 15, 2009, moved the case from Charleston County to Orangeburg County and sealed the records. Husband responded on June 18, 2009, seeking joint custody, enforcement of the prenuptial agreement, equitable division of property, and child support in accordance with South Carolina guidelines. On July 10, 2009, Wife acknowledged the prenuptial agreement but claimed it was lost. A temporary order that same day awarded custody to Wife, prohibited Husband from introducing Child to paramours, granted Wife exclusive use of their Charleston condominium, and required Husband to pay approximately $22,000 monthly for expenses.

A supplemental temporary order on February 26, 2010, modified some of Husband’s obligations. Brother intervened on January 5, 2010, to protect his interests in property and loans to Husband, with the court granting his motion on February 22, 2010, citing the need to protect those interests due to Husband's financial instability. On March 4, 2010, Brother filed a third-party complaint regarding his loans being classified as marital debt, which Husband admitted. Wife responded on March 29, 2010, stating she lacked sufficient information to confirm or deny the claims.

Following a consent order on August 2, 2010, relieving Husband's attorney, he proceeded pro se during the trial. Throughout the proceedings, Husband faced multiple contempt findings related to non-payment of court-ordered obligations, including two petitions and a supplemental petition filed by Wife. The family court found Husband in willful contempt on February 25, 2010, for failing to comply with the temporary order despite having funds for personal expenses. Additionally, on March 29, 2010, Husband was found in contempt concerning a domestic violence incident involving Brother. Further petitions filed by Wife alleged continued non-payment of expenses and violations of restraining orders concerning Child.

On January 6, 2011, the family court found Husband in willful contempt, sentencing him to ninety days in jail, suspended upon payment of specified expenses and $3,000 in attorney's fees to Wife's counsel. Subsequent motions were addressed in a March 24, 2011 order, where the court allowed Husband to purge his contempt by demonstrating arrangements for support payments and payment of the ordered attorney's fees. The court denied both Husband's motion to sell part of his interest in BHBI and Wife's motion for control over the business. A requirement for both parties to contribute $5,000 to a joint CPA was also established. 

During the trial from March 28 to April 1 and May 23-27, 2011, Wife complied with her CPA fee obligation, while Husband did not. On May 6, 2011, Wife filed a petition for contempt due to Husband's failure to pay CPA and attorney's fees, which remained unresolved. Following the trial, Wife filed a motion to reopen the case based on new evidence on June 17, 2011. The family court issued an interim order on July 18, 2011, granting dissolution of marriage based on one year of separation rather than adultery as requested by Wife. 

Wife's motions to alter or amend the interim order were denied on October 15, 2011, and she appealed on November 18, 2011. The family court requested Brother to submit proposed orders, resulting in a single Final Order issued on September 6, 2011, which included the denial of Wife's motion to reopen and addressed other matters. Wife's subsequent requests for response were ignored. Her motion to amend the Final Order was denied on November 30, 2011, leading to an appeal on January 6, 2012, which was consolidated with the previous appeal. 

Wife asserts multiple errors by the family court, including allowing Brother's intervention, denying her motion to reopen, miscalculating Husband's income, failing to award alimony or properly determine child support, neglecting to require life insurance, erroneous property apportionment, not recognizing her special equity in businesses, declining to hold Husband in contempt, denying her adultery-based divorce claim, and not awarding attorney's fees.

Family courts operate as courts of equity, and appeals from these courts are reviewed de novo by appellate courts, which allows for fact-finding despite existing evidence supporting the trial court's findings. Appellate courts are not required to disregard the trial court's factual determinations or the trial judge's credibility assessments. The appellant must demonstrate that the trial court erred in its findings, and decisions from the family court are affirmed unless there is a legal error or the appellant proves that the evidence supports different factual conclusions. 

For evidentiary or procedural rulings, the standard of review is based on whether there was an abuse of discretion by the trial court. This includes decisions regarding the admission or exclusion of evidence, motions to join or intervene in actions, and motions made under Rule 60(b) of the South Carolina Rules of Civil Procedure (SCRCP).

In the case presented, the Wife argues that the family court erred in its Final Order of divorce primarily due to the undue influence of the Husband's brother, who acted as a Third Party Intervenor. The Wife alleges that the trial court allowed the brother too much control over the proceedings, including directing his attorney to draft the Final Order without input from her legal representation. The appellate court concurs that, regardless of whether the intervention was initially permissible, the extent of the brother's involvement in unrelated matters was inappropriate. The rules governing intervention under Rule 24(a), SCRCP, should be interpreted liberally to ensure judicial economy and protect the interests of all parties involved.

A party seeking to intervene in a legal action must demonstrate standing under Rule 24, SCRCP, which requires a personal stake in the subject matter and being a 'real party in interest.' A real party in interest possesses a substantial interest in the case, unlike one with only a nominal connection. In this case, Brother was granted intervention based on several factors: he was a joint owner of marital property, co-obligor on marital debts, had mortgaged his property for Husband's business, and lent money to protect those interests. Wife challenged Brother's standing, citing a precedent where lawyers lacked standing due to a peripheral interest in a divorce proceeding. However, the court concluded Brother met the standing requirement, having a significant property interest and involvement in the marital debt. The family court recognized that Brother's interests could not be adequately protected without his intervention.

Despite this, the family court abused its discretion by not controlling the scope of Brother's participation. Throughout the trial, Brother's counsel made numerous irrelevant objections and interjections, such as contesting ownership issues and interrupting testimonies unrelated to Brother's interests. These actions included objecting to stipulations, opposing evidence that was not detrimental to Brother, and questioning witnesses on matters outside his financial interests.

The family court improperly allowed Brother to influence the distribution of assets and debts in the divorce between Husband and Wife, which should not have involved Brother beyond his role as a witness. The court's request for Brother's counsel to draft the Final Order further highlights Brother's undue influence over matters unrelated to his interests, such as custody and support issues. The court's actions contradicted established case law regarding the standing of parties in divorce proceedings. 

Wife's subsequent motion to reopen the case was based on newly obtained documents related to a sale of a ten-percent share in BHBI and Brother's interests in BHEC, which she argued were relevant to debts owed to Brother and the credibility of Husband and Brother. Despite this, the family court denied her motion to reopen the case. The documents provided by Constance Holmes included details of loans secured by BHBI shares and promissory notes relevant to the financial arrangements between the parties, which Wife believed warranted further examination.

To reopen a case due to newly discovered evidence, the movant must demonstrate five criteria: (1) the evidence is likely to change the trial outcome, (2) it was discovered post-trial, (3) it could not have been found before trial, (4) it is material to the case, and (5) it is not merely cumulative or for impeachment purposes. In this context, certain documents are deemed material to the Wife's claim of equitable interest in property and the Brother's claim of debt. The family court's analysis was flawed, asserting that the documents would not impact the case outcome, could have been discovered earlier, and were intended for impeachment.

Key issues at trial revolved around whether funds from Holmes were loans or an investment in a business. The family court incorrectly deemed the marital estate to have a negative net worth without properly considering these documents, which could have influenced the outcome. The categorization of financial transactions and the Husband's accounting practices regarding BHBI, the only income-producing marital property, were critical. The existence of a Private Placement Memorandum indicating Brother's ownership interest and the potential offset against the marital estate's negative valuation were significant. The family court’s ruling effectively gave the Husband control over the marital asset and disregarded Wife and Child's interests, which should have been factored into the trial outcome. Additionally, the Husband's evasiveness during discovery supports a reversal of the family court's decision, as compliance with financial disclosure requirements was not enforced.

Wife contests the family court's decision to impute Husband's income at $100,000 per year, asserting that the court overlooked substantial evidence indicating his actual income is $892,958 annually. The court's analysis was deemed incomplete and erroneous, distinguishing it from prior cases where the issue of income imputation was not adequately raised. Wife consistently addressed Husband's income throughout the trial and filed a motion to amend the court's ruling. The court-appointed CPA did not analyze Husband's financial situation, and Husband only presented outdated financial declarations.

Evidence revealed significant funds received by Husband from his business entities, which he used for personal expenses, contradicting his claims of financial hardship. Specific payments included over $14,000 for personal trips, $4,400 for a child's private school, $42,000 for life insurance, and mortgage payments on properties, indicating a comfortable lifestyle contrary to his assertions of being "broke."

As a result, the court reversed the income determination and remanded the case for a reevaluation of Husband's income. Additionally, Wife argued against the denial of alimony, emphasizing factors that support a substantial award. Given the improper calculation of Husband's income, the denial of alimony was also reversed, directing the family court to conduct a proper analysis, as alimony aims to maintain the supported spouse's standard of living akin to that during the marriage.

In Reiss v. Reiss, the South Carolina Court of Appeals established that the family court must issue alimony awards that are fit, equitable, and just, considering specific factors outlined in state law. These factors include the marriage's duration, the parties' health, education, employment history, standard of living, earnings, expenses, property ownership, child custody, marital misconduct, tax implications, prior support obligations, and any other relevant factors. The court emphasized that alimony should not serve as a reward or punishment but rather to maintain the parties' established status quo. The family court's denial of alimony to the Wife was reversed due to errors in calculating the Husband's income and marital debt, and the case was remanded for reassessment.

Regarding child support, the Wife contended that the family court erred in determining the Husband's income and neglected the Child's needs. The court had ordered the Husband to pay $821 monthly in child support based on imputed incomes of $45,000 for the Wife and $100,000 for the Husband. The court also mandated the Husband to provide health insurance for the Child, with the Wife responsible for the first $250 of uncovered expenses. The Wife argued for additional support based on the Child's previously enjoyed benefits, such as private schooling and extracurricular activities, referencing the case Rabon v. Rabon. However, it remained uncertain if the Husband could afford such expenses. The court agreed that both parties' standard of living needed to be reduced but remanded the issue of child support determination due to the improper calculation of the Husband's income.

Wife contends that the family court erred by not requiring Husband to maintain life insurance or other security for alimony and child support. The court is directed to reconsider this issue alongside its analysis of alimony and child support recalculations. Life insurance may be mandated if the supported spouse demonstrates special circumstances that warrant security, considering factors like age, health, income, earning ability, and assets. The family court must also evaluate the payor spouse's capacity to secure these obligations, including their age, health, income, insurability, and insurance costs. Wife asserts that circumstances justify requiring Husband to use life insurance previously held for her and their child. The court's review indicates a failure to adequately consider Husband's financial situation in its findings, leading to a remand for a reassessment of the life insurance requirement.

Wife also argues the family court improperly handled the equitable division of marital assets and debts, challenging its decisions on the valuation and apportionment of BHBI interests, the absence of "special equity" in certain properties, the handling of debts owed to Brother, and the distribution of upfit funds and marital artwork. The court is reminded that South Carolina law requires consideration of various factors in asset division, such as marriage duration, marital misconduct, the health and income of each spouse, and contributions to marital property acquisition. The family court's application of these factors is under scrutiny, particularly regarding its decisions affecting the overall equitable division of assets and debts.

The family court's handling of the trial concerning Brother's interests in the marital estate and Husband's debts to Brother was flawed, resulting in the erroneous conclusion that there is no equity in the marital assets. A critical error was the court's failure to ascertain whether the debts were incurred for the joint benefit of the parties during the marriage, as highlighted in Allen v. Allen, where loans from close family members must be scrutinized for legitimacy. The family court neglected to examine the connections between the debts owed to Brother and the marital properties, as well as their impact on the financing of marital and Husband's newer business ventures. Additional errors included overlooking the unauthorized sale of a portion of BHBI, failing to attribute income from BHBI to Husband, disregarding Brother's undisclosed interest in BHEC, and the use of BHBI funds for new businesses. Consequently, the entire equitable apportionment analysis regarding marital assets and debts requires reversal.

Wife contended that Husband improperly utilized marital funds to finance new businesses, including Amen Street Fish and Raw Bar, despite claims of BHBI's financial struggles. The court reversed the denial of Wife's special equity in these new ventures, directing the family court on remand to assess whether the businesses were funded by pre-filing earnings from BHBI or if Wife and Child hold a share in them.

Regarding contempt, Wife argued that the family court erred by not finding Husband in contempt for failing to pay his share of the court-appointed CPA fees and his attorney's fees. The court agreed, stating that contempt arises from willful disobedience of court orders. Husband's obligation to pay these fees was clear, and his failure to do so warranted a contempt finding, which the family court did not address.

The family court's denial of Wife's divorce claim on the grounds of adultery was found to be erroneous. The court initially based its decision on a one-year separation, which was unsupported by substantial evidence. Wife provided clear evidence of Husband's infidelity, while the court's findings lacked corroboration. Citing Brown v. Brown, the court reaffirmed that adultery must be proven by a clear preponderance of the evidence, which can include circumstantial proof indicating opportunity and disposition. Husband admitted to adultery with at least one paramour and later acknowledged relationships with both women during the trial. Notably, one incident involved a paramour spending the night with Husband shortly after their separation, an event that prompted Wife to seek divorce. Although the family court recognized Husband's fault when denying Wife alimony, it inconsistently concluded that the separation—not the adultery—was the primary cause of the marriage's end. Given the conflicting findings, erroneous separation date, and Husband's admissions, the court granted Wife a divorce on the basis of adultery.

Additionally, the court erred by not awarding Wife attorney's fees and costs. According to South Carolina law (Section 20-3-130(H)), the family court is authorized to order payment of litigation expenses, considering factors such as each party's ability to pay, the results obtained by the attorney, their financial conditions, and the impact of the fees on their standard of living.

A party's financial capacity is crucial in determining attorney's fee awards, taking into account the parties' financial conditions and the impact on their standard of living (Rogers v. Rogers). The Final Order recognized the E.D.M. factors for awarding fees, but the family court's incorrect findings regarding Husband's income, alimony, and child support affected this determination. If the outcome of the case is overturned on appeal, the attorney's fee award must also be reversed (Sexton v. Sexton). A proper assessment of Husband's income would indicate a greater ability to pay fees. Moreover, Husband's actions, including filing six rules to show cause, escalated litigation costs. Consequently, the court reversed and remanded the case for a thorough analysis and appropriate award of Wife's attorney's fees and costs, including future litigation expenses. The family court's decision for equal sharing of expert costs was contested, as there was no clarity on the reallocation of fees owed to the CPA, necessitating remand for a proper allocation of litigation expenses and consideration of open contempt issues.

The conclusion states that when a family court's order lacks specific factual findings, the appellate court may remand it. However, if the record is adequate, the court can make its own factual determinations (Thomson). In this case, the record did not provide sufficient information regarding marital assets, Husband's income, and other financial matters, limiting Wife's ability to present evidence. Thus, the appellate court could not correct errors through de novo review and opted to reverse and remand for further proceedings. Wife's divorce request on adultery grounds was granted. The opinion clarified that the standard for reviewing family court evidentiary or procedural rulings is abuse of discretion.

Husband did not provide the original or a signed copy of the prenuptial agreement but submitted an unsigned version as an exhibit with his affidavit. At the time the case was filed, the ownership of BHBI was distributed among various parties, with Husband holding 70% and Wife 5%. Wife assisted in the operation of their restaurants, which later reopened under new management. Following the discovery of the sale of a restaurant named Carolinas, Wife sought legal protection, resulting in an order requiring the escrow of proceeds from the sale. At trial, Wife claimed she received no payment from this sale, although Husband received an upfront payment and additional funds through a promissory note. Husband had paid $270,000 from these proceeds to a business partner, reducing a $550,000 note secured by property.

Husband obtained a summary judgment for $250,000 against Choto’s owner, but the collection status was pending at the time of trial. The family court criticized Husband for exposing their minor child to his paramour and disregarding a consent order, a contempt ruling Husband did not appeal. Discrepancies arose regarding the existence of certain documents, with Husband, as an attorney, denying their existence, which complicated the court's findings. Husband submitted only two financial declarations, each showing an income of $8,333 per month, failing to disclose other payments made on his behalf. 

Wife established that Husband committed adultery with two employee paramours, with the separation occurring in March 2009 after an incident when Wife returned home to find Husband absent. Supporting evidence included phone records and Husband's admissions, indicating that his actions and the family court's inaction significantly influenced the proceedings.