In the Missouri Court of Appeals
Western District
DEBORAH A. WALKER, )
Respondent, )
v. ) WD77805
)
JACK J. LONSINGER, ) FILED: May 26, 2015
Appellant. )
APPEAL FROM THE CIRCUIT COURT OF CLAY COUNTY
THE HONORABLE DAVID P. CHAMBERLAIN, JUDGE
BEFORE DIVISION TWO: LISA WHITE HARDWICK, PRESIDING JUDGE,
VICTOR C. HOWARD AND CYNTHIA L. MARTIN, JUDGES
Jack Lonsinger ("Husband") appeals from the circuit court's judgment
denying his motion for contempt against his former wife, Deborah Walker ("Wife"),
and granting her petition in equity to allocate, as an omitted marital debt, all of the
parties' 2011 tax liability to Husband. For reasons explained herein, the judgment
is affirmed in part and reversed in part.
FACTUAL AND PROCEDURAL HISTORY
Husband and Wife were married in 1981. When they separated in 2009,
Wife filed a petition for dissolution of marriage. In 2011, while the dissolution was
pending, Husband took distributions of approximately $80,000 from some of his
IRA accounts without Wife's knowledge. Husband used the funds to invest in a
business venture to which Wife was not a party. Although Husband disclosed his
investment in the business venture to Wife in interrogatory responses, he said only
that the funds for the investment came from his trust, which consisted of bank
accounts, CDs, money markets, stock, and IRA accounts. Husband did not
disclose to Wife that he withdrew the funds specifically from the IRA accounts in
his trust.
In early 2012, the financial institutions that maintained Husband's IRA
accounts issued 1099-R forms to him identifying the gross distribution amount of
each of his 2011 IRA distributions. Thereafter, in April 2012, the parties prepared
and filed joint 2011 federal and state tax returns. Although Husband was aware
that his IRA distributions were taxable, neither the federal nor state tax returns
included those IRA distributions. Without reporting Husband's IRA distributions,
the joint 2011 federal tax return indicated that the parties were entitled to a refund
of $319,000.
On August 6, 2012, Husband and Wife entered into a marital settlement
agreement. In the agreement, the parties agreed that they would "equally share
any 2011 tax liability or refund" without reference to a specific amount. The
agreement also contained a section titled "Full Disclosure," which included this
clause:
2. Each party warrants that he or she has fully advised the
other of the full extent of all income, liabilities, and assets in which
she or he had any interest, whether legal or equitable, from the filing
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of the Petition for Dissolution of marriage to the date of the execution
of this Agreement as well as all other facts relating to the subject
matter of this Agreement.
Husband did not disclose his 2011 IRA distributions or the resulting tax
consequences in the marital settlement agreement. Wife relied on Husband's
representations that he had disclosed all of his assets and debts when she agreed
to the division of the parties' assets and liabilities set out in the marital settlement
agreement.
The judgment dissolving the parties' marriage was entered on August 21,
2012. By agreement of the parties, the judgment incorporated the terms of their
marital settlement agreement. At no time prior to the entry of the dissolution
judgment did Husband disclose to Wife his 2011 IRA distributions or his receipt of
the corresponding 1099-R forms.
In November 2012, the IRS issued Husband and Wife a notice of deficiency
resulting from Husband's undisclosed IRA distributions. The notice of deficiency
was the first notice Wife received of the 2011 IRA distributions. In response to the
notice of deficiency, the parties' accountant prepared amended joint 2011 tax
returns to include the IRA distributions. The amended federal tax return indicated
that the parties owed $26,670,1 while the amended state tax return indicated that
the parties owed $4572.
1
Husband's reply brief indicates that the $26,670 owed on the amended federal return was the
amount that the parties were overpaid when they received their $319,000 refund.
3
Upon completion of the amended tax returns, Husband demanded that Wife
sign the amended returns and pay half of the resulting tax liability. Wife signed the
amended returns but refused to pay anything due to Husband's failure to disclose
his IRA distributions in the marriage settlement agreement or at any time before the
parties' divorce. Additionally, Wife refused to pay because Husband was the sole
beneficiary of the IRA distributions.
Husband paid the federal tax liability and then filed a motion for civil
contempt against Wife in September 2013. The motion requested the court to find
Wife in contempt of the dissolution judgment for refusing to pay half of the 2011
tax liability. In response, Wife filed a petition in equity in which she asked the
court to determine that the 2011 tax liability constituted a marital debt that was
omitted from the dissolution judgment. She requested that the court order
Husband to be solely responsible for paying this debt due to his failure to disclose
his IRA distributions and the resulting tax liability in the dissolution action. Wife
also requested payment of her attorney's fees. The court consolidated Husband's
motion and Wife's petition for trial.
Following the trial, the court entered its judgment denying Husband's
contempt motion and granting Wife's petition in equity. In its judgment, the court
found that Husband had knowledge of his 2011 IRA distributions and their
taxability before the execution of the marital settlement agreement and the entry of
the dissolution judgment, and that Husband bore the burden to disclose the
distributions to Wife. The court further found that, while Husband's failure to
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disclose the distributions did not constitute fraud, it was a mistake. Therefore, the
court ruled that Husband was solely liable for the 2011 tax liability, as well as any
interest and penalties associated with that liability. Additionally, the court ordered
Husband to pay Wife's attorney's fees in the amount of $9000. Husband appeals.
STANDARD OF REVIEW
Appellate review of this court-tried case is under the standard of Murphy v.
Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). Accordingly, we will affirm the
circuit court's judgment unless there is no substantial evidence to support it, it is
against the weight of the evidence, or it erroneously declares or applies the law.
Id. We defer to the court's determinations regarding witness credibility, and we
view the evidence and any inferences therefrom in the light most favorable to the
judgment. May v. O'Roark, 329 S.W.3d 410, 413 (Mo. App. 2011).
ANALYSIS
In his sole point on appeal, Husband contends the circuit court erred in
granting Wife's petition in equity, awarding her attorney's fees, and denying his
motion for contempt because the court's ruling amounted to an improper
modification of the dissolution judgment. Specifically, Husband argues that,
because it was more than one year from the date of the judgment, the only way
that the court could relieve Wife of her obligation under the dissolution judgment to
pay one-half of the 2011 tax liability would be if it found extrinsic fraud. Because
the court specifically found no fraud, Husband contends the court could not modify
the dissolution judgment.
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Under Section 452.360.2, RSMo 2000, the distribution of marital property in
a dissolution judgment is final and is not subject to modification. "'When the terms
of a parties' separation agreement are incorporated into a dissolution decree, the
court does not retain the power to modify them.'" Meissner v. Schnettgoecke,
211 S.W.3d 157, 160 (Mo. App. 2007). Within one year after the judgment is
entered, however, Rule 74.06 allows the circuit court to set aside the judgment
based on a finding of mistake, inadvertence, surprise, excusable neglect, intrinsic
or extrinsic fraud, misrepresentation, misconduct of an adverse party, or an
irregularity in the judgment. Rule 74.06(b) and (c); Reimer v. Hayes, 365 S.W.3d
280, 283 (Mo. App. 2012). Wife filed her petition in equity in October 2013, more
than one year after the August 2012 entry of the dissolution judgment. "'After
one year from the date of the judgment, the judgment is subject to attack only by
an independent action in equity upon a demonstration of extrinsic fraud when the
basis of relief is fraud.'"Reimer, 365 S.W.3d at 283 (citation omitted). See also
Rule 74.06(d). In its judgment, the court specifically found that there was no
fraud; hence, it did not grant Wife's petition in equity under Rule 74.06(d).2
Instead, the court granted Wife's petition in equity on the basis that the
2011 tax liability constituted marital debt that was omitted by mistake from the
division of property in the dissolution judgment. "Marital property, omitted from a
dissolution decree which has become final, may be divided in a subsequent
2
In her petition in equity, Wife alleged that Husband's failure to disclose his IRA distributions and
the resulting tax liability was either a mistake or fraud. At trial, however, Wife testified that she
was not contending that Husband committed fraud.
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independent action in equity if the decree was obtained by extrinsic fraud, accident
or mistake." West v. West, 871 S.W.2d 64, 65 (Mo. App. 1994) (citing Chrun v.
Chrun, 751 S.W.2d 752, 755 (Mo. banc 1988)). This same rule applies to allow
for the division of marital debt that was omitted from a final dissolution judgment.
Milligan v. Helmstetter, 15 S.W.3d 15, 26 (Mo. App. 2000).
The marital debt that the court purported to divide in this case -- the parties'
2011 tax liability -- was not omitted from the dissolution judgment. In fact, it was
specifically addressed, as the marital settlement agreement that was incorporated
in the dissolution judgment provided, "The parties will equally share any 2011 tax
liability or refund." It is true that, at the time the parties executed the agreement
and the court entered the dissolution judgment, the parties had already received or
believed they would receive a $319,000 refund. Nevertheless, instead of limiting
their agreement to address only the division of the tax refund claimed in their 2011
tax return, Husband and Wife elected also to provide for the division of any tax
liability, should one occur.
In its judgment, the court found that only Husband had knowledge of his
2011 IRA distributions and their taxability and that he mistakenly failed to disclose
those distributions and their taxability to Wife. Although these findings established
that the cause of the 2011 tax liability (Husband's IRA distributions) was omitted
from the dissolution proceeding, they did not establish that the 2011 tax liability
itself was omitted.It was not omitted, as Husband and Wife expressly
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contemplated how to divide such liability when they agreed to "equally share any
2011 tax liability." (Emphasis added.)
While a party can seek the distribution of a marital asset or debt that was
omitted from the dissolution judgment, the party "cannot seek the redistribution of
property covered by the decree." In re Marriage of Quintard, 691 S.W.2d 950,
953-54 (Mo. App. 1985); Meissner, 211 S.W.3d at 160. Wife's petition in equity
asking the court to hold Husband solely responsible for the parties' 2011 tax
liability did not seek to divide omitted marital debt; rather, it sought to redistribute
debt covered by the dissolution judgment. The circuit court erroneously applied the
law in granting her petition. Therefore, the portion of the judgment granting Wife's
petition in equity and awarding her attorney's fees is reversed.
Husband also argues that the court erred in denying his contempt motion
because he made a prima facie case to find Wife in contempt of the dissolution
judgment, and Wife failed to rebut it. The circuit court's judgment in a civil
contempt proceeding will not be disturbed absent a clear abuse of discretion.
Ream-Nelson v. Nelson, 333 S.W.3d 22, 28 (Mo. App. 2010). An abuse of
discretion occurs when the ruling "'is clearly against the logic of the circumstances
then before the court and is so arbitrary and unreasonable as to shock the sense of
justice and indicate a lack of careful consideration.'" Id. (citation omitted).
To establish a prima facie case for civil contempt, a party must prove "(1)
the contemnor's obligation to perform an action as required by the decree; and (2)
the contemnor's failure to meet the obligation."Id. "'The alleged contemnor then
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has the burden of proving that person's failure to act was not due to her own
intentional and contumacious conduct.'"Id. (quoting Walters v. Walters, 181
S.W.3d 135, 138 (Mo. App. 2010)). "Whether or not [the contemnor]'s conduct
was intentional and contumacious is a fact-driven inquiry." Basham v. Williams,
239 S.W.3d 717, 727 (Mo. App. 2007).
In this case, it is clear that the circuit court did not believe that Wife acted in
a contumacious manner by refusing to pay one-half of the parties' 2011 tax
liability. The court found that Husband's investment in the business venture during
the parties' separation placed an "undue burden" on Wife to try to track the source
of funds (his IRA distributions) for that investment. The court also found that
Husband not only "had superior knowledge regarding the IRA distributions," but
that he was the "only" party with knowledge of them. Additionally, the court
found that Husband had the 1099-R forms for his IRA distributions when the
marital settlement agreement was executed and the dissolution judgment was
entered. The court noted that, in the marital settlement agreement, Husband and
Wife each warranted that they had "fully advised the other of the full extent of all
income, liabilities, and assets in which he or she had any interest," from the date of
the filing of the dissolution petition to the date of the execution of the settlement
agreement, "as well as all other facts relating to the subject matter of this
[a]greement." The court found that, although Husband bore the burden to disclose
his IRA distributions to Wife, he failed to do so.
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Based upon these findings, we cannot conclude that the court's decision
was clearly against the logic of the circumstances then before it and was so
arbitrary and unreasonable as to shock our sense of justice and indicate a lack of
careful consideration. The circuit court did not abuse its discretion in denying
Husband's request to find Wife in contempt of the dissolution judgment.
Therefore, the portion of the judgment denying Husband's contempt motion is
affirmed.
CONCLUSION
The portion of the judgment granting Wife's petition in equity and awarding
her attorney's fees is reversed. The portion of the judgment denying Husband's
contempt motion is affirmed. Wife's request for attorney's fees on appeal is
denied.
____________________________________
LISA WHITE HARDWICK, JUDGE
ALL CONCUR.
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