Case Title: Towslee v. Callanan

Citation: 

Docket Number: 2009-382

State: vermont

Court: Vermont Supreme Court

Date: 2011-09-08T00:00:00Z

Document:
Towslee v. Callanan (2009-382)
 
2010 VT 106
 
[Filed 08-Sep-2011]
 
ENTRY ORDER
 
2010 VT 106
 
SUPREME COURT
  DOCKET NO. 2009-382
 
SEPTEMBER TERM, 2010
 
John Towslee
}
APPEALED FROM:
 
}
 
     v.
}
Bennington Family Court 
 
}
 
Cathleen Callanan
}
DOCKET NO. 51-2-97
  Bndm
 
 
 
 
 
Trial Judge: David Howard
 
In the above-entitled
cause, the Clerk will enter:
 
¶ 1.            
Husband appeals from a post-divorce ruling by the family court. 
The court held that, in determining what husband was owed from the sale of the
marital home, wife could deduct the principal and interest components of
mortgage payments she had made.  We affirm.
¶ 2.            
The parties were divorced in 1997.  By stipulation, which was
incorporated into the final divorce order, wife was awarded the marital home
(purchased three years earlier) until the parties' youngest child turned
eighteen.  Wife was responsible for all costs and expenses associated with
the home, including "the current mortgage," of which there were two, totaling
$87,500, a value near the property's purchase price.  The stipulation
provided that the proceeds from the sale of the property would be divided equally
after deducting the usual and customary expenses associated with the sale of
the property, the remaining balance of the current mortgage, the cost of the
appraisal, and "the cost of all capital improvements and capital contributions
(mortgage)." 
¶ 3.            
The phrase"capital contributions (mortgage)"is at the heart of this
case.  When wife attempted to sell the property in 2008 for $140,000, the
bank required husband to sign off on the sale.  Husband refused to do so,
claiming that wife owed him money under the terms of the final divorce
order.  Eventually, each party filed a motion to enforce.  The
dispute turned on whether wife was entitled to deduct not only the principal
component of the mortgage payments she made, but also the interest component of
those payments.  Following a hearing, the court found the phrase "capital
contributions (mortgage)" ambiguous, and it examined extrinsic evidence to
discern the parties' intent.  After hearing testimony from husband's
attorney, who drafted the language in question, as well as from wife, the court
concluded that the more reasonable interpretation, given the use of the word
"mortgage," was that wife could deduct the entirety of the payments made on the
debt secured by the original two mortgages.[1]  The court then requested briefing
on the amount owed to husband from the sale of property.  It appears
undisputed that after wife's deductions for capital improvements, which are
permitted under the divorce order, and after deducting all of her payments in
the amounts of principal and interest called for in the original mortgages,
there is little or no equity left to split between the parties.
¶ 4.            
On appeal, husband argues that the phrase "capital contributions
(mortgage)" plainly denotes only the mortgage payments to principal.  Even
if the phrase is ambiguous, he asserts that the court should have relied on the
undisputed testimony of the attorney who drafted the phrase and testified that
it was intended to refer only to principal payments as opposed to the entire
mortgage payment.  Conversely, wife maintains that the language supports
her interpretation, but if the language is ambiguous, this Court should find
the family court's construction reasonable.  Because the language does not
plainly support either interpretation to the exclusion of the other, the family
court correctly found the phrase ambiguous, and its construction of the
ambiguous language was reasonable in light of the circumstances.
¶ 5.            
We interpret divorce decrees according to contract principles.  Sumner
v. Sumner, 2004 VT 45, ¶ 9, 176 Vt. 452, 852 A.2d 611.  Thus, we look
first to the explicit terms of the decree and decide de novo if they are
ambiguous.  John A. Russell Corp. v. Bohlig, 170 Vt. 12, 16, 739 A.2d 1212, 1216 (1999).  If an agreement, even if "inartfully worded or
clumsily arranged, fairly admits of but one interpretation, it may not be said
to be ambiguous or fatally unclear."  Isbrandtsen v. N. Branch Corp.,
150 Vt. 575, 580-81, 556 A.2d 81, 85 (1988) (quotation omitted).  If
unambiguous, the language of the decree controls and the Court does not look to
external evidence.  Sumner, 2004 VT 45, ¶ 9; O'Brien Bros.'
P'ship v. Plociennik, 2007 VT 105, ¶ 9, 182 Vt. 409, 940 A.2d 692. 
But if "reasonable people could differ as to its interpretation," a provision
is ambiguous and the court should look beyond the plain language to discern the
parties' intent.  O'Brien Bros.' P'ship, 2007 VT 105, ¶ 9 (quotation
omitted).  This is "a question of fact to be determined based on all of
the evidencenot only the language of the written instrument, but also evidence
concerning its subject matter, its purpose at the time it was executed, and the
situations of the parties."  Main St. Landing, LLC v. Lake St. Ass'n., 
2006 VT 13, ¶ 7, 179 Vt. 583, 892 A.2d 931 (mem.).  We defer to the
court's factual findings so long as not clearly erroneous, meaning that we will
affirm if they are supported by the evidence as seen in the light most
favorable to the prevailing party.  Willey v. Willey, 2006 VT 106,
¶ 11, 180 Vt. 421, 912 A.2d 441.  
¶ 6.            
Husband argues that "capital contributions (mortgage)" applies to
payments toward principal, but not toward interest.  The family court
correctly noted that the phrase "capital contribution" does not ordinarily
apply to any mortgage payments.  Technically, "capital contribution" is a
business term of art defined as "[c]ash, property, or services contributed by
partners to a partnership," or "[f]unds made available by a shareholder,
usu[ally] without an increase in stock holdings."  Black's Law Dictionary
222 (8th ed. 2004).  The only case in Vermont that uses the term in a
divorce context applies it to supplying funds for a home purchase rather than
making mortgage payments.  See Ward v. Ward, 155 Vt. 242, 249-50,
583 A.2d 577, 582-83 (1990).  Nor do there appear to be cases from other
jurisdictions that address capital contributions specifically in a mortgage
payment context.  On the other hand, and as also explained by the court, a
"mortgage" is commonly understood to mean payments of principal and
interest unless specified to the contrary.  Assuming then, for argument's
sake, that the phrase "capital contributions" could reasonably refer to
payments to mortgage principal only, the parenthetical addition of the
explanatory, but contradictory, term "mortgage" within the same reference
muddies the meaning of "capital contribution."[2]  Not insignificantly to the court,
the term "mortgage" was also used earlier in the same subsection of the
parties' stipulation to have wife assume, and hold husband harmless from, the
mortgage paymentsagain commonly understood and clearly intended by the parties
to mean principal and interest, so that husband would be relieved of
that obligation.  This is another reason why husband's construction of
"capital contributions (mortgage)" is not the only plausible reading of the
language, and that the court's construction is not unfounded.
¶ 7.            
The parties' mutual invocation of the interpretive canon against
surplusage underscores the ambiguity of the phrase.  See N. Sec. Ins.
Co. v. Mitec Elecs., Ltd., 2008 VT 96, ¶ 24, 184 Vt. 303, 965 A.2d 447
(noting that the Court strives to avoid an interpretation that renders any
contract language surplusage).  Both husband's and wife's readings of the
three words in question must result in a superfluous term.  Wife posits
that "mortgage" clarifies that she is due credit for payments to both mortgage
principal and interest, but this necessarily renders the preceding phrase,
"capital contributions," superfluous.  Husband argues that "mortgage" is
merely descriptive of wife's "capital contributions" based on her payments of
mortgage principal.  This renders the same term superfluous if, as husband
argues, "capital contributions" could only mean principal paid on the
mortgage since other capital investment would appear to fall within the
decree's credit for her "capital improvements."[3]  Unlike Isbrandtsen, the
language here arguably supports both parties' interpretations and so is
ambiguous.  See Isbrandtsen, 150 Vt. at 581, 556 A.2d  at 85.[4]
¶ 8.            
The remaining question is whether the family court's construction of
this ambiguous phrase is clearly erroneous.  See Willey, 2006 VT
106, ¶ 11.  We hold that it is not.  Faced with two
less-than-compelling interpretations, the family court noted greater
deficiencies in husband's construction, especially his failure to craft the
stipulation to explicitly limit wife's reimbursement to principal payments if
that was the parties' intent.  That wife's reading was not flawless did
not foreclose the court from adopting her version if supported by conventions
of contract construction.  
¶ 9.            
There are ample reasons to support the court's judgment.  One
is that a "mortgage" payment, as recited by the court, ordinarily consists of
principal and interest payments.  Another is that the preceding phrase,
"capital contributions," does not necessarily contradict the later
parenthetical, as opposed to informing the court that what the parties meant by
"capital contributions" was "(mortgage)" payments.  Yet another, as
mentioned above, is that the term "mortgage" is used twice in the same
stipulation without distinction, the first referring to mortgage
paymentsprincipal and interest.  The family court was not irrational in
giving identical terms in the same document the same meaning.  Finally,
though the parties' attorneys apparently traded drafts back and forth,
husband's attorney recalled drafting the specific provision in question, and
the court found him to be the author of the stipulation.  "[W]here a
contract is ambiguous, it will be construed against the party who drafted it."
 State v. Spitsyn, 174 Vt. 545, 547, 811 A.2d 201, 204 (2002)
(mem.).  Accordingly, the family court was not clearly wrong to construe
the ambiguous provision against husband.  
¶ 10.        
The family court's construction was not unfair or unreasonable. 
See Trustees of Net Realty v. Avco Fin. Servs., 147 Vt. 472, 475-76, 520 A.2d 981, 983 (1986) (preferring fair and reasonable resolution of ambiguous
terms against the drafter).  While husband's divorce lawyer testified to
the effect that there was "little equity" in the house at the time of the
divorce, the court made no finding as to value.  Nor, so far as we can discern,
did husband introduce evidence of significant equity in the house at the time
of purchase or divorce.  The dissent suggests that husband was inequitably
denied an accrued stake in the pre-divorce marital estate, but without evidence
of some actual beginning value, the dissent's equitable arguments are largely,
if not entirely, speculative.  Even if theoretically unfair, the actual
record does not support husband's, and the dissent's, argument that the family
court's construction of the stipulation was clearly erroneous.  Thus,
husband's ongoing interest in relinquishing the marital home to wife, in return
for wife assuming the whole mortgage payments, was to share in any accrued
appreciation at the time of a later sale.[5] 
It was not clearly inequitable to credit wife for her entire mortgage payments,
when husband's interpretation would impose upon her, at no cost to him, the
entire interest-carrying cost for his prospective appreciation.[6]
¶ 11.        
Unsupported by the record, the dissent contends that husband's child
support subsidized wife's mortgage in proportion to her payments, so that
return on his contributions to equity were denied by the court's
construction.  Using the dissent's calculation of $860 per month in child
support and $550 per month in mortgage payments, it is still speculative that
 husband's support payments fully covered one half of wife's actual child
rearing expenses, and that some portion of his child support should be fairly
credited toward wife's mortgage payments.  In any event, this argument was
not presented below or on appeal, and it is not properly considered now.
 And again, any theoretical merit to this argument does not render the
family court's fact-based construction untenable. 
           
Affirmed.
 
¶ 12.        
DOOLEY, J., dissenting.  Viewed from any perspective, the
result in this case is manifestly unfair, and the provision in the order, as
interpreted by the majority, is perverse and indefensible.  On this point,
I strongly disagree with the majority decision that the result is not "unfair
or unreasonable."  Ante, ¶ 10.  The majority justifies the
result, and the perverse term of the order, on the basis that the wording of
the controlling provision, in context, requires it.  In fact, the majority
ignores the critical wording of the provision that controls this
decision.  Properly construed, the controlling provision supports the only
fair result.  Accordingly, I dissent.
 
¶ 13.        
Let me start with why the result is unfair.  At the time of the
divorce, the parties had limited property to divide apart from their clothing
and personal effects.  Wife was awarded an almost new car, the house and
most of its interior furnishings and contents.  Husband was awarded a
twelve-year old van, a two-year old snowmobile and a six-year old
motorcycle.  The only real value in this property was in the house,
although the equity was unknown and the property was subject to mortgages to
secure loans totaling $87,500.  At a minimum, there was the equity created
by the appreciation in value between the date of purchase (1994) and the date
of the divorce (1997).  In order to try to equalize the property
distribution, the court awarded wife title to the house, but she was required
to sell it when the youngest child reached eighteen years of age and divide the
proceeds with husband or, if wife remarried or moved from the house before that
time, she was required to pay "one half of the equity" to husband.  In the
end, wife received all the equity in the house, and husband received nothing
from its sale.[7] 
At least[8]
for the period until the house was sold, husband was obligated on the underlying
notes that reflected the purchase price of the house.[9]  Apparently, wife became delinquent
in mortgage payments in late 2003, and the bank started seeking collection from
husband.[10] 
Thus, not only did husband get no benefit from the value of the house, it
represented a large liability until it was sold.  The result is that the
distribution of the property of the marriage was inequitable, with wife
receiving almost all of its value.
¶ 14.        
The whole point of the distribution was to enable wife to stay in the
marital house with the two children.  To do this, wife paid around $550
per month on the mortgages.  The vast majority of the mortgage payments
went to interest.  In essence, husband's equity in the property was being
consumed by the interest payments that were credited to wife in the
distribution of the proceeds of the sale.  If, as the majority states,
there was no equity in the property at the time of the divorce,[11] the property would have had to increase
in value at a rate of approximately 4.62% per year for husband to have ever
recovered any equityeven a dollarfrom the property if it had been sold at the
time of refinancing.  The value of the house actually increased at the
annual rate of approximately 4.37% between the divorce and the refinancing.[12]  The fact is that husband's
interest in the equity was illusory.  The agreement and order was a kind
of shell game that husband could not win.  He would have been better off
if the house had been awarded completely to wife with a requirement that the
debt obligation be refinanced so husband was no longer liable for the debt.
¶ 15.        
There is another way in which the  result is unfair.  Husband
is paying child support according to the child support guidelines; the original
order set the amount at $200 per week.[13] 
The amount is based on the financial need of children, which includes their
housing cost.  See 15 V.S.A. § 654 ("The secretary of human services shall
prescribe by rule a guideline for child support . . . .  The rule shall be
based on the financial needs of Vermont children, established by such reliable
data as most accurately reflect their needs."); R. Williams, Guidelines for
Setting Levels of Child Support Orders, 21 Fam. L.Q. 281, 287 (1987) ("[A]
recent economic study . . . estimates that over one-half of family expenditures
on children fall into just three categories: food, housing, and
transportation.").  In this case, the major share of the children's
housing costs is the mortgage costs, particularly the interest on the
debt.  Thus, a substantial share of husband's child support represents
payment of mortgage interest.  At the same time, this interest is being
credited to wife to steadily reduce husband's equity interest in the
property.  In essence, husband is paying twice for the same expenseonce
through child support, and once through reduction in the equity.  His
steady loss of equity cannot be offset against his gross income in calculating
child support payments.  See 15 V.S.A. § 653(1) (defining "available
income" to determine child support obligation).  Nor was it counted as
income to wife in determining her share of the child support obligation. 
In fact, husband's child support amount was temporarily increased to reflect
the children's homeplace "costs and expenses."
¶ 16.        
Finally, our assessment of fairness should be reached in relation to
limits in our cases on delayed distribution of property.  The court can
delay distribution of property with each party obtaining a percentage of the
value at the time of distribution, including any appreciation or depreciation
caused by the delay.  Leas v. Leas, 169 Vt. 364, 370, 737 A.2d 889, 894 (1999).  Alternatively, it can award a property interest, and delay
its realization, but it must require the payment of interest on the value of
the property if a lengthy delay is expected.  See id.; Johnson
v. Johnson, 163 Vt. 491, 497, 659 A.2d 1149, 1153 (1995).  Here,
husband has the worst of all alternatives.  Ostensibly, he is awarded a
percentage of the equity in the property, but he can never receive that
equity.  Not only does he not obtain a share of any appreciation in value,
he loses any property value he had at the time of the divorce order.  He
is, of course, awarded no interest on any equity value; in fact, he has to pay
interest to the spouse who has the use of the property and he remains liable on
the underlying debt obligation for the property even though he will never
receive any benefit!  If this order were imposed by a court without an
underlying stipulation, I doubt that we would uphold it.  
¶ 17.        
In the following paragraphs, I outline the reasons why I believe that
the majority's construction of the language of the original court order is
wrong, apart from the unfairness of the result.  One point in this
analysis needs special emphasis.  The "Real Estate" section of the divorce
order contains three subsections.  Subsection (b), quoted and construed by
the majority, applies directly only when the youngest child turned
eighteen.  In fact, the youngest child of the parties was born in 1996 and
will turn eighteen in 2014.  As a result, subsection (b) does not apply
directly to this case.  The operative section is subsection (c), which
applies if wife remarries or moves from the marital residence, the latter
having occurred here.  It goes on to say that the property must be refinanced
to pay off husband or sold and that the distribution of the proceeds will occur
under subsection (b), thus indirectly invoking that subsection.  It is,
however, more specific in describing wife's obligation as "to pay to
[husband] . . . one half of the equity," language not in
subsection (b) and ignored by the majority.  This language is important
because it says clearly that the point of the proceeds distribution methodology
is to give husband one half of the equity in the property.  Under the majority's
construction of the distribution methodology language, the one result that can never
occur is that husband will receive one half of the equity in the
property.  The minute that wife made a mortgage payment the equity
available for distribution was reduced by the amount of wife's interest
payment.  The inevitable result, as this case demonstrates, is that if
wife stayed in the house for an extended period, husband would receive no part
of the equity of the property.  In my view, the added language in
subsection (c), the operative subsection of the order, is the chief reason that
the majority's construction of the distribution language is wrong.
¶ 18.        
Even apart from the unfair result and the language in subsection (c)
that specifies the intended outcome, I cannot agree with the majority's
reasoning and result on its own terms.  We have many rules for
construction of language in contracts or statutes, but the most important step
is to choose the right approach to best implement the drafter's intent.[14]  Here, the majority begrudgingly
accepts that the phrase "capital contribution" means the part of the mortgage
payment that goes to principal and thus increases the equitycapitalowned by
the mortgagee(s).  However inartful the chosen language may appear, it
cannot have any other meaning in context.  Contrary to the majority's
assertion, that meaning is supported by our case law[15] and decisions from other states.[16]  It is particularly common in tax
law because of the different tax treatments of interest and capital
payments.  See United States v. 1461 W. 42nd St., 251 F.3d 1329,
1336 (11th Cir. 2001) ("[T]he mortgage payments constitute both an ordinary
operating expense'payment of the interest'and a capital expense'payment
going toward equity."); United States v. All Assets & Equip. of West
Side Bldg. Corp., 1997 WL 187319, at *4 (N.D. Ill. 1997) ("The mortgage
payments . . . include two components: an operating expense (the interest
component of the payment) and a capital expense (the equity component of the
payment).").  This Court has never used the term "capital contributions"
to refer to payments resembling or including interest expenditures. 
Neither the trial court nor the majority even try to make "capital
contribution" mean interest payment.  
¶ 19.        
Next, the majority concludes that "(mortgage)" means all payments on the
underlying debt secured by the mortgage.  Because the term in the
agreement is the "existing mortgage," the trial court held that it means the
1994 mortgage, the only one in existence at the time of the agreement.[17]  While an all-payment
interpretation is a stretch for a single word inserted in parentheses, I
generally accept this interpretation in order to continue with the
analysis.  I note, however, that it is a definition intended to create a
conflict, exactly the wrong approach in this case.
¶ 20.        
It is at this point that the majority goes wrong finding an unnecessary
conflict between the words "capital contributions" and "mortgage" and declaring
that husband's interpretation will produce a surplus term when it will
not.  The critical interpretation rule is that we must apply all the terms
of the contractual language and seek to reconcile any superficial conflicts if
possible.  See State v. Philip Morris USA Inc., 2008 VT 11, ¶ 13,
183 Vt. 176, 945 A.2d 887 (stating that in interpreting contracts, this Court
"strive[s] to give effect to every part of the instrument and form a harmonious
whole from the parts" (quotation omitted)); In re Verderber, 173 Vt.
612, 615, 795 A.2d 1157, 1162 (2002) (agreeing that "an interpretation which
harmonizes all parts of the contract is preferable to an interpretation which
focuses on one provision heedless of context" (quotation omitted)).  The
majority doesn't attempt to reconcile its apparent conflict, even though the
method of doing so is obvious.  
¶ 21.        
In viewing the language to interpret it, we must start by recognizing
that a contradiction between a parenthetical phrase or word and a textual
phrase is virtually impossible.  A parenthetical word or phrase is
supplementary to the language it follows, and is optional for the reader. 
See, e.g., The Oxford Companion to the English Language 750 (1st ed. 1992)
(explaining that a parenthesis is "a qualifying, explanatory, or appositive
word, phrase, clause, or sentence that interrupts a construction without
otherwise affecting it," and that it "may be marked by pairs of commas, dashes,
or round brackets/parentheses"); The New Dictionary of Cultural Literacy 156
(3d ed. 2002) (stating that parentheses "subordinate . . . the material within
them so that readers save most of their attention for the rest of the
sentence").  It is totally inconsistent with the limited function of a
parenthetical phrase to make it controlling over the phrase it
supplements.  While I would still disagree with the majority's
construction if the word "mortgage" were set off by commas, rather than
parentheses, I think it is particularly wrong in this context.  
¶ 22.        
The obvious reconciliation of the terms is to interpret the phrase and
parenthetical as meaning capital contributions made through mortgage
payments.  This interpretation gives effect to all words in the operative
phrase and parenthetical and creates no internal conflict.  Moreover, it
does not make the reference to the mortgage unnecessary as the majority
claims.  The trial court interpreted the mortgage as only the 1994
mortgage[18]
and not the 2007 mortgage.  Thus, payments of principal under the 2007
mortgage may be capital contributions but they are neither "capital
improvements" nor "capital contributions" as the terms are used in subsection
(b) of the order.[19]
¶ 23.        
I believe that anyone fairly looking at the language of the order would
conclude that it allows wife an offset for the portion of her mortgage payments
that increase the equity in the property, but not for interest.  When it
is clear that this interpretation is necessary to reach a fair result and to
implement the purpose to split the equity from the property between the
parties, I think we must reverse the trial court decision.  Whatever
standard of review we operate under, we must reach the right result as a matter
of law.  Accordingly, I respectfully dissent.
¶ 24.        
I am authorized to state that Justice Skoglund joins in this dissent.
 
Dissenting:                                                     
BY THE COURT:
 
 
________________________________       
_____________________________________
John A. Dooley, Associate
Justice            
     Paul L. Reiber, Chief Justice
 
________________________________       
_____________________________________
Marilyn S. Skoglund, Associate
Justice          Denise R.
Johnson, Associate Justice

                                                                  
     _____________________________________
                                                                       
Brian L. Burgess, Associate Justice
 
 

[1]  There was subsequent refinancing by
wife that increased the mortgage debt, but the court limited her reimbursement
to an amount based on payments equivalent only to the mortgage obligations
"current" at the time of the divorce decree.
[2]  The dissent suggests that husband's
attorney's testimony deserves greater weight, post, ¶ 18 n.14, but
the record reflects no reason to credit the attorney's evidence over wife's
testimony to the contrary.
 
[3]  The dissent states, implausibly, that
the word "mortgage" could clarify that "capital contributions" refers only to
the 1994 mortgage, or that the phrase "capital contributions" does not apply to
non-mortgage expenditures that are also not capital improvements.  Post,
¶ 22.  The first theory is not reasonable because the word "mortgage" does
nothing to specify whether "capital contributions" refers to all mortgages or
just the 1994 mortgage.  The second explanation seems equally unlikely
since the dissent would rely on "mortgage" to exclude expenditures no one would
reasonably consider capital contributions in the first place.  We note
that neither explanation was advanced by husband or by his attorney who drafted
the document.
 
[4]  Nor are we persuaded otherwise by the
dissent's emphasis that wife must pay husband "half of the equity" at the time
of sale under subsection (c) of the divorce decree.  Post, ¶
17.  It is true this is a clear order that wife is to pay husband half of
the equity at the time of sale.  Superficially, this recommends husband's
interpretation, since house "equity" is commonly understood to be the
difference between the sale price and mortgage lien, and would ordinarily
suggest no credit to wife for her mortgage interest payments.  And yet,
under neither spouse's interpretation is husband entitled to half of that
equity so defined.  As the dissent acknowledges, subsection (c) incorporates
by reference subsection (b), which allows wife to deduct certain costs,
including "capital contributions (mortgage)."  There is no question that
under subsection (b) wife was also entitled to deduct for capital improvements
as well as payments to principal, meaning she is entitled to more than half the
equity if "equity" is given its standard meaning, so we know the standard
meaning does not govern.  The dissent's reiteration that husband is
entitled to half the equity merely begs the question as to what is "the
equity."   Such unavoidable circuity confirms the trial court's
conclusion that the stipulation is ambiguous.   
 
[5] The family court's construction of the
clause does not, as claimed by the dissent, necessarily defeat husband's share
in any appreciation in the home.  By the dissent's own calculations, if
the value of the house had increased an additional one quarter of one percent
per year, husband would have been entitled to some payment under the family
court's order.  Failure of husband to realize appreciation in the home,
after ostensibly contributing nothing to the principal and interest for eleven
years, was a function of the market as well as the court's construction of the
parties' stipulation.
 
[6] That husband remained legally liable on the
original mortgage is no basis, by itself and as the dissent would have it, for
disallowing wife's interest payments or crediting them to husband's
account.  This claim seems especially unfounded where, as here, the
parties expressly intended wife to hold husband harmless on the debt and
husband proffered no evidence of contributing to the payment of interest. 
The dissent would, incongruently, credit husband for wife's interest payments
even after her 2007 refinancing removed him from the debt. 
 
[7]  The majority tries to sugarcoat the
result a bit by stating that there was "little or no equity left to split"
after wife received all her credits off the top.  Ante, ¶ 3. 
In fact, it cannot be disputed that wife received 100% of the equity and
husband received 0%.
 
[8]  I have used "at least" because it is
not clear that husband is free of the debt obligation even today.  As the
trial court found, wife failed to pay off the preexisting mortgage entirely and
never had it discharged.  Husband signed that mortgage because of his
interest, albeit illusory, in the property.
 
[9]  A three-justice panel of this Court
found this exact distribution of risk and responsibility to be unfair because
it required, as here, that husband deed his interest to wife, but left him
obligated on the mortgage note and with no security to ensure he would
eventually receive part of the equity.  The panel ordered that husband not
be required to sign a deed or that he receive a security interest.  Gray
v. Gray, No. 2008-209, 2008 WL 4903038, at *2 (Vt. Nov. 5, 2008) (unpub.
mem.), available at: http://www.vermontjudiciary.org/d-upeo/upeo.aspx.  
 
[10]  The majority emphasizes that wife
agreed to hold husband harmless from the costs of the current mortgage. 
This is an illusory right where, as here, wife cannot make the mortgage
payments to the bank.  Husband is forced to pay the bank but cannot
collect on the hold harmless agreement from wife.
 
[11]  In fact, the assumption that there
was no equity in the house is almost certainly wrong.  There was no
appraisal at the time the house was purchased.  Husband and wife made no
down payment; the full purchase price was financed by the bank.  The "no
equity assumption" is built on the unlikely assumption that the bank loan equaled
all the value of the house, leaving the bank no margin of error in case of
default.  Further, it assumes that the value of the house did not increase
in the three years between its purchase and the divorce, an even more unlikely
assumption.  
 
[12]  It is worth observing that this level
of increase occurred mostly during a housing market where appreciation in value
was substantial.  In the stagnant market of the last few years, the amount
of total equity would not increase but the mortgage interest payments would
continue making husband's likelihood of receiving any equity even more remote.
 
[13]  It was amended a number of times
thereafter, but the payment amount remained comparable.
[14]  Although not my central point, an
example of how construction rules can be misused is in the treatment of the
testimony of husband's lawyer who drafted the provisions of the stipulation
dealing with the distribution of property.  He testified that he did not
intend that wife could get credit for interest paid on the house purchase loan
in determining the amount of equity to be distributed.  Although the trial
court, and the majority, find the critical language of the stipulation to be
ambiguous, they ignore the testimony and then, to pile on, construe the
language against husband because his attorney was the drafter.  See ante,
¶ 9.
 
[15]  See, e.g., Quimby v. Myers, 2005
VT 123, ¶ 11, 179 Vt. 611, 895 A.2d 128 (noting, in case about alleged business
partnership, that "court did not find an intent to distribute the assets on the
basis of individual capital contributions") (mem.); Murphy v. Stowe Club
Highlands, 171 Vt. 144, 156, 761 A.2d 688, 697 (2000) (referring to another
case where "the plaintiff's president received a substantial capital
contribution to the corporation and intentionally failed to disclose it to
defendant").  In one opinion dealing with divorce, we used "capital
contributions" to refer specifically to a husband's initial equity investment
in a piece of property.  Ward v. Ward, 155 Vt. 242, 250, 583 A.2d 577, 582 (1990) (finding that, where defendant husband paid about $11,000 of
his own money for couple's interest in property and spent two thousand hours
renovating it, that "the trial court weighed defendant's egregious conduct in
the balance, on the one hand, against defendant's sole initial capital
contribution and his largely single-handed renovation effort").
 
[16]  For example, in Thompson v.
Thompson, a Colorado divorce case, the court acknowledged that all capital
contributions, whether made through direct financial investment or sweat
equity, were meant to add to the accumulation of assets.  489 P.2d 1062,
1064 (Colo. App. 1971) (holding that "it was proper for the trial court to
consider contributions of parties to the increase in or accumulation of assets
by means other than direct contribution of capital"); see also Gregg v.
Gregg, 474 So. 2d 262, 265 (Fla. Dist. Ct. App. 1985) (acknowledging and
applying a theory that treats "special equity," or equity resulting from the
contribution of the wife's separate funds, "as a capital contribution whereby
the spouse obtains a percentage of the value of the acquired property equal to
the ratio that the separate property contributed was to the original total
acquisition cost"); Van Erem v. Van Erem, 111 N.W.2d 440, 442 (Wis.
1961) (noting that "where the estate to be divided on divorce has been
partially acquired from capital contributions of the wife, the wife should
first be awarded her capital contributions and the residue divided on the basis
of an equitable formula," and listing "capital contributions" as including "contributions from her separate estate ($9,500 equity in Appleton property
and $564.35 inheritance)"). 
 
[17]  Although it does not ultimately
matter because husband gets nothing no matter what is credited as mortgage
payments, construing the term mortgage to mean all payments creates
difficulties in fairness and meaning.  For example, wife made many late
payment penalties because she failed to make her installment payments on time. 
These penalties are secured by the mortgage and, therefore, are mortgage
payments just as much as interest payments are mortgage payments. 
Crediting these payments to wife to reduce husband's equity increases the
unfairness to husband. 
 
The trial court tried to
creatively maneuver around another fairness issue that is caused by its
resolution of this dispute.  Wife refinanced the mortgage debt in 2007
with a different financial institution and increased the amount to pay off
personal debts.  The trial court held that wife could not get credit for
the greater payments under this mortgage because the terms of the divorce order
allowed the remaining balance of only the "current mortgage" to be deducted
from the sale price as part of the equity calculation.  The court
interpreted the "current mortgage" to mean the 1994 mortgage and not the 2007
mortgage so credits would be made as if the 1994 mortgage were still in
effect.  This result is creative but hardly comports with the language of
the order.  Since the 1994 mortgage was paid off in 2007, there were no
payments thereafter on that mortgage.  The interpretation should mean that
wife would receive no credit for interest or principal payments after the 1994
debt and mortgage were extinguished.
 
[18] The majority now appears to war with the
trial court interpretation, saying the word "mortgage" does not specify whether
it means the mortgage existing at the time of the agreement or any
mortgage.  Except in the parenthetical, the agreement consistently refers
to the "current mortgage," which supports the trial court interpretation. 
Under the alternative interpretation, wife could deduct any principal and
interest on any mortgage, including the refinancing mortgage used to pay other
debts.  I cannot imagine anyone would say that is an acceptable
interpretation.
 
[19]  This is the most obvious answer to
the majority's conclusion that the term mortgage is superfluous because all
other capital contributions come under the heading of capital improvements,
which are specially recognized in the provision of the court order.  It is
not the only answer.  Expenditures could increase the value of the house
without fitting within the term "improvements."  For example, repair
expenditures to fix storm damage would increase the value of the house, but
could be found not to be improvements.