Court Opinion

ID: 1064906
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:19:13.759215+00
Date Added: 2024-06-11T13:22:13.514106
License: Public Domain

COURT OF APPEALS OF VIRGINIA

Present: Chief Judge Felton, Judges Benton and Petty
Argued at Richmond, Virginia

CHERYL A. CONCANNON
                                                              MEMORANDUM OPINION* BY
v.     Record No. 2108-06-2                                   JUDGE JAMES W. BENTON, JR.
                                                                      MAY 8, 2007
WILLIAM GLADSTONE

                      FROM THE CIRCUIT COURT OF ORANGE COUNTY
                             Franklin R. Blatt, Judge Pro Tempore

                 Benjamin M. Smith, III (The Duff Law Firm, on briefs), for
                 appellant.

                 John H. Kitzmann (Davidson & Kitzmann, PLC, on brief), for
                 appellee.

       This appeal concerns the enforcement of a property settlement agreement (the “Agreement”)

that was incorporated by reference into a final decree of divorce. Cheryl Concannon presents

twelve questions alleging errors by the judge pro tempore in enforcing her Agreement with William

Gladstone. For the reasons stated below, we reverse the judgment, in part, and remand.

                                                  I.

       The parties married February 26, 1996, and separated in May 2002. In an afternoon

recess during the divorce litigation, the parties and their attorneys negotiated an Agreement to

settle all contested issues. The hand-written Agreement, which the parties signed, was dated July

21, 2004, and provided in pertinent part as follows:

                    2. [Gladstone] shall receive from [Concannon] the sum of
                 $314,000.00 in full settlement of any claim to the proceeds of sale
                 from the parties’ former property in Orange County, Va. known as

       *
           Pursuant to Code § 17.1-413, this opinion is not designated for publication.
“Belvedere” as well as in full settlement of any claims to any of
the furniture or furnishings . . . . [Gladstone] waives any and all
further claims against [Concannon] in connection with the parties’
former interest in Belvedere; [Concannon] waives any and all
claims of whatsoever nature against [Gladstone] in connection with
the parties’ former interest in Belvedere. These waivers are
contingent on the payment by [Concannon] to [Gladstone] as
specified aforesaid.

  3. [Gladstone] shall assist [Concannon] to raise the amount of
$314,000.00 for payment to him by doing the following:

          a. by guaranteeing a loan to be obtained by
       [Concannon] against that certain piece of property currently
       owned by her and/or owned by a trust of which she is the
       sole beneficiary located in . . . Idaho . . . . [Concannon]
       represents that the record owner of the . . . property is . . . a
       limited liability company . . . of which [Concannon] is the
       sole member . . . and that she will take no steps such as
       conveying or retitling the property which would hinder or
       defeat her ability to so encumber the property. The loan to
       be guaranteed by [Gladstone] shall be $450,000.00.
       [Gladstone] and [Concannon] will take all steps to secure
       the financing as specified herein and using the Idaho
       property as security therefore, including cooperating with
       [Gladstone] to secure the financing as expeditiously as
       possible. The Circuit Court of Orange County, Va. will
       retain jurisdiction over this matter to enforce and supervise
       the refinance process to assure prompt placement of the
       financing on the property . . . .

          *       *       *       *       *        *       *

   4. In exchange for [Gladstone]’s undertaking [Concannon]
agrees to the following:

          a. pay [Gladstone] the sum of $314,000.00 in settlement
       of his claims as aforesaid by securing the loan against the
       aforesaid Idaho property as expeditiously as possible.
       Further she will take no action to prevent the placement of
       the loan as specified herein. And, for as long as
       [Gladstone] remains guarantor of the aforesaid loan, she
       will place no other encumbrances nor voluntarily allow any
       to be placed by anyone else against the property;

                                 -2-
          *       *       *       *       *      *       *

   5. That . . . Gladstone shall cause Waterside Productions, Inc.
to enter into an employment agreement with . . . Concannon
including the following terms:

          a. a 5 year term beginning on the date this agreement is
       signed.

          b. a monthly rate of $3,000.

          c. payment of . . . Concannon’s premium on her current
       health insurance policy or a same or equivalent policy.

          Ms. Concannon’s employment agreement under this
       section shall not be terminated for any reason.

   6. If at any time . . . Concannon’s employment agreement is
terminated, . . . Gladstone shall pay to . . . Concannon as spousal
support an amount of $3,000 per month for spousal support for a
number of months equal to the number of months left in the
aforesaid employment agreement. Such support shall not be
modifiable or terminat[ed] for any reason whatsoever . . . .

          *       *       *       *       *      *       *

   In the event [Concannon] fails to obtain the financing against
the Idaho property as contemplated by this agreement the parties
agree to the following:

          a. If [Concannon] fails, within 90 days from the
       execution of this agreement to obtain said loan, then,
       commencing with the fourth payment due to her from
       Waterside[, Gladstone] shall be paid by [Concannon] the
       sum of $1500 per month in partial payment of the amount
       she owns [Gladstone] under this agreement. [Gladstone]
       shall be entitled to withhold this amount ($1500) each and
       every month from her Waterside salary . . . and he shall
       apply said amount against the total sum [Concannon] owes.
       At the end of [Concannon]’s guaranteed employment with
       Waterside . . . [Concannon] shall owe him the difference
       between the amount owed and the total he has been paid
       against that sum from her salary . . . .

         b. In lieu of [Concannon] paying [Gladstone]
       $314,000.00 for which she owes him if the loan is secured,
       [Concannon]’s obligation to [Gladstone] will be
       $350,000.00 and the monthly amounts withheld from her
                                -3-
                        salary . . . shall be credited against a total amount due
                        [Gladstone] of $350,000.00;

                             c. [Concannon] shall be obligated to sell or place
                        financing against the aforesaid Idaho property to pay the
                        sum due him on or before the date upon which Waterside is
                        obligated to employ her (i.e. 60 months) . . . . To that end,
                        [Concannon] shall either obtain the financing within said
                        period, or cause the property to be listed for sale with a
                        mutually agreeable realtor who shall set the asking price
                        . . . by the first day of the fifty-ninth month after execution
                        of this Agreement.

        The Agreement was signed by Gladstone, Gladstone for Waterside Productions,

Concannon, and Concannon for her limited liability corporation and trust. The divorce decree,

which was entered October 19, 2004, “ratifi[ed], confirm[ed], approve[d], and incorporate[d],

but [did] not merge [the Agreement] into [the] decree by reference.”

        After entry of the decree, Gladstone made monthly payments to Concannon in

accordance with the Agreement. For the first three months, he paid $3,000 each month; he then

reduced his payments to $1,500 a month. A year after entry of the divorce decree, the judge pro

tempore entered an order finding that the Agreement “ha[d] not been fully implemented” and

setting a hearing concerning “implementation” of the Agreement. Prior to the hearing,

Gladstone filed a motion alleging Concannon had transferred her ownership of the Idaho

property. He asked the judge to hold her in contempt, to appoint a special commissioner to

obtain a loan or sell the Idaho property, to award him judgment for $357,000 against Concannon,

and to grant other relief.

        At the evidentiary hearing, Gladstone testified that he had done everything in his power

to help Concannon obtain the best possible loan. Gladstone testified he contacted a California

lender, but later was told this lender believed it “had to have a presence in Idaho . . . to issue a

loan.” After Gladstone learned this and talked to Concannon, she selected an Idaho bank.

Gladstone testified he sent the necessary paperwork to the Idaho bank as her guarantor, but the
                                                 -4-
Idaho bank did not respond for six weeks and then denied the loan for insufficient income.

When this occurred, Gladstone contacted Dominic Scibilia, a mortgage broker, about obtaining a

loan for Concannon and then informed Concannon she “can get a loan, there’s a no-doc loan,

there’s a variety of loans [she] can get.” He testified Concannon responded that “90 days is up, I

have no obligation to do anything.”

       Scibilia testified he first spoke with Concannon in July or August of 2004, but

acknowledged it was possible he first spoke to her in October 2004. Indeed, an exhibit, a copy

of an e-mail message from Gladstone to Concannon dated October 1, 2004, informed Concannon

that she would soon be receiving a call from Scibilia about a potential loan and asked if she

would cooperate with him. A week later in another e-mail message, Gladstone indicated Scibilia

thought he could get a loan for Concannon if she “added Gladstone to the title of the property.”

In Scibilia’s initial conversation with Concannon, he indicated that Gladstone’s guarantee of the

loan “required certain things, putting people in certain places on the title and things like that.”

He said “Concannon was adamant against that.”

       Scibilia testified Concannon could have obtained a loan for $400,000 in August 2004 and

that at the time of his testimony a loan was available to her for that amount. He testified,

however, “the lender will only lend to a person” and, therefore, Concannon would need to title

the property in her name. Scibilia explained that, although the contract required a loan of

$450,000, Gladstone had indicated to him a loan of $400,000 would suffice. Scibilia testified a

loan for the higher amount also could be had and he knew of “a number of loans available that

given certain credit and financial status do not require a lot of documentation.” He said, at the

time of the hearing, he had “made a formal submission to a lender . . . and [was] waiting for

physical underwriting approval” for a $400,000 loan.

                                                 -5-
        Scibilia acknowledged that if the lender determined Concannon lacked the ability to

repay the loan, it might be necessary to put Gladstone on the title to the Idaho property. Scibilia

testified the monthly payments for the $400,000 loan he could obtain were estimated to be

$3,712.87, but he said he did not recall the amount Gladstone was paying Concannon each

month. Scibilia testified he “was able to gather from a credit reporting service, [Concannon]

does qualify based on her credit worthiness.” Although Scibilia did not know Concannon’s

income, he informed lenders her income was “$9800 a month” because he “estimated . . . that is

a reasonable income for someone in her profession.” Scibilia acknowledged, however, that

neither Gladstone nor Concannon had filled out an application with him and Gladstone had not

sent his tax return.

        Scibilia testified Concannon has to certify she has the assets and income to repay the

loan. If she did not “have the assets to pay this loan, then that’s something . . . the parties need to

figure out among themselves.” He testified Concannon would not qualify for the loan if her

monthly income was $1,500 or $3,000; however, he testified that “with cooperation on her part,

this is an opportunity for a significant savings in interest rate.” He also testified if Gladstone

guaranteed the loan, “he has to go on [the] title” to the property. Scibilia testified that if

Concannon signed the loan with his “assumed numbers,” she would get the loan because “the

numbers are not checked; its just verified as her place of employment.” According to Scibilia,

Concannon’s signature would be “a certification it’s correct.”

        The escrow manager of a title company testified the Idaho property was titled in the name

of Concannon’s limited liability corporation, which was represented in the Agreement. The

escrow manager testified, however, that to close a loan to Concannon the limited liability

corporation would have to be “out of title.”

                                                 -6-
       Concannon testified that she submitted applications to three different lenders within the

ninety-day period following the Agreement. She said her intent was to obtain the financing

expeditiously and within the limited time period. She testified she believed Gladstone had

obtained a commitment for financing from his bank when they signed the Agreement in July

2004, but she never received an application from that bank. According to Concannon, the first

lender Gladstone contacted was a sub-prime vendor. After two months had lapsed, the

California lender informed her it was not licensed to make loans in Idaho and also raised as an

issue her employment status.

       Concannon testified she applied for a loan with a local Idaho bank and gave that bank

information about Gladstone. When the bank asked for her income, she supplied the bank a copy

of the Agreement and disclosed her other income of $200 per month from royalties. She testified

the Idaho bank sent Gladstone an application for him to be co-borrower and later rejected the

loan application after receiving the information. She testified the bank had conversations with

Gladstone during the application process that concerned them. Concannon said the discussion

concerned her employment status and whether she was an employee or independent contractor.

She testified the main issue with respect to the loan was her salary.

       Concannon also testified that Scibilia first contacted her in October 2004, that Scibilia

told her he would be unable to obtain a loan unless she put Gladstone on the title to the property,

and that Scibilia did not ask about her income. She testified she did not change the title on the

Idaho property, which remained titled to the limited liability corporation.

       Five months after the hearing, the judge entered a decree on May 25, 2006, appointing a

special commissioner to obtain a loan “in the name of Concannon” and “in an amount sufficient

to pay . . . Gladstone $314,000” and to pay other costs. The decree also adjudged that “the

Agreement constitutes an employment agreement . . . and . . . Concannon is an employee of

                                                -7-
Waterside Productions, Inc.,” and the decree provided other rulings to implement the Agreement.

Following the filing of motions and further argument, the judge entered a further order on July

21, 2006, implementing the May 25 decree and ordering various payments under the

employment aspect of the Agreement.

                                                 II.

       Concannon appeals the May 25, 2006 decree and the July 21, 2006 order, primarily

arguing the terms of the Agreement specified alternative contractual obligations if she failed to

obtain a loan within ninety days. Concannon contends the appointment of the special

commissioner deviated from the parties’ Agreement because the Agreement already provided

“an extensive contingency plan” if she did not obtain the loan. That is, if she did not obtain a

loan within ninety days of the Agreement, Gladstone’s company would pay her the reduced

monthly amount of $1,500 for the remaining five years, after which she would pay him

$350,000, less the monthly salary he withheld under the Agreement. Concannon reasons, that

because the evidence demonstrated her efforts to obtain the loan failed, the “contingency”

provisions in the Agreement should have taken effect, and she argues the “contingency

provisions of the agreement [were] not conditioned upon the ‘level of effort exerted’” by her.

Concannon additionally contends that the trial judge erred by sanctioning her for not obtaining a

loan within ninety days, in ruling that the parties’ Agreement did not imply a reasonable interest

rate for the loan, by interpreting the Agreement to give her a “reasonable time” to obtain the

loan, in finding that a suitable loan product was available to her, in refusing to allow her to

present additional evidence on her efforts to obtain the loan, in structuring the employment

payment obligation differently than contemplated by the Agreement, and by not requiring

Gladstone to pay her the full amount of the employment arrearage.

                                                -8-
          Gladstone responds that the trial judge did not err by appointing the special commissioner

to obtain the loan for Concannon, because in doing so he simply enforced the parties’

Agreement. He argues the “contingency plan will only go into effect if . . . Concannon first

exerted the level of effort contemplated by the Agreement.” He further contends the trial judge

did not sanction Concannon for her failure to obtain a loan, and the judge properly ruled on all

other issues.

                                                 III.

          Marital property settlement agreements are “contracts subject to the same rules of

formation, validity, and interpretation as other contracts.” Bergman v. Bergman, 25 Va. App.
204, 211, 487 S.E.2d 264, 267 (1997). As with contracts, interpretation questions concerning

property settlement agreements are subject to de novo review on appeal. Id.; PMA Capital Ins.

Co. v. US Airways, Inc., 271 Va. 352, 357-58, 626 S.E.2d 369, 372 (2006). Thus, “if all the

evidence which is necessary to construe a contract was presented to the trial court and is before

the reviewing court, the meaning and effect of the contract is a question of law which can readily

be ascertained by this court.” Fry v. Schwarting, 4 Va. App. 173, 180, 355 S.E.2d 342, 346

(1987).

          The Agreement explicitly provided that, “[i]n the event [Concannon] fails to obtain the

financing against the Idaho property as contemplated by this agreement,” other provisions in the

Agreement would apply. Both parties address the failure to obtain the financing within ninety

days as a “contingency.” See Black’s Law Dictionary 338 (8th ed. 2004) (denoting a

contingency as an event that may or may not occur, an event that is a possibility). In essence,

Concannon says the Agreement contains a “contingency plan.” On the other hand, Gladstone

approaches Concannon’s failure to obtain the financing as a breach of the Agreement. The

Agreement, however, does not structure this event as a breach of the Agreement or an event in

                                                 -9-
default of the provisions of the Agreement. Rather, by the Agreement’s express terms, it is an

event that triggers an alternative means of satisfying the contractual obligation. The parties

agreed to a specific action to be taken by Concannon with Gladstone’s assistance, and they

agreed that if Concannon “fails to obtain the financing” within ninety days, then they would

embark upon a different course of action. In other words, the occurrence of either of the agreed

events (Concannon’s success or failure in obtaining financing) would trigger a means of fully

performing the obligations. Concannon’s failure to obtain financing was not an unanticipated or

unforeseen event because, by their own agreement, they contemplated the happening of this

“contingency,” as they label it, and provided an alternative means of satisfying their mutual

obligations. See generally D&N Boening, Inc. v. Kirsch Beverages, Inc., 99 A.D. 522, 523

(N.Y. App. 1984) (discussing in another context contracts containing “an express contingency

creating an alternative mode of performance”).

       The parties dispute the extent to which the Agreement denotes the necessary effort on the

part of Concannon to obtain the financing. The Agreement’s use of the term “fails” is

instructive. When the meanings of a contract’s terms are unambiguous, those terms must be

construed as written. Campbell v. Campbell, 32 Va. App. 351, 355, 528 S.E.2d 145, 147 (2000).

In this context, “fails” means “[t]o be deficient or unsuccessful; to fall short.” Black’s Law

Dictionary 631 (8th ed. 2004). Among the dictionary definitions for “to fail” are: “to miss

attainment,” “to miss success in some effort,” and “to neglect to do something.” Webster’s Third

New Int’l Dictionary 814-15 (1981). The word “fails” is not qualified or otherwise explained in

the Agreement.

       At the hearing in July 2006, the trial judge found “that it came out in the evidence . . .

there was only one attempt made by . . . Concannon to obtain a loan.” Thus, he found that

“Concannon has not attempted in good faith to get a loan.” The evidence proved, however, that

                                               - 10 -
Gladstone, who also agreed to “take all steps to secure the financing,” initially contacted a lender

in California to assist Concannon in obtaining financing. Although Concannon testified the

lender informed her two months later that it could not make such a loan in Idaho, Gladstone said

he told Concannon that fact within hours of his learning the information. The trial judge did not

make findings specific to this issue but generally found “Concannon less credible than . . .

Gladstone.”1 Both Gladstone and Concannon testified, however, that when this lender indicated

he could not provide financing, Concannon applied for a loan with an Idaho bank. Gladstone

testified the application remained with the bank for more than six weeks awaiting a decision.

After the bank rejected the loan, according to Concannon because of her salary, Gladstone

contacted Scibilia in October of 2004.

       Scibilia sought to have Concannon apply for a loan in an amount different than required

by the Agreement; he wanted Concannon to add Gladstone’s name to the title to the property;

and he gave false information to a lender regarding Concannon’s income. The judge “discounted

the testimony of [Scibilia] and . . . found it somewhat abhorrent that his explanation as to

plugging a salary figure in for [Concannon] was okay because the banks didn’t check on that.”

       Even discounting Concannon’s testimony that she applied for two additional loans, the

evidence proved Concannon relied unsuccessfully upon Gladstone’s California lender; she made

an application to an Idaho bank which was rejected in September or October; and then she had

dealings with Scibilia in October upon Gladstone’s suggestion. In view of the judge’s finding

that Scibilia’s conduct was “shocking,” Concannon’s refusal to cooperate with his scheme

cannot be deemed a failure to act in good faith.

       1
          The trial judge later rejected Concannon’s effort to supplement the evidence with a
letter from the lender that supported Concannon’s recollection of the time lag. The letter was
proffered as rejected evidence.
                                               - 11 -
       In short, Concannon twice relied upon Gladstone’s recommendations as to sources of

financing to no avail and was unsuccessful in obtaining a loan on her own initiative from an

Idaho bank. The Agreement did not require her to continue to apply for a loan after receiving a

rejection based on insufficient income. No evidence established that she acted in bad faith when

she applied to the Idaho bank, or that the loan was rejected because she was not acting in good

faith. She and Gladstone completed the application and were rejected.2

       Regardless of Concannon’s level of exertion expended to obtain the financing, she was

unsuccessful in obtaining it. “The fact that the parties attribute to the same terms variant

meanings does not necessarily imply the existence of ambiguity where there otherwise is none.”

Smith v. Smith, 3 Va. App. 510, 513-14, 351 S.E.2d 593, 595 (1986). The Agreement provided

an alternative means of proceeding if Concannon failed to obtain the financing, and both of the

parties are bound by those terms. When the ninety-day period expired, so did Concannon’s

obligation to obtain the loan. This is the bargain they agreed upon. “However inartfully it may

have been drawn, the court cannot make a new contract for the parties, but must construe its

language as written.” Berry v. Klinger, 225 Va. 201, 208, 300 S.E.2d 792, 796 (1983).

       The evidence proved the joint efforts of the parties failed to secure the desired financing.

In addition, the evidence proved that when Concannon failed to obtain the financing within the

ninety-day period, Gladstone reduced his monthly payments to Concannon from $3,000 to

$1,500, which was consistent with the terms of the Agreement. Notwithstanding these events,

the judge ruled as if these events were irrelevant. We hold the trial judge erred by ordering

       2
         Evidence in the record indicated that the monthly payment for a $400,000 loan Scibilia
had sought was $3,712.87 and further indicated Concannon’s monthly income consisted of the
$3,000 payments she expected from Gladstone and royalties of $200. Indeed, the evidence
supports the inference that Scibilia used a false, inflated figure for Concannon’s income when
seeking a loan because he knew her salary of $3,000 was not sufficient to qualify her for a
$400,000 loan. He also testified her income would not support a loan for $450,000, which was
the amount of financing required by the Agreement.
                                                - 12 -
action contrary to the parties’ Agreement. Code § 20-109(C) inhibits the judge’s power to

contravene “the plain language of the Agreement.” Owney v. Owney, 8 Va. App. 255, 260, 379
S.E.2d 745, 748 (1989). The Agreement required Gladstone to pay Concannon the reduced

monthly salary of $1,500 for the duration of her employment contract and, at the end of that

period, for Concannon to pay Gladstone the difference between the $350,000 owed and the total

he withheld from her salary. Simply put, the trial judge erred in ruling the agreement did not

contemplate the events that occurred and erred in appointing a special commissioner to seek

financing for Concannon. We, therefore, reverse and remand on this issue.

                                               IV.

       Concannon additionally contends the trial judge erred by not awarding her the entire

arrearage owed under the employment arrangement and interest on the arrearage for the months

from November 1, 2004 through September 1, 2006. Gladstone contends the trial judge acted

within his discretion in not requiring Gladstone to pay the arrearage because, he argues, the

evidence supported the judge’s ruling that “nobody can agree on what the employment

arrangement is.”

       The Agreement provided for Gladstone to pay Concannon a salary of $3,000 a month

beginning August 2004. After three months, Gladstone was to reduce the monthly payments to

$1,500 due to Concannon’s failure to obtain financing. Although Gladstone wrote Concannon

checks for the appropriate amounts, Concannon did not cash them because she believed the

Agreement made her an employee and she objected to Gladstone’s inscription on the checks of

“independent contractor.” The trial judge ordered Gladstone to re-issue payment for August,

September, and October of 2004, and for September of 2006 and the following months. Without

explanation, the trial judge did not order Gladstone to re-issue payment for all of the money due

to Concannon under the Agreement, specifically for the months November 2004 until September

                                              - 13 -
2006. We agree with Concannon that the judge’s failure to order payments for this gap was

error.

         Concannon further argues that the trial judge abused his discretion by not awarding

interest on the arrearages. Code § 8.01-382 provides, in pertinent part, “In any action at law or

suit in equity, the verdict of the jury, or if no jury the judgment or decree of the court, may

provide for interest on any principal sum awarded, or any part thereof, and fix the period at

which the interest shall commence.” Under the statute, whether to award prejudgment interest

rested within the trial judge’s discretion. Grubb v. Grubb, 272 Va. 45, 57, 630 S.E.2d 746, 753

(2006). Although Concannon had not collected the money due to her under the contract,

Gladstone wrote her checks for the correct amounts. We hold that under these circumstances,

the trial judge did not abuse his discretion by declining to award prejudgment interest on the

principal sum.

                                                 V.

         For these reasons, we hold the trial judge erred by appointing a special commissioner to

seek financing, and we reverse and remand to the trial judge for entry of an order requiring the

parties to enforce the obligations provided in the Agreement. Because we hold that Concannon’s

failure to obtain a loan within the ninety days was contemplated by the Agreement and that she

was no longer obligated to obtain a loan under those provisions, we do not address the other

questions presented pertaining to the loan and the appointment of a special commissioner to

obtain the loan. We further hold that the trial judge erred by not issuing a judgment on the full

sum due to Concannon under the Agreement’s employment obligations, but did not err by

declining to award interest on the sum.

                                               Affirmed in part, reversed in part, and remanded.

                                                - 14 -