Appeal No. 01-A-01-9503-CV-00118.Court of Appeals of Tennessee. Middle Section, at Nashville.
September 1, 1995.
Appealed From The Circuit Court Of Williamson County At Franklin, Tennessee, The Honorable Henry Denmark Bell, Judge Williamson Circuit No. 93707.
MIKE W. BINKLEY, Attorney for Plaintiff/Appellee, ALBERT F. MOORE, Attorney for Defendant/Appellant.
CONCUR: TODD, P.J., M.S., LEWIS, J.
REVERSED IN PART; MODIFIED IN PART; AND REMANDED
CANTRELL, Judge
OPINION
In this post-divorce proceeding the former husband filed a petition to hold the former wife in contempt for refusing to pay one-half of the parties’ income taxes for 1993 as provided in the marital dissolution agreement. The former wife filed a counter-petition seeking a modification of the final decree under Rule 60.02 of the Tennessee Rules of Civil Procedure. The Circuit Court of Williamson County granted the wife’s counter-petition and awarded her a judgment against the former husband for $89,450. For the reasons that follow we reverse the money judgment in favor of the former wife, but we are of the opinion that she should be relieved of the taxes resulting from the income that accrued solely to the former husband.
II.
In 1993, as a prelude to their divorce, the parties worked out a Marital Dissolution Agreement which was incorporated into the final decree. The agreement, executed December 10, 1993, provided that the parties would file a joint tax return for 1993 and that they would be jointly liable for any tax due.
The parties each owned twenty-five percent of a corporation, Richter/Dial Builders, Inc. The corporation had a history of declaring a bonus for its shareholders around the end of March each year, apparently for the purpose of helping the shareholders pay their personal taxes. The bonuses, however, were often in amounts greater than the shareholder’s tax liability, so the difference would be loaned back to the corporation and would appear on the corporation’s books as a liability. Although it is not clear from the record, the corporation apparently withheld taxes from the bonuses in some years and remitted the taxes to the Internal Revenue Service. In other years it did not.
Mrs. Richter handled all the finances for the parties. She understood the corporation’s practice of awarding bonuses to its shareholders. She deposited the bonus check in a joint account with her husband and she wrote the check back to the corporation to make the loan. She did not, however, prepare the parties’ income tax returns. That task was performed by an accountant/friend who also did approximately eighty percent of the corporation’s accounting and tax work.
In the fall of 1993, while the parties were negotiating the Marital Dissolution Agreement, an entry on the corporation’s ledger balance sheet showed a debt to the Richters of $177,204.14. Mrs. Richter knew that she and Mr. Richter had received approximately $26,000 in bonuses that year, because she had deposited the checks. But since the parties had not received any other cash from the corporation, she assumed that the $177,204.14 figure was a book entry reflecting an accrued debt to the parties. She, therefore, took the position in the negotiations that she was entitled to one-half of that receivable. Mr. Richter objected to a division of that asset and insisted that Mrs. Richter give up any interest in the corporation whatsoever. Mrs. Richter asked her accountant/friend, who did the income tax returns for the Richters and most of the accounting work for the corporation, if the taxes had been paid on the money shown on the corporation’s ledger sheet. When the accountant told her that the taxes had been paid on that money, Mrs. Richter agreed to give up her interest in the corporation and her claim to any of the bonus money, in exchange for Mr. Richter’s concessions concerning the marital home and other marital assets.
Although only $177,204.14 showed up on the company’s books during the negotiations, the March 31, 1993 minutes of the company’s board of directors show that the board granted a $209,960 bonus to Mr. Richter on that date. Mrs. Richter was totally unaware of the corporate action. It is this figure, apparently, that resulted in the tax liability of approximately $40,000 in the 1993 tax year. When Mr. Richter demanded that Mrs. Richter pay one-half of that amount she refused to pay more than $1,500, which she, with the help of the company accountant, calculated was her part of the tax liability resulting from the income of which she was aware. The record is not clear how that figure was calculated but Mrs. Richter’s refusal to pay more than that started this proceeding.
The trial judge found that the parties had overlooked the $178,900[1] chose in action as a marital asset. He, therefore, granted Mrs. Richter’s motion and modified the divorce decree to give her a judgment against Mr. Richter for $89,450. She was also held responsible for her share of the 1993 taxes.
II.
Under Rule 60.02, Tenn. R. Civ. Proc., a court may relieve a party from the provisions of a final judgment for mistake, inadvertence, surprise, or excusable neglect (among other reasons set out in the rule). Although a 60.02 motion addresses itself to the sound discretion of the trial judge, Underwood v. Zurich Ins. Co., 854 S.W.2d 94 (Tenn. 1993), relief from a final judgment should be granted only under compelling circumstances. Banks v. Dement Const. Co., Inc., 817 S.W.2d 16 (Tenn. 1991). For relief based on mistake, inadvertence, surprise, or excusable neglect the movant has the added burden of showing some justification for the negligence or inattention. Travis v. City of Murfreesboro, 686 S.W.2d 68 (Tenn. 1985).
The trial judge found that the parties simply overlooked the debt owed to them by the corporation when they negotiated the Marital Dissolution Agreement. We think the evidence preponderates against that finding. See Tenn. R. App. Proc. 13(d). The record shows that Mrs. Richter was fully aware of the debt and made a claim to half of it. She abandoned her claim in the face of Mr. Richter’s refusal to give up any share of the corporation, which, in his estimation, included the debt. Thus, we think Mrs. Richter bargained away any claim to a part of the corporation’s obligation to the parties. For this reason the trial judge erred in giving her a judgment against Mr. Richter for $89,450.
We are persuaded, however, that Mrs. Richter is entitled to relief from the final divorce decree requiring her to pay taxes she thought had already been paid. When the parties negotiated the Marital Dissolution Agreement, Mrs. Richter first insisted on receiving one-half of the money owed to the parties by the Richter Dial Corporation. When Mr. Richter objected to a division of the debt owed to them by the corporation, Mrs. Richter agreed to give up her claim after being told by the corporation’s accountant that the taxes on the bonus had been paid. On that mistaken belief, she signed the Marital Dissolution Agreement.
Mrs. Richter was not aware that an additional bonus of $209,960 had been declared (but not paid) by the corporation. Neither was Mr. Richter, apparently. He testified that he did not know how the debt arose. So, it is safe to say that the parties were unaware of the March 1993 action of the corporation, although they knew that the corporate books showed a debt to them of $177,204.14 in September of 1993. Mrs. Richter would have been justified in assuming that the figure on the corporate books represented an accumulation of the loans made to the corporation in prior years on which the taxes had indeed been paid.
We think Mrs. Richter took reasonable steps to avoid the mistake that is the basis for her action here. She should, therefore, be relieved of the obligation to pay taxes on the 1993 income beyond the $1500 she has already paid. She is not, however, entitled to a judgment against Mr. Richter for any part of the corporate debt to the parties at the time of the divorce.
The judgment of the court below is reversed in part and modified in part and the cause is remanded to the Circuit Court of Williamson County. Tax the costs on appeal equally to the parties.
_____________________________ BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________ HENRY F. TODD, PRESIDING JUDGE
_______________________________ SAMUEL L. LEWIS, JUDGE