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Nusbaum v. Nusbaum

Court of Special Appeals of Maryland

December 20, 2019

PAUL W. NUSBAUM, JR.
v.
MARSHA R. NUSBAUM, ET AL.

          Circuit Court for Carroll County Case No. 06-C 03-039838

          Nazarian, Wells, Adkins, Sally D. (Senior Judge, Specially Assigned) JJ.

          OPINION

          Wells, J.

         Appellant, Paul Nusbaum, asked the Circuit Court for Carroll County to order the Carroll County Office of the Maryland Child Support Administration to reallocate the money he had previously paid for child support and alimony solely to his child support account. After a hearing on the issue, the circuit court ruled that Mr. Nusbaum was judicially estopped from the requested reallocation because Mr. Nusbaum had previously claimed part of the money as "alimony paid" and taken an income tax deduction. Consequently, the court ruled that he could not re-characterize those payments exclusively as child support.

         Mr. Nusbaum took a timely appeal and presents two questions for our review:

1. Did the circuit court err in declaring that Mr. Nusbaum was judicially estopped from claiming that the amounts he claimed as alimony on his tax returns should be reallocated toward his child support arrears with the [Carroll County Office of Child Support Enforcement (OCSE)]?
2. Did the Circuit Court err in not reaching a decision as to whether the allocation of support funds paid to a former spouse should be first paid to current child support and child support arrears, prior to any payment of funds toward spousal support?

         We hold that although the circuit court erred in its application of judicial estoppel to prevent the reallocation, the circuit court could not have legally ordered the reallocation in any event. We, therefore, affirm the circuit court.

          FACTUAL AND PROCEDURAL BACKGROUND

         When they divorced in 2005, the Circuit Court for Carroll County ordered Paul Nusbaum to pay his former wife, Marsha Nusbaum, $3, 250.00 per month in non-modifiable alimony. Mr. Nusbaum was also ordered to pay Ms. Nusbaum $1, 422.00 per month in child support for the benefit of their four children. At Ms. Nusbaum's request, Mr. Nusbaum was required to pay both sums via an Earnings Withholding Order through the Carroll County Office of Child Support Enforcement ("OCSE"), the local branch of the Maryland Child Support Administration ("MCSA"), the state agency charged with collecting child and spousal support.

         Around 2008, Mr. Nusbaum moved to Georgia. The OCSE duly registered the Earnings Withholding Order in Georgia, obligating Georgia to collect Mr. Nusbaum's alimony and child support payments and forward them to Maryland.

         It is important to note that during this time, although Mr. Nusbaum's wages were garnished, he did not pay the full monthly amount of either child support or alimony because what he earned could not fully satisfy either obligation. Consequently, by 2010, when Mr. Nusbaum asked the court to modify his monthly child support payment, he owed $36, 264.60 in unpaid child support and $117, 127.22 in unpaid alimony. Nevertheless, because of the emancipation of two of the Nusbaums' children, the court reduced his child support payment to $941.00 per month from January 2010 through August 2010, at $835.00 per month for September 2010, and established the child support payment at $929.00 per month starting in October 2010.

         Sometime in early 2016, Mr. Nusbaum noticed that Georgia allocated his monthly payments differently from Maryland. Whereas Maryland declared his child support arrears were $80, 905.25, Georgia said his child support arrears were approximately $30, 000.00. Mr. Nusbaum discovered that this was because Georgia allocated a higher percentage of his monthly payment to child support, rather than alimony. Maryland did almost the opposite, allocating 70% of his payments to alimony and 30% to child support. Armed with this information, Mr. Nusbaum returned to Maryland.

         On April 16, 2016, Mr. Nusbaum filed a motion asking the circuit court to order OCSE to do an audit and establish his arrears for both alimony and child support. Mr. Nusbaum also requested the court to modify his on-going child support payment because another of the Nusbaums' children had emancipated.[1] At a hearing before a Magistrate, Mr. Nusbaum argued that the circuit court should order OCSE to perform an audit to determine exactly how much he had paid for both obligations. After the audit, he wanted OCSE to credit all the money he paid be put toward his child support obligation until that obligation was satisfied. Only then, so Mr. Nusbaum argued, should any excess amount be credited against his alimony obligation. Ms. Nusbaum opposed the reallocation request.

         The Magistrate, in a written set of findings, reduced Mr. Nusbaum's on-going monthly child support obligation to $481.00 per month, plus $120.25 toward his arrears, due to the emancipation of one of the children. More importantly, the Magistrate determined that the circuit court did not have the authority to: (1) order OCSE to perform an audit, nor, (2) order OCSE to reallocate Mr. Nusbaum's prior total payments to exhaust his child support obligation before satisfying his alimony obligation. "Your Magistrate reviewed the statutes cited by the parties, testimony presented, Plaintiff's Exhibit 3, and [case cited], and finds that there is no authority given to this Court to alter the Audit in the manner requested by [Mr. Nusbaum]." Surprisingly however, the Magistrate recommended "that upon entry of this Order, that child support current and arrearage payments should be given priority over the alimony obligation, as it is in the best interests of the parties' minor child." OCSE filed Exceptions to the Magistrate's recommendations.

         At the Exceptions hearing, the attorneys for OCSE[2] and Mr. Nusbaum set forth their positions. Mr. Nusbaum wanted all past payments to Ms. Nusbaum reallocated to satisfy his child support obligation first, rather than be apportioned between alimony and child support, as OCSE had done. Additionally, he wanted any future payments apportioned to first satisfy child support, then child support arrears, and alimony last. In Mr. Nusbaum's view, it was in the children's best interests to prioritize the allocation of payments in this way.

         Ms. Nusbaum and OCSE disagreed. The attorney for OCSE noted that Mr. Nusbaum desired the reallocation because Georgia was "coming after" him for not making full payments to either child support or alimony. More importantly, OCSE's counsel explained that under current procedures, child support and spousal support are given equal priority, as the payments are for the benefit of the children and the former spouse.

         Additionally, counsel for OCSE explained that it would be too onerous for them to have to manually adjust each monthly payment and apportion it solely to child support.

         Seven days after the hearing, in an oral ruling, the judge "grudgingly" found that the Magistrate erred. The judge, essentially, agreed with Mr. Nusbaum and ordered OCSE to perform an audit and "allocate and prioritize all payments first and foremost to the child support obligation as well as any child support arrears." "Any other remaining payments… shall then be credited towards [Mr. Nusbaum's] alimony obligation and any outstanding arrearage."

         Ms. Nusbaum immediately filed a motion to alter or amend the court's order. Simultaneously, OCSE filed a motion to reconsider. Ms. Nusbaum argued that there was no evidence presented at the hearing to suggest that the ordered reallocation was in the children's best interests, as Mr. Nusbaum claimed. Additionally, both Ms. Nusbaum and OCSE argued that the circuit court should reverse itself because the reallocation was contrary to "Maryland [l]aw and federal and state regulations regarding child support." OCSE specifically argued that the court's order placed OCSE in direct violation of federal law, since they were obligated pursuant to federal statutes and the state's "distribution matrix" to collect spousal and child support without prioritizing one over the other. Mr. Nusbaum opposed altering the court's order in any way.

         The court held a hearing on Ms. Nusbaum's motion to alter or amend judgment and OCSE's motion to reconsider, after which the court took the matter under advisement. Later, the court issued an "Opinion and Order" which was a legal analysis of the arguments advanced at the motions hearing. For reasons not entirely clear, the court re-evaluated Ms. Nusbaum's request for counsel. The record is ambiguous as to whether the court denied her request or found it to be moot. In any event, the record is clear that Ms. Nusbaum was represented by counsel at the motions hearing. The court also revisited its in-court ruling denying Ms. Nusbaum's request to allow expert testimony at the hearing. The court determined that it properly excluded expert testimony.

         In its analysis of what the court termed "Motion 2," the reallocation issue, the judge admitted that at the end of the Exceptions hearing he was "uncomfortable" ordering OCSE to perform an audit and reallocate Mr. Nusbaum's payments giving priority to satisfying his child support obligation. The judge recalled that he found OCSE's allocation method, giving equal priority to spousal and child support, to be "inconsistent with the best interests of the child standard." Based on his reasoning at that time, the judge concluded that Mr. Nusbaum could not be "estopped" from getting what he wanted. Now, the judge noted that at prior hearings on Mr. Nusbaum's requests to modify child support, Mr. Nusbaum provided his income tax returns. The judge found that on those tax returns, Mr. Nusbaum "claimed a deduction from taxable income, the amount of alimony deemed 'paid' by [OCSE]."

In other words, he benefited from an income deduction based upon the very method of alimony payment allocation he now seeks to challenge. Indeed, he secured prior reductions of child support based upon his stated income at the time - which had been adjusted based upon a deduction for alimony paid. If he truly felt that all payments should have been applied to child support first as he now contends, then it is wholly inconsistent to take a corresponding deduction for alimony paid in prior tax returns. In short, it appears to the Court that Mr. Nusbaum is trying to "have his cake and eat it too."

         After reviewing the holdings of several cases, the judge concluded that Mr. Nusbaum was judicially estopped from seeking to reallocate past and future child support payments and have them take priority over his alimony obligation.

         Significantly, the judge did not answer the question of whether the court had the authority to order OCSE to reallocate payments in the manner that Mr. Nusbaum requested. Rather, the judge concluded that as Mr. Nusbaum was estopped from making the request, this threshold question would "have to await another day."

         STANDARD OF REVEIW

         We review the circuit court's decision using an abuse of discretion standard. "In general, the denial of a motion to alter or amend a judgment is reviewed by appellate courts for abuse of discretion." RRC Northeast, LLC v. BAA Maryland, Inc., 413 Md. 638, 673 (2010) (citing Wilson-X v. Dep't of Human Res., 403 Md. 667, 674-75 (2008)). "The relevance of an asserted legal error, of substantive law, procedural requirements, or fact-finding unsupported by substantial evidence, lies in whether there has been such an abuse." Wilson-X, 403 Md. at 676.

         Nevertheless, a "court's discretion is always tempered by the requirement that the court correctly apply the law applicable to the case." Arrington v. State, 411 Md. 524, 552 (2009); see In re Adoption/Guardianship No. T97036005, 358 Md. 1, 24-25 (2000) (abuse of discretion where trial judge's decision with respect to discretionary matter "was based on an error of law"); Guidash v. Tome, 211 Md.App. 725, 735 (2013) (abuse of discretion occurs when court "makes a decision based on an incorrect legal premise"); Brockington v. Grimstead, 176 Md.App. 327, 359 (2007) ("an exercise of discretion based upon an error of law is an abuse of discretion").

         DISCUSSION

         I. Estoppel Theories

         A. Judicial Estoppel

         Mr. Nusbaum first asks us to consider whether the circuit court properly determined that he was judicially estopped from requesting OCSE to reallocate his child support and alimony payments. He argues that judicial estoppel is inapplicable, as none of the elements of judicial estoppel apply in his circumstances. OCSE seemingly admits that judicial estoppel is inapplicable and argues that the allied doctrine of equitable estoppel should deny Mr. Nusbaum relief.

         The circuit court expressly based its ruling on the doctrine of judicial estoppel, and it is there that we begin our analysis. Judicial estoppel is derived from the doctrine of estoppel by admission in English jurisprudence. In Eagan v. Calhoun, 347 Md. 72 (1997), the Court of Appeals noted that, "Maryland has long recognized the doctrine of estoppel by admission, derived from the rule laid down by the English Court of Exchequer . . . that '[a] man shall not be allowed to blow hot and cold, to claim at one time and deny at another.'" Id. at 88 (citation omitted). Indeed, this Court explained in Gordon v. Posner, 142 Md.App. 399, 424, cert. denied, 369 Md. 180 (2002), that "[j]udicial estoppel, also known as the 'doctrine against inconsistent positions,' and 'estoppel by admission,' prevents 'a party who successfully pursued a position in a prior legal proceeding from asserting a contrary position in a later proceeding.'" Roane v. Washington Co. Hosp., 137 Md.App. 582, 592, cert. denied, 364 Md. 463 (2001). Judicial estoppel, therefore, "precludes a party from taking a position in a subsequent action inconsistent with a position taken by him or her in a previous action." Dashiell v. Meeks, 396 Md. 149, 170 (2006).

         Three circumstances must exist before judicial estoppel will be used to foreclose a party's claim:

(1) one of the parties takes a position that is inconsistent with a position it took in previous litigation, (2) the previous inconsistent position was accepted by a court, and (3) the party who is maintaining the inconsistent positions must have intentionally misled the court in order to gain an unfair advantage.

Bank of New York Mellon v. Georg, 456 Md. 616, 625 (2017) (quoting Dashiell, 396 Md. at 170 (citation omitted)); Blentlinger, LLC v. Cleanwater Linganore, Inc., 456 Md. 272, 297 (2017).

         We have noted that judicial estoppel performs two important functions. First, the doctrine "rests upon the principle that a litigant should not be permitted to lead a court to find a fact one way and then contend in another judicial proceeding that the same fact should be found otherwise." Gordon, 142 Md.App. at 425 (internal quotations and citations omitted). Judicial estoppel ensures "the 'integrity of the judicial process by 'prohibiting parties from deliberately changing positions according to the exigencies of the moment [.]'" New Hampshire v. Maine, 532 U.S. 742, (2001) (citation omitted); see also Dashiell, 396 Md. at 171 (explaining the doctrine is used "to protect the integrity of the judicial system from one party who is attempting to gain an unfair advantage over another party by manipulating the court system."). The Court of Appeals has explained that

[i]f parties in court were permitted to assume inconsistent positions in the trial of their causes, the usefulness of courts of justice would in most cases be paralyzed; the coercive process of the law, available only between those who consented to its exercise, could be set at naught by all.... It may accordingly be laid down as a broad proposition that one who, without mistake induced by the opposite party, has taken a particular position deliberately in the course of litigation, must act consistently with it; one cannot play fast and loose.

WinMark Ltd. P'ship v. Miles and Stockbridge, 345 Md. 614, 620 (1997) (internal quotations and citations omitted). The Supreme Court cautioned, however, that it was "not establish[ing] inflexible prerequisites or an exhaustive formula for determining the applicability of judicial estoppel." New Hampshire, 532 U.S. at 751. To the contrary, it observed that "[a]dditional considerations may inform the doctrine's application in specific factual contexts." Id. Therefore, the chief goal of judicial estoppel is to preserve the integrity of the judicial process by precluding a litigant from taking one position in a legal proceeding and taking a contrary position in another legal proceeding. See Civil Procedure Intent and the Application of Judicial Estoppel: Equitable Shield or Judicial Heartbreak?, Dodd, Brian A., 22 AMJTA 481, Fall, 1998.

         A subsidiary function that judicial estoppel performs is to protect the party seeking the estoppel. The Court of Appeals has recognized that in addition to protecting the judicial system, judicial estoppel seeks to preserve "'the relationship between the parties to the prior litigation.'" WinMark Ltd. P'ship, 345 Md. at 623 (citation omitted).

         B. Equitable Estoppel

         Equitable estoppel, on the other hand, has been defined as the

effect of the voluntary conduct of a party whereby he is absolutely precluded both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract, or of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse and who on his part acquires some corresponding right, either of property, of contract, or of remedy.

3 J. Pomeroy, Equity Jurisprudence, § 804 (5th ed. 1941), quoted in Leonard v. Sav-A-Stop Services, 289 Md. 204, 211 (1981). In Knill v. Knill, 306 Md. 527 (1986), the Court of Appeals noted that the doctrine "is comprised of three basic elements, 'voluntary conduct' or representation, reliance, and detriment." Id. at 535.

         In Creveling v. Government Employees Insurance Co., 376 Md. 72 (2003), the Court of Appeals held that a putative class's equitable estoppel claim was not satisfied. The appellant alleged that an insurance company's representations "likely" led putative class members to not retain documentation required for reimbursement. Id. at 101. The Court found that because appellants did not provide any evidence, "any prejudice or detrimental reliance suffered by the putative class is purely speculative." Id. at 103. Further, it said "any prejudice is dubious because even if claimants lost ...


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