FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH H. Thomas Padrick, Jr., Judge.
Kevin E. Martingayle (Bischoff Martingayle, P.C., on briefs), for Julio Fernando Cabral.
Christy L. Murphy (James A. Evans; Kaufman & Canoles, P.C.; Evans & Bryant, PLC, on briefs), for Debbie Ann Silveira Cabral.
Chief Judge Felton, Judge Kelsey and Senior Judge Bumgardner Argued at Richmond, Virginia
D. ARTHUR KELSEY, JUDGE
In these consolidated appeals, Julio Fernando Cabral contends the trial court erred by reopening a divorce case that had been closed since 2009 and by making an equitable distribution award and an award of attorney fees to his former wife, Debbie Ann Silveira Cabral. She also appeals, claiming the trial court erred by undervaluing a disputed asset and by awarding some, but not all, of her attorney fees. Because the trial court erred by reopening the case in the first place, we reverse the awards of equitable distribution and attorney fees.
After thirteen years of marriage and two children, Julio and Debbie Cabral filed for divorce in 2007. Represented by experienced counsel, the parties entered into a "Final and Permanent Separation, Custody, Support and Property Settlement Agreement" that resolved all contested issues in the case. The trial court entered a final decree in 2009 that ratified, confirmed, and incorporated by reference, but did not merge, the settlement agreement. The preamble of the seventeen-page agreement states its intent, among other things, to "fully satisfy all obligations which each of the parties now has or might hereafter have toward the other" and "to finally determine and settle their property rights" arising out of the marriage. App. at 24.
The settlement agreement thereafter divides between the parties a considerable number of assets, including the marital home, a beach house, two undeveloped lots in Williamsburg, a condo in Portugal, property in the Azores, and equity interests in several businesses. Based upon this agreed division of assets, both parties agreed to "waive any right or entitlement to seek an award of equitable distribution from the other." Id. at 30-31.
Immediately following this waiver, however, is a curious caveat: "The parties acknowledge that all assets have been disclosed and they are referred to in this Agreement. Any undisclosed or omitted assets shall be subject to an equitable distribution hearing and this matter may be reopened as to such property." Id. at 31. The agreement also includes a provision awarding attorney fees to the prevailing party under certain conditions in later litigation arising out of the agreement.
The trial court reopened the proceeding in 2010 at the request of Debbie Cabral, who sought to enforce various provisions of the settlement agreement. While the matter remained on the court's docket, Debbie Cabral filed a "Motion for Equitable Distribution." R. at 294. She claimed her former husband committed "multiple fraudulent misrepresentations" and failed to disclose an asset during the negotiations preceding the settlement agreement. Id. "In fact, " she alleged, "Husband lied during the divorce litigation in an attempt to hide the undisclosed asset." Id. at 295. The asset Julio Cabral allegedly failed to disclose was a $1.85 million "account receivable" owned by Sunset Development, LLC, a real estate holding company in which he had a 50% interest. Id. The account receivable was created when the company loaned $1.85 million to another member who owned the remaining 50% interest.
In 2011, the trial court entered an order specifically reinstating the case to the docket to address the equitable distribution motion. At the hearing on the motion, Debbie Cabral's counsel withdrew the allegation of fraud and argued instead that, even if non-fraudulent, Julio Cabral's failure to disclose the account receivable triggered the settlement agreement's provision authorizing the trial court to reopen the case for equitable distribution of the asset.
In response, Julio Cabral argued that he merely owned a 50% interest in Sunset Development, LLC. He had no ownership interest in the account receivable owned by the company, and thus, as a matter of law, it could not be considered a marital asset subject to equitable distribution. Even if it could be considered a marital asset, he continued, the court had no authority to reopen the case to distribute the asset because the divorce decree ending the case had long since become final under Rule 1:1.
The trial court agreed with Debbie Cabral, reasoning that "it didn't really matter per se whether it was an LLC or a corporation or a sole proprietorship. It's still a marital asset because people accumulate wealth, and they put that wealth in different entities." App. at 431. Based upon this reasoning, the court held that Julio Cabral failed to "disclose a marital asset, to wit: an account receivable . . . owned by Sunset Development, LLC, of which entity [Julio Cabral] owned 50% at the time of the parties' divorce." Id. at 439. That conclusion, the court added, made the "account receivable of Sunset Development, LLC" subject to equitable distribution. Id.; see also id. at 2019 (describing the asset as "an account receivable of Sunset Development, LLC"). After hearing evidence on valuation, the court made an "equitable distribution award" of $329, 000 to Debbie Cabral. Id. at 2020. The court also awarded her ...