Baker Stops the Show: Estoppel and Separation Agreements

In our practice in Greensboro, North Carolina, it is not uncommon for the parties in a divorce to agree verbally to a change in child support payments. Read on to see how such an apparent show of comity may not hold up in the eyes of the court.

Baker v. Showalter, 151 N.C. App. 546, 566 S.E.2d 172 (N.C. App. 2002)

1. Facts: The parties entered into a separation agreement stating that defendant would pay $500 per month in child support until the child reached the age of 18. This separation agreement was incorporated into the Judgment of Divorce. Later, plaintiff and defendant orally agreed to reduce child support payments defendant paid from to $300. A few months later, plaintiff signed a letter memorializing the previous oral agreement, stating that plaintiff “planned to continue to accept $300 but that he did not abdicate any rights as specified by the Separation Agreement.” Later and before the child turned 18, plaintiff demanded from defendant the unpaid amounts based on the original separation agreement. A motion was filed to order defendant to pay the arrearage, and at the hearing defendant raised a defense of estoppel arguing “she had detrimentally relied upon the oral agreement and the letter memorializing that agreement to reduce her child support payments.” The trial court did not agree and ordered defendant to pay the balance owed of $11,350 stemming from the original separation agreement. Defendant then appealed.

2. Issue: Did the trial court err by concluding that defendant did not rely, to her detriment, on the oral agreement and subsequent letter to lower child support payments?

3. Holding: No.

4. Rationale: “North Carolina courts have recognized the doctrine of equitable estoppel to preclude a party from denying the validity of a divorce decree or separation agreement.” Amick v. Amick, 80 N.C.App. 291, 294 (1986). The crucial element the Court relied upon for their ruling was that defendant did not incur any detriment when she relied on plaintiff’s acceptance of the reduced child support payments. The Court of Appeals, after reviewing the facts from the trial court (“…however, her reliance was not detrimental because she had use of funds that she would not have otherwise had…”), found that it was sufficient to support the trial court’s conclusion, and “legally correct.” Next, the Court reasoned that there was no detrimental reliance because the only consequence of defendant’s reliance was that she benefitted: “She testified that the money she retained allowed her to buy a townhome and to have some money to spend with [her] son.”

5. Observations:

a. Detrimental reliance is crucial. Just because an agreement was reached, in order to prevail in an equitable estoppel defense, one must have relied on the terms of the agreement to one’s detriment. An example using similar facts: Plaintiff and defendant agree to reduce alimony from a post-separation agreement so that defendant can afford tuition, through loans, for school. Plaintiff then demands that the original alimony should be paid. Defendant is still paying back those loans and cannot afford to pay both the arrearage and loans. Defendant now has a better chance at arguing estoppel because she relied on the agreement to lower alimony to her detriment, incurring a new debt.

b. How does timing play into the decision? In Baker, by the time the suit was brought before the court, the child had already reached 18, and there would be no further payments (except any payments towards the outstanding balance). If the suit was not for only arrears but also for enforcing the order to require continuing payments at $500, would the effect of paying more than defendant had in the past few years change the benefit/detriment issue?

c. NOTE: The modification of a child support agreement is typically not allowed unless upon motion in the cause and a showing of changed circumstances. This was discussed in the opinion and was further consideration for affirming the trial court.