PINNING DOWN THE MEANDERING LINE OF DEMARCATION
October 15, 2012 § 2 Comments
You might recall that I whined back in July about the Cuccia case from the MSSC that sent a case back to the chancellor to establish the line of demarcation for accumulation of marital equity. There was a temporary order in Cuccia, which under the case of Pittman v. Pittman, 791 So.2d 857, 864 (Miss.App. 2001), would have seemed to settle the question. Not so, said the high court, and sent it back.
So, with Cuccia and Pittman in mind, let’s look at this scenario: You represent the husband who at the time of the separation in 2004 has around $120,000 in a 401(k) account, and $270,000 in a pension fund, some of the latter of which is pre-marital. The parties file divorce pleadings in 2005, and continue legal sparring, but neither brings any request for temporary relief before the court.
In March, 2011, the chancellor adjudicated the case, dividing the 401(k) account as of the date of the divorce, and dividing other marital assets, including the pension, as of the date of the separation.
Your client is unhappy with the facts that (a) all of the other assets except the 401(k) were divided using the date of separation, and (b) the chancellor included the entire 401(k) value in the division, since it had appreciated by about $85,000 in the seven years from the separation to the final judgment, without any direct or indirect contribution by his wife. He tells you to appeal.
The above is what happened in Welch v. Welch, decided by the COA October 9, 2012.
As for the inconcistency in division dates among the assets, the COA brushed that argument aside by pointing out that Mr. Welch (Henry) had not contested the division of the pension, and, without saying so, that if he had he would have been even more unhappy because he might have lost even more ground to his wife (Susan). Judge Irving’s opinion explains why:
¶13. Based on the above, it is clear that the chancery court used the date of separation forpurposes of classifying the marital and separate portions of Henry’s pension. However, Henry does not challenge the court’s classification of his pension; instead, he argues that the same approach should be applied to his 401(k). Therefore, according to Henry, the chancery court should have found that any appreciation in the balance of his 401(k) account following the couple’s separation on December 23, 2004, was his separate property.
¶14. However, because there was no temporary-support order or separate-maintenanceorder entered in this case, the end date for the tallying of marital property was the date of the final judgment of divorce. Henry points out the inequity of awarding Susan one half of the entire value of his 401(k) given the Welches’ lengthy separation prior to divorce. However, this Court has previously held that a husband’s investment accounts were marital even though both accounts were opened after the couple separated and the husband was the sole contributor to the accounts. Stone v. Stone, 824 So. 2d 645, 647 (¶6) (Miss. Ct. App. 2002). This Court noted that even though the Stones were “separated and living apart prior to the divorce, [they] did not seek any order of separate maintenance[.]” Id. at 648 (¶7). Consequently, there was “no clear line of demarcation” after which the couple’s assets stopped being marital other than the date of the judgment of divorce. Id.
¶15. In Stone, the parties had been separated for over five years when the chancery court granted their divorce. Id. at 646 (¶¶1-2). Nonetheless, this Court held that property acquired during the separation was marital. While the Welches were separated for over seven years, we do not find that the length of their separation warrants a departure from our holding in Stone or existing supreme court precedent. As all of Henry’s contributions to the 401(k) account and its appreciation in value occurred during the marriage, the chancery court did not err in classifying the entire balance as marital property. This issue is without merit.
Here are a few points to ponder:
- I am sure Henry and his lawyers were delighted when Susan did not press for temporary support. After all, paying money to an estranged wife is like buying oats for a dead horse, isn’t it? But look at what the non-entry of a temporary order in this case wound up costing Henry in terms of his 401(k), and could have cost him had the chancellor applied the judgment date to division of the pension and other assets. It could be that Henry saved money over the long (seven year) run, or maybe he didn’t. We’ll never know for sure. But the holding in this case is something you need to discuss with your client before taking the bait and letting the case go ahead sans a temporary order.
- Read Cuccia, Godwin, Pittman and Welch and get an appreciation for how important it is to set a demarcation date. The trend seems to be away from discretion in the chancellor, and toward bright-line rules, but if there’s any wiggle room, exploit it for the benefit of your client. Try to persuade the judge to set the line where it will do your client the most good.
- This case did not address the propriety of the chancellor using different demarcation dates for different assets. Is that kosher? We don’t know for certain, because the COA did not take it on directly due to the way Henry framed his issues on appeal. My guess is that, unless the chancellor has a really well-reasoned, substantial reason, it’s not a good idea to use different demarcation dates.