BRIGHT LINE? WHAT BRIGHT LINE?

May 14, 2013 § 2 Comments

The line of demarcation — also referred to in the cases and in legal circles as “the valuation date” — is an important concept in divorce law. It’s something we’ve addressed here in prior posts.

Under the Ferguson case, the trial court must first identify which assets are marital, then value them, and then divide them equitably. The date that the court picks to establish the values of marital assets is crucial, since appreciation and depreciation mean that the value on one particular date may be sugnificantly different from that on another date.

Some lawyers argue that there is a “bright line” rule that the entry of a temporary order in a divorce or separate maintenance case cuts off all further accumulation of marital interests, and, indeed, some case law would seem to indicate that.

But the MSSC, in the case of Collins v. Collins, handed down May 9, 2013, makes it clear that there is no bright line rule. Here’s what Justice Coleman’s opinion says on the point:

[¶9] … The law in Mississippi is that the date on which assets cease to be marital and become separate assets – what we refer to herein as the point of demarcation – can be “either the date of separation (at the earliest) or the date of divorce (at the latest).” Lowrey v. Lowrey, 25 So. 3d 274, 285 (¶ 27) (Miss. 2009).

¶10. In Selman v. Selman, 722 So. 2d 547 (Miss. 1998), the wife had a retirement fund, and the chancellor awarded the husband half its value even though the fund did not begin to accrue until after the husband had vacated the marital home. Id. at 553 (¶ 22). When including the fund in the marital assets, “the chancellor stated only that ‘[t]he law says that until they are divorced, everything is on the table.’” Id. Applying the well-settled manifest error standard of review, id. at 551 (¶ 12), the Selman Court reversed the chancellor’s ruling and wrote, “while the marriage had not legally terminated, the relationship out of which equitable distribution arises had ended some months earlier.” Id. at 553 (¶ 25).

¶11. A temporary order may [emphasis in original] be considered by the chancellor to be a line of demarcation between marital and separate property, Cuccia v. Cuccia, 90 So. 3d 1228, 1233 (¶ 8) (Miss. 2012); see also Wheat v. Wheat, 37 So. 3d 632, 637-38 (¶¶ 16-18) (Miss. 2010) (recognizing, in dicta, that a temporary support order can indicate the demarcation point), but we have never held that it must. However, in Pittman v. Pittman, 791 So. 2d 857 (Miss. Ct. App. 2001), the Mississippi Court of Appeals held, “[T]he temporary support order serves the same purposes as a separate maintenance order and that property accumulated thereafter is separate property.” Id. at 864 (¶ 19). In so writing, the Pittman Court created the impression that Mississippi now has established a rule that temporary orders always and in every case provide the mark of demarcation. Temporary support orders vary. They may include issues such as which spouse controls the marital home, automobiles, and bank accounts, or they may simply, as in the case sub judice, provide only for temporary custody and support of a minor child. Because of the degree of variance in temporary orders and the particularities of every marital dissolution, we reaffirm our holding in Lowrey and hold that it is necessary that a chancellor maintain discretion to decide in each instance whether a temporary order is the proper line of demarcation. To the extent that the Pittman opinion can be read to create a rule that a temporary support order necessarily and always indicates the point of demarcation, we overrule it.

¶12. In the case sub judice, the chancellor did not explicitly state what date she chose as the date of demarcation, but from the substance of the opinion, it is clear she chose the date of the divorce. In their briefs, the parties accept that the chancellor used the date of the divorce as the point of demarcation. The temporary support order in the instant case dealt only with child custody and temporary child support. It did not go so far toward separating the parties’ several jointly-held assets that we would hold the chancellor abused her discretion in not finding it to be the point of demarcation.

¶13. However, the Cuccia Court noted that the chancellor must set out the specific date used as the line of demarcation and remanded the case partly for the chancellor’s failure to do so. Cuccia, 90 So. 3d at 1233 (¶ 11). The chancellor did not do so here, but, as noted above, the parties do not dispute the issue. We take the instant opportunity to write that had the issue been disputed, or had the chancellor’s order been ambiguous as to the demarcation date used, we would have remanded the case as did the Cuccio [sic] Court. We reiterate here that chancellors should indicate in the record what date they choose for the point of demarcation and why they choose it.

That should settle the debate once and for all that the demarcation date is at the discretion of the chancellor, who must always identify the date chosen and explain why that particular date was selected.

The downside to this is that when your client asks you about whether it would be wise to acquire any new assets between separation and the date of the divorce, your answer now will be an unqualified, “I don’t have any idea.”

As a trial practice matter, I seldom hear any evidence or argument as to what the valuation date should be. If you have a case where one valuation date is advantageous to your client as opposed to another, you should be zealous about informing the judge what date should be selected, and why it should be selected. For instance, if your client acquired a home after the separation, and has accumulated wealth after the separation, you want a valuation date near that separation date, not at the date of the divorce. If you don’t make that clear in the record, the judge might choose a date that’s not so nifty for your client, and you’ll have to ask the COA to fix it.

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