January 14, 2019 § Leave a comment
Robert Culumber was granted a divorce from his wife, Toni, on the grounds of habitual cruel and inhuman treatment and habitual drunkenness. They had separated after only 13 months together. The chancellor found that Toni was not entitled to alimony. Toni appealed both the granting of the divorce and the denial of alimony.
In the case of Culumber v. Culumber, handed down December 4, 2018, the COA affirmed on all issues. Chief Judge Lee wrote for the unanimous court (Tindell not participating) on the alimony issue:
¶28. Finally, Toni argues that in the event that the divorce was properly granted, then the chancery court improperly denied Toni’s request for rehabilitative alimony. Toni alleges that even though the marriage was short, she is entitled to rehabilitative alimony payments because Robert paid all the bills and expenses in the marriage and that she needs assistance to become self supporting after the marriage.
¶29. We first note that alimony is considered only if after equitable division, one party is left with a deficit. Carney v. Carney, 201 So. 3d 432, 440 (¶28) (Miss. 2016). “The decision of whether to award alimony, and if so, what amount, is left to the chancellor’s discretion.” Hearn v. Hearn, 191 So. 3d 129, 132 (¶10) (Miss. Ct. App. 2016). When determining whether to award alimony, the chancellor is to consider the Armstrong factors:
(1) the income and expenses of the parties; (2) the health and earning capacities of the parties; (3) the needs of each party; (4) the obligations and assets of each party; (5) the length of the marriage; (6) the presence or absence of minor children in the home, which may require that one or both of the parties either pay, or personally provide, child care; (7) the age of the parties; (8) the standard of living of the parties, both during the marriage and at the time of the support determination; (9) the tax consequences of the spousal support order; (10) fault or misconduct; (11) wasteful dissipation of assets by either party; or (12) any other factor deemed by the court to be “just and equitable” in connection with the setting of spousal support.
Larson v. Larson, 192 So. 3d 1137, 1142 (¶12) (Miss. Ct. App. 2016) (citing Armstrong v. Armstrong, 618 So. 2d 1278, 1280 (Miss. 1993)).
¶30. In regard to the type of alimony Toni argues she is entitled to, we note that rehabilitative alimony is “an equitable mechanism which allows a party needing assistance to become self-supporting without becoming destitute in the interim.” Serio v. Serio, 203 So. 3d 24, 30 (¶17) (Miss. Ct. App. 2016) (quoting Lauro v. Lauro, 847 So. 2d 843, 849 (¶15) (Miss. 2003)). It is “awarded to parties who have put their career on hold while taking care of the marital home.” Id. “Rehabilitative alimony allows the party to get back into the working world in order to become self-sufficient.” Id.
¶31. The chancellor stated that there was no basis for alimony. Toni alleges that the chancellor placed too much emphasis on the length of the marriage and did not properly consider the other factors. The record indicates otherwise. As the chancellor noted, Toni was not working at all when she came into the marriage. Additionally, she brought approximately $30,000 of debt into the marriage which Robert paid off in full. It is true, as the chancellor noted, that the marriage was very short—barely one year. The parties had no children. Per the chancellor’s findings, Toni was “actually better off by virtue of the marriage in terms of her education, having her student loan paid off and other things to help her further her career, rather than lose it.” Career wise, Toni was relatively young—being in her late thirties, while Robert was approaching retirement—being in his late fifties. In December 2013, Toni became employed, making around $38,000, and this employment continued at the time of trial. Robert paid all of the bills and expenses during the short-term marriage and assumed responsibility for all marital debt. Toni received payment for her
equitable share of marital assets in the amount of $13,442.00. As we now affirm, the chancellor found Toni at fault in the marriage on grounds of habitual cruel and inhuman treatment and habitual drunkenness. We do not find that the chancellor abused his discretion in denying Toni an award of rehabilitative alimony. This issue is without merit.
This is not a particularly noteworthy case, except that it illustrates how a chancellor, and the COA on review, may view rehabilitative (and other forms of) alimony in light of the Armstrong factors given a set of facts such as these.
October 31, 2018 § Leave a comment
A couple of days ago I posted about the big change in tax treatment of alimony coming after December 31, 2018.
Here are some points brought to my attention that correct and fine-tune that post:
- I said that there must be a judgment pre-dating the demarcation date. Other tax experts believe that a binding agreement for alimony to be treated for taxes as it currently exists will satisfy the law. The key is that the agreement must on its face be binding. To me that means either a PSA or a consent with alimony as an agreed issue presented to the court for approval or some other proceeding to make it binding.
- I also said that modification would result in making the pre-demarcation-date-alimony non-deductible and non-taxable. A more accurate statement is that modification may, in some cases, change the tax treatment. It’s too complicated for me to elaborate on here, but you need to get some competent guidance before jumping into any alimony modification post December 31, 2018.
Those are the tweaks. Here are two of my own observations:
- Don’t expect judges to be familiar with all of the nuances of these changes. Be prepared to offer expert testimony or stipulations that cover these points.
- Get some competent tax advice so that you can properly and accurately advise your clients. That disclaimer in your retainer agreements and PSA’s about tax advice does not relieve you of the obligation to be able to advise your clients about basics such as tax treatment of alimony and the pitfalls of modification because that’s not really tax advice — it’s divorce advice.
Thanks to the lawyer who called this to my attention.
October 29, 2018 § 2 Comments
Effective after December 31, 2018, alimony will no longer be deductible by the payor, and will no longer be income to the payee. That’s per the “Tax Cuts and Jobs Act” passed by Congress earlier this year.
The law refers to “divorce agreements executed” after December 31, 2018, which would seem to indicate that if you have a PSA executed by the parties on December 29, 2018, the payments would maintain their deductible/income character, but at least one tax expert whom I asked said that the law requires a judgment or decree either adjudicating alimony as a contested issue or incorporating an agreement.
Also, any judgment modifying alimony after the cutoff date will cause the alimony to lose its deductible/income character.
So here are some ramifications for Mississippi practitioners:
- If you’ve been dragging out that divorce case and the current alimony treatment is important to your client, you’d better get moving; you’ve only got two months left until the change.
- You need to think twice about modification, especially if you represent the payor. Even a slight modification of alimony after the cutoff date will cause it no longer to be deductible.
- The parties will no longer be able to agree to deductibility or non-deductibility, or taxability or non-taxability. All alimony is non-deductible and non-taxable, no matter what the parties agree.
- It will no longer make any sense to craft hybrid alimony provisions because taxability is no longer a factor.
- The court is required to consider the tax consequences under the Armstrong factors. Keep that in mind as you prepare your witness list. You might want to prepare a stipulation for the court as to taxability of alimony.
- I think this will: (a) make alimony more difficult to negotiate, and (b) have a depressing effect on amounts of alimony awarded and agreed.
- I believe this also applies to separate maintenance, but that’s my opinion.
It’s not too soon to sit down with a tax specialist who can advise you of the consequences of this change. This has drastic strategic consequences for divorce lawyers and their clients.
April 10, 2018 § 4 Comments
Adam Lewis filed a complaint to terminate alimony against his ex-wife, Karen. Adam contended that Karen was cohabiting or in a de facto marriage with her boyfriend, Dobel, since the parties’ 2002 divorce. There was a lot at stake, since the parties’ divorce agreement provided that Adam would pay Karen $15,000 a month in periodic alimony.
Following a trial, the chancellor dismissed Adam’s case per MRCP 41(d). Adam appealed. The COA affirmed the dismissal in In the Matter of the Dissolution of the Marriage of Lewis, decided March 20, 2018. You can read the facts as developed at trial for yourself. Here is how Judge Wilson addressed Adam’s arguments on cohabitation and de facto marriage:
¶17. “Modification of alimony may occur upon the existence of a situation of mutual support between the recipient spouse and another individual which alters the recipient spouse’s financial needs.” Scharwath v. Scharwath, 702 So. 2d 1210, 1211 (¶6) (Miss. 1997). “[C]ohabitation creates a presumption that a material change in circumstances has occurred. This presumption will shift the burden to the recipient spouse to come forward with evidence suggesting that there is no mutual support . . . .” Id. at (¶7) (citation omitted).
¶18. In the present case, Adam did not prove cohabitation and failed to prove any mutual financial support. Adam admitted that Karen and Dobel maintain separate homes and do not spend the night at each other’s homes. Adam also admitted that he had subpoenaed Karen’s financial records but had found no evidence that Dobel financially supported Karen or vice versa. On this record, the chancellor did not clearly or manifestly err by finding that Adam failed to meet his burden of proving cohabitation or mutual financial support.
B. De Facto Marriage
¶19. “In the absence of cohabitation, alimony can be terminated based on proof of what has been termed a ‘de facto marriage.’” Hughes, 186 So. 3d at 400 (¶18). “A de facto marriage may be proven in two ways.” Id. “First, a chancellor may find a de facto marriage if the alimony recipient is deliberately avoiding remarriage merely to continue receiving alimony.” Id. (citing Martin v. Martin, 751 So. 2d 1132, 1136 (¶16) (Miss. Ct. App. 1999)). “Second, a de facto marriage can be found . . . if the alimony recipient and another person have ‘so fashioned their relationship, to include their physical living arrangements and financial affairs, that they could reasonably be considered as having entered into a de facto marriage.’”
Id. (quoting Pope v. Pope, 803 So. 2d 499, 504 (¶12) (Miss. Ct. App. 2002)).
¶20. In Martin, Ben and Linda’s divorce judgment required Ben to pay Linda periodic alimony. Martin, 751 So. 2d at 1133 (¶3). After the divorce, Linda became involved in a long-term relationship with Norm Anderson. Id. at (¶5). Linda wore a diamond engagement ring that Anderson gave her, and the couple consistently told friends that they planned to marry “next year.” Id. Moreover, on cross-examination, Linda “admitted . . . that she and Anderson had not married because she need[ed] the financial support provided by the alimony received from [Ben].” Id. Linda and Anderson maintained separate residences, but Anderson’s was a “small . . . efficiency apartment,” while Linda’s was a “luxurious home.” Id. at 1133, 1136 (¶¶6, 15). Anderson had a key to Linda’s home, spent the night at her home a few times each month, ate meals at her home regularly, ran errands for her, and did yard work and other household chores. Id. at 1133 (¶6). In addition, Linda had written Anderson checks totaling over $11,000 over a three-year period. Id. Anderson also provided Linda with substantial discounts on clothes and cosmetics from the store where he worked. Id. Based on this evidence, the chancellor found that Linda and Anderson had entered into a “de facto marriage” and terminated Ben’s alimony obligations. Id. at 1134-35 (¶¶10, 14).
¶21. On appeal, this Court affirmed the chancellor’s finding that Linda had “structured her relationship with Anderson in an attempt to circumvent the appearance of cohabitation so as to continue her alimony.” Id. at (¶16). We did so based on Linda’s admission under oath “that she and Anderson had not married because she need[ed] the financial support provided by [her] alimony.” Id. We held that when “an alimony recipient spouse purposefully avoids marriage merely to continue receiving alimony, equity should not require the paying spouse to endure supporting such misconduct.” Id.
¶22. In contrast, in Hughes, supra, the chancellor found that the alimony payor failed to prove that his ex-wife, Mariel, had entered into a “de facto marriage” with her boyfriend, Darrell. Hughes, 186 So. 3d at 396 (¶3). Mariel and Darrell had been in an exclusive dating relationship for four years, and Mariel wore a diamond ring that Darrell had given her. Id. at 398-99 (¶¶11, 13). They maintained separate residences, but they spent the night at each other’s homes once a week or more. Id. at 398 (¶11). They also traveled and vacationed together, and Darrell had exhibited one of his Corvettes at the National Corvette Museum with a plaque stating that the car was on loan from “Darrell Hill & Mariel Hughes.” Id. at
399 (¶13). Mariel and Darrell denied that they had discussed marriage or planned to get married. Id. at (¶14). However, there was testimony that Mariel once “said that marrying Darrel would ‘mess things up’ in some unspecified way.” Id. at 401 (¶22).
¶23. On those facts, we affirmed the chancellor’s finding that the alimony payor failed to prove the existence of a de facto marriage. We concluded that Martin was distinguishable because there was no outright admission or other clear evidence that Mariel “was avoiding remarriage solely to continue her alimony payments.” Id. at 401 (¶22). In addition, the evidence was, at best, conflicting as to whether Mariel and Darrell had “so fashioned their relationship, to include their physical living arrangements and financial affairs, that they could reasonably be considered as having entered into a de facto marriage.” Id. at 403 (¶26) (quoting Pope, 803 So. 2d at 504 (¶12)). They were in a long-term, exclusive relationship, she wore a diamond ring that he gave her, they traveled together frequently, and they spent the night together regularly. However, they maintained separate homes and had no access to one another’s financial accounts. Id. at 402-03 (¶26). Therefore, there was evidence to
support the chancellor’s finding that the long-term, exclusive relationship was not a scheme to avoid remarriage to continue alimony payments or a de facto marriage. Id. We emphasized, as we had in a prior case, that “[t]he most important distinction” in our precedents on de facto marriage “is the finding of the chancellor.” Id. at 403 (¶26) (quoting Burrus, 962 So. 2d at 621 (¶15)). “We will not reverse a chancellor’s findings regarding the existence or nonexistence of a de facto marriage unless they are manifestly or clearly erroneous.” Id.
¶24. We reach the same conclusion in the present case. Karen and Dobel obviously are in a long-term, serious relationship. However, unlike Martin, there is no outright admission or any other clear or direct evidence that Karen is avoiding remarriage just to continue receiving alimony. Adam testified that he believes that is what Karen is doing. However, Adam did not call Karen or Dobel as an adverse witness. In addition, although Adam apparently deposed Karen prior to trial, he did not seek to introduce any part of her deposition into evidence. See M.R.C.P. 32(a)(2) (“The deposition of a party . . . may be used [at trial] by an adverse party for any purpose.”); Fred’s Stores of Tenn. Inc. v. Pratt, 67 So. 3d 820, 827-28 (¶¶39-44) (Miss. Ct. App. 2011) (Maxwell, J., concurring in part and in result) (explaining that a plaintiff may introduce a defendant’s deposition during the plaintiff’s case in chief). Moreover, as in Hughes, Karen and Dobel maintain separate residences and separate finances. As noted above, Adam admitted that he had found no evidence that Dobel supports Karen financially or vice versa. Therefore, as in Hughes, we cannot say that the chancellor manifestly or clearly erred by finding that Adam failed to prove a de facto marriage.
¶25. To reiterate, a trial judge’s ruling on a Rule 41(b) motion to dismiss “is, for purposes of appeal, treated like any other finding of fact. In other words, [her] decision will not be disturbed on appeal unless it was manifestly wrong.” Gray, 477 So. 2d at 1357. On such a motion, the trial judge is entitled to weigh the credibility of the plaintiff’s evidence as if “making findings of fact and rendering final judgment.” Id. at 1356-57. Thus, to the extent that Adam offered circumstantial evidence that could have permitted an inference of a de facto marriage, the chancellor was “not required to look at the evidence in the light most favorable to [Adam],” nor was she required to give him “the benefit of all favorable inferences.” Mitchell v. Rawls, 493 So. 2d 361, 362 (Miss. 1986) (quoting Davis v. Clement, 468 So. 2d 58, 61 (Miss. 1985)). The chancellor was entitled to judge the credibility of the evidence and make findings of fact. And we will reverse her decision only if she would have been “obliged to find for [Adam] if [Adam’s] evidence were all the evidence offered in the case.” Corson, 612 So. 2d at 369. Adam’s evidence was not so compelling as to oblige the chancellor to find in his favor. Therefore, we affirm.
Voilà, a textbook statement of the law on modification of alimony.
- Cohabitation and de facto marriage are the two main avenues to termination of alimony.
- Mutual support is the key characteristic of cohabitation. That will require financial proof. Discovery and use of subpoenas duces tecum are what it will take to develop your proof.
- As far as de facto marriage is concerned, try to get an admission of avoiding marriage to preserve alimony. Friends may provide admissions of the principals against interest. Living and financial arrangements are crucial evidence. As with cohabitation, commingled finances and mutual support may create circumstantial evidence.
March 7, 2018 § Leave a comment
When Charles and Lajuana Easterling were divorced in 2013, the judgment incorporated their property-settlement agreement under which Charles agreed to pay Lajuana $2,500 a month in periodic alimony. He also agreed to pay the monthly note on the former marital residence, which Lajuana continued to occupy.
At the time of the divorce Charles worked offshore as a tool pusher. He later remarried and had two stepchildren and an adopted child by his second wife.
In 2015, Charles’s employment was terminated for reasons beyond his control. His efforts to file other employment in the oil industry were unsuccessful. He filed a petition for modification asking the court to eliminate the alimony obligation, and there was a temporary agreement reducing his alimony to $600 a month. He quit making the mortgage payment, forcing Lajuana to pay it herself.
At the time of the final hearing in May, 2016, Charles still reportedly had no income. He did have $400,000 in a securities account, an annuity, real property, vehicles, and other assets. He claimed living expenses of $7,574.56 a month. He said that he made up the deficit by increasing credit-card debt.
Following a hearing, the chancellor reduced Charles’s alimony obligation to $1,500 per month. Charles filed a motion for rehearing charging that the court should have terminated, not reduced, alimony. The chancellor denied the motion and Charles appealed.
In Easterling v. Easterling, a February 20, 2018, decision, the COA appealed. Judge Griffis wrote for a unanimous court:
¶11. Here, the chancellor’s final judgment found that Charles’s “decrease in income from his loss of employment was not anticipated at the time of the divorce and is a material change in circumstances[, but] . . . the loss of employment does not justify a termination of alimony[.]” After which, the chancellor considered the Armstrong factors to determine the proper amount of alimony. See Holcombe, 813 So. 2d at 703-04 (¶12).
¶12. “Personal bills cannot be used as a factor to reduce support payments.” Hardin v. Grantham, 201 So. 3d 511, 515 (¶15) (Miss. Ct. App. 2016). Since the divorce, Charles has acquired a new home and land, and has remarried and adopted one child and has two stepchildren. The law is clear that the claim of the divorced wife under an alimony award on the ex-husband’s earnings takes precedence over that of a second wife. De Marco v. De Marco, 199 Miss. 165, 167, 24 So. 2d 358, 359 (1946). The obligations to the first wife also take precedence over any obligations the ex-husband may have as the result of children with his new wife. James v. James, 724 So. 2d 1098, 1104 (¶22) (Miss. Ct. App. 1998). As a result, Charles’s post-divorce personal bills and remarriage cannot be used as factors to reduce his support payments. See Hardin, 201 So. 3d at 515 (¶15).
¶13. Further, the chancellor considered the Armstrong factors and concluded that Charles had not missed any payments on his monthly financial obligations since the divorce. Despite having been fired and claiming that he was in financial jeopardy because of his alimony obligation, all of his debts were current and there was no risk of foreclosure or repossession at the time of the hearing. Charles argues that he was current on all of his debts only because he took on additional credit-card debt through cash advances in order to make the payments. However, “simply alleging, as does [Charles], that one is subsisting on borrowed funds does not show with the required particularity that he is unable to pay.” Varner v. Varner, 666 So. 2d 493, 497 (Miss. 1995).
¶14. At the time of trial, Charles held more than $400,000 in stocks and an annuity, along with real property, vehicles, and other assets. Here he argues that he will run out of money within four years if he is forced to pay $1,500 a month in alimony, $120 a month in mortgage payments— including retroactive payments on each—and his reported $7,574.56 in monthly expenses. If this were the case, at that rate without any other income, Charles would be rendered destitute regardless of the court-required support payments.
¶15. At the hearing, Charles could make his obligatory alimony payments to Lajuana, whose living expenses and needs have remained unchanged since the divorce. The supreme court has held:
[i]n property and financial matters between the divorcing spouses themselves, there is no question that, absent fraud or overreaching, the parties should be allowed broad latitude. When the parties have reached [an] agreement and the chancery court has approved it, we ought to enforce it and take as dim a view of efforts to modify it, as we ordinarily do when persons seek relief from their improvident contracts. Weathersby v. Weathersby, 693 So. 2d 1348, 1351 (Miss. 1997) (quoting Bell v. Bell, 572 So. 2d 841, 844 (Miss. 1990)).
¶16. “[T]he chancellor has substantial discretion in reaching a decision that [she] finds equitable and fair to both parties.” Seale v. Seale, 863 So. 2d 996, 999 (¶14) (Miss. Ct. App. 2004). The chancellor determined that Lajuana had been substantially dependent upon both her disability payments and the alimony payments from Charles since the divorce to meet her monthly living expenses. Her financial situation has not changed. As a result of Charles’s material change in circumstances, the chancellor concluded that a $1,000 reduction in his alimony obligation was warranted. We find the chancellor’s reduction in the amount of the alimony was neither manifest error nor an abuse of discretion. The chancellor’s judgment is affirmed.
It seems a harsh rule when viewed from the payer’s perspective, but the chancellor’s job is to find a solution that is “equitable and fair to both parties.” At ¶10, the court noted that, “When analyzing [the Armstrong] factors and ‘deciding whether to modify periodic alimony,’ chancellors should ‘compar[e] the relative positions of the parties at the time of the request for modification in relation to their positions at the time of the divorce decree.’ Steiner v. Steiner, 788 So. 2d 771, 776 (¶16)(Miss. 2001)(citations omitted).”
The only other thing to which I would call your attention is that there was “no record or written order” documenting the temporary proceeding, per ¶4. That’s just asking for trouble. Here the parties agreed to what had transpired, but absent an agreement it could have been dicey, particularly for Charles, who had reduced his alimony and quit paying the mortgage note. Had Lajuana denied any agreement, Charles might have a big arrearage judgment and may have had his modification case bounced for unclean hands. Make sure you get an order; better yet, make a record and get an order entered.
February 12, 2018 § 2 Comments
Last summer we posted here about the COA’s decision in Harris v. Harris, in which the court affirmed the chancellor’s decision to reduce alimony based on the ex-wife’s receipt of Social Security benefits derived from those of her husband. You can read my post at this link, if you care to. The chancellor and the COA relied on Spalding v. Spalding as authority for the proposition that the chancellor is required to give the alimony payer credit for Social Security benefits derivative of the payer’s.
The MSSC granted cert, and in Harris v. Harris, decided February 1, 2018, the court reversed the COA and the trial court, overruling Spalding. Here’s what Justice Chamberlin wrote for the court en banc:
¶19. Today, we hold that … Social Security benefits derived from the other spouse’s income do not constitute a special circumstance triggering an automatic reduction in alimony. When a spouse receives Social Security benefits derived from the other spouse’s income, the trial court must weigh all the circumstances of both parties and find that an unforseen material change in circumstances occurred to modify alimony. See Ivison, 762 So. 2d at 334 (holding that the circumstances of both parties are considered to determine whether there was a material change); see also
Tingle, 573 So. 2d 1389, 1391 (Miss. 1990) (holding that change in circumstances must be after-arising and unanticipated). To the extent that Spalding states otherwise, it is overruled.
You can read the other 18 paragraphs reasoning their way through the law of Mississippi and other jurisdictions to get to this point. The court remanded the case to the chancellor to analyze it under Armstrong v. Armstrong, 618 So.2d 1278, 1280 (Miss. 1993) to determine whether modification was warranted, and, if so, how to modify.
Maybe it’s just me, but it seems that one of the murkiest areas of alimony law is what effect retirement has on the obligation. Retirement is, after all, a foreseeable event. Social Security benefits are foreseeable. What are we supposed to do? One of the easiest answers until this case was that Social Security benefits derived from the payer created a credit. Now that certainty is taken away. I think lawyers should spend more time negotiating over the future of retirement benefits. Clients absolutely do not want to think or talk about it until retirement is the 500-pound gorilla knocking at the front door. But this decision leaves your clients little choice but to deal with it now or engage in expensive and impoverishing litigation later.
August 30, 2017 § Leave a comment
The fairly commonplace practice of securing alimony awards via life insurance has come under increasing scrutiny. A recent post on the subject is at this link.
You can add the COA’s decision in Griner v. Griner, handed down June 27, 2017, to your collection of cases on point. In that case, the chancellor had ordered Chip Griner to obtain a $1,000,000 life insurance policy based on an award of alimony to his wife, Melanie. On appeal, Chip argued that the parties’ consent to divorce authorized the judge to consider alimony, but not life insurance. Justice Irving wrote for the court:
¶28. We also find that the chancellor operated within the authority granted to him by the parties’ submission of the issue of alimony when he ordered Chip to maintain a life-insurance policy with Melanie designated as the beneficiary. Mississippi Code Annotated section 93-5-23 (Rev. 2013) provides that, when granting a divorce, a chancellor
may, in [his] discretion, having regard to the circumstances of the parties and the nature of the case, as may seem equitable and just, make all orders . . . touching the maintenance and alimony of the wife or the husband, or any allowance to be made to her or him, and shall, if need be, require bond, sureties or other guarantee for the payment of the sum so allowed.
Miss. Code Ann. § 93-5-23. This Court has held that “[a]n alimony payor may be required to maintain life insurance in an amount sufficient to satisfy payment of alimony obligations that survive the payor’s death.” Coggins v. Coggins, 132 So. 3d 636, 644 (¶35) (Miss. Ct. App. 2014) (citations and internal quotations omitted). “Recognizing the possibility that an alimony payor may fall behind in periodic-alimony payments and then die leaving those vested payments unsatisfied, this court has acknowledged the chancellor’s authority to require the alimony payor to maintain a life-insurance policy to protect the recipient spouse against such a contingency.” Id. at 645 (¶37); see also Johnson v. Pogue, 716 So. 2d 1123, 1134 (¶41) (Miss. Ct. App. 1998); Beezley v. Beezley, 917 So. 2d 803, 808 (¶17) (Miss. Ct. App. 2005).
¶29. While we find that the chancellor was within the authority granted him by the parties when he ordered Chip to maintain a life-insurance policy with Melanie named as the beneficiary, we also find that the amount that Chip was required to maintain—$1,000,000— was unreasonable and excessive. The purpose of requiring an alimony payor to maintain a life-insurance policy with the alimony payee designated as the beneficiary is to protect the vested but unpaid amount of alimony in case of the payor’s death.
¶30. In Coggins, we held that the chancellor erred in his requirement that the husband designate his former wife as the beneficiary to a $175,000 life-insurance policy “to protect against [the husband] defaulting on his $504-per-month alimony payments and then dying before curing the default.” Coggins, 132 So. 3d at 645 (¶38). We reasoned that “[t]his amount of insurance—the equivalent of thirty years worth of alimony payments—assumes not only that [the husband] may fall behind for three decades but also that [his former wife] will experience no material change of circumstances altering or terminating her need for alimony.” Id.
¶31. Here, with respect to the protection of the alimony awarded to Melanie, the chancellor stated in the modified order:
The [c]ourt failed [in its final judgment] to ensure that the amount of alimony awarded to Melanie [was] covered by insurance and hereby directs Chip to change the beneficiary on his $1,000,000.00 life insurance policy to make the same payable to Melanie for the performance of the [j]udgment of the [c]ourt in case of Chip’s death.
As noted earlier in this opinion, the chancellor awarded Melanie periodic alimony of $3,000 a month, as well as lump-sum alimony of $480,000, or $4,000 a month for ten years. Although Chip was allowed to pay the lump-sum alimony in installment payments, the full amount vested immediately. Only a $480,000 policy would be required to guarantee payment of the lump-sum alimony. If Chip immediately paid his lump-sum-alimony obligation in a single payment, he would have to fail making his monthly periodic-alimony payments for more than twenty-seven years to accumulate a $1,000,000 arrearage. And if Chip chose to pay his lump-sum-alimony obligation in installment payments, along with his
periodic-alimony payments, and failed to make any payments for ten years, he would be in arrears by only $840,000, not counting any accrued interest. It is unreasonable to assume that Melanie would allow the payments to get that far behind before seeking judicial redress. Moreover, it is not unreasonable that Melanie may remarry, at which time Chip’s periodic alimony obligation would cease. Since we are already reversing on other grounds, we direct that on remand the chancellor take a new look at the amount of life insurance that will be required to protect Melanie’s alimony interest.
Again, the amount of life insurance ordered needs to be enough to protect any arrearage that might reasonably be expected to accrue, and no more.
August 8, 2017 § 3 Comments
Yesterday I posted about the Powell bankruptcy case and how it addressed the handling of equitable distribution in divorce when there is a pending bankruptcy proceeding. As promised, here are my thoughts:
- I have heard it said that Powell is a big change fraught with implications for family law practitioners, but I don’t see that. The language cited from Professor Bell clearly states what the law has been. Powell does not change that.
- Some may have misinterpreted the federal domestic relations exception barring federal courts from exercising jurisdiction over divorce to mean that all matters incidental to a divorce are included. The US Supreme Court, however, has made it clear that it is the granting of the divorce itself that is barred. Any matters pertaining to the property of the bankruptcy debtor are subject to bankruptcy jurisdiction.
- The only way that a chancellor may proceed in divorce after bankruptcy is filed is for you to lift the automatic stay. You have to petition the bankruptcy court to remand all of the issues, as Jessica Powell did, even knowing that some will not be remanded.
- Only problem is, per Heigle, cited in the Powell opinion, our supreme court has made it clear that the chancery court should stay all proceedings before it until the bankruptcy is concluded.
- Even without Heigle to stop you from going forward, it’s obvious that if the bankruptcy estate is taken away, equitable distribution is impossible. If equitable distribution is impossible, alimony is impossible, since you can’t get to alimony without going through equitable distribution. If most of the assets are in the bankruptcy estate, that may well limit or even eliminate child support.
- As I mentioned yesterday, I am no bankruptcy expert, but it appears that if you represent the other spouse (not the debtor), you had better file a claim for him or her in bankruptcy court right away to protect that client’s rights. You need to ask a bankruptcy expert about this.
July 18, 2017 § 1 Comment
In 2015, Ronnie and Amy Ali were divorced in an acrimonious proceeding that featured over 200 docket entries. Amy was granted the divorce on HCIT, and was awarded custody, child support, equitable distribution, alimony, and attorney’s fees. To secure the financial award, the chancellor ordered Ronnie to maintain a $2 million life insurance policy. Ronnie appealed on several issues, including the life insurance.
In Ali v. Ali, handed down June 13, 2017, the COA reversed and remanded on the life insurance issue. Since the opinion is a concise statement of the law on the point, I am including that portion. Judge Fair wrote for a 6-4 court:
¶22. The chancellor ordered Ronnie to maintain a life insurance policy valued at $2 million, with Amy to receive $1.5 million and the minor daughter to receive $500,000 in the event of Ronnie’s death. On appeal, Ronnie argues that the policy amounts required for Amy are excessive in light of the permissible purposes of such awards. We agree.
¶23. In Coggins v. Coggins, 132 So. 3d 636, 644-45 (¶¶35-37) (Miss. Ct. App. 2014), this Court explained:
An alimony payor “may be required to maintain life insurance in an amount sufficient to satisfy payment of alimony obligations that survive the payor’s death.” [Deborah H.] Bell, Mississippi Family Law § 9.08[c] [(2005)] (citing In re Estate of Hodges, 807 So. 2d 438, 442-44 (¶¶14-23) (Miss. 2002)). The key phrase is “alimony obligations that survive the payor’s death.”
Periodic alimony is an obligation that “terminates automatically” upon the payor’s death and cannot be imposed upon the payor’s estate, absent an express agreement. Armstrong [v. Armstrong, 618 So. 2d 1278, 1281 (Miss. 1993)]; see In re Hodges, 807 So. 2d at 443 (¶19). While lump-sum alimony fully vests at the time of the divorce judgment, periodic alimony only vests on the date each payment becomes due. In re Hodges, 807 So. 2d at 442 (¶17). So when the payor dies, the only alimony obligations that survive—and the only obligations that may be insured—are unpaid lump-sum alimony and unpaid periodic-alimony payments that have already vested.
Recognizing the possibility that an alimony payor may fall behind in periodic-alimony payments and then die leaving those vested payments unsatisfied, this court has acknowledged the chancellor’s authority to require the alimony payor to maintain a life-insurance policy to protect the recipient spouse against such a contingency. [Johnson v. Pogue, 716 So. 2d 1123, 1134 (¶41) (Miss. Ct. App. 1998)]; see also Beezley v. Beezley, 917 So. 2d 803, 808 (¶17) (Miss. Ct. App. 2005). But in Pogue, this court found that requiring the payor to maintain a $75,000 life-insurance policy to protect against the potential failure to make $500-per-month alimony payments was “excessive.” Pogue, 716 So. 2d at 1134 (¶41).
¶24. Given the standard we have just recited, it is impossible to say that a life insurance policy of $1.5 million is necessary to guard against the potential failure to make $5,500 monthly alimony payments and to repay approximately $376,500 in marital debt. On remand, the chancery court should determine an appropriate award in light of the authorities we have just discussed.
- I think most attorneys have thought about life insurance as a replacement for future years of alimony that will not be paid in the event of the payer’s untimely death. Coggins, however, makes it clear that what is insured is any unpaid arrearage existing at the time of death, since periodic alimony payments cease at the death of the payer.
- Does the same rule apply to child support? In the absence of an agreement to the contrary, the child support obligation ceases at the death of the payer, and the estate of the decedent is not liable for future support. It would appear, then, that child support would be subject to the same considerations as alimony.
- One failing of most attorneys is to offer any proof of the cost of life insurance. I refuse to award it without some testimony of the projected cost.
June 22, 2017 § 1 Comment
Susan and Thomas Leon Harris were divorced from each other in 2011. Their property settlement agreement provided that Leon would pay Susan $2,755 monthly in periodic alimony. The only contingency recited in the agreement was that the alimony would cease at Susan’s remarriage or death.
At some point after the divorce, Susan filed for and began receiving Social Security retirement benefits in the amount of $1,035 per month. Susan’s benefit was based on Leon’s earnings record and was described as “derivative” of his benefit.
After Susan filed a pleading asking the court to review part of the agreement, Leon counterclaimed to reduce or terminate the alimony because Susan had begin drawing benefits off of his earnings record. Following a hearing, the chancellor ordered that Leon should pay Susan only $1,720 per month in alimony, since he was already receiving $1,035 based on his earnings record. Susan appealed.
In Harris v. Harris, decided May 16, 2017, the COA affirmed. Since the opinion addresses two issues of interest to chancery practitioners, I am including Judge Irving’s entire analysis:
¶6. Susan asserts that the chancellor erred in modifying the Agreement before requiring Leon to show a material change in circumstances. Susan asserts that the Agreement is a binding contract that is devoid of fraud, unconscionability, or any other factors which would render it an invalid contract; thus, the chancellor erred by disturbing the Agreement’s terms. She cites Peebles, in which this Court held that a property-settlement agreement—like any other contract—is “an agreement made between the parties [and] should ordinarily be enforced, and the court should take a dim view of efforts to modify or reform the parties’ settlement agreement.” Peebles v. Peebles, 153 So. 3d 728, 732 (¶17) (Miss. Ct. App. 2014) (quoting McFarland v. McFarland, 105 So. 3d 1111, 1119 (¶23) (Miss. 2013)). Susan also cites Lestrade, in which this Court held that property-settlement agreements “entered into by divorcing parties and incorporated into the divorce decree are not subject to modification, except in limited situations.” Lestrade v. Lestrade, 49 So. 3d 639, 642 (¶10) (Miss. Ct. App. 2010).
¶7. In support of her argument that the chancellor erred when he granted Leon credit for the Social Security benefits that she was receiving without first requiring Leon to show that a material change in circumstances had occurred since entering into the Agreement, Susan cites this Court’s decision in Cockrell, which provides:
A payor spouse’s alimony obligation may be modified or even terminated if the spouse is able to show a material change of circumstances has occurred since the original divorce decree. West v. West, 891 So. 2d 203, 212 (¶21) (Miss. 2004) (citation omitted). However, “the material change must be one that was not reasonably anticipated at the time of the original decree.” Clower v. Clower, 988 So. 2d 441, 444 (¶7) (Miss. Ct. App. 2008) (citing Holcombe v. Holcombe, 813 So. 2d 700, 703 (¶11) (Miss. 2002)). A material change in the income and expenses of both parties should be considered in determining any modification of periodic alimony. Austin v. Austin, 766 So. 2d 86, 90
(¶19) (Miss. Ct. App. 2000) (citing Armstrong [v. Armstrong], 618 So. 2d [1278,] 1280 [(Miss. 1993)]).
Cockrell v. Cockrell, 139 So. 3d 766, 770 (¶12) (Miss. Ct. App. 2014). Susan contends that Leon cannot show a material change in circumstances, as his health status has not changed, and he is still working as a bank president like he was at the time of the divorce. Susan
argues that even if her receipt of Social Security benefits constitutes a material change, Leon should have reasonably anticipated at the time of the divorce that she would begin collecting Social Security benefits in a few years, since Leon was sixty-one years old and Susan was sixty years old at that time. She also points out that at the time the two entered into the Agreement, Leon could have reasonably anticipated the need for a clause addressing Susan’s probable receipt of Social Security benefits in a few years.
¶8. In response, Leon submits that neither Peebles nor Lestrade is proper authority for this issue because both cases address modification of property division, not modification of alimony. Leon references this Court’s decision in Clower, which provides that “[p]eriodic alimony can be modified by increasing, decreasing, or terminating the award due to a material change in circumstances.” Clower, 988 So. 2d at 444 (¶7). Leon asserts that he was not required to show a material change in circumstances because he was not attempting to modify his alimony payment; rather, he maintains that he was only seeking clarification from the court as to how to make his alimony payment, because the Agreement is devoid of language specifying from which source those payments may be derived.
¶9. Leon cites Spalding v. Spalding, 691 So. 2d 435, 439 (Miss. 1997), in support of his argument that the chancellor was correct in finding that he should be credited for Susan’s receipt of the Social Security benefits derived from his work record. The facts of Spalding are similar to those in the matter at hand. In Spalding, the appellant insisted that “the decision of the chancellor to credit derivative Social Security benefits against alimony represented a downward modification of the alimony granted to [the appellant],” and asserted that “[the appellee] failed to meet his burden of proof regarding a material change in circumstances.” Id. The chancellor, in considering whether derivative Social Security benefits could be credited against alimony, relied on the Mississippi Supreme Court’s decision in Mooneyham v. Mooneyham, 420 So. 2d 1072, 1073-74 (Miss. 1982), wherein the court held that Social Security payments derivative from the child-support payor should be credited against the payor’s child-support obligation. Spalding, 691 So. 2d at 438 (citing Mooneyham, 420 So. 2d at 1073-74). The Mississippi Supreme Court in Spalding affirmed the chancellor’s application of Mooneyham, finding that, in light of Mooneyham’s holding that “Social Security payments derivative from the child[-]support payor should be credited against the child support,” it could not “fathom any valid reason or reasonable logic” as to why the rule of law would be any different with respect to periodic alimony rather than child support. Spalding, 691 So. 2d at 439 (citations omitted).
¶10. We agree with Leon that Spalding is dispositive of the issue presented. Therefore, we affirm the decision of the chancellor. The Agreement between Leon and Susan did not specify or qualify the source of income for payment of the alimony obligation. It simply required that Leon pay the amount to Susan. Crediting Social Security payments derivative from Leon against his alimony obligation, as set forth in the Agreement, is not a breach of the terms of that Agreement. As Leon points out, Susan is receiving the same amount of alimony that she is entitled to under the Agreement, and she would not be receiving the Social Security payments unhinged from Leon’s Social Security earnings record. Thus, we find that the chancellor did not abuse his discretion in failing to require Leon to show a material change in circumstances because Leon’s obligation to pay alimony in the amount set forth in the Agreement remains the same.
I agree that Spalding is dispositive for the reasons stated.
I wonder, though, at the statement in ¶8 that Leon argued that he “was not attempting to modify his alimony payment; rather, he maintains that he was only seeking clarification from the court as to how to make his alimony payment, because the Agreement is devoid of language specifying from which source those payments may be derived.” That does not seem to square with the very first sentence of Judge Irving’s opinion that “Thomas L. Harris (Leon) — alleging that a material change in circumstances had occurred since the judgment of divorce from his former spouse, Susan Harris — filed a complaint …” That sounds like modification language, not clarification language.
At any rate, I think both the chancellor and the COA were on the right track in this case. Spalding controls.
Pointer: It seems that older couples are getting divorced at a greater frequency. You would do well to explore the effect Social Security will have on the parties’ post-divorce standard of living. If Susan wants her retirement benefit excluded or to allow only partial credit, the agreement should say so.