Alimony | The Better Chancery Practice Blog

A Primer on Termination of Alimony

August 27, 2013 § 2 Comments

The chancery court always retains jurisdiction to modify an award of alimony. For many years, Mississippi law was that periodic alimony was terminable upon a showing that the recipient had cohabited or engaged in a sexual relationship. That rigid rule has softened over the years.

In the COA case of Pritchard v. Pritchard, handed down October 23, 2012, Judge Griffis penned as good a synopsis of the law on termination of alimony as you will be likely to find. Here it is:

¶20. The supreme court has found “that cohabitation creates a presumption of mutual support.” Scharwath v. Scharwath, 702 So. 2d 1210, 1210 (¶2) (Miss. Ct. App. 1997). The presumption shifts “the burden to the recipient spouse to come forward with evidence suggesting that there is no mutual support within his or her de facto marriage.” Id. at 1211 (¶7).

¶21. In Scharwath, the ex-wife, recipient spouse, had a sexual relationship with another man and provided him a truck and rent-free home. Id. at 1211 (¶¶5-6). The man, in turn, provided support around the house when he built a deck, retiled the basement, moved furniture, cut the grass, washed the car, and carried out the garbage. Id. at (¶6). “In kind” services must be assigned monetary value. See Tedford v. Dempsey, 437 So. 2d 410, 422 n.11 (Miss. 1983). The supreme court in Scharwath held that the chancellor erred when he did not consider the mutual support. Scharwath, 702 So. 2d at 1211 (¶6).

¶22. Periodic alimony may be terminated based on cohabitation or a de facto marriage. In her book, Professor Deborah H. Bell summarized this principle as follows:

Cohabitation and presumed support. In 1997, the supreme court discarded the fact-based test for determining whether an alimony payee’s cohabitation involves mutual financial support. The court reasoned that an alimony payor lacks the necessary information to prove mutual support between cohabitants. Accordingly, the court adopted a presumption that cohabitation is accompanied by financial support. . . . [Scharwath, 702 So. 2d at 1211; see Alexis v. Tarver, 879 So. 2d 1078, 1082 (Miss. Ct. App. 2004).]

A short period of cohabitation may not trigger the presumption. A chancellor properly refused to reduce alimony to a recipient whose friend and two sons moved into her house for five weeks after a hurricane. Her friend did not share her bedroom, bought groceries only once, and moved when his home was repaired. [Tillman v. Tillman, 809 So. 2d 767, 770 (Miss. Ct. App. 2002).] In a factually unusual case, a chancellor properly conditioned an award of rehabilitative alimony on the wife’s moving from her boyfriend’s home and establishing her own residence. [Alexis, 879 So. 2d at 1082.]

. . .

De facto marriage. Alimony may also be terminated even in the absence of cohabitation if a court finds that a payee is avoiding marriage to continue alimony. Alimony was terminated to a payee who was engaged without immediate plans to marry, even though there was little evidence of mutual financial support, on the basis that she had entered a de facto marriage. The court found significant that the couple appeared to forego marriage to obtain the benefits of alimony, stating that “equity should not require the paying spouse to endure supporting such misconduct.” [Martin v. Martin, 751 So. 2d 1132, 1136 (Miss. Ct. App. 1999).]

The de facto marriage test was restated recently to include an element of financial support. The court of appeals stated that alimony may be terminated where a recipient and another person “so fashioned their relationship, to include their physical living arrangements and their financial affairs, that they could reasonably be considered as having entered into a de facto marriage.” Applying this test, no de facto marriage existed based on proof that a woman spent several weekends with a man, that he stayed at her house overnight five or six times, and that he purchased groceries on those occasions. [Pope, 803 So. 2d at 504.]

Deborah H. Bell, Bell on Mississippi Family Law § 9.10[2][a]-[b] (2005).

¶23. In Burrus, the recipient spouse was paying for her “live in”’s psychological evaluation, car tag, attorney’s fees, clothes, cell phone, materials for his job, and motel room charges. Burrus, 962 So. 2d at 622-23 (¶18). The “live in” provided “in kind” household services and chores, such as maintenance and repair of the home. We held that there was sufficient evidence to support the chancellor’s decision there to modify alimony, child support, and custody. Id. at 626 (¶33).

The Pritchard case was the subject of a prior post on this blog that was somewhat summary. This issue can be so intricate, however, that I thought it would be helpful to set out the applicable law in a concise fashion for your use.

EQUITABLE DISTRIBUTION AS THE GATEWAY TO ALIMONY

May 7, 2013 § Leave a comment

The COA case of Jones v. Jones, decided April 30, 2012, is a reminder that, if the equitable division of the marital estate has made adequate provision for the spouses, there should be no award of alimony — not even nominal alimony.

In Jones, the chancellor carefully considered and analyzed all of the Ferguson factors as they applied to the case, and specifically found that the equitable division made sufficient provision for Jane Jones (she received 62.5% of the marital estate). He nonetheless awarded her nominal alimony of $10 a month in case she needed alimony in the future.

The COA affirmed the chancellor’s decision on equitable distribution, but reversed and rendered as to the nominal alimony. Judge Maxwell wrote for a unanimous court:

¶35. However, we do find manifest error with the award of “nominal” permanent—or periodic—alimony in the amount of $10 per month. See Armstrong v. Armstrong, 618 So.2d 1278, 1280 (Miss. 1993) (reviewing alimony awards for manifest error). We note the chancellor correctly identified and applied the Armstrong factors. See id. But he did so after acknowledging he had made sufficient provision for Jane through the equitable division of the property so that permanent alimony was not needed. Alimony should only be considered if the property division leaves one spouse in a deficit. Johnson, 650 So. 2d at 1287. “If there are sufficient assets to provide for both parties, then there is no more to be done.” Carter v. Carter, 98 So. 3d 1109, 1112 (¶8) (Miss. Ct. App. 2012) (citing Johnson, 650 So. 2d at 1287).

¶36. By referring to the award as “nominal” alimony, it does not appear that the chancellor was trying to address an actual deficit in the property award. Rather, he admits he was simply leaving the door open in case future events prove Jane has a need and John has an ability to pay. Such a contingency plan, while well-meaning, simply is not supported by our law. Alimony is to be considered as a remedy to an actual insufficiency in the marital assets, not as a contingency for a possible insufficiency in the future. Because the chancellor found the division of marital property left no need for alimony, we find it was error for the chancellor to nonetheless award “nominal” alimony. We reverse and render the award of $10 per month in permanent alimony award.

A good way to think about this is that equitable division is the gateway to alimony. Only after the chancellor has evaluated the Ferguson factors and adjudicated equitable division, and then having found that the equitable division leaves a discrepancy, may the chancellor even consider awarding periodic or rehabilitative alimony.

A caveat: Lump sum alimony, contrary to periodic or rehabilitative alimony, is a tool to achieve an equitable division of the marital estate.

Another consideration to bear in mind: I have tried contested cases where the lawyers have stipulated that the only issue is alimony, and they offered no proof whatsoever on the Ferguson factors. That, in my opinion, plants error in the record. You can not get to alimony without first going through Ferguson.

THE MISCHIEF OF “FAMILY SUPPORT”

April 4, 2013 § 3 Comments

I’ve spoken here before about the mischief that can arise when one uses the ambiguous term “family support” instead of terms of art such as “child support,” “alimony,” and “property division” that are familiar to our courts. As I said in a previous post, the repercussions can be quite unexpected and unpleasant for your client.

In a decision handed down March 11, 2013, the US Tax Court in the case of DeLong v. Commissioner of Internal Revenue, ruled that the term “family support” creates an alimony obligation, and not a child support obligation.

You can read the decision for yourself, but it essentially turns on the point that since the obligation is not specifically denominated as child support the IRS will not consider it such.

This case arises out of a California divorce judgment. Note that the opinion states that the tax court will look to state law for how the state would treat the obligation. If this were a Mississippi case, the tax court would, to the best of my knowledge, find no helpful authority because the term “family support” is unknown under our law.

There are some serious side-effects from a case such as this. Child support is not deductible by the payer, and it is not income to the payee. Alimony is, however, deductible by the payer, and it most definitely is income to the payee. So, in this case, Mr. Delong got to deduct the payments under the divorce judgment, and the former Mrs. D. gets a bill for income taxes on the payments. If you had negotiated the settlement for Mrs. Delong and that is what she expected as an outcome, then you’re in good shape. If, on the other hand, she was not expecting a tax bill, you’d better look out.

And if the judge, in a comatose moment, injects that kind of language into a judgment, protect your client by filing a timely MRCP 59 motion to get the judge to correct the ambiguity.

In Mississippi, payments are either alimony, or child support, or property division. Denominate them as such, allocating the specific amounts under each. Never use combined language like “Husband shall pay to wife the sum of $2,500 each month as alimony and child support.” And never use ambiguous, non-legal language like “family support” when there are perfectly suitable, meaningful terms like “child support,” “alimony” and “property division” that do the job quite well.

Thanks to Justin Cobb, Esq.

ALIMONY APPLES AND ALIMONY ORANGES

February 25, 2013 § 1 Comment

It was long the rule in Mississippi that only several forms of alimony were available, either by adjudication or agreement, and any variance from those forms was either reversible error or would be charcaterized by the appellate court as what its features dictated. See, e.g., Bowe v. Bowe, 557 So.2d 793, 795 (Miss. 1990). Unless otherwise specified by the trial court or from the context, alimony was presumed to be periodic. Wray v. Wray, 394 So.2d 1341, 1345 (Miss. 1981).

Then the appellate courts began to approve so-called “hybrid” agreements that mixed features of property settlement with alimony features, as in East v. East, 493 So.2d 927, 929 (Miss. 1986), where unmodifiable payments of $5,000 a month to the ex-wife would continue whether husband remarried or dies, but would terminate on wife’s death. The courts continued to affirm an array of such arrangements, but cautioned in McDonald v. McDonald, 683 So.2d 929, 933 (Miss. 1996), that the parties should be careful in drafting agreements with hybrid arrangements, and that, if the agreement is unclear, the payments will be presumed to be periodic alimony.

The problem with “hybrid” alimony is in the drafting. The devil is in the ambiguity.

The latest incarnation is Hollis v. Baker, a COA case decided February 12, 2013, in which the parties had agreed to the following provision:

[Hollis] shall pay [Baker] $500 . . . in alimony per month beginning on the first day of the month after the sale of the marital home is finalized. [Hollis] will increase alimony to $1,000 . . . per month beginning the month after child support ceases, to continue for the life of [Baker]. In the event [Baker] dies, these $1,000 . . . per month payments shall be made to the minor child until the death of [Hollis].

Hollis sued to modify the obligation because Baker had remarried, and Baker took the position that the payments were unmodifiable. The chancellor ruled for Baker because Hollis had agreed to continue making the payments even beyond Baker’s death, which logically would extend beyond her remarriage. Hollis appealed.

The COA reversed, and, since so much of the opinion, written by Judge Roberts, is of some import for practitioners, I quote at length here:

¶11. Over fifteen years ago, the Mississippi Supreme Court urged parties, attorneys, and judges to carefully draft property-settlement agreements to avoid future confusion and litigation over ambiguously drafted provisions. McDonald v. McDonald, 683 So. 2d 929, 932-33 (Miss. 1996). In McDonald, the supreme court stated:

[The] freedom to contract is not absolute, however, and parties and judges should be mindful of the traditional characteristics of lump[-]sum and periodic alimony in drafting their agreements and decrees for alimony payments. When possible, it would be advisable for parties and judges to pattern their alimony agreements and decrees for non-modifiable lump[-]sum alimony according to established precedent of this Court.

Id. at 932. The case before us is illustrative of the need for clear and careful drafting of property-settlement agreement provisions, particularly as these provisions relate to periodic monthly payments being considered by the parties as alimony or as a contractual division of marital property.

¶12. Hollis’s sole issue on appeal involves the chancery court’s finding that the provision in the agreement regarding alimony required him to continue paying Baker alimony even after she remarried. According to Hollis, this alimony provision is permanent periodic alimony, making it subject to termination upon remarriage of the alimony recipient.

¶13. There are four types of alimony available in Mississippi: periodic, lump sum, rehabilitative, and reimbursement. West v. West, 891 So. 2d 203, 212 (¶20) (Miss. 2004). “As a general rule, periodic alimony has no fixed termination date; instead, it automatically terminates at the death of the obligor or the remarriage of the obligee.” Id. at (¶21) (emphasis added). There is no dispute that permanent periodic alimony is modifiable and terminable even within the context of a property-settlement agreement. See Taylor v. Taylor, 392 So. 2d 1145, 1146-47 (Miss. 1981); Stone v. Stone, 385 So. 2d 610, 613 (Miss. 1980); Hughes v. Hughes, 221 Miss. 264, 268, 72 So. 2d 677, 678 (1954). Additionally, it is accepted that there are other provisions of a property-settlement agreement that are not modifiable. See McDonald v. McDonald, 683 So. 2d 929, 932-33 (Miss. 1996). Ultimately, the issue before us is whether the chancery court erred in determining that this provision was a property settlement provision and not permanent periodic alimony subject to termination upon remarriage of the recipient.

¶14. At issue is a portion of the agreement titled Child Custody and Property-Settlement Agreement that was signed by both Hollis and Baker prior to their divorce and incorporated into their divorce decree by the chancery court. Among other things, this agreement detailed the amount of alimony Hollis would pay Baker. Paragraph IV, subsection H of the agreement provides as follows:

¶15. This provision was modified by the chancery court on July 17, 2006. The chancery court stated in its July 17, 2006 decree and judgment that “the alimony [Hollis] is currently paying should be reduced from the sum of $500 . . . per month, to $350 . . . [per] month, effective July 1, 2006.” By modifying this provision, the chancery court acknowledged that this alimony was permanent periodic alimony and not some type of hybrid of alimony and property settlement as Baker claims. It is well settled that permanent periodic alimony is subject to modification and ceases upon the recipient’s remarriage or the payor’s death. See McDonald, 683 So. 2d at 931; Hubbard v. Hubbard, 656 So. 2d 124, 129 (Miss. 1995); Bowe v. Bowe, 557 So. 2d 793, 794 (Miss. 1990); Wray v. Wray, 394 So. 2d 1341, 1344 (Miss. 1981).

¶16. In the dissent authored by Judge Fair, he would find that the chancellor was correct in viewing Hollis’s obligation to continue paying alimony as a non-modifiable contract obligation between the parties. To support this position, he cites to In re Kennington’s Estate, 204 So. 2d 444, 445 (Miss. 1967) involving a settlement agreement between husband and wife that he would pay her a monthly sum until she died or was remarried and that it would be a binding obligation upon his estate. The following language was included in the provision:

[Husband] shall pay [wife $750] on June 1, 1954, and [$750] on the first day of each successive month thereafter throughout the lifetime of said [wife], or until she remarries. If she remarries, this [provision] shall thereafter be ineffective but this [provision] shall not be affected by the death of [husband]. [Husband] binds himself, his heirs, executors and assigns, to this covenant and obligation to her even after his death.

Id. at 445-46. In its opinion, the supreme court quoted the following language of the chancery court’s opinion: “The attorneys for the respective parties understood the legal differences between alimony and a property settlement and carefully and skillfully avoided the death of the then husband having any affect on the agreed payment each month. . . . In the [above-quoted provision] of this agreement[,] there is no doubt as to the intention of the parties.” Id. at 447. The supreme court then stated that “[i]t was the manifest intention of the parties that the obligation to make the payment should survive the death of [husband].” Id. at 449. We submit that the facts of the current case are easily distinguishable from the facts in Kennington primarily on the ground that the provision in the current case is completely silent as to whether alimony terminates upon her remarriage. In the above quoted language of Kennington, the provision explicitly states that it is the intent of the parties to have the $750 payments continue beyond the husband’s life. Thus, it was abundantly clear that as long as wife did not remarry, she was entitled to payment by either husband or husband’s estate for the remainder of her life.

¶17. The provision in the current case is simply silent on whether Hollis would continue paying Baker alimony after her remarriage. Moreover, in the present case, a prior judicial determination that the monthly payments for support were alimony subject to modification had been made by the chancellor, a determination from which Baker did not appeal. Such circumstance did not exist in Kennington. Without such an explicit provision requiring Hollis to continue alimony payments beyond Baker’s remarriage, we decline to require Hollis to continue such payments. Baker has a new husband capable of providing adequate spousal support.

¶18. Because this type of alimony terminates upon the subsequent marriage of the recipient, Hollis’s obligation to continue paying Baker alimony was terminated when Baker remarried in April 2010; therefore, we reverse and render the chancery court’s decision on this issue and the finding that Hollis was in contempt for his missed alimony payments after Baker remarried.

Whether you agree or disagree with the COA’s conclusion here, the point is made that, unless you specifically address survivability and modifiability of alimony with respect to remarriage, death and changes in circumstances, the questions arising therefrom will be resolved in favor of holding it to be periodic alimony, with all of the attendant and resulting attributes. In other words, the default setting is periodic alimony, unless you clearly, unequivocally and unambiguously change the setting.

I am sure Ms. Baker was somewhat disappointed with the outcome of this case. She now has no alimony, where before she anticipated that it would continue even beyond the grave for the benefit of her child.

Maybe this is one of those cases where the MSSC will give it another look and another spin. But I would not count on it. Draftsmanship would have made all the difference here.

FINALITY OF JUDGMENTS AND THE OPINION

January 16, 2013 § Leave a comment

Can a chancellor order alimony in an opinion to take effect before entry of the judgment?

That was the question in McCarrell v. McCarrell, 19 So.3d 168, 171 (Miss.App. 2009). In that divorce case, the chancellor had rendered a written opinion on December 20, 2007, concluding that Billy McCarrell should pay Janie McCarrell $1,800 a month in rehabilitative alimony, commencing January 5, 2008, and continuing for five years. The judgment corresponding to the court’s opinion was not filed and docketed by the clerk until January 18, 2008, thirteen days after the date of the first ordered payment. The judgment did incorporate the judge’s opinion.

Billy took the position that he was required only to comply with the final judgment, and not with the opinion. Since the final judgment was not entered until after the initial payment date was passed, he argued that the alimony obligation did not go into effect until after the date of the judgment.

On the face of it, Billy’s position makes some sense, because MRCP 58 states that “A judgment shall be effective only when entered as provided in MRCP 79(a),” and 79(a) defines entry as docketing on the General Docket showing the date of entry and a brief description, followed by filing in the court file.

What Billy overlooked, though, was the power of the chancellor to order interlocutory and temporary relief. The court said, beginning at ¶12:

… our jurisprudence recognizes that the chancellor possesses the statutory authority to order temporary alimony and make proper orders and judgments thereon. Miss.Code Ann. § 93-5-17(2) (Miss.2004). Moreover, courts are always deemed open for purposes of making and directing all interlocutory motions, orders, and rules. See also M.R.C.P. 77(a). * * *

¶ 14. Certainly, the chancellor possesses the authority to order temporary alimony and make all proper orders and judgments thereon. Miss.Code Ann. § 93-5-17(2); M.R.C.P. 77(a); see also Langdon v. Langdon, 854 So.2d 485, 496(¶ 44) (Miss.Ct.App.2003). The duty to pay temporary support terminates upon entry of the final judgment of divorce, but the judgment does not eliminate the obligation to pay temporary alimony arrearages which accrued before the entry of the final decree. Prescott v. Prescott, 736 So.2d 409, 416(¶ 35) (Miss.Ct.App.1999) (citing Lewis v. Lewis, 586 So.2d 740, 741 (Miss.1991)). Stated differently, a temporary order is not a final order; however, arrearages accrue on unpaid temporary support payments. Id. Further, temporary support orders are enforceable through contempt actions. [McCardle v.] McCardle, 862 So.2d at 1292(¶ 9); see also Bell on Mississippi Family Law § 9.01[5][c], at 236 (2005).

In this district, more often than not in more complicated cases I render a detailed opinion making findings of fact and conclusions of law, and I direct one of the attorneys to draft a judgment corresponding to the opinion, with instructions to present it to the court after it has been approved as to form by counsel opposite. Every now and then, a judgment will be delayed for one reason or another. McCarrell addresses what happens to the relief granted in that situation.

THE PRESUMPTION OF MUTUAL SUPPORT

October 29, 2012 § 1 Comment

The COA decision in Pritchard v. Pritchard, handed down October 23, 2012, is the most recent alimony termination case in which the courts have addressed the rule that cohabitation creates a presumption of mutual support, shifting the burden to the recipient spouse to produce evidence that there is no mutual support within the de facto marriage.

You need to read Pritchard yourself to appreciate the scope of mutual support that was enough to trigger the presumption. I won’t rehash them here. But here are a few nuggets gleaned from Judge Griffis’s decision (which quotes Professor Bell’s treatise):

Recipient-wife and another man had a sexual relationship, and she provided him a truck and lodging rent-free. In return, he built a deck, installed a floor, moved furniture, did yard work, and carried out the garbage. The trial court should have considered this mutual support. Scharwath v. Scharwath, 702 So.2d 1210 (Miss.App. 1997).
A de facto marriage can terminate alimony, as where a couple was engaged without immediate plans to marry, solely to prolong the receipt of alimony. Martin v. Martin, 751 So.2d 1132, 1136 (Miss. App. 1999).
A similar result in Pope v. Pope, 803 So.2d 499, 504 (Miss.App. 2002).
Where the recipient spouse pays for her live-in’s psychological evaluation, car tag, attorney’s fees, clothes, cell phone, job materials, and motel room, and the live-in provides household services and chores such as maintenance and repair of the home, the presumption is triggered. Burrus v. Burrus, 926 So.2d 618, 621 (Miss.App. 2006).

In Pritchard, the COA found that the chancellor applied the correct legal standard, but that there was not sufficient evidence to support the chancellor’s decision that the presumption was overcome by proof of non-mutual support. The COA reversed and rendered.

CAVEAT: a brief period of cohabitation may not trigger the presumption. See, Tillman v. Tillman, 809 So.2d 767, 770 (Miss.App. 2002).

These cases are fact-intensive. Before you go thrashing off into this swamp, you would do well to study what Professor Bell has to say, and read as many cases on point that you can find. There has to be either cohabitation for more than a short period coupled with mutual support, or there must be a de facto marriage. The latter is a more elusive concept. You will likely need a substantial base of discovery or PI work to do the job.

TRIAL BY CHECKLIST: UPDATED ALIMONY FACTORS

September 24, 2012 § Leave a comment

The 12 Armstrong factors have long been the decisive authority to be applied by the court in making its determination as to the type, amount, and reasonability of alimony. In the recent COA case of Pecanty v. Pecanty, decided September 18, 2012, however, Judge Fair’s opinion cited (at ¶25) to the 2002 Davis v. Davis case, 832 So.2d 492, 497, where the MSSC laid out 17 factors. Here’s the pertinent language from Davis:

In determining whether to make an award of periodic alimony, the following factors must be considered: (1) the health of the husband and his earning capacity; (2) the health of the wife and her earning capacity; (3) the entire sources of income and expenses of both parties; (4) the reasonable needs of the wife; (5) the reasonable needs of the child; (6) the necessary living expenses of the husband; (7) the estimated amount of income taxes the respective parties must pay on their incomes; (8) the fact that the wife has the free use of the home, furnishings and automobile; (9) the length of the marriage; (10) the presence or absence of minor children in the home; (11) the standard of living of the parties, both during the marriage and at the time of the support determination; (12) fault or misconduct; (13) wasteful dissipation of assets; (14) the obligations and assets of each party; (15) the age of the parties; (16) the tax consequences of the spousal support order; and (17) such other facts and circumstances bearing on the subject that might be shown by the evidence. Hemsley v. Hemsley, 639 So.2d 909, 912 (Miss.1994); Armstrong v. Armstrong, 618 So.2d 1278, 1280 (Miss.1993); Hammonds v. Hammonds, 597 So.2d 653, 655 (Miss.1992); Brabham v. Brabham, 226 Miss. 165, 84 So.2d 147, 153 (1955). In determining the amount of support payable to the wife, a chancellor must consider “not only reasonable needs of wife but also right of husband to lead as normal a life as reasonably possible with a decent standard of living.” Massey v. Massey, 475 So.2d 802, 803 (Miss.1985); Hopton v. Hopton, 342 So.2d 1298, 1300 (Miss.1977) (quoting Nichols v. Nichols, 254 So.2d 726, 727 (Miss.1971)).

The Davis factors expand on the Armstrong factors in several significant ways:

In addition to “the reasonable needs of the parties,” the court is to consider the reasonable needs of the child. This is significant because it opens the door to evidence about the impact that a child has not only on the expense and availability of child care, as set out in Armstrong, but also to the other needs of the child above and beyond child support, and how those needs impact the alimony recipient’s living expenses.
In addition to the Armstrong “tax consequences of the spousal support order,” Davis directs the court to consider the amount of income taxes the respective parties must pay on their incomes. Under Davis, the trial court must address not only the tax consequences, such as deductability, but also the availability of refunds, deductions, exemptions and other factors that influence income taxes upward or downward.
The fact that “the wife” (read “payee”) has free use of the home, furnishings and automobile is included as a factor. Granted, it has long been the law in Mississippi that those items are considered as part of the spousal support package, but the inclusion as a factor to be considered promotes it to a higher level of consideration.

It can be argued that Davis does not really add anything new to Armstrong. That may be so, and most attorneys, in presenting their Armstrong proof cover the same bases (except for income tax proof, which lawyers rarely touch on) for the most part. Still, I think it’s worth adding these to your portfolio of useful checklists. After all, in affirming the chancellor in Pecanty, Judge Fair noted with favor that she ” … addressed the seventeen factors set out in Davis … ” If he (and the rest of the COA) considered them noteworthy, we would be wise to do the same.

YET ANOTHER MILITARY DIVORCE POTHOLE

September 10, 2012 § 2 Comments

Representing military parties in a divorce case got a little more difficult a couple of weeks ago, and you need to pay attention or you might unwittingly victimize a client.

The problem lies in the intersection between state divorce law and federal statues governing military benefits.

The latest case is Mallard v. Burkart, decided by the MSSC on August 30, 2012. The parties were divorced in 2001. A significant part of the financial settlement that Burkart received was 40% of Mallard’s “disposable military retirement pay” for ten years. The language of the PSA to effect this division was as follows:

Pursuant to the Uniform Services Former Spouses Protection Act (“USFSPA”), 10 U.S.C. §1408, the Court makes the finding followings of fact:

(A) That the Husband is currently an active duty service member in the United States Air Force.

(B) That Husband’s rights under the Soldiers and Sailors Civil Relief Act have been observed in these proceedings.

(C) That Wife and Husband were married for at least ten (10) years during which Husband performed at least ten (10) years creditable service, making Wife eligible for involuntary military deductions under The USFSPA at such time [a]s Husband becomes entitled to retirement pay.

(D) Wife is awarded 40% of Husband’s disposable military retired pay for ten (10) years unconditional. Wife shall continue to receive 40% of Husband’s disposable military retired pay after ten (10) years if she does not remarry or has not lived with someone for a cumulative of sixty (60) days. Payments shall continue until Wife remarries or lives with someone for a cumulative of sixty (60) days upon which time payments shall cease. It is Wife’s responsibility to notify the Defense Finance and Accounting Service and Husband of any change of eligibility for payment.

(E) The Husband voluntarily consents to the exercise of jurisdiction to the State of Mississippi, County of Forrest for division [of] military retired pay.

That would appear to me to be a competently drafted provision that invokes every element needed for Burkart to cash in on her prpoperty settlement. It would also appear to give Burkart a full 40% of Mallard’s retirement pay. But things are not always as they appear, are they?

At some point after the divorce, Mallard elected to take a 60% disability rating as part of his retirement pay. By doing so, under federal law, he reduced his “disposable military retired pay,” dollar for dollar, by 60%. He reduced his payments to Burkart by a corresponding amount, limiting his payments to his ex-wife to the non-disability portion of his retirement. Due to the election, his payments to Burkart fell from $571 a month to between $80 and $120.

When Mallard sued Burkart for modification on some custody issues that are not part of this appeal, Burkart counterclaimed for contempt, based on Mallard’s payment of reduced retirement benefits. She charged that Mallard had improperly structured his retirment so as to defeat her contractual rights in the PSA. The chancellor found for Burkart, awarding her a judgment for $21,213.57, and Mallard appealed.

The MSSC stated the issue before it: ” … today we must determine whether federal law preempts state law, thus precluding state courts from treating as property divisible upon divorce, military retirement pay waived by the military spouse in order to receive military [veterans’] disability benefits.” Justice Carlson’s opinion noted that this was a case of first impression in Mississippi.

The court held that the issue was disposed of in the US Supreme Court case of Mansell v. Mansell, 490 US 581 (1989), in which the high court held: “In this appeal, we decide whether state courts, consistent with the [USFSPA], may treat as property divisible upon divorce military retirement pay waived by the rtetiree in order to receive veterans’ disability benefits. We hold that they may not.”

Another post highlighting a similar preemption problem with military life insurance beneficiary designation is here.

A few observations:

The MSSC opinion points out that it is unclear when Mallard was determined to be disabled. In my opinion, if the determination had predated the divorce, there is a fraud question in connection with the PSA.
Considering the minefield of federal law and regulation dealing with retired service members, you might want to define your client’s settlement in terms of alimony and property settlement in set figures as opposed to percentages. I know that percentages are a good way to make sure your client is not short-changed, and I know that alimony can terminate, but wouldn’t Ms. Burkart have been better off with an agreement that Mallard would pay her $571 a month in alimony, or that same sum as a division of her property rights in his military retirement? Then it would have been Mallard’s problem to figure out how to pay it.
What business do you have representing military parties — either husband or wife — if you don’t keep up with and fully grasp all the ins and outs of federal law and regulations governing military retirement?

None of this is a knock on the lawyers who participated in the drafting of the PSA in this case. This was, after all, a case of first impression in Mississippi. And, apparently and presumably, no one knew at the time of the divorce that there would be a disability election. If they had known, that Mansell case would have loomed large. Very large.

AN ENDURING MISCONCEPTION

June 26, 2012 § Leave a comment

In a contested equitable distribution case, I require the parties to present a pre-trial order that includes a listing of all property with values. Lawyers appear with the appropriate information, get a trial date, and we proceed from there.

Then, at trial, it happens quite often that someone testifies that they omitted an item or several — some stock, interest in a trust, some furniture, a few pieces of jewelry — usually with some significant value. And we then devote considerable attention and time to something that could simply have been listed on the property list that was not.

Almost invariably the rejoinder is to the effect that “It was something I owned before the marriage,” or “That was an inheritance from my dad that I received after the marriage,” or “Those were rings that momma gave me.”

The misconception — an enduring one — is that if it was owned before the marriage, or was an inheritance or gift, it is not considered in equitable distribution. That’s not so.

All property of the parties, whether marital or non-marital, is taken into consideration in equitable distribution. Among the Ferguson factors that govern the chancery court’s adjudication of equitable distribution is the value of each spouse’s separate estate, or, in the court’s own language, “The value of assets not ordinarily, absent equitable factors to the contrary, subject to distribution, such as property brought to the marriage by the parties, and property acquired by inheritance or inter vivos gift by or to an individual spouse.” Ferguson v. Ferguson, 639 So.2d 921, 928 (Miss. 1994). Thus, proof of each party’s separate estate must be developed and considered by the court in deciding how to divide the marital estate equitably.

Even though the parties’ separate property is required to be considered, however, assets that prove to be truly separate in nature are not subject to being divided in equitable distribution, meaning that they will go into the column of the party who owns them. The aftermath of equitable distribution will be two piles of marital assets that have been divided equitably, one for each party, upon each of which is heaped the party’s separate assets.

It is only after equitable distribution has been accomplished that alimony may be considered, and alimony is appropriate only when the equitable distribution leaves a party with a deficit, or inability to support himself or herself. Among the Armstrong factors for adjudication of alimony is “The obligations and assets of each party.” The MSSC has held that the trial court must consider in determining alimony both the assets awarded to the spouse in equitable distribution, and the parties’ separate assets. Striebeck v. Striebeck, 911 So.2d 628, 634-635 (Miss. App. 2005), Sanderson v. Sanderson, 824 So.2d 623, 627 (Miss. 2004). Disparity of income and assets, including separate assets, after equitable distribution triggers consideration of alimony.

Remember, too, that assets can change character from separate to marital or mixed. Just because your client tells you that she acquired that antique armoire from her aunt before the marriage, don’t automatically assume it is out of reach of equitable distribution. The appellate courts have clung to the “family use doctrine,” and that piece of furnture may have gotten in play for equitable division simply because the husband used it for ten years to store his shirts, ties, underwear, pajamas and even love notes from his girlfriend.

List all of the assets, clearly marital as well as questionably marital. Then argue your client’s case as to why certain items should be excluded from equitable distribution, but don’t fail to list them.

ALIMONY IS NOT FOR EQUALIZING THE DIVISION

February 22, 2012 § Leave a comment

What is the proper role of alimony vis a vis equitable distribution? In Williamson v. Williamson, decided by the COA on January 10, 2012, Judge Carlton’s opinion stated:

¶21. The record reflects that in equitably dividing the marital property, the chancellor erroneously applied the Armstrong factors by awarding Mary alimony in order to create equalization of the parties’ incomes. The chancellor then ordered Will to pay Mary $594 per month to be applied toward the mortgage on the marital home; and, in addition to that amount, the chancellor awarded Mary $200 per month in periodic alimony, for a total of $794, or approximately $800, until the former home sold. [Footnote omitted] As evidenced by the chancellor’s findings, the chancellor accomplished the ordered equitable division of the marital property by aid of an award of periodic alimony in favor of Mary in order to make the parties’ financial situations “equalized.” The record shows, as set forth in the excerpts herein, that the chancellor had not completed an equitable division of the marital property prior to considering alimony. In accordance with precedent, the equitable division of the marital property must be completed prior to determining if either spouse suffers a deficit in the division of the marital estate warranting an award of alimony. The record in this case shows, however, that the chancellor used alimony to equalize the parties’ future incomes instead of awarding alimony based upon need existing after completion of an equitable division of the marital property.

¶22. Mississippi now embraces the process of equitable division of the marital property. In applying the “equitable” division of the marital property in accordance with the Ferguson factors, alimony fails to serve as the primary method to equalize property division. See Lowrey, 25 So. 3d at 292 (¶44) (“[A]limony has become a secondary remedy to property division . . . . ‘One of the goals of adopting equitable distribution was to alleviate the need for alimony.’”). Alimony, instead, assists in the event the chancellor determines that a need exists by a spouse after the completion of the equitable division of the marital property. See id. at 293 (¶44) (“If the situation is such that an equitable division of marital property, considered with each party’s non-marital assets, leaves a deficit for one party, then alimony based on the value of non-marital assets should be considered.”); George v. George, 22 So. 3d 424, 428 (¶7) (Miss. Ct. App. 2009) (“[A]n award of periodic alimony is based upon need.”).

The proper procedure follows this sequence:

Determine which assets are marital and which are non-marital;
Adjudicate the values of both marital and non-marital assets;
Apply the Ferguson factors to the proof in the record to determine whether there should be an equitable division of the marital estate, and, if so, how it should be accomplished;
If the equitable division of the marital estate, considered with each party’s non-marital property, leaves a deficit for one party, then the court should analyze the evidence in light of the Armstrong factors to determine whether alimony should be awarded.

From a pratice standpoint, then, here is what you need to give the chancellor so that she or he can do the job:

An itemization of all assets, showing which your client claims to be marital and which your client claims to be non-marital. The best way to present this itemization is through lists introduced into evidence, rather than just a narration by your client. Have your client testify as to her basis for putting each asset into either category.
Assign values to each asset. In advance of trial have your client assign values to each asset. Real property, heavy equipment, leaseholds, buildings, fine art and jewelry, business operations and interests, and other assets other than automobiles and ordinary personal property should have values established by appraisals. Again, this should be done by lists and documentation as much as possible, although experts may be needed as to some items.
Offer proof as to each Ferguson factor. Have a copy of the factors to use as an outline as you develop testimony at trial. You might also want to look at the Cheatham factors for lump-sum alimony.
Whether your client is trying to get alimony or trying to resist it, put on proof as to the Armstrong factors. Have a copy of the factors to use as an outline as you develop testimony at trial.

In my opinion, one of the chief causes of failure on appeal is that the lawyers do an inadequate job of making a record that the chancellor can use in making a decision. This forces the trial judge to have to patch something together in an attempt to cover everything, and the result is a flaw that the COA will find reversible. Make your record as airtight as the truth allows.

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