Divorce | The Better Chancery Practice Blog

A DOUBLE DIVORCE MISFIRE (OR MISFORE, OR MISFAIR)

February 26, 2013 § 5 Comments

The case of Fore v. Fore, handed down February 19, 2013, by the COA, is one of those cases that leaves you scratching your head in wonderment. Oh, and the Fore decision was written by Judge Fair. Fore by Fair. You can’t make this kind of stuff up.

Anyway, what happened was that Darlene Fore, age 57, filed for divorce charging her husband, Cotton, age 70, with post-separation adultery. Cotton counterclaimed, charging Darlene with post-separation adultery. Darlene added that, if she were to be denied a divorce, she wanted separate maintenance.

As the opinion states, “The divorce was vigorously litigated, as evidenced by the twenty-five single-spaced pages of the trial court docket. For eighteen months the parties enthusiastically pursued all means of discovery allowed by the Mississippi Rules of Civil Procedure. Private investigators were hired. Contempt pleadings, motions for continuances, mediation attempts, amendments of pleadings, and volumes of subpoenas were filed, pursued, and argued.”

The chancellor bifurcated the trial so that the divorce issues would be tried first and separately from the remaining issues.

The trial took five days and produced a trial transcript of more than 800 pages.

The judge rendered a seven-page opinion denying either party a divorce, finding that neither had proven the ground pled by clear and convincing evidence. Oh, and he denied Darlene’s plea for separate maintenance because she testified that she would not return to live with Cotton under any circumstances.

So, after the dust cleared, neither party had a divorce, and Darlene was out in the cold with no support and no Cotton to go home to.

The COA affirmed, deferring to the chancellor’s scope of authority on the facts, and finding that his conclusions of law were correct.

What is the head-scratcher here is that, if both parties wanted a divorce, why did they not just enter into a consent? What would be the down side? If alimony and equitable distribution were issues on trial of the consent, they could still have the satisfaction of putting on proof of how despicable each other were while being assured that there would be a divorce. It’s hard for me to understand, with the consent statute, why this would happen.

It may be that one of the parties out of pure stubbornness refused the idea of a consent. That does happen from time to time. When I practiced I had to cajole and convince more than one divorce client that a consent was the best way to go, and that we were not giving anything up.

After I had written this, I found that Phillip Thomas had a post on his blog on this very case. As a lawyer who does not do divorce work, he found the outcome exceedingly difficult to understand. Join the crowd, Mr. Thomas.

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.

ALIENATION OF AFFECTION: A DISH BEST SERVED COLD

February 12, 2013 § 3 Comments

Alienation of affection survives the Mississippi legislature yet again, per Randy Wallace.

Here’s Philip Thomas’s take.

In the 21st century, what is the justification for continuing this cause of action in effect? Don’t the equitable distribution principles take care of this? Doesn’t the tort simply add a distorting feature to the equitable distribution arrangement?

Our family law has been evolving away from the nineteenth-century retribution-based model to today’s equitable relief, based on valuations and equities. This tort just does not fit.

Maybe some day all of our marital-dissolution law, including associated tort law, will move into the 21st century (hopefully before the 22nd century).

POLICE REPORTS AS EVIDENCE

February 11, 2013 § 2 Comments

Police investigations and reports not infrequently play an evidentiary role in divorce and modification trials in chancery court.

A recent example is Heimert v. Heimert, handed down by the COA on November 13, 2012. In this case, Sheri and Walter Heimert had a history of physical altercations involving allegations of biting, strangling, hitting, and on and on, with the physical marks to show for it. The police were called multiple times to intervene, and two police reports, one from August, 2007, and the other from December, 2008, were offered into evidence. The December report showed that Sheri was charged with domestic violence. Her attorney objected that there was an inadequate foundation to admit it, but the chancellor let it in anyway, and Sheri complained on appeal that the report should not have been admitted.

The COA rejected Sheri’s argument. Judge Lee, for the court:

¶16. “Even though police reports, if offered in evidence to prove the truth of the matter asserted[,] are hearsay and the information within them may be based on hearsay, they may be admissible under the hearsay exception in [Mississippi] Rule [of Evidence] 803(8).” Rebelwood Apartments RP, LP v. English, 48 So. 3d 483, 491 (¶36) (Miss. 2010). Rule 803(8), entitled “Public Records and Reports,” states:

Records, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth . . . (C) in civil actions and proceedings and against the state in criminal cases, factual findings resulting from an investigation made pursuant to authority granted by law, unless the sources of information or other circumstances indicate lack of trustworthiness.

¶17. The police report was taken after an investigation of domestic violence reported by Sheri. No assertion has been made that the document lacks trustworthiness. Sheri argues the police report was inadmissible because it was not authenticated. However, a document may be authenticated by the testimony of a witness with knowledge “that a matter is what it is claimed to be.” M.R.E. 901(b)(1). Sheri was a knowledgeable witness, and she submitted the police report as part of discovery. Sheri testified she was familiar with the document; thus, Sheri’s testimony was sufficient to show that the document was “what it [was] claimed to be” – the police report from December 5, 2008. See Cassibry v. Schlautman, 816 So. 2d 398, 403-04 (¶¶20-23) (Miss. Ct. App. 2001) (finding medical records submitted by plaintiff in discovery were authenticated by plaintiff’s own testimony).

¶18. Further, Sheri testified consistently with the information in the police report, and Walter testified consistently with his version of events in the police report. Thus, even if the police report was admitted into evidence erroneously, the admission was harmless, as it was cumulative. Id. at 404 (¶24) (holding admission of hearsay may be held harmless where corroborating evidence exists). Sheri complains she was prejudiced by the report because it only contained information provided by Walter. However, this is not the case. The report clearly contains information gathered from both Walter and Sheri.

¶19. Sheri was familiar with the police report, and she submitted it as part of discovery. Further, the contents of the police report were corroborated by the testimony. We find the police report was properly admitted into evidence. This issue is without merit.

In other words, Sheri was hoist with her own petard. She herself corroborated the facts in the report in her testimony, and she herself had sifted the poison pill into the recipe by providing it in discovery, thus weakening her arguments against authenticity and trustworthiness.

One is left to wonder whether Sheri’s objections would have been upheld if Walter had been the sponsor of the report, and if Sheri had truthfully denied the facts in the report. What do you think? Don’t overlook this statement by Judge Lee: “The report clearly contains information gathered from both Walter and Sheri.”

CORROBORATION BLUES

February 5, 2013 § Leave a comment

Tell me, how long, Judge, do I have to wait?
Can you let me know? Why must I corroborate?
— apologies to Rev. Gary Davis “Hesitation Blues”

We’ve visited the issue of corroboration in divorce cases several times on this blog. You can find posts on the subject here, here and here. As Judge Maxwell said in the case of Smith v. Smith, “[C]orroborating evidence need not be sufficient in itself to establish [habitual cruelty], but rather ‘need only provide enough supporting facts for a court to conclude that the plaintiff’s testimony is true.” citing Jones v. Jones, 43 So. 3d 465, 478 (Miss.App. 2009).

If your case lacks corroboration, you will leave the courtroom sans a divorce.

You will find the latest example in the case of Gillespie v. Gillespie, decided by the COA January 29, 2013. I’ll let Judge Griffis’s decision do the talking:

¶13. Habitual cruel and inhuman treatment as a ground for divorce must be proved by a preponderance of credible evidence. Chamblee v. Chamblee, 637 So. 2d 850, 859 (Miss. 1994). This Court has stated:

Conduct that evinces habitual cruel and inhuman treatment must be such that it either (1) endangers life, limb, or health, or creates a reasonable apprehension of such danger, rendering the relationship unsafe for the party seeking relief, or (2) is so unnatural and infamous as to make the marriage revolting to the nonoffending spouse and render it impossible for that spouse to discharge the duties of marriage, thus destroying the basis for its continuance.

Fulton v. Fulton, 918 So. 2d 877, 880 (¶7) (Miss. Ct. App. 2006) (citation omitted). Generally, the “cruel and inhuman treatment must be shown to be routine and continuous; however, a single occurrence may be [sufficient] for a divorce on this ground.” Boutwell v. Boutwell, 829 So. 2d 1216, 1220 (¶14) (Miss. 2002) (citations omitted).

¶14. In Chamblee, the supreme court addressed the requirement that the claims of cruel and inhuman treatment be corroborated by a witness. Chamblee, 637 So. 2d at 860. The court noted that the wife produced only one corroborating witness. Id. The witness simply observed the presence of bruises on the wife’s arm and had no independent knowledge of how they got there. Id. Finally, the husband denied abusing the wife. Id. For these reasons, the court determined the chancellor did not err when he denied the wife a divorce on the ground of cruel and inhuman treatment because she failed to prove her case by a preponderance of the evidence. Id.

¶15. In Fulton, 918 So. 2d at 880-81 (¶¶9-10), the wife produced three witnesses to corroborate her claim that her husband abused her. Id. at 880 (¶9). Her mother testified she observed bruises. Id. Also, a friend testified that on many occasions the wife called late at night to discuss the altercations between her and her husband. Id. Finally, a cousin testified she took pictures of the wife’s bruises and scratches in her mouth. Id. The cousin also observed tension in the household when she visited. Id. This Court determined that this evidence was sufficient to grant a divorce based on cruel and inhuman treatment. Id. at 881 (¶10).

¶16. Here, Timmy offered one witness, James Moss, to corroborate his claim of cruel and inhuman treatment. Moss observed bruises on Timmy but had no independent knowledge of how Timmy had received the bruises. Moss’s testimony was based not on his own knowledge or information but on what Timmy had told him.

¶17. Timmy also claims that Meagan observed an attack. But, Meagan did not testify to corroborate his claim.

¶18. No corroborating witness, with independent knowledge of the instances of cruel and inhuman treatment, testified to establish the claim of cruel and inhuman treatment. As a result, we find that the chancellor’s finding of grounds for a divorce due to cruel and inhuman treatment was not supported by substantial credible evidence in the record. Nevertheless, because we affirm the chancellor as to the grounds of adultery in the following section, this decision does not affect the outcome of this appeal.

The difficult corroboration cases seem to be the ones that I refer to as self-corroboration, which occurs when all that the corroborating witness knows is what he or she was told by the alleged abusee, as in Chamblee. In Smith, the only corroboration was police reports that the alleged victim had made, which were based on her own allegations and nothing else. The Fulton case, above, is a good illustration of the web of circumstantial evidence that will be found to be corroborative.

No corroboration, and you have to hesitate.

A COMPASS HEADING FOR DIVISION OF THE MARITAL ESTATE

January 23, 2013 § 4 Comments

In an equitable distribution case where there was a temporary order that provided for no support, is the date of that temporary order the demarcation line for purposes of classifying and valuing marital property?

Before we talk about how to answer the question, let me remind you that the the so-called demarcation line is important to delineate in an equitable distribution case. Depending on where the line is drawn, assets can increase or decrease by tens of thousands of dollars, or even lose value altogether, and your client who purchased a new pickup after the separation may be terribly chagrined to learn that his philandering estranged wife owns a part of it.

The line of demarcation is something we’ve talked about before here and here.

The general rule, in essence, is that marriage is deemed over for the purpose of classifying or valuing assets on entry of the final judgment, and any property or value acquired before that date is marital, unless there was a temporary order, in which event the date of the temporary order becomes the demarcation line. There are some exceptions in case law, but this is the general rule.

So, to get back to the original question, the COA confronted this very issue in the case of Mauldin v. Mauldin, decided January 15, 2013. In this case, Jim and Donna Mauldin found themselves in equitable distribution. Jim had bought some assets after a temporary order was entered, and the judge nonetheless included them among the marital assets subject to division. The COA opinion, by Judge Irving, stated:

¶13. Although the divorce decree did not specifically state the date that the marriage ended for purposes of classifying marital and separate property, it is clear that the chancery court used the date of divorce rather than the date of the temporary order. As previously stated, absent the entry of a separate-maintenance or temporary-support order, marital property continues to accumulate until the date of divorce. Although the chancery court entered a temporary order in this case, the order did not provide for temporary support. Therefore, Jim and Donna’s marital assets continued to accumulate until the date of their divorce. Accordingly, even though Jim purchased his motorcycle and his truck after his separation from Donna, the chancery court properly classified these assets as marital property. Additionally, the increase in Jim’s retirement account since his separation from Donna is marital property because the increase occurred during the marriage. This issue is without merit. [Emphasis added]

This case underscores what I have pointed out before, that it can be a two-edged sword when you don’t get a temporary support order entered. Yes, your client gets to dodge the bullet of any temporary support, but the asset values, as well as the inventory of marital assets, continue to change, often not in your client’s favor.

Put some thought in the strategy and tactics you should best employ for the benefit of your client in these cases. What is best for one client will not be the same for another. Knowing the rule, you will be in a position to plot the best course.

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.

SOME THINGS YOU NEED TO KNOW ABOUT CHILD DEPENDENCY EXEMPTIONS

January 8, 2013 § 4 Comments

Many property settlement agreements (PSA) involving children have a provision like this:

Husband shall claim the minor children as dependents for tax purposes in even-numbered years, and Wife shall claim the minor children as dependents for tax purposes in odd-numbered years.

What happens, though, where, despite the language of the agreement, the mom claims the children in an even-numbered year, and the father does, too? Is the language above enough to satisfy the IRS that the dad, and not the mom, was entitled to claim the exemption in that year?

The answer is no.

IRS regs require that if you are trying to base a claim for exemption on a writing that is not an IRS-designated form, the writing must conform to the substance of the IRS form and must be a document executed for the sole purpose of serving as a written declaration within the meaning of the IRS regs. A court order, PSA, handwritten note or any other document not meeting those requirements will not suffice. The claiming party must attach to the tax return a completed IRS form 8332 or a document including every element of it.

In the case of Armstrong v. Commissioner of Internal Revenue, decided December 19, 2012, by the US Tax Court (I do not have a cite for you) involved the scenario above. The court said:

The IRS’s Form 8332 provides an effective and uniform way for a custodial parent to make the declaration required in section 152(e)(2)(A) for the benefit of the noncustodial parent. But a noncustodial parent like Mr. Armstrong may also rely on an alternative document, provided that it “conform[s] to the substance” of Form 8332.5 See 26 C.F.R. sec. 1.152-4T(a), Q&A-3, Temporary Income Tax Regs., supra. In particular, for tax years including the year at issue here, a court order that has been signed by the custodial parent may satisfy section 152(e)(2)(A) as the noncustodial parent’s declaration if the document “conform[s] to the substance” of Form 8332.6 See Briscoe v. Commissioner, T.C. Memo. 2011-165 (concluding that the court order attached with the return did not conform with the substance of Form 8332); cf. Boltinghouse v. Commissioner, T.C. Memo. 2003-134 (holding a separation agreement conformed with the substance of Form 8332).

A basic element necessary for satisfying section 152(e)(2)(A) is a custodial parent’s declaration that she “will not claim” the child as a dependent for a taxable year. A custodial parent accomplishes this on a Form 8332 with the following statement: “I agree not to claim * * * for the tax year”. This statement is unconditional; and in order for a document to comply with the substance of Form 8332 and ultimately section 152(e)(2)(A), the declaration on the document must also be unconditional. See Gessic v. Commissioner, T.C. Memo. 2010-88; Thomas v. Commissioner, T.C. Memo. 2010-11; Boltinghouse v. Commissioner, T.C. Memo. 2003-134; Horn v. Commissioner, T.C. Memo. 2002-290.

The opinion points out that there are four considerations in determining whether a party is entitled to claim the dependency exemption: (1) Whether the “child receives over one-half of the child’s support during the calendar year from the child’s parents … who are divorced … under a decree of divorce”, sec. 152(e)(1)(A); (2) whether the child was “in the custody of one or both of the child’s parents for more than one-half of the calendar year”, sec. 152(e)(1)(B); or (3) whether “the custodial parent signs a written declaration (in such a manner and form as the Secretary may by regulations prescribe) that such custodial parent will not claim such child as a dependent for any taxable year beginning in such calendar year”, sec. 152(e)(2)(A); and (4) whether “the noncustodial parent attaches such written declaration to the noncustodial parent’s return” for the appropriate taxable year, sec. 152(e)(2)(B).

To rub a little salt in the wound, the Tax Court held that, since Mr. Armstrong had been ruled not to be entitled to claim the dependency exemption, the children were not “qualifying” within the regulations, so he could not claim the child credit, either. Ouch.

For drafting purposes, at a minimum you should include language that the non-claiming parent will timely execute IRS form 8332 for every tax year covered in the agreement. At least in that way you can ask the court for relief under MRCP 70(a). I have no idea whether a form executed by another party per the rule would satisfy the IRS, but it’s better than nothing. It would have the added benefit of documenting that you have made your client aware of the requirement of the form.

If I were practicing today, I would confer with my favorite CPA for advice about how best to avoid problems with this situation. Can you get the other party to sign ten years’ worth of forms in advance, each for the specific year in which your client will be claiming the exemption? I don’t know, but a CPA will know.

Of course, Mr. Armstrong could seek relief via contempt from the fomer Mrs. Armstrong. Contempt is a dish best served cold, as they say. But it has the disadvantages that one has to hire an attorney and try to collect money that may no longer be there. Yes, you can put that ex in jail, which may provide a measure of comfort and satisfaction, but it may not make you whole financially.

NOTE: Armstrong involves tax returns filed before the above-cited regs were adopted, and the language of the parties’ divorce decree included a clause that made claiming the exemption conditional upon payment of child support, but I believe my interpretation of the law above is accurate.

A BANKRUPTCY BUGABOO

November 1, 2012 § 1 Comment

Bankruptcy, particularly Chapter 7 liquidation, used to be such a complicating factor in chancery court. Divorce trials were held up for years while one or both parties pursued their arcane remedies in the alchemy of bankruptcy. Contempts and modifications were brought to a screeching halt. Everyone knew and feared the “automatic stay,” even if most did not even understand its scope and reach.

And so it was that Ian Garcino, attempting to collect a divorce-related debt from his ex-wife, Amanda Noel, encountered the buzzsaw of bankruptcy and unwittingly suffered its bite.

In 2008, the chancery court awarded Ian a judgment against Amanda in the sum of $16,278, which the court ordered her to pay within 60 days. Amanda not only did not pay, but she filed a Chapter 7 bankruptcy petition.

Now, 11 USC § 523(a)(5), (15) excludes debts to spouses, ex-spouses, and children from the list of dischargeable matters. So Ian, no doubt out of an abundance of caution, penned a handwritten letter to the bankruptcy court advising the court that the debt in question arose out of a divorce property settlement between him and Amanda, and concluding that “Under applicable present bankruptcy laws this debt should not be discharged.”

The bankruptcy court treated Ian’s letter as a pleading initiating an adversary proceeding. That’s because, since 2005, the bankruptcy laws no longer require a party in Ian’s position to do anything, since the debt is in and of itself not dischargeable. When Ian filed his letter, he in essence put something into controversy that would have been beyond controversy had he done nothing.

Belatedly, Ian learned from a bankruptcy lawyer (who might have been able to give Ian some advice before he wrote the ill-fated letter) the folly of what he had done, but before Ian could take any action the bankruptcy court entered its order dismissing Ian’s proceeding due to his inaction.

Later, when Ian tried to execute on the judgment in chancery court, the chancellor granted a stay of execution finding that the debt was adjudicated to be discharged in bankruptcy court. Ian appealed.

In response to the appeal, Amanda raised two issues: One, that the chancery court lacked jurisdiction to adjudicate dischargeablility; and Two, that the bankruptcy court’s decision was res judicata on the issue of dischargeability, and was binding on the chancery court.

Judge Maxwell’s opinion in Garcino v. Noel, decided by the COA October 23, 2012, is one you should read for its exposition on the law of Chapter 7 bankruptcy vis a vis chancery practice. Here’s how the court disposed of the jurisdictional argument:

¶22. [Amanda’s] first suggested reason—that the chancery court lacked jurisdiction to make such a determination—is clearly wrong. “It is well established . . . that ‘bankruptcy courts and state courts maintain concurrent jurisdiction to decide exceptions to discharge arising under [section] 523(a)[.]’” Marvin v. Marvin, 659 S.E.2d 579, 581 (Va. Ct. App. 2008) (quoting Monsour v. Monsour (In re Monsour), 372 B.R. 272, 278 (Bankr. W.D. Va. 2007)). “Although only the bankruptcy court can decide whether to grant a discharge in bankruptcy, the effect of such a discharge may be determined by any court in which the issue is properly raised.” Burns v. Burns, 164 S.W.3d 99, 103 (Mo. Ct. App. 2005) (citing Timmons v. Timmons, 132 S.W.3d 906, 915 (Mo. Ct. App. 2004)); see also Rogers v. McGahee, 602 S.E.2d 582, 586 (Ga. 2004) (holding that “a general discharge in bankruptcy does not deprive the state court of its jurisdiction to determine whether certain debts of the debtor former spouse are exempt”) (citations omitted). [Footnote omitted]

The COA found, however, that the res judicata argument was dispositive. The court held that the four identities required for res judicata were present because Ian brought the same claim, that the debt had not been discharged, against the same party in both the chancery court and in the bankruptcy court. The court held at ¶ 26 that the bankruptcy court’s adjudication was one on the merits, making it binding on other courts.

There are several lessons you can take from this case: One is that you don’t need to blunder into bankruptcy court unless you know what you are doing and know the possible effects of your actions; Two, the burden now is on the Chapter 7 bankruptcy petitioner to convince the bankruptcy court to stay the judgment, not vice versa, so you may proceed in chancery as if there were no impediments; and Three, res judicata has teeth.

PS … as Judge Maxwell’s opinion points out, this post is relevant to Chapter 7 bankruptcy, but it has limited applicability, if at all, to Chapter 13 and other forms of bankruptcy.

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.

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