ID DIVORCES IN DISTRICT 12
October 24, 2012 § Leave a comment
‘Way back in June, 2010, I posted the requirements in this district to present an irreconcilable differences divorce.
As I explained back then …
The chancery judge in an irreconcilable differences (ID) divorce is required by law to make a determination about the sufficiency of the provision for support of the minor children. Different chancellors approach the task in different ways. Some judges require a complete Rule 8.05 financial statement from each party. Some judges take the word of the attorney or litigants.
In District 12, we do not require an 8.05, but we do require that the property settlement agreement (PSA) must include certain information about the income and deductions of the paying parent. Here are our requirements:
- The property settlement agreement must include information showing gross income and deductions for taxes, Medicare and social security for year to date for the paying party, in the form of a pay stub attached to the agreement or a recitation of the actual figures, including monthly and year-to-date figures, in the body of the agreement; or, in the alternative, a statement satisfactory to the court as to why such information is not available. If the pay stub is attached, the agreement itself must include a provision that both parties have seen and are satisfied with the accuracy of the document. If the required information is not included, the agreement will not be approved.
We also have a requirement that the 8.06 disclosures either be in the PSA itself, or that the parties file it with the clerk simultaneously with entry of the divorce judgment. This policy is a recognition of the fact that 99.9% of parties do not file their 8.06 informantion as required in the rules. UCCR 8.06 mandates that the current names, addresses and telephone numbers of both parents must be disclosed and filed in the court file.
We also require at least one of the parties to appear and testify. The witness establishes the jurisdictional facts and answers two questions about the PSA: is it the entire agreement, so that there are no side agreements or unwritten deals; and does it settle all of the marital issues between the parties? If the other party is unrepresented, it would be a good idea to have that party appear also to be available to answer any questions or to make any changes in the PSA that are directed by the court.
AND MORE RE FRAUD ON THE COURT
October 18, 2012 § Leave a comment
Only last week I posted here about what it takes to trigger relief from fraud on the court. There was yet another case dealing with fraud on the court handed down by the COA last week, and it’s one you need to add to your notes on the subject.
Dogan v. Dogan, decided October 9, 2012, by the COA, is an involved equitable distribution/alimony case that covers many familiar financial issues that arise in the course of a high-dollar divorce. David Dogan was a partner in a law firm and had earnings as much as $35,000 a month. The firm lost a major client, Durabla, to bankruptcy, though, which negatively impacted his earnings. The chancellor wrestled with calculation of David’s income and concluded that it was $19,000 a month. David’s wife, Barbara, charged that David committed a fraud on the court because, although he reported the lower income figure on his 8.05 statement, he had filed a home loan application stating his income as $35,000. Keep in mind that, under the general principle of Trim, knowingly submitting a false financial statement to the court is fraud on the court.
The COA, by Judge Roberts, beginning at ¶14, upheld the chancellor’s decision as to David’s income:
In Mississippi, the general rule is that fraud will not be presumed but must be affirmatively proven by clear and convincing evidence. See Hamilton v. McGill, 352 So. 2d 825, 831 (Miss. 1977); Taft v Taft, 252 Miss. 204, 213, 172 So. 2d 403, 407 (1965). Further, on appeal, there are four requirements to vacate a decree due to fraud:
(1) that the facts constituting the fraud, accident, mistake or surprise must have been the controlling factors in the effectuation of the original decree, without which the decree would not have been made as it was made; (2) the facts justifying the relief must be clearly and positively alleged as facts and must be clearly and convincingly proved; (3) the facts must not have been known to the injured party at the time of the original decree, and (4) the ignorance thereof at the time must not have been the result of the want of reasonable care and diligence.
Manning v. Tanner, 594 So. 2d 1164, 1167 (Miss. 1992). Barbara has failed to meet these requirements. First, the chancellor did not make his decision solely on David’s Rule 8.05 financial statement; therefore, the amount in his statement was not a controlling factor in the decree as is required under the first prong. Barbara also fails under prongs three and four because, assuming the discrepancy on the Rule 8.05 financial statement and loan application to be true, Barbara was aware of it at the time of the original decree. Additionally, the chancellor addressed the discrepancy and found that the amount of the loan application was an average of the last two federal tax returns and did not take into consideration the bankruptcy of Durabla and its financial impact on the firm.
Thus the COA continued to flesh out how Trim will affect our case law. Before you cry “Fraud” to the trial court, make sure you can support your claim with proof in the record of the four Manning factors.
PINNING DOWN THE MEANDERING LINE OF DEMARCATION
October 15, 2012 § 2 Comments
You might recall that I whined back in July about the Cuccia case from the MSSC that sent a case back to the chancellor to establish the line of demarcation for accumulation of marital equity. There was a temporary order in Cuccia, which under the case of Pittman v. Pittman, 791 So.2d 857, 864 (Miss.App. 2001), would have seemed to settle the question. Not so, said the high court, and sent it back.
So, with Cuccia and Pittman in mind, let’s look at this scenario: You represent the husband who at the time of the separation in 2004 has around $120,000 in a 401(k) account, and $270,000 in a pension fund, some of the latter of which is pre-marital. The parties file divorce pleadings in 2005, and continue legal sparring, but neither brings any request for temporary relief before the court.
In March, 2011, the chancellor adjudicated the case, dividing the 401(k) account as of the date of the divorce, and dividing other marital assets, including the pension, as of the date of the separation.
Your client is unhappy with the facts that (a) all of the other assets except the 401(k) were divided using the date of separation, and (b) the chancellor included the entire 401(k) value in the division, since it had appreciated by about $85,000 in the seven years from the separation to the final judgment, without any direct or indirect contribution by his wife. He tells you to appeal.
The above is what happened in Welch v. Welch, decided by the COA October 9, 2012.
As for the inconcistency in division dates among the assets, the COA brushed that argument aside by pointing out that Mr. Welch (Henry) had not contested the division of the pension, and, without saying so, that if he had he would have been even more unhappy because he might have lost even more ground to his wife (Susan). Judge Irving’s opinion explains why:
¶13. Based on the above, it is clear that the chancery court used the date of separation forpurposes of classifying the marital and separate portions of Henry’s pension. However, Henry does not challenge the court’s classification of his pension; instead, he argues that the same approach should be applied to his 401(k). Therefore, according to Henry, the chancery court should have found that any appreciation in the balance of his 401(k) account following the couple’s separation on December 23, 2004, was his separate property.
¶14. However, because there was no temporary-support order or separate-maintenanceorder entered in this case, the end date for the tallying of marital property was the date of the final judgment of divorce. Henry points out the inequity of awarding Susan one half of the entire value of his 401(k) given the Welches’ lengthy separation prior to divorce. However, this Court has previously held that a husband’s investment accounts were marital even though both accounts were opened after the couple separated and the husband was the sole contributor to the accounts. Stone v. Stone, 824 So. 2d 645, 647 (¶6) (Miss. Ct. App. 2002). This Court noted that even though the Stones were “separated and living apart prior to the divorce, [they] did not seek any order of separate maintenance[.]” Id. at 648 (¶7). Consequently, there was “no clear line of demarcation” after which the couple’s assets stopped being marital other than the date of the judgment of divorce. Id.
¶15. In Stone, the parties had been separated for over five years when the chancery court granted their divorce. Id. at 646 (¶¶1-2). Nonetheless, this Court held that property acquired during the separation was marital. While the Welches were separated for over seven years, we do not find that the length of their separation warrants a departure from our holding in Stone or existing supreme court precedent. As all of Henry’s contributions to the 401(k) account and its appreciation in value occurred during the marriage, the chancery court did not err in classifying the entire balance as marital property. This issue is without merit.
Here are a few points to ponder:
- I am sure Henry and his lawyers were delighted when Susan did not press for temporary support. After all, paying money to an estranged wife is like buying oats for a dead horse, isn’t it? But look at what the non-entry of a temporary order in this case wound up costing Henry in terms of his 401(k), and could have cost him had the chancellor applied the judgment date to division of the pension and other assets. It could be that Henry saved money over the long (seven year) run, or maybe he didn’t. We’ll never know for sure. But the holding in this case is something you need to discuss with your client before taking the bait and letting the case go ahead sans a temporary order.
- Read Cuccia, Godwin, Pittman and Welch and get an appreciation for how important it is to set a demarcation date. The trend seems to be away from discretion in the chancellor, and toward bright-line rules, but if there’s any wiggle room, exploit it for the benefit of your client. Try to persuade the judge to set the line where it will do your client the most good.
- This case did not address the propriety of the chancellor using different demarcation dates for different assets. Is that kosher? We don’t know for certain, because the COA did not take it on directly due to the way Henry framed his issues on appeal. My guess is that, unless the chancellor has a really well-reasoned, substantial reason, it’s not a good idea to use different demarcation dates.
THE EFFECT OF AN APPEAL ON A JUDGMENT
September 11, 2012 § 2 Comments
After Van and Myria Strickland were divorced on October 15, 2010, and after Van had filed an appeal, the chancellor entered an “Order Clarifying Judgment” on December 20, 2010. The order awarded the parties the passive-growth increase in the value of asset accounts that had been divided in equitable distribution and had the effect of adjusting and changing the parties’ respective shares.
In the case of Strickland v. Strickland, decided by the COA August 28, 2012, the court vacated the order, holding that the chancery court lacked jurisdiction to enter the December order. The court said:
“Filing a notice of appeal transfers jurisdiction from the trial court to an appellate court, thereby removing the trial court’s authority to amend, modify, or reconsider its judgment.” Corp. Mgmt. v. Green County, 23 So. 3d 454, 460 (¶13) (Miss. 2009). “In other words, the appeal removes the case ipso facto to the appellate courts.” Id. A party may execute on the judgment if an appeal has no supersedeas bond; however, “the [chancery] court cannot ‘broaden, amend, modify, vacate, clarify, or rehear the decree.’” Id. (citation omitted). “On the other hand, when an appeal has a supersedeas bond it effectively suspends the judgment.” Id. (citing In re Estate of Moreland v. Riley, 537 So. 2d 1345, 1348 (Miss. 1989)). As such, “enforcement of the rights declared by the decree are suspended until the appeal is determined.” Id. “When a trial court’s order broadens, amends, modifies, vacates, clarifies, or rehears a decree, ‘it must be vacated as null and void because it exceeds the subject matter jurisdiction of the lower court.’” Id. (citation omitted). See generally M.R.C.P. 59(e) (“A motion to alter or amend the judgment shall be filed not later than ten days after entry of the judgment.”). See also McNeil v. Hester, 753 So. 2d 1057, 1075 (¶68) (Miss. 2000); Bert Allen Toyota, Inc. v. Grasz, 947 So. 2d 358, 362-63 (¶7) (Miss. Ct. App. 2007).
¶20. Van filed his notice of appeal on November 9, 2010. Myria responded by filing her notice of appeal on November 23, 2010. On December 20, 2010, the chancery court entered an order that altered the judgment of divorce by changing the division of the property regarding the increase in value of the asset accounts to the date of the distribution, rather than the date of the temporary order. Because the chancery court’s December 20, 2010 order impermissibly broadened and amended the previous judgments of the court, subsequent to the filing of Van’s notice of appeal, we find that the December 20, 2010 order must be vacated as null and void. See Corp. Mgmt., 23 So. 3d at 460 (¶13) (“When a trial court’s order broadens, amends, modifies, vacates, clarifies, or rehears a decree, ‘it must be vacated as null and void because it exceeds the subject matter jurisdiction of the lower court.’” (citation omitted)). The chancery court lacked jurisdiction to enter such an order. See id. We further find that the May 27, 2011 order, which was before the chancery court on the motion of Myria seeking to enforce the December 20, 2010 order, is also null and void.
I read the authority to mean that, after the time for reconsideration has passed under the MRCP, and once jurisdiction has been acquired by the appellate court, the chancery court can take no action to alter, amend, clarify, modify, or even enforce the judgment. I have had modification cases and contempts filed on judgments that were appealed. The authority cited by Judge Carlton in Strickland makes it clear that as long as the appellate court has not disposed of the appeal the trial court has no jurisdiction to entertain those kinds of actions.
So this is something you need to factor in when deciding whether to appeal. Can your client wait two to two-and-a-half years for a modification or to enforce the judgment while judgment wends its way through the appellate courts?
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.
THREE ACTS THAT DO NOT CONVERT SEPARATE PROPERTY TO MARITAL
August 28, 2012 § 1 Comment
Any asset value accumulated through the work efforts of one or both parties to a marriage during the marriage is a marital asset subject to equitable distribution in a divorce case. See, Hemsley v. Hemsley, 639 So. 2d 909, 915 (Miss. 1994).
Marital assets are subject to equitable distribution and may be divided between the parties in a divorce, applying the factors in Ferguson vs. Ferguson, 639 So.2d 921, 928-9 (Miss. 1994).
Any assets attributable to a party’s separate estate prior to the marriage, or acquired separately during the marriage, as by gift or inheritance, by one party, are the separate property of that party, and is not subject to being divided in equitable distribution. Hankins v. Hankins, 866 So. 2d 508, 511 (¶13) (Miss. Ct. App. 2004).
In Ory v. Ory, 936 So. 2d 405, 411 (¶13) (Miss. Ct. App. 2006), the court recognized the general rule that assets may lose their separate status as such if the party commingles the asset with marital property or uses [it] for familial benefit” (citing Johnson v. Johnson, 650 So. 2d 1281, 1286 (Miss. 1994).
So what are the actions that can make property lose its separate character? That was the question before the COA in the case of Marter v. Marter, decided by the COA August 7, 2012. In Marter the court considered and rejected the appellant-husband’s three arguments that the wife’s separate property had been converted from separate to joint property.
- Plantation and maintenance. The proof was uncontradicted that the husband had maintained the property and participated in planting trees on it. The opinion stated: “At some point during the marriage, the Marters planted 49 acres of pine trees and 32 acres of hardwood trees on the property. The Marters enrolled in a Conservation Resource Program (CRP) with the federal government whereby they receive rental payments for the trees. However, the rental payments have always been directly deposited into [the wife’s] separate checking account.” The husband also did bush-hogging and maintenance. The COA cited Hankins, at 1286-87 (¶¶14-15) (Miss. 1999), and Ory, at 411, which held that the fact that husband cleared a portion of the land, hauled dirt onto the property, and had a large number of seedlings planted on the property did not operate to convert the property to marital property. The court also held that the husband’s contributions to maintenance were de minimis.
- Joint titling. The Marters had conveyed the property to themselves in joint ownership, and the husband argued that the joint title made the property lose its separate character and converted from separate property to marital. Citing Pearson v. Pearson, 761 So. 2d 157, 163 (¶16) (Miss. 2000), the court rejected his argument, pointing out that the MSSC has rejected the “title theory”, and has stated that “[t]he issue in divorce is which property is ‘marital property,’ subject to equitable distribution, and that determination proceeds absent any presumption based on title.”
- Payment of Taxes. The parties paid the taxes on the property from their joint account, and the husband argued that that converted the property to marital. Not so, answered the COA. The court said: ” … this Court has previously held that property-tax payments are traceable and do not transmute separate property into marital. Brock v. Brock, 906 So. 2d 879, 888 (¶50) (Miss. Ct. App. 2005).
So there are three lines of argument for transmutation that have been found wanting by the appellate courts. What it takes to convert separate property is beyond the narrow scope of this post.
I encourage you, if you have a case either attempting to establish commingling or transmutation, or defending against it, that you carefully research the case law. There are many cases on this issue, and you will find authority all over the ballpark. If you show up in court without some authority, and the other side has its cases in hand … well, don’t expect to come out too spiffy.
RECENT AUTHORITY FOR UNEQUAL DIVISION
August 15, 2012 § Leave a comment
From the earliest days after the Ferguson case established equitable distribution as the law for division of marital estates in Mississippi, the rule has been that the division need not be equal, but it must be equitable. See, e.g., Wells v. Wells, 800 So.2d 1239, 1243-44 (Miss.App. 2001).
Over the years the concept of equitable distribution evolved at the trial court level into a concept of equal division, so that lawyers quit pushing the argument that their clients were entitled to a larger slice of the marital asset pie. But there are cases where lawyers have succeeded on the point, and you might find them helpful in your own practice.
Several cases in the past year or so offer some authority you might find helpful in achieving an unequal division:
- Cox v. Cox, 61 So.3d 927 (Miss.App. 2011). This is a case where the presumption that the wife’s “homemaker” indirect contribution to the accumulation of marital assets was rebutted by the proof. The chancellor’s award of 25% of the marital estate to the wife was upheld where the husband had made most of the direct financial contribution to acquisition of the marital assets, and she did not contribute to the husband’s business. The husband also paid the wife’s pre-marital debt, funded a business venture of hers that failed, and he paid for her to take courses in school and to otain a real estate license. The husband also paid to provide household assistance in the form of a domestic and yard help. This is one of those rare cases where the homemaker presumption was rebutted, but it reminds us that although the presumption mandates a rebuttable finding of equal contribution, it does not mandate an equal division.
- Powell v. Powell, 87 So.3d 495 (Miss.App. 2011), decided November 11, 2011, is a case we’ve discussed here before. In this case the disabled husband was awarded a greater share of the marital estate based on his greater contribution to the accumulation of wealth, wife’s greater draw during the marriage from the family business, and wife’s marital misconduct. A significant feature of this case is that the COA upheld the chancellor’s findings as to valuation despite scant evidence offered by either party on the point.
- Kimbrough v. Kimbrough, 76 So.3d 715 (Miss.App. 2011). In this Ittawamba County case, the chancellor awarded wife 24% of the marital estate. The unequal distribution resulted from the husband being awawded $166,000 in equity in the former marital residence versus the award of $4,400 in equity to the wife. The disparity was due to the fact that the home was husband’s debt-free, pre-marital asset, and the only contribution wife had made to the value was her payments against a home improvement loan. The court observed that “We do not look at the division of one asset in isolation” (at ¶19). [An interesting side note: the court’s opinion cites another case for a quite lopsided division: “See Redd v. Redd, 774 So.2d 492, 496 (¶ 15) (Miss.Ct.App.2000) (reversing on other grounds but stating that a 77% to 23% division of the marital property, standing alone, would not have been a ground for reversal).”]
- Allgood v. Allgood, 62 So.3d 443 (Miss.App. 2011), was a case in which the chancellor awarded husband 65% of the marital assets. As in Kimbrough, the unequal division stemmed from an unequal division of the equity in the former marital residence. Husband’s share of the marital estate was enhanced by $82,000 he had contributed to the home’s equity. As the court pointed out, although a party’s commingling of separate funds may transform their character into a marital asset, the trial court may nonetheless adjust the equities and award a greater share of the aset value to the party who made the contribution of separate funds.
- Jenkins v. Jenkins, 67 so.3d 5 (Miss.App. 2011). In this case wife was awarded a smaller percentage of the parties’ assets. The trial court considered contributions and expenditures of each spouse to the seven-year marriage, and that husband owned the bulk of the marital assets prior to the marriage and expended pre-marital earnings on improvements to the property during the marriage, and it was wife’s addiction to prescription medications that caused marital separation. Most of the wife’s share of the marital estate consisted of her retirement account. At the time of the divorce she was unemployed, with an application for Social Security disability payments pending.
- Bond v. Bond, 69 So.3d 771 (Miss.App. 2011). This is my favorite case of the bunch, and one I’ve posted about here before. The appeal was actually filed by the husband, complaining that the chancellor was too generous in awarding the adulterous wife ten percent — you read that right, 10% — of the marital assets. He thought she should have received naught. Judge Maxwell’s exposition on marital fault and its role in equitable distribution is something you should read and digest. I am still scratching my head over why Mr. Bond filed an appeal in this case.
DEFINING THE SCOPE OF TRIM
August 1, 2012 § 2 Comments
You’ve read here before about the case of Trim v. Trim and its ramifications for family law practitioners. Trim is the MSSC case holding that intentional filing of a substantially false UCCR 8.05 financial statement constitutes a fraud on the court, so that any judgment based on it is vulnerable to being set aside any time.
In the case of Rogers v. Rogers, decided July 24, 2012, the COA confronted the question of intentionality and exactly how substantial the falsehood needs to be to warrant setting aside the prior judgment.
At trial in 2009, Charles Rogers submitted a financial statement that showed his monthly adjusted gross income as $4,651.71. The court awarded child support and alimony based on that figure.
Later, in a 2010 contempt proceeding brought by his ex-wife Julianne, Charles disclosed in discovery that his gross income was in excess of $88,000 a year, which would produce considerably greater adjusted gross income.
The chancellor found that the discrepancy was “proof of a gross misrepresentation and fraud” upon the court, and revised the final judgment of divorce to increase both the child support and alimony.
On appeal, the COA noted that in his 2009 trial testimony Charles had expressly testified that his yearly gross income was $88,000, that the $4,400 figure represented two weeks’ pay, and he had been asked about it in detail both on direct and under cross examination. At the contempt trial, Charles steadfastly stood by his position that he had not intentionally failed to disclose or falsified the financial information.
Judge Carlton recited the well-known Mississippi rule on establishing the elements of fraud:
¶18. The general rule is well settled that fraud will not be presumed but must be affirmatively proven. Taft v. Taft, 252 Miss. 204, 213, 172 So. 2d 403, 407 (Miss. 1965). The Mississippi Supreme Court has held that in order to establish fraud, the burden is on the proponent to prove the following elements:
(1) a representation, (2) its falsity, (3) its materiality, (4) the speaker’s knowledge of its falsity or ignorance of its truth, (5) his intent that it should be acted on by the hearer and in the manner reasonably contemplated, (6) the hearer’s ignorance of its falsity, (7) his reliance on its truth, (8) his right to rely thereon, and (9) his consequent and proximate injury.
Koury v. Ready, 911 So. 2d 441, 445 (¶13) (Miss. 2005) (citing Mabus v. St. James Episcopal Church, 884 So. 2d 747, 762 (¶32) (Miss. 2004)). Additionally, “fraud . . . must be proved with clear and convincing evidence.” Hamilton v. McGill, 352 So. 2d 825, 831 (Miss. 1977). We have recognized that “[c]lear and convincing evidence is such a high standard that even the overwhelming weight of the evidence does not rise to the same level.” Moran v. Fairley, 919 So. 2d 969, 975 (¶24) (Miss. Ct. App. 2005) (citation omitted).
¶19. To vacate a decree due to fraud, the supreme court, in Manning v. Tanner, 594 So. 2d 1164, 1167 (Miss. 1992), listed the four necessary requirements that must be met:
(1) that the facts constituting the fraud, accident, mistake[,] or surprise must have been the controlling factors in the effectuation of the original decree, without which the decree would not have been made as it was made; (2) the facts justifying the relief must be clearly and positively alleged as facts and must be clearly and convincingly proved; (3) the facts must not have been known to the injured party at the time of the original decree, and (4) the ignorance thereof at the time must not have been the result of the want of reasonable care and diligence.
Applying the law of fraud to the case at hand, Judge Carlton concluded that the elements of fraud had not been proven, and that the chancellor’s judgment essentially setting aside the original judgment was, therefore, in error. Her opinion distinguished Trim in this way:
¶24. Julianne cites Trim v. Trim, 33 So. 3d 471 (Miss. 2010), in support of her argument that Charles’s inaccurate Rule 8.05 statement perpetrated a fraud upon the court. In Trim, George Trim submitted his Rule 8.05 statement listing the value of his company’s stock at $100,000. Id. at 473 (¶4). George and his ex-wife, Lisa, entered into a property-settlement agreement, which the chancellor later ratified, based on their assets and liabilities disclosed in their Rule 8.05 statements. Id. Lisa later discovered that George had misrepresented his stock value in his Rule 8.05 statement, and filed suit against him for fraudulent misrepresentation. Lisa’s expert valued George’s stock at $694,000 at the time of George and Lisa’s divorce. Id. at 474 (¶4). On appeal, the Trim court held that George’s intentional filing of a substantially false Rule 8.05 statement constitutes a fraud on the court, noting the chancellor’s finding that George’s Rule 8.05 statement drastically undervalued a major marital asset. Id. at 478 (¶17).
¶25. The case before us differs from Trim in that the record shows that Charles testified during trial and explained that his Rule 8.05 submission reflected a two-week pay period. In applying the standard for proving fraud to the facts and record before us, we cannot agree that Julianne met her burden of proving fraud by clear and convincing evidence. See Hamilton, 352 So. 2d at 831. Although Charles’s Rule 8.05 statement incorrectly reflected his monthly salary, the record shows that he explained the discrepancy several times in his trial testimony. As a result, we find that the chancellor erred in considering Charles’s Rule 8.05 statement only, and not also his trial testimony, in determining that Charles’s misrepresentation of his income rose to the level of fraud. In her July 6, 2010 judgment, the chancellor erroneously found that Julianne proved by clear and convincing evidence that Charles perpetrated a fraud upon the court. Therefore, the chancellor erred in vacating the prior decree and revising the final divorce decree by increasing the alimony award. Accordingly, we reverse and set aside the revised final judgment and reinstate the original divorce decree. We also reverse and render the increased award of $1,000 in rehabilitative alimony for thirty-six months, which was based upon the erroneous finding of fraud on the court. Since the record does not support a finding of fraud by clear and convincing evidence, we reinstate the chancellor’s original divorce decree. See Manning, 594 So. 2d at 1167; Shaeffer v. Shaeffer, 370 So. 2d 240, 242 (Miss. 1979).
So, unless and until the MSSC chooses to clarify the matter further, you will have to prove all of the elements of fraud by clear and convincing evidence in order to invoke Trim relief. Proof of discrepancies and oversights in 8.05 statements will not be enough to do the job.
THE POINT OF NO RETURN
July 10, 2012 § 3 Comments
We all know the familiar Ferguson approach to equitable distribution: First classify the assets as marital or non-marital; then value them; then divide them equitably (not necessarily equally).
An often-ignored aspect of Ferguson analysis is the demarcation date that the court should use in classifying property as marital or non-marital. It’s important, because the date selected may decide the category where the item is placed. And I say it is often ignored because you seldom hear either side say anything about it in the presentation of the trial.
In Goodwin v. Goodwin, 758 So.2d 384, 386 (Miss. 1999), the MSSC laid down the rule that entry of a separate maintenance order stops accumulation of marital interests in property, and creates a “point of demarcation” to be used by the courts in determining marital vs. separate interests when division ultimately comes before the court. In Goodwin, that portion of the husband’s retirement account accumulated after entry of the separate maintenance order was his separate property, not subject to equitable division.
The line of demarcation rule was extended to temporary orders in the case of Pittman v. Pittman, 791 So.2d 857, 863-64 (Miss.App. 2001). In that case, the court noted that temporary orders, like separate maintenance orders, are simply recognition that the parties have ceased living together as husband and wife; in other words, they have reached the point of no return (at least until reconciliation in good faith in the case of separate maintenance). So interests that accrue after its entry are separate interests.
Both Goodwin and Pittman set out a bright line for the trial courts. But that bright line is there in cases where there has been a separate maintenance or temporary order in the case. What about cases where there is neither?
Professor Bell identifies five other points of demarcation that have been employed in other jurisdictions: (1) the date of separation; (2) the date of filing for divorce; (3) the date of a divorce hearing; (4) the date of the divorce judgment; and (5) a date fixed by the court in its discretion. Bell on Mississippy Family Law, 2nd Ed., § 6.02[3][b], p. 135.
In Doyle v. Doyle, 55 So.3d 1097, 1107 (Miss.App. 2010), the COA held that marital equities continue to accumulate where there was no separate maintenance or temporary order. In Aron v. Aron, 832 So.2d 1257, 1258-59 (Miss.App. 2002), however, the COA held that it was in the chancellor’s discretion to classify the property as marital or non-marital where there was no separate maintenance or temporary order. In either case, the chancellor should consider the parties’ relative contributions in making the division of the post-separation-acquired property. Striebeck v. Striebeck, 5 So.3d 450, 452 (Miss. 2008).
The most recent case on point is Cuccia v. Cuccia, decided by the MSSC on June 28, 2012. The case was before the court on certiorari from the COA, which had reversed the chancellor. The Supreme Court’s opinion stated:
“¶9. In the case before us, a separate maintenance order was not entered, but a temporary support order was issued on May 6, 2008, and filed on May 9, 2008. In reviewing the chancery court’s [divorce judgment], we do not find that he set out the specific date as the line of demarcation in classifying marital verus nonmarital property. He must do so. After determining the line of demarcation, the chancery court must then determine which assets and liabilities are marital and nonmarital in accordance with Ferguson and Hemsley. Then, he must divide the marital estate equitably.” [Footnotes omitted]
So the direction is clear: if the chancellor does not make the demarcation line clear, there is reversible error in the record. You can influence the judge to pick that date, or you can do it via MRCP 59 motion; either way, if you let the record be finalized without a demarcation line, be sure to keep your trial notes, because you’ll need them for the remand trial.
The court gave no direction for how the chancellor should draw the magic line. If the case makes its way back for a third appellate decision we may find out. If not, then we will have to await a more definitive decision.
Until then, give some th0ught to how you want the marital estate divided and why. Give the judge some proof in the record to support a line of demarcation that is in your client’s favor. It might just put some money in your client’s pocket.
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.
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