April 30, 2019 § 1 Comment
Many, many divorces include either provisions in PSA’s or adjudications that divide retirement benefits to begin 10, 20, or even more years in the future, long after the time for appeal has run.
What happens when the underlying assumptions upon which that PSA or adjudication is based are changed over time or prove to be inaccurate or untrue?
Carolyn Hall was granted a divorce from Gary Hall on the ground of adultery in 2006. She was awarded alimony, and, as part of the property division, Gary was ordered to pay her: $23,976.23 from his 401(k) plan; $2,976.13 from his stock ownership plan; and $600 per month from his pension if he retired at normal age (based on a projected benefit of $5,212 per month, reflecting the plan’s increase during the parties’ 10-year marriage).
In 2007, Gary’s employer froze his pension benefits, but Gary did not file any action to seek modification. In 2016, Gary accepted an early retirement offer, causing him to retire at age 62 rather than the normal retirement age of 65.
Gary filed a petition for modification in February, 2017, claiming that the freezing of his benefits was a material change in circumstances that reduced his retirement benefits, and asked to eliminate the payment to Carolyn entirely. Perhaps recognizing that property division is unmodifiable (East v. East, 493 So.2d 927, 931 (Miss. 1986)), Gary argued at hearing that he was actually seeking relief from the divorce judgment pursuant to MRCP 60(b)(5) and (6). The chancellor granted Carolyn’s motion and dismissed Gary’s case. Gary appealed.
In Hall v. Hall, decided March 19, 2019, the COA affirmed.
¶13. Gary’s petition does not mention that it was filed under Mississippi Rules of Civil Procedure 60(b)(5) and (6). However, during the hearing on August 2, 2017, as well as within his brief to this court, Gary argued that he is entitled to relief pursuant to Rules 60(b)(5) and (6) and he is also entitled to equitable relief. Since this issue was raised with the chancery court we will address the Rule 60(b) arguments made by Gary.
¶14. Mississippi Rules of Civil Procedure 60(b)(5) and (6) provide:
(b) Mistakes; inadvertence; newly discovered evidence; fraud; etc. On motion and upon such terms as are just, the court may relieve a party or his legal
representative from a final judgment, order, or proceeding for the following reasons:
. . . .
(5) the judgment has been satisfied, released, or discharged, or a prior judgment otherwise vacated, or it is no longer equitable that the judgment should have prospective application;
(6) any other reason justifying relief from the judgment.
The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more than six months after the judgment, order, or proceeding was entered or taken. . . .
The supreme court follows the following criteria for determining Rule 60(b) motions:
(1) That final judgments should not lightly be disturbed; (2) that the Rule 60(b) motion is not to be used as a substitute for appeal; (3) that the rule should be liberally construed in order to achieve substantial justice; (4) whether the motion was made within a reasonable time; (5) [relevant only to default judgments]; (6) whether if the judgment was rendered after a trial on the merits-the movant had a fair opportunity to present his claim or defense; (7) whether there are intervening equities that would make it inequitable to grant relief; and (8) any other factors relevant to the justice of the judgment under attack.
M.A.S. v. Miss. Dep’t of Human Servs., 842 So. 2d 527, 530 (¶16) (Miss. 2003). See also Carpenter v. Berry, 58 So. 3d 1158, 1159 (¶18) (Miss. 2011); M.R.C.P. 60(b), advisory
¶15. Our court previously held in [In re Dissolution of Marriage of De St.] Germain[, 977 So.2d 412 (Miss. Ct. App. 2008)] that a court did not err when dismissing a
motion brought under Rule 60(b) where the appellant waited five years to set aside a divorce judgment:
Mississippi Rule of Civil Procedure 60(b)(5) [states that] “it is no longer equitable that the judgment should have prospective application”, [and] the catch-all provision under Mississippi Rule of Civil Procedure 60(b)(6) [provides for] “any other reason justifying relief from the judgment[.]” One who proceeds under either Rules 60(b)(5) or 60(b)(6) must do so “within a reasonable time.” M.R.C.P. 60(b). The chancellor did not specifically state that Brenda failed to file her motion “within a reasonable time,” but his ruling implies as much. We cannot find that the chancellor abused his discretion. Brenda filed her motion approximately five years after the chancellor entered the divorce judgment. The allegations raised within Brenda’s motion could have been submitted much earlier than five years after the judgment of divorce. Accordingly, we affirm the chancellor’s decision to grant Robert’s motion to dismiss.
Germain, 977 So. 2d at 416 (¶10).
¶16. Rule 60(b) reads in pertinent part that relief must be sought “within a reasonable time.” Additionally, the supreme court has held “Rule 60(b) provides for extraordinary relief which may be granted only upon an adequate showing of exceptional circumstances . . . .” Entergy Miss. Inc. v. Richardson, 134 So. 3d 287, 291 (¶10) (Miss. 2014). Here, Gary has not demonstrated any exceptional circumstances.
¶17. Further, Rule 60(b) motions are not to be used as a substitute for appeal. M.A.S., 842 So. 2d at 530 (¶16). Gary never appealed the original judgment of divorce or its retirement provisions. However, Gary has now filed a petition approximately ten years later challenging the retirement provisions of the divorce judgment. Moreover, during the hearing on August 2, 2017, Gary testified that his employer, Standex International Corporation, notified him that his retirement plan was frozen in 2007 and at least twice a year thereafter [Fn omitted] … [here the court quoted excerpts from the trial transcript in which Gary essentially admitted that he could have filed a court action much earlier than he did].
¶18. Gary’s petition could and should have been submitted much earlier than ten years after the memorandum opinion and divorce judgment. Gary knew or should have known in 2007 that his retirement plan was frozen in 2007 and that his retirement benefits would most likely not be $5,200 per month as projected. Gary failed to timely file his petition under Rule 60. In view of that, we affirm the court’s decision to dismiss Gary’s petition.
This case highlights the difficult position that litigants find themselves in when the assumptions upon which the equitable division change or prove to be untrue. If you’re negotiating how to divide your client’s retirement, it would be better to cast it as alimony, which is modifiable. If that doesn’t fly, try to negotiate a percentage rather than a fixed sum. If the case is being adjudicated, be sure to develop your client’s position that any such award should be alimony, and why, and that any award should be as a percentage.
Whatever strategy you employ to minimize risk to your client (and you), it’s important to keep in mind that these retirement provisions are ticking away in your client’s life, far beyond the time limit to appeal, and remember: property division is not modifiable.
March 25, 2019 § Leave a comment
In the course of their divorce proceedings, the chancellor twice requested both Tracy and Brent Williams to submit a list of assets, values, and debts. When they came to trial, only Brent did so, and Tracy even listed the value of her business, a daycare, as unknown. The chancellor used Brent’s figures upon which to base equitable distribution. Tracy appealed, arguing that the chancellor erred in not appointing appraisers, even though she never made that request of the trial court. She argued that the valuations were not accurate due to depreciation.
The MSSC affirmed in Williams v. Williams, decided January 17, 2019. Justice Beam wrote for a unanimous court:
¶19. While we note that “expert testimony may be essential to establish valuation sufficient to equitably divide property, particularly when the assets are diverse . . . ,” Ferguson v. Ferguson, 639 So. 2d 921, 929 (Miss. 1994), we also recognize and “reiterate the principle that findings on valuation do not require expert testimony and may be accomplished by adopting the values cited in the parties’ 8.05 financial disclosures, in the testimony, or in other evidence.” Horn v. Horn, 909 So. 2d 1151, 1165 (Miss. Ct. App. 2005) (quoting Ward v. Ward, 825 So. 2d 713, 719 (Miss. Ct. App. 2002)).
¶20. Here, the record reflects that only Brent attempted to provide the chancellor with evidence regarding the valuations of the parties’ business interests, and the chancellor used those valuations as reflected in her opinion. Tracy’s argument that the chancellor committed reversible error by not appointing experts to appraise the current valuations due to depreciation is without merit. This Court refuses to blame the chancellor for a party’s failure to present sufficient evidence of property valuation. Faced with similar circumstances, we stated the following in Dunaway v. Dunaway:
It is our conclusion that the chancellor, faced with proof from both parties that was something less than ideal, made valuation judgments that find some evidentiary support in the record. To the extent that the evidence on which the chancellor based his opinion was less informative than it could have been, we lay that at the feet of the litigants and not the chancellor. The chancellor appears to have fully explored the available proof and arrived at the best conclusions that he could, and we can discover no abuse of discretion in those
efforts that would require us to reverse his valuation determinations. Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (Miss. Ct. App. 1999). As explained in Dunaway, the chancellor’s duty is not to obtain appraisals of the marital property. Id. Further, the Dunaway court found that, while expert testimony about property valuations might be helpful in some cases, it is not required, and the chancellor may consider other
evidence presented by the parties. Id.
¶21. Tracy did not come forth with expert testimony or any other valuations of the businesses; therefore, the chancellor used the available proof, including Brent’s valuations, and arrived at the best conclusion that she could. Accordingly, this Court finds the chancellor did not err in the valuation of the Williams’s business interests.
I’ve said it here before that it’s often breathtaking how little attention lawyers give to adequate proof of values in divorce cases. That forces judges to do their dead-level best with scanty evidence. It can leave your clients disappointed in the outcome at the least, and mad as a hornet at you at the worst.
It’s malpractice in a divorce case to merely accept your client’s 8.05 as scribbled out by her without going over it and questioning every item, or at least the ones that appear out of line, and without making sure it is complete, with values and itemization of debt.
In this district, as the judge in this case did, we require an asset table showing the parties’ values, designation as marital or non, and debt. The list must be consolidated, meaning that there is one list. That way the judge is not required to figure out whether the “green sofa, $600” on her list is the same as the “couch in living room, $2,000” on his list are the same thing. We also will not give you a trial setting unless and until you produce that list. In cases where one party decides not to participate in that exercise, we accept the unilateral list and proceed to trial.
February 26, 2019 § Leave a comment
In a case last month the COA affirmed a chancellor’s dismissal of a an ex-wife’s petition filed 21 years after the divorce to “allocate and disburse retirement funds.” In the divorce case she had been granted only the divorce, custody, and child support; she had not sought any division of retirement or other funds, and the court did not order it. The case is Stubbs v. Stubbs, decided January 29, 2019.
That case is pretty straightforward and not particularly noteworthy, but it set me thinking about cases in which there is an agreement that, for instance, the husband will pay a percentage of his retirement benefits when he begins drawing them. I have seen those in military and railroad retirement, which is not otherwise divisible. PERS benefits would fit into that category.
If the court orders that an act be done beyond what would ordinarily be the statute of limitations (SOL) applicable to the order, does that stay the running of the statute?
Can one seek modification of that part of the order that has not yet taken effect? For example, could the ex-wife after 5 years, but before the retirement, ask the court to increase the percentage previously ordered, or does she have to wait until the retirement benefits begin?
We all know that a mere order of the chancery court is not adequate to protect the ex-wife’s interest in these scenarios. Either a QDRO or a court order in the form dictated by the military or Railroad Retirement Board is necessary to do so. Can SOL be pled to bar entry of a QDRO or similar order sought years after the original judgment on which it is based?
Just a few idle thoughts to ponder as we slog in our snowshoes toward another glorious Spring.
January 2, 2019 § Leave a comment
Most chancellors get testy when a party plays coy with financial information that is needed to decide a case. It usually happens in discovery where a party with financial assets gets vague with requests for information about account balances and the like. A recent case illustrates how that kind of tactic can cost a party dearly.
Julia and Steven Dauenhauer consented to a divorce on the ground of irreconcilable differences and left it to the chancellor to distribute the marital estate. Julia had some retirement accounts, but in discovery she did not produce statements and at trial she did not list all of them and their values on her 8.05. When the chancellor included them in the marital estate, Julia first filed a motion to “reconsider,” which was treated as a R60 motion because it was filed later than ten days after entry of the judgment. When she proved to be unsuccessful in that endeavor, she appealed claiming the accounts were separate property.
In the case of Dauenhauer v. Dauenhauer, decided November 13, 2018, the COA affirmed the chancellor’s ruling on the point. Judge Carlton wrote the unanimous opinion:
¶36. Julia next argues that the chancellor erred in classifying the following as marital property: (1) the money she withdrew from her PERS retirement account and (2) the contributions she made to her Empower 401K after the entry of the order for separate maintenance.
¶37. This Court employs a limited standard when reviewing a chancellor’s division and distribution of property in a divorce. Phillips v. Phillips, 904 So. 2d 999, 1001 (¶8) (Miss. 2004). “This Court will not disturb the findings of a chancellor unless the chancellor was manifestly wrong, clearly erroneous, or an erroneous legal standard was applied.” Id. Upon review, we examine the chancellor’s application of the Ferguson factors. Id. In so doing, we do not conduct a new Ferguson analysis; rather, we “review[ ] the judgment to ensure that the chancellor followed the appropriate standards and did not abuse his discretion.” Id.
¶38. Furthermore, “the party arguing to classify an asset as nonmarital property has the burden to demonstrate to the court the asset’s nonmarital character.” Wheat v. Wheat, 37 So. 3d 632, 640 (¶26) (Miss. 2010). The supreme court explained that meeting this burden requires going “beyond a mere demonstration that the asset was acquired prior to marriage.” Id. [My emphasis]
¶39. Julia explains that the $56,484.90 “withdrawals from retirement” listed in the Schedule of Marital Assets represents a PERS retirement account in the amount of $46,732.68 and a Great-West Retirement Services account in the amount of $9,752.22. In his judgment, the chancellor included a footnote explaining that the “total of the funds Julia withdrew from her retirement accounts is also a marital asset subject to equitable distribution.” However, Julia argues that she testified at trial that her PERS retirement was “originally acquired when [she] was divorced” from Steven the first time. Julia admitted at trial that contributions to the account had been made during their second marriage, but she now maintains that a portion of the total value of her PERS retirement account should be considered separate property.
¶40. At trial, the record shows that during cross examination, Steven’s attorney questioned Julia about whether she provided a statement showing the value of the PERS account on the date of her 2003 marriage to Steven. Julia responded that she was not requested to produce such a document. Steven’s attorney responded, “Well, ma’am, I definitely requested it in request of production documents, and you didn’t produce them, and I’m going to go through that.” The record shows that on her Rule 8.05 financial declaration, Julia attached a W-2 form indicating the value of the PERS account amounted to $46,732.68 when she cashed it out in 2015.
¶41. Regarding the $17,000 in her Empower 401K account, Julia asserts that the majority of the value of the Empower account constituted separate property. The chancellor’s judgment reflects that he divided the assets in the Empower account equally between the parties. In so doing, the chancellor also provided that “Julia voluntarily contributes approximately twenty percent of her income from West Jefferson [Medical Center] to her 401K retirement account.” Julia asserts that the three trial exhibits, including two of her pay stubs from April 2016, which the chancellor referenced as support for that amount, do not reflect contributions of twenty percent. Rather, Julia argues that her April 2016 pay stubs show that she only contributed fifteen percent of her monthly income to the account. Julia further submits that her contributions made to the account after the order for separate maintenance should be classified as separate property.
¶42. Steven argues, however, that Julia failed to produce a statement for the Empower account, despite being requested to do so in discovery. The trial testimony reflects that Steven’s attorney asked Julia if she had a pension plan. Julia responded, “Yes, I do.” Steven’s attorney asked, “But you didn’t put it on [your Rule 8.05 financial statement]?” Julia answered, “Correct.” Julia testified, however, that she started accumulating funds in
her Empower account in 2014.
¶43. Our review shows that the chancellor set forth the following findings with regard to Julia’s retirement account and Empower account:
Julia voluntarily contributes approximately twenty percent of her income from West Jefferson to her 401K retirement account.
. . . .
Prior to the separation, Julia purchased a home located at 209 Blue Heron Cove, Waveland, MS 39567, as well as a 2015 Mazda. When Julia purchased this home, she used $9,752.22 of her retirement funds from West Jefferson Medical Center to pay off the loan for the Honda Ridgeline. (See Exhibit 14, Page 10). Julia testified that she cashed in additional retirement savings in the amount of $46,732.68 and used these funds to purchase various items and appliances for her new home. (See Exhibit 14, page 8). Through post trial submissions, Julia has detailed how she spent $43,855.23 or this withdrawal.
¶44. The chancellor then performed a Ferguson analysis and found that “no non-marital property” existed. Under the factor of “the income and earning capacity of each party,” the chancellor made the following determination regarding Julia’s retirement accounts:
Both Steven and Julia have advanced degrees and therefore an ability to earn. However, because Steven has stated the desire to return to school to earn a teaching license, and Julia is currently working as a nurse practitioner, Julia’s current earning capacity is much higher than Steven’s. Julia also has the income and funds available to voluntarily contribute twenty percent (20%) of her income from West Jefferson to her retirement. This contribution is significantly more than required, and a much greater than Steven is saving towards his retirement through his PERS account.
¶45. Next, the chancellor set forth a schedule distributing the marital assets. Under Julia’s assets, the chancellor listed the $56,484.90 from the withdrawals from retirement as well as $8,500, which constituted one-half of her Empower account. The chancellor awarded Steven one-half of Julia’s Empower account, amounting to $8,500.
¶46. As stated, Julia bore the “the burden to demonstrate to the court [an] asset’s nonmarital character[,]” which requires going “beyond a mere demonstration that the asset was acquired prior to marriage.” Wheat, 37 So. 3d at 640 (¶26). Julia admitted that she did not produce a statement for her Empower account in discovery, nor did she produce a statement showing the value of the PERS account on the date of her 2003 marriage to Steven. Therefore we cannot say that the chancellor abused his discretion in classifying as marital property the money Julia withdrew from her PERS retirement account and the contributions she made to her Empower 401K after the entry of the order for separate maintenance.
So when you leave it up to the judge to make her best guess about the information you didn’t make clear in the record, you get what you get. If that gap in the record comes about from a cat-and-mouse strategy of non-disclosure, it can bite your client in a most sensitive and painful part of the anatomy.
November 26, 2018 § 2 Comments
Trey Speights did not bother to appear at his divorce trial, even though he was properly summoned and he did file a contest to the complaint. The chancellor granted a divorce on the ground of habitual drunkenness and equitably divided the marital estate. Trey appealed.
The COA affirmed the granting of a divorce and rejected Trey’s argument that the chancellor erred in allowing Trey’s parents to attempt to represent his interests at trial. The court reversed and remanded the equitable distribution, however.
The court’s opinion on the reversed issues in Speights v. Speights, rendered September, 18, 2018, was penned by Judge Barnes:
¶21. Trey contends that it was error for the chancellor to attempt to distribute the marital estate without requiring both parties to file financial disclosure forms under Uniform Chancery Court Rule 8.05. Trey contends that because of this failure, there was no information upon which the court could make a determination of marital and nonmarital assets, and a subsequent equitable division of the marital assets. We agree.
¶22. Rule 8.05 requires “each party in every domestic case involving economic issues and/or property division” to provide a “detailed written statement of actual income and expenses and assets and liabilities.” The parties must submit their income-tax returns for the preceding year and a general statement of employment history and earnings from the inception of the marriage or from the date of divorce, depending on the type of action. The rule also states that financial statements are not necessary if excused by court order for good cause shown. “It is vital to the effective administration of justice in the domestic relations arena that chancellors undertake this task while in possession of accurate financial
information.” Trim v. Trim, 33 So. 3d 471, 478 (¶16) (Miss. 2010).
¶23. At trial, no mention was made of Rule 8.05 forms. In her appellate brief, Kimberly states that the issue is without merit “because the parties had already exchanged financial affidavits during the discovery process.” Yet, no Rule 8.05 forms are in the record, and there is no indication on the chancery-court docket that any financial forms were exchanged, filed, or excused. However, Trey does not suggest, and we do not find, that there was any fraudulent intent by either party in failing to comply with this rule.
¶24. Citing Luse v. Luse, 992 So. 2d 659 (Miss. Ct. App. 2008), Kimberly argues that this issue is waived since Trey did not appear at the proceedings. We disagree. In Luse, the appellant, John Luse, argued that the chancery court erred in failing to require the parties to file Rule 8.05 statements; therefore, there was no documentation in the record regarding ownership of the property or any evidence justifying the court’s division of property. Luse, 992 So. 2d at 664 (¶16). The chancellor had stated in her findings that because child support and alimony were not at issue, and John failed to appear, the chancery court waived the Rule 8.05 disclosures. Id. at (¶19). This Court found no error in that regard, and that John, in failing to defend the suit in the chancery court, was attempting to do so on appeal, which was improper. Id. at (¶¶18-19).
¶25. However, Luse is distinguishable. While John “never responded to the complaint or entered an appearance in the court,” here, Trey took the actions of hiring counsel and timely answered the complaint, but he did not appear further. Id. at 660 (¶3). Therefore, we cannot say that Trey waived this issue. Because we are reversing and remanding on the property division, as explained below, on remand the chancery court should require both parties to complete and file Rule 8.05 financial forms.
As for the issue of the division of the marital estate, the court went on:
¶26. Trey contends that the chancery court erred in failing to make findings of fact regarding the equitable distribution of the marital property under the Ferguson factors. We agree.
¶27. “To equitably divide property, the chancellor must: (1) classify the parties’ assets as marital or separate, (2) value those assets, and (3) equitably divide the marital assets [based upon the Ferguson factors].” Anderson v. Anderson, 174 So. 3d 925, 929 (¶8) (Miss. Ct. App. 2015). Although the chancellor need not evaluate every Ferguson factor, the chancellor must consider the factors relevant to the case, on the record, in every case. Sproles, 782 So. 2d at 748 (¶25); Heimert v. Heimert, 101 So. 3d 181, 187 (¶24) (Miss. Ct. App. 2012) (citing Lowrey v. Lowrey, 25 So. 3d 274, 280 (¶7) (Miss. 2009)). The policy consideration behind this requirement is “not only essential for appellate purposes,” but to provide trial courts “a checklist to assist in the accuracy of their rulings . . . [and to] reduce[ ] unintended errors that may affect the court’s ultimate decision. The absence of an analysis of these factors and failure to apply the law to the facts at hand create error.” Id.
¶28. Trey is correct that there were no findings of fact by the chancery court regarding the distribution of marital assets. There was no discussion about which assets were marital, and the record is devoid of any mention of the Ferguson factors. Kimberly argues that these findings were not necessary because Trey did not appear, citing Luse in support. Again, we find Luse distinguishable because Trey actually did answer the complaint and denied Kimberly’s allegations regarding accumulation and division of marital property. Although the court was entitled to proceed with trial because Trey did not appear, the court was still required to make the necessary findings for the property distribution.
It is unfortunately too frequent that lawyers show up for trial without 8.05’s in cases where there are financial issues. I had yet another not too long ago.
This case makes it clear that to do so is to plant error in the record, plain and simple. Every finding by a chancellor must be supported by ample and substantial evidence in the record. Without 8.05’s there is not ample and substantial evidence to support the judge’s equitable division. Ergo, error and reversal as here.
I sympathize with the chancellor who now wears the scarlet letters R&R. Reversed and remanded because he was loath to delay this case further by sending the lawyer back to the drawing board to do what he should have done before trial and to cancel a scheduled trial and create an idle day in a crowded docket.
February 20, 2018 § Leave a comment
Valuation, valuation, valuation. It’s a subject I’ve talked about here often. I started to link some of my posts on the subject, but, instead, let me simply ask that you enter the word “valuation” above in the Search box and see for yourself the plethora of posts that pop up.
Most of the cases on which I have commented went up on a complaint by the disappointed party that the chancellor didn’t value assets correctly, or didn’t give proper weight to evidence presented, or whatever. The overwhelming number of cases decided on appeal say the same thing: the trial judge will do the best she can do with what evidence you present, so you’d better make a decent record.
The latest version of this old, sad tale comes to us courtesy of Mr. Timothy Benton, who appealed from a judgment assessing him with alimony and child support that he says are not supported by the evidence.
Tim and his wife, Beth were married in 2000. Tim was owner of two businesses, Tim Benton Tree Service and Benton Green, LLC, the income from which supported the family. Beth helped in the businesses from time to time, but she primarily cared for the parties’ four children.
Tim and Beth separated in 2013, and Beth filed for divorce in November, 2014, on the grounds of desertion, HCIT, and ID.
Following a temporary hearing on January 12, 2015, which both parties attended, Beth was awarded custody and Tim was ordered to pay her temporary child support of $3,500 and temporary alimony of $1,500. Because neither party could produce their tax returns at the hearing, the court reset the matter for February 18, 2015, with directions to produce them then. In addition, the judge directed Tim to produce any business financial records showing his income and operating expenses. When Tim appeared on the February date, he failed to produce the records, and the court continued the matter to April 6, 2015, with the same directions.
On April 6, 2015, Tim appeared yet again without financial records as directed. His attorney withdrew from representation.
The case proceeded to trial. Beth produced an 8.05 financial statement and some bank statements. Tim had neither 8.05 nor any financial records. The judge based her findings on the meager evidence presented, concluding that Tim had more than $17,000 a month in income. She ordered him to pay $2,500 a month in child support, plus all of the expenses and tuition of private schooling and all medical expenses of the children. The chancellor also ordered Tim to pay $6,000 per month in alimony and granted other financial relief.
Tim lawyered up and filed a R59 motion claiming that he had been unable adequately to represent himself at trial and needed a new trial to present CPA evidence.
Not surprisingly, the chancellor denied the motion, stating that, ” … the burden lied at the feet of the litigants to provide the Court with sufficient evidence in which to value the marital assets … during the course of the litigation [Tim] was afforded ample opportunity and time on multiple occasions to provide supplemental evidence, which he did not do.”
In Benton v. Benton, decided January 23, 2018, the COA affirmed. On the issue of the valuation used by the chancellor, Judge Irving wrote:
¶10. Tim argues that the chancery court erred in failing to value all material marital assets, including Benton Tree Services, and in rendering decisions of alimony and child-support awards accordingly. In response, Beth argues that the court properly distributed the marital assets in light of the fact that Tim refused to comply with the court’s orders to produce financial records. Thus, Beth maintains that the court’s subsequent alimony and child support awards were proper.
¶11. The Mississippi Supreme Court has stated that “the foundational step to make an equitable distribution of marital assets is to determine the value of those assets based on competent proof.” Dunaway v. Dunaway, 749 So. 2d 1112, 1118 (¶14) (Miss. Ct. App. 1999) (citing Ferguson v. Ferguson, 639 So. 2d 921, 929 (Miss. 1994)). “Nevertheless, it is incumbent upon the parties, and not the chancellor, to prepare evidence touching on matters pertinent to the issues to be tried.” Id. “Where a party fails to provide accurate information, or cooperate in the valuation of assets, the chancellor is entitled to proceed on the best information available.” Stribling v. Stribling, 906 So. 2d 863, 870 (¶25) (Miss. Ct. App. 2005) citation omitted).
¶12. Here, it is undisputed that the chancellor did not value Tim’s businesses. However, we refuse to hold her in error because of a party’s failure to cooperate in providing the necessary documents for proper valuation, and we reiterate the applicable caselaw set forth by the chancery court in its order denying Tim’s motion for a new trial. See Jenkins v. Jenkins, 67 So. 3d 5, 13 (¶21) (Miss. Ct. App. 2011) (declining to find a chancellor in error for failing to conduct a marital-property valuation where the parties failed to provide the relevant evidence); Common v. Common, 42 So. 3d 59, 63 (¶¶12-13) (Miss. Ct. App. 2010) (holding that a chancellor was not in error for valuing marital assets solely from the parties’ 8.05 financial statements, because the parties failed to provide the necessary evidence, and further holding that the former husband could not “now complain that the chancellor’s valuations [were] unfair when no reliable evidence of the value of the property was presented at trial”); Dunaway, 749 So. 2d at 1121 (¶28) (holding that, “[f]aced with proof that was far less than ideal, the chancellor made a valuation of the marital estate that finds some support in the record,” and refusing to hold a chancellor in error due to the former husband’s failure to produce evidence). It is this Court’s opinion that the chancellor did the best she could with the little information presented to her, and that she did not abuse her discretion. Accordingly, we affirm.
Not much to add, except this:
- It is always a losing, self-destructive strategy to play cat-and-mouse games with financial proof, withholding all or some. The chancellor’s attitude and reaction in this case is about what one should expect in the face of repeated failure to present financial records, especially after having been ordered by the court to do so.
- Forgive me for repeating what I often have said here: it is up to you to make a record of financial values. It’s not the judge’s job. Don’t expect your opponent to do it for you. It’s “at the feet of the litigants,” as the learned chancellor so eloquently put it.
February 6, 2018 § 1 Comment
It’s a hoary. ancient maxim of the law that “There must be an end to litigation,” a principle that was called into question in the case of Sandrock v. Sandrock, handed down from the COA on January 16, 2018.
The Sandrock saga began on August 1, 2005, when Jason Sandrock and his father Fred purported to enter into an agreement via a one-page, notarized document styled “Mortgage Agreement.” The agreement was for a 3,300 square-foot home in Bay St. Louis in exchange for 300 consecutive payments of $1,000 each. Neither Jason’s wife Cassie nor Fred’s wife Joellen were parties to the agreement. Jason and Cassie had been building the structure on Fred’s and Joellen’s property since November, 2004.
Before Jason and Cassie could move into their new digs, however, Hurricane Katrina severely damaged the house on August 29, 2005. The insurance company issued a check for $148, 601, to Jason, Fred, and Joellen. Jason was listed as the insured, and Fred and Joellen were listed as Mortgagees. An MDA grant check was issued to Jason, with no lienholder listed, in the amount of $149,327. Cassie was not named on either check. Jason turned over most of the money to Fred and Joellen.
On January 15, 2009, Jason and Cassie were divorced. In the divorce judgment, the chancellor found no credible evidence that Jason owed any debt to his parents for the property, and that the funds used to build the house were a gift to Jason and Cassie from Fred and Joellen. He also found that both Jason and Cassie had devoted significant time to building the house. In making equitable distribution, the chancellor ordered that the insurance and grant funds by divided equally, and for Cassie to execute a quitclaim deed to the property in favor of Jason.
In March, 2009, Cassie filed for contempt because Jason had not paid her the sums due. Jason counterclaimed asking the court to “correct” its divorce judgment to show that Fred and Joellen were owners of the property, and, therefore, that the insurance proceeds were properly theirs. The counterclaim was denied.
In May, 2009, Fred and Joellen filed a pleading seeking to intervene in the divorce action that had been adjudicated four months previously. Their motion was denied.
At this point, none of the court’s rulings or judgments had been appealed.
After the court denied their motion to intervene, Fred and Joellen filed a petition for judicial foreclosure on the property against Jason and Cassie.
On May 9, 2011, Jason filed an MRCP 60(b) motion asking for relief from the judgment to pay Cassie.
On February 23, 2012, a different chancellor from the one handling the divorce issues entered a judgment allowing the foreclosure in favor of Fred and Joellen against Jason. Cassie was not a record title holder. The court’s decision specifically did not adjudicate what effect its decision had on either the previous divorce judgment or Cassie’s interest in the money or equitable interest in the property.
On November 7, 2013, the chancellor denied Jason’s pending R60 motion.
On December 26, 2013, Jason filed a complaint for declaratory relief and injunction again seeking relief from the judgment. Following a hearing, the court denied Jason any relief on March 23, 2015. The chancellor — yet another different from the two previous — found that the relief sought by Jason was “nearly identical” to that he had sought earlier in his R60 motion. The chancellor found that, since Jason had not appealed the 2009 judgment, it was final.
Jason filed a timely R59 motion. After hearing the matter on April 7, 22016, the court denied the motion except to amend a prior order to state that Joellen had been a witness in the divorce proceeding.
Jason appealed from the denial of his R57 claim for declaratory judgment. Predictably, the COA affirmed. Judge Barnes wrote for a unanimous court:
¶18. As to the denial of Jason’s claims, under Rule 57(a) of the Mississippi Rules of Civil Procedure, “[c]ourts of record within their respective jurisdictions may declare rights, status, and other legal relations regardless of whether further relief is or could be claimed.” M.R.C.P. 57(a). On the other hand, a trial court may deny a complaint for declaratory judgment “where such judgment, if entered, would not terminate the uncertainty or controversy giving rise to the proceeding.” Id. Noting that Jason failed to appeal the 2009 divorce judgment, and Fred and Joellen did not appeal the denial of their motion to intervene, Chancellor Persons held:
Once a judgment becomes final, it is dispositive as to all issues arising from a claim that were, or could have been, asserted by the parties to the litigation. Trilogy Communications, Inc. v. Thomas Truck Lease, Inc., 790 So. 2d 881[, 885 (¶12)] (Miss. Ct. App. 2001).
With the exception of Jason’s additional claims that the divorce judgment was not properly enrolled, the relief requested by Jason in his Complaint for Declaratory Relief is nearly identical to the relief that he sought in his [c]ounter[c]laim to [c]orrect [the] judgment, and similar to the claim that he made in his Rule 60 motion, both of which were denied by the [c]ourt. In the absence of any timelyfiled notice of appeal or any pending appeal action filed on behalf of Jason Sandrock or Fred and Joellen Sandrock seeking relief from either the Judgment of Divorce or from the Order which denied intervention in the divorce action, the Final Judgment of Divorce, including the [s]tipulation executed by the parties, is a valid [j]udgment upon which this [c]ourt relies and upon which the parties are bound.
Subsequently, in his bench ruling denying the Appellants’ motions for reconsideration, the chancellor concluded:
The [c]ourt and the law seek finality. We have two judgments, both of which are final. To the extent they’re in conflict, no one appealed. In essence, you can’t do what should have been an appeal now in a declaratory judgment action, which, in essence, we have the issues [of] res judicata, law of the case, all sorts of the legal doctrines here that prohibit us – or me from reopening these things.
¶19. We find no abuse of discretion in the chancery court’s findings. The Mississippi Supreme Court has held that “[a] final judgment on the merits of an action precludes the parties and their privies from relitigating claims that were or could have been raised in that action.” Walton v. Bourgeois, 512 So. 2d 698, 701 (Miss. 1987). “A final judgment has been defined by this Court as a judgment adjudicating the merits of the controversy [that] settles all the issues as to all the parties.” Sanford v. Bd. of Supervisors, 421 So. 2d 488, 490-91 (Miss. 1982) (citations omitted). “[A]n order is considered final if it ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” LaFontaine v. Holliday, 110 So. 3d 785, 787 (¶8) (Miss. 2013). Jason’s complaint is, quite simply, a collateral attack on the 2009 divorce judgment, which awarded one-half of the insurance and grant proceeds to Cassie. The 2009 judgment, despite the Appellants’ argument to the contrary, is a final judgment. While not contained in the record, the chancery court noted that Jason had filed a counterclaim to correct the judgment, which was denied by the court. His Rule 60 motion was also denied. He did not appeal either decision. Thus, his request for declaratory relief is barred. The supreme court has held: “Res judicata bars all issues that might have been (or could have been) raised and decided in the initial suit, plus all issues that were actually decided in the first cause of action.” Little v. V & G Welding Supply Inc., 704 So. 2d 1336, 1337 (¶8) (Miss. 1997) (citation omitted). Additionally,
[r]es judicata is fundamental to the equitable and efficient operation of the judiciary and “reflects the refusal of the law to tolerate a multiplicity of litigation.” Little . . ., 704 So. 2d [at] 1337 [(¶8)]. . . . The courts cannot revisit adjudicated claims and “all grounds for, or defenses to recovery that were available to the parties in the first action, regardless of whether they were asserted or determined in the prior proceeding, are barred from relitigation in a subsequent suit under the doctrine of res judicata.” Alexander v. Elzie, 621 So. 2d 909, 910 (Miss. 1992).
Harrison v. Chandler-Sampson Ins., 891 So. 2d 224, 232 (¶23) (Miss. 2005) (emphasis added).
¶20. For res judicata to apply, four identities must be present: “(1) identity of the subject matter of the action; (2) identity of the cause of/civil action; (3) identity of the parties to the cause of/civil action; and (4) identity of the quality or character of a person for or against whom the claim is made.” Miller v. Miller, 838 So. 2d 295, 297 (¶5) (Miss. Ct. App. 2002) (citations omitted). Here, the first two identities – the subject matter and the cause of action, namely the underlying facts and circumstances – are the same. In both the 2009 divorce judgment and the complaint for declaratory relief, Jason and Cassie are parties. The only difference between the two causes of action is that Jason added Fred and Joellen as defendants to the second cause. But since Jason made no claims against them, and they never acted as adverse parties to Jason (as evidenced by the fact they are now joined with him as appellants), we find the third identity requirement is met. As to the fourth identity, Cassie was named as a defendant in both causes of action. Therefore, we find all four identities are present.
¶21. Accordingly, we affirm the chancery court’s denial of Jason’s complaint for declaratory relief.
In case you hadn’t counted, 88 months — seven years and four months — after the divorce action, we finally have achieved finality. That is, we have unless Jason files something else along the lines of his earlier attempts. Stay tuned.
November 28, 2017 § 2 Comments
A point I have harped on often around here is that you should not spare your effort to produce proof on valuation of assets — particularly retirement funds, equity, and the like. It can make a huge difference in what your client takes away in equitable distribution and/or alimony, and if you have to appeal it may be the difference between affirmance and reversal.
A recent example is the COA’s decision in Inge v. Inge, decided October 3, 2017. Denise Inge appealed, complaining that the chancellor had erred by not finding the present value of the parties’ future retirement benefits. The COA found no error. Judge Wilson succinctly rejected her argument for a 10-0 court:
¶19. Moreover, to the extent that Denise’s complaint is that the chancellor failed to make findings as to present values of the parties’ respective future benefits, we simply note that Denise failed to present such evidence or calculations. The chancellor is not expected to go beyond the evidence that the parties present in order to value the marital assets. See Pruitt v. Pruitt, 144 So. 3d 1249, 1252-53 (¶11) (Miss. Ct. App. 2014). The chancellor received evidence of the future payments that each party could expect to receive under their respective retirement plans and concluded that it was fair and equitable for each party to keep his/her own benefits. Again, we cannot say that the chancellor abused her discretion. The division of assets, as a whole, was fair and equitable. Dogan [v. Dogan], 98 So. 3d  at 1124 (¶20) [(Miss. Ct. App. 20120]. [My emphasis]
Let that sink in: The chancellor is not expected to go beyond the evidence that the parties present in order to value the marital assets. In other words, it’s up to you to make a record. The more thoroughly you do that the better equipped you will be on appeal.
A few other points to ponder (with links to some previous posts):
- Another post making the same point is here.
- If you don’t give the judge enough to tip the scales your client’s way, the judge may average competing values.
- The date applied by the court to valuation can cost or gain you client big bucks.
- 8.05’s should not be an afterthought or thrown together. They should be carefully crafted with the attorney’s help because they are the “gold standard” of financial proof in chancery litigation.
August 8, 2017 § 3 Comments
Yesterday I posted about the Powell bankruptcy case and how it addressed the handling of equitable distribution in divorce when there is a pending bankruptcy proceeding. As promised, here are my thoughts:
- I have heard it said that Powell is a big change fraught with implications for family law practitioners, but I don’t see that. The language cited from Professor Bell clearly states what the law has been. Powell does not change that.
- Some may have misinterpreted the federal domestic relations exception barring federal courts from exercising jurisdiction over divorce to mean that all matters incidental to a divorce are included. The US Supreme Court, however, has made it clear that it is the granting of the divorce itself that is barred. Any matters pertaining to the property of the bankruptcy debtor are subject to bankruptcy jurisdiction.
- The only way that a chancellor may proceed in divorce after bankruptcy is filed is for you to lift the automatic stay. You have to petition the bankruptcy court to remand all of the issues, as Jessica Powell did, even knowing that some will not be remanded.
- Only problem is, per Heigle, cited in the Powell opinion, our supreme court has made it clear that the chancery court should stay all proceedings before it until the bankruptcy is concluded.
- Even without Heigle to stop you from going forward, it’s obvious that if the bankruptcy estate is taken away, equitable distribution is impossible. If equitable distribution is impossible, alimony is impossible, since you can’t get to alimony without going through equitable distribution. If most of the assets are in the bankruptcy estate, that may well limit or even eliminate child support.
- As I mentioned yesterday, I am no bankruptcy expert, but it appears that if you represent the other spouse (not the debtor), you had better file a claim for him or her in bankruptcy court right away to protect that client’s rights. You need to ask a bankruptcy expert about this.
August 7, 2017 § 1 Comment
I am no bankruptcy expert, and my experience with its intersection with a divorce action is minimal. My impression, though, is that most lawyers think that if a bankruptcy action and divorce action occur at the same time, all one has to do is to file a motion to remand the case back to chancery under the “domestic relations exception” to federal jurisdiction, which bars federal courts from issuing divorce, alimony, and child custody decrees, and the bankruptcy court will fling the case back to chancery, where it belongs.
That isn’t quite accurate, however, as a recent case illustrates. The case is In Re: Zelius Welborn Powell, III, Debtor; Powell v. Powell, no. 16-51982-KMS, adv. no. 17-06008-KMS, rendered June 30, 2017, in the U.S. Bankruptcy Court for the Southern District of Mississippi. I’ve included as much citation information as possible because I can’t find an non-subscription electronic site for a link. The case is available behind a paywall on Pacer.
The case began when Jessica Powell filed for divorce against her husband, Zelius Welborn Powell, III (Trey). While the divorce was pending, Trey filed for bankruptcy. Trey had sold some stock, and the chancellor ordered that the proceeds be held in a restricted account and “frozen.” Later the funds were turned over to the Bankruptcy Trustee.
Trey removed the entire divorce proceeding to bankruptcy court under Bankruptcy Rule 9027, and Jessica countered with a motion to remand the case to chancery court. Following an adversarial hearing, U.S. Bankruptcy Judge Katharine M. Samson had this to say about chancery jurisdiction in these cases:
… The Supreme Court has held that “the domestic relations exception [to federal jurisdiction] … divests the federal courts of power to issue divorce, alimony, and child custody decrees.” Ankenbrandt v. Richards, 504 U.S. 689, 703 (1992) …
The domestic relations exception, however, does not divest this Court of all jurisdiction in this case. Federal courts “in which a case under [bankruptcy law] is commenced or pending shall have exclusive jurisdiction of all the property, wherever located, of the debtor as of the commencement of such case, and of property of the estate … .” 28 U.S.C. § 1334(e)(1) (2005). This exclusivity is not affected by a previously pending divorce action in Mississippi’s chancery courts.
When bankruptcy is filed after a divorce petition is filed but before the judgment of divorce, all assets titled in the name of the debtor spouse become a part of the bankruptcy estate. The state court action is stayed with respect to a property division. In Mississippi, a spouse has no property interest in marital assets titled in the other’s name until a judgment of divorce and equitable distribution. Under these circumstances, the nondebtor spouse becomes an unsecured creditor in the bankruptcy with regard to assets titled in the debtor’s name.
Deborah H. Bell, Bell on Miss. Family Law, § 21.06 (2d. ed.) (internal footnotes omitted).
. . .
To prevent confusion in this and future cases, the Court has gathered some Mississippi authorities concerning the jurisdiction and authority of a chancery court over property division when a bankruptcy case has been filed.
Family law and bankruptcy become most entangled when property division and bankruptcy coincide. A state court hearing a divorce action has the power to divide marital property equitably without regard to who holds title to the property. However, in Mississippi, a spouse has no interest in property owned by the other until a court judgment classifies the property as marital and orders a transfer of the property or a lump sum payment as part of equitable distribution … When bankruptcy and divorce occur simultaneously, marital property may include assets that are, or will become, property of the bankruptcy estate …
A state court may not classify and divide marital property without permission of the bankruptcy court. However, a spouse who files a divorce action seeking property division is asserting a claim against assets held by the debtor spouse and arguably at the moment of filing divorce becomes a creditor with an unliquidated claim against the estate. The spouse may file a claim in the bankruptcy and seek relief from the stay for the court to determine the she of assets to which he or she would be entitled outside of bankruptcy. Or, the state court may cho[o]se to proceed with the divorce and other aspects of the proceeding and reserve jurisdiction to divide the property after the bankruptcy has concluded.
Bell, supra, at § 21.03 (internal footnotes omitted.
The Mississippi Supreme Court has held that while a husband’s primary asset (a partnership) was in bankruptcy, the value of that asset was unknowable, and therefore the chancellor’s “decision to grant [the wife] a property settlement and/or lump sum alimony was premature … .” Heigle v. Heigle, 654 So.2d 895, 898 (Miss. 1995). The Mississippi Supreme Court has also held that other than the question of the divorce itself, which was undisputed, “all of the remaining issues should have remained in the trial court pending the conclusion of the bankruptcy proceedings.” Id; see also Dunaway v. Dunaway, 749 So.2d 1112, 1120-21 (Miss. Ct. App. 1999) (automatic stay of bankruptcy proceeding enjoins actions affecting bankruptcy assets).
The bankruptcy court granted Jessica’s motion in part, remanding the issues related to divorce, alimony, and child support to chancery, and denying it and retaining jurisdiction over issues involving assets of the bankruptcy estate.
That’s enough for now. I’ll comment tomorrow.