The Door to Equitable Distribution
December 16, 2013 § Leave a comment
It would seem to be self-evident that the door to equitable division of the marital estate is not open unless and until the trial court has a viable claim for divorce before it.
Yet, in the case of Brown v. Brown, decided by the COA on December 3, 2013, Kimberlye Brown argued that the chancellor erred when she denied Kimberlye’s prayer for equitable distribution after the chancellor had denied both parties a divorce, and, in addition, denied Kimberlye’s claim for separate maintenance. Kimberlye appealed. Judge Lee addressed the issue for the COA majority:
¶19. Kim contends that the chancellor erred in refusing to divide the marital estate. A chancellor has the authority to divide the marital estate after a divorce has been granted. Ferguson v. Ferguson, 639 So. 2d 921, 927 (Miss. 1994). In cases where only separate maintenance has been granted, however, a chancellor does not have the power to award either party a portion of the marital estate. In Daigle v. Daigle, 626 So. 2d 140, 146 (Miss. 1993), the supreme court stated that separate maintenance “is not a dissolution of a marriage and dividing of marital assets . . . .” And the court found that the chancellor erred by dividing the marital assets. Id.
¶20. Furthermore, in Thompson v. Thompson, 527 So. 2d 617, 622-23 (Miss. 1988), the court stated:
The legal duty of the husband to support his wife does not require that he convey any property to her. During cohabitation the wife has the legal right to live in the husband’s home, but he is under no legal duty to convey it to her. And after separation her legal rights are no greater than before. . . . [T]he court should not, under the guise of enforcing that contractual duty, deprive him of his lands or other specific property, where not necessary for the enforcement of that duty.
(Citations omitted).
¶21. By asking the chancellor to divide the marital assets in the absence of a divorce decree, Kim is asking for her legal rights to be greater than they were before the separation. The chancellor did not have the authority to divide the marital assets, because the claims for divorce had been denied. This issue is without merit.
Some of the toughest swivets I ever sweated out as a lawyer were the ones where I argued something I considered so elementary that I did not even bother to gather some authority to take with me, yet I discovered to my chagrin that the chancellor was blithely unaware of the law on the point. A senior chancellor once threatened to throw out my client’s contest of a modification petition filed against him because I had not filed an answer. To compound matters, the lawyer on the other side argued that an answer was absolutely required. Neither found the express language of R81 very persuasive. Ouch.
So you might want to tuck away the above language from the Brown case in that special place where you store your legal survival gear. It just might come in handy after you have successfully defeated your opponent’s claims for divorce and separate maintenance, and opposing counsel rises and says, ” … and now, your honor, about our prayer for equitable distribution …”
Equitable Division of Personal Injury Settlement Proceeds
December 2, 2013 § Leave a comment
Gail Williams received more than $50,000 from Dow Chemical in settlement of a defective breast implant suit she had filed. She deposited the money in an account separate from her husband, Phillp, and spent some of it. When the couple went through a divorce, Phillip argued that the remaining $25,000 was acquired during the marriage, and that it should be subject to equitable distribution. He pointed out that the breast implants had been paid for with $8,000 of marital funds; ergo, the proceeds from them should be marital property. The chancellor treated the account as Gail’s separate property, not subject to division, and Phillip appealed.
The COA affirmed on November 5, 2013, in Williams v. Williams. Judge Fair’s opinion includes a nifty recitation of the applicable law. Here it is:
¶15. As recognized by the chancellor, in an equitable division of property brought into or acquired during a marriage, the property must first be subjected to a Hemsley analysis, the determination of whether assets are marital or separate and assignment of a value to each item or groups of items. Property acquired during marriage is presumed marital. In this case Gail had received a money settlement based on defective breast implants made by Dow Chemical Company during the marriage. She kept it, however, in a separate account in her name only. The sum in the account was alternatively stated in the record as $25,097, $25,075, or “about $25,000.”
¶16. The Supreme Court of Mississippi had wrestled with determination of the status of personal injury settlements as marital or separate property long before it handed down the Hemsley and Ferguson cases on July 7, 1994. In fact, in Hemsley it noted specifically the case of Regan v. Regan, 507 So. 2d 54 (Miss. 1987), as a harbinger of things to come. In Regan, using language adopted in Hemsley some seven years later, the supreme court had held that:
Incident to a divorce the Chancery Court certainly has the power to look behind the formal state of title to property and decree an equitable division of jointly accumulated property, the division to be made by reference to the economic (though not necessarily monetarily economic) contributions made by each to the acquisition and maintenance of the property. Pickle v. Pickle, 476 So. 2d 32, 34 (Miss. 1985); Spearman v. Spearman, 471 So. 2d 1204, 1205-06 (Miss. 1985); Watts v. Watts, 466 So. 2d 889, 890-91 (Miss. 1985); cf. Pickens v. Pickens, 490 S o.2d 872, 875-76 (Miss. 1986). Here, however, the evidence is overwhelming that these monies derived in substantial part, if not in whole, from Lloyd’s personal injury claim. The Chancery Court in its opinion notes:
It is undisputed that the origin of the money was a 1981 settlement of a personal injury/loss of consortium claim arising from defendant’s [Lloyd’s] injuries.
While it is true that the evidence suggests that a good bit of the settlement proceeds have been expended for the mutual benefit of the parties, there is no evidence that Lloyd ever made any gift of one-half or any other part of the proceeds to Jeanette. See May v. Summers, 328 So. 2d 345, 347-48 (Miss. 1976); Tucker v. Tucker, 252 Miss. 344, 358, 173 So. 2d 405, 411 (1965). To the extent that the funds reflected by the certificate of deposit were in fact derived from the Lloyd’s maritime personal injury claim, they are his property and may not be ordered shared with his wife as a part of a property division incident to divorce proceedings. See Amato v. Amato, 180 N.J. Super. 210, 434 A.2d 639, 641-44 (1981).
The Chancery Court erred when it ordered the certificate of deposit divided equally between the parties. Rather, the property division should have reflected, pro-rata, the extent to which the settlement proceeds were fairly attributable to the respective claims of Lloyd and Jeanette. On this appeal Lloyd strongly urges that Jeanette had no claim and, accordingly, that he should receive the entire certificate of deposit. There is enough in the record, however, to suggest to us that this may well not be the case. Under the circumstances we remand to the Chancery Court and direct that court to determine the amount of the $225,000.00 settlement attributable to the claims of Lloyd and the amount of that settlement attributable to the claims of Jeanette. The proportions can then easily be calculated from which it will follow that the certificate of deposit will be divided in those proportions.
Regan v. Regan, 507 So. 2d 54, 56-57 (Miss. 1987).
¶17. Regan was recognized twelve years later by this Court in decisions, later affirmed by the supreme court, holding that funds acquired in a personal injury case are not automatically separate property. Justice Mills began the supreme court’s opinion by noting:
We granted certiorari to address the division of personal injury settlements between spouses in divorce proceedings. The Court of Appeals found that the law has broadened in favor of the non-injured spouse since we last squarely addressed the issue in Regan v. Regan, 507 So. 2d 54 (Miss. 1987). The Court of Appeals reversed and remanded to the Chancery Court of Panola County for further proceedings. Tramel v. Tramel, *** So.2d ***, 1998 WL 536861 (Miss. Ct. App. Aug. 18, 1998). Finding the decision of the Court of Appeals to be correct, we affirm.
Tramel v. Tramel, 740 So. 2d 286, 286 (¶1) (Miss. 1999). Revisiting the subject addressed in Regan was found appropriate because:
In 1994, this Court completely transformed the law of property division in divorce proceedings in Hemsley v. Hemsley, 639 So. 2d 909 (Miss. 1994), and Ferguson v. Ferguson, 639 So. 2d 921, 930 (Miss. 1994). In Hemsley, we held:
We define marital property for the purpose of divorce as being any and all property acquired or accumulated during the marriage. Assets so acquired or accumulated during the course of the marriage are marital assets and are subject to an equitable distribution by the chancellor. We assume for divorce purposes that the contributions and efforts of the marital partners, whether economic, domestic or otherwise are of equal value.
Tramel, 740 So. 2d at 288 (¶9).
¶18. In their Tramel opinions, both of our appellate courts described the three approaches being taken by other states in classification of personal injury settlements in equitable division cases. They drew from the comprehensive discussion in the South Carolina Supreme Court Case of Marsh v. Marsh, 437 S.E.2d 34 (S.C. 1993), which set out the three methods of classification then in use: (1) award to the injured spouse; (2) the analytic approach in which compensation for pain and suffering is personal, compensation for loss of wages during the marriage is marital, but future economic compensation non-marital; and (3) a mechanistic finding the settlement, since acquired during marriage, is wholly marital property. Declining, however, to leave the choice of approaches to the trial court as did the South Carolina court, our courts adopted the reasoning in Georgia and North Carolina cases, rejecting the first and third mechanistic approaches and adopting the analytical approach. Our supreme court expressly overruled any provisions of Regan contrary to its adoption of the analytic approach and held that the lines “a chancellor must draw, as difficult as they may be, are these:
1) that portion of the proceeds allocable to compensation to the initially injured spouse for pain, suffering, and disfigurement should be awarded in its entirety to the injured spouse;
2) that portion of the proceeds allocable to lost wages, lost earnings capacity, and medical and hospital expenses, to the extent those apply to the time period of the marriage, are marital assets and are to be divided according to equitable distribution principles; and,
3) that portion of the proceeds allocable to loss of consortium should be awarded in its entirety to the spouse who suffered that loss.
Tramel, 740 So. 2d at 291 (¶18).
¶19. In her opinion in this case, the chancellor found:
After a careful consideration of the proof presented in this matter and the application of the above summarized guidelines, the Court finds all of the real property and personal property addressed in these proceedings is marital property subject to equitable distribution, with the exception of the personal injury settlement proceeds received by Gail. Those funds are contained in the Woodman of the World account #973 in Gail’s name, in the approximate amount of $25,097. See Exhibits 17, 18 and 32. These funds were obtained by Gail as a result of a settlement with Dow concerning defective breast implants. Pursuant to the principles set forth in Tramel v. Tramel, 740 So. 2d 286, 291 (Miss. 1999), the Court finds those personal injury proceeds were for Gail’s pain and suffering and disfigurement. Further, insufficient proof was presented to establish those funds had been co-mingled with marital assets.
(Emphasis added). The account records show the principal amount deposited and withdrawal of interest, as testified to by Gail, on that money, which she said was commingled with marital funds. Gail testified that her full settlement was for $45,000, and she was additionally awarded $5,000 for medical expenses for corrective surgery. She paid $20,000 for a new car, a marital asset, and placed the remaining $25,000 in a separate account. She related that she and Phillip discussed why she wanted it in her name at the time. “It was for pain and suffering,” she said three times in her testimony, adding that the additional $5,000 was for medical expenses. She concluded by saying that there were also accounts in Phillip’s name only and that she wanted to have that account in hers only. It was established that the cost of the implant surgery, which occurred fifteen years before trial, was paid from the marital checking account. The amount paid is not in the record on appeal, although Phillip claims it is, and that it is $8,000. The chancellor found Gail’s testimony that the amount left in the account is for pain and suffering to be credible, and not directly contradicted by Phillip’s testimony.
¶20. We affirm the chancellor’s finding the settlement proceeds were separate property as well within her discretion.
Not much more needs to be said except that what you have there is the body of a brief if you’re ever called upon to recite the law on the issue of equitable distribution of personal injury settlement proceeds.
Averaging Valuations
November 18, 2013 § 1 Comment
I’ve whined here before about inadequate proof of values in equitable didtsribution cases and the burden it places on the trial judge. I won’t repeat my plaints here.
The latest case where a chancellor had to make a decision with far-less-than-precise proof of values is Williams v. Williams, decided by the COA on October 5, 2013.
Phillip and Gail Williams were before the court in a divorce where the main matter in dispute was equitable distribution. Neither party produced an appraisal of a residence and real property in Alabama. Instead …
- Phillip introduced a document styled “An Acknowledgment of Lease Purchase Agreement” by which Phillip purported to sell the property to a purchaser for installment payments of $325 a month until he could “obtain a loan to pay off the balance of $40,000 … less the $325 a month without interest …” The document was filed among the land records in Alabama. In his testimony, Phillip stated that the purchaser would, indeed, be paying more than $50,000 for the property.
- Gail introduced a tax receipt showing that the property was valued for tax purposes at $61,100, with $43,900 attributed to the house, and the remainder to the underlying property.
Also included in the adjudication were the parties’ householdd goods, yard equipment, and tools, the values of which were in dispute between the parties, and for which there was no appraisal. Each party accused the other of undervaluing the items that he or she would keep, while overvaluing the items that the other would receive.
The chancellor averaged Phillip’s claimed $40,000 value with Gail’s tax receipt value of $61,110, and adjudged the value of the Alabama property at $50,550. She also averaged the parties’ valuations of the personalty.
Phillip appealed, complaining that the chancellor was in error in averaging the values.
Judge Fair, for the COA, addressed the issue this way:
¶31. In McKnight v. McKnight, 951 So. 2d 594 (Miss. App. Ct. 2007), we held that the averaging of proposed appraisals was allowed in valuation of marital realty. Even more recently we held chancellors are required only to do the best they can with what is introduced into evidence before them:
[T]he chancellor cannot be blamed for the failure of the parties to present evidence of valuation. Faced with similar circumstances, this Court held as follows in Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (¶28) (Miss. Ct. App. 1999):
[T]he 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.
It was not the chancellor’s duty to obtain appraisals of the marital property. Willie cannot now complain that the chancellor’s valuations are unfair when no reliable evidence of the value of the property was presented at trial. This issue is without merit. Common v. Common, 42 So. 3d 59, 63 (¶¶12-13) (Miss. Ct. App. 2010).
¶32. We find the chancellor’s averaging of valuations provided on Rule 8.05 forms submitted in the record and discussed on the record an acceptable course of action and within her discretion.
¶33. Overall, we find Phillip’s objections to the characterization, valuation, and division of marital property to be based on the evidence and within her discretion under Hemsley, Ferguson, and their progeny.
I get it that in some cases the cost of obtaining appraisals can seem disproportionate to the advantage to be gained. And there are some cases where one side, if not both, would prefer for the proof to be fuzzy in hopes that the chancellor will fall their particular way.
When you leave it up to the trial judge to resolve inconclusive or incomplete evidence, you get what you get. As long as the chancellor “explored the available proof and arrived at the best conclusions that he could,” and did not otherwise abused discretion, you will be stuck with the results.
Where Do the Children’s Vehicles Go?
August 28, 2013 § 4 Comments
The parties have complied with the court’s order to produce at trial a consolidated list of all the marital assets. There, among all the end tables, pots, pans, what-nots, and nick-nacks, is the 1994 Honda auto — worth $15,275 — that was purchased for the daughter to transport herself to and from college. Husband says wife should get it in equitable distribution, and wife says husband should get it. Whoever winds up with it gets a $15,275 bump in the asset column.
Those were the essential facts in the COA case of Terrell v. Terrell, decided July 16, 2013.
In that case, Robert Terrell had purchased the car for his daughter, Catherine, titled it in her name, and transferred ownership to her. The chancellor nonetheless included the vehicle in wife Mary Terrell’s share of equitable distribution. Mary appealed, arguing that the asset value of the car erroneously inflated her allocation of the marital estate.
The COA agreed with Mary, reversing and rendering:
¶17. We agree that the vehicle should not have been deemed a part of the marital estate. While it was purchased during the course of the marriage, it is not marital property, nor is it separate property. Rather, it was a gift from Robert and Mary to Catherine, who was a third-party recipient. Catherine has retained physical custody of the vehicle and has been the legal title holder of the vehicle since it was purchased. It was not an asset of Robert or Mary either jointly or separately. Accordingly, we reverse and render this issue specifically for the elimination of Catherine’s automobile from the marital estate.
The outcome here is pretty clear, but there are all kinds of permutations of this fact scenario, in my experience. Robert could have kept the car titled in his name, for insurance purposes. Or the car could have been titled in Mary for the same reason. Some parents want the car titled in either or both names solely as a control mechanism. Sometimes the car is titled in one parent’s name until the child pays some consideration for it. The possibilities are limited only by one’s imagination.
I have put the child’s auto in the column of a parent who testified that he had the car titled in his name, and did not know whether he would continue to provide the child with a vehicle. It seems to me that where the car goes depends on the particular facts of the case. In general, however, I think it’s safe to say that if the car is clearly going to stay with the child, it should be kept out of equitable distribution, and if it is really only a chattel that a parent is going to exercise control over, it should go with that parent.
I do the same with the children’s furniture and moveables.
One final point. There is plenty of case law that says if one part of the determination of assets-equitable distribution-alimony triangle is disturbed, the chancellor must look at it again and redo the whole ball of wax. Here, the appeal result is to reduce Mary’s distribution by $15,275, a not inconsiderable chunk of change. I just wonder why this was rendered and not remanded.
Tailoring Your Proof to Fit Your Case
August 22, 2013 § 2 Comments
Yesterday I visited the COA’s decision in Pelton v. Pelton, which the COA reversed because the chancellor did not make findings on the Ferguson and Armstrong factors.
All most of us know about Pelton is what we read in the opinion.
But before you dismiss this as the fault of the chancellor, consider the possibility that the record may not have included what the judge needed to adjudicate this case. I’m not saying that’s what happened here. I’m merely pointing out that sometimes the judge has to make do with what he or she has in the record. And sometimes what is in the record is not enough to cover all of the factors.
For example: in an equitable distribution case, the judge must first determine which assets are marital, and then go through the Ferguson factors to determine whether and how they should be divided. I have heard cases where there is next to no evidence as to when or how the assets were acquired. I have heard cases with scant evidence upon which to make Ferguson findings.
In a child custody case, the judge can not make Albright findings on evidence that is not in the record. So if you want the judge to consider your client as the parent with continuity of care, then you will have to put on proof to that effect. Another chancellor related his experience in a case a couple of years ago where the custodial parent defending a custody modification put on no proof as to Albright factors at all. What exactly is the chancellor to do in that situation?
MRE 614 does allow the judge to call witnesses and intrrogate them, which would seem to be a viable option where the best interest of a child is involved. But that should be a last resort in a contested case, and, in my experience, is rare in chancery court.
The bottom line is that you have to make your record. The chancellor can not rule on evidence not in the record. The appellate courts can not find that the trial judge’s ruling is supported by substantial evidence in the record when it is not there.
Inadequate Findings in a Factor Case = Remand
August 21, 2013 § 3 Comments
Most lawyers, when they are through with a case, don’t want to revisit it. That’s what makes a remand so detestable. Those do-overs are a pain.
The most sure-fire way to get a do-over is for the trial judge not to address the factors in a factor case. For those of you who have not been paying attention, certain kinds of cases require that the chancellor consider certain factors in making an adjudication. I have called it Trial by Checklist. When the chancellor does not tick off the items on the checklist, remand is practically automatic.
The latest example is the COA’s August 13, 2013, decision in Pelton v. Pelton, in which the chancellor did not: classify the assets as marital or non-marital; do an analysis of the Ferguson factors in making equitable distribution; or apply the Armstrong factors for alimony. Result is a do-over.
If you wind up with an adjudication in which you feel that the chancellor did not address the applicable factors, or where you feel that they were not adequately addressed, here are several suggestions to remedy the situation:
- File a timely R59 motion asking the court to make specific findings on the applicable factors. In Pelton, the parties did file post-trial motions, but the COA decision does not spell out what the parties were asking the court to do.
- If you are concerned that you did not make a good enough record for the judge to make findings on the proper factors, ask the court to reopen the proof to allow you to make a record. That would be a R59 motion, which must be filed within 10 days of the judgment.
- You can also in a R59 motion offer to do proposed findings of fact and conclusions of law.
Another Non-Family-Use Case
August 7, 2013 § 2 Comments
I’ve mentioned here before that I am no big fan of the “family-use” doctrine that morphs separately-owned property into marital merely because it was used by the family.
There are some exceptions to the rule, however, as I have posted about. Here is a post where the COA refused to apply it. Here is another post where I pointed out cases holding that neither plantation and maintenance, nor payment of taxes, nor even joint titling convert separate property into marital.
The latest case, Renfro v. Renfro, decided by the COA on July 30, 2013, is yet another where the appellate court did not agree with the chancellor’s application of the concept.
Claudia and Johnny Renfro married in 1987, and had no children. In January, 2011, they separated after Claudia discovered that Johnny was involved in an adulterous affair, and Claudia sued for divorce.
At issue in the divorce was equitable distribution. The parties had accumulated the usual marital things, including cars, retirement accounts and other financial assets, a residence. In addition to all of the other assets, there was a 140-acre tract of unimproved land that Claudia’s mother had deeded to her in 2007.
Following a trial, the chancellor adjudicated all of the assets, including the 140-acre tract, to be marital property subject to division. She allocated one-half of the assets, which totalled in value nearly $600,000, to each party. In her opinion, the chancellor found as to the 140 acres as follows:
The testimony and evidence is substantial that the management of the property, including its enrollment in government programs, planting of trees, leasing for hunting purposes, construction of gates and roads, spraying and paying of taxes was solely at the control of [Johnny]. Further, and perhaps most importantly, [Claudia] indicated that the development and management of the property as a tree farm was for the purposes of providing income for the parties’ retirement. As such, the court finds that the normally non-marital character of the property was changed by the family[-]use doctrine, Algood [v.] Algood, 63 So. 3d 443 (Miss. [Ct.] App. 2011), as well as by conversion by implied gift, Algood, supra, such that the property lost its non-marital nature and now must be considered marital property subject to equitable distribution.
Claudia appealed, complaining primarily that the 140 acres was not marital property subject to division, and that the chancellor had misinterpreted the evidence.
In its opinion, penned by Judge Carlton, the COA found that there was inadequate evidence to support the judge’s finding that the tree farm on the property had been developed as part of the parties’ retirement plan.
As for the other indicia of family use relied upon by the chancellor, the COA said:
[¶16] … We also find error in the chancellor’s determination that Johnny’s actions of enrolling the land in government programs, planting trees, leasing the land for hunting purposes, constructing gates and roads, spraying the land, and paying taxes on the property constituted sufficient evidence to convert the land into a marital asset. See Hankins [v. Hankins,] 729 So.2d [1283]at 1286-87 (¶15); Ory [v. Ory], 936 So. 2d [405] at 411 (¶15). This Court has held that property-tax payments are traceable and do not transmute separate property into marital property. Brock v. Brock, 906 So. 2d 879, 888 (¶50) (Miss. Ct. App. 2005) (quotation omitted) (“[T]he key to determining when there has been transmutation [from separate property to marital property] by commingling is whether the marital interests can be identified, i.e., can be traced.”). We also find no evidence submitted by Johnny to show how the land increased in value during his marriage to Claudia, or that an agreement existed between Claudia and Johnny that Johnny’s actions of managing the land would give him an interest in the property.
¶17. As acknowledged, nonmarital assets may lose their status as such if the party commingles the asset with marital property or uses the assets for the benefit of the family. Johnson, 650 So. 2d at 1286. However, Claudia testified that she and Johnny never used the land for any family purposes. Significant to our analysis, we recognize that in the recent and similar case of Marter v. Marter, 95 So. 3d 733, 737-38 (¶¶14-16) (Miss. Ct. App. 2012), this Court held that evidence that the husband maintained the property inherited by the wife, paid the property taxes, and planted some trees on the property did not convert the property to marital property by virtue of commingling.
¶18. Accordingly, we find the chancellor erred in classifying the 140 acres as marital property. The record fails to show that the real property at issue was converted to marital property through the family-use doctrine, since the property was not used for a family purpose. Additionally, Johnny’s testimony only showed a potential intended purpose for the property in the future. See Deborah H. Bell, Bell on Mississippi Family Law § 6.04 (2005). The record also fails to contain evidence that Claudia commingled the property or used it as collateral for family purposes. See Bell, § 6.04[2]. Also, insufficient evidence exists in the record to show that Johnny contributed anything of significance to the improvement of the property. The record shows little, if any, contribution by Johnny, and shows that Claudia owned the property for only three years while she cohabited with Johnny. For the foregoing reasons we reverse the judgment of the chancery court on the matter of equitable division of the property — specifically, the classification of the 140 acres as marital property — and remand to that court for further proceedings consistent with this opinion.
That is a template you might be able to use in extricating your client’s property from the grasping tentacles of the family-use doctrine.
It’s still beyond me that activities like infrequent use of a beach condo, or fishing in a lake, or use of an antique chair, would convert separate property to marital, while plantation and maintenance would not. But, hey, I’m not complaining. Any exception to this rule is gratefully welcomed by me!
A Not-so-Separate Peace
July 2, 2013 § Leave a comment
Christopher and Tammy Clausell purchased a jointly-titled home in 2003, using a cahsier’s check for $60,000 that was derived from settlement of a personal-injury claim that Christopher had before the marriage, but that he received post-marriage.
In 2005, after Hurricane Katrina, the parties received a joint grant of $98,000, of which they devoted around $78,000 to remodelling the home.
The parties lived together in the home until 2008, when they separated, and, after Christopher filed for a divorce, he was awarded temporary occupancy of it.
In the course of the divorce, the parties entered into a consent, leaving it to the chancellor to decide the equitable distribution of their personal and real property.
In 2011, the chancellor classified the home as marital property. The judge ruled that the facts that the home was the primary marital residence for most of the ten-year marriage, and that it was jointly titled, and that the grant money was invested in it, all supported a finding that it was a marital asset. After applying the Ferguson factors, she ordered that it be sold, with the net profit divided equally between Christopher and Tammy.
Christopher appealed, taking the position that the chancellor was in error in classifying the home as marital property subject to division, since the entire purchase price was paid out of his personal-injury settlement.
In Clausell v. Clausell, decided June 25, 2013, the COA affirmed. Judge Fair, for the majority, explained:
¶9. 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. Hemsley [v. Hemsley], 639 So. 2d at 914; Ferguson [v. Ferguson], 639 So. 2d at 928. Here, the only dispute by either party of the chancellor’s classification of assets as marital or separate and the division of those assets is the classification and division of their jointly titled house. In Johnson v. Johnson, 650 So. 2d 1281, 1287 (Miss. 1994), our supreme court stated that all marital assets are subject to possible equitable distribution in accordance with the factors provided in Ferguson. Marital property is “any and all property acquired or accumulated during the marriage . . . and [is] subject to an equitable distribution by the chancellor.” Hemsley, 639 So. 2d at 915. Further, such marital “[a]ssets acquired or accumulated during the course of a marriage are subject to equitable division unless it can be shown by proof that such assets are attributable to one of the parties’ separate estates prior to the marriage or outside of the marriage.” Id. at 914.
¶10. Christopher mistakenly asserts that the home cannot be marital property because it was purchased with money from his personal-injury settlement from litigation filed before marriage on a cause of action that accrued to him prior to marriage. However, Christopher was married to Tammy when he received the settlement check, and he was married to Tammy when they purchased the home. Further, “nonmarital assets . . . may be converted to marital assets if they are commingled with marital assets or used for familial purposes. Such converted assets are then subject to equitable distribution.” Heigle v. Heigle, 654 So. 2d 895, 897 (Miss. 1995). “The burden is upon one claiming assets to be non-marital to demonstrate to the court their non-marital character.” A & L, Inc. v. Grantham, 747 So. 2d 832, 839 (¶23) (Miss. 1999) (citing Hemsley, 639 So. 2d at 915). “This burden goes beyond a mere demonstration that the asset was acquired prior to marriage.” Id.
¶11. Reversal is warranted “only where the failure to make sufficient findings of fact and conclusions of law constitute manifest error.” Selman v. Selman, 722 So. 2d 547, 554 (¶29) (Miss. 1998). In this case, the chancellor set out her considerations in classifying the home as marital under Hemsley and conducted a detailed analysis of all the Ferguson factors in distributing the marital estate. We cannot say that the chancellor abused her discretion in classifying the home as marital and dividing proceeds of its sale equally. Accordingly, we affirm the judgment of the chancellor.
Understand that if you represent the party seeking to keep an asset separate, you have a substantial burden that “goes beyond a mere demonstration that the asset was acquired prior to the marriage.” You will have to show how the asset retained its separate character, or how it can easily be traced out and re-separated. And your proof must be in the record. If you just dump that on the judge to do and do not make the record, you are planting potent reversible error.
My sense is that it is getting harder and harder to convince the appellate courts that an asset is in any way separate (1) if it has been used in any form or fashion for family use, or (2) if marital money was invested in it, or (3) if there is no pre-marital agreement that it be treated separately despite (1) and/or (2).
As a lawyer, you are in a position to advise clients in advance how to avoid these judicially-created traps. The downside is that, 99% of the time, you are invited to get involved long after the deed is done (no pun intended).
Equitable Distribution of Hidden Assets
June 26, 2013 § 2 Comments
What do you do when one party hides assets she claims are separate, and refuses to divulge their whereabouts? You divide them anyway. At least that is what happened in Wilson v. Wilson, decided June 11, 2013, by the COA.
Penny and Gregory Wilson had the kind of financial arrangement that one sees from time to time in a divorce case. Penny made most of the income, apparently, and the parties maintained completely separate banking and finances. Gregory paid Penny a sum that they agreed was one-half of the household expenses, and some extra money when he worked odd jobs or when Penny wanted to go on vacation. One might say that Gregory was renting his marriage.
Penny was quite the financial wizard. She had managed to accumulate more than $200,000 in a credit union account, but she withdrew the money before trial and, according to the COA opinion, she ” … declined to reveal where she had placed the funds from that account” (¶ 4). She also managed to squirrel away some cash in several CD’s, but she cashed those in also, and when asked where the cash was, she ” … refused to reveal its location to the chancery court” (¶ 6).
Now, let’s stop right there.
What exactly is any self-respecting chancellor to do when confronted with a party who blatantly and wantonly refuses to comply with the express dictates of UCCR 8.05?
Rule 8.05(a) requires these disclosures:
A detailed written statement of actual income and expenses and assets and liabilities, such statement to be on the forms attached hereto as Exhibit “A”, copies of the preceding year’s Federal and State Income Tax returns, in full form as filed, or copies of W-2s if the return has not yet been filed; and, a general statement of the providing party describing employment history and earnings from the inception of the marriage or from the date of divorce, whichever is applicable …
There is no exception for separate property, or what one claims to be separate, or any other financial information. The rule specifically requires disclosure of actual income and expenses, as well as assets and liabilities, without exception.
The rule also states that:
The failure to observe this rule, without just cause, shall constitute contempt of Court for which the Court shall impose appropriate sanctions and penalties.
What the chancellor chose to do here was to divide the assets between Penny and Gregory, over Penny’s protestation that Gregory had not contributed to their accumulation, and that they were separate. In affirming the chancellor’s ruling, the COA pointed out that the burden was on Penny to prove the non-marital character of the assets (¶ 14), which she failed to do.
I guess that the chancellor decided that Penny had, in fact, disclosed the assets as required in UCCR 8.05, to the extent that she subjected them to adjudication, and her attempt to conceal them would not shield them from execution. Still, I find it troubling that a party could take the stand and expressly refuse to be candid and forthright about her assets, for a couple of reasons:
- There already exists a “fudge factor” in most financial statements. It’s not uncommon for parties to overestimate their expenses, overlook overtime and bonuses, and minimize self-employment income. When a party takes the stand and professes to be hiding assets, that kicks it up to an entirely different level.
- When one hides assets, no one knows for sure exactly how much money or value we are dealing with. Penny disclosed that there was $217,000 in the credit union account, but if she divulged the institution and account number, discovery might have found the real balance to be more like $300,000. And there is nothing in the COA opinion to show that Penny ever told the balance that had been in the CD’s.
I can’t say that I would have overlooked Penny’s intransigence.
I also don’t understand how Gregory’s lawyer did not raise cane before trial over the secretion of more than $200,000 in cash and CD’s. Gregory had a substantial stake in establishing their true value. The chancellor awarded him 40% of the credit union money. There is a big difference between 40% of 200,000 and 40% of $300,000.
“FAMILY USE DOCTRINE” HITS A WALL
June 13, 2013 § 1 Comment
I confess that I am no fan of the so-called “Family Use Doctrine.” That’s the concept that, simply because a separate asset was used by the household, its character changes from separate to marital, in whole or in part. I’ve voiced my concern about it here before.
In its latest manifestation, the COA reversed the chancellor’s ruling that Ceicle Palmer was entitled to one-half of the marital estate, which the chancellor adjudged to include a home separately owned prior to the marriage by her husband, Roland. The parties had lived in the home together, and Ceicle had invested some $2,000 in it. The effect of the judge’s ruling, then, was to award Ceicle half of the home equity, which amounted to more than $30,000. Roland appealed.
In the case of Palmer v. Palmer, decided May 7, 2013, the COA reversed and remanded. At ¶ 9 the opinion by Judge Irving states that, “We agree with the chancellor’s finding that the home is marital property.” That’s the “Family Use Doctrine” clicking into place. The court went on to say, however:
¶10. We have held that “[e]quitable distribution does not mean equal distribution,” and there is no requirement that each spouse must receive half of an interest in the property. Jenkins v. Jenkins, 67 So. 3d 5, 11 (¶13) (Miss. Ct. App. 2011) (quoting Seymour v. Seymour, 960 So. 2d 513, 519 (¶15) (Miss. Ct. App. 2006)). “[E]quitable distribution [is] a fair division of marital property based on the facts of each case.” Seymour, 960 So. 2d at 519 (¶15). We point out that the chancellor did not specifically award Ceicle a fifty percent interest in the marital home. Rather, he awarded her a fifty percent interest in the marital estate. However, the effect of awarding her fifty percent of the marital estate was to award her a fifty percent interest in the marital home. In reaching his decision, the chancellor noted that there was no evidence that the home had appreciated in value during the course of the marriage and that Ceicle’s only financial contribution to the home was $2,000 for putting in some carpet and tiling the kitchen floor. At one point, the chancellor stated that there was no evidence that the carpet and tile had resulted in an appreciation in the value of the home. However, the chancellor later said that Ceicle had made $2,000 worth of improvements.
¶11. We acknowledge the clarity in our law—that equitable distribution is committed to the sound discretion of the chancellor. However, we, as an appellate court, have oversight responsibility, and if we could never reverse a chancellor’s decision regarding equitable distribution, our oversight responsibility would be reduced to the ministerial act of simply rubber-stamping a chancellor’s decision. While Ceicle did pay $2,000 for new flooring, it is difficult to conclude that her meager financial contribution, along with her domestic contributions to the relationship, warrants a fifty percent interest in the marital home. The house was already paid for before Ceicle and Roland married. The record reflects that Roland also made domestic contributions to the relationship in addition to providing the home, without any compensation or contribution from Ceicle. The record also reflects that Roland has no money from any source other than his meager Social Security check. He would be forced to sell the home in order to pay Ceicle the $31,502.50 that the chancellor awarded her. At that point, he would be homeless or would have to incur additional expenses for lodging. Even the chancellor recognized this fact, as he specifically found [as much].
The court went on to consider the parties’ relative financial conditions and health, concluding that the equities should be adjusted to give Roland the greater part of the marital estate.
There was a dissent critical of the majority opinion, which was addressed by the majority as follows:
¶13. The dissent apparently misreads the focus of our finding that the chancellor erred in dividing the marital estate, as the dissent states, in paragraph 21, that “Mississippi law does not require a spouse to have made a direct economic contribution to an asset to be awarded an interest.” Nothing in our opinion suggests that our law requires such. We do not find error with the chancellor’s judgment because it awarded Ceicle what is tantamount to a fifty percent interest in an asset that she made no contribution to acquiring. We have discussed the facts surrounding the acquisition of the marital home because those facts are relevant to the greater issue of whether there is substantial evidence to support the chancellor’s finding that a fifty-fifty division of the marital estate is equitable. It is only one piece of the overall equation, but an important piece because the marital home constitutes more than fifty percent of the total value of the marital estate. To be clear, our decision rests upon a consideration of the totality of the factual circumstances, including Roland’s health versus Ceicle’s, Roland’s post-divorce financial situation, and especially the chancellor’s finding and recognition that:
If this court were to direct that Roland Palmer sell the marital home, he would net some cash, but would be forced to either rent or buy and would rapidly deplete any funds realized from the sale of the home. Based upon his current income, he would be unable to afford to either rent or buy.
Despite this finding, the chancellor, in effect, concluded that it was equitable to thrust Roland into the very situation that he specifically found was inequitable and which would leave Roland in dire straits.
It’s hard to reconcile this case with Rhodes v. Rhodes, the family-use case I whined about in that prior post. In Rhodes, the COA held that, among several other factors, the household use of a beach condo a few weeks a year for the several years of the brief marriage converted it to marital poperty. That was viewed as equitable by the COA.
I have joked that our jursisprudence is reaching biblical proportions, meaning that one can now find authority to support nearly every possible position, and even several cases on each opposite side of an issue.
Is this Palmer case an anomaly, an outlier? We’ll see.
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