Local Rules
August 7, 2019 § 1 Comment
In the divorce case between Marcus and Sumie Sanders, the parties entered an agreed order that their temporary hearing would be submitted by affidavits, without live witnesses. The parties submitted their affidavits, and the court awarded custody of the parties’ daughter to Sumie.
Following entry of a final judgment in his case, Marcus appealed. One issue he raised was that the court in his district required submission of temporary issues by affidavit, which amounts to an unapproved local rule that prejudiced him in the ultimate outcome of the case.
Judge Jack Wilson’s opinion in Sanders v. Sanders, a May 14, 2019 COA decision, addressed the issue:
¶39. On appeal, Marcus argues that the Fourteenth Chancery Court District enforces a local rule requiring temporary custody hearings to be decided by affidavits only. He argues that the rule is invalid because the Mississippi Supreme Court has not approved it. See M.R.C.P. 83(b) (“All . . . local rules . . . adopted before being effective must be filed in the Supreme Court of Mississippi for approval.”). Marcus further argues that the chancellor’s temporary ruling impacted her final ruling, and yet because there was no real hearing on temporary custody, the chancellor’s temporary ruling “cannot be reviewed.”
¶40. We find no reversible error for three reasons, two of which are related. First, the record contains only an agreed order. The record does not show that there actually is an “unapproved local rule.” The chancery court’s website does provide a fill-in-the-blank template for an order setting a hearing on temporary matters by affidavit. [Fn omitted] However, there is nothing to show that this template equates to a court rule that such hearings must be decided on affidavits alone. Nor does the template establish that the chancellors of the district will not hold a live hearing or consider live testimony upon request.
¶41. Second and related, Marcus never raised this issue in the trial court. There is nothing to show that he ever asked for a live hearing or to present live testimony. Because Marcus did not raise this issue, we have no way of knowing whether there is an unapproved rule or whether the chancellor would have heard and considered live testimony. Therefore, the record is inadequate to review Marcus’s claim, and the issue is waived and procedurally barred on appeal. See, e.g., Adams v. Rice, 196 So. 3d 1086, 1090 (¶13) (Miss. Ct. App. 2016) (“A party is not allowed to raise an issue for the first time on appeal.”).
¶42. We note that the Supreme Court addressed a similar issue in Fredericks v. Malouf, 82 So. 3d 579, 582 (¶¶15-16) (Miss. 2012). In that case, the defendants argued that they were prevented from obtaining a hearing on their motion to transfer venue because of an unapproved local rule that stated that hearings on motions were not “automatically granted” and that the parties would “be notified by the court” if the court determined that a hearing was necessary. Id. at (¶15). The Supreme Court concluded that the local rule was “in derogation of Mississippi Rule of Civil Procedure 83, because [it had] never been submitted to [the Supreme] Court for approval.” Id. at (¶16). Nevertheless, the Supreme Court also “emphasize[d] that the trial court’s rule did not prohibit the [d]efendants from requesting a hearing; there [was] no evidence that the trial court would not [have] consider[ed] such a request; and no order exist[ed] denying such.” Id. In other words, the unapproved local rule did not excuse the defendants’ failure to at least request a hearing on their motion. Likewise, in this case, we conclude that the alleged existence of a local rule does not excuse Marcus’s failure to request a live hearing on temporary custody.
¶43. A third reason that Marcus’s argument is without merit is that he fails to establish any prejudice. “A temporary custody order is just that, temporary; it does not change the underlying burden of proof.” Neely v. Welch, 194 So. 3d 149, 160 (¶33) (Miss. Ct. App. 2015) (quoting Baumgart v. Baumgart, 944 S.W.2d 572, 573 (Mo. Ct. App. 1997) (brackets omitted)). The chancellor must conduct an Albright analysis and decide the issue of permanent custody de novo regardless of the temporary order. See id. Marcus overstates the significance of the temporary custody order as it relates to the chancellor’s final ruling and Albright analysis. The chancellor’s final judgment found that the continuity of care factor “strongly favor[ed]” Sumie because Sumie had “always” been Kristen’s primary caregiver, “[b]oth prior to and after the issuance of [the] [t]emporary [o]rder.” (Emphasis added). The chancellor’s analysis was based on the totality of the evidence and only briefly mentioned the temporary custody period. In addition, for the reasons discussed above, there is substantial evidence to support the chancellor’s permanent custody decision.
I would add that two points: (1) Marcus agreed to the affidavit procedure by agreed order, so he should be bound by that agreement; and (2) MRCP 43 expressly allows the trial judge to decide fact issues raised in motions by affidavits.
This argument raises the question: when do local practices and judges’ preferences become local rules? We have all kinds of local practices here in my district that reflect the judges’ preferences as to how to conduct business, but we have no local rules. As we all know, practice varies from one district to another, and even among chancellors within a district. And for good reason. What works in the Delta or on the Coast may not be practical here. Workloads vary, judges’ personalities and approaches to work are different, and different people have different work-styles. I hear lawyers bemoan the fact of varying practices among districts from time to time, but I really don’t believe the answer is to squeeze all chancellors into mechanical uniformity.
To Set Aside a Default Judgment
August 6, 2019 § Leave a comment
American Pride LLC filed suit to quiet and confirm title to property it acquired at a tax sale. It obtained a default judgment against John Vanaman, who owned the property.
Vanaman filed a motion in the trial court to set aside the default judgment, which the chancellor denied. Vandaman appealed, arguing that he was not properly served with process and that the chancellor’s decision did not properly follow the law.
In Vanaman v. American Pride Properties, LLC, decided December 18, 2018, the COA reversed and remanded, finding that the chancellor’s decision not to set aside the default judgment was in error, but finding that Vanaman was properly served with process. On the setting aside of the default judgment, the court pointed out that the trial court is required to apply a three-prong balancing test:
(1) the nature and legitimacy of the defendant’s reason for default (i.e., whether the defendant has good cause for default); (2) whether the defendant has a colorable defense to the merits of the claim; and (3) the nature and extent of the prejudice which may be suffered by the plaintiff if the default judgment is set aside. American States Insurance Co. v. Rogillio, 10 So. 3d 463, 468 (Miss. 2009).
Rogillio adds that the second factor is the most important. In Vanaman, the court upheld the chancellor on the first factor and reversed on the second. Judge Irving wrote the court’s opinion:
¶17. With respect to the second prong, Vanaman argues that he has a colorable defense because the chancery clerk did not follow the requirements of Mississippi Code Annotated section 27-43-3 (Rev. 2017) in issuing the notice of forfeiture stemming from the tax sale of the Wortham Road property. Vanaman maintains that he was not properly served with the notice of forfeiture either personally or by certified mail to his usual place of abode, and that publication was not proper. In response, American Pride asserts that Vanaman did not contest the validity of the notice of forfeiture provided by certified mail or by publication. Rather, he only took issue with the personal service provided by the sheriff. With respect to personal service, American Pride maintains that the 20440 Armes Road address was the proper location to serve Vanaman given that it was the address listed on the 2001 quitclaim deed, and that the chancery clerk had no reason to believe that Vanaman’s address was anything other than that.
¶18. Of the three prongs of the Rogillio balancing test, this one is the most important. Rogillio, 10 So. 3d at 470 (¶16). Our supreme court explained the meaning of a “colorable defense” in Tucker v. Williams, 198 So. 3d 299, 312 (¶35) (Miss. 2016):
“Colorable” is defined as appearing to be true, valid, or right. A colorable defense is one that reasonably may be asserted, given the facts of the case and the current law. A defense need not be compelling, be proven to trial standards, or be supported by sworn evidence in order to qualify as a “colorable defense.” Rather, the defense must be a reasonable one. Indeed, this Court has held that even a defense of questionable strength may be colorable.
(Citations and internal quotation marks omitted).
¶19. Mississippi Code Annotated section 27-43-1 (Rev. 2017) requires that a chancery court clerk, “within one hundred eighty (180) days and not less than sixty (60) days prior to the expiration of the time of redemption with respect to land sold, either to individuals or to the state . . . issue notice to the record owner of the land sold as of 180 days prior to the expiration of the time of redemption.” Section 27-43-3 requires that redemption notice be given by personal service, mail, and publication in an appropriate newspaper:
The clerk shall issue the notice to the sheriff of the county of the reputed owner’s residence, if he is a resident of the State of Mississippi, and the sheriff shall be required to serve notice as follows:
(a) Upon the reputed owner personally, if he can be found in the county after diligent search and inquiry, by handing him a true copy of the notice;
(b) If the reputed owner cannot be found in the county after diligent search and inquiry, then by leaving a true copy of the notice at his usual place of abode with the spouse of the reputed owner or some other person who lives at his usual place of abode above the age of sixteen (16) years, and willing to receive the copy of the notice; or
(c) If the reputed owner cannot be found after diligent search and inquiry, and if no person above the age of sixteen (16) years who lives at his usual place of abode can be found at his usual place of abode who is willing to receive the copy of the notice, then by posting a true copy of the notice on a door of the reputed owner’s usual place of abode.
The sheriff shall make his return to the chancery clerk issuing the notice. The clerk shall also mail a copy of the notice to the reputed owner at his usual street address, if it can be ascertained after diligent search and inquiry, or to his post-office address if only that can be ascertained, and he shall note such action on the tax sales record. The clerk shall also be required to publish the name and address of the reputed owner of the property and the legal description of the property in a public newspaper of the county in which the land is located, or if no newspaper is published as such, then in a newspaper having a general circulation in the county. The publication shall be made at
least forty-five (45) days prior to the expiration of the redemption period.
. . . .
Notice by mail shall be by registered or certified mail. In the event the notice by mail is returned undelivered and the notice as required in this section to be served by the sheriff is returned not found, then the clerk shall make further search and inquiry to ascertain the reputed owner’s street and post-office address. If the reputed owner’s street or post-office address is ascertained after the additional search and inquiry, the clerk shall again issue notice as set out in this section. If notice is again issued and it is again returned not found and
if notice by mail is again returned undelivered, then the clerk shall file an affidavit to that effect and shall specify in the affidavit the acts of search and inquiry made by him in an effort to ascertain the reputed owner’s street and post-office address and the affidavit shall be retained as a permanent record in the office of the clerk and that action shall be noted on the tax sales record. If the clerk is still unable to ascertain the reputed owner’s street or post-office address after making search and inquiry for the second time, then it shall not be necessary to issue any additional notice but the clerk shall file an affidavit specifying the acts of search and inquiry made by him in an effort to ascertain the reputed owner’s street and post-office address and the affidavit shall be retained as a permanent record in the office of the clerk and that action shall be noted on the tax sale record.
. . . .
Should the clerk inadvertently fail to send notice as prescribed in this section, then the sale shall be void and the clerk shall not be liable to the purchaser or owner upon refund of all purchase money paid.
“All three requirements must be met for the redemption notice to be complete and in accordance with the statute.” Cleveland v. Deutche Bank Nat. Tr. Co., 207 So. 3d 710, 715 (¶20) (Miss. Ct. App. 2016). Statutes governing notice of a tax sale are “to be strictly construed in favor of the landowners, and any deviation from the statutorily mandated procedure renders the sale void.” Id.
¶20. We disagree with American Pride that Vanaman failed to raise the issue of notice via certified mail or publication. Vanaman argues that his motion to set aside the court’s default judgment was erroneously denied; inherent in the analysis of whether a court should have set aside a default judgment is the question of whether the landowner has a colorable defense. As such, this issue is properly before us on appeal.
¶21. As Vanaman points out, several documents were filed with the chancery clerk’s office listing his address as 22311 L. Lizana Road following the execution of the quitclaim deed in 2001, including a certificate of redemption in 2010 and a release from delinquent tax sale in 2012. Despite the filing of these documents with the chancery clerk, the notice of forfeiture executed on April 1, 2015, still listed Vanaman’s address as 20440 Armes Road. We further take note of the fact that whoever signed the return receipt on April 8, 2015, after delivery of the notice of forfeiture, actually wrote out a different address—22311 L. Lizana Road—from the address the notice was actually delivered to—20440 Armes Road. It is clear from the record that Vanaman had a colorable defense with respect to whether service was properly effectuated regarding the notice of forfeiture. As stated, this factor is the most significant of the Rogillio balancing test; we find that it weighs in favor of Vanaman, and that it merits the default judgment being set aside.
The court, brushing aside American Pride’s argument that it would be prejudiced if the default judgment were set aside because it had invested two years of litigation expenses in the case, held that prejudice “must be something more than the routine cost of litigation” (¶23).
The two obvious takeaways here are: (1) that if you expect to set aside a default judgment, you had better have a colorable claim; and (2) any failure of the clerk or sheriff to comply with every detail of the statute can get your tax sale set aside.
More than Known Creditors
August 5, 2019 § Leave a comment
MCA 93-7-145 is the statute that requires publication of notice to creditors in an estate matter. A prerequisite to publication is the filing of an affidavit by the fiduciary.
Most lawyers with whom I come into contact call that affidavit “The Affidavit of Known Creditors.”
But that is a misnomer, and a dangerously misleading one at that, because it is not at all an affidavit stating only the creditors who are known; the statute requires that the fiduciary must make “reasonably diligent efforts to identify persons having claims against the estate,” and make affidavit of those efforts.
In Estate of Petrick, 635 So. 2d 1389, (Miss. 1994), the Mississippi Supreme Court stated:
“From a reading of this statute it is clear that an administratrix has four responsibilities: (1) she must make reasonably diligent efforts to ascertain creditors having claims against the estate and mail them notice of the 90 day period within which to file a claim; (2) she must file an affidavit stating that she has complied with the first subsection; (3) she must publish in some newspaper in the county a notice to creditors explaining that they have 90 days within which to file claims against the estate; and (4) she must file proof of publication with the clerk of court.”
In Petrick the court affirmed a chancellor’s ruling allowing the untimely $6,220 claim of a medical firm whose status as a claimant should have been reasonably known to the fiduciary, but the fiduciary did not include the firm in her affidavit and did not send it notice.
Another flaw in the fiduciary’s actions was that she published notice to creditors first, and filed her affidavit a month after beginning publication. The court in Petrick stated that publication may be done only after the affidavit is filed.
A previous post on point is at this link.
“Quote Unquote”
August 2, 2019 § 2 Comments
“The sun, with all those planets revolving around it and dependent upon it, can still ripen a bunch of grapes as if it had nothing else in the universe to do.” — Galileo Galilei
“Go outside. Don’t tell anyone and don’t bring your phone. Start walking and keep walking until you no longer know the road like the palm of your hand, because we walk the same roads day in and day out, to the bus and back home, and we cease to see. We walk in our sleep and teach our muscles to work without thinking and I dare you to walk where you have not yet walked and I dare you to notice. Don’t try to get anything out of it because you won’t. Don’t try to make use of it because you can’t. And that’s the point.” — Charlotte Eriksson
“Nature poets can’t walk across the backyard without tripping over an epiphany.” — Christian Wiman
Voluntary Reduction in Income
July 31, 2019 § 2 Comments
During a period when he was earning between $186,000 and $229,000 working in foreign countries, David Martin entered into an agreed judgment in 2014 to pay his ex, Wendy Borries, $2,000 a month in child support.
Martin’s employment contract ended in May, 2015, and he relocated from overseas to Mississippi. Unable to find employment at his former level of income, he took a job at Ingalls Shipbuilding as an electrician earning $4,200 a month.
In April, 2016, Martin filed a petition for downward modification of support, citing his reduction in income. Borries counterclaimed to require Martin to pay half of the oldest child’s college expenses.
Following a hearing, the special chancellor denied Martin’s request for modification and ordered him to pay half of college, with a small reduction in his child support. Martin appealed, claiming error in the court’s refusal of his modification request.
In Martin v. Borries, handed down June 18, 2019, the COA affirmed. Chief Judge Barnes wrote for the court:
¶8. The chancery court denied Martin’s petition for modification, finding he had “failed to prove to the [c]ourt a substantial and material change in circumstances since the February 28, 2014, [a]greed [j]udgment of [m]odification.” In its findings, the court placed “great weight” in Martin’s earning capacity and concluded that his reduction in income was voluntary.
¶9. “There can be no modification of a child support decree absent a substantial and material change in the circumstances of one of the interested parties arising subsequent to the entry of the decree sought to be modified.” Evans v. Evans, 994 So. 2d 765, 770 (¶16) (Miss. 2008) (quoting Gillespie v. Gillespie, 594 So. 2d 620, 623 (Miss. 1992)). One factor to be considered in assessing whether a material change in circumstances has occurred warranting modification of child support “is the relative financial condition and earning capacities of the parties.” Bailey v. Bailey, 724 So. 2d 335, 337 (¶7) (Miss. 1998) (citing Caldwell v. Caldwell, 579 So. 2d 543, 547 (Miss. 1991)). But “[t]he change must be one that cannot have been reasonably anticipated at the time of the original decree and one that reasonably affects the parties’ ability to abide by the original decree.” Howard, 968 So. 2d at 972 (¶24) (citing Poole v. Poole, 701 So. 2d 813, 818 (¶¶19, 21) (Miss. 1997)). Martin claims that he suffered a material change in circumstances that was unforeseeable and “came through no fault of his own.” Therefore, he argues that the court’s findings were “manifestly wrong.”
¶10. In Tingle v. Tingle, 573 So. 2d 1389, 1391 (Miss. 1990), the chancery court granted a father’s petition to reduce his child-support obligation after the father quit a steady, wellpaying job to attend college full-time. The Mississippi Supreme Court noted that when the father entered into the divorce decree awarding child support—only six months before filing the petition for modification—“it [was] reasonable to believe that this action . . . was anticipated.” Id. at 1392. The supreme court, therefore, concluded that “under the facts of the case at bar, the unilateral acts of the appellee do not justify a reduction in his child support obligation” and reversed the chancery court’s decision. Id. at 1393. Subsequently, in Bailey, the supreme court reversed and remanded a chancellor’s decision to reduce a mother’s child-support obligation after she left her employment to stay at home with a new baby. Bailey, 724 So. 2d at 337 (¶6). Concluding that the mother’s actions constituted a voluntary reduction in income, the Bailey Court reasoned that it would be inequitable for one parent to quit his or her job by choice and expect the other parent “to pick up the slack” without having any vote in the matter. Id. at 338 (¶10).
¶11. At trial, Martin testified that he had worked offshore in project management for eight years and that his adjusted gross income in 2013 was $186,782 and $229,000 in 2014. He earned $184,716 from January to June 2015. When Martin entered into the agreed order in 2014, he was aware that his project assignment had a finite duration. Furthermore, although Martin claims that the job market was “difficult” and that he was unable to find equivalent employment to his prior job, there was testimony that there were job opportunities available to him, which for his own personal reasons, he found unappealing.
Q. And you would admit to His Honor there are postings now on Rigzone that you certainly would be qualified for?
A. There are postings on Rigzone that I would certainly be qualified for.
. . . .
But what I do know is there are various countries in this world that I absolutely will not work in because of the nature that our world is in right now . . . they’re high-risk areas.”
As the chancery court observed, it was Martin’s decision “not to return to his high paying career unless he [could] choose the country to which he would go,” and Martin admitted before the court that taking the job at Ingalls for less pay was “a choice that I have made.” Our Court has held that a minor child “should not suffer a diminution in support because of [the father’s] unilateral act based upon personal preferences about his workplace.” Pullis v. Linzey, 753 So. 2d 480, 485 (¶11) (Miss. Ct. App. 1999). Martin also acknowledged that three months after his contract ended, he bought his wife a new Mercedes for $38,223.
¶12. Borries also testified that Martin had been planning to quit working offshore for a while:
A. He has told me for years that he was going to quit his job and come work at Ingalls, and I wasn’t going to be getting the child support that I was getting.
Q. What did he describe it as? What was the word he used to describe his payments to you?
A. The gravy train.
Q. Okay. So [Martin] said that he was going to quit working overseas, come work at the shipyard, and that, quote, the gravy train–what would happen to the gravy train?
A. It was going to stop.
Q. Okay. And so he told you he was going to do this?
A. He has told me numerous times over the years. He told me he was going to quit his job as soon as . . . he married this woman.
. . . .
So he has told me that when [his wife] gets her citizenship and she–he moves her over here, he’s going to quit working offshore and find a job here, and he wasn’t going to be paying child support because the gravy train was going to stop. And he has told me that so many times it’s not even funny.
In Leiden v. Leiden, 902 So. 2d 582, 585 (¶¶12, 14) (Miss. Ct. App. 2004), this Court affirmed a chancellor’s decision to deny modification of child support when the father’sactions in terminating his employment were voluntary and the evidence showed that he “had planned to take an early retirement.”
¶13. We find this case similar. The evidence reflects that Martin planned to quit his overseas job and return to Mississippi for less pay. These actions were voluntary and anticipated. Finding no manifest error in the chancery court’s determination that Martin voluntarily reduced his income, we affirm the court’s denial of the petition for modification.
Don’t you wish you had a crystal ball that would reveal all of your prospective client’s statements against interest before you decided to get into the case? Gravy train, indeed.
Late to the Party
July 30, 2019 § Leave a comment
Terrie Singleton and Orlando Buford had a son together. Orlando filed an action in chancery seeking custody of the child. On the day set for hearing Terrie failed to appear, and, based on the undisputed testimony of Orlando and his mother, he was granted custody.
Neither Terrie nor her attorney appeared because the attorney had calendered the case for the wrong date. Later that day the attorney discovered the error and asked for a continuance, which was denied. The attorney then filed a “motion for reconsideration” even before the judgment was entered, followed by a motion for new trial “or reconsideration” seven days after the judgment was entered. The chancellor denied the relief and Terrie appealed.
In Singleton v. Buford the COA reversed and remanded in a decision rendered June 18, 2019. Judge Jack Wilson’s opinion for the majority devoted considerable attention to whether Terrie’s post-trial motion were for R59 or R60 relief, and then turned its attention to whether the chancellor abused his discretion in not granting rehearing:
¶18. On the facts of this case, we cannot avoid the conclusion that the chancery court abused its discretion by denying Singleton’s motion for reconsideration or a new trial. [Fn omitted] A child custody case involves more than just the competing interests of ordinary civil litigants. As this Court has explained,
It passes without citation that, in child custody cases, the paramount consideration is the best interest of the child. . . . Certainly, a more prudent determination of custody may be made when based upon evidence presented from both parents rather than evidence presented by only one. Where a chancellor has the opportunity to consider the argument of both parents, the facts and circumstances affecting his determination are presumably more fully developed. It follows that a chancellor is able to make a more informed decision, thereby ensuring to a higher degree of certainty that the best interest of the child is met.
Wade v. Wade, 967 So. 2d 682, 684 (¶8) (Miss. Ct. App. 2007).
¶19. Wade’s discussion of this issue is sound, and it applies directly to the facts of this case. There was no persuasive reason not to allow Singleton to present evidence and provide the court with additional information relevant to the custody determination. Allowing her to present evidence would have allowed the chancellor “to make a more informed decision, thereby ensuring a higher degree of certainty that the best interest of the child is met.” Id. And on the other side of the balance, the need for “[f]inality of judgments as a policy reason for denial is not nearly so strong” when a motion is filed within ten days of the judgment. Bruce, 587 So. 2d at 904. On these facts, we hold that the chancery court abused its discretion by relying on the “need to achieve finality in litigation” [Fn 7] and by denying Singleton’s motion.
[Fn 7] As noted above, the chancery court relied on Stringfellow v. Stringfellow, 451 So. 2d 219 (Miss. 1984), for this proposition. Stringfellow was a Rule 60(b) case involving issues of alimony and property division, and its facts bear little resemblance to the instant case. In Stringfellow, the chancery court held a hearing on alimony and property division, both sides presented evidence, and the court entered a final judgment. Id. at 220. The exwife later filed a Rule 60(b) motion in which she alleged that her ex-husband committed a fraud on the court, but the Supreme Court found no evidence of that. Id. at 222. The exwife also alleged that her lawyer failed to conduct adequate discovery, but the Supreme Court held that, without more, attorney incompetence “does not give rise to Rule 60(b)(2) relief.” Id.
¶20. We emphasize that a legal determination that a trial judge committed an abuse of discretion “does not ‘imply bad faith or an intentional wrong on the part of the trial judge.’” Sanford v. Dudley, 196 So. 3d 1106, 1112 (¶19) (Miss. Ct. App. 2016) (brackets omitted) (quoting White v. State, 742 So. 2d 1126, 1136 (¶42) (Miss. 1999)). Rather, “an abuse of discretion is viewed as a strict legal term.” Id. (quoting White, 742 So. 2d at 1136 (¶42)). As our Supreme Court has explained,
[J]udicial discretion is not boundless but is defined as a sound judgment which is not exercised arbitrarily, but with regard to what is right and equitable in circumstances and law, and which is directed by the reasoning conscience of the trial judge to just result. An abuse of discretion means clearly against logic and effect of such facts as are presented in support of the application or against the reasonable and probable deductions to be drawn from the facts disclosed upon the hearing.
Douglas v. Burley, 134 So. 3d 692, 697 (¶13) (Miss. 2012) (citations and quotation marks omitted). On the facts of this child custody case, there simply was no “sound” reason for denying Singleton’s motion. As a result, the denial was arbitrary and an abuse of discretion.
Carlton dissented, joined by Barnes and Greenlee. They would have ruled that Singleton failed to meet her burden of proof for relief under R59.
This is one of those haunting scenarios that recur in lawyers’ nightmares. Sometimes, though, there is more to the story than meets the eye on appeal. If the lawyer were habitually late or absent, the judge may have drawn a line. If so, the better practice would have been to include that in the order denying the motion. I’m not saying that was a factor in this particular case, but if it were the judge’s action is more understandable.
Valuation in the Face of Insubstantial Proof
July 29, 2019 § Leave a comment
There is plenty of case law holding that the chancellor may rely on the parties’ evidence submitted at trial to value marital assets and make equitable distribution, even when that evidence is less than substantial. I posted on the subject here and here, and in other posts.
That precedent did not persuade the COA, however, in Mark Chism’s appeal from the chancellor’s ruling in the divorce case he filed against his wife, Landaria. In Chism v. Chism, decided June 4, 2019, the COA reversed and remanded the chancellor’s decision that adopted Landaria’s valuation of the parties’ jointly-owned chicken-wing business. Chief Judge Barnes penned the court’s opinion:
¶20. Mark argues that the chancellor erred in accepting Landaria’s valuation of the couple’s business without sufficient proof and therefore led to an inequitable division of the marital property. Thus, Mark claims the entire financial award must be reversed and remanded.
¶21. To resolve property division, the chancellor must: “(1) classify the parties’ assets as marital or separate, (2) value those assets, and (3) divide the marital assets equitably.” Burnham v. Burnham, 185 So. 3d 358, 361 (¶12) (Miss. 2015). Equitable division of property is governed by the factors articulated in Ferguson v. Ferguson, 639 So. 2d 921, 929 (Miss. 1994). The third Ferguson factor asks the chancellor to consider “[t]he market value . . . of the assets subject to distribution.” Ferguson, 639 So. 3d at 929. Three methods of valuation may be used to determine the market value of a business for this purpose: “(1) an asset-based approach, in which assets and liabilities are evaluated, (2) a market-based approach, in which the market is surveyed for similar sales, or (3) an income-based approach, in which a value is placed on earning potential.” Lacoste v. Lacoste, 197 So. 3d 897, 907 (¶34) (Miss. Ct. App. 2016) (citing Singley v. Singley, 846 So. 2d 1004, 1011 (¶18) (Miss. 2002)).
Regardless of what method an expert might choose to arrive at the value of a business, the bottom line is one must arrive at the “fair market value” or that price at which property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts.
Id.
¶22. The chancellor found the total value of all marital property, including the business, was $1,176,598. Landaria was awarded fifty-percent of that value. Taking into account the Ferguson factors and distribution of other marital property, Landaria was ultimately awarded $521,299. Mark does not dispute that the chicken-wing business was a marital asset. However, he maintains that because the business was the couple’s main asset and source of income, a more specific business evaluation was necessary for an equitable distribution of marital property.
¶23. The chancellor found that the parties owned Memphis Best Wings. Although Mark had operated another chicken-wing business prior to the marriage, he started this new business jointly with Landaria during the marriage, and both parties contributed. In fact, Landaria quit her job as a teacher to work at the restaurant as a paid employee. However, not surprisingly, she was dismissed upon the parties’ separation. These facts are uncontested. The chancellor found the business’s value was $1,000,000 according to Landaria’s unsupported testimony and Rule 8.05 estimate. No details of how she arrived at this valuation were provided, and Mark did not even list the business on his Rule 8.05 form. The chancellor found that the business had “grown into a very substantial and profitable” one. He stated the $1,000,000 figure “has not been disputed” by Mark, who did not rebut this estimate at trial or offer his own estimate. Yet, there was no testimony from Landaria about how she arrived at that value for the business. Landaria even admitted, when asked by the chancellor, that her stated value was “just [her] estimate.” However, Mark’s 2014–2016 tax returns, provided during discovery, were admitted into evidence and included his profit and loss income statements. These evidence net profits of $60,291; $48,543; and $63,516, respectively, which does not appear to support a $1,000,000 valuation. [Fn omitted] During his examination of Mark, Landaria’s counsel tried to show that Mark was “keep[ing] the cash out of the business [account].” A photograph was entered into evidence showing Mark and his sister sitting at a table with a pile of cash on it, but none of these bills appear to be large ones. Statements showed that Mark made few cash deposits to the bank each month, but he maintained that he bought supplies and paid bills with the cash and did not keep it for personal use. Additionally, the chancellor speculated that the couple was not reporting all of their cash earnings from the business but using this money to fund their extravagant lifestyle.
¶24. In Mark’s post-trial motion to reconsider, he argued the chancellor erred by appointing a business-valuation expert, and Mark moved to designate Robert Vance as such an expert. Vance submitted a valuation report which came to the conclusion that Memphis Best Wings had a fair market value of $1,898 as a going-concern entity, excluding goodwill. Vance used the asset-based approach for his valuation, claiming that the market-based approach and the income-based approach are inappropriate because they imply the existence of goodwill in the value of a business, which is prohibited under Mississippi law, citing Lacoste and Singley v. Singley, 846 So. 2d 1004, 1011 (¶18) (Miss. 2002). Landaria moved to strike the expert’s testimony and opinion because discovery had been completed for well over a year. Mark moved to proffer it, and a hearing was held on the matter. Although the chancellor denied Mark’s motion to reconsider, he allowed the expert’s proffered testimony and business valuation report, dated April 3, 2018, for identification purposes.
¶25. This Court and the Mississippi Supreme Court have reversed the chancellor when evidence on the valuation of the business in property distribution was insufficient. In Lacoste, this Court reversed and remanded a business valuation which the chancellor based on the previous year’s profit/loss statement. Lacoste, 197 So. 3d at 908 (¶38). Like here, the business was considered the couple’s main asset and source of income. Id. at 907 (¶34). However, the parties failed to present sufficient evidence to value the business by the approach the chancellor deemed best (the income-based approach). Id. at 908 (¶37). While we found “the chancellor did the best she could with the evidence presented,” this Court nonetheless found it necessary to reverse because of lack of support for the valuation. Id. at 909 (¶42). In Mace v. Mace, 818 So. 2d 1130, 1133 (¶¶13, 16) (Miss. 2002), the Mississippi Supreme Court reversed the chancellor on the value placed upon a husband’s medical practice which was a marital asset. The value of $144,000 was determined solely by the husband’s testimony, did not appear to be based upon any reliable method, and it was unclear what physical assets were included in the valuation. Id. at 1134 (¶15).
¶26. Moreover, this Court, following the Mississippi Supreme Court’s directions, 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, 639 So. 2d at 929). As stated earlier, the chancellor must determine the “fair market value” of the business, using one of the three approaches: an asset-based approach, a market-based approach, or an income-based approach. Lacoste, 197 So. 3d at 908 (¶34) (quoting Singley, 846 So. 2d at 1011 (¶18)).
¶27. Not all approaches will be applicable for all businesses. For example, in Lacoste, the chancellor found an asset-based approach was inapplicable because the business had few assets, owned little equipment, and had no employees or training facility. Lacoste, 197 So. 3d at 908 (¶36). The market-based approach was also ruled out as no comparable business sales were introduced, and the business’s success was largely due to the reputation of the owner and marketing. Id. The chancellor, therefore, considered only the income-based approach as appropriate. Id. at (¶37). We found, however, that given the drastic income fluctuations and possibility that income “may be intertwined with goodwill, as the business hinge[d] on [the husband’s] reputation and personal efforts,” the case had to be remanded for further evaluation. Id. at 910 (¶45).
¶28. Here, the chancellor was unable to adopt any of the three approaches as none were presented to him. Landaria offered only an unsupported estimate on her 8.05 form and testimony. Mark did not provide any value for the business on his Rule 8.05 form or give any testimony as to its value. As established in Lacoste and Mace, the chancellor should require that the parties utilize a reliable method of valuation and support it with adequate proof, or prove valuation through expert testimony. See Lacoste, 197 So. 3d at 910 (¶46); Mace, 818 So. 2d at 1134 (¶15). If they fail to offer such proof, the chancellor may appoint an independent valuation expert. Id. Accordingly, we reverse the chancellor’s $1,000,000 valuation of Memphis Best Wings and remand for further proceedings.
What this portion of the opinion omits is that Mark failed, refused and neglected to provide financial proof sufficient to value the business, and was even jailed for contempt for non-cooperation in discovery. He went through a succession of lawyers. It seems to me that he had his chance to offer proof of the value of of his business, but he chose to play cat-and-mouse games with Ladaria and the court. Unfortunately, those shabby tactics served him well on appeal. He actually benefitted from his evasion of discovery by getting a second bite at the apple.
Contrast the court’s treatment of Mark’s coyness with values and the suggestion that the trial judge should appoint an expert with this language from Kimble v. Kimble, a COA case decided only 14 days after Chism:
¶8. “[T]he 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, 639 So. 2d at 929). “[I]t is incumbent upon the parties, and not the chancellor, to prepare evidence touching on matters pertinent to the issues to be tried.” Benton v. Benton, 239 So. 3d 545, 548 (¶11) (Miss. Ct. App. 2018). When “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.” Id. The chancellor possesses sole authority to assess both the credibility and weight of witness testimony. Culumber v. Culumber, 261 So. 3d 1142, 1150 (¶24) (Miss. Ct. App. 2018). [My emphasis]
Admittedly, Kimble involved valuation of vehicles, not a business, but sometimes it’s difficult here at grass-roots level to figure out where we are supposed to draw the line. I posted about Kimble here.
Denial of Visitation and Modification of Custody
July 24, 2019 § Leave a comment
The chancellor found Shanna Hayes in contempt for denying her ex-husband, Jeremy Hayes, visitation with their daughter. The judge also found that the denial was a material change that had an adverse effect on the child, and he modified custody, awarding it to Jeremy. Shanna appealed, arguing among other grounds that the chancellor erred in modifying custody.
In the case of Hayes v. Hayes, the COA affirmed on May 7, 2019. Judge Westbrooks wrote the opinion for the court:
¶36. Shanna asserts that the trial court’s court [sic] modification of custody was against the overwhelming weight of the evidence and insufficient to support a finding that there was a material change in circumstances adversely affecting K.H., warranting custody modification.
¶37. Shanna relies on Ash v. Ash, 622 So. 2d 1264 (Miss. 1993), in support of her argument. In Ash, the Mississippi Supreme court held that “a mother’s continual refusal to allow a father visitation did not constitute a material change of circumstances justifying a change in custody.” Id. at 1266. The Court found that “[t]he better rule would be for a chancellor to enforce contempt orders through incarceration, when necessary, to insure compliance with custody provisions rather than resorting to a change of custody.” Id.; see also Blevins v. Bardwell, 784 So. 2d 166, 179 (¶49) (Miss. 2001). “The ‘totality of the circumstances’ must be considered.” Ash, 622 So. 2d at 1266.
¶38. But in Ash, the supreme court determined that the chancery court found, by clear and convincing evidence, “that the mother’s interference with the father’s visitation ha[d] been a material change of circumstances that c[ould not] be corrected by contempt; that it [wa]s and d[id] adversely affect the child and that it [wa]s in the child’s best interest that he live with his father.” Ash, 622 So. 2d at 1267. Essentially, the supreme court upheld the custody modification.
¶39. Further, the Mississippi Supreme Court has held that “[p]arental behavior that poses a clear danger to [a] child’s mental or emotional health can justify a custody change.” McDonald v. McDonald, 39 So. 3d 868, 880 (¶37) (Miss. 2010) (citing Morrow v. Morrow, 591 So. 2d 829, 833 (Miss. 1991)). Furthermore, “[i]n determining whether a material change of circumstances has occurred, a chancellor should look at the overall circumstances in which a child lives.” Id. (internal quotation marks omitted).
¶40. Here, the trial court found by clear and convincing evidence that Shanna exhibited an alarming pattern of denying Jeremy’s visitation of K.H. without just cause. The trial court noted that Shanna had also filed multiple misdemeanor criminal charges against Jeremy, filed a request for a domestic-violence order, and filed two felony charges against Jeremy. The GAL, after conducting a thorough Albright analysis, found that there had been a material change in circumstances in Shanna’s home that adversely affected K.H. The GAL noted the inappropriate and disturbing photos that Shanna sent of K.H., claiming that she had been abused. The GAL also mentioned that Shanna initiated several DHS claims against Jeremy alleging that he sexually assaulted K.H. These claims, however, were later proven to be unsubstantiated. As a result, the GAL recommended that physical custody be modified to Jeremy, noting that Shanna should enjoy standard visitation with K.H. and the parties continue to share joint legal custody. It appears that the trial court considered the totality of the circumstances affecting K.H. since Shanna and Jeremy’s divorce in 2015. The trial court ultimately found the following:
There has been a material change in the circumstances which adversely affects the minor child, [K.H.] Shanna has made multiple false accusations that [K.H.] has been sexually abused by Jeremy, causing [K.H.] to undergo multiple unnecessary physical examinations, Shanna has wil[l]fully refused Jeremy visitation with [K.H.] and has done everything she could do to alienate [K.H.] from Jeremy. It is [in] the best interest of [K.H.] that Jeremy be given her primary physical custody with Shanna to have this Court’s standard visitation rights.
¶41. After review of the record, we cannot say that the trial court’s decision was manifestly wrong in finding Shanna in criminal and civil contempt. We also do not find error in the trial court’s decision to award Jeremy attorney’s fees. Accordingly, we find that there was substantial evidence to support the trial court’s findings of fact and conclusions of law and affirm the custody modification.
Ash is the go-to case when arguing that interference with visitation should result in a change of custody. But remember that you still have to show an adverse effect and best interest, and that contempt alone will not correct the problem.
The Better Chancery Practice Blog 