Some Useful Equitable Distribution Points

September 18, 2019 § Leave a comment

Last year’s Pettersen case caused somewhat of a ruffle among many attorneys when it affirmed a chancellor’s findings that pre-marriage assets were marital or converted to marital, and passive appreciation of pre-marital securities was also marital. One lawyer told me that he was still scratching his head over the latter.

Lost in the consternation is that the opinion by Judge Barnes includes some jewels of authority that you might find useful:

Frederick Pettersen claimed that the chancellor erred when he announced that he would not consider child support, but he never objected at trial. In ¶10, the court said, “Furthermore, this issue was not asserted in Frederick’s motion for reconsideration.” Aside from the fact that there is no such thing as a motion for reconsideration, this is a remarkable statement because it assumes that you must assert the bases for your R59 motion in the motion. In my experience, few attorneys recite more than that they want a new trial or an amendment of judgment without detailing the reasons why. R7(b) specifically states that a motion “shall state with particularity the grounds therefor, and shall set forth the relief or order sought.” That “grounds therefor” language is pretty important, but sometimes overlooked.

As for the proper demarcation date, the court said at ¶12:

Our Court has held:

“The law in Mississippi is that the date on which assets cease to be marital and become separate assets—what we refer to as the point of demarcation—can be either the date of separation (at the earliest) or the date of divorce (at the latest).” Collins v. Collins, 112 So. 3d 428, 431-32 (¶9) (Miss. 2013). [However, a] chancellor may consider a temporary order as the line of demarcation between marital and separate property. Id. Ultimately, however, the chancellor has the discretion to draw the line of demarcation. Id. at (¶10).

Randolph v. Randolph, 199 So. 3d 1282, 1285 (¶9) (Miss. Ct. App. 2016).

At ¶18, the opinion discussed classification of assets:

¶18. Furthermore, when determining whether certain property is marital, a chancery court “must inquire whether any income or appreciation resulted from either spouse’s active efforts during the marriage.” Rhodes v. Rhodes, 52 So. 3d 430, 436 (¶20) (Miss. Ct. App. 2011). “If so, that income or appreciation becomes part of the marital estate.” Id.

In ¶19, the court rejected Frederick’s argument that his wife, Audrey, was not entitled to any of his retirement funds because of an extra-marital affair:

Moreover, a spouse’s misconduct is only one factor to consider in the division of marital assets. A chancery court “should not view equitable distribution as a means to punish the offending spouse for marital misconduct. Rather, ‘marital misconduct is a viable factor entitled to be given weight by the chancellor when the misconduct places a burden on the stability and harmony of the marital and family relationship.’” Bond v. Bond, 69 So. 3d 771, 773 (¶6) (Miss. Ct. App. 2011) (quoting Carrow v. Carrow, 642 So. 2d 901, 904-05 (Miss. 1994)).

In discussing whether pre-marital properties were properly classified, the court said at ¶23:

¶23. “Marital property is ‘anyand all property acquired or accumulated during the marriage and is subject to an equitable distribution by the chancellor.’” Mamiaro v. Mamiaro, 179 So. 3d 51, 53 (¶7) (Miss. Ct. App. 2015) (quoting Hemsley v. Hemsley, 639 So. 2d 909, 915 (Miss. 1994)). There is no dispute that these properties were acquired before the marriage. But, in discussing Ferguson, the Mississippi Supreme Court held:

Instead of looking to the bare title of a marital asset, this Court, as should the trial courts, will continue to consider all of the facts and circumstances surrounding the accumulation of the marital assets, including noneconomic contributions and factors, when deciding how the marital property should be divided under our system of equitable distribution.

Carnathan v. Carnathan, 722 So. 2d 1248, 1253 (Miss. 1998). Although Frederick argues that Audrey made no economic contribution to these properties, he acknowledges that Audrey helped prepare balance sheets with respect to the rental properties for a period of time during their marriage. We find, therefore, that the chancery court’s awarding her ten percent of the properties’ value was not an abuse of discretion.

And the court reminded us of the definition of commingling:

¶26. “Commingled property is a combination of marital and non-marital property[,] which loses its status as non-marital property as a result.” Maslowski v. Maslowski, 655 So. 2d 18, 20 (Miss. 1995).

Finally, the opinion considered Frederick’s argument that he used non-marital funds to purchase an asset, so it should be a “mixed asset” with greatly reduced equitable distribution to Audrey:

¶29. “[A] presumption of marital property arises to any property acquired during the marriage.” Maslowski, 655 So. 2d at 20. The chancellor properly considered the applicable Ferguson factors, finding: (1) the property was acquired during the marriage; (2) Audrey had “substantially contributed to this property by serving as bookkeeper”; and (3) Frederick had managed the subject property during the separation and continues to do so. Therefore, we find no merit to this issue.

THE FAMILY USE DOCTRINE IS ALIVE AND WELL

January 18, 2011 § 3 Comments

It is well settled in our jurisprudence that a gift to or inheritance by one of the parties during the marriage is separate property unless it loses its separate character through some act of the parties.  Title, for instance, may be changed from individual to joint.  Or separate funds may be commingled to the extent that they lose their separate character.  Or there may be investment of marital assets in the separate property so that the marital estate has a substantial stake in it. 

In 2000, the concept of the “family use doctrine” made its appearance in Mississippi in the case of Brame v. Brame, 98-CA-00502-COA, ¶20 (Miss. App. 2000), in which the husband’s clock, piano and dining set, all of which had been gifted to him took on a “new personna [sic] of full family use,” and was converted from separate into marital property.

In Rhodes v. Rhodes, decided by the court of appeals on January 11, 2011, the court found that a Florida vacation home purchased by the husband three years before the marriage was converted into marital property under the family use doctrine based on the facts that:  the wife engaged in “extensive efforts” in the property’s upkeep and maintenance; the wife “undertook efforts” to improve the property; the wife decorated the home on her own; the husband made payments on the home from his earnings through the marriage; the wife made contributions through deposits into a joint checking account; the wife contributed housekeeping efforts to the home; the wife and “her family” regularly vacationed and spent holidays there; the wife lived there for a considerable time and considered it her second home; and she and her daughter used it as a residence for “several months” after Hurricane Katrina.  Rhodes at ¶ 36.  The court held that as a result of the combination of factors, “the vacation home lost its character” as separate property of the husband.  Thus, as of January 2011, the family use doctrine is alive and well.

On the facts of this case, with the many factors apparently supported by the evidence, it’s hard to quibble with the outcome.  Most practitioners and trial judges grasp without any difficulty the equitable principles involved in finding a conversion from separate to marital when there has been financial investment of marital money and/or “sweat equity” in the property. 

What gives most of us at the trial level pause, though, is the concept that an item may be converted from separate to marital property simply because it is used in the marriage by the family. 

If I were a lawyer whose client just inherited a mortgage-free beach home in Gulf Shores and was concerned about the future of his marriage, would I not be wise to advise him under our current law: to prohibit any use of the property by his wife and children; and to pay all taxes and expenses of the property from entirely separate funds and not from any current income.  Or what if the wife inherits an antique Baldwin grand piano from her aunt, would she not be best advised to store it where neither the husband nor the children could touch it and possibly convert it into marital property, even though the daughter has considerable musical skills and would benefit from its use?     

Assuming I am correct about the above advice, how in the world does such a policy promote what is best for the family as a whole?  Policy and its consequences often have a strong influence on people’s actions.  Is this one of those unintended consequences we’ve talked about here before?

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