Commingling and Family Use

April 29, 2020 § 1 Comment

Allison Gaskin inherited two parcels of property during her marriage to her husband, Tony.

When it came time for a divorce, Tony took the position that the two parcels were marital, subject to division. Allison disagreed. After trial, the chancellor found the property to be part of Allison’s separate estate. Tony appealed.

In Gaskin v. Gaskin, handed down April 14, 2020, the COA affirmed. Judge Cory Wilson wrote the unanimous opinion:

¶18. During the course of the marriage, Allison inherited interests in two parcels of land: the first was a fourteen-acre tract of land referred to by the parties as the “White House property,” and the second was a sixty-five-acre tract located at 3506 Highway 18 in Rankin County. The chancellor determined that the White House property had been commingled and converted to marital property because Tony had purchased Allison’s brother’s one-half interest in the property and had “made significant contributions in maintaining the property.” The chancellor further found that the property “ha[d] been used by Tony and the boys for hunting and fishing.” The White House property was valued at $160,000, and the chancellor awarded the property to Allison as part of the division of marital assets.

¶19. Regarding the sixty-five-acre tract of land located at 3506 Highway 18, Tony testified that he occasionally bush-hogged the property and stored some Gaskin Plumbing equipment on the property. The parties stipulated that the total value of this parcel was $607,000. In contrast to the White House property, the chancellor found that the sixty-five-acre parcel Allison inherited had not been “commingled to the extent necessary to classify it as marital
property for the purpose of division between the parties.”

¶20. On appeal, Tony asserts that the chancellor erred in finding that the sixty-five-acre tract of land constituted nonmarital property. He contends that the evidence was clear that he spent substantially more time and effort maintaining the sixty-five-acre property than he did maintaining the White House property. Tony also asserts that he would hunt, fish, and play sports on the sixty-five-acre tract with the boys. He contends that these activities effectively commingled the property and converted it to marital property, not Allison’s separate nonmarital property.

¶21. “When dividing marital assets, the chancery court must first classify the property as marital property or nonmarital property.” McDonald v. McDonald, 115 So. 3d 881, 885 (¶12) (Miss. Ct. App. 2013) (citing Stewart v. Stewart, 864 So. 2d 934, 937 (¶12) (Miss. 2003)). “Marital property is defined as ‘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.’” Id. By contrast, “[i]nter vivos gifts and inheritances are considered nonmarital property unless they have been commingled.” Id. at 886 (¶12) (citing Everett v. Everett, 919 So. 2d 242, 247 (¶19) (Miss. Ct. App. 2005)). “Assets which are classified as nonmarital, such as inheritances, may be converted into marital assets if they are commingled with marital property or utilized for domestic purposes, absent an agreement to the contrary.” Stewart, 864 So. 2d at 937 (¶12) (quoting Boutwell v. Boutwell, 829 So. 2d 1216, 1221 (¶20) (Miss. 2002)).

¶22. Importantly, “we will not substitute our own judgment for that of the chancellor.” McDonald, 115 So. 3d at 886 (¶16). Here, we cannot say that the chancellor erred in finding that the sixty-five-acre property inherited by Allison and her brother remained nonmarital property despite Tony’s assertions that he spent substantial time maintaining the parcel and that he spent time on the property with the couple’s boys. The chancellor found that Tony’s
occasional bush-hogging, equipment storage, and recreational activities with the family were not sufficient to commingle the property with the parties’ marital assets, such that the land should be classified as marital property for the purpose of equitable division. We find that the chancellor did not abuse his discretion in treating the sixty-five acres as nonmarital property, and this issue is without merit. [Fn omitted]

I think the law of so-called “family use” which is the same as the commingling argument here, could use some attention from the MSSC. We have this case at one end, where hunting, fishing, bush hogging, and storing business equipment is inadequate to bring it into the marital estate. And on the other end we have a case such as Rhodes v. Rhodes, in which use of a separate beach condo once a year by the family and the wife’s selection of drapes for it converted it into a marital asset. I whined about Rhodes in this old post.

 

Separate Property and Family Use

October 29, 2014 § 2 Comments

It’s no secret that family use of an asset during the marriage can convert it from separate property to marital property.

Steve Cupp tried to argue that his Lake Cormorant house was separate property, not subject to equitable distribution, because: (1) he acquired the property before his ten-month marriage to his wife, Jenny; (2) he titled it in his sole name; (3) he made all of the mortgage payments from his separate account; and (did I already mention this?) (4) he and Jenny lived together only ten months before they separated.

The chancellor agreed with Jenny that family use had converted the property from separate to marital, and included it in the equitable distribution. Steve appealed.

The COA affirmed in Cupp v. Cupp, handed down October 8, 2013. Judge Maxwell’s opinion explained:

¶16. We first address Steve’s argument that the chancellor erred in classifying the Lake Cormorant property as marital, and, therefore, the property should not have been included in the division of marital assets. Steve asserts that because he acquired the property prior to the marriage, titled the property solely in his name, and made mortgage payments from his separate account, that the property is not marital in nature. Jenny counters Steve’s claims by noting that she lived in the home with her son and Steve before Steve moved to Sevierville. At that time, Jenny contributed domestically to all maintenance on the home for a number of months until she joined Steve in Sevierville.

¶17. Mississippi employs the family-use doctrine when determining whether a couple’s separate property has become marital due to the family’s use of the property. See, e.g., Stewart v. Stewart, 864 So. 2d 934, 937-38 (¶13) (Miss. 2003); Rhodes v. Rhodes, 52 So. 3d 430, 438 (¶¶25-26) (Miss. Ct. App. 2011); Brame v. Brame, 98-CA-00502-COA (¶20) (Miss. Ct. App. Mar. 28, 2000), rev’d in part on other grounds, 796 So. 2d 970 (Miss. 2001). Property that was acquired prior to the marriage by one of the parties can become marital property when used by the family. See id. Furthermore, a party’s contribution to the maintenance of a family home, whether monetary or physical, is considered when dividing the home equitably. See, e.g., Ferguson, 639 So. 2d at 928; Hemsley v. Hemsley, 639 So. 2d 909, 915 (Miss. 1994); Tatum v. Tatum, 54 So. 3d 855, 861 (¶21) (Miss. Ct. App. 2010).

It seems to me that the only way to avoid having property succumb to the family use doctrine is to do everything that Steve did here, except to allow his wife to set foot on the property. Ever. He should have kept it padlocked and given her a letter informing her that if she entered the property she would be prosecuted for trespass.

Of course, I am being facetious. But only in part. What else must one do to keep property separate? It seems that the so-called family-use doctrine can have a decidedly un-family-friendly whipsaw to it. Imagine telling your wife she can’t set foot on your lake property because you want to keep it separate. Imagine telling your child that you can’t take her fishing there because it’s separate. Imagine telling your musically-gifted son he can not practice on the grand piano you keep locked up in a warehouse because you promised grandma that you would keep it in the family.

In my opinion, it would be better to say in a case like this that it is separate property, the value of which causes a disparity in the financial situations of the parties, opening the possibility for time-limited alimony for Jenny.

¶18. The record reflects that the chancellor determined that the property in question was converted to a marital asset by means of the family-use doctrine. The chancellor also noted “that while [Steve] made the primary financial contributions to the accumulation of marital assets, [Jenny] made significant domestic contributions to the marriage.” We agree. Steve, Jenny, and Jenny’s son all lived in the home for some time prior to their move to Sevierville. Jenny also physically maintained the home by herself for several months after Steve moved. We cannot find manifest error in the chancellor’s determination that the Lake Cormorant property was part of the marital estate. This issue is meritless.

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!

“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.

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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