Say What You Mean and Mean What You Say
January 4, 2016 § 2 Comments
Lee and Leslie Voulters were divorced from each other in 2004 on the sole ground of irreconcilable differences. The divorce judgment incorporated their PSA, which provided that Lee would pay Leslie lump-sum alimony in the sum of $1.08 million at the rate of $10,000 a month until paid in full. He also agreed to maintain a policy of life insurance on his life with a benefit of $1.08 million, with Leslie as beneficiary.
When Leslie filed a contempt action in 2013 charging Lee with missing some lump-sum payments and with failing to provide proof of life insurance, Lee counterclaimed, asking the court to interpret the PSA that the purpose of the life insurance was to protect Lee’s payment of lump-sum alimony, and that the obligation would terminate when the lump-sum alimony was paid in full.
Spoiler alert: There is no provision in the PSA that links the life insurance requirement to the lump-sum-alimony requirement.
Here are the pertinent parts of the agreement:
LUMP SUM ALIMONY/SPOUSAL SUPPORT
Lee shall pay spousal support to Leslie, in the form of lump sum alimony, the total sum of $1,080,000.00, payable in monthly installments of $10,000.00 each for a period of nine years. Such payments for support shall be due and payable by automatic bank transfer from Lee’s checking or other account directly into Leslie’s checking account, commencing on the fifth day of April, 2004, and shall so continue for one hundred and seven consecutive months thereafter. Lee’s obligation to pay such support to Leslie shall be fully vested upon the entry of a Final Judgment of Divorce in this cause, and shall not be modifiable. Lee’s obligation to pay such support shall not terminate upon Leslie’s death or remarriage, nor shall it terminate upon Lee’s death. However, despite the conventional definition of lump sum alimony[,] . . . these payments by Lee to Leslie under this Agreement shall be taxable to Leslie, and deductible by Lee, for state and federal income tax purposes.
LIFE INSURANCE
Lee agrees to maintain life insurance on his own life in an amount not less than one million, eighty thousand dollars ($1,080,000.00), naming Leslie as primary beneficiary thereon. Proof of such insurance coverage shall be furnished to Leslie within fifteen (15) days following the date of execution of this Agreement. Furthermore, Lee shall direct his insurance carrier to provide coverage information to Leslie at least twice a year if requested by Leslie.
. . . .
EFFECT OF AGREEMENT
. . . .
The respective rights and obligations of the parties hereunder are deemed independent and may be enforced independently irrespective of any of the other rights and obligations set forth herein. This Agreement contains the entire understanding of the parties, who hereby acknowledge that there have been and are no representations, warranties, covenants, or understandings other than those expressly set forth herein.
RELEASE AND WAIVER
Subject to the provisions of this Agreement, each party has released and forever discharged . . . his or her heirs, legal representatives, Executors, Administrators, and assigns . . . from all causes of action, claims, right or demands . . . in law or in equity . . . except . . . causes of action for divorce or separation action now pending . . . . Each party releases, waives, and relinquishes any and all rights . . . to share in the estate of the other party upon the latter’s death . . . . (Emphasis added.)
Both parties offered testimony about their intent in negotiating the language into the agreement. Lee argued that the agreement was ambiguous because it had no termination date. Leslie argued that she negotiated it for support, which she needed because her estate was meager in comparison to Lee’s.
One question before I tell you how the chancellor ruled: do you see anywhere in that language quoted above any link between the life insurance obligation and the lump-sum alimony?
The chancellor ruled that the agreement was unambiguous, and that it did require Lee to maintain the life insurance regardless of the status of the lump-sum payments. Lee appealed.
On December 8, 2015, the COA affirmed in Voulters v. Voulters. The opinion by Judge Barnes includes a nice recitation of the law of contract interpretation, life insurance and insurable interests, and even attorneys fees in contempt actions and on appeal. I definitely commend it to your reading.
What I want to focus on here is this: If you want your agreement to mean a particular thing, then make sure there is language in it that says that particular thing. Remember that when the judge is called on to interpret a contract, she is bound by the language within the four corners of the document, and she may not accept parol evidence to vary or “explain what the parties meant” by those terms unless she first finds the agreement to be ambiguous. Just because Lee did not include a termination date for his life insurance obligation, that did not render the agreement ambiguous. It rendered instead the meaning that it had no termination date. In other words, it meant exactly what it did and did not say.
Be careful in your draftsmanship. Take time to make sure it says exactly what your client needs it to say. I think I was saved a hundred times or more by the simple practice of drafting the agreement and setting it aside for at least a day. I would then pick it up and read it afresh, often catching something that could be read two ways, or was simply not clear enough to do the job. Sometimes I would imagine myself to be another person altogether, looking at it as an outside observer. Anything to get an objective perspective.
Remember that some day someone entirely unconnected with the negotiations and the emotion of the divorce case is going to be reading your work with absolutely none of the knowledge that you had when you drafted it. It may be a judge, or it may be another lawyer having to represent your client, or — heaven forbid — a lawyer looking for a cause of action against you. That’s why it’s critical when you draft an agreement to give some thought and care to the words, phrases, and language construction that you use. That’s what your client is paying you for: to have absolutely no more trouble out of this matter after the final judgment is entered.
Lump-Sum Alimony = Alimony?
December 1, 2014 § Leave a comment
Most of us tend to think in the 21st century that lump-sum alimony is a tool for equitable distribution; however, it does retain a small role in alimony itself, as the court’s analysis in a recent case illustrates.
In the November 6, 2014, MSSC case, Davenport v. Davenport, the chancellor had conducted a Ferguson analysis, and ordered Tammy Davenport to pay her ex, Richard, lump-sum alimony in the sum of $1,515,914.33, payable in monthly installments of $8,421.75 over 180 months. Tammy appealed, arguing on this point that the chancellor had erred by not making on-the-record findings of Tammy’s ability to pay applying the Armstrong factors.
Justice Randolph addressed the argument:
¶30. Lump-sum alimony can serve two distinct purposes. The first purpose is to aid the chancellor in equitably dividing the marital estate under the Ferguson factors. See Haney, 907 So. 2d 948. The second purpose is to aid the chancellor in correcting an equitable deficit, resulting from the equitable distribution of the marital estate under the Armstrong factors. See Rogillio v. Rogillio, 57 So. 3d 1246, 1249 (Miss. 2011).
Let’s pause right there and look at that second stated purpose. Lump-sum alimony has also been used as a replacement or supplement for permanent or rehabilitative spousal support, and to award a spouse’s substantial contribution to asset accumulation. See Bell on Mississippi Family Law, 2d Ed., § 9.02[2][b][ii]-[v], pp. 244-245. So it does retain a role in the award of alimony.
The analyses of equitable distribution and alimony pass through two entirely different filters. Equitable distribution is conducted applying the Ferguson factors. Alimony requires analysis of the Armstrong factors. Only if the equitable distribution leaves a deficit for one spouse may the court then proceed to consider alimony.
The Davenport decision continues, explaining the factors applicable to lump-sum alimony, and how they fit into the picture:
¶31. In Haney v. Haney, this Court found that the chancellor’s award of lump-sum alimony was allocated to equitably distribute the marital assets. Haney, 907 So. 2d at 952. This Court discussed how, prior to Ferguson, lump-sum alimony was the central mechanism through which marital property was divided. Haney, 907 So. 2d at 952. In Cheatham v. Cheatham, the Court set out factors to be taken into account when considering an award of lump-sum alimony. Cheatham v. Cheatham, 537 So. 2d 435, 438 (Miss. 1988). Based on the factors later presented in Ferguson, this Court stated:
Clearly, the Cheatham factors were simply an earlier attempt by this Court to provide a chancellor with guidelines for awarding what today is called an equitable distribution of marital assets, under appropriate circumstances. Indeed, we see no Ferguson factor which would be inappropriate in evaluating lump sum alimony. Although we continue to refer to certain payments as “lump sum alimony,” these payments are really no more than equitable distribution in the form of lump sum cash, rather than an equitable portion of certain property which cannot be divided equitably.
Haney, 907 So. 2d at 955.
¶32. This Court later considered an award of lump-sum alimony and reiterated that ” . . . the chancery court was obligated to apply the appropriate factors . . . the Cheatham-Ferguson factors. Yelverton v. Yelverton, 961 So. 2d 19, 25 (Miss. 2007). See also Dickerson v. Dickerson, 34 So. 3d 637, 647-48 (Miss. Ct. App. 2010) (After reviewing Haney and Yelverton, the court concluded that chancellors should consider lump-sum alimony under the Ferguson factors; however, an analysis under Cheatham is not reversible error.); George v. George, 22 So. 3d 424, 427-30 (Miss. Ct. App. 2009) (Lump-sum alimony was analyzed under this Court’s ruling in Haney, considering the Cheatham factors, while periodic alimony was analyzed under the factors set forth in Armstrong.); Dunn v. Dunn, 911 So. 2d 591 n.4 (Miss. Ct. App. 2005) (acknowledging that, pursuant to Haney, the Ferguson factors should be considered when determining an award of lump-sum alimony).
¶33. In Lauro v. Lauro, this Court described alimony as something which is contemplated subsequent to the equitable division of marital property. Lauro v. Lauro, 847 So. 2d 843, 848 (Miss. 2003). Lauro relies on the language set forth in Johnson v. Johnson, quoting:
If there are sufficient marital assets which, when equitably divided and considered with each spouse’s non-marital assets, will adequately provide for both parties, no more need be done. If the situation is such that an equitable division of marital property, considered with each party’s non-marital assets, leaves a deficit for one party, then alimony based on the value of non-marital assets should be considered.
Lauro, 847 So. 2d at 848 (emphasis original) (quoting Johnson v. Johnson, 650 So. 2d 1281, 1287 (Miss. 1994)). Lauro further explains that the Armstrong factors must be considered when awarding alimony. Lauro, 847 So. 2d at 848. See Lowrey, 25 So. 3d at 280. (“Failure to make an on-the-record . . . analysis is manifest error.”).
¶34. If lump-sum alimony is awarded as a mechanism to equitably divide the marital assets, then chancellors may conduct their analysis under the Ferguson factors. Haney, 907 So. 2d at 955. However, if the alimony, lump-sum or otherwise, is awarded subsequent to the equitable distribution of the marital assets, then chancellors must conduct their analysis under the Armstrong factors. Lauro, 847 So. 2d at 848.
¶35. In the instant case, the chancellor fully considered the award of lump-sum alimony under the Ferguson factors because the award served as a means to equitably divide the marital property. Therefore, the chancellor appropriately conducted a Ferguson analysis in the findings of facts and conclusions of law incorporated it into the final decree; thus, the chancellor did not fail to adequately consider Tammy’s ability to pay the award. This issue is without merit. [Emphasis added]
I think it would simplify everything if we would:
- Leave the term “lump-sum alimony” exclusively to describe that post-Armstrong-analysis use of a lump-sum payment to supplement or replace true alimony or to reward substantial contribution to accumulation of assets; and
- Use the term “equalizing payment” or some similar phrase to apply to payments ordered under a Ferguson analysis to balance out the equitable division.
To continue to call something alimony that we all know has nothing to do with an Armstrong analysis invites confusion and the continued need to explain and clarify it in our case law, for no good reason. Lump-sum alimony was judicially created in 1856 to address a void in the law of alimony. It was created to allow lump-sum payments of true alimony in lieu of periodic payments. In the pre-Ferguson days, the court looked for a way to adjust equities around our title rules, and transmuted lump sum alimony into a tool to do that. Ferguson, however, changed this area of the law, yet the old terminology has remained confusingly in place. With the change ushered in by Ferguson, it’s appropriate that we should change our nomenclature.
ALIMONY IS NOT FOR EQUALIZING THE DIVISION
February 22, 2012 § Leave a comment
What is the proper role of alimony vis a vis equitable distribution? In Williamson v. Williamson, decided by the COA on January 10, 2012, Judge Carlton’s opinion stated:
¶21. The record reflects that in equitably dividing the marital property, the chancellor erroneously applied the Armstrong factors by awarding Mary alimony in order to create equalization of the parties’ incomes. The chancellor then ordered Will to pay Mary $594 per month to be applied toward the mortgage on the marital home; and, in addition to that amount, the chancellor awarded Mary $200 per month in periodic alimony, for a total of $794, or approximately $800, until the former home sold. [Footnote omitted] As evidenced by the chancellor’s findings, the chancellor accomplished the ordered equitable division of the marital property by aid of an award of periodic alimony in favor of Mary in order to make the parties’ financial situations “equalized.” The record shows, as set forth in the excerpts herein, that the chancellor had not completed an equitable division of the marital property prior to considering alimony. In accordance with precedent, the equitable division of the marital property must be completed prior to determining if either spouse suffers a deficit in the division of the marital estate warranting an award of alimony. The record in this case shows, however, that the chancellor used alimony to equalize the parties’ future incomes instead of awarding alimony based upon need existing after completion of an equitable division of the marital property.
¶22. Mississippi now embraces the process of equitable division of the marital property. In applying the “equitable” division of the marital property in accordance with the Ferguson factors, alimony fails to serve as the primary method to equalize property division. See Lowrey, 25 So. 3d at 292 (¶44) (“[A]limony has become a secondary remedy to property division . . . . ‘One of the goals of adopting equitable distribution was to alleviate the need for alimony.’”). Alimony, instead, assists in the event the chancellor determines that a need exists by a spouse after the completion of the equitable division of the marital property. See id. at 293 (¶44) (“If the situation is such that an equitable division of marital property, considered with each party’s non-marital assets, leaves a deficit for one party, then alimony based on the value of non-marital assets should be considered.”); George v. George, 22 So. 3d 424, 428 (¶7) (Miss. Ct. App. 2009) (“[A]n award of periodic alimony is based upon need.”).
The proper procedure follows this sequence:
- Determine which assets are marital and which are non-marital;
- Adjudicate the values of both marital and non-marital assets;
- Apply the Ferguson factors to the proof in the record to determine whether there should be an equitable division of the marital estate, and, if so, how it should be accomplished;
- If the equitable division of the marital estate, considered with each party’s non-marital property, leaves a deficit for one party, then the court should analyze the evidence in light of the Armstrong factors to determine whether alimony should be awarded.
From a pratice standpoint, then, here is what you need to give the chancellor so that she or he can do the job:
- An itemization of all assets, showing which your client claims to be marital and which your client claims to be non-marital. The best way to present this itemization is through lists introduced into evidence, rather than just a narration by your client. Have your client testify as to her basis for putting each asset into either category.
- Assign values to each asset. In advance of trial have your client assign values to each asset. Real property, heavy equipment, leaseholds, buildings, fine art and jewelry, business operations and interests, and other assets other than automobiles and ordinary personal property should have values established by appraisals. Again, this should be done by lists and documentation as much as possible, although experts may be needed as to some items.
- Offer proof as to each Ferguson factor. Have a copy of the factors to use as an outline as you develop testimony at trial. You might also want to look at the Cheatham factors for lump-sum alimony.
- Whether your client is trying to get alimony or trying to resist it, put on proof as to the Armstrong factors. Have a copy of the factors to use as an outline as you develop testimony at trial.
In my opinion, one of the chief causes of failure on appeal is that the lawyers do an inadequate job of making a record that the chancellor can use in making a decision. This forces the trial judge to have to patch something together in an attempt to cover everything, and the result is a flaw that the COA will find reversible. Make your record as airtight as the truth allows.
UPDATED CHECKLIST OF CHECKLISTS
May 27, 2011 § 5 Comments
Proving your case by proving certain factors is a fact of legal life in Mississippi. I’ve referred to it as trial by checklist. If you’re not putting on proof of the factors when they apply in your case, you are wasting your and the court’s time, as well as your client’s money, and you are committing malpractice to boot.
Many lawyers have told me that they print out these checklists and use them at trial. I encourage you to copy these checklists and use them in your trial notebooks. And while you’re at it, you’re free to copy any post for your own personal use, but not for commercial use. Lawyers have told me that they are building notebooks tabbed with various subjects and inserting copies of my posts (along with other useful material, I imagine). Good. If it improves practice and makes your (and my) job easier and more effective, I’m all for it.
Here is an updated list of links to the checklists I’ve posted:
Doing an accounting in a probate matter.
Income tax dependency exemption.
Modification of child support.
A CHECKLIST OF CHECKLISTS
December 15, 2010 § Leave a comment
Proving your case by proving certain factors is a fact of legal life in Mississippi. I’ve referred to it as trial by checklist.
Here are the checklists I’ve posted (you can click on the links to get to them):
Modification of child support.
Periodic and rehabilitative alimony.
Income tax dependency exemption.
Those are all of the checklists of which I am aware. If you know of others, please let me know and I will add them to the list.
I also posted a checklist for closing an estate, but it’s a procedural cheklist rather than a substantive checklist.
PROVING TAX EFFECTS OF ALIMONY
September 2, 2010 § 3 Comments
Armstrong vs. Armstrong, 618 So.2d 1278, 1280 (Miss. 1993), sets out the factors that the trial court is supposed to consider when adjudicating whether to award alimony, and if so, the form, duration and amount.
All of the Armstrong factors are important, and failure to prove even one can doom your claim. One of those factors is “The tax consequences of the spousal support order.”
There are only two ways to establish the tax consequences: (1) Have an expert testify or offer into evidence a learned treatise; or (2) Agree with opposing counsel what they are and present the agreement to the court.
It doesn’t take a legal scholar to appreciate the advantages and disadvantages of these approaches. An expert can offer clarity, but she can be asked about so many extraneous matters on cross until the court is bewildered. A learned treatise can be precise and clear, but you still need to lay a foundation for it with an expert in most cases. In either case, experts are expensive.
By contrast, it doesn’t take much to convince opposing counsel that it is to both parties’ benefit to enter into a stipulation as to the tax consequences. That way, both parties have evdence in the record for the court to consider, and if the case is appealed, the Court of Appeals is not left scratching its collective head about why there is no proof of the tax consequences.
Back when I was practicing, several of us attorneys colluded and came up with a form for a stipulation. I believe it covers every base. It was done several years ago, and may not reflect intervening changes in the tax code, but it will at least provide a template for you to adapt to the current law.
Here is the form:
| MISSISSIPPI CASE LAW | FEDERAL INCOME TAX |
| “Lump-Sum Alimony” | “Lump-Sum Alimony” |
| Represents part of the equitable distribution of the marital estate. Is a fixed sum not subject to modification. Obligation to pay continues after the death of the payee or payer. | Represents a property settlement for income tax purposes and is not taxable by the payer or taxable to the payee. Is not alimony for income tax purposes because payments would continue, by operation of law after the payee’s death. |
| “Periodic Alimony” | “Periodic Alimony” |
| Is based on the payer’s duty to support the payee in the manner to which she or he had become accustomed, is modifiable and terminates on payee’s remarriage, death, or payer’s death. | Is tax deductible by the payer and taxable to the payee; i.e., qualifies as alimony for tax purposes. The reason periodic alimony qualifies as alimony for tax purposes is because under Mississippi law there is no liability to make any payment (in cash or property) after the death of the recipient spouse. |
| “Rehabilitative Alimony” | “Rehabilitative Alimony” |
| Is for a fixed term, but is modifiable. | If the liability to make the payments stops after the death of the recipient spouse, then rehabilitative alimony would qualify as alimony for income tax purposes. |
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The payment is in cash.
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The instrument does not designate the payment as not alimony.
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The spouses are not members of the same household at the time the payments are made. This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance.
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There is no liability to make any payment (in cash or property) after the death of the recipient spouse.
-
The payment is not treated as child support.
*********
The obvious advantage of the stipulation is that it establishes the fact without expense and both parties have the information in the record. Unfortunately, this is an element of alimony proof that is almost never addressed by the attorneys in a trial, and it could cost your client dearly.
TRIAL BY CHECKLIST: LUMP SUM ALIMONY
August 31, 2010 § 9 Comments
A practice tip about trial factors is here.
The factors that the trial court must consider in making an award of lump sum alimony are:
- Substantial contribution to accumulation of the marital assets by quitting work or assisting in the business;
- A long marriage;
- Financial disparity;
- Other considerations, including payor’s assets and payor’s stability or instability.
Cheatham v. Cheatham, 537 So.2d 435, 438 (Miss. 1988). NOTE: these factors predated Armstrong (periodic alimony) by five years, and the Armstrong factors essentially overlap these. It may be preferable to cover all of the Armstrong factors coupled with a specific request for lump sum alimony as well as periodic or rehabilitative.
TRIAL BY CHECKLIST: PERIODIC AND REHABILITATIVE ALIMONY
August 27, 2010 § 19 Comments
A practice tip about trial factors is here.
Armstrong vs. Armstrong, 618 So.2d 1278, 1280 (Miss. 1993), sets out the factors that the trial court must consider and address in making a determination about whether to award periodic and/or rehabilitative alimony. They are:
- The income and expenses of the parties.
- The health and earning capacities of the parties.
- The needs of each party.
- The obligations and assets of each party.
- The length of the marriage.
- The presence or absence of minor children in the home, which may require that one or both parties either pay, or personally provide, child care.
- The age of the parties.
- The standard of living of the parties, both during the marriage and at the time of the support determination.
- The tax consequences of the spousal support order.
- Fault or misconduct.
- Wasteful dissipation of assets by either party.
- Any other factor deemed by the Court to be “just and equitable” in connection with the setting of spousal support.
Before the court can reach the issue of alimony, the court must first adjudicate equitable distribution and determine whether any need for alimony can be alleviated by a greater share of equitable distribution. This means that the factors for equitable distribution (Ferguson factors) must be presented in alimony cases. If, after equitable distribution, the court finds that the needs of both parties are met and there is no disparity, the court does not consider alimony.
Professor Deborah Bell in her MISSISSIPPI FAMILY LAW treatise and her annual seminars has done some important research into how length of marriage and relative income affect awards of periodic, rehabilitative and lump-sum alimony. You should become very familiar with her work if you are going to take on an alimony case.
Caveat: This is an area of the law in flux, and the cases are significantly fact-driven. You should do some research for authority supporting your position pro or con before going to trial. There is plenty of case law on both sides of the issue.
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