April 14, 2020 § 5 Comments
If you’re looking for the most efficient way to drain your client of all credibility in financial proof, let him submit an 8.05 financial statement that only an idiot would accept as accurate.
When Michael and Lisa Dickinson were in trial over their divorce, Michael submitted a financial statement listing the value of their former residence as $500,000, unsupported by any other evidence. Lisa valued it at $126,170, supported by the tax collector’s bill and valuation. Neither party offered a professional appraisal. The chancellor found Lisa’s valuation more credible. Dissatisfied, Michael appealed.
In Dickinson v. Dickinson, decided March 31, 2020, the COA affirmed. Judge Tindell’s opinion:
¶25. Michael also argues that the chancellor erred in the valuation of the couple’s marital home. Michael concedes that neither he nor Lisa submitted formal appraisals of the home to the chancellor at trial. Rather, each party submitted their Rule 8.05 financial statements with their alleged valuations of the home. [Fn omitted] Michael submitted a $500,000 valuation of the home, which the chancellor found to be speculative and unsupported by any other evidence or documentation. Lisa submitted a valuation of $126,170 along with the Jackson County Tax Collector’s bill and valuation statement, issued on November 26, 2014, which also valued the home at $126,170. Based upon the limited evidence presented, the chancellor valued the home at $126,170 and awarded the home to Lisa.
¶26. Lisa argues that the chancellor appropriately valued the home based upon the limited available evidence, and she cites to Williams v. Williams, 264 So. 3d 722 (Miss. 2019), in support of her argument. In Williams, the Mississippi Supreme Court upheld a chancellor’s valuation of a couple’s marital property based upon limited evidence submitted by the parties. Id. at 728 (¶21). During the couple’s divorce proceedings, the wife submitted no evidence to the chancellor related to valuation other than her Rule 8.05 statement, while the husband did provide some documentation supporting his valuation of the marital property. Id. at (¶18). The chancellor ultimately valued the property based upon the husband’s documentation, which the wife appealed. Id. In upholding the chancellor’s valuation, the Supreme Court stated that it “refuse[d] to blame the chancellor for a party’s failure to present sufficient evidence of property value.” Id. at (¶20). The Supreme Court further held that “the chancellor’s duty is not to obtain appraisals of marital property.” Id. (citing Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (Miss. Ct. App. 1999)). Where the parties present the chancellor with “less than ideal” proof, the Supreme Court held that the chancellor may rightfully use the available proof to arrive to the best conclusion possible. Id. at (¶21).
¶27. Here, the chancellor found Michael’s $500,000 valuation to be speculative and unsupported by any evidence, other than his Rule 8.05 financial statement. While Lisa also failed to submit an appraisal at trial, the chancellor found that her $126,170 valuation matched the Jackson County Tax Collector’s bill and valuation. Again, we cannot fault the chancellor for the parties’ lack of evidence. As such, we also cannot say that the chancellor
committed manifest error by using the best information available to value the marital home.
- A common and ridiculous practice is for parties to assign high values to items they agree for the other to have, and low values to items that they want for themselves. In one case I had where the parties agreed that the husband would have ownership of a riding lawnmower, the wife valued it at $18,000, and the husband valued it at $200. There was no testimony that it was either gold-plated or rusted out, so I settled somewhere in the lower extremity of that range. The case was affirmed on appeal, so I guess I did something right.
- I think it’s malpractice if you don’t go over your client’s 8.05 in advance of trial and challenge the figures. You need to ask, among others: how did you come up with this figure?; are you really spending $700 a month on gas and oil?; why is the spinet piano valued at $10,000? If you don’t get those kinds of things straightened out in your office, you are sending your client off like a sheep to the slaughter.
- On a related note, those of you who don’t work with your clients on their 8.05’s should know that it is painfully obvious that you neglected this aspect of client representation. Figures don’t add up. Some are almost illegible. One I saw actually had a dirty footprint on the front page. Another chancellor calls those “Parking Lot 8.05’s” because they look like they were hastily scrawled in the parking lot before entering the courthouse — and they probably were.
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.
July 15, 2019 § 1 Comment
Rodney Kimble and his wife Stepidy went through a divorce. Rodney didn’t like the way the chancellor divided the marital estate, and he particularly objected to the judge’s valuation of a 2006 Volvo truck, a 2000 Freightliner trailer, and a 2007 Transcraft trailer, all of which he complained were overvalued by the chancellor. He appealed, arguing that the trial court erred in not considering his testimony that the truck and trailers were inoperable and had not been used in several years.
Here’s how Judge Tindell, writing for the COA, addressed Rodney’s claims in Kimble v. Kimble, decided June 18, 2019:
¶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).
¶9. Here, as previously discussed, both parties submitted Rule 8.05 financial disclosures to the chancellor and testified at the hearing. Rodney’s initial Rule 8.05 disclosure, however, failed to reflect all his assets. During questioning by Stepidy’s attorney, Rodney admitted that his Rule 8.05 financial statement failed to include three bank accounts and five vehicles and/or trailers that he owned. Stepidy’s attorney also questioned Rodney about the values he listed for certain vehicles and the discrepancies between those values and the higher valuations reflected by the National Automobile Dealers Association (NADA). While subsequently questioning Rodney about his valuation of the marital home, the following exchange occurred:
STEPIDY’S ATTORNEY: Okay. And on the financial declaration, you say the house . . . [is] worth about [$]63,000; is that right?
RODNEY: I guess.
STEPIDY’S ATTORNEY: Well, I mean, that’s what you put down.
THE COURT: Hang on. Rule 8.05 requires the parties to exchange a financial statement that’s to be signed under oath. I’ve sat here for the last 30 minutes and listened to various and numerous discrepancies in your 8.05. I’m going to take a break, and at 9:45[a.m.], I’m going to return, and I want that 8.05 to reflect exactly what your knowledge is.
THE COURT: I’ve heard vehicles that aren’t listed. I’ve heard checking accounts that aren’t listed. Somebody hasn’t done . . . [his or her] job. I’m going to give you ten minutes to do it, or I’m going to hold you in contempt. Do you understand what I’m telling you?
¶10. On Stepidy’s Rule 8.05 statement, she listed the following values for the three vehicles now at issue on appeal: (1) $20,000 for the 2006 Volvo truck (VIN ending in 3635); (2) $17,000 for the 2000 Freightliner conventional trailer; and (3) $20,000 for the 2007 Transcraft trailer. Stepidy testified that she and her attorney obtained these values from NADA after inputting the vehicles’ VINs and title information. While Rodney’s initial Rule 8.05 statement failed to list any of the three disputed vehicles, Rodney testified that the 2006 Volvo truck (VIN ending in 3635) was inoperable and that he no longer used the 2000 Freightliner conventional trailer. Rodney further testified that he had tried and failed to sell the vehicles. As a result, Rodney claimed that both vehicles lacked any monetary value. As to the 2007 Transcraft trailer, Rodney stated that he rarely used the trailer, and he valued the item at $4,000.
¶11. Despite Rodney’s testimony that he had not driven or operated the 2006 Volvo truck (VIN ending in 3635) in three to five years, Stepidy’s attorney questioned him about two different tickets he had received for the vehicle within the last two years. (The first ticket was issued in August 2015, and the second ticket was issued in February 2016.) In response, Rodney stated that a mistake had occurred and that the VINs for his two 2006 Volvo trucks had been mixed up.
¶12. In rendering his bench opinion, the chancellor found that Rodney lacked credibility and that his testimony had been full of inaccurate and untruthful information intended to conceal his income and assets. Based on the evidence before him, the chancellor valued each of the now disputed items among the amounts provided by Stepidy’s Rule 8.05 statement and Rodney’s testimony and amended the Rule 8.05 statement. Because we find the record contains sufficient evidentiary support for the chancellor’s valuation of the three disputed assets, we refuse to find any manifest error. See Dunaway v. Dunaway, 749 So. 2d 1112, 1121 (¶28) (Miss. Ct. App. 1999) (refusing to find error where “the chancellor, faced with proof from both parties that was something less than ideal, made valuation judgments that find some evidentiary support in the record. . . . [and] appears to have fully explored the available proof and arrived at the best conclusions that he could . . . .”). We therefore find this assignment of error lacks merit.
- The chancellor found that Rodney lacked credibility. Not surprising given the sorry state of his 8.05 and his slipshod answers to questions about values. When the chancellor bases her findings on credibility, her conclusions are well-nigh bulletproof on appeal because it is within the chancellor’s exclusive realm of responsibility to assess credibility and the weight to assign to testimony.
- You could just about hear the chancellor’s frustration over the incomplete 8.05. A frustrated chancellor is never a good thing when he is frustrated at you or your client.
- Rodney sort of self-destructed on the witness stand over his assertion that he hadn’t driven the truck and trailers but had been ticketed while operating them. The judge didn’t buy the mixed-up VIN excuse, and I don’t know anyone else who would have either.
- Contrast Rodney’s valuations with Stepidy’s. Hers had a rational basis that the chancellor could rely on, and were presented in an orderly and complete fashion.
December 19, 2016 § 1 Comment
Three things are fundamental when it comes to equitable distribution:
- It’s incumbent on the chancellor to determine the fair market value of the assets before determining division; and
- It’s up to the parties to offer evidence of the values; and
- It’s up to the chancellor to determine the weight and credibility of the evidence.
When Chad and Catherine Potts showed up in court for their divorce in 2015, one item at issue was equitable division of the former marital residence and 40 acres of land. There was no dispute that the property was marital. Catherine presented a 2011 appraisal that valued the property at $138,000, and Chad offered an eight-month-old 2014 appraisal placing the value at $86,000. After quizzing Chad over the discrepancy between the two valuations, the chancellor averaged the two and determined the value to be $112,000.
Dissatisfied, Chad appealed, contending that the judge should have adopted his more recent value. On November 22, 2016, in Potts v. Potts, the COA affirmed. Judge Irving wrote for the unanimous court:
¶8. “Property division should be based upon a determination of fair market value of the assets, and these valuations should be the initial step before determining division.” Ferguson v. Ferguson, 639 So. 2d 921, 929 (Miss. 1994). Pursuant to Ferguson, Chad argues that the chancellor should have relied solely on the appraisal he submitted to the court because it was more recent and, therefore, a more accurate determination of the fair market value of the property at the time of the divorce. He asserts that the chancellor erred by applying an average of both appraisals that were submitted to the court rather than simply applying the most current appraised market value of the property.
¶9. Catherine responds that the chancellor was not in error in determining the value of the marital home and land by averaging the appraisals submitted by the parties. She argues that Chad’s appraisal showed a $52,000 reduction in the fair market value of the property, and no evidence was presented to the court explaining the reduction in value. In addition, she argues that the overall award in the case was fair, reasonable, and equitable.
¶10. “A chancellor is responsible for determining the fair market value of the marital assets.” McKnight v. McKnight, 951 So. 2d 594, 596 (¶6) (Miss. Ct. App. 2007). It appears that the chancellor found it disturbing that the property had lost a considerable amount of its value and he attempted to obtain an explanation to assist in the determination of the property’s fair market value. The chancellor addressed this issue during the proceedings with Chad as follows:
Chancellor: Property values are about the same now as they were three or four years ago?
Chad: Yes, sir.
* * * *
Chancellor: Have you taken away a lot of the improvements to the property in the past few years?
Chad: Taken away? What do you mean?
Chancellor: Are they gone from what they were from, say, 2009 until 2014? Have a bunch of the improvements been gone?
Chad: No, I haven’t.
Chancellor: Are they deteriorated very much, or have you kept them up pretty well?
Chad: Yes, sir, I have.
¶11. There was no evidence offered to support the reduction in value as both appraisals were conducted by the same entity. In addition, Chad testified that the property values were about the same as they were at the time of Catherine’s appraisal, that no improvements had been removed, and that the property had not deteriorated. “To the extent that the evidence on which [a] chancellor base[s] his opinion [is] less informative than it could have been, we lay that at the feet of the litigants and not the chancellor.” Williams v. Williams, 129 So. 3d 233, 241 (¶31) (Miss. Ct. App. 2013) (citation omitted). Chad failed to give a reasonable explanation for the diminishment in the value of the property from 2011 to 2014, even though property values generally had remained steady. The appraisals were the only evidence submitted to the chancellor to determine the value of the property. As stated, there was a considerable difference in the value arrived at by the two appraisals with no apparent explanation for the difference. The chancellor split the difference, as in his discretion he was permitted to do, to arrive at a reasonable value. McKnight, 951 So. 2d at 596 (¶7). After reviewing the record, we find nothing to suggest that the chancellor abused his discretion. This issue is without merit.
The chancellor actually did Chad a favor by giving him the opportunity to explain why his value of the property had decreased as much as he claimed in the period between the two appraisals. As you can see, Chad didn’t do much to help his cause. By the way, MRE 614 specifically allows the judge to examine any witnesses, and even to call witnesses herself. In this case, I think the appellate result would have been exactly the same whether or not the judge asked any questions.
It’s ingrained in our law that the chancellor may average values when presented with competing valuations. If you want to have a basis to challenge averaging, you have to put some evidence in the record as to why your client’s valuation is the more credible. For instance, had Chad called one or both of the appraisers to testify, that may have produced a different result. In the absence of that testimony, he may perhaps have been able to explain some deterioration of the property or some other factor affecting value negatively. Absence of that kind of proof left a vacuum which the chancellor filled with an average. And it deprived Chad of much to argue on appeal.
November 17, 2011 § 3 Comments
Some lawyers like to play a cat-and-mouse game in which they go light on some proof, expecting the chancellor to fill in the blanks in their client’s favor. Sometimes that strategy fails calamitously.
The latest case in point is Powell v. Powell, decided by the COA on November 8, 2011, an equitable distribution case. Sherida Powell and her husband James were locked in a battle over the marital estate, the major components of which were the marital residence, some future payments from the sale of a business, and James’s retirement account. The chancellor decided the values based on the proof, and sherida hit the appeal button, complaining that the judge’s adjudication of values was incorrect.
The COA, via Judge Irving, disagreed with Sherida. The opinion is instructive about what works and does not work as proof of values, so I am quoting it here:
¶20. Sherida first attacks the value that the chancery court assigned to the marital home, which James testified was worth $80,000 before he renovated it prior to his marriage to Sherida. Sherida complains that numerous documents could have been provided to prove the value of the home. While such documents could have been provided, they were not–not by James, and not by Sherida. Sherida was entitled to provide whatever documentation she could obtain regarding the value of the home; in the absence of such, we decline to find error with the chancery court’s valuation of the home. * * *
¶21. Sherida next complains that the chancellor erred in “failing to calculate the value” of the future payments on the promissory note from ASAP’s sale. We note that Sherida made no effort to provide a calculation of the future value of the payments. In the absence of any valuation of the ASAP promissory note payments, we decline to hold the chancery court in error in its valuation of the payments.
¶22. Sherida also complains that James’s retirement account should have been considered a marital asset. In her brief, Sherida concedes that the only evidence as to the value of the account came from her trial exhibit 31. That exhibit was simply a summary of Sherida’s valuation of certain assets, including James’s retirement account. It appears that Sherida’s “value” for the account is simply the percentage that she believes she should receive of each of his monthly disability checks. This did not provide the chancery court with an adequate valuation of the retirement account. No other evidence was presented by either party that conclusively established the account’s value. Under these circumstances, the chancery court did not err in declining to evaluate the account as a marital asset.
A few nuggets from this case:
- The chancellor has no duty to go out and develop your proof for you. It’s up to you to put adequate proof in the record to support your client’s position. If you don’t do so, the appellate courts are not going to entertain your complaint that the judge should have found a different way.
- The chancellor can pick and choose what to believe from equivalent proof. In other words, if each party simply lobs up a guess as to a value, the judge can pick which one to swing at and hit. It’s up to you to come up with weightier proof, like an appraisal from a qualified appraiser, or some other weightier source, if you want to have the upper hand as to values.
- If you want the judge to calculate future values or some such, then offer an expert, or a stipulated table, or something of the like. Don’t expect the trial judge to perform actuarial and trigonometric calculations when you have not provided the template to do so.
- If you fail to provide adequate proof of the valuation of a retirement account and the parties’ relative contributions to it, you do so at your client’s peril. Here, the fallout was a finding by the trial court that the account was not marital. In Pierce v. Pierce, 42 So.3d 658 (Miss.App. 2010), the fallout was a remand for further findings of fact.
- If you don’t put evidence into the record, don’t expect to be able to argue about it on appeal. And don’t expect the trial judge to rule in your favor, either.
- Once again … the more difficult you make it for the trial judge to figure out, the less likely you will prevail, as I have often said here before.
- When you have a valuation case, jump on it early. Get your client to bring you as many documents as possible, such as account balances, valuations, appraisals and financial statements. Get tax returns with depreciation info. Collect closing statements and property tax data. Use discovery to get admissions as to admissibility and authenticity of documents, and to admit values. Discover the existence of any other documents. If valuation will be contested, line up your experts. And remember that experts must be designated no later than 60 days before trial, per UCCR 1.10, if you were requested to disclose them in discovery.
There’s another interesting aspect to this case, and you can read about it here.