COMMINGLING OF SEPARATE HOME DOES NOT EQUATE TO 50/50 SPLIT OF VALUE

Decisions on the division of equity in homes run the full gamut. It seems the Appellate Courts typically affirm a trial judge’s ruling, thus allowing judges to make decisions based upon the facts of each case. This is thought to lead to greater fairness to the particular litigants, but a byproduct is uncertainty of result in other cases. The “precedent effect” of decisions is diminished.

In Palmer v Palmer, No. 2011–CA–01199–COA (5/7/13) the lower court found that a home acquired and paid for before the marriage was commingled as marital property by the parties’ use of the home in the marriage. The Court found that the wife had contributed a new floor and daily upkeep on the home. The trial court divided the equity in the home equally. The Court of Appeals reversed, stating:

“We agree with the chancellor’s finding that the home is marital property. Although the home was clearly Roland’s separate property prior to his marriage to Ceicle, the parties lived in the home as a married couple. As such, the home was converted into a marital asset. ¶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).... 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.”

FINANCIAL STATEMENTS ARE REQUIRED IN ALL DIVORCE CASES - PART TWO

Even though you might get stuck with a bad financial statement, the Judge cannot ignore the true facts sometimes.

In a recent blog, we showed how a fellow was punished on both ends with inaccuracies in his Rule 8.05 financial statement. In Jones v Jones, NO. 2011–CA–01440–COA (Decided April 30, 2013) an attorney litigant “ guesstimated” numbers on his 8.05.  The Judge took numbers the attorney didn't like (values he had over estimated) and didn't take numbers the attorney liked (budget items he underestimated).  The Appellate Court found that the Judge had the right to rely upon the “ guesstimates” when he chose to and the right to discount the numbers he found unreliable.

In a recent, similar, situation, the Supreme Court took the opposite tact from the lower Court of Appeals.  In Collins v Collins, No. 2010–CT–01909–SCT (5/9/13) the Court reversed a case where child support was calculated by the Judge based upon a poorly prepared financial statement. The Supreme Court found that even though the man had prepared an inadequate statement, it was important in child support matters for the Judge to base her decision on evidence where she could; in this case, checking account records from the business.

Hard and fast rules are hard to come by in Court.

WHEN DO WE DETERMINE THE VALUE OF ASSETS FOR EQUITABLE DISTRIBUTION?

When do we determine the value of assets for equitable distribution purposes? The date of separation? The date of divorce? Or some other date, such as the date of the temporary order?  The Court has described this valuation date as the “point of demarcation.”  The Court has opted to leave the matter open, holding that it is necessary that a chancellor maintain discretion to decide in each instance.  Lowrey v. Lowrey, 25 So. 3d 274, 285 (Miss.2009).  With no hard and fast rule, confusion remains.

One Judge tried to hold that it could divide a pension fund, even though it did not start accumulating value until after separation, stating that assets accumulated up until the divorce, but he was reversed, the Supreme Court stating, “while the marriage had not legally terminated, the relationship out of which equitable distribution arises had ended some months earlier.” Selman v. Selman, 722 So. 2d 547 (Miss. 1998)

The court has held that a temporary order may be considered by the chancellor to be a point of demarcation, but it has also been quick to point out that even though the temporary order might often be a valid point, it is not always.  Collins v. Collins, NO. 2010–CT–01909–SCT (5/9/13).

Points to consider are the nature of contributions, the timing of contributions and the nature of the asset.  A stock account, where neither party contributes, would seem to be best divided upon the date of the divorce, while a pension that grows with contributions after separation might best be valued at separation.  Savings accounts might best be valued on the date of the temporary order when the Court assigns financial and support responsibilities.  These are just one lawyer’s ideas, though.

JUDGES SHOULD SAY WHY THEY DO THINGS

Judges should say why they do things.  In Carney v. Carney, No. 2010-CT–00646–SCT (5/9/13), the Judge did a thorough analysis of the pertinent factors in making her decision, but failed to state why she was making an award which heavily favored the wife.  The Court stated that while Mississippi is not a community property state, and the Judge does not have to divide property equally (it is even true that a Judge could award 100% of the assets to one or the other), the Appellate Court must be able to tell why, so they can Judge the case on its merits.

FINANCIAL STATEMENTS ARE REQUIRED IN ALL DIVORCE CASES

Uniform Chancery Court Rule 8.05 requires detailed, written, financial disclosure in all domestic cases involving financial matters.  The form requires each party to show their address, their income and deductions, their monthly expenses, their assets and liabilities.  The Rule also requires a detailed employment history and the attachment of the most recent income tax return.  These financial statements are critical to the divorce process and must be taken seriously. (You can find a sample form here.)

Judges and attorneys are allowed and expected to rely on the financial information submitted in the 8.05 financial statement. “A Rule 8.05 statement is a mandatory filing with the chancery court that provides that court with accurate financial information to assist in its equitable distribution of the divorcing parties’ assets.” Trim v.Trim, 33 So. 3d 471, 478 (¶¶16-17) (Miss. 2010) (emphasis added) (holding that “failure to submit a Rule 8.05 statement without just cause constitutes contempt of court” and “a party’s intentional filing of a substantially false Rule 8.05 financial statement constitutes a fraud on the court”). Consequently, a chancellor’s valuation of marital assets “may be accomplished by adopting the values cited in the parties’ 8.05 financial disclosures[.]” Jenkins v. Jenkins, 67 So. 3d 5, 13 (¶19) (Miss. Ct. App. 2011) (quoting Horn v. Horn, 909 So. 2d 1151, 1165 (¶49) (Miss. Ct. App. 2005). Reliance upon the Rule 8.05 form is within the chancellor’s discretion. See Mauldin v.Mauldin, 107 So. 3d 176, 179 (¶¶14-15) (finding no error in the chancellor’s reliance on values assigned in spouses’ Rule 8.05 forms). Chancellors are also permitted to view information on the Rule 8.05 with skepticism, where the numbers do not appear to be credible.

This law took an interesting turn for one attorney litigant when he “ guesstimated” numbers on his 8.05.  The Judge took numbers the attorney didn't like, and didn't take numbers the attorney liked.  The Appellate Court found that the Judge had the right to rely upon the guesstimates when he chose to, and the right to discount the numbers he found unreliable. Jones v Jones, NO. 2011–CA–01440–COA (Decided April 30, 2013)

ATTORNEYS FEES IN DIVORCE ACTIONS

Divorce Clients often ask if they can recover their attorneys fees from the opposing, offending party. While our law does allow for a recovery of attorneys fees, the right to recovery is limited to persons who do not have the ability to pay.

Ability to pay is judged not only by what assets a person might have available before and during the divorce, but also by what assets a person might get as a result of the divorce. Consequently, in cases where there are assets which may be recovered in the divorce, there will be no attorneys fees.

See, Jones v Jones, NO. 2011–CA–01440–COA (Decided April 30, 2013).

TEXTING CAN BE GOOD AND IT CAN BE DANGEROUS

All business people and lawyers are taking advantage of the texting technology which allows us to communicate with clients and others instantaneously.  We don’t have to wait for someone to answer the phone to get a message to them.  We don’t have to pick up the phone and dial.  We simply click on their name and start texting (which my daughters can do at the speed of light with their thumbs).  Texting is a good thing because it can enhance service.  But there are reasons for caution with texting.  

First, it’s instantaneous.  We can find ourselves in a “rat-a-tat” conversation that goes too quickly and can lead to less than thoughtful expressions.  Of course, the same thing can happen in a conversation, or other form of communication, but it seems more likely for some reason in texting.

Second, sometimes we look at words and read a meaning into them that we would not see if we were talking.  The messages are also usually shorter than a letter or email, so there may not be as much explanation of the meaning.  My associate coached me one time to never read something negative into a text.  Always see it in a positive light until confirmation of the meaning is possible.  This is good advice!

Third, sometimes texts are read at a different time than they were sent and miscommunication can result.  Last night I worried all night about a text a client sent me after hours, only to find out the next morning in a phone call that we had talked after she sent the text and I had satisfied her concerns in the call. 

So, take advantage of the technology, but be sensitive to the weak spots!

WHAT DOES IT TAKE TO CHANGE CUSTODY?

In a June 4, 2012 blog post, I discussed the necessity for showing a material adverse change in circumstances in the custodial parent’s household adversely affecting the child.  I discussed the Sullivan case where 32 year old Kenneth Sullivan had custody of his young daughter through divorce proceedings. In a later modification, it was proved that Kenneth was having a sexual affair with a 19 year old and had actually snuck into the 19 year old’s parent’s home at night to have sex with her. Kenneth also admitted to drinking and driving, but denied doing it with his daughter in the car. The daughter, however, told the Guardian Ad Litem that Kenneth did, in fact, drink while driving her in the car. It was also established that Kenneth had friends who used crystal meth.

The trial court was “troubled” by Kenneth’s drinking and driving and immoral behavior, but concluded that since there was no proof this behavior had an adverse impact on the daughter, no change in custody was warranted under our law.  The Court of Appeals affirmed, stating that no change was warranted because the four year old daughter had not exhibited any harm from this conduct.  This was a correct reasoning on the part of the trial judge according to the Court of Appeals. Sullivan v. Sullivan, No. 2010-CA-01847-COA (Decided May 29, 2012.)

This ruling must be tempered by law which states that a trial court does not have to wait for harm to appear.

“[W]here a child living in a custodial environment clearly adverse to the child’s best interest[] somehow appears to remain unscarred by his or her surroundings, the chancellor is not precluded from removing the child for placement in a healthier environment.” Riley v. Doerner, 677 So. 2d 740, 744 (Miss. 1996). 

And, this law must be tempered with law that states that if a parent corrects the adverse situation, a change in custody may not be granted.  Ruth v. Burchfield, 23 So. 3d 600, 606-07 (¶20) (Miss. Ct. App. 2009)

Confused?

WHAT DO I DO ABOUT TAXES WHILE SEPARATED?

Divorce lawyers often get questions as to how to deal with taxes in a divorce context.  There are two basic filing statuses for separated spouses: married, filing jointly; married, filing separately.

First, a preliminary point:  if you were married in all of 2012, you cannot file as though you were not married, even if you are separated.  Second, if you were divorced in 2012–even for one day–you cannot file as a married person.  (Consideration should be given to this if you are about to divorce late in the year and have some discretion as to whether you divorce before year end or not.)

Here are some considerations.

You may be so hostile to your spouse that you do not want to cooperate at all, even if it means unnecessary tax losses.  If you are, you should take a careful look at whether you are cutting off your nose to spite your face.

As for cooperation, it usually comes down to two basic considerations: one, will your spouse file an honest return, and two, what status will benefit you most.

If you have any doubt about whether your spouse will file an honest return, you should probably decline to file jointly, as you will probably be liable for any dishonesty on the part of your spouse.  (Don’t put too much stock in the “innocent spouse” doctrine.)

If you think your spouse will prepare an honest return, consider filing married, filing jointly.  Have your CPA run different scenarios to see how you turn out best.  For example, you might receive a refund if you file separately and can keep all of the refund.  But, you might receive an even bigger refund if you file jointly and split the refund according to agreement.  The pros and cons have to be weighed.

If you will clearly benefit from filing jointly, and have no concerns about your spouse’s tax honesty, it may prove beneficial to file jointly.  If you do, make sure you arrive at a reliable and written agreement as to what accountant will be used, how he/she will be paid, and how any refund will be divided.

Some of these considerations may be affected if there is a Temporary Order or Separation Order in effect.

Check with a CPA in your area before making any decisions. (I checked with George Butler of Grantham Poole, CPAs before posting this!)

Note: these recommendations are made from the experience of a divorce lawyer and not from the vantage point of a tax lawyer or CPA, who should be consulted before filing any return.

DOES FILING FIRST MATTER?

Many people come to me with a great deal of worry, saying it is imperative that they “file first.”  As a rule, this is misplaced worry, but there are things to consider and talk about. There are reasons when one should truly, “file first.”

1. Asset protection: If a spouse has concern that the other spouse is about to sell or waste assets, immediate action in court may be necessary. Careful examination of the assets of the marriage is essential in the initial interview to determine what action should be taken and whether court action is necessary.
2. Personal Protection: Sometimes there is domestic abuse which requires emergency protection from the courts. 
3. Jurisdictional fights: When two or more states might have jurisdiction over a case, the person who files first may have obtained a very important advantage. 
4. Order of proof: Whoever files first gets to go first and last in the proof part of a trial.
5. Emotional considerations: Sometimes a person just has to strike back at the other party.

Don’t panic about the issue of filing first, but do consult with a lawyer about it.