PREMARITAL AGREEMENTS – DISCLOSURE – STANDARD FOR PROVING FRAUD OR NON-DISCLOSURE – ESTOPPEL — CLAIMED REVOCATION/REPUDIATION OF AGREEMENT – SUPPORT — MODIFICATION RETROACTIVITY — DISCOVERY — UNUSUAL DISCOVERY ORDER UPHELD. The Court of Appeals in Makoui v. Makoui, unpublished, 26 VLW 726, 11/22/11, upholds a premarital agreement whose disclosure attachment valued stock at $68,000, even though the owner spouse testified that at the time of the agreement it was worth $250,000 to $300,000.
The Court says the first thing to consider is that the agreement signed by both parties “specifically states each gave a ‘fair and reasonable disclosure,’” and the Premarital Agreement Act says this recitation creates a presumption that it is true. (Code § 20-151(B).)
Second, “the statute requires only that the disclosure be ‘fair and reasonable’ and not that the disclosure include a present fair market value for each item of property disclosed.” And looking at the context, the schedule listed many other intangible asset values totaling $214,000, just counting those whose values were listed, plus “thousands of shares of named stocks for which no value was listed.” (And wife offered no evidence that the value of the non-valued stocks was negligible.)
As for other challenges to the agreement as unconscionable, the Court stresses that it takes both unconscionability at the time of signing and non-disclosure to overturn the agreement under Code § 20-151(A)(2) , and that both parties were “mature, college-educated adults at the time of their marriage,” and “the agreement did not provide for a gross disparity in the division of any marital assets that might come into existence during their marriage.”
Husband had told the wife that he had torn up the agreement when she demanded to see a copy of it. But that does not estop him from later asserting his rights under the agreement, the Court says. Although it seems he had lied about this, the trial court didn’t find that the wife proved that she had relied upon that misrepresentation in any way, and that if she had, that reliance would have been unreasonable. Both Code §20-153 and the prenup’s terms say that a prenup can be revoked or amended only by a written instrument. And “wife was charged with knowledge of both the applicable statute ... and the terms of the agreement.” A useful reminder to make sure that clients have read and understood “boilerplate” provisions, and the statutes that lay out the framework, ground rules and limitations of the agreements they are entering.
The husband cross appealed because he had filed for a modification of pendente lite spousal support, and when the court granted that modification from $5,000 to $1,000 per month it did not make it retroactive to the date he filed the motion. The Court of Appeals upholds, as “husband could have avoided the accrual of the arrearage if he had acted in a timely fashion.” So filing for modification so as to enable a change to be retroactive to the filing date, but then not setting it for hearing, can be dangerous.
The trial court ordered a federal-court-style schedule of evidence disclosures instead of the usual discovery process, and the Court of Appeals says that was not reversible error, at least to the extent the wife preserved her objection. There is a right to discovery under Rule 4:1(b)(1), the Court stresses, but that Rule also says the court may limit “‘the frequency or extent of’ discovery methods ‘if it determines [inter alia,] that: . . . (iii) the discovery is unduly burdensome or expensive, taking into account the needs of the case, the amount in controversy, limitations on the parties’ resources, and the importance of the issues at stake in the litigation.’” And “the granting or denying of discovery is a matter within the discretion of the [circuit] court and will not be reversed on appeal unless ‘the action taken was improvident and affected substantial rights.’” (Citing O’Brian v. Langley Sch. (Va. 1998) and Rakes v. Fulcher (Va. 1970)). At the time when the wife moved to compel answers to interrogatories, the trial court had already disposed of all issues except for four-digit property and alimony issues, so its ruling did not “affect substantial rights.”
Over the past few days we've reported the new laws enacted in the areas of divorce, domestic violence, child abuse/neglect/dependency, and adoption. There were a few other bills passed, some affecting family law, others not in family law but still affecting what we family lawyers do in our practice. Here they are:
HB 1095 Qualified domestic relations order for enforcement of support. Provides that a court may enforce a support order by entering a qualified domestic relations order or other order designed to attach or garnish pensions and other deferred compensation or retirement plans governed by federal law.
SB 89 Garnishment; corrects form listing Exemptions from garnishment. Corrects the form listing garnishment exemptions by replacing the reference to "rent or services of a laborer or mechanic" with "spousal or child support" to reflect amendments made in 1990 (Acts, Ch. 942) that were never incorporated into the form. This bill also contains technical amendments. This bill is a recommendation of the Committee on District Courts. It changes the § 8.01-512.4. Notice of exemptions from garnishment and lien Form to state that a homestead exemption cannot be claimed in a garnishment for child or spousal support.
HB 84 Child custody; judge shall communicate basis for decision, except in certain cases. Provides that the judge's required communication of the basis for his decision regarding child custody or visitation, except in cases of a consent order for custody or visitation, shall set forth the judge's findings regarding the relevant statutory factors used to determine the best interests of the child.
HB 229 Doctrine of necessaries; lien not to attach on residence held by spouses as tenants by entireties. Provides that a lien arising out of a judgment under the doctrine of necessaries shall not attach to the principal residence of a husband and wife that was held by the spouses as tenants by the entireties prior to the death of either spouse where the tenancy terminated as a result of such death.
HB 761 Recording deeds; statement of preparation. Authorizes the circuit court clerk to reject for filing or recording a deed, except for deeds where a public service company, railroad, or cable system operator is either a grantor or grantee, unless it states on its first page that it was prepared either by the owner of the property or by an attorney licensed to practice in Virginia.
HB 101 / SB 94 Rules of Evidence; adoption of amendments or additions of Rules by Supreme Court of Virginia, etc. Provides that the Rules of Evidence (available here) that have been prepared and adopted by the Supreme Court of Virginia and approved by the Virginia Code Commission shall take effect on July 1, 2012. A rule derived from an evidentiary provision in the Code of Virginia shall note such Code section in the title of the rule. Subsequent amendments or additions to the Rules of Evidence must be adopted by the Supreme Court of Virginia by November 15 and shall become effective on July 1 of the following year unless the General Assembly modifies or annuls such amendments or additions by general law. As introduced, this bill was a recommendation of the Virginia Code Commission. This bill is identical to SB 94.
SB 59 Injunctions; requirement for bond. Requires a moving party to post bond only for temporary injunctions. Under current law, a bond is required for both temporary and permanent injunctions. The new version of the law reads:
§ 8.01-631. Injunction bond. A. Except in the case of a fiduciary or any other person from whom in the opinion of the court awarding an injunction it may be improper or unnecessary to require bond, no temporary injunction shall take effect until the movant gives bond with security in an amount that the trial court considers proper to pay the costs and damages sustained by any party found to have been incorrectly enjoined, with such condition conditions as the trial court or judge may prescribe.
ALIMONY — MODIFICATION — RETIREMENT — SEPARATION AGREEMENT TERMS — “FORESEEABLE” CHANGES IN CIRCUMSTANCES — STANDARD OF REVIEW. In Dailey v. Dailey, ___ Va. App. ___, ____ SE2d ____, 26 VLW 1168, http://bit.ly/dailey4c (3/6/12), a policeman had a very hard time showing that his retirement was a change in circumstances that could justify modifying alimony, even though his decree-incorporated separation agreement said alimony “shall be modifiable upon a material change in circumstances.” His ex-wife agreed that it was a change of circumstances, but argued that alimony could not be modified because, she claimed, “the parties had contemplated the change at the time they entered into their agreement”. The trial judge agreed that the parties had “bargained for” alimony on top of the sharing of the pension, and on that ground, refused to modify.
The Court of Appeals agrees with the ex-wife that, “In some instances, a petition for modification of spousal support will be defeated because the change in circumstances was ‘foreseeable.’” It reasons that trial courts making support awards “look to current circumstances and what the circumstances will be within the immediate or reasonably foreseeable future. Srinivasan v. Srinivasan, 10 Va. App. 728, 735, 396 S.E.2d 675, 679 (1990).” … “When a particular event or circumstance is reasonably foreseeable, trial courts are expected to build that event into the support award,” and “it will not constitute a material change in circumstances.” It cites Barrs v. Barrs, 45 Va. App. 500, 612 S.E.2d 227 (2005), where wife’s $60,000 annual income from investments received in equitable distribution was foreseeable at the time of the divorce.
After all, the Court adds, Code § 20-109(B) “provides that a trial court may revisit spousal support if there is a ‘material change in circumstances … not reasonably in the contemplation of the parties when the award was made.’” It does not note that that Section is about modifications of defined-duration awards, and that the statute on modifying alimony generally, § 20-109(A), says instead that a court may modify it “as the circumstances may make proper.” The alimony in this case was not defined-duration.
The Court admits that “Retirement is a likely and predictable occurrence for most. A broad reading of foreseeability would mean that retirement would never constitute a material change ….” But “We have rejected such a broad reading of the foreseeability concept.”
Retirement was not “foreseeable” in the sense of the word used above, the Court finds, looking at “objective evidence available at the time of the previous award of support”, as it must under Furr v. Furr, 13 Va. App. 479, 482, 413 S.E.2d 72, 74 (1992). For one thing, the husband might have died before retiring, in which case the wife would have no retirement income, since the department had no survivor benefits available in pre-retirement divorces. And husband testified that at the time of the decree, when he had 29.5 years on the force, he had no retirement plans — and that testimony was “uncontested”. Other facts that the Court recites prominently are that the agreement has an “if as and when” division of the pension; and that the parties stipulated to the material change of circumstances, and did not appeal the trial court’s finding of such a change.
The Court also looks at the wording of the agreement. It says an agreement “is highly relevant and perhaps dispositive in establishing what was reasonably in the contemplation of the parties at the time they entered into the agreement.” And this agreement “is silent on the question of whether spousal support should continue or terminate upon husband’s retirement,” and thus gives no evidence that the parties “reasonably contemplated, or foresaw, the effect of husband’s retirement.” The Court here reiterates that interpretations of contract language should be reviewed de novo as matters of law, and not “under a deferential abuse of discretion standard.”
The Court also takes note of its own opinions in other cases emphasizing that a support award should not be based on future conditions, but should instead set support based on current conditions and modify later if things change. (Rogers v. Rogers, 51 Va. App. 261, 270-71, 656 S.E.2d 436, 440 (2008); Robertson v. Robertson, 215 Va. 425, 428, 211 S.E.2d 41, 44 (1975).)
To use “foresee” in lay terms, the Daileys probably did foresee retirement, but they probably did not know for sure what economic effect retirement would have. Retirement could either decrease or increase income, depending on post-retirement employment. So perhaps the kind of foresight that will nullify statutory and contractual grounds for modification is foresight of a change which not only is extremely predictable, but also has very predictable, known, economic effects.
Many divorcing parties who include modifiability in an agreement do so precisely because they foresee that circumstances might change and modification might be needed. In some cases, parties contemplate very specific and likely changes of circumstances. Unfortunately, that very foresight can nullify those modification terms of their agreements, under the foreseeability rule discussed in this case. But must foresight be 20/20 to trigger that rule? At least, it must be more accurate, and clearer, than the prophecies of the Old Testament prophets, the Oracle at Delphi, and even parts of the New Testament, depending on how they are interpreted. This case will probably be cited to the effect that retirement is per se unforeseeable, but the Court’s prominent recitation of so many particular facts may help it distinguish this case from other future cases. So we should expect separation agreements to start sounding more like horoscopes, saying more about whether certain events are foreseen, and about what specific events might be material changes of circumstances. And some people who would otherwise reach agreement may not be able to come to an agreement when more specifics about future possibilities have to be expressly agreed-on.
ALIMONY – LOCAL GUIDELINES – SLAVISH ADHERENCE. A circuit judge who carefully went through all the listed factors in Code §20-107.1 and made findings of Record on each one – but then told counsel to go work the local guideline formula for spousal support — erred, the Court of Appeals says in its unpublished opinion in Coleman v. Coleman, 26 VLW 725 (11/22/11). The appellate court does carefully state that even though these findings were delivered orally from the bench, the transcript of the hearing satisfies the requirement for written findings. The problem is, the Court of Appeals explains, that the Record does show that the trial judge considered each of the factors under Subsection (E), but after doing that did not “fix the amount,” but instead applied a published local formula, and thus the statute was not satisfied because Subsection (F) was violated. Such finding and “fixing” as the trial actually did took the form of saying, “The Henrico County pendente lite spousal support guidelines shall be applied in order to determine the amount of spousal support.” That just won’t do it, the appellate Court emphasizes.
ALIMONY –- STATUTORY-FACTORS-EXPLANATION REQUIREMENT –- ALIMONY PRESUMPTION –- ROLE OF FAULT. Pilati v. Pilati, 59 Va. App. 176, 717 S.E.2d 807 (12/6/11), is another simple and straightforward Court of Appeals opinion, but it explains a great deal about the Court’s current thinking on the spousal support statute’s specific-explanation requirements and how the Court intends to apply them. It was a case that reverses one of these judgments for insufficient information, but not without explaining in detail what it does want. Thus it should be very useful to trial judges and the Virginia lawyers who try these cases – and/or appeal them. It emphatically declares, for what that’s worth, that the Court of Appeals will no longer tolerate a sloppy or casual kiss-off of these requirements. The Court of Appeals reaffirms and perhaps refines its continuing belief in Virginia’s common-law alimony presumption (ever beloved of the appellate courts, except when they say it isn’t), and the respective roles of payor and payee fault in its application. The trial judge doesn’t seem to have done much of a job of addressing these statutory requirements, even after both sides offered written proffers of fact on each of them, and after the judge announced his decision, counsel called him on that. The trial judge then called for written briefs on the factors, and got them, with proposed Findings of Fact and Conclusions of Law, and then issued a letter opinion more or less quoting the statute’s factor list, including two fact findings: that the marriage was 22 years and the standard of living had been “high middle class.” This Record didn’t make Judge Kelsey very happy, and his opinion patiently explained what the statute requires. Courts have a duty to explain their reasoning in detail only when there is a statutory requirement for it, and nothing says they have to give written findings of fact and conclusions of law or explain their decision’s basis generally.
Nor does a signed written order take any explaining, absent the statute saying otherwise -- and without such requirements an appellate court presumes the trial court followed the governing legal principles, and resolves all factual disputes in the prevailing party’s favor. Now the spousal support statute, when it says a judge has to communicate to the parties, either orally or in writing, the basis for the decision on alimony, calls for more than merely mentioning the predominating reasons for the decision. It requires identifying all relevant statutory factors that support the decision and giving counsel and parties an explanation of its findings on any significant factual disputes, under §20-107.1(F). Judge Kelsey even offers a helpful contrast with the child custody statute, §20-124.3. Communicating the basis for the decision he made requires that the judge orally or in writing give a case-specific explanation, which gets its “contextual meaning” from the evidence that came in, and that explanation has to concern the fundamental, predominating reasons for the decision. Now the judge can satisfy the “written explanation” requirement in alimony cases by written orders, written letter opinions that are part of the Record, or oral rulings from the bench -- if they are recorded in a written transcript -- or for the more daring and reckless would-be appellants, a good old “Statement of Facts.”
And make no mistake: the alimony presumption is alive and well, because, Judge Kelsey explains, when a support claim is made by a party who is blameless for the end of the marriage, the law imposes a duty on the other spouse, as informed by ability to pay and payee needs, to maintain the blameless wife in the station in life to which she had become accustomed.
CHILD SUPPORT – GUIDELINE CALCULATION – ALIMONY AS WIFE’S INCOME – ALIMONY CUTOFF FOR COHABITATION. The Court of Appeals decided two issues in a case called Cranwell v. Cranwell, 59 Va. App. 155, 717 S.E.2d 797 (12/6/11). One was on the oft-raised issue of how much it takes to prove the “cohabiting in a situation analogous to marriage” element of the alimony cutoff statute, §20-109.1 A. (The opinion never mentions the statute because this case concerned the application of agreement language tracking the statutory wording.) On the child support calculation question, the ruling was simple and straightforward: that the calculation statute means what it says. §20-108.2 C requires that the calculation begin with the parties’ gross income, and that that includes alimony. Wife’s counsel had argued, and the trial judge had apparently agreed, that husband’s payment of the alimony had been spotty or irregular, and the trial judge said he did not think alimony should be included in the wife’s income. This ruling, the Court of Appeals says, was simply wrong. The fact that performance has been spotty or irregular, the appeals court explained, does not make a difference, because it does not say that in the statute. On the alimony cutoff question, this was one of those cases where ex-wife and her boy friend had carried on their sexual relationship without actually moving in with each other. So this issue was fairly easily determined too. The boy friend testified that he didn’t even have a key to the ex-wife’s house, and kept only “incidental items” there. Whether this went on for over a year or not, it did not establish marital cohabitation. As it has explained endless times, a mere sexual relationship, even a long-term one, will not do the trick because more is required -- like living together, for one (and only one) thing. It also includes “carrying out the mutual responsibilities of the marital relationship.”
SUPPORT ENFORCEMENT – STATUTE OF LIMITATIONS – JUDGMENTS – TWENTY-YEAR STATUTE APPLIES. Yes, the statute making every child support installment a judgment from the minute it is due and unpaid means what it says, the Virginia Supreme Court points out. But for that very reason, the Supreme Court tells the DCSE in Adcock v. Commonwealth, ___ Va. ___, ___ S.E.2d ___, 26 VLW 670 (11/4/11), the general 20-year statute of limitations on judgments, §8.01-251, means exactly what it says too, and it applies to these judgments going back 20 years or more. Nothing in the statute makes an exception or says it doesn’t apply, and therefore a “deadbeat Dad” does not have to pay them. This is all nothing but statutory interpretation, the Supreme Court says, and it is straightforward and simple. The only quirk is the established legal principle that a statute of limitations does not apply to an ongoing judgment that you will have to pay future child support, but those payments that were missed and became instant “judgments” against the payor parent are not that, and just like any other judgments, after 20 years they became uncollectible.
ALIMONY – MODIFICATION – PAYOR’S RETIREMENT AND INCOME REDUCTION – ABILITY TO PAY – PROPERTY HOLDINGS - LIQUIDATION OF PRINCIPAL. Appellate courts are always going on and on about how sacred the dichotomy between income and property is, especially as a rationale for double-dipping awards, where the asset or income stream can be characterized as both at the same time, and thus be hit twice to suit the desires of the awarding court. It seems illogical and arbitrary to some, but after all, when it comes to alimony, the criteria in the statute include payor assets as an element of “ability to pay.” That’s right. We have seen the appellate courts look to the interest that could be made on property holdings that belong to the payor, but a new opinion from the Court of Appeals makes plain that the assets don’t have to be throwing off income to be charged as an alimony pay-ability source, and indeed the opinion seems to say that a court can even require the drawdown or liquidation of principal to satisfy alimony obligations – though it is more clever and more subtle than to say exactly that. (See below.) This holding issued in a case where it was the payor seeking modification by reason of his greatly reduced payor income, so of course he had a several-pronged burden of proof to meet, and that may distinguish this case from other situations. The holding sustained by the Court of Appeals in Driscoll v. Hunter, ___ Va. App. ___, ___ S.E.2d ___, 26 VLW 617 (10/25/11), is distinguishable from cases that come up in a different procedural configuration. Meaning, of course, that the result could be the same, but the means of getting there might be different. The husband in this case, who retired from his oral surgery business for health reasons, had relied at first on the wording of an agreement that didn’t say exactly that he had to show a material change in circumstances to come in to seek a support reduction. But that agreement, the Court of Appeals points out, was a temporary agreement, and it was swallowed up in the final divorce litigation and divorce decree and that there was no dispensing now with that proof requirement. The trial judge did not hold that retirement did not constitute a material change of circumstances, though the Court of Appeals hints that it would have been fine with them if he had – a fairly dire warning for the ex-husbands out there. Assuming change in circumstances, the trial court held that even though Husband’s income went down drastically, he still had the ability to pay because he had plenty of money in investments (as indeed he admittedly did). The Court of Appeals doesn’t care where he gets his money to pay the unchanged alimony obligation, but says it would have been O.K. to liquidate principal to do it. The ex-wife had worked for only a very short time after divorce and quit, deciding she just didn’t like working and would rather have the time. So the husband’s counsel tried an imputation argument. Now we all know how hard payee imputation is to get, or at least for it to survive appellate review, but the more frightening thing about the Court of Appeals treatment of it here is its statutory analysis. That analysis indicates that when a petitioner seeking alimony reduction has not satisfactorily proved he lacks the ability to pay, all those “equitable factors” like payee imputation can’t even be looked at. And weren’t we recently told that imputation is a deviation/variation factor, but a mandatory one? Well of course that would have to have been payor imputation (and that was probably a child support case anyway).
The fact that a wife waived alimony and child support in a written separation agreement does not control whether the separated (or “separated”) wife will get the death benefits from husband’s workmen’s compensation provisions if he dies in a work-related accident, the Court of Appeals held in Sifford v. Sifford, ___ Va. App. ___, ___ S.E.2d ___, 26 VLW 555 (10/11/11). What matters, the Court of Appeals held as it overturned a denial by the Workmen’s Compensation Commission, is whether or not this wife is “an actual dependent” of the deceased husband. Code §65.2-515(A)(1) in fact conclusively presumes that wife is a dependent if she has not voluntarily deserted or abandoned him, or if she lives with him, and at that time is actually dependent on him. And as for actual dependency, the Court explains, all she needs to establish is a partial dependency. The remaining requirements are that she prove husband contributed to her support with “some degree of regularity,” and that she relied upon him for reasonable necessities. The Commission had already found that the husband paid all household expenses, that the wife paid for groceries out of the joint checking account, and that she paid no rent in the marital home. Also, this is a case in which after the formal separation all the spouses did was to move to separate bedrooms, with the husband going on paying health insurance on the wife and the child and still paying all other expenses of the household. Nor does it make any difference whether the Court of Appeals agrees with the Commission’s determination that that was the intent of the agreement, because the effect of the no-alimony agreement was to provide regular support for the wife too. She didn’t need alimony all that much with this actual marital support continuing.