The Court of Appeals in Robbins v. Robbins, 48 Va. App. 466, 632 S.E.2d 615, 21 VLW 265 (8/1/06), revisited a subject that has been kicked around several times before, the re-valuation of real estate that has increased dramatically in value while the litigation went on. In doing so it provided welcome clarification on just what the “law of the case doctrine” is and is not.
This case was tried in Virginia Beach, where the use of Commissioners for equitable distribution was widespread, and a case that had been tried that way was referred back to the Commissioner because of what the parties agreed was a mathematical error in calculating alimony. The wife had resisted reopening the matter, though, and maintained that if the case went back to the Commissioner she should be allowed to present new evidence of the current value of the former marital home two years after the first appraisal. The trial court referred the case back to the Commissioner over her objection and her argument that if there was a new evidentiary hearing, new value evidence should be allowed, since she contended that the increase in value had been nearly 100%, and nearly $1,000,000. In this case, however, the re-valuation was refused on the ground that the law-of-the-case doctrine precluded it.
Before it got into discussing the law of the case doctrine, the Court of Appeals thought it had to first discuss the standard-of-review question of whether the trial judge’s decision to uphold the Commissioner on this was an exercise of discretion to which an appellate court must defer. The answer, however, was no. More precisely, it was “In this case, however, there was no exercise of discretion to which we can defer. The Commissioner concluded, as a matter of law that he could not address the issue....We disagree.” The law of the case doctrine, the Court of Appeals explains, is simply, in this context, the rule that parties cannot re-litigate after appeal what was not raised on appeal but should have been, or was raised but expressly rejected by the appellate court. It states: “The law of the case doctrine has no binding effect on a trial court prior to an appeal.”
The footnote explains how that applies to remanded and re-appealed cases. At trial, a trial court can modify or rescind interlocutory orders all the time, and change its mind while the matter is pending as much as it wants. Nor, the Court of Appeals explains, does the law of the case doctrine govern the advisory relationship between a judge and a Commissioner. What a Commissioner in Chancery makes to the Chancellor is recommendations.
As the Court of Appeals saw it, “by relying on a legally inapplicable doctrine...the Commissioner abused his discretion. By not correcting this error, the circuit court did as well.” The equitable distribution award was reversed and remanded with instructions to re-value the house.
The Court gave some valuable guidance as to how much you must show, when opposed by the trial judge, to protect for appeal your right to get re-valuation. This wife, the Court of Appeals said, could hardly be faulted for not making a more specific proffer than counsel’s unilateral declaration that the home had nearly doubled in value. The Commissioner had decided before the hearing that he would hear no further evidence on valuation of this house, and the Court denied the wife’s motion for permission to have an appraiser enter the property for a new appraisal.)
ALIMONY AND CHILD SUPPORT. What the Commissioner and the trial judge did in figuring the wife’s alimony may sound plausible to most lawyers, but it was wrong. From the shortfall the wife showed on her income and expense statement, the judge subtracted the amount of child support he knew she would get, considered the remainder her remaining need, and awarded her approximately that much alimony. The appellate court’s condemnation of this is multi-pronged, vehement, and obscure. And although the castigation of the trial judge’s reasoning might leave some practitioners wondering exactly what the Court of Appeals is getting at, one trial-court mistake can’t be denied: under the statute and the Frazer rule, you have to calculate alimony before child support, and this judge did the opposite.
SOURCE OF FUNDS AND TRACING. The Court of Appeals also took the opportunity to come mightily to grips with the fiercely baroque concepts of multi-source/multi-destination tracing. But it ended up finding that even if the theories of the husband’s expert rang true, this testimony and the husband’s whole submission as to his supposedly traceable separate assets were utterly lacking in any evidence to provide a factual foundation. All the pretty theories in the world won’t make any difference, the Court of Appeals announced, if you don’t have any evidence to support their application. In short, it was error for the trial judge to listen to the husband’s expert and classify the shares that he still held in his medical practice as 93.16% separate property. Over the years the husband had sold off shares of his medical practice to incoming doctors, and the expert’s theory was that everything that got sold was marital and everything he kept was separate. But nobody actually traced funds from any stock sale to any particular asset. The investment accounts that were supposedly purchased with separate funds actually came from marital as well as separate funds and certainly were not purchased entirely with the profits of stock sales. What the Court of Appeals is emphatic about is that you cannot establish a percentage at the beginning, Brandenburg style, and then simply pull out the same percentage at the end of the process, if you do not have evidence to establish what money came from where and what money went where. The Court found that it did not even have to evaluate the sufficiency of the proof of the multiple sources of funds, since there was no evidentiary support for the multiple destination of the funds that was assumed. Nothing was there to support the contention that the husband had intended to keep his separate property forever separate. Nor would the ratio among deposits be arbitrarily presumed to match the ratio of withdrawals from a given account. So when you commingle separate property, the Court reminds litigants, you must carry the burden of tracing, and if you cannot, it will be treated as wholly marital. Nothing in the evidence the husband was able to come up with showed that when he sold shares he was sharing only marital shares, or even that, in each sale, that is what he intended. After all, the presumption is that property is marital. The terms of the remand were that the circuit court was instructed to reclassify the pre-separation shares as all marital property.
Intent is important in classifying withdrawn funds, the Court of Appeals acknowledges, but there has to be evidence to support the intent being argued. The evidence can be direct or circumstantial, but there has to be enough of it.
The Court of Appeals says “No Virginia court has expressly held that the deposit ratio may be arbitrarily used to approximate a pro-rata withdrawal ratio. Nor do we.” The Court even resorts to Brett Turner’s jar of red and white marbles to make its reasoning clear to all.
EQUITABLE DISTRIBUTION PERCENTAGES – CONDUCT. Upheld, however, is the judge’s decision to divide the property 65-35 in the husband’s favor. The judge’s reasoning was based on the §20-107.3(E) factor that it was basically the wife who broke up the marriage. So long as the judge considers all the applicable factors, what weight to assign to a particular factor is within a trial court’s sound discretion, and here the wife’s romantic involvement with a co-worker was considered a major contributing factor and the precipitating event in her decision to end the marriage. In a footnote the Court expressly declares that factors and circumstances leading to the dissolution of the marriage can be considered in property division even if they had no financial impact, “as long as those factors detracted from an overall marital partnership.” That should be clear, the Court says, from Ranney v. Ranney, 45 Va. App. 17, 46-47, 608 S.E.2d 485, 499 (2005) as well as such cases as Budnick and Watts.
ALIMONY - INCOME AND EXPENSES. The Court does give some useful guidance as it addresses the use of misuse that was made of this wife’s income and expense sheet at trial. It did not expressly include any expenses as children’s expenses, nor name any expenses that one could particularly identify as the children’s. However, the wife in her testimony admitted that some of the expenses went to help support the children and her adult brother, and one of her emancipated sons. When the Commissioner deducted her child support from her shortfall, there was nothing on the income and expense sheet to tie any of the money to children, so that is another reason it was wrong. As a “solution to the problem of mixed expenses,” the Commissioner’s deduction of the child support was, the Court of Appeals says, totally improper. The Court of Appeals does say that “expenses that are indivisible by nature or trivial in amount need not be segregated.”