Virginia Family Law Appeals

Third party's mortgage payments were marital; sole custody justified, GAL report evidence; sole-named debt can be weighed AND ordered paid -- Harrop II v. Harrop

THIRD-PARTY MORTGAGE PAYMENTS WERE MARITAL:

A church's payment's of a divorcing couple's joint mortgage obligations were marital-property contributions to the home's equity, even though the husband was the sole occupant and solicited the church's assistance, the Virginia Court of Appeals ruled in Harrop II v. Harrop, unpublished, March 7, 2023. He presented no  evidence of what the church's intent was, so he did not overcome the presumption that paying a jointly-titled debt was a gift to both spouses, not just him.

That's all straightforward and sounds right. What's troubling is the court's footnote to this, which seems to mean that its holding is not really going to be the rule in similar future cases where such payments are made post-separation:

We recognize that because the property at issue was acquired after the date of the parties’ last separation, husband would have been entitled to a presumption that the property was separate property. See Luczkovich v. Luczkovich, 26 Va. App. 702, 708 (1998) (“Property acquired after the last separation is presumed to be separate unless the party claiming otherwise proves that the property ‘was acquired while some vestige of the marital partnership continued or was acquired with marital assets.’” (quoting Dietz v. Dietz, 17 Va. App. 203, 211-12 (1993))). However, because husband did not make this argument to the trial court or to this Court on appeal, we treat it as waived. Coward v. Wellmont Health Sys., 295 Va. 351, 367 (2018) (“[I]t is not the role of the courts, trial or appellate, to research or construct a litigant’s case or arguments for him or her, and where a party fails to develop an argument in support of his or her contention or merely constructs a skeletal argument, the issue is waived.” (quoting Bartley v. Commonwealth, 67 Va. App. 740, 746 (2017) (applying Rule 5A:20(e)))).

Does "the property at issue was acquired after the date of the parties’ last separation" mean that the home -- the property being divided -- was acquired post-separation, or that the church's contributions to the mortgage were "property" the husband "acquired"? The latter, apparently, because the husband was already making mortgage payments on the home for the same month when the parties separated. So the footnote strongly implies that the payments were property, and were acquired by the husband, even though they were third-party payments of a debt that was in both spouses' names. And that if only he had made that argument, he would have won that point, unless the wife could present proof that the church intended a gift to both spouses.

SOLELY-TITLED DEBTS:

The court also reconciled two things the equitable distribution statute says about debts that are in only one party's name: Code § 20-107.3(C) says “the court shall have no authority to order the division or transfer of . . . marital debt, which is not jointly owned or owed.” It also says the court "shall also have the authority to apportion and order the payment of the debts of the parties, or either of them, that are incurred prior to the dissolution of the marriage, based upon the [equitable distribution] factors listed in subsection E.” 

Therefore, "the court could account for the debts in the course of equitably distributing the property under Code § 20-107.3(E)."

But not only that, "Code § 20-107.3(C) ... still gives courts the option to account for those debts by ordering one spouse to pay debts in the other spouse’s name."  However, that was not actually an issue in the case. The court was simply upholding the trial court's allocation to each party of that party's own debts that were already in that party's sole name.

That apportionment, which left the husband with debts elevenfold greater than the wife's, was not a blind refusal to consider such debts: it was correctly done by considering the equitable distribution factors, e.g., "the cumulative effect of the extra-marital conduct ... was devastating and ... a significant negative nonmonetary contribution," and "wife’s positive contributions to the family, including raising the parties’ children and spending substantial time educating herself on how best to care and advocate for the child with autism."

The trial court also properly considered the “debts and liabilities of each spouse” as a factor, and  "accounted for holding husband responsible for most of the marital debts by awarding wife less of the marital property than she had sought." 

CUSTODY:

The court also approved of the trial court's reasons for awarding sole legal custody: The father was "'mostly resistant and uninvolved'", "'quick-to-anger'", “'resistant to engage in a dialogue with [wife] about child-related decisions' and lacked 'willingness to collaborate with her over the past three years'  ... 'even if an agreement is reached in the moment, [husband] takes steps afterwards to frustrate the process and recharacterize the outcome.'”  These observations in the Guardian ad Litem's report also "'coincide closely with'" the trial judge's firsthand observations.

Why was the Guardian ad Litem's report admissible evidence? The Court emphatically rejected the father's argument that "a guardian ad litem report is entitled to no more weight than a closing argument. See Wiencko v. Takayama, 62 Va. App. 217, 233 (2013) (finding that the abuse of discretion standard 'affords the trial court appropriate flexibility in determining to what extent it should rely on the recommendation of the guardian ad litem'); Bottoms v. Bottoms, 249 Va. 410, 420 (1995) (reversing trial court’s custody determination for failing to consider guardian ad litem report)."

And the trial court had authority to order sole legal custody even though the mother's pleadings did not expressly request it: "a court may award relief it deems appropriate, even if that form of relief was not specifically requested by that party. ... D’Ambrosio v. D’Ambrosio, 45 Va. App. 323, 336 (2005) ... Cloutier v. Queen, 35 Va. App. 413, 424 (2001)." And the father comprehensively  "put the question of custody before the court in his counterclaim for divorce when he asked the court to 'adjudicate issues of child custody, visitation and support of the parties’ minor children.'”

Parties’ Incomes a Proper Basis for Dividing Marital Debt -- Gaines v. Gaines

“It is hard to convince of a fact outside of the ten specifically delineated statutory factors that would be more ‘appropriate to consider in order to arrive at a fair and equitable’ assignment of marital debt than the income of the parties.”

The trial court said it had considered all the factors listed in Code section 20-107.3 (E), offered to answer any questions about how it had considered and weighed those factors, then ordered the parties to pay the marital debt in proportions that matched their stipulated incomes. This might not be the right result in every case, but was reasonable in “the totality of the circumstances, which included a lack of other liquid assets.”

The trial court valued the parties 'student loan debt as of the date of the trial, and that is upheld as it is expressly allowed on the motion of either party for good cause shown.

Gaines v. Gaines, Va. Ct. App. unpublished 3/30/21

Court of Appeals Upholds “Lump Sum Alimony” Equal to Mortgage Balance - Durocher v. Durocher

The trial court found “a compelling need” because the wife could not afford the mortgage payments, and also had “long-standing obligations related to the minor children’s successful competitive swimming careers” — i.e., chauffeuring them “sometimes multiple times a day” — that would interfere with having a job. The award was proper “ so that wife would be able to maintain the quality of life enjoyed during the marriage.”

The husband argued that there was no particular need to keep the marital home. But “the parties mutually agreed that wife should continue to reside in the marital home with the children.” And the trial court had awarded her the home.

“We have consistently held that a lump sum spousal support award can be used to pay off a debt,” whether secured or unsecured. And the ED award is a factor to consider in awarding alimony under 107.1.

Durocher v. Durocher, unpublished, 3/31/21

Court could not punish husband for wasting a business whose value was unproved.

Von Hassell v. Von Hassell, 2016 Va. App. LEXIS 310 (November. 15, 2016)

Husband assigns multiple errors to rulings of the trial court related to the entry of the parties’ final decree of divorce. Specifically, he contends the trial court erred in classifying certain personal property as appellee wife’s separate property, in its classification and distribution of husband’s interest of a corporate entity in which he was the majority owner, in determining husband’s income for spousal support purposes, and in making certain contempt rulings. 

Parties failed to introduce evidence of value of a marital company. Trial court awarded all marital debt to Husband to compensate "wife for her interest in that entity" and for husband's mismanagement and waste of marital resources. Appeals court found the award to be an abuse of discretion because the award for an interest in the company could not be reconciled with the lack of any evidence as to its value.

Also, an indefinite sentence for civil contempt was reversed because it extended beyond the statutory 12 month limit.

 

 

Unilateral sales violating pendente lite order were waste, though apparently in good faith and necessitated by marital debt

The Court of Appeals upholds a finding of waste against a husband sold many items during the ten-year separation, though there was a court order saying not to, in Moret v.  Moret 5/08/2018. He argued that the parties' overwhelming marital debts justified it.

 “[T]he burden is on the party who last had the funds to establish . . . that the funds were used for living expenses or some other proper purpose. If the party is unable to offer sufficient proof, the [trial] court must value the property at a date other than the date of the evidentiary hearing so as to achieve an equitable result.” Clements v. Clements, 10 Va. App. 580, 588, 397 S.E.2d 257, 261 (1990).

The Court upholds an "alternate valuation date" to account for these sales, and the use of husband's loan application to determine those alternate values, even though the items sold for less than those values. The trial court found that he "failed to realize the best price for personal property upon sale, resulting in a significant wasting of marital assets.” It thus ordered him to pay the wife half the values given on the loan application. When he objects that the actual sales were a better measure of value, the Court responds that "the linchpin of the problem" with all of it was his failure to get the wife's agreement to the sales.

"Although the sales do not appear to be illegitimate, that is not a mitigating factor under Code § 20-107.3(E)(10) that either the trial court or this Court must consider, thus appellant’s reliance on his alleged good faith business dealings carries no weight."

The Court likewise upholds the trial court's refusal to give husband any credit for reducing the marital debts with the proceeds of these sales.

It also upholds imputation of income from a business, a spousal support award, and a refusal to recalculate arrearages back to before a pendente lite modification. 

Divorce court must account for income effects of property division when setting support; value assets net of secured debt; require strict tracing

Income calculation must include effects of ED award

The Court of Appeals agrees with a husband who says the trial court's income calculation for child and spousal support needed to account for income from accounts that were transferred from him to the wife, and reverses, in Henderson v. Henderson, 5/15/2018, Record No. 1364-17-2. (A separate opinion issued the same day, with a different case number, addressed wife's appeal of various rulings.)

Valuation: Secured Debt

The Court also reverses a valuation that did not subtract the amount of debt secured by the asset. An account had a lien against it for an equity line of credit in the husband's name. The trial court valued the account at its full value, not counting the lien, and divided it equally, then left the debt entirely to the husband. That sounds wrong, but what makes it absolutely wrong under the ED Statute?

Code § 20-107.3 requires a court effecting an equitable distribution to proceed in an orderly fashion: Specifically, it must (1) “classify the property,” (2) “assign a value” to the property, and (3) “distribute the property to the parties, taking into consideration the factors listed in Code § 20-107.3(E).” Theismann v. Theismann, 22 Va. App. 557, 564, 471 S.E.2d 809, 812, adopted upon reh’g en banc, 23 Va. App. 697, 479 S.E.2d 534 (1996). Code § 20-107.3(E) requires the circuit court, when distributing the marital property during the final phase of the process, to consider the “debts and liabilities of each spouse, the basis for such debts and liabilities, and the property which may serve as security for such debts and liabilities.” Code § 20-107.3(E)(7). “However, to the extent that a valid indebtedness which is secured creates an encumbrance on the legal title” of marital property, we have held that this “indebtedness must be considered” by the circuit court at an earlier stage in the process, when “determining the value of the marital property.” Trivett v. Trivett, 7 Va. App. 148, 151, 371 S.E.2d 560, 562 (1988)

However, "On remand, the court should once again apply the subsection (E) factors to determine the distribution of the account." So the trial court might do something on remand that arrives at the same result.

Tracing

Husband had two accounts created during the marriage, which he and bank employees testified were funded solely from a pre-marriage account that contained 100% pre-marriage funds. But there were three years during the marriage, about 15 years ago, for which no statements from that old were available. Thus he failed to meet his burden of proof that the new account, created during the marriage, was separate property. The trial court had the discretion not to believe husband's testimony that no marital funds had been added to the old account, so its classification of the accounts as marital is upheld. 

But the husband was able to show that what was already in the account at the time of marriage was sufficient to account for what was put into the new accounts. That doesn't matter: "The mere fact that the husband was able to prove that he had pre-1999 earnings and bonuses in an amount sufficient to fund account #0410, the amount he claims to have traced, was insufficient to meet his burden of proof." 

Disability Retirement

Husband was a retired professional athlete and was receiving disability pension payments under a retirement plan. But there was no evidence that the payments were analogous to a "pain and suffering" personal injury award: they replaced wages and regular retirement benefits, and so they were marital. The timing of husband's employment should have made them hybrid, so it is possible, though not spelled out, that the trial court found the disability portion of already-received payments to be entirely marital because they were considered "wage replacement", not "deferred compensation."

 

Divorce court cannot order transfer of any solely-titled property; must consider but needn't discuss every ED factor; can't award what counsel conceded wasn't sought.

The Court of Appeals in Ozfidan v. Ozfidan, Va. Ct. App. unpub. 5/5/15 ("Ozfidan I")  overturned an order for "rollover" of an IRA from husband to wife in a divorce, because §20-107.3(C) says in part, "Except as provided in subsection G, the court shall have no authority to order the division or transfer of separate property or marital property, or separate or marital debt, which is not jointly owned or owed." [Except that it may order transfer of one party's separate property in the other party's sole possession or control]

Subsection G is about dividing retirement assets. It says in part:

 The court may direct payment of a percentage of the marital share of any pension, profit-sharing or deferred compensation plan or retirement benefits, whether vested or nonvested, which constitutes marital property and whether payable in a lump sum or over a period of time. The court may order direct payment of such percentage of the marital share by direct assignment to a party from the employer trustee, plan administrator or other holder of the benefits. However, the court shall only direct that payment be made as such benefits are payable.

But the Court cites Broom v. Broom, 15 Va. App. 497, 505, 425 S.E.2d 90, 94 (1992) as "holding that an IRA is not a pension, profit-sharing or deferred compensation within the meaning of Code § 20-107.3(G)(1)". 

Unequal division of marital property: The Court says it was not error for the trial court to say it had considered all the §20-107.3(E) factors, but only to discuss some of them in its ruling.

Although the trial court must consider all factors set out in Code § 20-107.3(E), it “need not quantify or elaborate exactly what weight was given to each of the factors” as long as its findings are “based upon credible evidence.” Taylor v. Taylor, 5 Va. App. 436, 444, 364 S.E.2d 244, 249 (1988); see also, e.g., Judd v. Judd, 53 Va. App. 578, 592-93, 673 S.E.2d 913, 919 (2009). “Virginia law does not establish a presumption of equal distribution of marital assets. It is within the discretion of the court to make an equal division or to make a substantially disparate division of assets as the factors outlined in Code § 20-107.3(E) require.” Matthews v. Matthews, 26 Va. App. 638, 645, 496 S.E.2d 126, 129 (1998). “A circuit court, therefore, need not start off at the 50-yard line and then look to the discretionary factors of Code § 20-107.3(E) to move the ball marker up or down the sidelines.” Robbins v. Robbins, 48 Va. App. 466, 480, 632 S.E.2d 615, 622 (2006).

It was also appropriate to consider, and give great weight to, bad behavior that did not have any effect on the marital property. It was enough that "husband’s cruelty to wife caused the dissolution of the marriage and obviously detracted from the overall marital partnership."

But in the apportionment of debts, the trial court erred when it chose not to give the husband a $9,000 credit for his payment of marital debt, which the wife's closing argument had said was "fair" and "should" be done. It had also been on her ED forms. This specific limitation on what she was asking for was not negated by her original Complaint's general request for “all rights and remedies afforded by Section 20-107.3 of the Virginia Code” and “such other and further relief as the nature of this case may require.” A court cannot award a party more than she asked for, the Court says.

For this it cites Rosedale v. Rosedale, (Va. Ct. App. unpub. July 22, 2008), where a wife asked for 50% of an asset at trial but was awarded more of it; Brown v. Brown, 5 Va. App. 238, 245, 361 S.E.2d 364, 368 (1987) on "not seeking spousal support"; Carter v. Lambert, 246 Va. 309, 435 S.E.2d 403 (1993), and Johnson v. Buzzard Island Shooting Club, Inc., 232 Va. 32, 36, 348 S.E.2d 220, 222 (1986).

Waste was a significant issue in the trial, but was not appealed.

On spousal support, it was error to make no decision, thus leaving a juvenile court order, when the wife had not asked the divorce court to award alimony but the husband's pleadings had asked it to deny or limit alimony. This is discussed in more detail in our posting about the later "Ozfidan II" appeal opinion, after remand.

Affair taken into consideration when determining equitable distribution.

Wiley v. Wiley, 2017 Va. App. LEXIS 33 (February 14, 2017)

In this case, the court of appeals affirmed the circuit court's holding that the husband had wasted marital funds. The husband had used marital funds for some proper purposes, such as paying the marital mortgage. However, he also used marital funds to pay off his credit card. His credit card was used to furnish a lavish apartment for himself and his girlfriend. In addition to the apartment, the pair would go on multiple vacations, and enjoy expensive. The husband failed to trace all of the marital funds to proper purposes. On the date of trial, they had only approximately $50,000.00. With this evidence, it was not an abuse of discretion to find the husband had wasted marital funds. The Court of Appeals also held that the trial court was not punishing the husband for his affair when it reviewed the economic and non-economic effects of the affair when determining equitable distribution. Regarding the non-economic effects, the parties' minor child had taken the husband's "breaking up [their] family" hard. Furthermore, the husband had testified that he missed visitation with his child to vacation with his girlfriend. This behavior may have been motivated by the fact that the girlfriend had informed the husband that his relationship with his minor child was negatively impacting his relationship with her. Considering these factors, it was not an abuse of discretion to consider the effect of the affair when considering equitable distribution.