Virginia Family Law Appeals

Campbell case: Wife shoots husband, gets his family business reclassified as marital

ALIMONY FACTORS – WIFE SHOOTING HUSBAND – EFFECT OF ADMISSION – APPEALS — “LAW OF THE CASE” – PROPERTY DIVISION – MARITAL AND SEPARATE – PRESERVING SEPARATE IDENTITY – PROPORTIONS AND PERCENTAGES – GIFTS.  Perhaps it is not difficult to see why the Court of Appeals had to write a 35-page (unpublished with dissent) opinion.  It is, though, difficult to sort out the tangled fact situation, and even harder to say anything useful or helpful – let alone clever – about this (we hope) oddball Albemarle case.  Be advised, though, that the Court of Appeals does, in this post-remand appeal in Campbell v. Campbell, 49 Va. App. 498, ___ S.E.2d ___ (2007), actually say that you can deny spousal support, and even divide property more favorably to a husband, for conduct contributing to the dissolution of the marriage.  You could say that wife here did that, since she admittedly shot the husband “multiple times,” so that he ended up in a coma, and needed 22 days in the hospital.  Of course she had her various accusations against him as well, and later tried to retract her admission and blame the shooting on her son, but that didn’t work.  The big fight was apparently about the property division, as husband had been in partnership with his brother in a sawmill business since 1957, married wife in 1973, and in 1977 opened another sawmill and finally incorporated in 1983.  The parties finally separated rather dramatically with the aforesaid shooting incident in 1996.  The thing has been going through the courts at least since early 2002.  Wife had argued that there was an agreement with her husband to give her his first sawmill if he didn’t drop the divorce litigation, but after years of hearing this, the trial court said that she had failed to prove an enforceable agreement there. The 2010 divorce decree (after remand) adjusted her share of property from 28% to 38% and increased the valuation of the first lumber business by almost $8,000 (but we are talking multi-millions here).  Husband kept on alleging that his stock in the two companies had to be separate.  Though husband appealed the inclusion of that stock in marital property as well as the trial court’s valuation, the Court of Appeals this time affirmed, and as to the wife’s attempt to relitigate who shot husband, “law of the case” precludes that.  (Why? Because she didn’t try to raise that particular question in her last appeal).  Yes there is a “material change of facts exception,” but it does not apply if we see a party creating conflicting testimony for strategic purposes.  The trial court had actually ruled that the shooting amounted to constructive desertion, and actually terminated pendente lite alimony on that ground, and the Court of Appeals does not disturb that, saying the Court properly applied §20-107.3(E) factors.  The Court this time upheld the marital classification of the stock in both companies, as well as its valuation, reasoning that the husband failed to prove that his pre-marital interest in the business or businesses had retained its separate identity, since he had acquired numerous assets in various ways.  It classified the $3.2 million appreciation during the marriage as marital, since his marital property and his personal efforts contributed.  Money for the second lumber company was supplied by a loan secured on marital property, and he did not prove that he repaid the loans out of separate property.  And in this $17 million-assets case, the Court of Appeals says that the $7,826 increase in valuation was “de minimis.”

Judge Powell dissents, pointing out several of what he considers errors in the majority analysis.  It was not right to focus on the date of incorporation when classifying the original stock as marital, since the business was started way before the marriage.  Nor do individual equipment assets of the business justify calling it all marital, since §20-107.3(A)(3)(d) gives a method for making these determinations, and that method requires wife to prove the increased value supposedly contributed by marital property and/or her personal efforts.  Campbell v. Campbell (unpublished), 26 VLW 306 (8/9/11).

 

Pascarella v. McCoy: Judge needn't classify & value everything when spouses agree on how to divide it

PROPERTY DIVISION — CLASSIFICATION, VALUATION AND DISTRIBUTION REQUIRE­MENTS — STIPULATIONS — AGREEMENTS.  An agreement at the beginning of an equitable distribution trial as to how a holding company would be valued and divided, and by whom, will be effective to control the proceedings, and a wife’s later argument, that the trial judge erred in letting the company be disposed of the way they agreed, got nowhere in the Court of Appeals.  The husband and wife had agreed that the LLC should be divided per its Operating Agreement, and that included letting a mutually-agreed-upon CPA not only value it but divide it by percentages of interest. Thus it hardly made sense to come back and argue that the judge ignored the requirements of §20-107.3 by not going through the identification-classification-valuation-distribution ritual. A more interesting point in this case is that the Court of Appeals also rejected the wife’s argument that 20-107.3A requires that the judge individually classify and hang an individual price tag on each item of property. The appellate court doesn’t interpret it that way. And it does not just say that it wasn’t required in this case because all the judge had to do was follow the stipulated proedure. It expressly says that “we find no such requirement in that Code section.” Pascarella v. McCoy, unpublished, 25 VLW 1102 (1/11/11).

PROPERTY DIVISION — SOURCE OF FUNDS AND GIFT — BUSINESS VALUATION AND INCOME — INCREASE IN PROPERTY VALUE.

Apparently the Court of Appeals is deeply offended by the Source of Funds Statute and its 1991 amendment concerning gifts, and has sworn eternal hostility to the idea of trial courts' applying it. It has set up multiple new requirements to assure that no case which might arise under the laws of Virginia will be a legitimate one for application of the statute recognizing partially separate and partially marital property. In Rowe v. Rowe, ___ Va. App. ___, ___ S.E.2d ___, 11 VLW 855 (2/4/97), it holds that a trial court erred by recognizing even a part of the husband's contribution from separate property to the marital real estate as separate.

GOOD WILL VALUATION: VIRGINIA'S UNIQUE POSITION

On December 11 of 1990 the Virginia Court of Appeals decided a very important case, Russell v. Russell, 399 S.E. 2d 166. Successful counsel in that appeal, Ron Evans of Richmond, is a member of the Family Law Section Board of Governors, and can explain the case from the viewpoint of a successful litigant elsewhere in this issue. Others would argue that Russell is a strangely-reasoned case that places Virginia in a minority of one on this important nationwide issue. Although the opinion says a few things to the contrary, it appears to take the position that good will of a professional practice can be equated with the entire earning capacity and reputation of a sole practicioner, rather than excess earnings; and that such earning capacity can be the basis of both a property-division and an alimony award. A reading of the Russell opinion, and Ron Evans's article, is strongly recommended to anyone practicing in the area of equitable distribution.