My clients get sick of me harping on refining and corroborating their financial declarations before we file them. In the future I will direct them to the April 5, 2017 Court of Appeals opinion in Sweeney v. Sweeney and remind them how both parties were harmed by financial declarations that were inaccurate or uncorroborated.
Husband initially filed for a no-fault divorce. Wife counterclaimed for an adultery divorce. In discovery and at trial, Husband attempted to diminish the importance of his adultery–claiming it post-dated the parties’ separation when it obviously didn’t. Thus the parties went to trial with a thirty-year marriage, a high-income, at-fault Husband, a marginally employed Wife, and substantial assets. After trial neither party was happy with the results and both parties appealed.
Very little was modified by the Court of Appeals. Husband first argued that permanent alimony should not have been awarded and that the $5,000 per month amount was excessive. In support of this argument, he claimed Wife could save expenses by paying off the mortgage on her home by using a portion of her equitable distribution award, and that her interest in the parties’ Morgan Stanley account would generate her $6,710 per month in investment income based on the historical rate of return.
The Court of Appeals rejected these arguments. As for paying off the mortgage, the Court of Appeals noted that even Husband’s financial expert acknowledged the tax advantages in Wife having the mortgage deduction. If further held that Wife shouldn’t have to invade her equitable distribution proceeds to pay off the mortgage. The bigger problem for Husband’s argument was a filed financial declaration showing him only receiving $785 per month in dividends, interest, trust income, and capital gains. The Court of Appeals found that inconsistent with his argument on appeal.
Husband’s only successful argument on appeal was that the family court should not have equitably divided a Health Savings Account (HSA) that he funded but that was solely owned by one of the parties’ sons. The Court of Appeals found that the parties did not own an interest in this HSA and reversed the family court’s determination that this should be included in the marital estate.
Husband also argued that the family court should not have divided a 100% interest in one of the parties’ investment properties, claiming that one of their son’s owned an interest in that property. Finding that Husband failed to present any evidence of son’s ownership interest, the Court of Appeals rejected this argument.
Husband also argued he should not have been held in contempt for violating a temporary order restraining the parties from invading marital assets absent court order except for $75,000 each party was granted for advanced litigation costs. During the litigation Husband used additional marital funds to pay for the children’s college expenses. He argued that Wife agreed to these expenses and thus he did not have a “bad intent” in withdrawing the funds. The Court of Appeals noted that Husband could have filed a motion authorizing him to use these funds for the children’s college. In rejecting Husband’s claim of lack of bad intent, the Court of Appeals held, “[w]e also decline to create a rule of law in which parties cannot be held in contempt when they do not intend to benefit themselves by violating a court order.”
Husband finally argued that the Court of Appeals erred in awarding Wife an additional $15,000 in attorney’s fees. Noting that Husband earned substantially more than Wife, and was awarded the majority of the marital estate, the Court of Appeals affirmed this award.
Wife’s cross appeal argued that her alimony award was insufficient. First she argued that she should have been imputed minimum wage (currently $1,257 per month) rather than $1,500 per month in setting alimony. The Court of Appeals noted her recent employment history as a garden center worker at $8 per hour and as a tutor at $25 per hour. Further, she could become recertified as a public school teacher. Thus the Court of Appeals rejected that argument.
The Court of Appeals also rejected her argument that $5,000 per month in alimony was insufficient to meet her needs. On appeal she claimed monthly expenses of over $7,000 per month. However, her financial declaration only listed expenses of $6,670 per month. The Court of Appeals concluded that her imputed income, alimony award, and interest from the Morgan Stanley account were sufficient to meet those expenses.
Wife also argued that the Court of Appeals misvalued her 2012 Toyota Prius and the personal effects in the marital home. The Court of Appeals rejected these arguments. At trial, Wife argued the Prius was worth $18,049 while Husband argued it was worth $25,611. The family court awarded it to Wife at a value of $30,000. The Court of Appeals affirmed, finding that there was evidence in the record that the original value was $33,500 and that the family court’s valuation was thus within the range of values presented to the court.
To the extent the family court and Court of Appeals were attempting to value the Prius as of the date of filing, rather than the date of trial, this valuation can probably be justified. The record is not clear if that is what the courts are doing. I have unsuccessfully argued in an unpublished appeal that a party keeping a vehicle should be credited with the depreciation during the litigation proceedings. If that is what the courts are doing here, it would have been useful to make that clear. If that’s not what they are doing it appears the Prius was overvalued.
Wife also argued that the family court overvalued her personal effects in the marital home. She testified they had a value of $7,330, Husband testified that they were worth about $80,000, and neither party presented an appraisal. The family court awarded these effects to Wife at a value of $25,000. The Court of Appeals affirmed this valuation, finding it to be within the range of evidence.
While agreeing with the Court of Appeals’ decision on this issue, I don’t agree that an appraiser was probably necessary to establish valuation. Questions that apparently remained unasked at trial include asking Husband whether he would want the personal effects at a value of $80,000 and asking Wife whether she would want Husband to have them at a value of $7,330. I highly suspect the answers to these questions would have been an empathic “no.” The easiest way to establish values on cross-examination is to determine at what value the party is indifferent as to who is awarded the item. If those question aren’t asked the family court is able to accept any valuation presented by either party, and that valuation is probably going to be affirmed on appeal.
Wife’s one successful issue on appeal was the family court’s failure to treat $4,500 in rental proceeds that Husband deposited into the Morgan Stanley account during the litigation process as marital property. Given that the rental income was from a marital asset, it seems like an obvious error to not treat this income as marital.
Wife finally argued that the award of $15,000 in attorney’s fees was insufficient. In support of this claim she argued that Husband took unreasonable litigation positions and that the temporary order did not already provide her $75,000 in advanced litigation expenses because she used some of those funds for personal expenses. The Court of Appeals rejected both arguments. It found Husband’s litigation positions were not unreasonable. It further found that language from the temporary order that “[e]ach party . . . be advanced $75,000.00 from the parties’ joint savings account (the Morgan Stanley account) to cover any expenses incurred up until the merits hearing, inclusive of attorney[‘s] fees, expert fees[,] or investigative fees” indicated an intention of the court to previously award Wife some advanced litigation expenses. It further noted language from the temporary order that “[t]he responsibility of either party for said fees is to be determined by the court at the time of the merits hearing,” supported this position.
In Sweeney both parties’ arguments at trial and on appeal were undermined by the contents of their financial declarations. One cannot understate the importance of accurate financial declarations.