Last week I blogged about how the Supreme Court’s decisions in Lewis and Stoney–mandating a de novo standard of appellate review of family court factual findings–was making it more worthwhile to appeal family court orders. I noted last month’s oral argument in Conits v. Conits as an example of how this less deferential standard of review was affecting family court appeals.

After an initial reported South Carolina Supreme Court opinion in Conits held that Husband had preserved the issue of the valuation of his farm in Greece, on November 20, 2019, the South Carolina Supreme Court reversed a family court finding (subsequently affirmed by the Court of Appeals) that the farm was 30 acres with Husband’s half interest valued at $1,420,000.00. If further found that “Husband’s testimony was the only competent evidence of the farm’s size and value in this record.”

In reaching this conclusion, the Supreme Court noted that the Court of Appeals had relied upon cases prior to Lewis in affirming the family court and had thus applied the improper standard of review. Thus, despite the family court’s numerous factual findings that Husband was not credible, his valuation of this Greek farm prevails, reducing the amount he has to pay Wife to effectuate equitable distribution by approximately $700,000.

The Conits opinion is yet another piece of evidence that the ability to appeal family court orders is becoming a vital skill set for South Carolina family court attorneys.

For the 25 years I have been practicing family law no published South Carolina appellate opinion has approved an award of rehabilitative alimony. While I only began reading unpublished opinions in 2004, I cannot recall any such unpublished opinions. I certainly cannot recall any opinion in which an appellate court reversed an award of permanent periodic alimony and awarded rehabilitative alimony instead.

Thus the May 15, 2019 Court of Appeals opinion in Gillmann v. Gillmann is unprecedented. Further the Gillmann opinion offers only opaque justification for this reversal:

We find the family court erred in awarding Wife permanent periodic alimony, and we award Wife alimony of $2,000 per month for eighteen months from the date of divorce. There was compelling evidence that, given her impressive experience and marketable skills in the banking industry, Wife would be able to find suitable employment at a significant salary within this eighteen month period.

We acknowledge permanent periodic alimony is the preferred form, but based on our review of the facts and considering the statutory factors, we find an alimony award of $2,000 per month to Wife for eighteen months is just and equitable in this case.

Citations omitted.

Perhaps Wife has “impressive experience and marketable skills in the banking industry” that would have enabled her to maintain the marital lifestyle within eighteen months of the divorce–a time period that elapsed on February 9, 2018. However the Gillmann opinion fails to substantiate this claim. Given how unusual it is for the South Carolina appellate courts to approve rehabilitative alimony–and it being even more unusual to reverse an award of permanent periodic alimony to reach this result–a more thorough explanation is certainly justified.

…And if ever a family law appeal justified a petition for certiorari–after the required petition for rehearingGillmann is it.

After three published opinions in Conits v. Conits, one a refiled Supreme Court opinion, on May 2, 2018 the Court of Appeals issued an unpublished opinion on the remanded issue of the value of Husband’s Greek farm. Either Spiro Conits is a pants-on-fire liar who is finally getting his just desserts or a foolish litigant who allowed inadequate trial preparation to cost him almost $700,000.

At trial, the parties presented conflicting evidence about the size and value of the farm in Greece. Husband claimed a one-half interest in a three-acre farm with a fair market value of $43,750. Wife claimed the farm is thirty acres with a fair market value of $1,420,200. In dividing the marital estate the family court determined a 50/50 division of assets was equitable. It valued the farm at $1,420,200, and awarded it to Husband. Thus, Husband essentially paid Wife $710,100 to compensate for his interest in that farm. If Husband was correct about the size and value of the farm he is overpaying by $688,225.

On remand the Court of Appeals accepted Wife’s valuation. It detailed both parties’ trial evidence on the value and size of the farm. Wife’s evidence was summarized:

Wife testified she and her counsel prepared the schedule and it reflected the assets and debts of the parties as of 2009. The schedule listed a thirty-acre family farm valued at $1,420,200. Wife testified without objection regarding the schedule, stating it reflected her opinion of the value of the parties’ assets. Wife based her opinion of the value of the marital assets on valuations made by others, including an architect she hired in Greece and an appraiser who appraised property in South Carolina. The court admitted into evidence the architect’’s written estimates of two buildings in Greece. According to Wife, she could not afford to pay the architect to travel to the United States to testify for her. Wife also testified Husband refused during the marriage to discuss the parties’ real estate with her. Wife testified her lawyer requested she get a copy of the records of the parties contained in “the red books.” According to Wife, the red books disappeared from the parties’ den after she told her friend, Angela McNutt, her lawyer wanted them. Wife testified she later found out McNutt had an affair with Husband.

Husband’s evidence was summarized:

Husband listed a one-third interest in a nonmarital, thirty-acre farm as worth $60,000 on his financial declaration dated September 14, 2009 and valued his interest at $20,000. Wife moved to admit this financial declaration without objection, and the court admitted it. On Husband’s financial declaration dated June 25, 2012, Husband disclosed a fifty percent interest in a three-acre orange farm as marital property valued at “$21,875 (50%).” During trial, he testified the parties owned three acres in Greece, it was purchased after the marriage, he conceded it was marital property, and he valued it at “no more than 35 or 40,000 [dollars].” Finally, Husband admitted during cross-examination that he omitted some assets from his financial declaration and valued numerous properties less than he valued them on a financial declaration submitted to the bank.

A footnote listed Husband’s omissions and valuation discrepancies:

Omissions: Bank Account in Greece; Traveler’s Rest Bank Account; and Carolina Fine Foods Restaurant. Valuations of Bank Compared to Family Court: Traveler’s Rest – $750,000:$550,000; Milano’s – $400,000:$275,000; Simpsonville – $1.8 million: $1.3 million; Warehouse – $375,000: $183,000; Laurens County – $410,000: $340,000; etc.

Given the inconsistencies in Husband’s assertions about the Greek farm and his omissions on his financial disclosure, one understands why the family court accepted Wife’s evidence on the size and value of the Greek farm. As the Court of Appeals explained in affirming the family court’s valuation:

Both Husband and Wife’s financial declarations list a thirty-acre farm in Greece. Although Husband changed the description of the farm on subsequent financial declarations to three acres, he was on notice that Wife continued to describe the farm as thirty acres. Although the family court in this case found the financial declarations were not evidence, Wife’s testimony that she and her counsel prepared the schedule and it reflected the assets and debts of the parties as of 2009 was evidence. … Based on our own view of the evidence, we find no legal error and likewise find Husband has failed to meet his burden of proving the preponderance of the evidence is against the finding of the family court.

There are two aspects to this issue that make the Conits case highly unusual. First, while a number of disputes in family court resolve upon issues of the parties’ relative credibility, the size of the Greek farm should not have been one of them. That farm is either three acres or thirty acres and some publically available record in Greece would be conclusive evidence of that farm’s size. Further this wasn’t some minor issue where going to the trouble and expense of obtaining definitive evidence wasn’t justifiable, so relying on the parties’ testimony and hoping a favorable credibility finding made sense: this was a $688,225 dispute.

One assumes–because Husband could have easily provided evidence of the size of the farm but failed to do so, and because his testimony on the farm was inconsistent–that this is a thirty-acre farm and this result is just. However Wife took a rather large risk in not conducting discovery to compel Husband to provide a copy of the deed to (and any other public records from Greece on the size and value of) this farm. If the court found against her on credibility, she was out almost $700,000. Moreover, if this is actually a three-acre farm, Husband’s failure to provide the trial court a copy of the deed cost him almost $700,000. If this was an equitable distribution case in which the parties had few other assets, Husband could have been left with an equitable distribution award he had no ability to comply with.

I’m sure my clients are frequently annoyed when I harp on the importance of accurate financial declarations and adequate trial prep. This unpublished Conits opinion is a useful reminder of why such advice is vital.

As part of the February 7, 2018 Shearouse advance sheet, the Supreme Court asked the South Carolina General Assembly to approve a change to the rules of appellate procedure. One of the proposed changes would add a “Standard of Review” section to appellate briefs:

(D) Standard of Review. If all the issues are governed by the same standard of appellate review, the Brief shall contain a section with the heading”Standard of Review,” which shall concisely set forth the applicable standard of review with citations to relevant case law establishing the standard. If the same standard of review is not applicable to all of the issues, a separate section with a heading of “Standard of Review” shall be included at the start of the argument on each issue with citations to relevant case law establishing this standard of review.

Given the December 2017 Supreme Court grant of certiorari and immediate remand for failing to apply the correct standard of review in the appeal of Stoney v. Stoney, a requirement that briefs contain a standard of review statement makes sense. When the standard of review strengthened my argument, I was already including such a statement in the brief. It seems that, almost seven years after Lewis v. Lewis, 392 S.C. 381, 709 S.E.2d 650 (2011), family court appellate attorneys and the Court of Appeals needed the reminder that family law appeals have a broad–de novo–standard of review.

To demonstrate the point that the proper standard of review continues to evade the Court of Appeals is the unpublished February 7, 2018 Court of Appeals opinion in Domnick v. Domnick. There the appellant challenged a $17,000 attorney fee award. The Court of Appeals summarily affirmed this award with a citation to Blumberg v. Nealco, Inc., 310 S.C. 492, 493, 427 S.E.2d 659, 660 (1993) (“Where an attorney’s services and their value are determined by the trier of fact, an appeal will not prevail if the findings of fact are supported by any competent evidence.” (emphasis in original).

The gulf between de novo review [the appropriate standard] and “any competent evidence” is vast–so vast that if the appellate courts applied an “any competent evidence standard” almost any family court determination on child custody, alimony, or property division would be impossible to overturn. Despite the reminder of Stoney, the Court of Appeals is still not uniformly applying the correct standard of review to family court appeals.  Perhaps a requirement that appeal briefs cite the standard will help.

I rarely blog about unpublished opinions because even when they are interesting, and even when they should have been published, they rarely do anything other than restate legal principals that have been established in published opinions.

However two recent unpublished family court opinions make new law–or would make law if they were published and therefore citable as legal authority: the June 14, 2017 opinion in Lester v. Sanchez and the July 26, 2017 opinion in Murphy v. Murphy. Both should have been published.

Lester was a custody case between the child’s father (Lester) and grandparents (Sanchez). The opinion discusses South Carolina’s recent De Facto Custodian statute, S.C. Code § 63-15-60 (2012), which no published opinion yet interprets. The family court awarded Lester custody and the Sanchezes appealed. One of the arguments they raised on appeal was that they were de facto custodians, and therefore alleged equal custody rights to a natural parent. Under subsection C of the de facto custodian statute, “[t]he family court may grant visitation or custody of a child to the de facto custodian if it finds by clear and convincing evidence that the child’s natural parents are unfit or that other compelling circumstances exist.”

While the family court did not find the Sanchezes to be de facto custodians, the Court of Appeals addressed their claim by holding that the Sanchezes being de facto custodians would not have changed the trial outcome. To reach this conclusion it gave the following interpretation to Subsection C:

This language does not negate the rebuttable presumption that it is in a child’s best interest to be in the custody of a biological parent or suggest de facto custodians are on equal footing with biological parents.

I have litigated a couple of de facto custodian cases and the issue often arises, what “position” does a party hold as it regards custody and visitation once that party establishes that he or she is a de facto custodian. One obvious interpretation of Subsection C is that, had the legislature wanted to place de facto custodians on equal footing with parents, it would not have required “compelling circumstances” to award such folks visitation. This is an interpretation the Lester opinion adopts. Another interpretation of the statute is that one must have assumed a parental role (and that at least one parent must have abdicated a parental role) for someone to become a de facto custodian–so why shouldn’t that person have equal rights to the child?

What “compelling circumstances” must exist to award such persons custody? If the child’s natural parents are fit does the de facto custodian have a strong claim to visitation? If the child’s natural parents are fit does the de facto custodian have an equal right to custody? Subsection C answers none of these questions. Lester answers that last question but does not answer it in a manner that is binding on the family court. Had it been published it would be binding.

Murphy is interesting because it is a rare case in which rehabilitative alimony was ordered. It is even more interesting because it was the Court of Appeals that ordered it, rather than merely approving the family court’s award.

The last published appellate opinion approving rehabilitative alimony was from 1988: Bryan v. Bryan, 296 S.C. 305, 372 S.E.2d 116, 119 (Ct.App. 1988). Murphy involved a ten year marriage that produced no children. It Wife’s second marriage and she was 53 years old at the time of separation. At trial Wife sought, but was not awarded, alimony. This was one of the issues she raised on appeal. The Court of Appeals found Husband’s actual gross monthly income was at least $8,500 and Wife’s monthly income was $2,913 with an ability to earn at least $4,642 per month if anticipated surgery enabled her to recover sufficiently from a knee injury to go back to work as a teacher. The Court of Appeals awarded Wife alimony of $1,250 per month for a maximum duration of sixty months, which it found to be “just and equitable.”

This was a ten-year marriage with an $8,500/$2,913 income disparity and with a potentially disabled Wife. The opinion does not address marital fault but it does not appear the family court or the Court of Appeals found Wife at fault in the breakup of the marriage. Both parties were of an age in which their anticipated future earnings will decrease, but it is hard to see how this might justify rehabilitative alimony. Normally this situation would call for an award of permanent alimony with the possibility of a downward adjustment if Wife was able to go back to teaching.

Is it that this was a second marriage which produced no children that caused the Court of Appeals to award only rehabilitative alimony? Is the ten-year duration of the marriage the reason for this award? The opinion doesn’t explain its reasoning. However, given how rarely rehabilitative alimony is even approved by the appellate courts, the Murphy opinion is noteworthy. The Court of Appeals should have better explained its reasoning and should have published its opinion.

I would love to see the May 24, 2017 Court of Appeals opinion in Baker v. Hardwick get published. Not just because T. Ryan Phillips and I share office space; not just because I referred him the appeal that he turned into a victory reversal. Baker establishes an important legal principle: the outer limits of standing for the family court to award visitation to non parents.

In Baker the child was placed with the Bakers [the child’s distant relatives] when DSS brought a removal action against the child’s parents. DSS eventually return the child to Hardwick, the child’s father. Meanwhile the Bakers filed for custody. Realizing that Hardwick was likely fit, the Bakers approached trial seeking visitation if they were not awarded custody. The family court awarded Hardwick custody but awarded the Bakers visitation. Before Hardwick’s motion to reconsider was resolved, he was held in contempt for refusing the Bakers visitation. He appealed the contempt order and the underlying visitation order but was unsuccessful in obtaining a stay of the visitation order during appeal.

The Court of Appeals opinion reversed both orders. It found the family court incorrectly determined that the Bakers had standing to seek visitation. The opinion notes the four ways that a non-parent can have standing to obtain visitation: the grandparent visitation statute [S.C. Code Ann. § 63-3-530(A)(33) (Supp. 2016)], the sibling visitation statute [S.C. Code Ann. § 63-3-530(A)(44) (2010)], the De Facto custodian statute [S.C. Code Ann. § 63-15-60(B)], and the psychological parent doctrine. Middleton v. Johnson, 369 S.C. 585, 594, 633 S.E.2d 162, 167 (Ct. App. 2006). Finding none of the four could be applicable here, it found the Bakers lacked standing to seek visitation.

Baker should have been published. It establishes important law on the issue of standing of non-parents to seek visitation in South Carolina. This is an issue that frequently recurs and the family court bar and bench would benefit from the guidance and authority it would supply as a published opinion. There is no published case law that succinctly establishes the various ways that a non-parent party can have standing to seek visitation. This unpublished opinion does succinctly state this law. Because standing can be obtained via two separate statutes (with two different methods within one statute) and one judicially created doctrine, it can be hard to establish the limitations of standing without citing to multiple authorities. Being able to cite to one authority to establish this matter would be helpful.

Further, there is obvious confusion on the limits of standing to seek visitation, as evidenced by the incorrect decision by the lower court. Absent clear authority, this is a incorrect decision I could see other family court judges making. Meanwhile Hardwick case was ordered to make his child available for visitation when the court had no authority to so order him. He was even found in contempt for failing to comply with an ultimately invalid order. The potential for intrusion into a fit parent’s constitutionally protected right to determine who has relationships with his or her child(ren) that stems from this lack of authority would be greatly reduced by having clear authority on this matter.

The issue resolved in this appeal is subject to frequent recurrence, involves constitutionally protected rights, and subjects parents to potential incarceration if the family court incorrectly determines standing. For all of these reasons, this opinion should be published. Attorneys who agree with me, and wish to support Mr. Phillips in his motion to publish, are welcome to send him a supporting affidavit.

Child custody determinations are among the hardest family court matters to get reversed on appeal. Because custody decisions are based upon the weight the trial judge places on sixteen listed factors and a seventeenth catch-all factor, and because so much of the weighing of these factors can be based on the judge’s credibility determinations, appellate courts are typically reluctant to overturn the trial court’s custody determinations. Rarely am I optimistic when folks consult with me about bringing custody appeals. I doubt South Carolina averages one published custody reversal a year.

An unpublished July 22, 2015 Court of Appeals opinion in Huggins v. Pritchett presents a rare custody reversal. As such it should have been published. In Huggins, the parties had two children, ages 8 and 9. At trial, the judge, pursuant to Rule 22, SCRFC, privately interviewed both children in chambers. Based on this interview, the trial judge found that the younger child “has required tremendous attention and support since the divorce of the parties due to her special educational, medical and developmental needs.” Apparently determining that this child’s needs so taxed Mother that she could not provide the older child the necessary attention, the trial court changed custody of the older child to Father. Mother sought reconsideration and supersedeas. In denying Mother’s request, the trial court stated:

[A]ny error in reliance upon the children’s interview would in fact be error in reliance on the younger child’s pitiful and emotional pleas to stay with her mother which this court did in fact defer to. Therefore, any error would have favored the mother in the maintenance of custody of the younger daughter with her.

On appeal the Court of Appeals reversed the change of custody to Father, holding:

We find insufficient evidence in the record to support the family court’s determination that a substantial change in circumstances warranted a change in custody. To change a custody arrangement established by a family court, there must be a substantial change in circumstances and the change of custody must be in the best interest of the child.

Much of the family court’s order focuses on the change in circumstances with regard to the younger child, but it is not apparent how the younger child’s situation has impacted the older child. In particular, there is very little evidence to indicate that the extra attention the younger child requires is given to the detriment of the older child. The family court gave no indication of what information it learned through its discussion with the children during the in chambers interview.

Citations omitted.

While the apparent failure of the trial court to explain its reasoning would justify a reversal of the custody modification, it is unclear why this reversal did not remand the matter for clarification. It could well be that Father demonstrated a substantial change of circumstances to the trial court but that the trial court simply failed to explain its reasoning. Obviously something in the children’s interviews made the trial judge believe that changing custody of the older child to Father was in that child’s best interests.

Drafting a final order that contains sufficient factual findings to justify the result is a craft that attorneys need to master. It could be that the failure of Father’s trial attorney to draft an adequate order may be the reason Father lost on appeal. Huggins should have been published. It also should have been remanded.

A recent unpublished opinion Court of Appeals opinion, Herring-Wilson v. Wilson, highlights a common fallacy in valuing small personal services businesses for purposes of equitable distribution: treating personal goodwill as marital property. The Court of Appeals reversed a finding that Wife’s business had a value of $603,000 and requiring her to pay Husband half that amount as part of an equitable distribution award. As I’d represented Ms. Herring-Wilson in a brief period between trial and appeal, I was interested in the outcome of her appeal.  I congratulate her and her attorney, Donald Bruce Clark, on their victory. I couldn’t believe her business had any significant value, and the obvious injustice of making her pay her husband $301,500 for a one-half interest in a largely defunct company needed to be remedied.

In Herring-Wilson Wife ran a business, Jeanie’s Home Services, with Husband’s assistance. None of their clients had contracts with the business and, after the parties’ separation, each spouse took some of the clients and some of the clients stopped doing business with either spouse. Yet, at trial, Husband’s expert claimed the business had a discounted cash flow value of $603,000, and Husband claimed that Wife had kept control of the business. Meanwhile, Wife testified that the business’ value was the value of its equipment minus the business’ credit card debt.

There were numerous problems with the expert’s valuation. First, even the expert admitted this value was not what someone would be willing to pay for the business.  Second, the parties were taking a draw from the company but not counting it as salary. The discounted cash flow failed to account for this draw. Paying them each a salary of approximately $30,000 a year would have resulted in no positive cash flow. Third, by the time of trial, few of the customers who were with the company at the time of filing remained with the company: some had stopped doing business with either party and some had hired Husband in a competing business he established after the separation. Finally, at the time of trial, Husband had some of the business’ customers.  Thus valuing the business as though Wife had kept 100% ownership wasn’t accurate. Unfortunately Wife’s trial attorney failed to highlight these valuation problems and the Family Court adopted the expert’s valuation while awarding Wife 100% of the value of this now largely defunct business.  On appeal the Court of Appeals reversed and adopted Wife’s (minimal) valuation.

For very good reasons, South Carolina does not recognize personal goodwill in a business as subject to equitable distribution. As a self-employed attorney, I know my business has tremendous value to me (it is my means of livelihood) but has very little value to anyone who wanted to purchase it–unless that person is in the market for a used office equipment and furniture. Typically, personal services businesses only have the value of hard assets minus the hard debts (unless one is willing to devote labor after the sale to helping the new owners keep existing customers and maintain the business’ reputation–in which case part of sales price is the value is the owner’s post-sale labor and expertise). Valuing a personal services business as though the owner’s draw is pure profit grossly overvalues personal services businesses.

Put Mr. Forman’s experience, knowledge, and dedication to your service for any of your South Carolina family law needs.

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