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Divorce Mediation Blog

A Well-Reasoned Opinion from the Appeals Court on a Tricky Subject: Calhoun v. Rawlings

Wednesday, July 11, 2018

Levine Dispute Resolution - Divorce Mediation

The Massachusetts Appeals Court recently reviewed the decision of a Superior Court judge on the question of whether or not a spendthrift trust settled for the benefit of a disabled person, created and funded with a divorce settlement - assets transferred to the trust by his (ex-) wife – was a “self-settled” trust as a matter of law, and hence, reachable by a potential tort-creditor of his estate. The husband’s court-appointed guardian signed the separation agreement and trust instrument on his behalf.

The trust named the wife as the settlor; and it appointed the husband’s guardian, his sister and a bank as trustees, with broad discretion. The wife funded the trust with assets exceeding $4 million in value; and the husband transferred some $120,000 from his own name into the trust.

The husband appears to have later caused an automobile collision, in which he died, while seriously injuring the occupants of another other car, resulting in a lawsuit for damages, seeking, in part, a declaration that the husband’s trust assets are available to the plaintiffs for potential damages. The Superior Court judge ruled that the plaintiffs could only reach that part of the trust corpus that the husband’s own cash funded, which the judge deemed to be the trust “self-settled”. The plaintiffs appealed.

Justice Amy Blake wrote the opinion of the Appeals Court, with clear analysis and expression. “Self-settled” trusts, or those where the creator and the beneficiary are the same, she observed, cannot serve as a firewall against creditors as a matter of public policy, at least to the extent that distributions are permitted to the beneficiary in a “support or discretionary trust”. The case turned, then, on whether or not the portion contributed by the decedent’s wife as a divorce settlement should also be deemed “self-settled”.

Justice Blake wrote of the need look past the labels of a trust to determine its true character. Remember that the wife was the named settlor of the trust, and she literally paid in 98% of the trust holdings. But, the court reasoned that her transfer was not a gift, but rather a disgorgement of marital assets to which the husband was equitably entitled under M.G.L., ch. 208, §34.

The court then invoked the law of contract, reasoning that in return for the wife’s recognition of the husband’s equitable property rights, he (by his guardian) consented to the trust’s creation, thus, providing consideration. In so doing, the husband, substantively, even if not in form, settled the trust. She then drew on analogy, comparing this to a pair of cases involving Medicaid and bankruptcy wherein a conservator created a trust, the other was funded by inheritance, each deemed to be “self-settled” despite literal trust nomenclature.

In the end, the spouses’ intent to shield the assets from creditors fell to the public policy that bars a creditor from a self-interested embargo of assets.

As we read this decision, we fully expected the opposite outcome, but by the end, we said “of course”. All in all, a really good appellate read.

 

“[T]he Parties Proceed at Their Own Risk” in the Probate and Family Court: Smith v. Smith

Wednesday, June 27, 2018

Levine Dispute Resolution - Alimony

For decades, Massachusetts divorce lawyers have advised their clients that if they depart from their divorce judgment obligations informally, and don’t incorporate their new deal in a modification order or judgment, they cannot rely on their consensus alone if one of the party decides to enforce the divorce orders that still exist, in court. The Appeals Court now says that we have all been wrong, with the blazingly ironic “... the parties proceed at their own risk.”

In a court system and body of law with judicial discretion that sometimes takes the breath away, life just became even less predictable. As did advising clients.

In Smith v. Smith, the husband accumulated $87,400.00 of alimony arrearages but claimed that he did so with the wife’s advance agreement, sometimes in return for his taking on voluntary financial burdens for emancipated children. The wife eventually thought better of her purported compromises, and she sued. The Probate and Family Court judge bought the husband’s claim that he relied on the wife’s prior agreements to his detriment, rejecting the wife’s claim of coercion, and wiping out the husband’s arrearages.

For reasons not addressed in this entry, the Appeals Court reversed the Probate Court’s retroactive reduction of the husband’s alimony, but it upheld that trial judge’s ruling of non-contempt, because the wife’s consent precluded a finding that the husband’s violation of the alimony orders was “undoubted”. So much for the previously given truth that only the court can modify its own orders.

In support, the Appeals Court cited its own Wooters v.Wooters, a case in which the husband was relieved of a contempt finding, while the established an alimony arrearage nonetheless, because of a bona fide dispute about the meaning of the alimony order: did a divorce judgment that ordered a lawyer to pay his wife a third of his compensation apply to a stock option income, that didn’t exist at the time of divorce, but arose later, when the husband left law practice for a corporate job.

Readers can reasonably debate the Appeals Court’s conclusion in Wooters, but what does a legal dispute over the meaning of the previous order have to do with the Smith judgment, with orders of unquestioned meaning? In fairness, the Appeals Court’s citation was limited to the principle that an arrearage (they even called it a “violation”) need not compel a finding of contempt. Wooters to Smith is, at best, a non sequitor.

An important principle was at stake, here. Either parties can or cannot supplant the court’s authority by their own behavior. If they do, the violation cannot be doubted. The question, really should be “can it be excused?

The answer to the real question now appears to be a resounding “maybe”, as in “maybe they can”. In a field where lawyers struggle to give clear and assured advice, life just became more, rather than less, uncertain.

 

… Bad Boys, Whatcha Gonna Do? The punishment exceeded the crime for divorce property division in D.R. v. D.A

Wednesday, June 13, 2018

Levine Dispute Resolution - Divorce Property Division

We will not bore you with our complaints about Appellate Rule 1:28 again, but …

In the case of D.R. v. D.A, the Massachusetts Appeals Court found that the Probate Court judge “gave undue weight to the husband’s ‘bad’ conduct such that the grossly unequal asset allocation ‘falls outside the range of reasonable alternatives’”, vacating the 4 to 9 per cent asset allocation to the offending spouse (the parties gave different computations), a difference that the appellate panel deemed “immaterial”.

The bill of particulars against the husband: voluntary unemployment, controlling and abusive behavior, no contribution to household tasks and unexplained negative impact on the habitability of the martial residence. The trial judge concluded that the husband contributed “little to the marital enterprise…economically or otherwise [and negatively impacted] the wife’s wellbeing.”

Elaborating on prior case law in which the Massachusetts courts had established that “conduct” that “harmed the marriage or the marital estate” could lead to diminished recovery under equitable property distribution principles, the Appeals Court resorted to a graphic treatise treatment:

    Negative conduct, to be more than a featherweight factor, must either be economically detrimental to the welfare of the partnership, such as by undermining the family’s economic stability such as through disposal or waste of martial assets, such as through unlawful or fraudulent acts, or be so egregious as to impair the ability of one spouse to function in the future

A pretty specific set of limiting criteria: the kind that a court that intends to assert clarifying precedent would use. The again, D.R. may not be cited as precedent.

 

Pre-marital Cohabitation in Defining Marital Length Clarified; But, In Rejecting Normalized Income for Alimony & Accepting Early Valuation Date: Why won’t the Appeals Court tell us what they really think?

Wednesday, May 30, 2018

BORTOLOTTI V. BORTOLOTTI - Part 2

Levine Dispute Resolution - AlimonyAfter announcing one useful alimony holding, which we discussed in Part 1, the appellate panel in Bortolotti v. Bortolotti speed-wrote six issues that are common to many divorce cases, and where the bench and bar could use some real direction. In this blog entry, we will focus on two of them:

  1. the trial judge’s decision to use “normalized” salary for business valuation purposes but half that amount for alimony calculation; and
  2. the judge’s acceptance of a 2014 real estate valuation at a 2016 trial.

The Appeals Court upheld both decisions, simply noting that each was within the Probate and Family Court’s discretion, but with the thinnest possible explanation, giving little critical value to the reader.

Bearing in mind that “unpublished” opinions are not formal precedent, but that the Appeals Court invites their use for “persuasive value”, why wouldn’t the appellate bench want to write its opinion persuasively? Why not share their actual analysis?

In our first example, trial court accepted the uncontested adjustments that a valuation expert made to the husband’s salary, in furtherance of an income-based valuation, for which salary “normalization” is an essential component. Normalization is an effort to approximate the owner’s actual economic yield, or more traditionally, that which a hypothetical buyer might fairly expect achieve in the future.

Common adjustments are one-off expenses, personal expenses written off against revenues and S Corporation tax effect. A potential business buyer uses this to measure likely return, so as to rationalize its investment, including acquisition debt. The divorce court does it to determine the value to the business owner who is cashing out the opposing spouse’s marital interest.

The Appeals Court owed no explanation for upholding the acceptance of the normalized salary in the valuation context because no one disputed the substance of the finding at trial. But, then, the panel addressed the trial court’s determination to use only half of the normalized sum for alimony purposes because “there was evidence that [the husband] did not derive any actual income from” his company.

What does this mean? Were the actual earnings zero? Were they normalized to a positive value, more than zero based solely on adjustments? Alternatively, did the expert find positive earnings, but zero salary and/or profit distributions made? If so, did the judge determine that half of the realized but undistributed income was retained for legitimate business purposes?

In short, it matters what the essential facts were, and why the Appeals court found the trial decision to be sound. Discretion is not unbridled; and appellate analysis is, or should be, an explanation of why the judge did not abuse it so that the bench and bar may learn from an elucidated point of view, from which they may analogize with intellectual consistency. Instead, we are left with bare bones, and a conclusory statement, which may create mischief in place of clarity.

Some lawyer soon will assert that Bortolotti supports the proposition that “actual income” and “realized income” are opposites (they are not) and that a rigorous application of JS v. CC is not really required for alimony matters, when a controlling owner does not distribute realized income. Neither is a healthy result.

It is possible the trial court did apply JS v. CC factors comprehensively and well, and this was not reported in keeping with the Rule 1:28 admonition that the opinion does not “fully” address the facts. Yet, the facts that are key to the decision should be discussed or at least identified. Otherwise, what is the point of making the decision publicly available?

Similarly, where the judge applied a two-year-old real estate appraisal value to the marital home, the Appeals Court simply opined that the date was halfway between the date of separation and the date of trial and that the judge was within his or her discretion. This conclusion leaves us wondering: Were all assets valued as of the interim date? Was there intrinsic significance to the halfway point? Was the Court choosing between bad alternatives (2-years-old v. older)? Did only one party offer a value? Was a more recent value offered, but on an infirm basis?

The answers to these questions, and others, matter; and we; and we suspect other curious minds would like to know the why as much as the what.

 

Pre-marital Cohabitation in Defining Marital Length Clarified

Tuesday, May 15, 2018

But, In Rejecting Normalized Income for Alimony & Accepting Early Valuation Date:
Why won’t the Appeals Court tell us what they really think?
BORTOLOTTI V. BORTOLLOTTI - Part. 1


Levine Dispute Resolution - Alimony

We have previously lamented the shortcomings of Massachusetts Appeals Court’s Rule 1:28 opinion practice, and the recent Bortollotti v. Bortollotti has us at it again, but that will have to wait until Part 2.


Today, instead, we focus on the court’s helpful clarification of the legislature’s provision that tasks trial judges with determining if and when a marriage may be construed to begin before its legal registration, for purposes of calculating the length of marriage, and the resulting presumed durational limit calculated under M.G.L., ch, 208, § 48. When we say it is helpful, it is not to say that we agree or disagree with the concept, but rather, that, like a puzzle part, it fills a gap that makes the statute more understandable and, therefore, more predictable in outcome.

The concept of a de facto relationship giving rise to an obligation normally associated with a legal one preceded the Alimony Reform Act (“ARA”), beginning with California cases involving child support by estoppel (obligations arising from unrelated-party voluntary undertakings and resulting reliance), to pre-marital contribution in equitable division cases (see, Liebson v. Liebson and Moriarty v. Stone) and, more recently and directly on point, judges’ grappling with the inequities of same sex couples who were divorcing after long relationships and fact-based economic unions, but to whom marriage was foreclosed until implementation of 2005’s Goodridge decision.

In ARA, the legislature expanded the notion to all marriages in the alimony context.

Section 48 allows the trial court to back-date the start of marriage for a “significant marital cohabitation that includes ‘economic marital partnership’”, per Bortollotti. In this case, the trial judge found that the parties had, in fact, cohabited before legal marriage, but that the wife had not contributed income to the partnership, therefore, an economic marital partnership did not exist.

With logic more parallel to actual marriage, and historic alimony law, the Appeals Court reversed, stating that the wife’s very economic dependence signified that the marital partnership had begun. They reconciled three ARA features: the enumerated criteria for awarding alimony; the “common household” needed to trigger a payor’s post-divorce right to demand redress; and the pre-marital issue, here.

Since economic dependence is one of the enumerated alimony factors, the appellate court reasoned, it will suffice to extend the length of marriage retrospectively, for alimony’s presumed durational limit purposes.

The holding is fairly simple. It will apply to many cases, sometimes with minor, and other time substantial effect. The most extreme, obviously, will be when this metric leads to a finding that a 19 ½-year marriage was preceded by a more than 6-month cohabitation with economic dependency, stripping the payor of any presumed durational limit whatsoever, especially where the payor is more than 16 years shy of full social security retirement age. We can expect that this aspect of those cases to be most hotly contested.

The next time, Rule 1:28 and why the rest of Bortollotti is frustratingly sparse.

 

Hoisted on Her Own a Fraudulent Petard, or There’s Just No Damn Honor Among Frauds Anymore: Shea v. Cameron – Part 2

Thursday, April 05, 2018

Levine Dispute Resolution - Alimony

It is tempting to dismiss the Massachusetts Appeals Court’s Shea v. Cameron as a confection of divorcing people behaving badly, and a tale of narcissistic comeuppance. But, the case actually has two important messages in it, for which we are grateful.

First, obviously, is that “not all human actions…have an avenue for legal recourse, no matter how much anger, sorrow, or anxiety they cause.” Those words would be well-posted over the courthouse door.

But second, the court underscored the gravity of the allegation “undue influence”, the key to many efforts to avoid enforcement of pre-marital and divorce agreements specifically, and to eschew responsibility for one’s own actions, more generally. The court aptly cited SJC precedent, in stating that:

    …a plaintiff must establish that the defendant overcame the will of the grantor …. [by]… some form of compulsion which coerces a person into doing something the person does not want to do.

And, in connection with Ms. Shea:

    …the undisputed evidence shows that [she] was in full command of her personal affairs and was neither ill, dependent nor enfeebled at the time of the transfer of real or personal property to Cameron.

Undue influence is a high bar, as well it should be.

 

Hoisted on Her Own a Fraudulent Petard, or There’s Just No Damn Honor Among Frauds Anymore: Shea v. Cameron – Part 1

Wednesday, March 21, 2018

Levine Dispute Resolution - Alimony

It isn’t often that we get to see the phrase “joint stipulation of fraud”.

But, in the Massachusetts Appeals Court’s recent Shea v. Cameron, it is the perfect appetizer to a meal of mutual marital chicanery that resulted in the court’s decision to distance the itself from the:

    … “ingratitude, avarice, broken faith, brutal words, and heartless disregard of feelings of others,” which although blameworthy, are not legally compensable.

He lied about loving her. They married. He cheated. She filed for divorce. She withdrew her complaint. She filed a new complaint, this time for annulment. He snapped up that opportunity, only too happy to admit his faux amour.

Not so fast. After the parties presented their cooked-up annulment petition to the court, Ms. Shea served Mr. Cameron – on his way out of the courtroom, no less - with an complaint demanding a cookbook of damage remedies based on his “fraudulent inducement to marry”.

First, the Probate and Family Court, and then the Superior Court, kicked out Shea’s claims on summary judgment. But, the second judge “reported” the question to the Appeals Court, which took the matter up despite its procedural reservations. After a scholarly review of the history of various “heart balm” actions, the court wisely ended the matter for good, with unassailable logic:

  1. the law provides remedies for married persons when they break up, for equitable property division and support; and
  2. when the wife chose annulment instead of divorce, she gave up those remedies, since no marriage ever existed, a fiction of her own design.

Thus did Ms. Shea hoist herself, luring Mr. Cameron into admitting fraud, while plotting to then show him, but accidentally giving him a free pass, in the process.

There is just no honor in fraud anymore.

 

Wanted: An SJC Case to Challenge the “Real Advantage” Standard: Chief Justice Gants’ Compelling Concurrence in Miller v. Miller

Wednesday, March 07, 2018

Levine Dispute Resolution - Divorce Mediation

Concurrences are rare in family law cases, but when the Chief Justice writes a clear-eyed one with firm conviction, people take notice. C.J. Gants, with Associate Justice Gaziano joining him, did not take issue with majority’s decision, but rather the “analytical gymnastics” necessary to find it. They were right.

The source of the problem is less 1985’s Yannas v. Frondistou-Yannis, though that case alone has doomed the efforts of countless “non-custodial” parents to resist the removal of their children to other jurisdictions than the more problematic case of Mason v. Coleman (2006), or as the concurrence points out, the toxic intersection of the two cases.

It is Mason that undermined decades of effort in the Probate and Family Courts, and among its practitioners, to tone down the fight over custodial labels by fractious parties, by awarding access to the lower-bar “real advantage” removal test to parents with “sole physical custody”, setting up a two-stage fight in every potential removal case: first, does someone have sole physical custody (later modified to be a “functional” test rather than a legal label); and if so, are the childrens’ best interests driven by that individual parent’s personal needs?

It took the Miller case to put this problem into stark relief, presenting a matter where no labels, or functional findings, could have attached previously, since it was the time of divorce. Thus the court had to conclude, based on the messy life of an intact family, who would have been hypothetically denominated the physical custodian. A fiction on top of a fiction – and one that Judge Gants persuasively argues ought to end.

Whether the Mason problem is a product of a fundamental mis-perception of Yannis may be beside the point that both the Miller majority and concurring justice make: that the best interests of the child is meant to be the overarching inquiry for every removal case. For too long practitioners have accurately read the trial court’s predominant “read” of Yannis, namely, that the primary caregiver’s personal needs pretty much trump further inquiry, absent spousal spite, or a child who is too young to yet be bonded to the parent who would be left behind in Massachusetts.

Justice Gants’ point: artificial jousting over the label, or even the “functional” reality of primary caregiving, is too often confounded by informal parenting histories, by self-serving constructs and by too little historical precedent (as in Miller); and it does not serve the ultimate policy of finding and enhancing children’s outcomes via a straight up best interests inquiry. Rather, the exercise can range from pointless to damaging, by obscuring the true issues.

Justice Gants is also right that a primary care parent’s individual needs and interests cannot, and should not, be ignored. The certainly can be critical to a child’s interest; just not always so, and as often, not conclusively. We hope that the opportunity arises for the SJC majority to follow its Chief, as they may have signaled in Miller already, acknowledging but deferring the issue to another day and case, wherein one of the parties directly challenges, briefs and argues the issue on appeal.

We hope that that opportunity comes soon.

 

The SJC Weighs in on Self-Adjusting Alimony Orders and Recipient “Need”: Young v. Young, Part 9

Wednesday, February 07, 2018

Levine Dispute Resolution - Alimony

“Fair balance of sacrifice?”

In Young v. Young, the Supreme Judicial Court (SJC) imported a concept that it had previously coined in the case of Pierce v. Pierce.

In the latter, the SJC reviewed (and upheld) a modification judgment of the Probate and Family Court in which the judge had reduced, but not terminated, the payor’s alimony obligation after he had voluntarily reduced his income, and his resulting ability to pay, finding that the reduction achieved a “fair balance of sacrifice” between the parties.

This modification concept followed an original divorce judgment which occurred without regard to any such construct. Rather, as a matter of law, the original alimony orders were necessarily based on the wife’s “need”, the husband’s ability to pay and what the divorce judge concluded to be “fair and reasonable”.

The Pierce court’s crafting of “fair balance of sacrifice” focused on the husband’s need to bear up under the circumstances of his own making, even if it felt to him as payor that he had paid quite enough alimony and he deemed the court’s modification judgment to be onerous in his current circumstances.

In the intervening years, the Alimony Reform Act (ARA) (eff. 3.1.12) introduced a formal range of maximum presumed alimony in M.G.L., ch. 208, §53(b) (since deemed the lawful and reasonable presumptive order by appellate case law), without any reference at all to the theme of “sacrifice”.

Rather, by comparing “need” to the maximum of 30-35% income differential, the legislature recognized that there is often not enough income in a case to sustain the marital station in two households, and formalized a longstanding practice of equitably sharing income, after presuming the tax leveraging of IRC §215 (which may or may not survive the 115the U.S. Congress). This is completely consistent with case law that establishes that a recipient has no guarantee of unchanged lifestyle, if the payor can’t provide it.

The equitable sharing of income can be a useful construct both in acknowledging that the parties can’t necessarily maintain the marital standard post-divorce; and in explaining why a payor will inevitably keep more of his or her income than the recipient will receive, because of the post-judgment efforts required to earn the money that funds spousal support.

But a “fair balance of sacrifice”? Where the vast bulk of divorce cases resolve with equal division of assets and debt, how can the same concept justify an unequal division of income, at the time of equitable distribution?

We are not advocating for the equal division of income, and it is not a result that will ever be required in our time. But was it helpful for the SJC to gratuitously introduce a standard that the legislature neither enunciated nor necessarily implied? Was it necessary support for its central outcome in Young? Will it now complicate cases with another subjective standard about which to fuss?

No, no and we’re afraid so.

 

The SJC Weighs in on Self-Adjusting Alimony Orders and Recipient “Need”: Young v. Young, Part 8

Wednesday, January 24, 2018

Levine Dispute Resolution - Alimony

“Did stated intent of the
order trump the its effect?”

In Young v. Young, the Supreme Judicial Court (SJC) vacated the trial court judgment that awarded variable alimony based on a fixed percentage of the husband’s gross pre-tax compensation, based in part on its conclusion that it crossed the Alimony Reform Act (ARA) (eff. 3.1.12):

…[B]ecause [the order] was intended to award the wife an amount of alimony that exceeds her need to maintain the lifestyle she enjoyed during the marriage. (Italics ours)

By focusing on the intent of the order, we can only infer that the court was addressing the judge’s rationale for the order, instead of the order itself. That election matters, because it raises two questions:

  1. If the trial judge explained herself differently, might the SJC have upheld the judgment?
  2. If the SJC looked at the order in its full ramification, would it have impacted the outcome?

The actual support award in Young was bi-lateral, rising and dropping with the husband’s income, a fact eclipsed by the court’s sharp focus on intent. Thus, while the trial judge may have focused her analysis of the parties’ rising station, her order actually provided downside protection for the husband, too.

Had the judge expressed an intent to protect the husband in the event of income decline and stressed it concomitantly with the potential for “upside”, might the “intent” infirmity that the SJC seized upon been neutralized? Or, if the judge had found that a family with roller coaster income might experience corresponding lifestyle flux?

After all, as the SJC observed:

    There may also be special circumstances where an alimony award based on a percentage of the supporting spouse's income might not be an abuse of discretion, such as where the supporting spouse's income is highly variable from year to year, sometimes severely limiting his or her ability to pay, and where a percentage formula, averaged over time, is likely not to exceed the needs of the recipient spouse.

The SJC dealt with the former, but not the latter.

 



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