Monday, June 24, 2013

Vermont Split

Felis v. Felis, 2013 VT 32

Today’s case demonstrates that the notion of “fairness” is all relative.  In some circumstances, it’s difficult to tell who is the “winner” and who is the “loser” we ordinarily expect in an adversarial legal system.

This appeal arises from a final order of divorce, by which the trial court endeavored to divide a substantial marital estate and determine the parental rights of the parties with respect to the youngest of their five children (the other children being over the age of 18).  Husband, a successful businessman and entrepreneur, amassed a great fortune during the nearly three decades before the parties separated.  As a full-time homemaker, wife had been the children’s primary caregiver during the marriage.

Following several days of hearings, the trial court issued a 64-page decision granting sole parental rights and responsibilities to wife, awarding biweekly parent–child contact to husband, dividing the nine-million-dollar marital estate 57–43 in favor of wife, and awarding her nominal maintenance in the amount of one dollar per year.  Husband appealed.

The SCOV first addresses the parent–child contact schedule.  Under a 2007 temporary order, husband had visitation with the child starting Thursday afternoon and ending Monday morning, every other week.  In the final order, however, the trial court changed the schedule so that the child would return to wife on Sunday afternoon, rather than the following morning.  Husband argued that the trial court abused its discretion by deviating from the existing schedule without explanation, asserting that the scheduling determination was not supported by the court’s factual findings.

The SCOV rejects this argument, pointing out that wife had proposed a Thursday through Sunday schedule to help with the transition back to the school week, while husband sought a 50–50 split between the parents, without proposing a specific schedule.  The SCOV concludes that it was appropriate for the trial court to adopt the wife’s proposal, and that the court had correctly stated that the new schedule “generally” tracked the old one.

The SCOV next addresses husband’s challenges to the trial court’s distribution of the marital property.  The first issue concerns certain expenditures made by husband during the pendency of the divorce; specifically, a $100,000.00 payment to his secretary for work related to this litigation, a $145,000.00 loan to a restaurant owner who, incidentally, became husband’s girlfriend (and who later defaulted on the loan), as well as a $5,000.00 loan to another woman.  Husband argued that these expenditures had already been accounted for in determining the size of the marital estate and therefore should not have been credited to wife with respect to the final order.

The same expenditures had been the subject of a 2009 motion by wife to freeze the marital accounts to prevent husband from dissipating assets.  At that time, concluding that wife had not shown the expenditures to be excessive or wasteful, the trial court nonetheless ordered that husband cap his discretionary spending to the same $3,500.00 per week that wife was receiving under the temporary order.  The court also prohibited both parties from incurring any personal or business expenses in excess of $10,000.00 without prior notice to the other party.

When wife raised the issue again in the final divorce hearing, the trial court found that she was attempting to relitigate an issue that had already been decided, and concluded that to consider the items as disallowed expenditures would amount to “double counting.”  Nonetheless, the trial court ultimately attributed the sum of the questionable loans to husband in distributing the parties’ assets.  On appeal, husband asserted that the court should not have addressed a previously litigated issue, and that its treatment of those expenditures was inconsistent with its conclusion that there had been no proof of wasteful dissipation of marital assets.  This is true, says the SCOV.

After a thorough analysis, the SCOV finds that the “dissipation doctrine” allows a court to consider assets transferred out of the marital estate as available to the party responsible for the transfer where the transfer involved “financial misconduct, such as intentional waste or selfish financial impropriety, coupled with a purpose unrelated to the marriage.”  Acknowledging that the loans were suspicious, the SCOV concludes that, although the dissipation doctrine is broad enough to include the type of expenditures at issue, in the absence of a finding of financial misconduct or intentional waste, they should not have been attributed to husband.  With respect to the $100,000.00 paid to husband’s secretary for services rendered, the SCOV similarly finds that there was no factual basis to support the trial court’s conclusion that the amount of the payment was unreasonable under the circumstances.  Because the trial court erred in determining what was included in the marital estate, the SCOV reverses and remands the property award.

Husband next argued that the trial court erred in deviating from an equal division of property between the parties and awarding nominal maintenance to wife based on husband’s early retirement. Husband asserted that the decision was founded in bias, as evidenced by certain unnecessary, arguably inappropriate commentary included in the court’s findings concerning husband’s motives for retiring early.

The SCOV finds that in spite of isolated “unfortunate” remarks, there was no evidence of bias by the trial court, which had in fact ruled in favor of husband on numerous issues.  The SCOV further concludes that the larger award to wife was properly based on consideration of statutory factors; most notably, the imbalance between the parties’ future earnings potential and that wife was to receive marital property rather than maintenance. 

Husband further asserts that one of the permissive factors, “the respective merits of the parties,” should have weighed in his favor based on wife’s serial infidelity during the marriage.  On this issue, the SCOV declines to disturb the trial court’s conclusion that, because both parties had engaged in blameworthy conduct, fault was not a significant factor.

Finally, the SCOV affirmed the award of nominal maintenance and litigation expenses to wife.  With respect to maintenance, the SCOV holds that a court may award nominal maintenance so as to preserve its ability to modify the award later down the line if circumstances change.  This mechanism was particularly appropriate in this case, given the uncertainty surrounding husband’s motivation to take an early retirement and the possibility that he might return to the work force, and resume earning substantial income, once the divorce was final.  As far as fees, the SCOV explains that the trial court found that “reasonable” and necessary litigation costs for wife would have been around $300,000.00, and that, as husband had been required less than that amount, the award was appropriate.  Finding no abuse of discretion, the SCOV affirms the fee award.

Divorce is mixed game.  It is often maddeningly fact-specific, but it is still governed by legal standards.  Although a trial court may try to insulate its decision through well-supported factual findings, as here, the findings must also be logically tied to the legal conclusions, which the SCOV evidently found lacking.  

So, husband gets a “do-over” on the property award, but from our vantage point, there is no way to know whether his renewed efforts will leave him in any better position.  In fact, the SCOV seems to limit what he will be able to argue in round two. 

The only thing for sure is that both parties will expend more time, money, and energy to bring this matter once again to a conclusion.

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