Rhodes v. Rhodes
| Docket Number: | 2009-CA-00555-COA | |
| Court of Appeals: |
Opinion Link Opinion Date: 01-11-2011 Opinion Author: Maxwell, J. Holding: Affirmed in part, reversed and remanded in part. |
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| Additional Case Information: |
Topic: Divorce: Irreconcilable differences - Marital assets - Equitable distribution - Vacation home - Family-use doctrine - Businesses - Condominium - Expert tesimony - M.R.E. 702 - Rehabilitative alimony - Attorney's fees - Marital home Judge(s) Concurring: Myers, P.J., Irving and Roberts, JJ. Concur in Part, Concur in Result 1: Barnes, J. Concurs in Part and in Result Without Separate Written Opinion Concur in Part, Dissent in Part 1: Lee, P.J. Concurs in Part and Dissents in Part With Separate Written Opinion Concur in Part, Dissent in Part Joined By 1: Ishee, J. Concurs in Result Only: King, C.J. Without Separate Written Opinion Procedural History: Bench Trial Nature of the Case: CIVIL - DOMESTIC RELATIONS |
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| Trial Court: |
Date of Trial Judgment: 01-26-2009 Appealed from: Harrison County Chancery Court Judge: James B. Persons Disposition: Final Judgment of Divorce Entered Case Number: C2402-07-00402(4) |
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| Note: | Griffis, J. Concurs in Part and Dissents in Part With Separate Written Opinion with Carlton, J. Concurring in Part and Dissenting in Part | |
| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Stacey Amme Rhodes |
CLIFFORD C. WHITNEY III, LEE DAVIS THAMES JR. |
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| Appellee: | George William Rhodes, Jr. | DEAN HOLLEMAN, HALEY LYNN ZELENKA |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Divorce: Irreconcilable differences - Marital assets - Equitable distribution - Vacation home - Family-use doctrine - Businesses - Condominium - Expert tesimony - M.R.E. 702 - Rehabilitative alimony - Attorney's fees - Marital home |
| Summary of the Facts: | George Rhodes Jr. (“Rocky”) and Stacey Rhodes were granted an irreconcilable-differences divorce. Stacey appeals. |
| Summary of Opinion Analysis: | Issue 1: Vacation home Stacey argues that the chancellor wrongly found the vacation home was a separate asset owned entirely by Rocky. Marital property is any and all property acquired or accumulated during the marriage. Excluded from this definition are assets attributable to one of the parties’ separate estates prior to the marriage or outside the marriage. The chancellor must inquire whether any income or appreciation resulted from either spouse’s active efforts during the marriage. If so, that income or appreciation becomes part of the marital estate. Appreciation that is merely passive and not a result of either spouse’s active efforts remains separate property. One spouse’s property may have lost its separate character by virtue of commingling or familial use. Jointly titling property does not give rise to a presumption regarding the marital or separate character of the property for the purposes of equitable division. The converse is also true. Simply titling the property in one spouse’s name does not create a presumption that the property is separate. Stacey does not dispute the fact that Rocky purchased the vacation home prior to the marriage or that it was initially his separate property. Rather, she takes issue with the chancellor’s determination that $304,874 in equity in the vacation home all belongs to Rocky as his separate property. Property that was once separate may convert to marital property under the family-use doctrine. Three years before the marriage, Rocky purchased the vacation home in Florida. Title has since remained in his name. When the parties married, Rocky still owed money on the mortgage. Some of the mortgage payments and utilities were paid from the parties’ joint checking account. Other mortgage payments were made from Rocky’s checking account where he deposited paychecks earned during the marriage. Stacey financially contributed to the joint account during the marriage by depositing her paychecks into the account until she resigned from her job in mid-2005 and by placing her child-support payments into the account. During the marriage, the parties discussed refinancing the home, and ultimately, they did refinance in late 2003. It is not disputed that Stacey participated in selecting the home. According to Stacey, she has used the home often ever since it was purchased. Stacey testified that she assumed an active role in maintaining and improving the house. She claimed that she had performed yard work along with her father and daughter. Stacey and her father had also pressure washed the house. She performed various maintenance and improvement projects with her neighbor. She was also responsible for contacting repair and maintenance businesses and ensuring their payment for various repairs to the home, including those to the air conditioner and the water heater. Further, she took part in securing rent-paying tenants to live in the house. During the marriage, the parties regularly vacationed there and spent holidays there. Under these circumstances, the family use of the vacation home was sufficiently significant to warrant its inclusion in the marital estate. Thus, the chancellor manifestly erred in determining that Stacey was not entitled to any interest in the vacation home. How the equity in the home should be divided is not resolved by this classification, and that issue is remanded for the chancellor to consider. Issue 2: Businesses Rocky is the president of RCD and its sole shareholder. His family has owned and operated RCD since 1947. Rocky and his brother, Keith, each owned a twenty-four percent interest prior to Rocky and Stacey’s marriage. Less than two weeks after the parties married, Rocky’s parents “gifted” additional interests of twenty-six percent to both Rocky and Keith, so that each brother then owned a one-half interest. Approximately a week later, Keith redeemed all of his stock for cash, making Rocky the sole shareholder. The chancellor found RCD, which he valued at $1,636,519.50, was Rocky’s separate property. Stacey argues this classification was error, and RCD is a mixed asset, having both marital and non-marital character. She admits that an equitable percentage of twenty-four percent remains Rocky’s separate property but contends the other seventy-six percent is marital property. She claims the twenty-six percent portion that Rocky acquired from his parents was compensation for work performed rather than a gift, and this interest is marital property. She also alleges the remaining fifty percent of the company acquired from Keith’s stock redemption is marital property. Finally, she argues that RCD appreciated in value due to Rocky’s active efforts during the marriage, and this alleged appreciated value is marital property. With regard to the stock transfer, Keith’s testimony touched on every element of a valid inter-vivos gift and supported that all were met. He specifically testified that the stock did not cost anything. The family accountant echoed that the stock transfers to the brothers was a gift, which she added “had nothing to do with their compensation.” Under the circumstances involved in this case, it was not clearly erroneous for the chancellor to conclude that Keith’s stock redemption did not constitute active appreciation in the value of the company resulting from Rocky’s efforts. Both parties admit that the flooring business saw a considerable increase in its income during 2006 immediately following Hurricane Katrina, no doubt attributable to the many flooded homes on the Mississippi Gulf Coast and the high demand for new flooring at that time. They disagree, however, that the fair market value of RCD actually increased over the course of the marriage. The chancellor fully recognized that the appreciated value of a business gained as a result of either spouse’s efforts is marital property. But he found that the overall value of RCD had not appreciated during the fairly short marriage, and the equitable value of the company remained Rocky’s separate property. Stacey’s primary argument on this issue is that the chancellor improperly considered the company’s earnings for the first quarter of 2008, which was after the August 2007 temporary order was entered. When equitably dividing marital property upon divorce, the date of valuation is necessarily within the discretion of the chancellor. The cutoff date for the accumulation of marital property here was when the temporary order was entered. Stacey argues that two businesses, both of which are intertwined with RCD, are marital property or actively appreciated during the marriage. But these businesses were formed using Rocky’s separate assets from RCD. And as with RCD, the record does not reveal that any appreciation in the value of these businesses occurred as a result of Rocky’s active efforts. Issue 3: Condominium The chancellor found that a one-third interest in a condominium was Rocky’s separate property. Rocky testified that the property was purchased during the parties’ marriage by RCD as a corporate asset, but it was mistakenly titled in his name. RCD’s balance sheets list the condo as an asset. Stacey argues the condo is marital property because Rocky had the property titled in his name. But the chancellor found credible Rocky’s testimony that the property was a corporate asset mistakenly titled in his name. The chancellor did not err in determining that the titling of the property was not determinative and that the condo was Rocky’s separate property. Issue 4: Expert testimony Stacey offered James Angle, CPA, as an expert in business valuation. Rocky had previously filed a motion to exclude Angle’s testimony. With it, he attached Angle’s deposition in which Angle admitted his valuation method did not distinguish tangible from intangible assets such as goodwill. Under M.R.E. 702, the court must determine whether the expert opinion is relevant in that it must assist the trier of fact and whether the proffered opinion is reliable. The chancellor found that Angle’s lack of prior experience providing in-court testimony sufficed as a valid reason to exclude his testimony. The test is whether a witness possesses peculiar knowledge or information regarding the relevant subject matter which is not likely to be possessed by a layman. Angle clearly possessed particular accounting knowledge not possessed by a layman. Insofar as the chancellor excluded Angle’s testimony on this ground, he committed error. Yet the chancellor rested his decision in part on a correct ground — Angle’s inclusion of goodwill in his valuation. In a divorce action, goodwill should not be utilized in performing a valuation of a business. Issue 5: Rehabilitative alimony Stacey argues that the chancellor improperly applied the Armstrong factors in this case in awarding rehabilitative alimony. The chancellor awarded Stacey $2,000 per month in rehabilitative alimony for six months. He also ordered Rocky to pay one-half of Stacey’s health insurance for six months and permitted Stacey to remain in the Florida vacation house for this same period. Rehabilitative alimony is awarded to parties who have put their career on hold while taking care of the marital home. Stacey argues the chancellor failed to sufficiently account for the disparity in the parties’ respective incomes and failed to take into account her testimony regarding her health problems. The chancellor did not overlook the disparity in the parties’ assets. This is but one factor to be considered in the overall calculus of the award, and the chancellor accorded it proper weight. Also, the chancellor fully analyzed Stacey’s health concerns. It is undisputed that Stacey has not attempted to find work and that she has offered no medical evidence of any kind showing that her medical conditions hinder her ability to work. The chancellor also considered the relatively short marriage and the above average standard of living enjoyed during the marriage. In the chancellor’s estimation, Stacey “should be able to seek and obtain gainful employment.” He reasoned that her unemployment since 2005 was a short enough period of time not to hinder her ability to find new employment. Thus, the chancellor did not abuse his discretion in setting the appropriate rehabilitative-alimony award. Issue 6: Attorney’s fees Stacey claims error in the chancellor’s refusal of attorney’s fees. The chancellor denied attorney’s fees based partly on the fact that Stacey unilaterally acquired a $60,000 home equity loan using the marital home. The chancellor observed that the only evidence of the amount of her attorney’s fees was Stacey’s own testimony that she had paid $45,000 in attorney’s fees, $5,600 for deposition and subpoena costs, and $16,000 for expert fees. While noting that this exceeded the $60,000 loan, the chancellor found important that Stacey admitted that the fees had already been paid. Thus, the chancellor found that Stacey had not established an inability to pay. Attorney’s fees may only be awarded to a party who has shown an inability to pay. Though Stacey contends Rocky is more capable of paying her attorney’s fees, she wholly fails to show that she is unable to pay them. Further, Stacey has offered insufficient evidence to support an accurate assessment of her attorney’s fees. Thus, the chancellor acted within his discretion in refusing to award attorney’s fees to Stacey. Issue 7: Marital home Since there is reversible error as to the classification of a marital asset, the entire equitable distribution is remanded for the chancellor to reconsider. All property division, lump sum or periodic alimony payment, and mutual obligations for child support should be considered together. Though the chancellor’s overall Ferguson analysis in addition to his handling of the marital home appear reasonable, these issues are remanded for the chancellor to reconsider. |
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