Standard of Value dictates Use of Discounts in Divorce Case

The Alabama Court of Appeals recently issued an opinion in Grelier v. Grelier, holding that the parties’ agreement to employ the fair market value standard in a divorce case precluded wife from arguing on appeal that the trial court should not have applied marketability and minority discounts.

In Grelier, the parties appointed a neutral expert to determine the value of the husband’s business, a retail and commercial real estate development company. The husband owed a 25% interest; his father, brother and college roommate owned the other interests. The consent order appointing the expert specified that he would determine the fair market value of the business. Husband and Wife each hired independent experts to offer their opinions of value as well.

The court-appointed expert testified that marketability and minority discounts should not be applied to the husband’s interest in the real estate business, but the opinion does not reveal why. Wife’s expert testified that the court-appointed expert’s valuation was flawed because it relied on out-dated appraisals and verbal statements of value but agreed that discounts should not be applied. Husband’s expert testified that a minority interest discount was appropriate because the wife had not proven that the husband had a right to act independently from the majority stakeholders; and that a marketability discount was standard practice when determining the FMV of close corporations. Husband’s expert suggested a 25% minority discount and 25% marketability discount, but the trial court reduced the combined discounts to 40%.

On appeal, the wife argued that the trial court should have utilized the fair value standard instead of FMV; and that the minority interest and marketability discounts should not have been applied. The Alabama Court of Appeals held that the wife’s argument was waived for failure to raise it in the trial court, where she had consented to a FMV standard in the order appointed the expert. Moreover, the appellate court held that the trial court had not abused its discretion in applying the discounts to arrive at FMV.

Can the Court Award Legal Fees in a Child Suppot Modification Proceeding?

An interesting, and perhaps unanswered, question which may arise in a child support modification proceeding is, “Can the court award legal fees to the prevailing party?” Since 1997, there has been statutory authority for awarding legal fees in a child support case. Previously, no statutory authority existed.

23 Pa.C.S. 4351 authorizes an award of legal fees where “an obligee prevails in a proceeding to establish paternity or to obtain a support order.” Soon after the enactment of this law, it was tested in the Pennsylvania Supreme Court by a lawyer who advocated an automatic award of legal fees to all support recipients, based on a simple disparity in their net incomes.

The Supreme Court rejected that notion in Bowser v. Blom, a case that established several criteria for determining whether a support recipient should receive reimbursement of legal fees.

Factors which the court may consider include: (1) whether the obligor’s unreasonable or obstreperous conduct impeded the determination of an appropriate support order; (2) whether the obligor mounted a fair and reasonable defense in a child support order; (3) whether the obligor’s failure to fulfill his moral and financial obligation to support his children required legal action to force him to accept his responsibilities; and (4) whether the financial positions and financial needs of the parties are disparate.

Subsequently, the Superior Court was asked to determine, in Krebs v. Krebs, whether the trial court should have forced a father to reimburse the mother’s legal fees, in a case where child support was modified retroactively for several years because the father had concealed an increase in his income. The Superior Court vacated and remanded the case, instructing the trial court to consider whether the mother’s claim for legal fees was appropriate under 23 Pa.C.S. 4351 or 42 Pa.C.S. 2503 (a different statute authorizing an award of legal fees as a sanction for dilatory, obdurate or vexatious conduct by a litigant).

More recently, in Sirio v. Sirio, the Superior Court was again asked to decide whether the mother should have been awarded legal fees in a child support modification proceeding. Once again, the Superior Court vacated and remanded the trial court’s decision not to award fees, instructing the trial court to consider 23 Pa.C.S. 4351 as well as 42 Pa.C.S. 2503. The Sirio Court alluded to Krebs, suggesting that it answered the question of whether fees could be awarded in a modification proceeding (despite statutory language that refers to “establishing” paternity or “obtaining” a support order).

I think both Krebs and Sirio have asked the question, but I have yet to see an authoritative decision (or, for that matter, a strong policy argument).

Why Good Drafting Counts

A recent decision issued by Florida’s intermediate appellate court, Craissati v. Craissati, amply demonstrates the importance of good contract writing skill. The husband and wife in this case entered into a marital settlement agreement, in which the husband agreed to pay alimony for eight years. Like most alimony agreements, this agreement provided that the alimony would terminate upon the death of the recipient, her remarriage, or cohabitation for a period of three months or more.

The wife in this case was incarcerated after a DUI conviction, and the husband petitioned the court for termination of his contractual alimony obligation. The parties stipulated that wife was, technically, “cohabiting” with her cell mate for a period in excess of three months, and that the termination clause of the marital settlement agreement was unambiguous. Still, the trial court held, the termination of alimony due to incarceration would be an absurd result not within the contemplation of the parties. The trial court modified the amount of alimony (since wife’s needs had been temporarily curtailed) but refused to terminate the obligation.

On appeal, the Florida appellate court reversed, adopting a literal construction of the agreement. Adding insult to injury, the author of the opinion found that driving under the influence was a voluntary act known to possibly result in incarceration, so the wife should have known that her criminal behavior could result in the termination of alimony.

If only the prisons were less crowded, the wife could have maintained her alimony award, I guess.

Virtually Gone Their Separate Ways

So, what happens when you discover that your spouse has been having an affair (or, more precisely, your spouse’s avatar has been having an affair) on Second Life? Well, naturally: tell him on Facebook that you want a divorce.