Opinion
Case No.: CL16-1639
06-30-2017
NANCY MARCELLETTE FRIEDMAN, Plaintiff, v. GERALD JAY FRIEDMAN, Defendant.
ORDER REGARDING ADVANCEMENT OF SUMS FOR ATTORNEY'S FEES AND COSTS AND SALE AND DISBURSEMENT OF CERTAIN MARITAL ASSETS
THIS CAUSE came to be heard on June 20, 2017, upon the Motion for Advancement of Sums for Attorney's Fees and Costs and Sale and Disbursement of Certain Marital Assets (the "Motion") filed by Defendant Gerald Friedman ("Gerald"). Based on the pleadings, the argument ore tenus, and applicable authorities, the Court GRANTS IN PART and DENIES IN PART the Motion and ORDERS the parties as follows.
Background
Plaintiff Nancy Friedman ("Nancy") filed her Complaint for divorce on February 12, 2016, seeking, inter alia, equitable distribution of "both legal and equitable interests in a variety of assets and debts." (Compl. ¶ 16.) Gerald filed a Cross-Complaint on March 11, 2017. Pursuant to subsequent pendente lite orders, Gerald was ordered to pay Nancy temporary spousal support payments. (Jan. 4, 2017, & Jan. 27, 2017, Orders.) As of the most recent pendente lite order, Gerald also had ongoing monthly health care costs exceeding $3,000. (Jan. 27, 2017, Order.) Although the parties have significant joint assets, some of which provide shareholder distributions to the parties, such distributions are sporadic and cannot be relied upon.
The parties apparently have identified the following as potential marital property: Hague Park Apartments; Apartment Management Co., Inc.; Four Seasons Resort, Inc.; Ocean Associates, L.P.; Little Neck Towers, LLC; Moyock Land Co., LLC; Ocean Hill Properties, Inc.; Swan Beach Corolla, LLC; Ocean Hills Commercial, LLC; 500 Pacific Avenue #905 and #907; 4137 North Virginia Dare Trail A/D/A "Finalee"; Swan Island Development, LLC; Swan Island Properties, LLC; and M-2 Lot at Swan Beach. (Def.'s Mot. Advancement of Sums from Assets for Advancement of Att'y's Fees, Ex. B, at 1-3.)
In response to Gerald's December 15, 2016, Motion for Advancement of Attorney's Fees, the Court found that (i) there were no liquid joint assets presented to the Court from which monies could be drawn, and (ii) there currently was no suggested asset before the Court from which disbursement could be made. (Jan. 24, 2017, Order re Advancement of Att'y Fees.) The Court therefore denied the motion, without prejudice, and granted Gerald leave to file a future motion if he could identify an asset with sufficient equity from which to derive funds for attorney's fees, including the possibility of allowing a loan against such an asset. (Id.) Gerald filed a subsequent Motion for Advancement of Sums from Assets for Advancement of Attorney's Fees on March 6, 2017. Therein, Gerald asserted that he sought—through counsel—to identify a marital asset with liquid funds and proposed selling 4137 Virginia Dare Trail (located in Kitty Hawk, North Carolina), a joint asset, but allegedly was informed that Nancy "does not agree to sell any properties at this time." (Def.'s Mot. Advancement of Sums from Assets for Advancement of Att'y's Fees ¶¶ 3-4.) The Court directed the parties at a later hearing to confer about how they could utilize joint assets to create cash flow; the parties were unable to reach an agreement on this matter, however. Gerald filed a third motion seeking advancement of funds on June 21, 2017, which now is before the Court, styled as a Motion for Advancement of Sums for Attorney's Fees and Costs and Sale and Disbursement of Certain Marital Assets. Therein, Gerald asserts—through counsel—that he, inter alia, suggested to Nancy's counsel the possibility of taking a loan or line of credit against a certain North Carolina property owned by the parties but received no response. (Def.'s Mot. Advancement of Sums for Att'y's Fees and Costs and Sale and Disbursement of Certain Marital Assets ("Mot. Advancement of Sums") ¶ 7.) At a May 24, 2017, hearing, the Court recommended that the parties arrange for distributions of $15,000 to each party from the "Four Seasons" property and $10,000 to each party from the North Carolina "Finalee" property and that the parties attempt to acquire a loan or line of equity on the Finalee property. (May 24, 2017, Ruling Tr. 4-5.) According to Gerald, although the $15,000 Four Seasons distribution was made, the $10,000 Finalee distribution was not, and Gerald alleges that Nancy "stated that she will not and 'will never' complete an application for a loan against the North Carolina ["Finalee"] property." (Mot. Advancement of Sums ¶¶ 9-10.) Gerald's counsel further contends that she suggested to opposing counsel that the parties sell a jointly owned property and that she has made a good-faith attempt—without success—to reach agreement with Nancy's counsel to identify marital assets from which the parties can acquire advanced funds. (Id. ¶¶ 12-13.)
Nancy's counsel represented to the Court that there were insufficient available funds to make a $10,000 distribution, but offered no explanation why a smaller distribution could not be made.
Gerald also asserts that $3,500 is needed for Gerald to retain an expert to review the recent mental health evaluation of Gerald and that $15,000 is needed for an initial "retainer" for a business valuation expert, (id. ¶¶ 14-15), which the Court has identified as necessary (see June 22, 2017, Order for Accounting, CL16-1182).
Gerald in his latest motion for advancement of funds requests that the Court order the parties to sell certain jointly owned assets (referred to as "Ocean Hill Properties," "the condominiums known as at [sic] 905 and 907 located at 500 Pacific Avenue," and "all properties and assets owned by Four Seasons Resort, Inc."). (Mot. Advancement of Sums, at 5-8.) He also requests that (i) the Court order $2,000 monthly disbursements to each party from Four Seasons until the Four Seasons properties are sold, (ii) the parties be ordered to cash out their UBS accounts and split the proceeds, and (iii) when Hague Park distributions are made, Nancy be required to pay to Gerald one half of her distributions as an advancement of attorney's fees and costs. (Id. at 7-8.)
The Court held a telephonic hearing on June 20, 2017, after which it granted the parties leave to submit post-hearing briefs.
Legal Standard
The Virginia Supreme Court has repeatedly declared that "jurisdiction in divorce suits is purely statutory and 'cannot be acquired by the courts inferentially or through indirection.'" Lapidus v. Lapidus, 226 Va. 575, 578, 311 S.E.2d 786, 788 (1984) (quoting Johnson v. Johnson, 224 Va. 641, 645, 299 S.E.2d 351, 353 (1983)).
The Code of Virginia specifies available pendente lite relief in divorce suits. It provides, in pertinent part, as follows:
In suits for divorce, . . . the court having jurisdiction of the matter may, at any time pending a suit pursuant to this chapter, in the discretion of such court, make any order that may be proper (i) to compel a spouse to pay any sums necessary for the maintenance and support of the petitioning spouse [or] (ii) to enable such spouse to carry on the suit . . . .Va. Code Ann. § 20-103(A) (2016 Repl. Vol.).
"To enable judges to respond adequately to the needs of [divorcing] spouses, the legislature gave broad discretion to judges to award attorney's fees and did not limit in a strict manner the time in which attorney's fees could be awarded. The only statutory requirement is that the [divorce] suit must be pending." Wilson v. Wilson, 25 Va. App. 752, 765, 492 S.E.2d 495, 501 (1997).
"The key to a proper award of counsel fees is reasonableness under all the circumstances." Lightburn v. Lightburn, 22 Va. App. 612, 621, 472 S.E.2d 281, 285 (1996). In making such an award, a trial court must consider "the circumstance of the parties," Barnes v. Barnes, 16 Va. App. 98, 106, 428 S.E.2d 294, 300 (1993), and the "equities of the entire case," Davis v. Davis, 8 Va. App. 12, 17, 377 S.E.2d 640, 643 (1989).
The Code of Virginia provides for the equitable distribution of marital property "upon decreeing a divorce from the bond of matrimony." Va. Code § 20-107.3(A). "As a means of dividing or transferring the jointly owned marital property, the court may transfer or order the transfer of real or personal property or any interest therein to one of the parties, permit either party to purchase the interest of the other . . . or order its sale by private sale by the parties, through such agent as the court shall direct, or by public sale as the court shall direct without the necessity for partition." Id. § 20-107.3(C).
The Virginia Court of Appeals has held that "it is clear . . . that no decree of equitable distribution can be made before the parties are divorced." Parra v. Parra, 1 Va. App. 118, 124, 336 S.E.2d 157, 160 (1985).
Discussion
As an initial matter, the Code gives the Court broad authority to fashion pendente lite orders at any time pending a suit to, inter alia, compel a spouse to pay for maintenance and support of the other spouse or to enable a spouse to carry on the suit. Va. Code Ann. § 20-103 (2016 Repl. Vol.). Virginia courts have relied on this provision to order a party to pay his or her spouse's attorney's fees. See, e.g., MacDougall v. Levick, 66 Va. App. 50, 782 S.E.2d 182 (2016) (affirming award of $291,288 in attorney's fees); Thomas v. Thomas, 1996 Va. App. LEXIS 738, at *15 (Nov. 26, 1996) (affirming award of $66,326.39 in attorney's fees).
As is appropriate, the Court does not consider the unpublished Court of Appeals Opinion to hold precedential value. The Court instead considers the rationale offered by the Court of Appeals to the extent that the Court finds it persuasive, which is permissible. See Va . Sup. Ct. R. 5.1(f); Fairfax Cty. Sch. Bd. v. Rose, 29 Va. App. 32, 39 n.3, 509 S.E.2d 525, 528 (1999).
The primary question before the Court is whether the Code authorizes—prior to entry of a final divorce decree—the sale of joint marital assets, including real estate, for purposes of paying court-ordered spousal support and/or enabling a spouse to carry on a divorce suit. Although there apparently are no Virginia published decisions directly on point, appellate courts from other jurisdictions have recognized the authority of trial courts to order a pre-decree sale of marital property. See, e.g., Randazzo v. Randazzo, 875 A.2d 916, 924 (N.J. 2005) (finding that a pre-decree sale "was necessary for the financial maintenance of the parties"); Watega v. Watega, 143 P.3d 658, 664 (Alaska 2006) (recognizing the court's ability to order a pre-decree sale of real estate but finding that, under the circumstances present, "the sale of the property did nothing to increase or preserve the assets of the marital estate" and therefore was not necessary for the financial maintenance of the parties).
Nancy argues that the Court lacks the authority to order the sale of marital property prior to entry of a final divorce decree by equating Gerald's requested relief to equitable distribution of marital property. (Pl.'s Post-Hr'g Br. 3.) Nancy relies primarily on Mayers v. Mayers, 15 Va. App. 587, 425 S.E.2d 808 (1993). There, the Virginia Court of Appeals addressed the issue of whether a court could order the sale of the marital home as provided in a property settlement agreement that was incorporated into a court order pending entry of the couple's final decree of divorce. Id. at 589, 425 S.E.2d at 809. The wife requested that the trial court order the sale of the home and the husband objected, asserting that the court lacked jurisdiction to order the sale. Id. The appellate court agreed with the husband, holding that because the trial court ordered the sale prior to entry of the final divorce decree, "on that date the court lacked jurisdiction to order the sale of the property." Id. at 590, 425 S.E.2d at 810.
Mayers is distinguishable from the case at bar, however, as it was not decided in the context of a request for attorney's fees to carry on the suit. The Court nevertheless recognizes the similarities between a proposed pendente lite sale of a marital asset and the proposed pre-decree equitable distribution of such property. While the Court continues to believe that it would be in the best interests of the parties for them, by agreement, to either liquidate marital assets or take out a loan or line of credit against marital assets—to facilitate expeditiously traversing what has become a very expensive and litigious path toward divorce and equitable distribution—the Court finds it unnecessary to decide whether it has jurisdiction to order the sale of marital assets prior to entry of a final divorce decree. At present, the Court elects to fashion a remedy that allows Gerald to carry on the suit without the Court having to order—at least for the time being—a sale of marital assets that would likely yield less than market value, thereby decreasing the value of the marital estate.
The Court is mindful of the expense the parties will need to bear in order to carry on the suit, including paying their attorneys, and the Court strongly believes that the parties have been—and continue to be—well served by having the benefit of legal representation. Based on the evidence presented and representations made to date, the Court understands that while Nancy has had access to substantial non-marital funds to assist her in paying her attorney's fees, Gerald is not—and has not been—in a similar position. The Court finds that Gerald is not currently able to carry on the suit. Specifically, Gerald is unable to simultaneously pay maintenance and support payments to Nancy (pursuant to the current pendente lite Order), stay current on his own maintenance and support expenses (including his substantial ongoing monthly health care costs), and bear the expenses associated with carrying on this suit. Gerald's attorney apparently has made significant efforts to identify joint assets and explore opportunities to liquidate them or take out loans against them, but these efforts have come to naught. Based on representations by counsel, it appears that Nancy—for whatever reason—has been unwilling to pursue any of the opportunities identified by Gerald's counsel. Nancy also has not suggested alternative solutions that would create the necessary cash flow to allow Gerald to carry on this suit.
These funds allegedly are from family members who are supporting Nancy.
The pendent lite maintenance and support calculation did not account for the substantial non-marital funds to which Nancy has had access to assist her in paying her attorney's fees.
Upon consideration of the circumstances of the parties and the equities of the case, including but not limited to Gerald's current inability to carry on this suit, the Court ORDERS the following:
• Nancy shall advance all necessary funds to retain and pay for a business valuation expert to conduct both an accounting and a valuation of all entities in which there is a claim of marital interest (the "Expert Funds"), and the parties shall cooperate and coordinate with the expert to expeditiously conduct such accounting and valuation. Unless otherwise ordered by the Court, Gerald is obligated to reimburse Nancy one half of the Expert Funds, which will be reconciled upon or before equitable distribution.
• Nancy shall advance to Gerald $30,000 within thirty days to be used by Gerald to assist him in paying expenses, including his attorney's fees, necessary to carry on this suit (the "Ordered Attorney's Fees"). Unless otherwise ordered by the Court, Gerald is obligated to reimburse Nancy the full amount of the Ordered Attorney's Fees, which will be reconciled upon or before equitable distribution.
• Gerald is responsible for any expenses and costs associated with any expert he may choose to retain to review the mental health evaluation of Gerald that the Court previously ordered and received. As discussed at a prior hearing, the Court anticipates that the parties will schedule a competency review hearing prior to the end of July 2017.
• Nancy is not required to advance Gerald's half of the Expert Funds or to advance the Ordered Attorney's Fees if she cooperates with Gerald to take appropriate actions to make $50,000 available to Gerald within the next thirty days—or a longer period of time, assuming Gerald agrees that Nancy is making a good-faith effort to do so and demonstrable progress is being made. Such appropriate actions may include arranging for distributions from joint assets to be made, obtaining a loan or line of credit against one or more joint assets, selling one or more joint assets, or taking any other actions to which the parties mutually agree. Gerald is directed to cooperate with any such efforts and to use such funds to assist him in paying expenses, including his attorney's fees, necessary to carry on this suit.
This is the expert identified as the "Retained Expert" in the parallel business litigation suit. (See June 22, 2017, Order for Accounting, CL16-1182.) --------
Conclusion
Based on the above, the Court GRANTS IN PART and DENIES IN PART Defendant's Motion for Advancement of Sums for Attorney's Fees and Costs and Sale and Disbursement of Certain Marital Assets. Any objections to this Order shall be submitted to the Court within fourteen days. Endorsements are waived pursuant to Rule 1:13. The Clerk shall mail or email copies of this Order to all counsel of record.
IT IS SO ORDERED this 30th day of June, 2017.
/s/_________
David W. Lannetti
Circuit Court Judge