I’ve had a few cases in which the issue of what constitutes “personal property” has been the subject of debate. The understanding of the typical litigant is that such property is the household furnishings–what a homeowner’s policy might consider “contents.” However, from a purely legal standard, personal property is any property that isn’t real estate. Under this definition, financial accounts, debts, securities, and business are included in “personal property.” This ambiguity becomes germane when family court litigants settle “personal property” issues with one party believing that the household contents have been resolved and the other party believing only real estate remains at issue.
Such ambiguity was an issue in the April 17, 2013 Court of Appeals opinion in Schultze v. Schultze, 403 S.C. 1, 741 S.E.2d 593 (Ct. App. 2013). Wife appealed the family court’s equitable distribution award that gave Husband a portion of her retirement, successfully arguing that the family court could not equitably divide this asset because the matter had been resolved prior to trial.
In support of Wife’s position the Court of Appeals noted that Husband had filed an affidavit at the temporary hearing stating, “To the best of my knowledge, my wife and I have already divided all of our personal property, as we have been separated for over three years.” The subsequent pre-trial order did not contain checks in the corresponding box for “equitable apportionment of personal property.” Below that list within the same order, paragraph four was checked, which read, “The parties stipulate that all marital personal property has been divided to their mutual satisfaction.” Further in their pretrial trial briefs, each party indicated personal property had been resolved, with Wife’s pretrial brief emphasizing that this included “retirement accounts.”
At trial Husband sought an equitable distribution of Wife’s retirement account. The family court awarded him fifty percent of her retirement account—$21,463 plus any passive gains or losses. Wife appealed. The Court of Appeals reversed this award, finding that the pre-trial order controlled the family court’s ability to divide this account:
A pretrial order “limits the issues for trial to those not disposed of by admissions or agreements of counsel” and “controls the subsequent course of the action . . . .” Rule 16(b), SCRCP. Thus, both parties and the court considered the issue of equitable division of personal property to have been resolved before trial.
After representing to the court that all issues regarding personal property were resolved, John [Husband] was required to take formal action to bring the issue back before the court. See id. (explaining the pretrial order “controls the subsequent course of the action, unless modified on motion, or at the trial to prevent manifest injustice” (emphasis added)). If John wanted the court to disregard the parties’ agreement and consider personal property in its equitable division, he was required to make a motion or otherwise ask the family court to do so. John did neither.
Wife was not successful in arguing that this same pre-trial order precluded the family court from making her pay 25% of Husband’s debts:
Heather [Wife] pled equitable apportionment of property in her complaint, thus the issue of dividing the marital debts was presented to the court. Even though the family court left the issue of “marital debts” unchecked on the pretrial order, paragraph five was checked, which required the parties to exchange a list of marital debts before trial. Unlike the issue of personal property discussed above, the division of marital debts was still at issue prior to trial. Therefore, the issue was properly before the family court, and the court did not err in addressing it.
Wife further argued that she should not be required to pay any of Husband’s debts because he “presented insufficient evidence as to the marital purpose of the debts or their balance on the date of separation or filing.” The Court of Appeals rejected this argument, noting Wife had the burden of proving that debts incurred during the marriage were not marital and that she presented minimal evidence regarding these debts.
Finally, Wife appealed her attorney fee award as insufficient. Because the Court of Appeals granted her favorable results on her retirement, it remanded the award of attorney’s fees.
In implicitly finding that the issue of Wife’s retirement was not tried by consent, the Court of Appeals noted that the amount of her retirement was relevant on the issues of alimony and attorney’s fees. The amount of Husband’s debts would be relevant on these same issues and I am unsure why a requirement of exchanging a list of marital debts therefore leads to a conclusion that these debts remained subject to equitable distribution when the pre-trial order indicated personal property had been resolved.
Further, while I understand why a court might consider retirement accounts to be “personal property,” I can also understand why Husband might not have considered it such. However kudos to Wife’s attorneys at the McDow Law Firm for making this relatively novel argument and using the pre-trial order as a basis to reverse this equitable distribution award.
Two clear lessons from Schultze. First, do not indicate “personal property” is settled if it is merely household furnishings that have been resolved. Second, pre-trial orders are going to start limiting trial issues in family court. If an issue that is settled or resolved in the pre-trial order subsequently becomes unresolved, the safest practice is to file a motion to amend the pre-trial order.
Interesting. Thank you for sharing. I need to tweak a few things.
Greg:
This is excellent analysis of the Schultze case; and I, for one, agree completely with your conclusions in your closing paragraph. Also, taking it a logical step forward, what happens if your pretrial order also requires that “all pretrial discovery is to be fully completed within (a fixed timeline)”, and the attorneys forget or fail to comply. Can you then raise a Rule 37, SCRCP objection to exclude evidence at trial or move that a matter or cause of action be deemed “admitted” or “proven”? Finally, every family law attorney should read and re-read Rule 16(b), SCRCP, regarding the possible draconian results for a failure to comply with the pretrial order.
I routinely file amended pre-trial orders if we agree to extend discovery deadlines. However this case has me considering making that policy uniform.