Pennsylvania Family Law : Pennsylvania Divorce Lawyer & Attorney : PA Family Law Blog : Fox Rothschild Law Firm : Family Law Serving Philadelphia, Pittsburgh, Bucks County, Montgomery County, Chester County

Clients have a sixth sense for things that are problematic. Unfortunately, that sense is coupled with a tendency to freeze and avoid talking about the problem. Often times, clients prefer to ignore the problem, or assume that it will solve itself. 

Lawyers fancy themselves as problem solvers and good lawyers have a knack for doing just that. Unless the lawyer knows and understands the problem, however, solutions are not easily found. When a client senses a problem, there are three places where clients tend to move quietly and not tell their attorneys what their plans are: tax returns, home sales, and asset transfers and sales.  As one might expect, the failure to examine these transactions with an attorney can be harmful, or even fatal, to the financial interests of the client.  Let’s take a look:

                Tax returns.   Joint tax returns make for joint liability. Every year by April 15, private taxpayers must file their income tax returns and tax payments for the previous year. For example, the 2008 tax year closed on December 31.  So, tax returns and taxes were due on April 15, 2009. Historically, almost all couples file joint returns because that is what they have done in the past. Also, there are usually tax savings associated with a joint return.  For Americans who are paid wages, there are not many options in terms of tax avoidance.  Where one or both of the taxpayers are self-employed, however, there is room for mischief. Unfortunately, clients tend to assume that tax fraud is something that affects the other “self employed” guy, and that nothing bad will ever happen to them. As a result, every year clients end up signing joint income tax returns without realizing that if the return “blows up” and is challenged by the IRS, any resulting liability is what attorneys call joint and several.  That means if your spouse puts false numbers on the return, the tax law says that, with few exceptions, you agree that your assets can be seized to pay the tax and penalties arising from the matter.  The fact that you are separated is not itself and impediment to collection efforts by the IRS. The classic case is Duff v. Duff, 510 Pa. 251 (Pa. Supreme 1986).  Although there are ways to try to address this problem, the starting point is to realize that joint returns make for joint legal responsibility. Your oath that the return is accurate extends beyond your own income to that of the spouse with whom you file.

                Home Sales.   If husband and wife own a home as joint tenants or tenants in common, neither can sell the property without the consent of the other.  In order to sell the property, the co-owner must join in the deed to convey a clear title to property.  So, when we are asked whether a spouse can sell a house out from under the other, the answer is no, unless the house is held in the name alone of the spouse having title.  That’s good news.  But, it is fairly common for a separated husband and wife to agree that they want to sell their joint property.  They sign the listing agreement together and the broker/agent attempts to sell the property. Let’s say, for example, a couple lists for $400,000 and they receive and offer of $375,000, which they find attractive.  Again, the tendency is to not solicit legal advice. So, they agree to take the $375,000 and they sign the agreement of sale tendered by the prospective buyers. This is major because they are now “under agreement.” Although these agreements usually contain conditions allowing for an “out” by the buyer e.g., home inspection, mortgage contingency), they rarely allow the seller to back out.  Once the agreement is signed, the sellers are legally bound to convey title at settlement upon tender of the contract price.  This is a good thing, right?  Yes and no.  Without further agreement between the sellers, the title agent will issue the proceeds in a single check that mirrors the title to the property. This means that neither party will have access to the proceeds from the sale unless there is an agreement. If you are planning on using these proceeds to acquire a substitute residence, you may find that you have no access to the funds until you “agree” with your spouse on a distribution or the court otherwise decides your case. Without an agreement, the proceeds will be left in escrow until there is an agreement or court order disposing of the same.

                Assets Transfers and Sales. The law seems clear that unless a court order prevents an individual from selling or moving assets from an individual account, each spouse can buy, sell or transfer assets as he or she pleases.  We find that clients tend avail themselves of these powers.  This is not bad in and of itself.  Clients, however, tend to ignore the fact that each time sales and transfers are effected, there is a likelihood that the spouse not in possession of the account will want to “trace” each transaction or transfer in order to insure that no proceeds were skimmed from the transaction.  This process requires expensive accounting, which tends to consume time and money, as well as slow down the divorce process.

                If you are signing legal documents of any substance while going through a separation or divorce, let your attorney know.  If you are signing a document with your spouse from whom you are separated, it is imperative that you understand the legal consequences before you sign.  As a rule, assume that you cannot “undo” a document once you have signed it.  

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It seems as if, more and more, the classic story (boy meets girl, boy falls in love with girl, boy and girl get married, have a house full of babies and live happily ever after) needs a little help from science. The Center for Disease Control reports that as of 2002 approximately eight percent (8%) of women of reproductive age attended an infertility related medical appointment at some point. Given that there are approximately sixty two million women of reproductive age in the United States, the number who are suffering from infertility is staggering. 

However, as the numbers of individuals with infertility concerns rise, so seemingly do the numbers of treatments available. The real growth in the field of assisted reproductive technology (“ART”) started in the United States in the early 1980’s with In Vitro Fertilization (“IVF”). Since that time, the options available have expanded to include surrogacy, gestational carriers, and a host of medications.

With the growth in ART has come a whole host of legal and ethical questions, which many states have failed to definitely or adequately answer. As a simultaneous student of Bioethics and Law at the University of Pennsylvania, I had the unique experience of exploring how the ethical issues of ART intersect with the scant “law” which exists on the topic. While the law is equipped to deal with the usual circumstance of IVF (using the gametes of a husband and wife and implanting any resultant embryos in the wife), once you move beyond that scenario and use donor eggs or donor sperm, a surrogate or a gestational carrier, the waters become more merky. It is imperative that before anyone dives head first into the process, he or she reviews all of the potential legal ramifications with an attorney. 

For example, what will become of the embryos you do not use? Many clinics require couples to make this decision up front, but what if an individual changes his or her mind? What if an egg donor changes her mind and no longer wants her fertilized eggs to be used?  What happens if the intended parents separate while a surrogate is pregnant? What if those separated intended parents have no genetic ties to the expected child? Is it more beneficial to use unknown or known donors?  Surrogates?

Until recently, it had not been definitively determined whether a sperm donor owed a right of support to any children which resulted from his donation in Pennsylvania. 

In another matter, an egg donor, who wanted nothing to do with the ongoing custody dispute between the gestational carrier and the intended parents, was dragged into court, albeit briefly. 

All of these scenarios may require an attorney to represent the individuals involved against the other individuals involved in the realms of custody and support, but may also require representation against the medical professionals and organizations involved. Hospitals may be at a loss as to whom they should release a baby, as to who should be listed as parents on a birth certificate and as to what their responsibilities are in terms of releasing or destroying embryos.

The best way to avoid legal problems when undergoing ART, is to plan ahead and be aware of what legal situations may arise and how to best deal with them.  Cleaning up after the fact, when there is a child in the middle, is never ideal.

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Although our law firm has litigated several of the largest support cases decided in Pennsylvania the matter of how much support children need is one of endless controversy for those who have household net incomes exceeding $20,000 per month. We are often asked to offer second opinions or discuss those cases we have tried.  The fact is that while we have opinions about these larger cases, most of them settle because the range of possible outcomes is so wide even in cases where we believe we understand the approach taken by the judicial officials deciding the law.

Since 1984, Pennsylvania has operated under a Supreme Court ruling in Melzer v. Witsberger,   480 A.2d 991 (Pa. Supreme 1984).  The case created a multi-part formula beginning with an analysis of the income each parent’s available income and then assessing the “reasonable needs” of each parents for his or her own support and graduating to an assessment of the reasonable needs of the child or children in each parent’s household.  Based upon a subjective evaluation of these needs, the court allocates what contributions need to be made from one household to the other to cover the child’s reasonable needs. The process is complicated and rife with opportunity for “judgment” calls. Moreover, most members of the judiciary will candidly admit that a lifetime of common sense experience often leaves them unprepared to decide what is reasonable when wealth is enormous.  Does a one year old need a governess if the primary caretaker is already staying at home.  Does a reasonable vacation expense include first class seats?  Private plane?  747?  While Pennsylvania has not opined on these subjects, other states have had to.

It is rare for high income cases to be reported because they usually settle.  But in January of this year a Schuylkill County case, Rich v. Rich, was decided by the Superior Court based upon their review of a Melzer analysis. 967 A.2d 400 (Pa. Super. 2009)

The case involved support of four children at its beginning.  One was emancipated during the two years of litigation culminating in the final order.  The father was a CEO for several coal and co-generation companies.  Father’s gross income was $9-10 million per annum.  His net worth roughly four times that amount.  Mother was not employed.  Father’s home and contents occupied 150 acres and had an aggregate worth of $2-3 million.  Mother lived in a mortgage free $725,000 home. 

Mother presented expenses of roughly $180,000 a year for the four children.  The trial court accepted these expense and awarded $15,000 a month. Support was not reduced upon the eldest child’s emancipation, the Court finding that other expenses would have risen during the period involved.

Father appealed from the order.  His first complaint is that Ms. Rich failed to document her expenses.  The Rules of Civil Procedure were amended in 2006 to require documentation of expenses in cases decided under Melzer where net income of the family exceeds $20,000 per month Pa.R,C.P. 1910.27(c)(2)(a).  His particular complaint was a $50,000 item budgeted for credit cards charges without supporting data or delineation.  The Superior Court found that Father waived the argument when he agreed that the expenses presented for 2005 were reflective of actual post separation expenditures.

The second basis for the appeal was the trial court’s refusal to reduce support by 25% once the eldest child was emancipated. The appellate court properly noted the law to forbid arithmetic reductions not supported by testimony related to expense savings.  At the same time, it observed that it was also an abuse of discretion to infer that the cost of living increase was equal to the reductions in costs arising from a child’s emancipation.  The case was remanded to the trial court to consider what cost savings would result from the child’s emancipation.

Mother also appealed. T he core of her appeal was that the support was insufficient and she pointed to two cases litigated by Fox Rothschild (on behalf of plaintiff’s) where more support was awarded for children than Mr. Rich was required to pay even though his income was 2-4x greater than the payor spouses in Karp v. Karp, 686 A.2d 1352 (Pa. Super. 1996) and Mascaro v. Mascaro. 803 A.2d 1186 (Pa. Supreme 2002)

The Superior Court easily disposed of this . The support award made by the court was 100% of the budget presented by Ms. Rich even though she claimed that her needs were only 10% of the $15,000 in claimed monthly expenses. Where she pointed to the disparity in accommodations between her $725,000 home and father’s $2-3 million dollar residence, the Court pointed to Colonna v. Colonna, 855 A. 2d 648 (Pa. Supreme, 2004) where the Supreme Court of Pennsylvania held that “case law does not require that all the recreational benefits that the children enjoy when they are with Father must also be provided through support from Father when they are in Mother's custody.  In fact, Mother admitted that the children have continued to attend private schools and summer camps as they did before she established a separate residence.  Our review of the record in relation to Mother's first two issues reveals that the court's conclusions are not in error and no abuse of discretion was committed.”

So, in the 25^th year after Melzer became the law of the Commonwealth, we still do not have an appellate case that thoroughly analyzes what is a “reasonable” expense for a child or even how to allocate things such as auto insurance or propane bills between parent and child.  But we do know that $15,000 is not an abuse of discretion for four children and we are reminded that Mr. Rich’s access to vacation homes while the children are with him does not warrant support adequate to allow Ms. Rich to replicate that lifestyle while with the children.  The case also discusses how to dispose of huge accumulations of credits or arrearages emerging from lengthy proceedings and interim payments. But that will be for another day.

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Although our law firm has litigated several of the largest support cases decided in Pennsylvania the matter of how much support children need is one of endless controversy for those who have household net incomes exceeding $20,000 per month. We are often asked to offer second opinions or discuss those cases we have tried.  The fact is that while we have opinions about these larger cases, most of them settle because the range of possible outcomes is so wide even in cases where we believe we understand the approach taken by the judicial officials deciding the law.

Since 1984, Pennsylvania has operated under a Supreme Court ruling in Melzer v. Witsberger,   480 A.2d 991 (Pa. Supreme 1984).  The case created a multi-part formula beginning with an analysis of the income each parent’s available income and then assessing the “reasonable needs” of each parents for his or her own support and graduating to an assessment of the reasonable needs of the child or children in each parent’s household.  Based upon a subjective evaluation of these needs, the court allocates what contributions need to be made from one household to the other to cover the child’s reasonable needs. The process is complicated and rife with opportunity for “judgment” calls. Moreover, most members of the judiciary will candidly admit that a lifetime of common sense experience often leaves them unprepared to decide what is reasonable when wealth is enormous.  Does a one year old need a governess if the primary caretaker is already staying at home.  Does a reasonable vacation expense include first class seats?  Private plane?  747?  While Pennsylvania has not opined on these subjects, other states have had to.

It is rare for high income cases to be reported because they usually settle.  But in January of this year a Schuylkill County case, Rich v. Rich, was decided by the Superior Court based upon their review of a Melzer analysis. 967 A.2d 400 (Pa. Super. 2009)

The case involved support of four children at its beginning.  One was emancipated during the two years of litigation culminating in the final order.  The father was a CEO for several coal and co-generation companies.  Father’s gross income was $9-10 million per annum.  His net worth roughly four times that amount.  Mother was not employed.  Father’s home and contents occupied 150 acres and had an aggregate worth of $2-3 million.  Mother lived in a mortgage free $725,000 home. 

Mother presented expenses of roughly $180,000 a year for the four children.  The trial court accepted these expense and awarded $15,000 a month. Support was not reduced upon the eldest child’s emancipation, the Court finding that other expenses would have risen during the period involved.

Father appealed from the order.  His first complaint is that Ms. Rich failed to document her expenses.  The Rules of Civil Procedure were amended in 2006 to require documentation of expenses in cases decided under Melzer where net income of the family exceeds $20,000 per month Pa.R,C.P. 1910.27(c)(2)(a).  His particular complaint was a $50,000 item budgeted for credit cards charges without supporting data or delineation.  The Superior Court found that Father waived the argument when he agreed that the expenses presented for 2005 were reflective of actual post separation expenditures.

The second basis for the appeal was the trial court’s refusal to reduce support by 25% once the eldest child was emancipated. The appellate court properly noted the law to forbid arithmetic reductions not supported by testimony related to expense savings.  At the same time, it observed that it was also an abuse of discretion to infer that the cost of living increase was equal to the reductions in costs arising from a child’s emancipation.  The case was remanded to the trial court to consider what cost savings would result from the child’s emancipation.

Mother also appealed. T he core of her appeal was that the support was insufficient and she pointed to two cases litigated by Fox Rothschild (on behalf of plaintiff’s) where more support was awarded for children than Mr. Rich was required to pay even though his income was 2-4x greater than the payor spouses in Karp v. Karp, 686 A.2d 1352 (Pa. Super. 1996) and Mascaro v. Mascaro. 803 A.2d 1186 (Pa. Supreme 2002)

The Superior Court easily disposed of this . The support award made by the court was 100% of the budget presented by Ms. Rich even though she claimed that her needs were only 10% of the $15,000 in claimed monthly expenses. Where she pointed to the disparity in accommodations between her $725,000 home and father’s $2-3 million dollar residence, the Court pointed to Colonna v. Colonna, 855 A. 2d 648 (Pa. Supreme, 2004) where the Supreme Court of Pennsylvania held that “case law does not require that all the recreational benefits that the children enjoy when they are with Father must also be provided through support from Father when they are in Mother's custody.  In fact, Mother admitted that the children have continued to attend private schools and summer camps as they did before she established a separate residence.  Our review of the record in relation to Mother's first two issues reveals that the court's conclusions are not in error and no abuse of discretion was committed.”

So, in the 25^th year after Melzer became the law of the Commonwealth, we still do not have an appellate case that thoroughly analyzes what is a “reasonable” expense for a child or even how to allocate things such as auto insurance or propane bills between parent and child.  But we do know that $15,000 is not an abuse of discretion for four children and we are reminded that Mr. Rich’s access to vacation homes while the children are with him does not warrant support adequate to allow Ms. Rich to replicate that lifestyle while with the children.  The case also discusses how to dispose of huge accumulations of credits or arrearages emerging from lengthy proceedings and interim payments. But that will be for another day.

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We live in a mobile society.  We also live in a society that experiences a high rate of divorce.  These two facts make for some of the most contentious litigation found in the domestic relations world.  It is the fight over whether one parent, usually the one with primary physical custody, can take a child to another state to reside there on a permanent basis.

When we have children we all form the Currier and Ives image of the happy nuclear household.  The children will grow up in an intact family with the love and respect of both of their loving parents.  But when mom and dad split and mom shortly thereafter announces that she wants to move to Texas to re-up with her former boyfriend the term “nuclear family” takes on a whole new meaning.  It was bad enough that father got dumped.  It was worse that she took most of the assets.  Then there was the child support. And now, topping the cake, is the concept that the children should live 2,000 miles away and see their loving father once a month and four weeks in the summer.

Can this happen in 21^st century America?  It does every day.  Part of the reason is that none of the facts recited in the last paragraph really matter a lot.  Custody is not about parental pain.  It is about what is in the childrens’ best interests.  So, how could it be in a child’s best interest to grow up hours away from one parent.  Courts struggle with this issue every day.  And, in so doing, they are not unmindful of how a custody result may be grossly unfair to a parent even though in the child’s best interest.

There is a three prong test employed when one parent proposes to move a significant distance from the other parent taking the children with them.  The test comes out of a 1990 Superior Court case called Gruber. v. Gruber. 583 A.2d 434 (1990).

Prong 1: What is the potential advantage of the move and the likelihood the move will substantially improve the life of the custodial parent and the children? Also is the move the product of a momentary whim on the part of the custodial parent?

Prong 2: Does the motivation for the move have integrity and is the reason for opposing the move have a similarly sound basis? and

Prong 3: Are there available realistic alternative arrangements for substitute partial custody or visitation and will such arrangements adequately foster an ongoing relationship between the child and the non-custodial parent?

The initial burden is upon the party proposing the relocation to show the “advantage” to the parent and child.  Each party has the burden with respect to the second prong addressing integrity for the dispute over relocation.

In these cases, past is usually prologue.  A non-custodial parent intimately involved both physically and emotionally in rearing a child presents a major hurdle to that custodial parent who wishes to relocate.  A parent whose involvement has been limited to routine visits and little more may find him or herself in a disadvantaged position.  Courts also examine whether parental conflict over custody issues may make distance an attractive option.  On the other hand there are also cases where a modest level of conflict drives one parent to ask to relocate because “life will be simpler.”  This does not usually make for a successful case.

The most common and most nettlesome area of conflict is over the question of whether relocation “will substantially improve the life of the custodial parent and the children.” There is language in the Gruber case that seems to imply that benefit to the custodial parent may be enough even without palpable advantage to the children.  In metropolitan areas with competitive schools and rich cultural resources, it is sometime difficult to persuade a court that there is an advantage to the child associated with the move.

In recent years there has been a vast increase in this breed of custody litigation.  There are many issues to consider and many reported cases addressing the issue.  But Gruber stands as the seminal case.  The cases decided in the 1990s tended to focus on the benefit to the parent and permit relocation even though a distinct advantage to the child was not often clear.  But in the past decade, the trend has shifted against relocation with recent cases weighing how the children benefit from the move in ways that differ from the happiness of the custodial parent.  One thing remains clear.  People who have already experienced and angst and heartache of separation and divorce do not respond well to plans intended to permit relocation of their children to distant places.

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In the past, I have blogged extensively about the legal, medical and value-based decisions made in the case of the unmarried California woman who gave birth to octuplets, while having six other children at home. Enough!

I just returned from an ABA conference in Baltimore regarding the legal aspects of assisted reproductive technology (ART). It was an interesting conference, as I got to meet other lawyers who practice in this area of law. We talked extensively about the issues surrounding egg, sperm and embryo donation. I learned a good deal about the pitfalls that can occur and the many different ways of approaching the problem of infertility, depending upon medical, legal, financial and geographical issues.

The most important fact that I can share is the importance of having experienced people involved in the transaction—both legally and medically. This area of practice keeps growing and becoming more and more sophisticated. There are many people who hold themselves out as experienced, but may not have the level of experience that leads to deep knowledge of the complications that arise. 

If you are looking for assistance, do your homework. Make sure your medical and legal team practice frequently in this area. Interview several potential people before making any decisions. Contact medical practices associated with the teaching hospitals in the area: Temple, University of Pennsylvania/Pennsylvania Hospital, Cooper—to name a few.

While most surrogacy/infertility agencies are legitimate, you should choose an agency with a long and successful history. Use Google or other web-sites to investigate. Several useful sites are: http://www.sart.org/; http://www.asrm.org/;http://www.cdc.gov/ART/. A case in which I represented a surrogate mother and the Estate of her dead child established a legal precedent that agencies are responsible to intended parents and surrogates for negligence in some specific sets of circumstances. Huddleston v. Infertility Center of America , 700 A 2d. 453 (Pa. Super., 1997) provides a guide as to what can go wrong. While such circumstances do not occur regularly, you do not want any problems with your family. Surrogacy or other similar agreements are very complicated. I am happy to provide a consultation to educate you as to the issues will face in these circumstances.

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This short memorandum will send any competent real estate lawyer into fits of hysteria. Lien law is some of the most complex real estate law one can encounter. But ordinary people bang into these kinds of problems every day and especially so when parties are separated from one another.

There are three ways to own property with another individual in Pennsylvania. Be careful at the outset, because you can also own property as a limited liability company (LLC) a partnership (either general or limited) or as a shareholder in a corporation. But where individuals hold property with others they usually do so in three ways:

                                Tenancy in common

                                Joint Tenancy with right of survivorship

                                Tenancy by the entireties

A tenancy in common means that our interests are completely divisible. If you and I own a bank account or a piece of real estate as tenants in common and one of my creditors gets a judgment against me, that creditor can seize my interest in the asset through proceedings to enforce the judgment. If we have a bank account with $1000 in it and we own it as tenants in common 80% me and 20% you, a judgment for taxes, child support, or any other kind of debt allows the creditor to seize my 80% interest to satisfy the judgment against me. He cannot get at your 20% interest but if we have a house together or we own a race car, the creditor can seize the asset, sell it to satisfy his lien and turn over to you 20% of the proceeds. Goodbye race car.

A joint tenancy is an estate planning device. We own the property together but if either one of us dies, the survivor gets the whole of the asset. We own the $100,000 race car we share. I die. You get it even though I put up $80,000 and you $20,000. Most tenants in common and joint tenants hold equal shares but they can make the percentages whatever they want. It is also not a device limited to two owners. A hundred people can own a joint interest in property if they want. Usually, that does not occur.

Now suppose the two of us own a race car and my ex-wife gets a judgment against me for failing to pay child support. She can take her judgment and use it so sever the joint tenancy just as she would with a tenancy in common. It just requires the extra step of breaking apart the joint tenancy. In the end, our race car is sold and she will get her judgment from the 80% of the proceeds that are mine.

Tenancy by the entireties is a joint tenancy between a husband and wife. No one else can qualify for this status. Unlike joint tenancy, the only person or entity that can break apart a tenancy by the entireties and sell the asset it owns is someone who has a judgment again both my wife and me. Let us say my current wife and I own the race car. I don’t pay my child support or my taxes. My ex-wife can’t get a judgment against my current wife. She does not owe child support. I do. So she might have a judgment for a million dollars. The law says she can’t get to our race car (new wife and me).

But suppose my current wife and I don’t pay our taxes. We file jointly but we just don’t send the money in. Now the tax authority has a claim against both of us because it is a joint obligation we both owe. They can get a judgment for what is owed and execute on the race car, because the debt, like the car is held as tenant by the entireties. If we filed our taxes separately, the answer is quite different. We don’t owe the taxes joint then, we owe them separately.

Husband and wife own a house. Usually they will have title as tenant by the entireties. Husband leaves wife and runs off to Las Vegas. He signs $100,000 worth of gambling markers and promptly loses all the money. Can the casino come after the house? No. That’s husband’s debt; Not joint debt even though the parties are not legally separated. Suppose wife get s angry at Mr. Gambler and buys a $25,000 ring on her American Express card. Can Amex get to the house? Again, no, unless the credit card is a joint card. Suppose the Amex card is a privilege card; meaning that Husband is the card holder and Wife is an authorized user. Curiously, no. Wife is not legally obligated to American Express unless she signed the agreement with American Express as well. So husband and wife could be back in the house; he with a gambling hangover and she with a beautiful new ring. But neither the casino nor the card issuer can force the sale of the home to get the debt paid.

A question we commonly are asked is whether one party can put the house in jeopardy by taking out a mortgage. The short answer is that where a home is owned as tenants by the entireties, it takes two to make the tango. No bank will issue a mortgage (which is to say lend money) on an entireties house unless BOTH parties sign the mortgage. So what if one party fraudulently signs the other parties name without his or her permission (known in the industry as a windshield signature). That’s not a valid mortgage and the risk ordinarily is taken by the lender. The lender has the duty to take precautions to insure that the signatures are legitimate.

Having fun yet? Here are a couple other wrinkles we see where clients have made trouble they failed to recognize. Many young couples these days like to buy their homes before tying the knot. If they close on the property before the wedding day, they CANNOT take title as tenants by the entireties. Reason: they are not married. And a subsequent marriage does not change the status of the ownership. So, when wife defaults on her student debt or her car loan, the creditor may be able to get to the house and force it to be sold.

A second extra credit problem we are seeing more of. Husband and wife are married. They want a house at the shore. Husband has bad credit. Wife has good credit. The lender does not want anything to do with husband. What they will do is make the loan to wife only.  She will sign the promissory note for $500,000. But they will make both husband and wife sign the mortgage if they want the property to be tenancy by the entireties.  Husband and wife own the property together.  But only she is on the note and can be sued for it.  Should she default, the lender will have the right to take a judgment against her in accordance with the note, but the mortgage says that it is collateral for the note even though husband is not on the note.  Husband does not owe the $500,000 but he pledges whatever interest he had in the shore home to the mortgage company. What we call mortgages are actually two separate transactions done at the same time.  Lenders who give you money make you sign a promissory note to pay it back.  That is itself an “unsecured transaction” because there is nothing to “secure” your promise to pay.  But if the lender demands collateral (such as a house, boat, car, aircraft) the mortgage is a document by which you pledge the asset in what is now a secured transaction (the object is the security).  You don’t need to be on the debt itself to pledge an asset.  If your no good brother in law borrows $50,000 from a bank, they may tell him he must get a guarantor who will pledge assets to secure the debt.  When your bride comes crying to you that her nieces and nephews will be on the street unless the two of you are willing to help, just remember it could be your house that gets sold when brother in law defaults.

Now wasn’t that fascinating.  Even we don’t think so.  But this is important stuff to know.

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It was Monday morning in Media, Delaware County, Pennsylvania. The daily “list” of special relief petitions had almost thirty matters on it for disposition. The good news was that ten of them had either been withdrawn or “continued” to a later date. The bad news was that an unscheduled “emergency” would mean that the judge would be delayed by an hour in ascending the bench to hear the twenty matters left for disposition.

My matter had evolved into a dispute over $60,000 in interim distributions. But in Courts, matters do not proceed in order of the amount in controversy.  Often there is no rhyme or reason in what order matters are heard.  Judges prefer to dispose of any settled matters first because it lessens the list.  Some will take the cases in the order on the list.  Others will ask how long the parties will take to present their cases and proceed first with those matters requiring the least amount of time.

Sit in any courtroom in Pennsylvania and you will obtain an education.  You will see lawyers and their clients fight over matters of great magnitude.  Others will grapple over the ridiculous and then move on to the sublime.

In court today and ahead of my matter were two lawyers whom I respect. Alas, the fight of the day did not warrant their level of skill. The dispute?  How an affluent couple would divide their summer cottage between them for the season ahead. By the time the Court reached them on the list each client had an investment of $ 1,500 in legal fees.

Great news for the lawyers, right? Really, no. All but the greediest of attorneys would have happily avoided this morning of watching and waiting for their fifteen minutes of fame.  This is what lawyers term a “power fight”. It rarely has to do with the merits of the summer schedule.  Take each party aside and ask them why they are there and the answer is: “He/She has pushed me around enough.

I want my six weeks this summer when I want it.  I have been dictated to enough.”

We have previously written that there are times when “principle” warrants a courtroom battle.  This is not one of them. There is very little principle attached to whether husband or wife gets the last week of August or the fourth of July. Certainly, even wealthy people will not be happy to see their invoice for May legal services include $2,000 for the battle for Independence Day. One other thing.  Rarely does any litigant win a clear victory in these battles.  Compromise is what judges do except where they perceive huge injustice.

So what needed to happen? As we stood in the back of the Court waiting for the proceedings to begin, the comment was made that almost any lawyer in the Courtroom could have resolved the controversy fairly in 10-15 minutes after hearing both sides out. The parties did not need a jurist to decide this matter.  They just needed someone neutral who would hear both sides out and make the decision. Instead, the parties sat for three hours waiting for the judge to reach them.  When he did, the job was done and fairly.  But lawyers sat and client’s paid for hours of waiting.

We have previously suggested that in a world of expensive legal services clients should pick their legal fights carefully.  If the dispute does not require specialized skill but only a brief argument and a prompt disposition ask your lawyer whether you and your spouse can appoint someone to dispose of it quickly. Chances are you will pay that person.  But that will get you a result and your neutral will put you to the head of the line.

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For some segments of our society litigation is part of everyday life. Insurance adjusters make their living out of measuring damages and assessing the risk and cost of doing battle over insurance claims. As such, they make judgments every day as to whether a particular claim is something they want to fight over. In so doing, they take into consideration the damage the claimant incurred, the cost of contesting the claim and the likelihood they will prevail over the claimant (or otherwise reduce the claim recovery).

Businessmen are not as immersed in litigation as those in the insurance industry, but businesses deal with various kinds of legal claims every day. Employees sue for wage claims or discrimination claims. Developers battle municipal authorities over home many homes they can build on a parcel. Again, each of these matters involves assessment of risk and benefits associated with potential litigation.

Family law litigants, even those who assess commercial risks and rewards every day tend to lose sight of the fact that they have a role in deciding when to fight versus when to switch. Tell someone that a planned vacation with his/her children for the summer has been abruptly “cancelled” by a former spouse and many will tell you they do not care what it costs to enforce their rights as parents. That may be true until the bill comes in.

In family law, many clients tell us that they are fighting for principle. Principle does have its place and there are times when a matter must be litigated simply to “send the message” that a client takes his or her rights very seriously and will invest in the principle of the matter even when a dollar recovery is remote. But even in these cases, it is worthwhile to ask, how likely is it that the principle I am promoting will be validated by the Court. And what will I invest for that validation.

A classic example involves child support. Even in a world where there are support guidelines with explicit definitions there is still room for battle. Husband loses his job in the current economic environment. Wife says he quit. Husband says he was laid off. Wife wants to assert that support should be based not on his unemployment but his earning capacity. There is a triable issue of fact. But what is the likelihood that each side will prevail? And what is the cost of the hearing or trial.

Let us say that unemployment is $2,000 a month. Husband formerly earned $7,000 a month. Assume spousal support only is in issue. Further assume that Wife is working and making $2,000 a month. Husband’s best case is no support at all as wages are equal while he is unemployed. Wife’s best case scenario is that Husband owes her $2,000 a month in support based on his earning capacity. Now we have a range of outcomes. Let’s assume that Wife’s attorney estimates his chance of a total win at 50%. The value of the claim is no longer his best case of $2,000 a month but half of that amount. Now how long can he expect to collect the support if he prevails. If it is estimated at two years the value of the claim is 24 months multiplied by $1,000 representing the value of the claim. Now the question becomes what are the litigants willing to spend to enforce an outcome that centers around $24,000. If they try the case for a day before a judge or hearing officer they will each invest probably 30 hours between the various preliminary proceedings. At $300 an hour, each will invest $9,000. Now we see an $18,000 investment pursuing a probably $24,000 outcome. Now, bear in mind, each party will only be putting up half but most would agree that $9,000 is a fairly pricey expense where $24,000 is the probably value of the claim.

Take equitable distribution of a case involving $500,000 in assets. The best outcome for a dependent spouse is probably no greater than 60% or $300,000. The primary breadwinner argues that the spouse can make as much as he can and he proposes 50/50. That means Wife gets $250,000; a discount of $50,000 from her goal. The “spread” buys roughly 165 hours of legal time. That may seem like a lot but spread it over the 18-24 months that most divorces take in Pennsylvania and we are now looking at each side devoting 4 hours a month to preparation and litigation of the case.

The point is to use your attorney and pick your fights wisely. Remember that a $100,000 claim where you have an 80% chance of a win is only an $80,000 claim in reality. Meanwhile, the cost is certain to occur. Even when the most important of principles is involved; cost and likelihood of winning are two factors that cannot be sensibly ignored.

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