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CAV: Court had to value student loans as of couple's split.

Byline: Rebecca M. Lightle

For equitable-distribution purposes, the circuit court erred in failing to determine the amount of a husband's student loans as of the date he and his wife separated. Under the circumstances, it was within its authority to re-open evidence on that issue.

Background

The parties married in 2006. That year, Husband started a five-year doctoral program in clinical psychology. He obtained numerous student loans to pay for the program as well as family living expenses.

The parties stopped living together in 2011. In 2016, following a divorce complaint, the parties appeared for a hearing on equitable distribution, stipulating to the amounts of Husband's outstanding student loan balances. The circuit court held that the student loans were marital and allocated 25 percent of the loans to Wife and 75 percent to Husband.

Wife objected, on grounds that the court had not determined the amounts owed as of the date of separation, as required by Code 20-107.3. Husband proposed a method to determine the amount using additional evidence. The circuit court did not accept that evidence as submitted, but re-opened the issue to take additional evidence and make a determination. The circuit court ultimately adopted its initial ruling, noting that the evidence was insufficient to determine the amounts of the loans owed on the date of separation. In fashioning the allocation of 25 percent to Wife, the circuit court ordered her to "assume" the payments on certain loans.

Wife has appealed.

Accepting additional evidence

Following the circuit court's initial ruling, Husband asked the court to value the loans as of the parties' separation date. He attached some documents to his motion, including a worksheet reflecting his proposed calculations. Wife objected that the circuit court should not allow Husband to supplement the record with additional and unauthenticated documents.

Saying it was an "oversight" that "the amount of the loans on the date of separation" was not specifically addressed at the prior hearing, the circuit court reopened the record solely to allow presentation of evidence regarding the balances of the loans as of the date of separation. At an evidentiary hearing for that purpose, Husband introduced a deposition of an employee of both the lender and guarantor on the loans, as well as a document purporting to show the loan balances as of July 31, 2011.

Here, the circuit court concluded that, based on the equities of the case, it was best to reopen the record in order to rectify the "evidentiary oversight." Under these circumstances, the circuit court acted within its discretion by allowing the admission of additional evidence.

Student loans

Wife argues that the equitable distribution was erroneous because Husband didn't provide sufficient evidence to permit valuation of the debts as of the date of separation, and the loans titled in Husband's name could not be allocated to her.

Applying Fox v. Fox, 61 Va. App. 185 (2012), this court necessarily concludes that Code 20-107.3(A)'s provision that the trial court "shall determine the amount of any [marital] debt as of the date of the last separation of the parties" is mandatory. The statutory scheme does not authorize circuit courts to factor a debt into the equitable distribution calculation without first determining the amount owed.

Thus, the circuit court erred by not determining the amounts owed on the loans as of the date of separation before distributing the marital property to the parties.

This error was not harmless. The circuit court, faced with a difficult case and focused on the equities involved, attempted to avoid the requirement of valuation by ordering Wife to make all future payments on certain loans. It determined which loans constituted her 25 percent of the marital share based on their 2016 balances. Accordingly, failure to determine the amounts owed as of the date of separation did affect the equitable-distribution determination.

The equitable-distribution award must be reversed and remanded.

Valuation

The circuit court declined Husband's suggestion to rely on the loans' interest rates, their original amounts, and certain federal provisions that govern student loans to calculate the balances owed as of separation.

Trial courts must determine whether the record contains credible evidence of value. But here, the circuit court was not required to accept Husband's calculations as credible. He did not present any evidence supporting his assertion that he used an acceptable calculation method for proving the balances on the loans for purposes of equitable distribution.

However, Virginia courts must take judicial notice of what any relevant law is, or was, at any time, whether specially pleaded or not. Therefore, the circuit court erred here in not taking judicial notice of the relevant federal laws, as Husband suggested. On remand, the circuit court should take judicial notice of federal statutes and regulations relevant to determining the amounts owed on the loans as of the date of separation.

Affirmed in part; reversed and remanded in part.

Scheer v. Scheer, Record No. 1145-17-2, Aug. 14, 2018. CAV (Decker), from Albemarle Cir. (Higgins). Christopher J. Smith for Appellant; Ann W. Mische for Appellee. VLW No. 018-7-212, 17 pp.

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Title Annotation:Court of Appeals of Virginia
Author:Lightle, Rebecca M.
Publication:Virginia Lawyers Weekly
Date:Aug 17, 2018
Words:851
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