Family Law

Sweat Equity Valuation

  • 1.  Sweat Equity Valuation

    Posted 02-07-2016 12:57 PM

    Hello listmates:

    Client obtained two Harleys after Sandy with engines that were destroyed by the salt water.  Without putting marital funds into them, he was able to rebuild the motors and get both bikes running.  At the moment he believes that they are each worth about $6,000 and this leads me to my question - what value should the bikes be given.  My position is that without my client's knowledge, talent and time, there would be no value but I would appreciate any commentary on the issue and as always, thank you in advance. 

    Best,

    Eric

    ------------------------------
    Eric Hannum Esq.
    Jackson NJ
    (732)370-9596
    ------------------------------


  • 2.  RE: Sweat Equity Valuation

    Posted 02-07-2016 01:19 PM

    Eric,

    I presume the fix was post-date of marriage, and that, post-fix, the parties are now separating/divorcing.

    If that's the case, why aren't the Husband's efforts considered marital?

    If the Wife wrote a novel or created a screenplay or other intellectual property during the marriage, "out of nothing" and without expending marital funds, wouldn't Husband claim his fair share of the market value?

    Also, the $12,000 fmv militates against a fight on this, I'm sure you would agree.

    I would suggest to him that he keep one of the two bikes, and give her the other one or sell it and give her the net sale proceeds, whichever she prefers.

    Hanan

     


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    Hello listmates: Client obtained two Harleys after Sandy with engines that were destroyed by the salt water. Without putting marital funds into... -posted to the "Family Law Section" community

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    Sweat Equity Valuation

    Image removed by sender. Eric B. Hannum, Esq

    Feb 7, 2016 12:57 PM

    Eric B. Hannum, Esq

    Hello listmates:

    Client obtained two Harleys after Sandy with engines that were destroyed by the salt water.  Without putting marital funds into them, he was able to rebuild the motors and get both bikes running.  At the moment he believes that they are each worth about $6,000 and this leads me to my question - what value should the bikes be given.  My position is that without my client's knowledge, talent and time, there would be no value but I would appreciate any commentary on the issue and as always, thank you in advance. 

    Best,

    Eric

    ------------------------------
    Eric Hannum Esq.
    Jackson NJ
    (732)370-9596
    ------------------------------

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  • 3.  RE: Sweat Equity Valuation

    Posted 02-07-2016 01:39 PM
    Assuming the bikes were acquired post-marriage, pre- complaint I don't see how his efforts don't qualify as active appreciation with the new values on in the martial pot. Perhaps a disproportionate allocation.

    Sandy

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  • 4.  RE: Sweat Equity Valuation

    Posted 02-07-2016 01:49 PM
    That's what I was thinking.  In doing so, a disproportionate allocation would allow her to have some percent of the value but provide him with a greater return given the work he put into the bikes.   
     
     
     
    On Sun, Feb 07, 2016 at 01:39 PM, T. Sandberg Durst via New Jersey State Bar Association wrote:
     
     
    Assuming the bikes were acquired post-marriage, pre- complaint I don't see how his efforts don't qualify as active appreciation with the new...

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    Re: Sweat Equity Valuation
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    Feb 7, 2016 1:39 PM
    T. Sandberg Durst, Esq
    Assuming the bikes were acquired post-marriage, pre- complaint I don't see how his efforts don't qualify as active appreciation with the new values on in the martial pot. Perhaps a disproportionate allocation.

    Sandy

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  • 5.  RE: Sweat Equity Valuation

    Posted 02-07-2016 04:19 PM
    Eric - I agree with Hanan and Sandy.

    He's out there sweating and doing the work, presumably without her help, but it was marital effort.

    The increase is subject to distribution, but 75% / 25% sounds a lot more "equitable" than 50/50. That's be $9,000 him, $3,000 her. So offer her $2,000 and settle on $3,500? If you're all attending mediation together across a table, I would hope she'd agree that 50/50 isn't fair, but she gets something.


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  • 6.  RE: Sweat Equity Valuation

    Posted 02-08-2016 09:46 AM
    Agreed.
     
     
     
    On Sun, Feb 07, 2016 at 04:19 PM, David Perry Davis via New Jersey State Bar Association wrote:
     
     
    Eric - I agree with Hanan and Sandy. He's out there sweating and doing the work, presumably without her help, but it was marital effort. The...

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    Re: Sweat Equity Valuation
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    Feb 7, 2016 4:19 PM
    David Perry Davis, Esq
    Eric - I agree with Hanan and Sandy.

    He's out there sweating and doing the work, presumably without her help, but it was marital effort.

    The increase is subject to distribution, but 75% / 25% sounds a lot more "equitable" than 50/50. That's be $9,000 him, $3,000 her. So offer her $2,000 and settle on $3,500? If you're all attending mediation together across a table, I would hope she'd agree that 50/50 isn't fair, but she gets something.


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  • 7.  RE: Sweat Equity Valuation

    Posted 02-08-2016 06:59 PM
    Sculler

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  • 8.  RE: Sweat Equity Valuation

    Posted 02-07-2016 05:08 PM

    Right on!

     

     

     

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  • 9.  RE: Sweat Equity Valuation

    Posted 02-07-2016 04:56 PM

    I'm not a fan of disproportionate splitting of equity, whether from sweat or anything else.

    If a woman banks $100K and a man $50K during the marriage, or contributes in those proportions to their respective 401k's, why doesn't it get split evenly?

    I've had people make this argument for decades, men and women, and, quite frankly, it annoys me.

    At the end of the marital partnership, when they are doing their accounting to one another, the partners should split what they have accumulated.  The exceptions should be rare, IMO.

    Hanan

     


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    Hanan M. Isaacs, Esq.

     

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    Eric - I agree with Hanan and Sandy. He's out there sweating and doing the work, presumably without her help, but it was marital effort. The...

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    Re: Sweat Equity Valuation

    Image removed by sender. David Perry Davis, Esq

    Feb 7, 2016 4:19 PM

    David Perry Davis, Esq

    Eric - I agree with Hanan and Sandy.

    He's out there sweating and doing the work, presumably without her help, but it was marital effort.

    The increase is subject to distribution, but 75% / 25% sounds a lot more "equitable" than 50/50. That's be $9,000 him, $3,000 her. So offer her $2,000 and settle on $3,500? If you're all attending mediation together across a table, I would hope she'd agree that 50/50 isn't fair, but she gets something.



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    That's what I was thinking.  In doing so, a disproportionate allocation would allow her to have some percent of the value but provide him with a greater return given the work he put into the bikes.   

     

     

     

    On Sun, Feb 07, 2016 at 01:39 PM, T. Sandberg Durst via New Jersey State Bar Association wrote:

     

     

    Assuming the bikes were acquired post-marriage, pre- complaint I don't see how his efforts don't qualify as active appreciation with the new...

    Family Law

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    Re: Sweat Equity Valuation

    Image removed by sender. T. Sandberg Durst, Esq

    Feb 7, 2016 1:39 PM

    T. Sandberg Durst, Esq

    Assuming the bikes were acquired post-marriage, pre- complaint I don't see how his efforts don't qualify as active appreciation with the new values on in the martial pot. Perhaps a disproportionate allocation.

    Sandy

    Sent from my iPhone

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  • 10.  RE: Sweat Equity Valuation

    Posted 02-08-2016 09:15 AM

    It's clearly marital. That's the way the cookie crumbles. The perceived difference posed by this example is a contextual illusion. IMO

    ------------------------------
    Curtis Romanowski Esq.
    Senior Attorney - Proprietor
    Metuchen NJ
    (732)603-8585



  • 11.  RE: Sweat Equity Valuation

    Posted 02-08-2016 06:51 PM
    If you want to be technical, the following should be asked:  how much time was devoted to the project?  What was the wife doing during this time (watching children, cooking cleaning, working) that permitted husband to spend his time with the bikes?  The question is: what martial effort on wife's part can be tied into husband's work on the bikes?  That is Schuller at the heart.

    But who follows the law anyway?  You do run the risk of a 50/50 split, but I agree that the "right" percentage is more 25/75 or even 30/70.



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  • 12.  RE: Sweat Equity Valuation

    Posted 02-09-2016 07:46 AM
    Lisa,
     
    Thanks for the input.  Actually, the Husband in this case is not only the primary wage earner but also the primary caregiver of the children.  Dad does all of the transportation, cooks the majority of the meals, cleans the home while wife works part-time.  In fact, dad has been sleeping on the sofa for the past year and has finally reached his breaking point.  Very unfortunate circumstances. 
    Eric
     
     
     
    On Mon, Feb 08, 2016 at 06:51 PM, Lisa Harvey via New Jersey State Bar Association wrote:
     
     
    If you want to be technical, the following should be asked: how much time was devoted to the project? What was the wife doing during this time ... -posted to the "Family Law Section" community

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    Re: Sweat Equity Valuation
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    Feb 8, 2016 6:51 PM
    Lisa S. Harvey, Esq
    If you want to be technical, the following should be asked:  how much time was devoted to the project?  What was the wife doing during this time (watching children, cooking cleaning, working) that permitted husband to spend his time with the bikes?  The question is: what martial effort on wife's part can be tied into husband's work on the bikes?  That is Schuller at the heart.

    But who follows the law anyway?  You do run the risk of a 50/50 split, but I agree that the "right" percentage is more 25/75 or even 30/70.



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  • 13.  RE: Sweat Equity Valuation

    Posted 02-11-2016 10:32 AM

    One of the more difficult issues we deal with all the time is the distinction between generally accepted principles of law that have become entrenched and principles of perceived fairness. As with "Beauty", "Fairness" is generally in the eye of the beholder. When conflict arises, we often sympathize with our clients whom we serve. But after sympathy wanes, we are left with the entrenched principles. In this case, one party's efforts during the marriage has produced monetary value but the cycles are not exempt and the increase in value is not passive. If the argument is whether one party's efforts to produce asset appreciation or additional income should result in something other than an equal division of such appreciation or income , I have to ask why there should be any distinction between the given example (rebuilding motorcycles) and any other kind of asset appreciation or active creation of income (painting a house – buying a favorite stock – writing an article).

    Quite obviously, the "actor" believes that his individual effort to create value or income is – or perhaps should be – recognized. I cannot see the argument beyond the perceived and understandable notion of "unfairness". Of course, this is just one person's opinion and I do understand that there are other examples of asset appreciation that are NOT divided equally such as one person's efforts to increase the value of a closely held corporation which typically result in 30/33% division between spouses.

     

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  • 14.  RE: Sweat Equity Valuation

    Posted 02-11-2016 05:36 PM
    << One of the more difficult issues we deal with all the time is the distinction between generally accepted principles of law that have become entrenched and principles of perceived fairness. As with "Beauty", "Fairness" is generally in the eye of the beholder. When conflict arises, we often sympathize with our clients whom we serve. But after sympathy wanes, we are left with the entrenched principles.>>

    Amen, Gerry. Especially with new practitioners and those who dabble in Family (but even with a few of us who have been around for a while), things never go well when attorneys lose their objectivity and/or become enmeshed emotionally with a client. Learning to advocate without letting it be personal is a tough lesson. We all see it as ESP panelists when two attorneys are acting like they're the litigants and are going after each other personally -- it's so obvious on the other side of the table that "this is just a case" and that each client could have retained the other attorney. When attorneys lose objectivity, unrealistic demands are mande based on what seems "fair", which increases not only the cost to the client (when we fight for something they won't get), but the agita involved in practicing Family Law. It's one thing to advocate zealously for a client, it's another to be a client's surrogate.



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  • 15.  RE: Sweat Equity Valuation

    Posted 02-09-2016 08:28 AM

    I must be missing something here. Eric, he's not arguing that these bikes are immune, correct? I always thought Sculler involved an immune asset and Frank moved in limine for the court to provide guidance on as to burden of persuasion on showing what effort-based entitlement the non-owner spouse had.

    I haven't read all the comments  back and forth so, if I am missing something, please excuse me.

    ------------------------------
    Curtis Romanowski Esq.
    Senior Attorney - Proprietor
    Metuchen NJ
    (732)603-8585



  • 16.  RE: Sweat Equity Valuation

    Posted 02-09-2016 08:48 AM

    I agree with Curt. These Harleys are presumptively joint assets.

    Not really Valentine's Day material, but here goes:

    "Equity by any other name would smell as sweat."

    Hanan


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  • 17.  RE: Sweat Equity Valuation

    Posted 02-09-2016 09:17 AM

    Hi all,

     

    Anyone ever been successful on a motion to reconsider in the App. Div.?

    If so,  I would appreciate hearing from you  - via this email stream or privately.

     

    Thanks!

    Jill

     

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  • 18.  RE: Sweat Equity Valuation

    Posted 02-09-2016 11:34 AM
    <<At 09:17 AM 2/9/2016, you wrote: Hi all, Anyone ever been successful on a motion to reconsider in the App. Div.? If so, I would appreciate hearing from you - via this email... -posted to the "Family Law Section" community >>

    Jill -
    <x-tab>        </x-tab>I'm cross-posting to the NJSBA Appellate Practice Committee and will advise as to any responses.
    <x-tab>        </x-tab>I've filed two reconsideration motions in the App Div. One resulted in fixing a small portion of the opinion (stock options v. stock grants - https://scholar.google.com/scholar_case?case=17496482588389873833 ), the other was denied without comment (the Supreme Court later reversed the App Div - https://scholar.google.com/scholar_case?case=2954641248749965659 - ). Here's a sample App Div motion for reconsideration (Kummarapurugu v. Thota
     - http://www.dpdlaw.com/appeals.htm , pages 13-34 of the Petition for Certification).
    <x-tab>        </x-tab>I'd also most highly recommend New Jersey Appellate Practice from Gann Law - http://www.gannlaw.com/OnlineStore/Main/cartAdd.cfm?book_no=34 it has a whole section on reconsideration in the Appellate Division. I only got it a couple of years ago, but I truly wish I'd gotten it earlier. It's an excellent resource.


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  • 19.  RE: Sweat Equity Valuation

    Posted 02-09-2016 10:08 AM
    Hypothetically:
    husband purchased these 2 motorcycles for 8,000.00 (total cost - by way of a loan ) and ultimately sold both bikes for 4,000.00, sustaining a 4,000.00 loss in the deal - would he be suggesting that he eat a disproportionate share of the loss since it reflected his "sweat equity" or would he be suggesting that the loss be divided equally?
    The only way I think there could be a disproportionate sharing of the gain / loss is if the parties had been separated at the time of the purchase and they remained separated leading to the divorce filing and the money for the purchase came from post separation funding. With this changed fact pattern, the shared enterprise theory is "lessened".

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  • 20.  RE: Sweat Equity Valuation

    Posted 02-11-2016 11:24 AM

    Gerry makes excellent arguments here.

    Hanan







  • 21.  RE: Sweat Equity Valuation

    Posted 02-11-2016 01:14 PM
      |   view attached

    What about Falkowski? (2011-Unpublished).  Affirmed unequal distribution. 

    ------------------------------
    Jenny Berse Esq.
    Cranford NJ
    (855) FAM-LAW1



  • 22.  RE: Sweat Equity Valuation

    Posted 02-11-2016 01:23 PM

    I have not read that case, but isn't that part of the appeal of practicing in this area? We have generally accepted notions from which we can depart if the circumstances dictate. If anyone remembers Bill Brennan (son of the Justice), he used to be a partner in my first out of Law School job as an Associate. And I will always remember his advice on a touchy area, "it is those times when you are arguing with your client that you are earning your money as an attorney". Not 100% accurate but when faced with exceptional circumstances, one of the most difficult jobs we have is to a) retain a client's trust and yet b) advise the client that such circumstances often result in departures from the norm and to your own client's (sometimes) disappointment.

     

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  • 23.  RE: Sweat Equity Valuation

    Posted 02-12-2016 03:12 PM
    Thanks Jenny.  


    On Thu, Feb 11, 2016 at 01:14 PM, Jenny Berse via New Jersey State Bar Association wrote:

    What about Falkowski? (2011-Unpublished). Affirmed unequal distribution. ------------------------------ Jenny Berse Esq. Cranford NJ (855) FAM... -posted to the "Family Law Section" community

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    Re: Sweat Equity Valuation
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    Feb 11, 2016 1:14 PM  |    view attached
    Jenny Berse, Esq

    What about Falkowski? (2011-Unpublished).  Affirmed unequal distribution. 

    ------------------------------
    Jenny Berse Esq.
    Cranford NJ
    (855) FAM-LAW1
    ------------------------------
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    Original Message------

    What about Falkowski? (2011-Unpublished).  Affirmed unequal distribution. 

    ------------------------------
    Jenny Berse Esq.
    Cranford NJ
    (855) FAM-LAW1
    ------------------------------


  • 24.  RE: Sweat Equity Valuation

    Posted 02-12-2016 03:39 PM

    Let's agree that there are any number of reported cases that conflict with each other? I would agree that such conflicts create instability but there they are. Try looking at the cases that provide an equitable interest in real estate bought by one party "in contemplation of marriage". Now THERE you get really crazy stuff - or those cases where a non-titled spouse acquires an equitable interest in a residence by cleaning it during a marriage. Last I looked, unless one adds something of value to an otherwise exempt asset, real estate is passive but there really are reported cases that go way outside the box. And so it is with other issues in our world. These do create problems and we have to deal with them.

     

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