The August 31, 2011 Court of Appeals opinion in Barrow v. Barrow, 394 S.C. 603, 716 S.E.2d 302 (Ct. App. 2011) analyzes the issue of “misconduct” in the context of equitable distribution awards. It represents a substantial victory for local family court attorney, colleague, and friend, Anne Frances Bleecker.
The opinion is hard to follow because most attorneys are deficient in math skills and family court attorneys are more deficient than most. A spreadsheet explaining the family court’s and the Court of Appeals’ equitable distribution calculations would have been most helpful.
Apparently, during the marriage, Husband paid a number of the parties’ ongoing living expenses. Unfortunately (for him) he did not pay his income taxes. Meanwhile, Wife filed separately and paid sufficient funds to be current on her tax obligation at the time of trial. The family court found Husband’s tax liability was a marital debt but made him responsible for 100% of this debt. On appeal, the Court of Appeals determined the total tax liability of the parties (exclusive of penalties which, at oral argument, Husband conceded should be his sole responsibility), determined how much Wife had already paid, and made Wife responsible for a sufficient amount of Husband’s tax liabilities so that she would pay one-half of the parties’ total taxes.
There’s one big flaw with the Court of Appeals’ approach: the opinion is unclear whether Wife paid her taxes before or after the date this action was filed. If she paid these taxes after the date of filing, the Court of Appeals approach seems reasonable. If she paid these taxes before the date of filing, her tax payments were not a marital debt for the purpose of equitable distribution and it’s unclear why she should get credited for these payments. The Court of Appeals also affirmed the family court’s refusal to consider Wife’s admitted “‘economic misconduct” during the marriage including chronic overspending and opening credit cards without Husband’s knowledge,” as a factor in equitable distribution. If Wife’s tax payments were made prior to the date of filing, this makes the Court of Appeals’ decision to make Wife only responsible for only $38,081 of Husband’s $168,504 tax liability seem even less fair.
The other issue Husband obtained a reversal on was the family court’s equitable distribution of the marital home. Wife’s parents either gifted or loaned Wife $40,000 as a down payment on the marital home. The family court considered this contribution by giving Wife a $30,000 “special equity” interest in the marital home and equally dividing the remaining equity.
On appeal, the Court of Appeals rejected the family court’s approach, noting that when property is marital, a “special equity” analysis is not the appropriate method of dividing property. Instead the family court is supposed to consider this contribution in equitably dividing the property. Therefore the Court of Appeals awarded Husband an extra $15,000 in equitable distribution (one-half of the $30,000.00 “special equity” the family court had awarded Wife).
Here the Court of Appeals’ approach seems unfair to Wife. Case law has long held that a family’s contribution to the down payment on the marital home is a reason to deviate from a 50/50 division of the marital home equity. Bauer v. Bauer, 287 S.C. 217, 337 S.E.2d 211, 212 (1985) (reversing family court’s 50/50 award of marital home and awarding marital home to wife, in part because of wife’s parents furnished down payment on home); Barr v. Barr, 287 S.C. 13, 336 S.E.2d 481, 484-85 (Ct.App. 1985) (gift of down payment by Husband’s father proper to consider in equitably dividing marital home). While the Court of Appeals properly rejected the family court’s use of special equity to divide the marital home equity, it is unclear why the Court of Appeals then considered a 50/50 division to be equitable.
My most troublesome cases are those in which economic misconduct has led to a complete loss of all assets by the time I get the case. For some reason, some spouses (usually women) choose to turn a blind eye to what is going on the finance department of the marriage. Often when I get the case, the house is already in foreclosure and the 401K is gone. Any ideas on how to handle that, Greg? Or should the negligent spouse just lose?
When there’s no property to divide, alimony is the only way to get money out of an irresponsible, soon-to-be-ex spouse.
We almost never get alimony up here if it is not a long, long marriage with plenty of fault and a big disparity in incomes.
The second part of this opinion also seems to conflict with the opinion from Dawkins v. Dawkins last year (which was confusing in and of itself).
If you’re not supposed to take the special equity off the top, or increase the percentage received of the value of the marital home, then the only option becomes paying the special equity out of other assets — presumably those that are more liquid? But what if there are none (particularly in a case like MJ described)?
These two opinions go too far. Read together they give Family Court judges very little ability to do what is equitable under the circumstances.
Megan-
As I understand it, “special equity” only applies to providing a spouse an interest in non-marital property. Family court judges keep getting reversed for finding special equity interests in marital property. Instead, the family court should have divided these properties unequally based on whatever “special” factors led them to award special equity.
Even when I’m wrong I learn something :)
I think this could be a good topic for a CLE since it seems that equitable distribution is generally glossed over.