The March 16, 2016 Court of Appeals opinion in Conits v. Conits, 417 S.C. 127, 789 S.E.2d 51 (Ct. App. 2016) rejects many of Husband’s allegations of error in the family court’s equitable distribution award because he lacked credibility in his financial disclosure. This opinion is a warning to those who would provide false financial disclosure that this lack of credibility can be fatal on equitable distribution claims.
The Husband in Conits was a Greek immigrant. At the time of the marriage Husband owned property in both Greece and South Carolina. During the marriage Husband would open businesses in South Carolina, purchase the land where the business was located, and then sell the business but lease the land back to the new business owner. He allegedly borrowed money from his brother, to whom he provided a note, and claimed the debt was marital. Husband and his brother also alleged that his brother owned a half interest in one piece of property titled solely in Husband’s name. The family court found all of Husband’s pre-marital property was transmuted, found the debt to brother was non-marital, found that his brother had no interest in the disputed real estate, and divided the marital estate 50/50. It also awarded Wife substantial attorney’s fees, including fees for paralegal and law clerk work.
On appeal one of the issues Husband raised was the family court’s decision to distribute property in Greece that Husband claimed was non-existent. The Court of Appeals found the issue wasn’t preserved for appeal because Husband hadn’t raised this issue in the family court. Further the Court of Appeals noted that Husband testified about this property’s existence at trial, and that his first and final financial declaration listed this property, while his second financial declaration did not. This contradictory financial disclosure becomes a recurring theme of the opinion.
Husband also argued that he was only the half-owner of a piece of South Carolina real estate, with his brother owning the other half. However title of this property was solely in Husband’s name. Brother actually intervened in the family court case seeking dismissal of the equitable distribution of this property. Because there was no evidence other than Husband’s and brother’s testimony that brother had an ownership interest in this property, the Court of Appeals affirmed the finding that this property was solely marital.
On the issue of the debt to the brother, the Court of Appeals affirmed the family court’s decision that it was not a marital debt. At trial Wife testified that she was aware of the note, and a local attorney testified that he had prepared the note in 2004. However that attorney was not aware whether the note had been executed or whether brother provided Husband the $235,000 allegedly borrowed under the note. While there is a rebuttable presumption that debts incurred during the marriage are marital, neither the family court nor the Court of Appeals believed this debt existed. Husband’s lack of credibility on financial issues are a likely basis for this conclusion.
Husband also argued that two pieces of real estate in South Carolina, one of which he purchased shortly before the marriage, were not transmuted into marital property. However, during the marriage, Husband had repeatedly mortgaged these properties, used the funds for marital purposes, and then used marital funds to repay the mortgages. Thus the Court of Appeals affirmed the finding of transmutation.
Husband further argued that two properties in Greece had not been transmuted into marital property. For one property, prior to the marriage, Husband had bought an option to purchase the property. Husband used marital funds to exercise the option. Thus it was found to be transmuted. The other property was bare land at the time of the marriage. During the marriage, Husband and his family constructed a four-story building on the land. Husband used marital funds to pay for the building. Initially the construction was three stories of retail office space. A residential fourth story was added and the parties often spent summers living there. Wife’s family assisted in the construction of this building. These circumstances supported the conclusion that the property was transmuted.
Husband also argued that the family court erred in dividing all the marital property 50/50. He argued that this division was a back door method of awarding Wife alimony (which, apparently, she was not entitled to–likely due to adultery). The Court of Appeals rejected that argument. It noted the presumption of a 50/50 division of marital property in a long-term marriage. It further noted that one of the factors in equitable distribution, “the income of each spouse, the earning potential of each spouse, and the opportunity for future acquisition of capital assets,” (S.C. Code § 20-3-620(B)(4)) was an appropriate consideration in dividing marital property and was not a method of awarding “back door alimony.” Because Husband had a greater ability to accumulate assets in the future, the Court of Appeals affirmed the 50/50 division.
Finally the Court of Appeals found the family court’s award to Wife of more than $135,000 in attorney’s fees and costs was not error. It found that paralegal fees and law clerk fees were a compensable component of fees. It found Wife was the prevailing party in the vast majority of contested issues. It found Husband had the better ability to pay fees. Finally it found that Husband’s litigation conduct, including his lack of truthfulness and his lack of “reasonable efforts to resolve this matter without contested litigation” were factors justifying the fee award.
While, at least based on the facts cited in this opinion, it is unlikely Husband could have successfully prevailed on any of the transmutation issues, it is quite possible that his duplicitous conduct regarding financial issues were instrumental in the decisions not to treat the loan from his brother as a marital debt, to award Wife 50% of the equity in transmuted assets, and in the award of substantial attorney’s fees.
Ironically, two days before Conits issued, I filed a responsive appeal brief in which a Bulgarian immigrant Husband engaged in much the same conduct as Husband here. In my case, Husband lost many of the contested equitable distribution issues at trial, in part due to his lack of credibility, and was ordered to pay substantial attorney’s fees, in part due to his failure to engage in meaningful settlement negotiations. For good reason the family court, and the appellate courts, give little credibility to litigants who hide and present conflicting evidence on assets and are likely to hold such litigants accountable for substantial attorney’s fees.
