Ex-Wife Looks to “Claw Back” Assets Hidden by Ex-Husband

Florida’s Fifth District Court of Appeal recently heard the appeal of an ex-wife (“Susan”) concerning the division of marital property with her ex-husband (“Jared”). As part of her petition for the dissolution of her marriage, she joined additional parties, including her stepson (“Isaac”) and various corporations that her ex-husband formed during the marriage.

In her petition, Susan claimed that Jared had commingled their marital assets with assets owned by Isaac and by the corporate parties she brought into the suit. She also asserted that Jared and Isaac were receiving distributions from these corporations in what they called “loans,” in an effort by Jared to deplete the marital estate. Susan sought partition of the marital assets, recognition and equitable distribution of her interest in the corporations that Jared formed during the marriage, to have the court “claw” back and then equitably distribute to the spouses any marital assets previously transferred to the corporations, as well as injunctive relief.

Susan asserted that she had a “marital interest” in certain properties now held by her ex, Isaac, and the corporations… and she alleged they were all involved in a scheme with her ex-husband to minimize or conceal his net worth to defraud her from any interest in millions of dollars of marital assets that Jared transferred to these parties. She asked that the trial court identify all properties that should be classified as marital assets and require the other parties to “account” for their receipt of these marital properties. Finally, she requested that the court then equitably distribute all marital assets between the spouses.

Isaac asked to be dismissed from the case, arguing that Susan hadn’t alleged a cognizable cause of action against him to entitle her to any relief and that her claims were barred by the statute of limitations. The trial court granted Isaac’s motion for summary judgment and dismissed him from the case.

The Court of Appeal explained in its opinion that in a dissolution of marriage proceeding, § 61.075 of the Florida Statutes requires the trial court to equally distribute the marital assets and liabilities between the spouses unless there is a justification for an unequal distribution based on the factors listed in that statute. The Court noted that one subparagraph of the statute was relevant, providing that a spouse’s “intentional dissipation, waste, depletion, or destruction of marital assets after the filing of the petition[,] or within two years prior to the filing of the petition,” must be considered by the court in distributing the marital assets. Under this statute, if a spouse intentionally dissipates a marital asset, the trial court has the authority and discretion to assign the dissipated asset to the dissipating spouse as part of that spouse’s equitable distribution.

Susan alleged that Jared’s fraudulent dissipation of some of the marital assets to or through her stepson Isaac and the corporate parties took place more than two years before her petition for dissolution of marriage was filed. The Court explained that in an earlier case they held that § 61.075(1)(i) wasn’t a two- year statute of limitations (or deadline) to bar a spouse’s efforts to subject marital assets dissipated by the other spouse to equitable distribution. In cases of dissipation of marital assets occurring more than two years before the filing of the petition, § 61.075(1)(j) allows a trial court to consider “any other factors necessary to do equity and justice between the parties…” However, it doesn’t require the court to consider more remote dissipation of marital assets when equitably distributing the marital assets and marital liabilities to the spouses.

As far as Isaac, the Court of Appeal said that under principles of equity, a trial court may determine whether a third person has acted with a spouse to deprive the other spouse of his or her share in the marital estate. However, for the court to make a complete determination of the case before it, that person (Isaac in this case) must be joined as a party to the action where, as here, he was claiming an interest in the marital assets because in a dissolution action, the trial court doesn’t have jurisdiction to adjudicate the rights of nonparties. In addition, § 61.075(1)(j) gives the trial court the discretion to claw back marital assets that may have been remotely dissipated by Jared more than two years before Susan’s dissolution of marriage petition was filed. Because of this, it would be inconsistent to preclude the court from making a full and complete adjudication of the spouses’ marital property rights to those dissipated assets by dismissing Isaac from the litigation based on his statute of limitations defense.

Here, it wasn’t in any way clear whether the trial court would exercise its discretion under § 61.075(1)(j) to consider assets allegedly remotely dissipated by Jared to make a complete determination of the cause to achieve equity and justice between the spouses. If, after receiving evidence and argument at trial, the court elected to exercise its discretion and distributed remotely dissipated assets in its equitable distribution of the marital assets and marital liabilities to Susan and Jared, then those parties whose property rights would be affected by the distribution (like stepson Isaac) would be indispensable to the complete adjudication of the case. Isaac shouldn’t have been dismissed from the case.

Thus, the final summary judgment for Isaac was reversed, and the case was remanded for further proceeding. Martinez v. Martinez, Case No. 5D16-795, 2017 Fla. App. LEXIS 7183 (Fla. Dist. Ct. App. 5th Dist. May 19, 2017).

Florida laws states that couple should have an “equitable distribution” of marital assets and liabilities. The marital property should be divided fairly or equitably (not necessarily equally) between the parties regardless of how the title is held based on a long list of factors. If you have questions about the “equitable distribution” of marital assets in your divorce action, contact DeVoe Law Firm to schedule a free consultation with an experienced divorce attorney.