Gershman v. Gershman

• Decision Date: 08 April 2008
• Docket Number: No. 17924.,17924.
• Citation: 943 A.2d 1091,286 Conn. 341
• Court: Connecticut Supreme Court
• Parties: Debra S. GERSHMAN v. Donald GERSHMAN.

943 A.2d 1091

286 Conn. 341

Debra S. GERSHMAN v. Donald GERSHMAN.

No. 17924.

Supreme Court of Connecticut.

Argued September 20, 2007.

Decided April 8, 2008.

Steven D. Ecker, Hartford, for the appellant (defendant).

Gerald A. Roisman, with whom, on the brief, was Edith F. McClure, West Hartford, for the appellee (defendant).

ROGERS, C.J., and NORCOTT, VERTEFEUILLE, ZARELLA and SCHALLER, Js.

VERTEFEUILLE, J.

The dispositive issue in this appeal¹ is whether the trial court properly concluded that the defendant had dissipated marital assets where there was no evidence that the defendant had engaged in financial misconduct for a nonmarital purpose. We conclude that the trial court improperly determined that the defendant had dissipated marital assets, and, accordingly, we reverse the judgment of the trial court.

The trial court reasonably found the following facts. The plaintiff, Debra S. Gershman, and the defendant, Donald Gershman, were married in 1987. Three children were born during the parties' eighteen year marriage: a son in 1989, and twin daughters in 1996. The plaintiff was employed as an attorney from 1986 to 1992, but stopped working outside the home in 1993 so that she could remain at home to care for her son on a full-time basis. In 1999, the plaintiff began working part-time as an art teacher at a private school, earning an annual salary of $14,000. At the time of trial,² the plaintiff was still employed part-time as an art teacher. The plaintiff was forty-six years old and in good health.

The defendant, who is also a licensed attorney, served as the couple's primary income earner during the marriage. From 1986 to 2005, the defendant was employed first as an attorney, and then worked in real estate development for Konover Properties Corporation (Konover), rising to the position of vice president of that organization. At Konover, the defendant's salary increased from $75,000 in 1986 to $196,000 in 2005.³ The defendant was forty-nine years old and in good health. The defendant's employment with Konover was to terminate in January, 2006, at which time he was to receive a severance package that included one year's salary in addition to one year of health insurance coverage.

In 2002, the defendant invested in a business development opportunity (Alkon partnerships) with one of the principals of Konover. The defendant initially had asked the plaintiff to invest some of her separately owned funds in these partnerships, but the plaintiff declined to do so. The defendant thereafter opted to use his own funds to make an initial investment of $105,000.⁴ At the time of the dissolution of the marriage, the Alkon partnerships were valued at $31,074.

The parties purchased their first home, in West Hartford, in 1987. They lived together in this house for several years, but thereafter decided to construct a larger home to accommodate their growing family. The parties moved into their new home on Arlen Way in the West Hartford in 2002 (Arlen Way residence). Although they originally had set a budget of $500,000 to $600,000 for the Arlen Way residence, the construction of the house, which was overseen primarily by the defendant, ultimately cost $994,000, including $50,000 for a construction manager hired by the defendant. The trial court found that the defendant had been primarily responsible for the allegedly excessive cost of the house,⁵ and that the plaintiff had not been aware of the magnitude of the cost until she filed for divorce in 2004. The house ultimately was sold pendente lite for $787,500.

The parties both had substantial, separate financial assets before they were married and at the time of dissolution. The plaintiff's premarital assets, family gifts and inherited assets totaled $1,171,900.87. The total cash value of her assets on her amended financial affidavit at the time of the dissolution trial was approximately $1,796,144. By contrast, the defendant's assets declined over the course of the marriage. Although he entered the marriage with premarital assets, inheritances and family gifts totaling $795,737, his financial affidavit at trial listed total assets of $782,304.72, including a 401(k) account of $193,275.72, which had accrued during the marriage.

When the trial court rendered judgment dissolving the marriage, it entered orders regarding child support, property distribution, alimony and other matters. In issuing its award, the trial court concluded: "[The defendant] made a bad investment in the Alkon partnerships, paying approximately $123,000 for an asset he now values at $31,074. The court finds that he was primarily responsible for the cost overruns for the home on Arlen Way and [the parties] lost $200,000 on the sale of the home. The matter of the dissipation of family assets has been taken into consideration in the overall asset division." This appeal followed.

On appeal, the defendant claims that the trial court improperly: (1) determined that he had dissipated marital assets despite the absence of any evidence of financial misconduct for a nonmarital purpose; (2) ordered the defendant to pay 45 percent of the cost of educating the minor children in private schools through the completion of high school despite the defendant's desire that his children attend public school; and (3) failed to make findings with regard to the plaintiff's earning capacity. We agree with the defendant's first claim, which is dispositive of this appeal.

The defendant claims that the trial court improperly concluded that he had dissipated family assets. More specifically, the defendant asserts that his conduct did not constitute dissipation as a matter of law, because dissipation requires a finding that one spouse engaged in financial misconduct, such as intentional waste or selfish financial impropriety, and a further finding that such conduct was motivated by a purpose unrelated to the marriage. The plaintiff asserts, in response, that the trial court properly considered all statutory criteria in its property distribution, only one of which was dissipation of family assets. We agree with the defendant, and, accordingly, we reverse the judgment of the trial court.

We begin our analysis of this claim with the applicable standard of review. Although we generally apply the well settled abuse of discretion standard in domestic relations matters, our review in the present case is plenary because we address the question of what, as a matter of law, constitutes dissipation in the context of a marital dissolution proceeding. Weinstein v. Weinstein, 280 Conn. 764, 770, 911 A.2d 1077 (2007).

Generally, dissipation is intended to address the situation in which one spouse conceals, conveys or wastes marital assets in anticipation of a divorce. See 2 B. Turner, Equitable Distribution of Property (3d Ed. 2005) § 6:102, p. 539. Most courts have concluded that some type of improper conduct is required before a finding of dissipation can be made. Thus, courts have traditionally recognized dissipation in the following paradigmatic contexts: gambling,⁶ support of a paramour,⁷ or the transfer of an asset to a third party for little or no consideration.⁸ Well-defined contours of the doctrine are somewhat elusive, however, particularly in more factually ambiguous situations.

A review of the case law in other jurisdictions⁹ reveals that findings of financial misconduct are fact specific, and frequently turn on the motivation of the party charged with misconduct. A representative case is McDavid v. McDavid, 333 S.C. 490, 511 S.E.2d 365 (1999). In McDavid, the South Carolina Supreme Court interpreted a statute that allowed a family court to consider in the equitable division of property the "marital misconduct or fault of either or both parties." (Internal quotation marks omitted.) Id., at 493, 511 S.E.2d 365. The trial court had found that, in the context of a marital dissolution proceeding, the husband's expenditure of $24,143.50, without his wife's knowledge, to support his failing business constituted "misconduct" under the statute, and warranted a downward adjustment in his share of the marital assets at the time of dissolution. Id. The Maryland Court of Appeals reversed the trial court and the state Supreme Court affirmed, holding that one spouse may be chargeable with a downward modification of his or her share of equitable distribution "only where he/she acts in bad faith with an intent to deprive the other spouse of marital assets." Id., at 495, 511 S.E.2d 365. More specifically, the court concluded that "poor business decisions, in and of themselves, do not warrant a finding of marital misconduct" and "there must be some evidence of willful misconduct, bad faith, intention to dissipate marital assets, or the like, before a court may alter the equitable distribution award for such misconduct." (Internal quotation marks omitted.) Id., at 496, 511 S.E.2d 365; see also In re Marriage of Fennelly, 737 N.W.2d 97, 106 (Iowa 2007) (husband dissipated marital assets through unexplained cash advances on his credit cards at end of marriage).

Many courts require that a marital asset be used for a nonmarital purpose before there can be any finding of dissipation. For example, in Harris v. Harris, 261 Neb. 75, 621 N.W.2d 491 (2001), the Nebraska Supreme Court considered whether a husband who had withdrawn more than $48,000 from a marital savings account in anticipation of a marriage dissolution could be charged with having dissipated those assets and consequently penalized in the dissolution asset distribution. The Supreme Court ruled that the trial court improperly had concluded that the husband had dissipated the entire sum because the trial court had failed to account for the fact that the husband had spent a substantial portion of the funds on marital expenses, including, for example, car payments, utilities for the home, and grocery purchases. Id., at 86, 621 N.W.2d 491. On remand, the trial court was instructed to...