McDavid v. McDavid

Citation511 S.E.2d 365,333 S.C. 490
Decision Date18 January 1999
Docket NumberNo. 24882.,24882.
CourtUnited States State Supreme Court of South Carolina
PartiesWilliam G. McDAVID, Jr., Respondent, v. Mildred T. McDAVID, Petitioner.

John B. Duggan of Mitchell, Bouton, Duggan, Yokel, and Childs, of Greer, for respondent.

J.D. Todd, of Leatherwood, Walker, Todd and Mann, and Kenneth C. Porter, of Porter and Rosenfeld, both of Greenville, for petitioner.

WALLER, Justice:

We granted certiorari to review the Court of Appeals' opinion in McDavid v. McDavid, Op. No. 97-UP-277 (S.C.Ct. App. filed April 28, 1997). We affirm in part, reverse in part.

FACTS

This is a domestic case. Respondent, Husband, was granted a divorce from Petitioner, Wife. In equitably dividing the couple's property, the family court, inter alia, excluded from the value of the marital estate $22,400.00 in assets owned by Wife prior to the marriage. The family court also valued the equity in the marital residence by using the payoff balance owed as of the date of filing of the marital litigation. Finally, the family court subtracted $24,143.50 from the Husband's share of the equitable distribution award, representing funds allegedly misused by Husband during the marriage.

The Court of Appeals reversed. It held Wife's assets had been transmuted into marital property such that their value ($22,400.00) should have been included in the marital estate. The Court of Appeals also held Husband should not have been penalized for the $24,143.00 he used towards his failing business, and that Husband was entitled to an equitable share of the increase in the value of the marital home between the filing of the marital litigation and the time of trial.

ISSUES
1. Did the Court of Appeals properly hold Wife's premarital assets should have been included in the marital estate?
2. Did the Court of Appeals properly hold the $24,143.50 used towards Husband's business during the marriage should not have been included in the marital estate?
3. Did the Court of Appeals err in holding Husband was entitled to a share of the increase in the value of the marital residence at the time of the trial?
1. WIFE'S PREMARITAL PROPERTY

Wife concedes the $22,400 worth of premarital assets she brought into the marriage (a $10,000 lot on which the marital residence was built, a $10,000 down payment on the home, and $2400 Wife had in a savings account) were marital property.1 She contends, however, that it was proper for the family court to take into consideration the value of these assets in equitably dividing the property.

Contrary to Wife's assertion, the family court did not merely "take into consideration" Wife's $22,400 in assets. Rather, the family court specifically held Wife should be given credit for these sums. In doing so, the family court treated the items as non-marital property and excluded them from the value of the estate. This was error. See S.C.Code Ann. § 20-7-473 (Supp.1997) ("Marital property" is generally defined as "all real and personal property which has been acquired by the parties during the marriage and which is owned as of the date of filing or commencement of marital litigation. . . .").2 We affirm the Court of Appeals' holding on this issue.

2. HUSBAND'S DISSIPATION OF FUNDS

Husband used $24,143.50 in support of his failing business during the marriage, without Wife's knowledge. The family court held Husband's dissipation of these funds constituted marital misconduct. Accordingly, the court added $24,143.50 to the value of the marital assets, then taxed that amount against Husband's share. The Court of Appeals reversed, finding Husband's use of these funds, even if imprudent, did not constitute "misconduct" warranting a downward adjustment from his share of the marital assets. We agree.

Under S.C.Code Ann. § 20-7-472(2) (Supp.1993), one factor the family court considers in equitably dividing property is "marital misconduct or fault of either or both parties, whether or not used as a basis for a divorce as such, if the misconduct affects or has affected the economic circumstances of the parties, or contributed to the breakup of the marriage."

Very few South Carolina cases have addressed "misconduct" affecting the economic circumstances of the party. In Peirson v. Calhoun, 308 S.C. 246, 417 S.E.2d 604 (Ct.App.1992), the Court of Appeals held the husband's drinking was "misconduct" which caused the breakup of the parties' marriage and necessarily affected the parties economically inasmuch as the separation resulted in increased utility costs, home maintenance, and general household expenses. Accordingly, the Court of Appeals held the increased living expenses should be attributed to the husband.

Recently, in Smith v. Smith, 327 S.C. 448, 486 S.E.2d 516 (Ct.App.1997), the wife was granted a divorce on grounds of adultery. The Court of Appeals held the family court properly considered fault in awarding wife alimony, where the fault affected the economic circumstances of the parties. Although the Court did not specifically address how the Husband's adultery had affected the parties circumstances, there was evidence that Husband had been having an affair for quite some time and that he had secreted assets for years in preparation of leaving Wife.3

The most similar case to the one at hand is Roe v. Roe, 311 S.C. 471, 429 S.E.2d 830 (Ct.App.1993). In Roe, the family court found the wife was guilty of misconduct affecting economic circumstances of marriage due to her investments in a pizza company. Notably, the court in Roe found the wife had "continued to sink money in that hole" both before and after the separation, and that wife had both misrepresented and failed to disclose to the court which marital assets she had invested in R & R Pizza subsequent to the parties' separation. 429 S.E.2d at 833. Accordingly, in Roe there was evidence the wife had deliberately continued to dissipate marital funds after the parties' separation and had been less than forthright with the family court regarding these funds.

Unlike Roe, there is no evidence in the present case that Husband intentionally dissipated funds either during the marriage or immediately after the parties' separation, or that the funds were used for any improper purposes. On the contrary, the only evidence in the record is that Husband used the funds either to support his failing business, or to pay household/family expenses.4 Moreover, the funds were spent some two years prior to the parties' separation.

We are aware of no authority holding "poor business decisions," in and of themselves, justify a downward modification of a party's entitlement to equitable distribution. On the contrary, courts have generally held one spouse chargeable only where he/she acts in bad faith with an intent to deprive the other spouse of marital assets. See Matti v. Matti, 647 So.2d 168 (Fla.App.1994)

(record suggested paramour and wife depleted parties' assets by trickery or duress); Re Marriage of Olson, 223 Ill.App.3d 636, 166 Ill.Dec. 60, 585 N.E.2d 1082 (1992) (husband held to have dissipated assets in paying independent contractor, who also happened to be husband's paramour, for expenses unrelated to business); Davis v. Davis, 175 A.D.2d 45, 573 N.Y.S.2d 162 (1991) (husband's efforts to diminish value of business and transfer funds without consideration to third parties supported family court's equitable distribution award in favor of wife); Hollander v. Hollander, 89 Md.App. 156, 597 A.2d 1012 (1991) (husband's attempt to transfer practice to daughter was "obvious" attempt to deceive court concerning practice and its valuation).

However, in cases in which there is no indication of willful misconduct, courts have generally not penalized a spouse for making poor business decisions. See, Sien v. Sien, 889 P.2d 1268 (Okla.App.1994)

(equitable reallocation of marital debt not warranted by husband's capital contribution to cattle operation where contributions were legitimate investments for the intended benefit of both parties and there was no evidence of fraud or malice on husband's part, even though husband made poor business decisions in ill-fated enterprise which worked to the detriment of the marital estate); In re Marriage of Isaacs, 260 Ill.App.3d 423, 198 Ill.Dec. 169, 632 N.E.2d 228 (1994) (even though wife's transfer of closely held stocks to employee stock ownership program decreased value of corporation, wife held not to have dissipated assets as she acted in good faith); Goldman v. Goldman, 248 N.J.Super. 10, 589 A.2d 1358 (1991) (husband not chargeable for dissipating $400,000 in marital funds where he used funds in good faith investing funds in business which failed).

In accordance with these courts, we hold poor business decisions, in and of themselves, do not warrant a finding of marital "misconduct," and that 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. As there is no such evidence in this case, we affirm the Court of Appeals' holding that Husband should not have been charged with the $24,143.50 spent on his failing business.5

3. DATE OF VALUATION

The family court valued the marital residence as of the commencement of the marital litigation. The Court of Appeals held the family court should have used the payoff balance as of the date of the trial in order...

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