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Dissipation of Taxes and Payments on Marital Property
© 2005 National Legal Research Group, Inc.
MISSOURI: Fitzwater v. Fitzwater, 151 S.W.3d 135 (Mo. Ct. App. 2004).
Marital funds were not dissipated when spent to pay personal property taxes on marital property, to maintain marital property, and to pay marital debts.
The husband appealed a judgment of divorce that included an order for the division of property that the husband asserted no longer existed at the time of the dissolution proceeding and that had not been squandered by the husband. The court of appeals reversed and remanded.
By the dissolution order, the wife was awarded a judgment against the husband in the amount of $28,477, the majority of which, $18,697, was found by the trial court to be her share of the proceeds from the sale of a marital farm. The husband contended that the majority of the sale proceeds was expended on reasonable living expenses, was not part of the marital estate, and thus was not subject to division. Prior to separation, the farm had been sold, and approximately $37,000 remained after the mortgage was paid. The husband admittedly used most of the proceeds to pay various creditors. Some of the debts were clearly marital in nature, while others were incurred by the husband after the date of separation. The record was unclear, however, as to a number of the other debts, many of which could have been incurred prior to separation.
The appellate court first declared the general principle that a trial court cannot value and include in its division of marital property an asset that does not exist at the time of trial. This is because the appropriate date for valuing and determining marital assets is the date of the trial. An exception to this rule exists when a spouse is found to have secreted or squandered marital assets in anticipation of the marriage being dissolved. In such a case, the trial court may charge the offending spouse with the value of the secreted or squandered assets. The court then noted that an understanding of where the burden of proof and the burden of production lies is essential to understanding the application of these principles at trial. The burden of injecting the issue of whether an asset has been secreted or squandered, stated the court, is on the spouse claiming such wrongful conduct. Once raised, the burden of producing evidence shifts to the alleged wrongdoer spouse, who must account for the asset by presenting evidence as to its whereabouts or its disposition. Matters of credibility and weight of the evidence are for the trial court. The burden of proof or persuasion, however, remains on the spouse who claims that the property has been secreted or squandered.
Looking to the case before it, the court pointed out that applying the above-referenced principles was difficult because there was no stated claim or argument on the record that the husband had squandered or secreted the farm sale proceeds nor any contention that the proceeds had existed at the time of the hearing. But because the cross-examination by the wife and her testimony clearly indicated her disagreement with the husband's incurring debts and spending these proceeds for living or farm expenses during the separation, the court would consider whether the evidence supported a finding that the husband had squandered the sale proceeds. A review of the record showed that the husband had presented evidence about the farm sale, the amount of the net proceeds, and the debts that had been paid with those proceeds. Marital debt, added the court, is that debt incurred subsequent to the commencement of the marriage and prior to the date of legal separation, and, generally, marital debt is treated the same as living expenses for purposes of expenditures leading up to dissolution. Here, as the husband had presented evidence to account for the sale proceeds, the wife retained the burden of ultimate proof or persuasion that he had squandered such proceeds. She presented no substantial evidence to satisfy that burden. Her first complaint that the husband had paid personal property taxes out of the proceeds on assets he was awarded, while she paid personal property taxes out of her own income, ignored the fact that income earned, to the extent it still exists in some form, is also marital property. Her argument also ignored the fact that the tangible property the husband acquired after separation but before trial was still marital property and was properly treated by the trial court as such, thus making the payment of taxes thereon the payment of a marital debt. Her second complaint that the husband used some of the proceeds to pay for feed, supplies, and equipment in his farming operation, which he continued on other premises after the marital farm was sold, also failed to support a contention that the husband had squandered the sale proceeds. The livestock and equipment on such other premises were marital property, and the trial court treated them as such during the dissolution proceedings. Postseparation expenditures of marital funds for the maintenance of marital property is not the squandering of marital property. The evidence only showed that the husband spent the money for marital debts or to maintain or acquire other marital property that was subject to division by the trial court.
The appellate court concluded, therefore, that the wife had failed in her burden to provide substantial evidence to support a finding that the proceeds from the sale of the marital farm had been secreted or squandered, and, on the evidence that was presented, the trial court would have erred in applying the law to hold that the expenditures that were made amounted to squandering. Thus, the trial court erred in treating the proceeds as an existing asset that could be charged against the husband in the division of the marital property. Reversal and a remand to the trial court for a reconsideration of its property division was mandated.
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