< Home Page [Advertising]
DISSIPATION OF ASSETS
© 2001 National Legal Research Group, Inc.
ILLINOIS: In re Marriage of Carter, 317 Ill. App. 3d 546, 740 N.E.2d 82 (2000).
The circuit court was incorrect in not considering the husband's dissipation of marital assets when it equitably distributed the couple's marital property in equal proportions.
In this case, the couple married in 1973. In October 1998, the wife filed for divorce on the ground of mental cruelty. In November 1999, the trial court entered a judgment that dissolved the marriage and allocated the marital assets and debts.
During the marriage, the couple lived in a home that they purchased together, which had a market value between $50,000 and $55,000, according to the wife's estimate. The husband estimated the value of the home to be $65,000. The wife had paid off the mortgage by July 1998. The husband and the wife each owned an automobile subject to a car loan. Their checking and savings accounts amounted to no more than a few hundred dollars each. Each had an individual retirement account (IRA) amounting to about $5,000. The wife had a 401(k) retirement plan worth almost $47,000. The husband's retirement plan was worth about $11,600. Each party had monthly expenses, excluding debt repayment, of $900 to $1,000 each.
The couple had previously separated in April 1992 when the wife received a telephone bill for over $3,700 in toll charges that the husband had incurred on their home telephone by calling several 900 numbers to play games and receive gambling-related sports information. The husband told the wife that he would pay off the bill. However, the husband established a credit card account in April 1992 to borrow $500 toward paying off the telephone bill. The husband did not make any additional charges to that account, yet the July 1999 outstanding balance was $1,100.
In April 1992, the wife filed a petition for dissolution of marriage. In December 1992, the husband admitted incurring debts related to his gambling. He agreed to stop gambling and amassing debts so that he could move back in with the wife. The wife then had her April 1992 dissolution petition dismissed.
After the husband returned to the marital residence in December 1992, the couple lived mostly separate lives. They ate separate meals. The husband often stayed out late at night, and the wife took care of the children. For the most part, the husband slept on the couch, but he occasionally slept with the wife. They maintained individual checking, savings, and credit card accounts. The husband agreed to pay the power bill and to continue to pay the wife $110 per week, an amount that he had been ordered to pay for child support in the 1992 dissolution proceedings. The husband did not discuss his credit situation with the wife because "she more or less lived her life and [he] was living [his] life." 740 N.E.2d at 82.
They continued living in this way until July 1998 when the husband stopped contributing to the household expenses. The wife suspected that the husband was in financial difficulty when she received telephone calls from his creditors. In October 1998, the wife obtained the husband's credit report and was shocked to discover that he had accumulated over $45,000 in debts. She did not recognize much of that debt as relating to household expenses, so she assumed that the husband was gambling again. She decided to separate from the husband because he had hidden these debts from her. On October 27, 1998, the wife filed the instant petition for dissolution based on the ground of mental cruelty. The husband moved out of the marital residence on November 1, 1998.
The husband's credit card and other unsecured debts increased by approximately $25,000 from his December 1992 total balance of approximately $13,500 to his July 1999 total balance of nearly $38,500. In December 1992, the husband owed $7,500 on his Chase Visa credit card, and he had a $6,000 balance in cash advances on a line of credit from Providian National Bank obtained in October 1991. According to the husband, the wife knew about these two accounts in December 1992.
The husband claimed that he incurred debts after 1992 for household expenses and repairs. He referred to an exhibit that listed his accounts and a brief explanation of the nature of the charges. However, this exhibit accounted for only $7,652 in household expenses out of the $25,000 increased debt incurred from December 1992 to July 1999: he paid $1,823 in income taxes in 1995 and 1996; $829 for three car insurance payments; $300 for car repairs; $1,900 for an air conditioner and furnace in the marital residence; $1,100 at Sears for a microwave and Christmas presents; $900 to Illinois Power and his weekly contributions to household expenses; and $800 for a storm door for the marital residence. He also claimed that he spent an unspecified amount for gas, officiating expenses, and miscellaneous items. He listed from memory the expenses that he paid, but he said that he could not account for every dime that he owed because he could not remember everything since 1992. He attached credit card statements that established only the balances that he owed as of July 1999, but he did not produce any itemization, receipts, or other statements to support his claim that he borrowed and then spent money for household expenses.
The husband's credit card balances increased in part because he made only minimum payments on his accounts. In July 1999, his total minimum monthly credit cards payments were at least $1,000. He realized that he did not pay anything on the actual debts because his minimum payments were often insufficient to meet credit fees and periodic finance charges. In July 1999, for example, the husband incurred multiple $30 monthly fees for making late payments, having checks returned, and exceeding his credit limits. The husband also incurred periodic finance charges at effective annual rates exceeding 20%. The only way that he tried to reduce his debt burden was to transfer the balances to other credit card accounts. For instance, he created an American Express account in November 1995 to transfer balances of $3,000 from his Chase Visa account and $2,000 from his Bank One First USA MasterCard account.
All of the husband's credit card balances included credit fees, although he itemized in his exhibit only $1,000 in fees for 2 of his 10 accounts. The husband did not indicate how much of his balances resulted from accumulated interest. He never sought to reduce his borrowing costs by obtaining a home equity loan even though he owned the marital residence in joint tenancy with the wife.
At the August 1999 hearing, the wife argued that the husband's debts resulted from his past and continuing gambling activities. The husband maintained that his debts resulted from cash advances to pay household expenses, credit fees, and "exorbitant" interest rates. Id. at 85. The trial court found that all of the husband's debts were marital and that none of the amounts represented dissipation. It also found no evidence that the husband's debt was attributable to a gambling problem. By docket entry, the trial court denied the wife's motion for reconsideration and entered a finding that the marriage was irreconcilably broken in July 1999.
The wife argued that the trial court abused its discretion in burdening her with the husband's gambling debts in its division of marital property. In her brief, the wife conclusively stated that the trial court abused its discretion in inequitably allocating one-half of the husband's debt to her. The appellate court considered the claim of dissipation to be contiguous with the wife's contention, and therefore it discussed dissipation.
Dissipation is one of the statutory factors in section 503(d) of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS 5/503(d)(2) (West 1998)) that the trial court should consider to divide equitably marital property in just proportions. Dissipation is defined as the use of marital property for one spouse's benefit or for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown. In re Marriage of Partyka, 158 Ill. App. 3d 545, 549, 511 N.E.2d 676, 680 (1987). The issue of dissipation is generally a question of fact, and the trial court's finding concerning dissipation will not be disturbed unless it is against the manifest weight of the evidence or an abuse of discretion. In re Marriage of Tietz, 238 Ill. App. 3d 965, 984, 605 N.E.2d 670, 683-84 (1992).
Whether a given course of conduct constitutes dissipation depends upon the facts of the particular case; a spouse does not dissipate when spending marital assets for legitimate family expenses and necessary and appropriate purposes. . . . However, a court may still find dissipation where a spouse's "use of marital funds for his or her own living expenses . . . could be shown to be so selfish and excessive and improper as to constitute an outright waste of marital funds." In re Marriage of Hagshenas, 234 Ill. App. 3d 178, 197, 600 N.E.2d 437, 451 (1992). A finding of dissipation is possible even though the dissipating party did not derive personal benefit from the dissipation of the asset. In re Marriage of Gurda, 304 Ill. App. 3d 1019, 1025, 711 N.E.2d 339, 343 (1999).
The spouse charged with dissipation of marital funds has the burden of showing, by clear and specific evidence, how the marital funds were spent. . . . Vague and general testimony that marital funds were used for marital expenses is inadequate to meet that burden, and the trial court is required to find dissipation when the spouse charged with dissipation fails to meet that burden.
Id. at 86 (2000).
The appeals court noted that, here, the marriage was irreconcilably broken as far back as 1992 when the couple separated because the husband incurred gambling-related debts. The husband moved back into the marital residence in December 1992 on the condition that he not incur more debts. Although he occasionally slept with the wife, they lived separate lives for the most part. Their finances were at arm's length, and they did not share meals or child-rearing responsibilities. Because the husband secretly continued to incur debts in spite of agreeing not to do so, the purported reconciliation in December 1992 was a mere pretext. Thus, even though the husband returned to the marital residence in December 1992, the marriage was still undergoing an irreconcilable breakdown.
Because the marriage was undergoing an irreconcilable breakdown since at least 1992, the appellate court noted that the trial court should have required the husband to show, by clear and specific evidence, how he spent marital funds represented by the marital debts that he owed. Although the husband accounted for a portion of his debts as representing legitimate household expenditures, his explanation of how he spent the rest of the money for "household expenses" and "repairs" was too general and vague to satisfy his burden. Also, the husband dissipated marital funds by paying what he called "exorbitant" interest and credit fees, and he offered no reason why he could not have satisfied his delinquent credit card debts out of his assets. The appellate court held that the trial court abused its discretion in not considering the husband's dissipation of marital assets in equitably distributing marital property in just proportions. The court remanded the case so that the trial court could reconsider the distribution of marital assets and liabilities in light of the husband's dissipation of marital assets.
The trial court's judgment was reversed and remanded on this point.
Go to: Marital Home Category
Go to: Cases of Interest by Category
Go to: Previous Page
About Us | Monthly Newsletter | Terms & Conditions | Privacy Statement | Contact Us | Advertising
The information contained on this page is not to be considered legal advice. A lawyer should always be consulted in regards to any legal matters. Divorce Source, Inc. is also not a referral service and does not endorse or recommend any third party individuals, companies, and/or services. Divorce Source, Inc. has made no judgment as to the qualifications, expertise or credentials of any participating professionals. Read our Terms & Conditions. © 1996 - 2012 Divorce Source, Inc. All Rights Reserved.