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DISSIPATION OF ASSETS AND THE BURDEN OF PROOF
© 1998 National Legal Research Group, Inc.
KENTUCKY: Brosick v. Brosick, 974 S.W.2d 498 (Ky. Ct. App. 1998).
Once a spouse shows by a preponderance of the evidence that marital funds were dissipated, the burden of going forward shifts to the other spouse to prove that the funds were not expended for an improper purpose.
DISTRICT OF COLUMBIA: Herron v. Johnson, 714 A.2d 783 (D.C. 1998).
A trial court which finds that marital property was dissipated must distribute the property even if it no longer exists because it has been wholly dissipated.
These two cases treat different aspects of one of the most intractable problems in the area of equitable distribution.
Dissipation of Marital Funds Burden of Proof. When one spouse claims that the other spouse dissipated marital funds, who has the burden of proof? Brosick v. Brosick provides guidance on this important issue.
The wife claimed that during the marriage the husband spent or gave nearly $100,000 in marital funds to another woman. Specifically, the wife showed that the husband maintained a joint checking account with the woman, that there were regular deposits to the account in excess of the woman's income, and that no other person made deposits to the account. Based upon the evidence, the wife alleged that the husband made deposits to the account of more than $91,000. She also showed that the husband had jointly purchased and sold real estate with the woman during the marriage, and had withdrawn funds from his credit union account and had not accounted for other funds.
The trial court found that the husband had dissipated marital property and granted the wife a more favorable property division without specifically determining the amount of the dissipation.
The Kentucky Court of Appeals held that the wife presented sufficient evidence to raise a reasonable inference that the husband had dissipated marital assets. It remanded for the trial court to make a finding concerning the amount of the dissipation proven by a preponderance of the evidence, after which the husband would have the burden of proving that the assets were not expended for an improper purpose.
Under Kentucky case law, the court observed, a trial court may find dissipation when marital property is expended (1) during a period when there is an impending separation or dissolution, and (2) where there is a clear showing of intent to deprive one's spouse of his or her proportionate share of the marital property. Finding no Kentucky cases directly addressing the standard of proof necessary to prove dissipation, the court found guidance in case law from other states, including Jeffcoat v. Jeffcoat, 102 Md. App. 301, 649 A.2d 1137 (1994), and In re Marriage of Smith, 128 Ill. App. 3d 1017, 471 N.E.2d 1008 (1984). Although the marital property presumption must be rebutted by clear and convincing evidence in Kentucky, the clear and convincing evidence standard is not necessary in dissipation cases, the court decided. The court said that the spouse alleging dissipation should first be required to present evidence establishing that the dissipation occurred. Once the dissipation is shown, placing the burden of going forward with the evidence on the spouse charged with the dissipation is reasonable because that spouse is in a better position to account for these assets, the court stated.
Assets That No Longer Exist. Marital funds may be distributed in a divorce action even if one spouse has entirely dissipated the funds, the District of Columbia's top court decided in Herron v. Johnson.
In the parties' equitable distribution proceedings, the wife presented documentary evidence showing that the husband had made a series of withdrawals from his pension fund without her knowledge and consent and for his own personal use. The trial court nevertheless refused to distribute the pension funds, because by the time of the divorce the funds no longer existed and therefore were not available for distribution.
The District of Columbia Court of Appeals pointed out that the equitable distribution statute expressly requires a trial court to consider the dissipation of assets. That obligation extends to property which no longer exists at the time of dissolution because it has been wholly dissipated, the court held, reasoning that it would not further the aim of a just and reasonable distribution to consider a partial dissipation but not a complete one. The court emphasized that the District of Columbia's equitable distribution statute speaks of property "accumulated during the marriage" and does not expressly require distributable property to be owned by the spouses at the time marital litigation commences.
Most courts in other jurisdictions have held that dissipated property must be distributed like any other marital asset despite the present nonexistence of the asset, the court said, citing cases from Delaware, Maryland, Minnesota, and Ohio. Summarizing its views on dissipation, the court said that dissipation is the disposition of marital property by a spouse in a manner intended to circumvent the equitable distribution of the marital estate. Dissipation may be shown by prima facie evidence, unrebutted, that the spouse used marital property for his or her own benefit and for a purpose unrelated to the marriage at a time when the marriage was undergoing an irreconcilable breakdown. Upon a finding of dissipation, the trial court must distribute the property in question, and enter judgment accordingly, whether or not the asset still exists. Whether and how the judgment can be enforced may depend on future events, the court said.
The court remanded for a determination as to whether the husband's pension withdrawals were made in order to defeat the wife's equitable distribution rights.
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