Remedies for financial misconduct in divorce cases

Domestic relations cases are handled in courts of equity. As such, the court, being obligated to “do what is equitable upon the facts and circumstances of each case,”[1] has some leeway in its judgments, as long as they are just and fair. For this reason, in most domestic relations appeals, the higher court is tasked only with making sure the trial judge did not abuse that discretion by reaching a conclusion that did “not comport with reason or the record.” [2]


When hearing a domestic relations case involving a division of property, the trial court must determine what constitutes marital property, that is to be divided, and separate property, that remains with the owner of that property. Unfortunately, in some situations, one party may attempt to hide or misrepresent assets that constitute marital property, so as to minimize its obligations to the soon-to-be ex spouse.

When a court finds that one party has indeed committed some sort of financial misconduct, which could, among other things, be dissipation, destruction, concealment, nondisclosure, or fraudulent disposition of assets, the court has options, like awarding the wronged party a greater portion of marital assets.[3] The court is also empowered to correct the situation by making an offsetting distributive award to the wronged party, and/or an award of attorney’s fees.[4]

Examples of financial misconduct: Smith v. Smith

In one 2012 Summit County case, the trial court found that the husband had “engaged in a course of conduct cold-bloodily calculated to strip [the wife] of financial assets.” [5] The trial court 1) awarded the wife half of the assets, almost $200,000, that the husband had dissipated in anticipation of the divorce; 2) required the husband to maintain a life insurance policy until he had satisfied this obligation, and also simply because it deemed that insurance investment is important; and 3) required the husband to pay the wife $3,500 monthly until the wife’s death or remarriage. [6]

Here are some underlying facts. The parties were married in 1968, but in 2008, the wife returned home from vacation and found a note from her husband informing her that he had moved to a different state, Oregon, and that he wanted a divorce.[7]

During the seven months prior to his filing for the divorce, the husband liquidated nearly $500,000 in marital assets, including the couples’ interest in an apartment building. Also during this seven month period, the husband:

  • Used the funds to pay parts of their children’s’ college loans and upcoming tuition expenses;
  • Paid off his car;
  • Paid taxes on the property that he had sold;
  • Gave money to his divorce attorney; and
  • Used $1,000 to move to Oregon.[8]

Ultimately, the trial court determined that the husband had committed financial misconduct, finding that he intentionally deprived the wife of the parties’ marital assets,[9] thus justifying the above-described remedy.

Leathem v. Leathem

Another case, out of Hancock County[10], shows that courts can even go so far as to void one spouse’s transfer of property to a third party under certain circumstances. The court set out the following facts:[11] the parties married in 1941 and had four children. In 1989, the husband conveyed the marital residence to the parties’ son to hold in trust, as trustee, and named himself and his wife as income beneficiaries. Later that year, the wife filed her complaint and sought alimony only.

In 1993, the trial court granted the parties’ legal separation and divided the assets. In so doing, it also determined that the conveyance of the residence was fraudulent, as an attempt to defeat the wife’s rights to an interest in it, because the residence was marital property before it was conveyed into the trust. [12] For this reason, the wife had an interest in it that the husband had undercut.

The court cited the following evidence for its conclusion voiding the conveyance of the home to the son:

  • The marital residence was the parties’ only valuable asset;
  • [The husband] conveyed the marital residence to their son, to hold as trustee, approximately two months after [the wife] had had a fifth stroke, and after it became necessary for her to reside outside the marital residence;
  • The conveyance was at a time when [the wife] needed monies for medical and/or health care;
  • [The wife] was not a signatory to the trust agreement;
  • [The wife] did not release her inchoate dower rights in the conveyance to the trustee; and
  • Even though [the wife] was an income beneficiary of the trust agreement, the trust produced little or no income. [13]

In light of the voided transfer to the son, the trial court ordered the marital property to be sold, and the proceeds, minus the outstanding mortgage, to be divided equally between the parties.[14]

On appeal, the appellate court agreed with the trial court’s conclusion, including the determination that the trial court did not need jurisdiction over the third party/son to effectuate the judgment. [15]

Willoughby v. Willoughby

A 2014 case out of Trumbell County,[16] also involving a transfer of property to avoid the sharing of marital assets, had a different outcome. In short, the husband had sold his dental practice, by way of a contract that the court determined to be valid, to another dentist. [17] Two days later, the wife filed for divorce, pursuant to which the trial court issued an order restraining both parties from disposing of any marital assets. [18]

The trial court found that the selling dentist had engaged in financial misconduct and ordered the purchasing dentist to pay money to the marital estate on the theory that he was unjustly enriched. [19]

But the appellate court reversed, in part because the two dentists had a legitimate contract, executed prior to the trial court’s order prohibiting the sale of any marital assets: “[f]inding that [the seller] engaged in financial misconduct by dissipating a marital asset does not, in any way, invalidate or rescind the contract…The trial court abused its discretion by placing the burden of [the seller’s] financial misconduct on [the buyer].”[20]

Even so, the appellate court “[found] it appropriate to remand [the] matter for consideration of a financial misconduct remedy …as the trial court deems appropriate.” It reasoned that “when unforeseen circumstances defeat a trial court’s equitable division of marital assets, the trial court may make a distributive award in order to achiev

[1] Willoughby v. Willoughby, 11th Dist. No. 2012-T-0095, 2014-Ohio-743 (March 3, 2014), ¶ 24 (emphasis added)

[2] Id.

[3] Smith v. Smith, 9th Dist. No. 26013, 2012-Ohio-1716 (April 18, 2012), ¶ 14

[4] Id. at ¶ 36.

[5] Smith v. Smith, 9th Dist. No. 26013, 2012-Ohio-1716 (April 18, 2012), ¶ 16

[6] Id. at ¶ 4

[7] Id. at ¶ 2

[8] Id. at ¶ 3

[9] Id. at ¶ 4

[10] Leathem v. Leathem, 94 Ohio App. 3d 470, 640 N.E.2d 1210 (3rd Dist. 1994)

[11] Id. at 471, 472

[12] Id. at 472

[13] Id. at 473

[14] Id.

[15] Id.

[16] Willoughby v. Willoughby, 11th Dist. No. 2012-T-0095, 2014-Ohio-743 (March 3, 2014)

[17] Id. at ¶ 5, 29

[18] Id. at ¶ 6

[19] Id. at ¶ 1, 41

[20] Id. at ¶ 29, 35

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