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A Brave New Frontier: The Equitable Distribution 2008 Legislative Changes

Family Law

July 1, 2008, marks a significant milestone in the evolution of the law of equitable distribution in dissolution of marriage actions in Florida. That date is the effective date of the legislature’s amendment of the equitable distribution statute in four significant respects: abrogating the special equity doctrine and replacing special equity claims with claims for unequal distribution or enhancement in value of nonmarital assets, defining the burden of proof to overcome the gift presumption as clear and convincing evidence, extending the gift presumption to personal property, and constructing a partial equitable distribution statute.1 This article will review the statutory changes, provide a historical context in order to understand the rationale for the statutory changes, and offer practical considerations.

Special Equity
The cornerstone of the new legislation is the abolishment of special equity claims and the special equity formula set forth in Landay v. Landay, 429 So. 2d 1197 (Fla. 1983).2 The new statute provides that the special equity doctrine is abrogated and that claims previously argued as special equity are now to be argued as claims for unequal distribution or enhancement of nonmarital assets.3Further, consistent with the legislature’s intent to abolish special equity, the gift presumption that previously attached to real property titled by the entireties has been changed to reflect that if the presumption is successfully rebutted, the property will be treated as nonmarital rather than subject to a claim of special equity.4

In order to appreciate that the statutory amendment abrogating special equity is not just a semantics change, and in fact, represents resolution of a significant internal conflict in the prior statute, a brief history of the special equity doctrine is in order. The special equity doctrine was a property division mechanism created by the Supreme Court of Florida in 1932 in the case of Heath v. Heath, 138 So. 2d 796 (Fla. 1932), to correct a perceived unfairness created by Florida’s divorce statutes at that time.5 The law then in effect provided that a wife who was guilty of adultery and had no real property or other assets titled in her own name was not allowed to receive alimony or a property distribution.6 The special equity doctrine was, therefore, created to allow a wife in such a case to obtain a property distribution from property titled in her husband’s name and to avoid the gross inequity of that spouse leaving a long-term marriage penniless.7

The term “special equity” was further described in case law over the years as a vested interest in property brought into the marriage or acquired during the marriage from a source disconnected from the marital relationship, in essence, a vested interest that a party acquires because of a contribution of funds, property, or services made over and above the performance of normal marital duties.8 Though the original underpinnings of the special equity doctrine relating to adultery became redundant even prior to the enactment of Florida’s equitable distribution statute, F.S. §61.075 (1988), the special equity doctrine remained firmly embedded in Florida law.9 However, the statute and the accompanying case law failed to recognize that the special equity doctrine had become antiquated and anachronistic.10

Florida’s equitable distribution statute has always defined assets as either marital or nonmarital. Under the prior statute, if real property was titled by the entireties (and currently, if real property or personal property is so titled), and the gift presumption was not overcome, the asset was deemed marital and potentially subject to unequal distribution pursuant to the statutory factors in Fla. Stat. §61.075(1)(a)-(I). If the gift presumption was successfully rebutted, the party was entitled to a special equity.11 Thus, the former rule that provided a party was entitled to a “special equity” when the gift presumption was overcome was at odds with the statutory construct that assets are either marital or nonmarital. Further, given that the statutory underpinnings of the special equity doctrine had long been abolished, namely that adultery was a complete bar to alimony and property rights and that a wife had no claim to property in her husband’s name, the special equity doctrine was a relic whose abrogation was past due.

As a result of the new changes, several practical considerations should be noted. First, the practitioner making a claim that certain property is nonmarital will need to examine the issue of the gift presumption. As discussed in detail herein, the new statute provides that an asset titled by the entireties, whether the property was acquired prior to or during the marriage, is presumed to have been a gift to both parties and is, therefore, a marital asset and that the burden of proof of establishing the contrary is on the party seeking to overcome the gift presumption.12 The new statute provides that the burden of proof to defeat the gift presumption is clear and convincing evidence.13 The practitioner will, thus, argue that the gift presumption has been overcome and that the subject property at issue is nonmarital and, therefore, should be returned to the party who originated the asset. At this stage, it should also be argued that any appreciation of the nonmarital asset is passive appreciation and, therefore, owned by the party who originated the asset.

However, even if the practitioner is unsuccessful in rebutting the gift presumption, the practitioner can argue that the subject property should be subject to unequal distribution based on the statutory considerations set forth in F.S. §61.075 (1)(a)-(I).14 Courts have long recognized the propriety of an unequal distribution of a marital asset to a party based on compelling factors. For example, in McMonagle v. McMonagle, 617 So. 2d 373 (Fla. 5th DCA 1993), the husband gifted the wife all his premarital assets, while the wife retained her premarital assets.15The marriage was less than two years, was entered into by the parties when they were 56 years of age, was a second marriage for both, and all the parties’ assets had been acquired prior to their marriage.16 Neither made any substantial contribution to the other party’s income or assets during the marriage.17 The appellate court reversed the trial court’s equal division of assets with directions for the trial court to reference the relevant statutory considerations in Subsection 61.075(1) in making an equitable distribution of the parties’ assets.18

Similarly, in Krafchuk v. Krafchuk, 804 So. 2d 376, 380 (Fla. 4th DCA 2001), the court ruled that distributing marital assets in favor of the wife was not an abuse of discretion. There, the wife accumulated all the assets in question by herself after an auto accident that resulted in the husband’s severe injury, and the assets were acquired during the separation.19Likewise, in Vaughn v. Vaughn, 714 So. 2d 632 (Fla. 1st DCA 1998), the short duration of the marriage and the wife’s limited income justified an unequal distribution. In Goosby v. Lawrence, 711 So. 2d 577 (Fla. 3d DCA 1998), an unequal distribution of marital assets and liabilities was supported where the wife suffered from emotional problems stemming from marital difficulties and the husband’s infidelities. The wife did not work outside the home, and instead, contributed as a homemaker and child care provider. Finally, In Ibanez-Vogelsang v. Vogelsang, 601 So. 2d 1303 (Fla. 3d DCA 1992), the marriage lasted a mere six weeks, during which time one of the parties had transferred a nonmarital asset into joint names. The court pointed out that the fact that the gift presumption was not overcome did not mean the trial court could not divide the property unequally, and awarded the property to the husband, who brought the property into the marriage and conveyed it to the entireties on the parties’ wedding day.20

In sum, even if the gift presumption cannot be overcome, regardless of whether it is termed special equity, or now, more appropriately, simply a request for an unequal distribution, a party should request an unequal distribution for the contribution of nonmarital funds when a balancing of the factors under §61.075(1) suggests it is appropriate.21 Further, based on the plain language of the statutory change, the analysis of the issue will not include a resort to the rigid calculations identified by Landay22and its progeny, but a review of the equities under the statutory factors for equitable distribution.23

Second, as previously discussed, the new statute also expressly provides that special equity claims are now argued as claims for unequal distribution or enhancement in value or appreciation of nonmarital property.24 Thus, the practitioner will delineate and argue for the return of any contributions from the spouse’s nonmarital assets to the other spouse’s nonmarital assets under this language. Specifically, they will argue that any contributions causing the appreciation of the other spouse’s nonmarital asset(s) was not intended as a gift and should be returned to that party. The application of this provision will, thus, likely be very limited because any active appreciation (appreciation as a result of a contribution of marital funds or marital labor) of the other spouse’s nonmarital asset is expressly defined as a marital asset under the statute which must be equitably divided between the parties.25 Conceivably then, this section will apply only to those situations where one spouse used clearly nonmarital income to benefit the other spouse’s nonmarital asset(s). An example of a scenario that may occur under this provision is when one spouse used his or her income from the trust or other non-actively managed investment source to pay for improvements or enhancements to the other spouse’s nonmarital asset(s) whether the asset is real estate, a business interest, or other type of asset and no gift was intended.

Finally, in an abundance of caution, a claim should be made in the initial pleading for unequal distribution or enhancement of a nonmarital asset. Though the case law does not specifically mandate that claims for unequal distribution be specifically pled, prior case law provided that claims for special equity in fact needed to be specifically pled or were waived.26 Accordingly, it is suggested that unequal distribution claims now be specifically pled.

Burden of Proof
Section 61.075 has further been amended to provide that the burden of proof to defeat the gift presumption is clear and convincing evidence.27 The new statute provides for a resolution of conflicting law among the districts as to the quantum of proof necessary to disprove the gift presumption.

Historically, there was a conflict between the districts as to the burden of proof necessary to defeat the gift presumption. Several courts ruled that the burden of proof to rebut the gift presumption was defined as beyond a reasonable doubt, including the Supreme Court in Lindley v. Lindley, 84 So. 2d 17, 21 (Fla. 1955), the First District in Antonini v. Antonini, 473 So. 2d 739, 741 (Fla. 1st DCA 1985), and the Third District in Smith v. Smith, 597 So. 2d 370, 371-72 (Fla. 3d DCA 1992). The Third District also adopted a preponderance of the evidence standard in Knecht v. Knecht, 629 So. 2d 883, 886 (Fla. 3d DCA 1993), as did the Fourth District in Dix v. Dix, 400 So. 2d 1294, 1295 (Fla. 4th DCA 1981) (rejecting the court’s earlier statements that the standard of proof in special equity cases was “beyond a reasonable doubt”). Previous to Knecht and Smith, the Third District had adopted a clear and convincing evidence standard in Harrison v. Harrison, 314 So. 2d 812, 814 (Fla. 3d DCA 1975), as did the Second District in Abbot v. Abbot, 297 So. 2d 608, 609 (Fla. 2d DCA 1974). The Second District in Abbot noted that since Lindley, a number of cases have retrenched from vigorous standards of proof.28

While the new statutory changes clarify the burden of proof, the quantum of proof now necessary to constitute clear and convincing evidence remains unresolved. However, the discussion herein may offer some assistance.

Much of the focus of prior case law as to the question of overcoming the gift presumption has focused on fact patterns where one party claims the transfer was solely for probate reasons and the other party disagrees with that characterization. Under the clear and convincing standard as adopted by the legislature, it is unlikely that one party’s unsubstantiated testimony that the conveyance was for estate purposes would satisfy the standard. For example, in Kollar v. Kollar, 21 So. 2d 356, 358 (Fla. 1945), the Supreme Court said that the husband’s conduct evidencing joint ownership cannot be overcome by the mere unsubstantiated claim, raised for the first time during a dissolution proceeding, that he never intended a gift to the wife at the time of the conveyance. In Hill v. Hill, 675 So. 2d 168, 170 (Fla. 5th DCA 1996), the court stated that “[I]n the absence of a written, contemporaneous agreement that the deed was executed for survivorship purposes only, the husband could produce no better evidence than the testimony of the wife supporting his no-gift claim.” The husband, thus, unequivocally established his no gift claim.29 It is likely then, that the clear and convincing evidence standard would be satisfied by both parties’ agreement that a deed is executed for estate or survivorship purposes. It is equally clear, however, that a party’s unsubstantiated testimony, while perhaps meeting a standard of preponderance of the evidence, cannot meet the clear and convincing standard that is Florida law as of July 1, 2008.

Personal Property Gift Presumption
Effective July 1, 2008, the equitable distribution statute has further been amended to provide that not only real property, but also personal property titled jointly by the parties as tenants by the entireties, regardless of whether the parties acquired the property prior to or during the marriage, is presumed to be a marital asset.30 If a spouse claims to the contrary, he or she has the burden of proof to show the nonmarital status of the property.31 Accordingly, under the new statute, contrary to prior law, all entireties titled property, whether vehicle, security account, certificate of deposit, stock, bond, other accounts, or assets, are now are entitled to the gift presumption, and the burden of proof is on the party seeking to establish the asset’s continued nonmarital status and to argue that the conveyance was not a gift.

To understand the genesis of the statutory amendment applying the gift presumption to personal property, a brief history may be instructive. In Archer v. Archer, 712 So. 2d 1198, 1200 (Fla. 5th DCA 1998), the court explained that the creation and maintenance of a joint tenancy in personal property was not enough to establish a presumption that a gift was intended. The court noted that while former §61.075(5)(a)(5) presumed a gift was established when a tenancy by the entireties was created as regards to real property, the statute created no such presumption in so far as personal property was concerned.32 In Crouch v. Crouch, 898 So. 2d 177, 183-84 (Fla. 5th DCA 2005), the court noted that the legislative silence in that regard suggested that any public policy relative to the creation of gifts by a spouse retitling property as entireties properly extended only to real property. However, the court in Crouch noted that in Beal Bank, SSB v. Almand & Associates, 780 So. 2d 45 (Fla. 2001), concerning the rights of a creditor to garnish bank accounts jointly held by the husband and wife, policy considerations favored creating a presumption in favor of a tenancy by the entireties when a married couple jointly own personal property.33 The court stated that it was for the legislature to change the law in this area if it so desires.34 The Florida Legislature has now done so, abrogating prior law that the gift presumption did not extend to personal property in the divorce setting and reconciling these two areas of law.

Interim Partial Equitable Distribution
An additional significant change in the statute is that the statute now allows a court to order an interim partial equitable distribution of assets.35 However, historically, a partial equitable distribution was disallowed in Florida.36

The new statute provides that if the court finds good cause that there should be an interim partial distribution, the court may enter an interim order which provides for a partial distribution.37 The order can only be entered upon good cause and sworn motion establishing a specific basis for the award and why the matter should not be determined at final hearing.38 Although “good cause” is defined under the express terms of the statute to mean “extraordinary circumstances that require an interim partial distribution,” the “extraordinary circumstances” contemplated are not discussed.39 Regardless of the circumstances, a trial court making an interim partial distribution must 1) identify and value the marital and nonmarital assets and liabilities that are the subject of the sworn motion; 2) set apart the nonmarital assets and liabilities; and 3) distribute the marital assets and liabilities.40 Further, an order making interim distributions must be supported by factual findings that refer to the factors enumerated in F.S. §61.075(1).41 An interim order must also contain specific written findings of fact and must set forth specific findings that the partial distribution will not cause an inequity or prejudice to either party with regard to either party to claim for support or attorneys’ fees.42 Further, in any final allocation of marital assets and liabilities that follows an interim partial distribution, the trial court must account for and provide appropriate credit for the partial distribution that was previously ordered on an interim basis.43

Several practical considerations under these provisions merit attention. First, regarding what constitutes “extraordinary circumstances” under the statute, it appears likely that a threatened foreclosure or immediate exigent threat of dissipation of assets will qualify. In Gay v. Gay, 604 So. 2d 904 (Fla. 5th DCA 1992), for example, the trial court was faced with circumstances wherein there was imminent foreclosure of a mortgage encumbering a large parcel of real property which apparently was a substantial portion of a marital asset of the parties. The district court concluded that a trial court should have the discretion to render such orders as would preserve an asset or its proceeds for alternate disposition for the benefit of both parties.44 If the “extraordinary circumstances” language of the new statute is construed literally, run of the mill claims for interim distributions may well be denied. However, exigent circumstances, including foreclosure and immediate dissipation of assets, should qualify as “extraordinary circumstances.” It is important to note, though, the key inquiry overlaying every decision under this section will be whether the distribution can wait until final hearing or whether the interim distribution will negatively impact the availability of an asset or otherwise cause prejudice to either party in a subsequent claim for support or attorneys’ fees.

Second, based on the plain language of the statute that requires specific allegations for a sworn motion, it is likely trial courts will have the authority to deny relief based on a facially insufficient motion. However, it is equally clear that trial courts will need to conduct a hearing or have stipulated facts to craft a legally sustainable order since the statute requires extensive findings of fact by the court regarding identification, valuation and distribution.

Finally, though the legislature has sought to provide for an interim distribution in a dissolution of marriage proceeding, the law precluding distributions in an action for separate maintenance would seem alive and well.45 Under the express terms of the statute, courts are permitted to enter an order after a petition for dissolution of marriage is filed and served and before final distribution is made.46 Notably, no mention is made of permitting a distribution in an action for separate maintenance.

In conclusion, the four statutory changes correct significant inconsistencies and conflicts in Florida’s equitable distribution law and provide family law practitioners with the additional tool of partial equitable distribution. The new statutory changes abolish special equity, a doctrine whose usefulness had long passed. The doctrine was born out of necessity during an era in Florida’s jurisprudence when fault-based and gender-biased property distribution laws in dissolution actions could and did work to deprive otherwise deserving spouses of all property and alimony claims, and had become a historical anomaly that was inconsistent with the modern statutory scheme. The 2008 amendments to Ch. 61 abolish special equity to provide a coherent, consistent, and fair statutory construct for resolution of equitable distribution claims in Florida dissolution of marriage actions.

The statutory changes also provide a clear statement on the burden of proof necessary to overcome the gift presumption, reconciling the cases on the issue that were hopelessly in conflict. Additionally, the statutory changes reconcile the conflicting areas of law relating to titling of personal property, making the law in the debtor/creditor arena consistent with family law. Finally, the changes provide a new way for family law practitioners to resolve old problems through the concept partial equitable distribution.

1 See 2008 Fla. Laws, Ch. 2008-46, §§1, 3, amending Fla. Stat. §61.075 (2008).

2 Fla. Stat. §61.075(11) (2008).

3 Id.

4 Fla. Stat. §61.075(6)(a)2.

5 See also Victoria Ho & RebeccaZung, Special Equity and Unequal Distribution of Assets, 75 Fla. B.J. 79(Nov. 2001).

6 Heath, 138 So. 2d at 797.

7 Id. at 797-98; see also Ho & Zung, Special Equity and Unequal Distribution of Assets, 75 Fla. B.J. 79, at n.1(Nov. 2001).

8 See, e.g., Canakaris v. Canakaris, 382 So. 2d 1197, 1200 (Fla. 1980); Duncan v. Duncan, 379 So. 2d 949, 952 (Fla. 1980).

9 See Canakaris, 382 So. 2d at 1200.

10 Ho & Zung, Special Equity and Unequal Distribution of Assets, 75 Fla. B.J. 79(Nov. 2001).

11 Fla. Stat. §61.075(5)(a)5 (1991), amended by Fla. Stat. §61.075 (2008).

12 Fla. Stat. §61.075(6)(a)2-3 (2008).

13 Fla. Stat. §61.075(6)(a)4.

14 See McMonagle v. McMonagle, 617 So. 2d 373 (Fla. 5th D.C.A. 1993). As noted in McMonagle, nothing mandates an equal split of the marital assets between the parties.

15 Id.

16 Id.

17 Id.

18 Id. at 374.

19 Krafchuk v. Krafchuk, 804 So. 2d 376, 380 (Fla. 4th D.C.A. 2001).

20 Ibanez-Vogelsang v. Vogelsang, 601 So. 2d 1303,1303-4 (Fla. 3d D.C.A. 1992).

21 See Zangari v. Cunningham, 839 So. 2d 918, 921 (Fla. 2d D.C.A. 2003); Cattaneo v. Cattaneo, 803
So. 2d 889, 891 (Fla. 5th D.C.A. 2002); Edward v. Edwards, 705 So. 2d 39, 40 (Fla. 1st D.C.A. 1997).

22 Landay, 429 So. 2d 1197.

23 Fla. Stat. §61.075(11) (2008).

24 Id.

25 Fla. Stat. §61.075(6)(a)1b.

26 Collins v. Collins, 737 So. 2d 1204, 1205 (Fla. 5th D.C.A. 1999) (holding that in the absence of a prayer for special equity, the trial court abuses its discretion in awarding a special equity in the marital home); Hu v. Hu, 432 So. 2d 1389 (Fla. 2d D.C.A. 1983) (special equity cannot be awarded simply on basis of a general prayer for equitable distribution).

27 Fla. Stat. §61.075(6)(a)4 (2008).

28 Abbot, 297 So. 2d at 608.

29 Hill v. Hill, 675 So. 2d 168, 170 (Fla. 5th D.C.A. 1996).

30 Fla. Stat. §61.075(6)(a)3 (2008).

31 Id.

32 Archer v. Archer, 712 So. 2d 1198, 1200 (Fla. 5th D.C.A. 1998).

33 Crouch, 898 So. 2d at 183 (Fla. 5th D.C.A. 2005). The court in Beal Bank, SSB, 780 So. 2d at 57-58, noted that the time was ripe to recognize that more confusion and less predictability in the law resulted from the law’s failure to recognize a presumption in favor of a tenancy by the entireties arising from joint ownership of bank accounts by husband and wife as against creditors.

34 Id.

35 Fla. Stat. §61.075(5) (2008).

36 Dent v. Dent, 851 So. 2d 819, 821 (Fla. 2d D.C.A. 2003).

37 Fla. Stat. §61.075(5).

38 Fla. Stat. §61.075(5)(a).

39 Fla. Stat. §61.075(5)(d).

40 Fla. Stat. §61.075(5).

41 Fla. Stat. §61.075(5)(c).

42 Id.

43 Fla. Stat. §61.075(5)(b).

44 Gay v. Gay, 604 So. 2d 904, 907 (Fla. 5th D.C.A. 1992).

45 See Clawson v. Clawson, 54 So. 2d 161 (Fla. 1951).

46Fla. Stat. §61.075(5)(2008).

Nicole L. Goetz is managing shareholder of the Naples law firm of Asbell, Ho, Klaus, Goetz & Doupé, P.A. She received her J.D. from the University of Florida with honors. She is currently serving as co-chair of the Equitable Distribution Committee of the Family Law Section for The Florida Bar, and she practices exclusively in marital and family law at the trial and appellate level.

David L. Manz practices with the law firm of Greenman, Manz & Ables, P.A., in Marathon and Key West. His practice is limited to complex marital and family law matters and he is board certified by The Florida Bar in marital and family law, and is a fellow of the Florida Chapter of the American Academy of Matrimonial Lawyers. Mr. Manz is a member of the executive council of The Florida Bar Family Law Section, and is currently secretary of the Family Law Section. He is also a former chair of The Florida Bar Marital and Family Law Board Certification Committee.

This column is submitted on behalf of the Family Law Section, Scott Rubin, chair, and Susan W. Savard, Laura Davis Smith, editors, and Patricia Kuendig, special editor.

Family Law