Florida Bar Journal

Special Equity and Unequal Distribution of Assets

Special Equity” v. “Unequal Distribution.” What do these two terms mean today?Andhow, if at all, are they related?

The unequal distribution of marital assets is not often ordered by Florida courts. Although marital assets are presumed to be equally divided, this is just a starting point in the search for equity in dividing assets acquired during a marriage. Special equity is a concept that seemingly illustrates a justification for unequal distribution, i.e., services or contributions over and above normal marital contributions. However, with the advent of the equitable distribution statute in 1989, a simple request for an unequal distribution of marital assets is more clear and in line with the definition set forth in the statute.

First used in 1932, in the case of Heath v. Heath, 103 Fla. 1071, 138 So. 796 (Fla. 1932), the term “special equity” was initially a judicially proferred term, created to circumvent the harsh statutory rule which prohibited any form of alimony award to an adulterous wife. ¹ That meaning has metamorphasized. The Florida Supreme Court in 1980 defined special equity, in its purest sense, as “a vested interest which a spouse acquires because of contribution of funds, property, or services made over and above the performance of normal marital duties.” Duncan v. Duncan, 379 So. 2d 949, 952 (Fla. 1980). ²

Rendered simultaneously with Duncan was the landmark Florida Supreme Court case, Canakaris v. Canakaris, 382 So. 2d 1197 (Fla. 1980). Explaining that historically there were two types of special equity, the Canakaris court clearly approved one form, but refuted the use of the term “special equity” for the other. The court determined that special equity was inappropriately used when considering lump sum alimony. The court opined that because this use of the term “lump sum alimony” did not actually characterize a vested interest by a spouse, but rather was used to ensure a fair result, it did not accurately convey the true meaning of special equity.

Conversely, the Canakaris court did embrace the more traditional definition of special equity, which describes a vested interest in either marital property or the nonmarital property of the other spouse because of the contribution of funds or services over and above normal marital duties. ³

The Equitable Distribution Statute—Two Presumptions

Directly resulting from F.S. §61.075, the equitable distribution statute, are two presumptions which too often are taken as absolutes. The first is the presumption that, after a solely titled nonmarital home is placed into joint names, whereby the husband and the wife become owners as tenants by the entirety, that home is marital. See F.S. §61.075(5)(a)5. At that point in time, the burden shifts to the original owner spouse to prove that a gift was not intended. This presumption seems to be almost irrebuttable in light of the case law of the past 12 years.

The second critical presumption is that marital property shall be distributed equally. However, a presumption of equal distribution is just a starting point. This very same statue also contains factors for distributing assets unequally. ⁴ “(j) Any other factors necessary to do equity and justice between the parties.” If one party has contributed funds or services over and above the normal marital expectations and duties, or if a transmutation has occurred through commingling of a separate asset with a marital one, then the best remedy to ensure a fair result is to recognize that contribution, not by calling it a special equity, but rather by an unequal distribution of the marital assets.

Special Equity

The burden of proof for a special equity claim is two-fold. First, the party claiming a special equity must prove the funds or property came from a nonmarital source, and second that a gift was not intended. ⁵ The burden to show a special equity is upon the party claiming it. ⁶

The key to determining which portion of a separate asset remains nonmarital often is whether the funds remain traceable. If funds become so commingled within marital funds or assets that they lose there original characteristics, no special equity will be granted. In other words, separate property is transmuted into marital property. In Bashem v. Bashem, 541 So. 2d 118 (Fla. 3d DCA 1989), the Third District was presented with this issue. The wife in this case was appealing a decision by the trial court that refused to give her credit for funds that she brought into the marriage. She had placed the separate funds into the parties’ joint accounts and the funds were then utilized to pay for many of the parties’ expenses throughout the marriage. The trial court had awarded special equities to certain other assets such as real estate and stocks, which were not placed in joint accounts. As to the funds placed in joint accounts, however, the court held that because the funds were commingled and not traceable, they had lost their nonmarital character and were transformed into a marital asset.

Nearly 10 years later, the Fifth District in Archer v. Archer, 712 So. 2d 1198 (Fla. 5th DCA 1998), confirmed that tracing is still used by the courts to determine the characterization of assets. In that case, the wife owned certain assets with her mother: real property as joint tenants with rights of survivorship and a cash management account. When her mother passed away, the wife acquired title to these assets. She placed the house in joint names with her husband as tenants by the entireties, and commingled many of the funds from the bank account with marital funds in the parties’ joint accounts. The court held that there was a presumption of a gift of the marital home. To the extent that the funds in the bank account became so commingled with joint funds as to lose their capability of being specifically identified as the earlier separate property, no special equity was awarded. However, some of the wife’s original assets remained traceable, in that stocks held by her before being placed in a joint account were still intact, save only the transfer into joint names with the husband. Accordingly, the burden then shifted to the husband to prove that the wife intended to gift them to him. Unable to establish the wife’s donative intent, the husband failed to carry this burden and the wife retained the traceable property, which was characterized in this case as a special equity.

As Archer indicated, a dichotomy exists between the treatment of personal property and the treatment of real property. statute, while there is no presumption of a gift for personal property, there is, conversely, a strong presumption of a gift for entireties property. Historically, this was not the case. In fact, just a quarter of a century ago a distinction was drawn between situations where the contributing spouse furnished all of the consideration for the entireties property and where the contributing spouse furnished only some of the consideration. In 1976, in Ball v. Ball, 335 So. 2d 5 (Fla. 1976), the Florida Supreme Court explained the state of the law at that time as it pertained to property where one spouse furnished all the consideration. “In these cases, the property should be awarded to that spouse, as if the tenancy were created solely for survivorship purposes during coverture, in the absence of contradictory evidence that a gift was intended.” In other words, the burden was on the nonowner spouse to prove that a gift was intended.

The equitable distribution statute, promulgated in 1989, turned this principle on its head. Today, there is a presumption of a gift for entireties property, even if one spouse provided every penny of consideration for its purchase. The burden has been shifted to the original owner spouse to prove that a gift was not intended. The Supreme Court in Robertson v. Robertson, 593 So. 2d 491 (Fla. 1991) explained:

As we read it, §61.075(3)(a) 5 preempted the principle established in Ball. Under Ball, despite the fact that property was held as tenants by the entireties, when a spouse demonstrated that he or she had paid for the property from a source unconnected with the marriage, that spouse was entitled to a special equity in the property unless the other spouse could prove that a gift was intended. In contrast, the statute creates a presumption that entireties real estate is marital property regardless of who paid for it. The party claiming a special equity and seeking to have the property declared a nonmarital asset now has the burden of overcoming this presumption by proving that a gift was not intended. ⁷

What is the standard of proof for a party who is claiming that the entireties property is nonmarital? The Fourth District Court of Appeals in Heim v. Heim, 712 So. 2d 1238 (Fla. 4th DCA 1998), explained that the standard of proof is the “greater weight of the evidence and not beyond a reasonable doubt.” However, even with this lower standard of proof, the presumption, which remains one of the strongest in family law today, is very difficult to overcome. ⁸

In fact, this presumption is so strong that there appears to be only one case to date where the presumption was overcome. In Hill v. Hill, 675 So. 2d 168 (Fla. 5th DCA 1996), the husband testified that he placed the home in joint names for estate planning purposes, never intending to make a gift to the wife. However, in this case the wife agreed that this was the reason for the joint ownership. Compare Hill to the facts in Rutland v. Rutland, 652 So. 2d 404 (Fla. 5th DCA 1995). Rutland was heard in the same appellate court as Hill and only one year prior. Like the husband in Hill, the husband in Rutland testified that he placed the marital home in joint names for estate planning purposes. Not only did the Fifth District deny the husband’s claim that the home was nonmarital and presume that he had given it to the wife as a gift, but the court went on to criticize the husband’s statements as “self serving.”

So, where does Landay v. Landay, 429 So. 2d 1197 (Fla. 1983), fit into this picture after Robertson ? The answer is a resounding “It doesn’t!” In Landay, the court promulgated an equation which was to be used when a spouse furnished some, but not all, of the consideration for entireties property. ⁹ Nineteen cases cite to Landay after Robertson, but none use the formula set forth in Landay correctly, if it is applied at all. ¹⁰ For example, in Gallinar v. Gallinar, 763 So. 2d 447 (Fla. 3d DCA 2000), the husband argued that the trial court erred when it failed to award him a special equity in the marital home. The appellate court commented that while it was quite evident the husband had contributed substantial nonmarital funds to the home, he still failed to rebut the presumption of a gift and therefore Landay was not necessary because there was no special equity.

The Landay formula was used to determine a nonmarital component of marital real property. This must be distinguished from the formula propounded in Stefanowitz v. Stefanowitz, 586 So. 2d 460 (Fla. 1st DCA 1991), which is used to determine a marital component of a nonmarital asset.

Unequal Distribution

F.S. §61.075 (1989) states that “[i]n a proceeding for dissolution of marriage, in addition to all other [equitable] remedies. . . the court shall set apart to each spouse that spouse’s nonmarital assets and liabilities, and in distributing the marital assets and liabilities between the parties, the court must begin with the premise that the distributions should be equal, unless there is justification for an unequal distribution based on all relevant factors. . . . ” ¹¹ In other words, once the marital portion of the pie has been defined, the court, beginning with the presumption that the marital assets will be equally divided, must then determine, after looking at all of the factors in the statute, whether an equal division will result in an equitable decision. Hence, the term “equitable distribution,” not “equal distribution.”

At some point in our recent judicial history, the marital gift presumption for real property has become confused with the presumption of equal distribution. Theoretically, the solution used to rectify an inequitable situation where one party titles a separate asset in joint names and feels that an inequitable situation has been inadvertently created, is to identify jointly held property as marital and then request an unequal division. Since 1989, there are only two cases where a court has found the parties’ situation to be egregious enough to merit the award of an unequal division where one party has gifted nonmarital real estate to the other party.

In the first case, Ibanez-Vogelsang v. Vogelsang, 601 So. 2d 1303 (Fla. 3d DCA 1992), the parties were married for six weeks. On the parties’ wedding day, the husband placed a $900,000 home into joint names. The wife was a self-employed, financially independent professional, but still received a $35,000 ring, $16,000 in rehabilitative alimony, and $26,000 in attorneys’ fees. The home, on the other hand, was distributed entirely to the husband.

One year after Vogelsang, in McMonagle v. McMonagle, 617 So. 2d 373 (Fla. 5th DCA 1993), the Fifth District Court of Appeals was also asked to make an unequal division. In that case, the parties, who were both 56 years old, were married for less than two years. Neither party contributed to the wealth of the other as virtually all assets were acquired prior to the marriage. While the wife did not place anything in both parties’ names, the husband did title his premarital home jointly. The trial court divided all of the assets right down the middle. The husband appealed arguing that the decree was inequitable because the wife more than doubled her assets and conversely the husband’s were cut in half. The appellate court agreed opining that while there is a presumption of a 50-50 split, that is simply a starting point.

The presumption of an equal distribution of assets is so difficult to overcome that there are only two cases in this area. ¹² In Vaughn v. Vaughn, 714 So. 2d 632 (Fla. 1st DCA 1998), the court determined that the facts of the case merited an unequal distribution because the parties were married for less than two years. And in the second case, Escudero v. Escudero, 739 So. 2d 688 (Fla. 5th DCA 1999), the court deemed an unequal distribution to be justified because the husband’s dissipation and concealment of assets warranted it.

Conclusion

Special equity is an antiquated term that is like a man without a country in family law today. Though the statute continues to keep the term alive, it is used in a vague and misleading manner in recent case law. With personal property, the term should not be used; one should simply define what is marital property and what is nonmarital property. Furthermore, Robertson and Chapter 61.075 have created a seemingly irrebuttable presumption of gift in jointly titled real estate, regardless of who provided the consideration for the home and regardless if the consideration was total or partial. Therefore, while the term “special equity” is used in many reported cases since promulgation of the equitable distribution statute in 1989, the term today is really synonymous with the term “unequal distribution.” (A chart of cases where the courts have considered special equity claims since Ball v. Ball was decided in 1976 can be found below, or by clicking here. ) Put another way, a request for special equity is really a request for an unequal distribution of marital assets or a determination that the property in question is nonmarital.

Family law practitioners should first determine whether an asset and the appreciation thereon is marital, nonmarital, or some combination of both. Second, look at whether the presumptions of gift apply through title to real estate or commingling of assets. Third, determine whether an argument for unequal distribution of a marital asset is appropriate. A thorough and thoughtful application of the criteria and definitions set forth in F.S. §61.075 support this reasoning, akin to past efforts of practitioners and courts to establish special equities in assets.

¹ In that case, the wife was observed by her husband lying on the conjugal bed, clothed only in her underwear and a sheer bathrobe, with a former male employee who was sans coat and shoes. Even though the wife had substantially contributed her own capital and personal services into the husband’s chain of stores, the courts at that time could not grant alimony to an adulterous wife. So, instead, that court decided that that rule did not preclude an award to the wife in the form of a “special equity” in property and the business of the husband, in recognition for her material contributions in the form of funds and industry during the marriage.
² Furthermore, the Supreme Court remarked in Duncan that if a court finds a special equity, it should find that one party indeed has a vested interest in the subject property. Additionally, if a special equity is found and thus awarded, the award is permanent and not subject to modification.
³ Canakaris, 382 So. 2d at 1200.
⁴ Fla. Stat. §
61.075 (1993) reads in pertinent part:

“(1) In a proceeding for dissolution of marriage, in addition to all other [equitable] remedies…the court shall set apart to each spouse that spouse’s nonmarital assets and liabilities, and in distributing the marital assets and liabilities between the parties, the court must begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution based on all relevant factors, including:

“(a) The contribution to the marriage by each spouse, including contributions to the care and education of the children and services as homemaker.

“(b) The economic circumstances of the parties.

“(c) The duration of the marriage.

“(d) Any interruption of personal careers or educational opportunities of either party.

“(e) The contribution of one spouse to the personal career or educational opportunity of the other spouse.

“(f) The desirability of retaining any asset, including an interest in a business, corporation, or professional practice, intact and free from any claim or interference by the other party.

“(g) The contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the marital assets and the nonmarital assets of the parties.

“(h) The desirability of maintaining the marital home as a residence [for specific reasons]. . . .

“(i) The intentional dissipation, waste, depletion or destruction of marital assets after the filing of the petition or within 2 years prior to the filing of the petition.”
⁵ Straley v. Frank, 585 So. 2d 334, 336 (Fla. 2d D.C.A. 1991).
⁶ Baird v. Baird, 696 So. 2d 844, 845 (Fla. 2d D.C.A. 1997).
⁷ The opinion continues by quoting a commentator: “One important difference between case law and the statute is the treatment of real estate that is held by the parties as tenants by the entireties. The statute provides that the conveyance of premarital real estate to entireties ownership changes the character of the premarital property and creates a presumption that the parties intended the property to be subject to equitable distribution on divorce. In contrast, Ball v. Ball and subsequent cases held that once a spouse proved that property was originally nonmarital, a presumption arose that the property remained nonmarital, unless the other spouse could show that a gift was intended. Thus, the 1988 statute has shifted the burden of proof by creating a presumption that property transferred to a tenancy by the entireties is marital, regardless of its original acquisition. It is up to the spouse who claims a special equity interest to prove that a gift of that interest was not intended.” Robertson v. Robertson, 593 So. 2d 491, 494 (Fla. 1991) citi ng 2 Fla. Fam. L. (MB) §34.24 (Mar. 1990).
⁸ In Collinsworth v. Collinsworth, 624 So. 2d 287 (Fla. 1st D.C.A. 1993), the trial court awarded the wife a special equity of $28,000, which the wife claimed she contributed from nonmarital funds, toward the purchase of a lot the couple owned jointly. The appellate court reversed, explaining that the wife had failed to carry her burden of proving that a gift of those funds was not intended. There is a plethora of cases which demonstrate this point. See also Bomwell v. Bomwell, 676 So. 2d 508 (Fla. 4th D.C.A. 1996)(holding that the trial court erred in finding that the wife had a special equity in the marital home where the wife presented no evidence to rebut the presumption that she had intended the funds to be a gift); Kelly v. Kelly, 637 So. 2d 43 (Fla. 2d D.C.A. 1994) (reversing award of a mortgage to the wife as a special equity because even though the home was purchased using funds that the wife inherited she did not present evidence to rebut the gift presumption); Rutland v. Rutland, 652 So. 2d 404 (Fla. 5th D.C.A. 1995) (holding that the home the husband purchased prior to the marriage and thereafter deeded to his wife as tenants by the entirety was presumed a gift and therefore no special equity was found); Geddes v. Geddes, 530 So. 2d 1011 (Fla. 4th D.C.A. 1988).
⁹ The equation was that the special equity acquired is equal to one half the ratio which his or her contribution bears to the entire consideration in addition to the contributing spouse’s automatic 50% interest in the subject property. See Landay v. Landay, 400 So. 2d 43 (Fla. 2d D.C.A. 1981).
¹⁰ Those cases are: Hieke v. Hieke, 782 So. 2d 443 (Fla. 4th D.C.A. 2001); Romano v. Romano, 632 So. 2d 207 (Fla. 4th D.C.A. 1994); Straley v. Frank, 585 So. 2d 334 (Fla. 2d D.C.A. 1991); Gallinar v. Gallinar, 763 So. 2d 447 (Fla. 3d D.C.A. 2001); Hess v. Hess, 715 So. 2d 1044 (Fla. 4th D.C.A. 1998); Adair v. Adair, 720 So. 2d 316 (Fla. 4th D.C.A. 1998); Williams v. Williams, 683 So. 2d 1119 (Fla. 3d D.C.A. 1996); Straley v. Frank, 612 So. 2d 610 (Fla. 2d D.C.A. 1992); Smeaton v. Smeaton, 678 So. 2d 501 (Fla. 1st D.C.A. 1996); Hess. v Hess, 654 So. 2d 199 (Fla. 4th D.C.A. 1995); Saare v. Saare, 610 So. 2d 628 (Fla. 1st D.C.A. 1992); Heinrich v. Heinrich, 609 So. 2d 94 (Fla. 3d D.C.A. 1992); Greenberg v. Greenberg, 602 So. 2d 626 (Fla. 4th D.C.A. 1992); Napier v. Napier, 600 So. 2d 48 (Fla. 3d D.C.A. 1992); Holmes v. Holmes, 578 So. 2d 323 (Fla. 4th D.C.A. 1991); Wertkin v. Wertkin, 763 So. 2d 461 (Fla. 4th D.C.A. 2000); Fellman v. Southfield Farms Corp., 747 So. 2d 1035 (Fla. 4th D.C.A. 1999); Reich v. Reich, 652 So. 2d 1200 (Fla. 4th D.C.A. 1995); and Roberge v. Buis, 95 F.3d 42 (Va. 4th Cir. 1996).
¹¹ For a complete list of the relevant factors, see supra note 4.
¹² There are many cases where the courts opine that there was insufficient evidence to justify an unequal division based on the statutory factors.

Victoria M. Ho is a partner in the law firm of Asbell, Coleman, Ho & Hazzard, P.A., Naples. She is a fellow of the American Academy of Matrimonial Lawyers and is board certified in marital and family law. She practices exclusively in the area of marital and family law. Ms. Ho is a graduate of the University of Wisconsin Law School, and received her undergraduate degree, magna cum laude from the University of Minnesota.
Rebecca Y. Zung is an associate with Asbell, Coleman, Ho & Hazzard, P.A., Naples. She received her J.D., cum laude , from the University of Miami School of Law and her B.S., cum laude , from Millersville University of Pennsylvania.
This column is submitted on behalf of the Family Law Section, Norman D. Levin, chair, and Peter L. Gladstone, editor.