South Carolina Court of Appeals Looks at When Assets and Debts Become Marital Property in Recent Case
When a family court divides up property owned by a married couple, if a spouse has kept certain inherited or premarital property separate from the pooled assets of the couple, that property may be considered nonmarital and not included in the division of assets by the court. The question of whether or not formerly separate property has been turned into marital property, through the process known as “transmutation,” can often be a source of heated debate during a divorce. The recent case of Conits v. Conits is an example of a case where the divorcing couple disagreed about the marital or nonmarital status of nearly all their property, and where inconsistent and unsupported testimony from a spouse proved to be detrimental to his interests.
While the couple involved in this case disagreed on numerous questions of ownership, we’ll focus on the husband’s appeal from the trial court’s findings on three issues: whether separate property re-mortgaged during the marriage became marital, whether a loan the husband took out from his brother was a marital debt, and whether a farm in which the husband had an interest should be considered marital property.
The couple at the center of this case had met in Greece in 1985, subsequently settling in the US. Prior to marriage, the husband had purchased multiple pieces of land, which he mortgaged repeatedly during the marriage and on which he made loan payments with marital funds. The husband had asserted that, since these properties were purchased prior to the marriage, they should be considered separate property and remain wholly his in the divorce. However, the trial court found that since marital funds were used to make payments on additional loans on the properties, they had been transmuted into marital assets, making the wife entitled to an equitable portion of their value.
Next, the husband asserted he had borrowed a large sum of money from his brother during the marriage to purchase one property, and that this loan should be considered a marital debt. While an attorney testified to drafting a loan agreement for the brothers, the attorney had not seen the note executed, nor could the husband produce additional evidence that the loan actually existed. The wife testified that she knew about the note, but had no additional information about the loan. The trial court concluded there was insufficient evidence to prove the loan transfer had occurred, and thus did not consider it marital debt for which both spouses should be responsible. On appeal, the court agreed, ruling that the husband needed to be able to adequately explain the debt he claimed was marital if he wished for his wife to be partially responsible for it.
Additionally, the husband’s testimony regarding a farm in Greece had been inconsistent and conflicted sharply with the wife’s description of the property. In the husband’s first financial disclosure presented to the court, he stated he had a 33% interest in a 30-acre property, valued at $20,000. On his second disclosure, he failed to note the property at all. On the financial disclosure presented at trial, the husband stated that he had a separate 50% interest in a three-acre property, valued at $21,875. He testified during trial that his interest was worth between $35,000 and $40,000, and stated that it was not a marital asset. On her own financial disclosure, the wife described the farm as a 30-acre piece of land worth $1.4 million, and as a marital asset. The trial court found the husband’s testimony unconvincing, and instead used the wife’s valuation of the farm, as well as her opinion that it was a marital asset. On appeal, the husband claimed that the asset did not, in fact, exist, a claim which he had not raised at trial, and which seemed in direct opposition to his testimony and previous financial disclosures. The court on appeal noted the incongruity of his testimony, but stated that regardless of the incongruity, the husband could not have this question reconsidered, as he had not first raised it in the trial court.
Ultimately, the court on appeal upheld the family court’s 50/50 division of the $5.9 million in marital assets the court found to exist, and awarded the wife over $135,000 in attorneys’ fees and costs. The large attorney fee award was attributed to the husband’s greater earning ability going forward and greater ability to pay attorneys’ fees, but also to the husband’s dishonest and combative conduct throughout the divorce proceedings.
This case provides a good lesson for determining both the factors that may lead to a finding of transmutation, and also the importance of maintaining consistency in representations of your asset/ debt values throughout family court proceedings. As with the husband in this case, failure to do so may lead to a court finding that you lack credibility and therefore believing the values set forth by your spouse instead.
If you are facing a South Carolina divorce or custody dispute, contact the knowledgeable, ethical, and determined Spartanburg family law attorneys at The Cate Law Firm for a consultation on your case, at 864-585-4226.