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Supreme Court clarifies equitable distribution in a long-term marriage and slowly moves South Carolina to a community property state status

The January 4, 2010 Supreme Court opinion in Dawkins v. Dawkins, 386 S.C. 169, 687 S.E.2d 52 (2010) was explicitly intended to clarify for the bench and bar “the apparent trend at the appellate level to find an abuse of discretion when an equitable division award in a long-term marriage deviates from an equal division, and our view that the manner of accounting for a spouse’s ‘special equity’ in marital property should follow the approach approved in Toler v. Toler, 292 S.C. 374, 356 S.E.2d 429 (Ct. App. 1987).”

The clarification on “special equity” was helpful.  Lower courts had sometimes been using the “special equity” concept to segregate pre-marital or non-marital contributions to transmuted marital property.  That is what the Court of Appeals did in its unpublished decision in Dawkins: treating the husband’s mother’s gift of the marital home as “special equity” worth $25,000.00 and backing that figure out of the marital estate (and awarding these funds to husband) prior to equitably dividing the remaining property.

The Supreme Court rejected the Court of Appeal’s “special equity” analysis, citing Toler in ruling that “the correct way to treat an inheritance is as a contribution by the inheriting party to the acquisition of marital property and that this contribution should be taken into account in determining the percentage of the marital estate to which the inheriting party is equitably entitled upon distribution.”

While rejecting the Court of Appeal’s determination of a “special equity” interest in its decision, the Supreme Court noted that a “special equity” interest can “refer to an interest in any increase in value of nonmarital property resulting from the non-owner spouse’s material contribution.” Citing Arnal v. Arnal, 363 S.C. 268, 294, 609 S.E.2d 821, 835 (Ct. App. 2005).   However only this circumstance, and not a circumstance in which property has been transmuted, properly results in a “special equity” interest.

However, while the Supreme Court’s attempted clarification of the issue of equitable distribution in a long-term marriage was helpful, it was also problematic.  The Supreme Court noted that equitable distribution awards are subject to an “abuse of discretion” review and held the family court had not abused its discretion in the attempted 60-40% division (due to a math error the actual division was 56-44%).  It therefore reversed the Court of Appeals’ decision creating an equal division of marital property and reinstated the family court’s division.  However, the Supreme Court, for the first time, endorsed a 50-50% division as a “safe harbor in most cases in the division of marital property in a long-term marriage.”  By informing the bench and bar that a 50-50% division of marital assets in a long-term marriage is a “safe harbor” the Supreme Court has basically informed family court judges that they will almost never be reversed in making such a distribution.  This is a subtle push towards making South Carolina a community property state.

A lay person, or even an attorney, reading South Carolina’s equitable distribution statute, § 20-3-620, would not conclude that it anticipates or even encourages a close to equal division of the marital estate.  I have handled a few cases (representing both husbands and wives) in which I believed a 75-25% division (or even more extreme) was “equitable”: mostly cases in which one spouse had dissipated or wasted assets or tended towards extreme laziness.  I have handled divorces in which it was clear that one spouse was both the primary homemaker and the primary wage earner.  How is anything close to an equal division of that marital estate equitable?

If our legislature had intend South Carolina to be a community property state, it could have drafted an equitable distribution so stating.  No fair reading of  § 20-3-620 indicates an equitable distribution of marital assets should typically be an equal division of marital assets and I believe our appellate courts misread and misapply the equitable apportionment statute.  While a presumption of equal division in a long-term marriage may make equitable distribution easier, it sometimes makes it less just.

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