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Mischief potential in restraints against disposing of marital property

Many family court attorneys routinely seek a restraining order at the beginning of a marital dissolution case against “disposing of, hiding, encumbering, or in any way dissipating the value of marital assets.”  The problem with such restraints is that the harm they are designed to prevent is often less serious then the mischief they can create.

The perceived harm from a party “disposing of, hiding, encumbering, or in any way dissipating the value of marital assets” is overstated.  S.C. Code § 20-3-630(A) creates the marital estate as of the date of filing.  Assets and debts that exist as of that date can be equitably divided by the court despite their being disposed of during the litigation period.  Typically, this valuation is done as of the date of filing with the parties entitled to share in any passive appreciate or depreciation of the value of the asset during the litigation period:

For purposes of equitable distribution, marital property is typically valued at the time of the commencement of the marital litigation.  Often, the value of marital assets change, sometimes substantially, between the time the action was commenced and its final resolution. Both parties are entitled to share in any appreciation or depreciation that occurs to marital property after separation but before divorce. However, this Court has previously held when one party is at fault in causing the diminishment in value of the property, that depreciation may be assessed against the at-fault party.

Brown v. Brown, 379 S.C. 271, 665 S.E.2d 174, 180 (Ct.App. 2008) (citations omitted).

If a party deliberately dissipates assets during the litigation process, the family court is supposed to value the asset as of the date of filing, and debit the dissipating party the lost value from his or her equitable distribution award.  In Dixon v. Dixon, 334 S.C. 222, 512 S.E.2d 539, 542-45 (Ct.App. 1999), Husband deliberately set out to destroy his business during the litigation process.  The family court found the business had no value but awarded Wife 75% of the marital estate.  Both sides appealed.  On appeal, the Court of Appeals determined that awarding Wife 75% of the marital estate was excessive and reduced her award to 60%.  However, it also found the family court should have valued the business as of the date of filing (which the court found was then worth $339,306) and credit Husband with the full value of that business in its equitable distribution award.

Typically, having one party dispose of a marital asset during the litigation benefits the other party.  For example if a spouse trades in a car during the litigation for a set amount, and the other spouse doesn’t dispute the car is worth the value it was traded-in for, this resolves any dispute on the value and disposition of the car.  Even if the other spouse believes the car was traded-in for less than it was worth, that spouse has a likely “floor” on any potential valuation for that vehicle.  Unless an encumbrance was made for “marital purposes,” any encumbrance on spouse makes on marital assets during the litigation period will be credited to that spouse.

Thus any dissipating, destroying or encumbering of marital assets is often of benefit to the other spouse.  As for a restraint against hiding marital assets, one needs to know about the asset and prove that it was hidden for such a restraint to have any benefit.  Typically showing that one spouse hid marital assets during the litigation period is sufficient to anger the family court and adversely affect that party’s equitable distribution award.

Meanwhile attorneys don’t really consider the mischief such restraining orders can create.  In theory, the contents of the marital home pantry and refrigerator are marital assets.  Eating the food therein “dissipates” marital assets.  While no one intends eating “marital” food to be a violation of the restraining order, it is a violation.  It is a violation of this restraining order to use furnishings or electronics that break or wear out.  I actually once had a client who had to defend a rule to show cause for violating such a restraining order after he disposed of an old computer with a crashed hard drive.  It’s an experience I try to avoid repeating.

The family court knows how to value assets as of the date of filing and (in my experience) uniformly debits parties with an asset they sell or dispose of during litigation when dividing the marital estate.  A restraining order that prevents a party from using marital assets in an ordinary and customary manner is simply an invitation to unnecessary litigation.

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