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Court of Appeals provides guidance on enforcing equitable distribution orders when a party doesn’t own the subject property

The June 26, 2013 Court of Appeals opinion in Simpson v. Simpson, 404 S.C. 563, 746 S.E.2d 54 (Ct. App. 2013), provides quite useful guidance as to how the family court is to effectuate a final property division order when a party claims it doesn’t own title to the property.

In Simpson, Wife had filed a divorce action naming Husband, Son and an LLC controlled by Husband and Son, as parties for the purposes of equitable distribution.  At trial, the family court ordered Husband to effectuate its equitable distribution award by transferring seven properties to Wife, finding that Husband was the owner of these seven properties.  Husband appealed but neither son nor the LCC appealed.  On appeal, Husband argued that some of the properties he was ordered to transfer were owned by the LCC.

In an unpublished opinion, the Court of Appeals found that Husband’s argument was not preserved for appellate review and, further, that Husband failed to present credible evidence to support his contention that the property had been transferred to the LLC.  The Court of Appeals’ opinion included language that “the property awarded to [Wife] was individually owned by [Husband], and was not property owned by the LLC.”

After the matter was sent back to the family court, Wife filed a contempt petition seeking to have Husband transfer these properties to her.  Husband again argued that he did not own the properties and the family court declined to hold him in contempt, finding Husband was not in contempt because the LLC was the titled owner of the subject properties.  Wife filed a motion to reconsider, arguing the family court erred in finding Husband was not the titled owner of the subject properties. Wife further argued the contempt order would result in her receiving less than her percentage share of the marital assets. In response to Wife’s motion, the family court issued an order reapportioning the marital property. Subsequently, Husband and Son individually filed motions for reconsideration with the family court, which were both denied.  Both parties then filed cross appeals.

The Court of Appeals found “the family court lacked subject matter jurisdiction to modify the division of property set forth in the Final Decree.”  It further held that:

[T]he family court erred in allowing Husband and Son to relitigate the issue of ownership of the subject properties at the contempt hearings. First, Husband and Son’s argument that Husband, individually, could not comply with the Final Decree because the subject properties were titled in the name of the LLC, was barred by the doctrine of res judicata…Furthermore, Son, who has been a party to this action since it commenced in 2003, did not appeal the family court’s determination that Husband individually owned the subject properties.  Therefore, Husband and Son were not entitled to take a second bite at the apple by defending themselves in the contempt proceedings on the ground that the subject properties were titled in the name of the LLC.

Citations omitted.

The Court of Appeals addressed the issue of how to enforce the prior final order if the LLC, and not Husband, actually owned the subject properties:

The crux of this dispute is how Wife’s equitable apportionment award should be enforced. Due to the prolonged nature of this dispute and the family court’s admitted difficulty in enforcing the Final Decree, we address the appropriate method of making Wife whole again.

Although the family court lacked subject matter jurisdiction to modify the property provisions in the Final Decree, it did have the equitable authority to enforce the Final Decree.  Therefore, even if the Final Decree mistakenly declared the subject properties to be titled in Husband’s name, it was the duty of the family court to interpret the intent of the property provisions in the Final Decree and effect compliance as best as possible…

In this instance, the Final Decree clearly identifies the subject properties as marital property titled in Husband’s individual name. Additionally, the Final Decree orders Husband to transfer to Wife full ownership in each of the subject properties as a part of her equitable apportionment award. Therefore, we interpret the decree as mandating that Wife receive full ownership in the subject properties.

Given the clear mandate in the Final Decree that Wife is entitled to full ownership in the subject properties, it was the duty of the family court to effectuate the division of marital property as written in the Final Decree. Furthermore, in Simpson I, this court found that there was no credible evidence to support Husband and Son’s argument that the family court mistakenly declared the subject properties to be titled in Husband’s name. Therefore, irrespective of the alleged mistake in the Final Decree, the family court had subject matter jurisdiction to determine the subject properties were marital property and to apportion the subject properties to Wife.

Citations omitted.

Because both Son and the LCC were parties to the divorce action, the Court of Appeals held that they were bound to the final order of equitable distribution, and thus they could be ordered to transfer the subject properties to Wife:

Pursuant to the Final Decree, Wife was entitled to have full ownership in the subject properties. As outlined above, the family court had subject matter jurisdiction to award full ownership interest in the subject properties to Wife. Furthermore, the family court reiterated throughout the Final Decree that there was no clear identification and valuation of the marital property due, in large part, to Husband and Son’s resistance to any effort to disclose the exact nature of their holdings. Therefore, it would be inappropriate and inequitable to allow Husband and Son to benefit, by avoiding transfer of the subject properties to Wife, from an error created by their own conduct.

We find equity and fairness require the family court to carry the terms of the Final Decree into effect by requiring Husband, Son, and the LLC to join in the execution of the deeds to the subject properties to Wife.  Therefore, we reverse the family court’s orders modifying the ownership determinations and division of property in the decree and remand this case to the family court to enforce the property provisions in the Final Decree by ordering Husband, Son, and the LLC to join in the execution of the deeds to the subject properties to Wife.

Citations omitted

In finding that the family court erred in modifying the equitable distribution award, rather than enforcing it against Son and the LCC, the Court of Appeals distinguished this case from  Richardson v. Richardson, 309 S.C. 31, 419 S.E.2d 806 (Ct. App. 1992):

There, the family court adopted the parties’ settlement agreement, which required husband and husband’s mother to transfer the marital home to wife as a part of wife’s alimony award.  Wife brought a rule to show cause motion against husband and husband’s mother, alleging they had not complied with the alimony provisions of the divorce decree. In his return, husband argued that he did not own an interest in the marital home and was legally unable to comply with the decree. The family court found that it had no jurisdiction over husband’s mother because she was not a party to the divorce proceedings. The family court concluded that husband was not in contempt because he was not the titled owner of the property and was unable to comply with the divorce decree. In order to make wife whole, the family court determined the value of the marital residence and ordered husband to pay to wife lump sum alimony in that amount. This court upheld the decision of the family court, finding “the family court’s interpretation to be logical and fair and the best possible solution in making the wife whole.”

Citations omitted

The distinction between Simpson and Richardson is that in Simpson the parties who actually owned title to the subject properties–Son and the LCC–had been made parties to the equitable distribution case, while the person who owned the subject property in Richardson–Mr. Richardson’s mother–was not a party in that case.  Thus, the Richardson court had no jurisdiction to order transfer of the subject properties.  Therefore reforming the equitable distribution award was the only equitable option.  In contrast, the Simpson court had authority to order transfer of the subject properties and it was inappropriate for the family court to modify equitable distribution when it had jurisdiction over the necessary parties to order the transfer.

The Court of Appeal further reversed and remanded the family court’s denial of Wife’s attorney fee claim:

Wife argues that the family court abused its discretion by failing to award her compensatory attorney’s fees and expenses for her efforts to enforce the terms of the Final Decree. We agree. …

Wife has spent over five years seeking to enforce the property provisions in the Final Decree. The family court held that Husband was not in contempt because the subject properties were titled in the name of the LLC and, therefore, Husband did not have the legal ability to comply with the terms of the decree. As discussed previously, the finding that the LLC was the titled owner of the subject properties was erroneous.  Therefore, we remand the issue of attorney’s fees for further consideration in light of this decision.

Citations omitted

Simpson indicates that when an equitable distribution award requires transfer of property that is not actually owned by the spouse, the family court can and must still require transfer if the party who actually owned that property was a party to the equitable distribution case.

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