Special equity and unequal distribution of assets.

• Author: Ho, Victoria M.
• Position: Marital assets - Florida - Family Law

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. [section] 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. [section] 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. By 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, [section] 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...