Financial Misconduct: Only against a spouse, not a third party?

            From a recent decision by the Eleventh District Court of Appeals (which includes Ashtabula, Geauga, Lake, Portage and Trumbull Counties), a court cannot find that a third party to litigation committed financial misconduct, only a spouse.  Moreover, the court found that a third party cannot be held liable for the financial misconduct of a spouse, in the absence of fraud, illegality, or the necessary claim plead by the offended party.

            In Willoughby v. Willoughby, 11^th Dist. Trumbull No. 2012-T-0095, 2014-Ohio-743, the husband sold his dental practice for $75,000 to his then partner, just months prior to the divorce filing.  The trial court determined this was less than fair market value.  The wife joined the partner and the dental practice as third parties.  The court found that the actual value of the practice at the time of the sale was $330,488, and that the former partner had been unjustly enriched by the husband’s financial misconduct, and therefore owed the marital estate $255,488 ($330,488 less the $75,000 purchase price).

            The court of appeals ultimately held “[t]here is no provision in the law that requires a purchaser, in the absence of fraud, to pay an increased price for a marital asset based on the financial misconduct of one of the spouses.”  Important to the court of appeals decision is the sale of the husband’s practice to the former partner was by a written contract; there was no finding of fraud or illegality by the trial court; and the wife’s complaint against the former partner and the dental practice failed to specifically plead unjust enrichment.  

It appears that without presenting the appropriate legal claims, at least one court of appeals is not willing to extend the financial misconduct statute, R.C. 3105.171(E) against a third party.  With the benefit of hindsight, it is mandatory to plead all alternate theories in your requests for relief.  Failure to do so may result in a reversal on appeal.  A domestic relations court is a court of equity, not just law.  Including a theory of an equitable interest retained by one of the spouses, or the marital estate, may help bridge the gap. 

The Willoughby decision is available on the Supreme Court of Ohio’s website at http://www.sconet.state.oh.us/rod/docs/pdf/11/2014/2014-ohio-743.pdf.

            For more information regarding these issues, and the process involved, please contact Joseph Stafford at Stafford Law Co., L.P.A. (216) 241-1074; or  http://staffordlawcompany.com.