The family court’s tasks when dividing marital property are (1) to determine whether the marriage is a short-term marriage, in which case the spouses should, usually, return to their pre-marriage status; (2) for a long-term marriage or a short-term marriage in which the spouses obtained a significant property or debt, to identify marital property, value the property and equitably divide that property; (3) to determine whether any needs-based or significant contribution-based exceptions justify an invasion ofone’s separate property for the other; and, finally, (4) to determine whether any exception to equitable distribution, including fault, discovery sanctions, litigation sanctions, and unclean hands, counsel an unequal division or forfeiture.[1] The spouse seeking to include property in the marital estate must prove a reasonably ascertainable value.[2]
A. EQUITABLE DISTRIBUTION
For long-term marriages, or in a short-term marriage in which the spouses have acquired together a significant item of property or debt, the family court must, usually, equitably divide the items acquired between the date of marriage and the date of divorce according to the Sparks factors, which include the duration of the marriage, the contribution of each party to the marital estate, their age, health and status, their needs and circumstances, their earning abilities, past relations and conduct, and general principles of equity.[3] However, “equitable” does not mean “equal,” and, although the standard is usually to divide marital property congruently, the family court should not divide property if one of the exceptions to equitable distribution applies.[4]
1. IDENTIFY
The first step in the equitable distribution analysis is to identify the property subject to equitable distribution. This includes all property the parties obtained during the marriage “by reason of the marriage,” which excludes gifts and inheritances unless comingled and passive appreciation of separate property.[5] Separate property that appreciated actively due to the owning spouse’s efforts during the marriage the family court may also divide, but only to the extent of the appreciation proven.[6]
2. VALUE
A common misconception is that the family court must value property as of the date of divorce, as that is the ending-date used to identify marital property. Not so. The family court has considerable discretion to value property as of some other, appropriate date, such as the date of separation or the date of filing for divorce.[7] Determining the appropriate date, the family court should consider factors such as when the spouses physically separated, whether and to what extent the spouses continued to commingle their assets and how financially independent or dependent they were.[8] For example, if spouses have obtained separate residences and paid their own expenses, whether through support orders or otherwise, the date of separation is appropriate.[9]
3. DIVIDE
Finally, unless an exception applies, the family court must divide the property and debts. There is no standard formula or rigid rule for property distribution, but the distribution must be equitable, i.e. “fair and equitable under all the circumstances.”[10] This standard means that, absent a clear reason for an unequal division, the distribution of marital property must be “roughly congruent.”[11] When making this determination, the family court must consider the applicable Sparks factors, which are the duration of the marriage, the contribution of each party to the marital estate, their age, health and status, needs and circumstances, their earning abilities, the past, conduct, and equity.[12]
C. EXCEPTIONS
Even if the family court finds property to divide, equitable distribution should not apply if the court finds one of the following exceptions, in addition to equity.
1. SEPARATE PROPERTY INVASION
There is a strong presumption that each spouse should at divorce retain his or her separate property.[13] The spouse seeking to invade separate property bears the burden of proving the spouse needs the property, and the other is financially able to give it, and/or that the spouse significantly contributed to the property’s increase in value.[14] It bears repeating that the spouse must significantly assist in the acquisition or growth of the other’s separate property; even then, the spouse is only entitled to “compensation” that should be no more than necessary to compensate the spouse for that contribution.[15]
2. DISCOVERY SANCTIONS
A family court may order sanctions for failure to comply with discovery. [16]Sanctions range from prohibiting a party form introducing a witness to outright dismissal of the entire action.[17] Severe sanctions, such as dismissal, “should be employed when there has been a flagrant and wanton refusal to facilitate discovery and not when failure to comply with a discovery request is accidental or involuntary.”[18]
We usethe following factors to determine the sanction: (1) whether the violation was willful or accidental; (2) the party’s history of refusing to comply with discovery; (3) the prejudice to the other party; (4) the time before trial; (5) whether there is a history of engaging in deliberate delay; (6) the degree of compliance with other orders; (7) an attempt to timely cure the defect; and (8) what sanction serves justice.[19]
3. LITIGATION SANCTIONS & DISSIPATION
A family court may also deny a spouse a share of marital property if that spouse has committed wrongs during the course of litigation, whether discovery or otherwise. For example, in Olmstead v Olmstead,[20] the family court properly sanctioned a wife for committing perjury about the nature and extent of her assets during trial.
Similarly, and as a final exception example, the family court should sanction a spouse for dissipating assets during the marriage. When one spouse dissipates marital assets without the other’s fault, the value of the dissipate asset may be included in the marital estate.[21] For example, in Zamfir v Zamfir,[22] the family court treated over $200,000 of marital funds as if they were still available, and ordered the spouse who spent it without the other’s consent, one-half the value, a $10,000 payment. In other words, a spouse who dissipates marital assets in an effort to avoid dividing them will shoulder the burden, because the family court will still consider the value of those gone assets.[23]
[1] See, e.g., Reeves v Reeves, 226 Mich App 490; 575 NW2d 1 (1997).
[2] Wiand v Wiand, 178 Mich App 137; 443 NW2d 464 (1989).
[3] Sparks v Sparks, 440 Mich 141; 485 NW2d 893 (1992).
[4] Id.
[5] Reeves v Reeves, 226 Mich App 490; 575 NW2d 1 (1997).
[6] Korth v Korth, 256 Mich App 286; 662 NW2d 111 (2003).
[7] See, e.g., Booth v Booth, 194 Mich App 284; 486 NW2d 116 (1992).
[8] See, e.g., Kurz v Kurz, 178 Mich App 284; 443 NW2d 782 (1989).
[9] Id.
[10] See, e.g. Sparks v Sparks, 440 Mich 141; 485 NW2d 893 (1992).
[11] Jansen v Jansen, 205 Mich App 169; 517 NW2d 275 (1994).
[12] Sparks, 440 Mich 141; 485 NW2d 893(1992).
[13] McNamara v Horner, 255 Mich App 667; 662 NW2d 436 (2003).
[14] Reeves v Reeves, 226 Mich App 490; 575 NW2d 1 (1997).
[15] Id.
[16] MCR 2.313 and related caselaw.
[17] MCR 2.313(B)(2)(b), (c).
[18] Traxler v Ford Motor Co., 227 Mich App 276; 576 NW2d 398 (1998).
[19] Dean v Tucker, 182 Mich App 27; 451 NW2d 571 (1990) (citations omitted).
[20] 340 Mich 156; 65 NW2d 313 (1954).
[21] Everett v Everett, 195 Mich App 50; 489 NW2d 111 (1992).
[22] 92 Mich App 170; 284 NW2 517 (1979).
[23] Thames v Thames, 191 Mich App 299; 477 NW2d 496 (1991).