Will a court compensate a spouse for the other spouse’s use of marital monies to fund an extramarital relationship? What about for frivolous spending? Or a gambling addiction? These are questions often asked by divorce clients as financial disputes are often a factor in the ending of a marriage. How far will a court go in addressing financial irresponsibility during a marriage?
Typically, a court will not reimburse or penalize spouses for spending decisions made during the marriage. In a trial court decision upheld by the Superior Court on April 10, Schultz v Schultz, __ A.3d __ , 2018 Pa Super. 83, Delaware County Court of Common Pleas Judge Nathaniel C. Nichols opined, “It is not the role of the court to recoup expenditures made during the marriage by one party that the other party does not know about or agree with, or to make a party whole again.”
This is not to say that a court will not give any consideration to such expenditures when dividing the assets. One of the equitable distribution factors that a court must consider is “the contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property …” Large sums of money spent by one spouse on a paramour for example, could sway a court to grant the other spouse a larger share of the marital assets. Or such sums could be charged against the spouse who made the expenditures. Similarly, monies spent on a drug or gambling addiction could be assessed against the offending spouse.
In Mellon Bank v. Holub, 583 A.2d 1157, 400 Pa. Super 360 (1990), the court awarded the entire marital estate to the wife, after consideration of the equitable distribution factors, including the husband’s dissipation of marital assets relating to his criminal conviction for his attempts to hire a third party to murder his wife. LaBuda v. Labuda, 503 A.2d 971, 349 Pa. Super 524 (1986), held that the trial court did not err in considering the husband’s extramarital affair in the asset distribution, as it did so only insofar as his use of marital assets to fund the affair.
But the opposite is also true in that a court has the authority to give consideration to a party’s acquisition of or contributions to marital property when deciding how to equitably divide the marital assets. In Schultz, the wife accused the husband of spending millions of dollars of marital monies on his paramour. But counterbalancing that, the court found that the husband was largely responsible for the accumulation of the marital assets. After weighing all of the equitable distribution factors set forth in 23 Pa.C.S.A. 3502(a), the trial court awarded the wife a greater percentage of the marital assets than the husband, 55 percent to the wife and 45 percent to the husband. The trial court stated in its opinion that it gave considerable consideration to the dissipation of assets and monies expended by the husband during the marriage. But it also gave consideration to the fact that husband’s contributions during the marriage by way of salary and stock options was far greater then the wife’s contribution.
The wife appealed the trial court’s decision, arguing that she was entitled to more than 55% of the marital assets, largely because of the husband’s expenditures on his paramour. The Superior Court affirmed the trial court’s award of 55 percent of the marital assets to the wife. Even assuming that the husband did spend millions of dollars on his paramour, the Superior Court found that in consideration of all of the 11 factors set forth in the 23 Pa.C.S.A. 3502(a), a 55/45 percent division of assets in the wife’s favor was not an abuse of discretion by the trial court.
Mismanagement of finances or frivolous spending can often be a factor leading to the end of a marriage. But just as Pennsylvania is a no-fault state when it comes to extramarital affairs, so does Pennsylvania law decline to reach into the poor or reckless financial decisions made during a marriage and penalize or make spouses whole for such decisions.
Julie A. Auerbach is a partner at Astor Weiss Kaplan & Mandel. Her practice is focused in the area of family law. She practices in the counties of Philadelphia, Delaware, Chester, Montgomery and Bucks, and has written and lectured extensively on the subject of family law.