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Equitable Division and Property Owned by Third Party

The Supreme Court of Georgia recently heard a case regarding whether property owned by a third party can be equitably divided in a divorce. In Armour v. Holcombe, the husband’s mother purchased a house during the parties’ marriage and allowed the parties to live there. Armour v. Holcombe, S10AF0946 (2010). A few years later, the husband’s mother deeded the property to the husband as a gift. Id. The husband refinanced the property and both he and his mother made payments on the debt. Id. In March 2005, the husband deeded the property back to his mother as he was facing financial difficulty. Id. Six months later, the wife filed for divorce and added the husband’s mother as a defendant, alleging that the deed “was executed to deprive Wife of her marital interest in the property.” Id. at 2.

Despite the trial court ordering the home sold and proceeds held in escrow pending the outcome of the litigation, the wife decided not to pursue the fraudulent conveyance issue at the divorce trial. Id. Nonetheless, the trial court instructed the jury that the sales proceeds were a marital asset subject to equitable division, and the jury awarded the wife approximately 2/3 of the proceeds. Id.

The husband’s mother appealed, arguing that the trial court erred because “there was no evidence that the property was a marital asset,” and the Georgia Supreme Court agreed. Id. The Court emphasized that the wife did not cite any case law regarding property owned by a third party being subject to equitable division, “nor should authority for such a ruling be expected.”Id. at 5. The Court adamantly held “[i]t would be highly disruptive to the transfer and ownership of property to allow a divorcing spouse to claim that property held by a third party is subject to equitable division in the divorce action based merely upon that spouse’s actions regarding the property during its prior ownership by the other spouse.” Id. at 5.

The Georgia Supreme Court mentioned that the wife may have had recourse with a fraudulent conveyance claim, but the wife “chose to abandon” this avenue. Id. at 7.

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