If there's one thing worse than getting divorced -- I assume; I've never been divorced but I've represented plenty of people in divorce, and it seems pretty bad, even before I send the bill -- it's "getting divorced, and also one of your creditors manages to intervene and sue you, too."
Sounds terrible, right? It doesn't happen much, but it can happen: Your creditors could intervene in a divorce to try to affect how you distribute assets and how the court characterizes debt.
It happened in In re Marriage of Curda-Derickson v. Derickson, 2003 WI App 167. Lynn and Richard were innocently going through their divorce, a divorce that maybe, just maybe, was brought about by Richard's having embezzled $370,000+ from the Sokogon Gaming Enterprise, a division of the Chippewa tribe, and both Linda and Richard being indicted in federal court for that.
After Richard plead guilty, charges against Lynn were dismissed. Richard was ordered to pay restitution, and Lynn agreed to give up her claim to many assets, excluding Lynn certain properties located in Wisconsin.
In 2000, Lynn and Richard were divorcing and Sokaogon moved to intervene in their divorce, asserting a right to have the trial court consider how to classify the restitution order. Sokaogon wanted it to be a marital debt, so that it could pursue certain assets Lynn had.
After testimony, the trial court denied Sokaogon's request, finding that Lynn wasn't involved in the embezzlement and so the debt wasn't a marital debt.
On appeal, Sokaogon argued what could probably be termed the Dark Matter Theory Of Property Division if anyone but me would get that reference:
The Sokaogon then characterizes the restitution order as a type of "negative property" and reasons that because "[s]tolen money is not a gift or an inheritance," the restitution order that requires repayment of stolen money that was acquired during marriage must be presumed to be part of the marital estate. The Sokaogon also contends that Lynn failed to rebut the presumption that all debts incurred during the marriage are marital debts and therefore, the restitution order is a marital debt and subject to division between the parties. In so doing, the Sokaogon attempts to assume the posture of a spouse appealing from a judgment of divorce, rather than a judgment creditor seeking recovery for an obligation incurred by a spouse during the marriage.
The Court of Appeals raised my first question for me, almost indirectly: Why bother intervening in the divorce? A judgment of divorce isn't binding on anyone other than the two parties to the action, and a creditor could use a regular lawsuit to have a court determine the character of a debt or asset received in the divorce.
As you'd expect from someone who not only knew of this case but also has used this maneuver, I have an answer: you want a say in how the property is divided, and you want to be aware of what's going on in the lawsuit, things that you can't otherwise easily get. In a divorce action, you get to question people about finances and such early on, whereas in a lawsuit, most lawyers (including your esteemed blog author) will refuse to turn over financial details unless and until you get a judgment.
(Unless, of course, turning them over is legally required, or helpful to my clients.)
Sokaogon's main argument was that the restitution order stemmed from a debt that benefitted the marital estate -- an argument that threatens to swallow up the classification of marital debt under chapter 766. Lawyers make arguments like this all the time: It's a business debt, they'll tell me of credit card obligations, because your client used his credit card to buy a business suit (That's an actual argument a lawyer once made to me.)
Lynn took a more rational stance on appeal: she said that the restitution order was easily classified as an obligation arising from a tort, the tort being theft, which is conversion, which is clearly a tort.
The Court of Appeals, not willing to say "Lynn's right" and call it a day, went through the usual rigamarole:
WISCONSIN STAT. § 766.55 contains no clear provision for obligations arising from an order for restitution, but we conclude it may be classified as are other obligations incurred during marriage.
That's good -- start off with a low hurdle. Running through the rules of how and why a tort obligation can't be satisfied from the nonincurring spouse's property, the Court got back to where Lynn started, only couldn't quite bring itself to say, in so many words, Lynn's right, let's call it a day:
Accordingly, we conclude that § 766.55(2)(cm) classifies obligations resulting from a spouse's wrongful act during the marriage as an obligation for which only the tortfeasor spouse is personally liable.
See? They didn't come right out and say theft is a tort, but you get the point.
Surprisingly, there's still more decision to come... even though the Sokaogon didn't argue that Lynn was wrong, either:
The Sokaogon does not contest the court's findings or Lynn's assertion that the restitution order resulted from a tort committed solely by Richard during the marriage. A proposition asserted by a respondent on appeal and not disputed by the appellant's reply is taken as admitted. Schlieper v. DNR, 188 Wis. 2d 318, 322, 525 N.W.2d 99, 101 (Ct. App. 1994). Accordingly, for the reasons stated above, we conclude that the circuit court properly classified the restitution order as Richard's individual obligation, according to the provisions of § 766.55(2)(cm).
That's that, right? Wrong. There's three more paragraphs left to go, because the Sokaogon argued public policy. (As my old boss used to say, If you're arguing public policy, you've already lost.)
To refute this conclusion, the Sokaogon argues, on policy grounds, that where a marital estate benefits from a tort committed by a spouse during the marriage, the subsequent restitution order should be a marital debt. The Sokaogon contends that "the State of Wisconsin [should not] shelter their marital estate from financial responsibility to the very members of the public they injured."
The Court said NAY!, noting that the legislative history of the Marital Property law clearly indicated that torts were not to be considered a family purpose debt, and finally called it a day.