Blast From The Past: Gambling: The Consequences Of Financial Misconduct In A Divorce

Financial Misconduct in a Divorce, Is it a Gambling Addiction?

PUBLISHER’S NOTE: This blog about financial misconduct in a divorce case is as meaningful today as it was when we originally posted it on April 22, 2017. We have a ton of interesting articles in our archives of the Ohio Family Law Blog. Use our Search tool and enjoy a few oldie but goodies!

Overview on Ohio Divorce Law: Gambling as the Basis for Financial Misconduct and Unequal Division of Marital Assets Upon Divorce

Gambling exists in every state (even in Utah and Hawaii where it is illegal), but not everyone gambles the same.  If gambling gets out of control, it becomes a real medical condition. A “Gambling Disorder”, as the affliction is known, affects slightly more than 2 percent  of all U.S. adults. According to the Mayo Clinic, “Gambling  can stimulate the brain’s reward system much like drugs such as alcohol can, leading to addiction”.

Individually, male gambling addicts typically accumulate an
average debt between $55,000 and $90,000.  Female gambling addicts average a $15,000 debt, by one estimate. But as one might expect, most gamblers do not have sufficient resources to pay back what they owe.

As a result, gambling addicts develop a high tendency to, suffer from other health issues, lose their jobs, commit crimes, and strain their relationships and marriages. Research indicates that Ohio is tied for 4th of states with the highest percentage of adults with gambling disorders., not surprisingly, as a divorce lawyer, I have seen a significant rise of gambling problems/debts as a primary factor leading to divorces. Click here to read more statewide gambling statistics.

Divorce and Gambling Primer

With that background, here is a primer about divorce and gambling and how it MAY impact a Court in a property division award:

• Generally speaking, pursuant to R.C. 3105.171(C)(1), in Ohio the division of martial assets shall be equal  – however if an equal division is inequitable, then the court shall divide it in a manner it deems equitable.
• R.C. 3105.171(E)(4)– states that:
  • “if a spouse has engaged in financial misconduct, including, but not limited to, the dissipation, destruction, concealment, or fraudulent disposition of assets, the court may compensate the offended spouse with a distributive award or with a greater award of marital property”.
  • Note – several of the cases found refer to section E(3) as being the applicable section, however it has changed and is now E(4).
• Burden of Proof:
  • Burden of proving financial misconduct is on the complaining party.
  • Smith v. Emery-Smith,  11thDist., 2010-Ohio-5302
• Relevant Case Law:
  • Courts have found that gambling does constitute financial misconduct in some (but not all cases). As a result, the court usually fashions an equitable award rather than an equal one as demanded by 3105.171(C)(1).
  • See for example:
    • Putman v. Putman, 12th Dist., 2009-Ohio-97
      • There Husband argued that Wife had engaged in financial misconduct by gambling away approximately $240,000.
      • Lower Court agreed and ordered equitable division of the assets so Wife appealed claiming trial court abused its discretion and requested an equal division instead.
        • Specifically, Wife argued that because the gambling occurred before the couple separated and because Husband was aware and even supported her gambling habit, there was no misconduct (Husband had gone with her to casinos during the marriage).
      • Nevertheless, the Appeals Court upheld the equitable division and the finding of financial misconduct because the evidence showed that she had withdrawn $225,000 from casino ATMs in 4 years and she tried to hide that she used it for gambling. She also withdrew money from her 401(k) to gamble.
        • Court found that even though Husband was somewhat aware, Wife consistently tried to conceal it from him and he only became aware of the withdrawals once the couple was audited.
      • Downey v. Downey, 9th Dist., 2007-Ohio-6294
        • There, Appeals Court upheld a finding of financial misconduct and a distributive award to Wife.
        • Evidence showed that Husband used money acquired from taking out a second mortgage on the house to pay gambling debts.
        • Trial Court found financial misconduct and ordered Wife was entitled to distributive award.
        • Husband argued there was no financial misconduct because Wife was aware of what he was doing and even signed the loan documents. The Appeals Court upheld Trial Court’s findings/award.
      • Osborn v. Osborn, 11th Dist. 2004-Ohio-6476
        • Court found there to be financial misconduct where Husband used marital funds to support his gambling habit and, therefore, upheld a distributive award granted to Wife.
        • There, the Court found that Wife was completely unaware of Husband’s gambling problem or the money he was spending to fund it.
• However, Ohio courts have noted that certain factors should be taken into consideration before determining if  a spouse did actually engage in financial misconduct.
• See for example:
  • Lindsay v. Lindsay,6th Dist., 2013-Ohio-3290
    • There the Court stated that the time frame in which the alleged conduct occurred may demonstrate “wrongful scienter”.
    • For example, the use of martial assets during the pendency of the marriage or immediately prior to filing for divorce can show financial misconduct.
  • Grow v. Grow, 12th Dist., 2012-Ohio-1680
    • There the Court stated that the AWARENESS OF THE SPOUSE’S WRONGDOING CAN NEGATE FINANCIAL MISCONDUCT.
      • Here, the Court failed to issue a finding of financial misconduct on Husband’s part because Wife was aware of his gambling and had participated in many of his gambling trips.
• Courts generally require a finding of financial misconduct by one of the parties in order to justify a distributive award:
  • R.C. 3105.171(A)(1) says a distributive award is any payment/payments, in real or personal property . . . that are made from separate property or income and that are not made from marital property.
  • However, it seems that even if the court does not specifically state that a spouse’s gambling away of marital assets constitutes financial misconduct, a court can still order an unequal division of martial property based in equity rather than a distributive award.
  • See for example, Oliver v. Oliver,  12th Dist., 2011-Ohio-6345
    • There, Husband appealed a division of assets wherein the court held him accountable for a $35,000 gambling debt.
    • Evidence showed that Husband withdrew $35,000 out of the couple’s joint account and gambled it all away 1 week before Wife filed for divorce.
    • Husband claimed that because it occurred during the marriage, the debt shouldn’t be his alone.
    • The Trial Court ordered an equitable division of the assets with each party receiving approximately $60,000 in marital assets, however, it credited the $35,000 that Husband withdrew to his award and ultimately found that he owed Wife $17,400.
    • Husband appealed saying the money he was ordered to pay constituted a “distributive award” under 3105.171(E)(4).
    • The Appeals Court ultimately held that it was not a distributive award because there was no mention of financial misconduct in the Trial Court’s decision. In addition, it said that Husband was ordered to pay the money out of funds from the sale of marital property and not separate.
      • Also noted that Husband admitted to withdrawing and gambling the $35,000 alone.
      • So because he solely benefited from the use of a marital asset, it was not an abuse of discretion for the Trial Court to credit the entire $35,000 to his share of the assets.

Hire An Experienced Divorce Attorney In Complicated Misconduct Gambling Cases

As you can see, divorcing a gambling addict can be very tricky and the outcome can be factually dependent! If you find yourself in this situation, seek out a divorce lawyer experienced in litigating these complicated gambling cases. A more “generalist” lawyer may incorrectly assume that despite the financial gambling misconduct, that the assets will be divided equally by the Court.

Tell us about your case.

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