A wife’s effort to obtain a portion of the increased value of her husband’s multi-million dollar ownership interest in a Palm Beach County auto dealership as part of the couple’s divorce failed because, according to a 4th District Court of Appeal ruling, the prenuptial agreement she signed effectively waived her right to pursue such claims. Even if it hadn’t, the dealership’s rise in value was not due to the husband’s active efforts during the marriage, so the wife wouldn’t have been entitled to an equitable distribution anyway.
The dealership at the center of the case was Delray Motors in Delray Beach, founded by Ed Young in 1958. The business comprised a new-and-used auto dealership and a highly successful wholesale parts department. In 2002, Young’s son, Roy Timothy Young, purchased a 20% share of the business from his father. In 2010, the son’s wife of 14 years filed for divorce. As part of the equitable distribution she sought in the divorce, she challenged the validity of the prenuptial agreement the couple signed back in 1996 and asserted a claim to half of the 20% ownership purchase her husband made eight years earlier in the multi-million auto business.
When the case went to trial, the trial judge concluded that the couple’s prenuptial agreement was valid, and, based upon the terms of the agreement, she was not entitled to half of the husband’s 2002 ownership purchase. She was, however, entitled to seek an equitable distribution tied to the increase of the value of the dealership between 2002 and 2010. An expert CPA for the wife opined that the 20% interest the husband bought in 2002 increased in value by $1.85 million between the purchase date and the time the couple began divorce proceedings. The husband’s expert testified that his 20% share actually decreased in value between 2002 and 2010.
The trial judge ultimately ruled in favor of the husband. In order for a spouse to be entitled to an equitable distribution based upon a business’ rise in value, that increase must the result from the other spouse’s “active marital efforts.” In the case of Delray Motors, the trial court decided that the business’ value increased only due to the increase in the value of its land and buildings, not the effort the husband put into the business from 2002-10.
The wife appealed and lost. The appeals court concluded that the lower court was correct in determining that the increase in Delray Motors was a passive one based upon a rise in the value of the business’ buildings and land, not the efforts of the husband. In addition, the court concluded that, even if the business had increased in value due to the active marital efforts of the husband, the wife still was not entitled to an equitable distribution based upon that increase in value. The appeals court determined that, contrary to the trial court’s ruling, the terms of the prenuptial agreement included a sufficient waiver such that it actually prevented the wife from receiving anything based upon the business.
The appeals court pointed to another case originating in Palm Beach County, Hahamovitch v. Hahamovitch. In both cases, the prenuptial agreements were very similar. Both agreements contained waivers to claims related to property purchased during the marriage by a single spouse and titled in his or her own name. These waivers, when taken in conjunction with the rest of the terms of the agreements in both the current case and the Hahamovitch case, indicated that the intent of the parties was also to waive claims based on the “future enhancement of non-marital property, even if it is due to marital earnings or labor.” As a result, the prenuptial agreement effectively blocked the wife’s equitable distribution claim based upon the auto dealership.
Working through divorces and equitable distributions can be complicated, especially when high-dollar assets are involved. To ensure that your divorce is resolved in a way that is fair to you and protects your business holdings, you need experienced counsel on your side. Talk to the Florida family law attorneys at Stok Folk + Kon. Our divorce attorneys have helped many clients with situations similar to yours and can give you the reliable and determined representation you need.
Contact us online or by calling (954) 237-1777 to schedule your consultation.
More blog posts:
Florida Trial Court’s Alimony Award Reversed for Exceeding Wife’s Established Need, Florida Business Lawyers Blog, Sept. 2, 2015
Your Florida Divorce’s Impact on the Business Interests You and Your Spouse Co-Own, Florida Business Lawyers Blog, July 2, 2015