DIVORCE AND THE FAMILY BUSINESS — To Join, or Not to Join, Part II

With the advent of the legal fiction that a business could constitute a separate legal entity, the question has arisen to what extent, if any, a business can or should be joined as a party to a dissolution-of-marriage action.

A further issue raised by cases in which the payee spouse only asserts that the corporation and payor spouse are “one and the same,” which has been held insufficient for joinder in a dissolution of marriage, is what additional allegations might be necessary to properlyallege an “alter ego” basis for joinder of a corporation. The leading case on “piercing the corporate veil” is Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114 (Fla. 1984). Under Dania Jai-Alai, the corporate veil can only be pierced on allegations and proof of “improper conduct,” 450 So.2d at 1116, 1117, 1121, such as the corporation having been “organized or employed to mislead creditors or to work a fraud upon them.” Id. at 1120, citing, Advertects, Inc. v. Sawyer Industries, Inc., 84 So.2d 21, 23 (Fla. 1955).

In Hoecker v. Hoecker, 426 So.2d 1191 (Fla. 4th DCA 1983), the wife sued the husband and his corporation, essentially alleging a 50% special equity in the corporation. The trial court dismissed the corporation as a party, but the Fourth DCA reversed. The court noted the following factors as being sufficient for the wife to keep the corporation in the suit: The parties owned the real estate jointly on which the corporation (a restaurant) did business and the corporation was financed in part by loans generated from mortgages on thatproperty; “[t]he parties’ course of conduct demonstrates a blending of marital and business partnerships”; both parties had access to corporate checkbooks and paid both corporate and personal expenses from them; the husband paid for trips to Nassau and Las Vegas from corporate funds; the wife’s car was purchased and maintained by the corporation; and husband admitted, “I am the company.” 426 So.2d at 1192.

The Hoecker court went on to state that because of the “intertwining nature of [wife’s] claims against [husband] and the corporation,” the corporation was properly joined, and it was error to dismiss it as a party. 426 So.2d at 1192 (bracketed material added for clarity).See also, Johnson v. Johnson, 454 So.2d 797 (Fla. 4th DCA 1984) (wife worked as bookkeeper in husband’s family corporation for ten years without salary and therefore claimed special equity; wife’s motion to join corporation should have been granted). See also, Picchi v. Picchi,supra (joinder of two corporations proper where wife alleged corporations were mere alter egos of her husband, who had allegedly entered into scheme to defraud wife of her interests in jointly owned real estate by conveying property to corporations). Because the demarcations of when a corporation is sufficiently “intertwined” with a spouse, in order to permit joinder, are not well defined, it is best to either seek a direct claim against corporate assets, or to allege the formation or use of the corporation for fraudulent or improper purposes, in order to ensure that joinder will be allowed.

Share this page to social media...