When a spouse in a dissolution of marriage case has an ownership interest in a corporation or other business entity, a question often arises as to whether the entity must be added as a party to the litigation in order to resolve all issues between the parties, including, but not limited to, equitable distribution, alimony, child support and special equities.
A decision whether to sue or not to sue a corporate entity in a dissolution action often requires a close and complex analysis of the facts and law, and every corporation is different. The analysis in part requires a determination of whether or not a spouse owns stock in a corporation, whether a nonspouse owns any stock in the corporation, whether there are facts to predicate a separate lawsuit against the corporation, and whether you can obtain sufficient financial transparency from the corporation without filing suit.
Questions arise as to what causes of action and claims potentially exist including, but not limited to, special equity claims, constructive trusts or other causes of actions. Two scenarios highlight the types of issues that arise.
100 percent ownership
Where one or both spouses owns 100 percent of a corporate entity, the corporate entity need not be sued if the only claim is a claim asserted against the spouse's stock ownership in the corporation.
A court may order a spouse to transfer stock without the joinder of the corporation as a party. See Feldman v. Feldman/390 So. 2d 1231 (Fla. 3d 1980), and Good v. Good, 458 So. 2d 839 (Fla. 2d DCA 1984).
In fact, some appellate cases have held that a corporation should not be joined in a dissolution action where the only issue pleaded was the issue of stock ownership. See Ashourian v. Ashourian, 483 So. 2d 486 (Fla. 1st DCA 1986).
However, if there are separate and distinct claims or causes of action seeking specific relief against the corporate entity itself, such as claims for special equities in corporate property, the corporation should be made a party.
Further, instances where a spouse's intimate involvement with the corporation makes the opposing spouse's actions against them inextricably intertwined, the corporation is a proper party to sue. See Hoecker v. Hoecker, 426 So. 2d 1191 (Fla. 4th DCA 1983). This is particularly true when the spouse's conduct demonstrates a blending of marital and business assets.
outside shareholder
This involves cases where an outside person or entity is a shareholder in conjunction with one or both spouses. Again, just as in the first scenario, if the only claim asserted is against the spouse's ownership of stock in the corporation, then the corporation need not be joined as a party.
However, if a spouse seeks corporate assets, a court lacks the power and jurisdiction to transfer corporate assets to one or both spouses when the corporation has not been included as a party to the dissolution proceeding. See Sandstrom v. Sandstrom, 617 So. 2d 327 (Fla. 4th DCA 1993). See also Austin v. Austin, 120 So. 3d 669 (Fla. 1st DCA 2013).
There must be separate and distinct claims asserted against the corporation seeking specific relief against the corporate entity that may include special equities in corporate properties. Cases supporting this proposition obviously make perfect sense as you have other stockholders, be they persons or entities with ownership interest in the corporation assets, and therefore 100 percent of the corporate assets are not owned by the husband and/or wife.
In summary, at the beginning of your dissolution case, you must determine if either of the spouses owned stock in any corporations and, if so, are they the only shareholders or are there other persons or entities who own stock.Thereafter, you should determine if claims should only be asserted against the spouse's stock ownership or if separate and distinct causes of action for specific relief against the corporation is required in order for the parties to obtain full relief. If so, the corporation should be added to the dissolution action.
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