Better Your Odds: Knowing The Factors That Affect The Recovery Of Marital Assets Wasted Through Gambling

By Las Vegas Board Certified Divorce Attorney Vincent Mayo

Perhaps in no other state is the litigation of marital assets wasted through gambling as prevalent as in Nevada. Although not directly addressed, it is generally understood in Nevada that gambling can constitute a waste of marital property. In fact, NRS 125.150(1)(b) provides:

In granting a divorce, the court shall, to the extent practicable, make an equal disposition of the community property of the parties, except that the court may make an unequal disposition of the community property in such proportions as it deems just if the court finds a compelling reason to do so and sets forth in writing the reasons for making the unequal disposition.

There are two Nevada cases that elaborate on the definition of the compelling reason requirement. In the first, Lofgren v. Lofgren,112 Nev. 1282, 926P.2d 296 (1996), the Nevada Supreme Court identified one “compelling reason” for unequal disposition of community property as financial misconduct in the form of one party’s wasting or secreting of marital assets. In the second case, Putterman v. Putterman, 113 Nev. 606, 939 P.2d 1047 (1997), the Nevada Supreme Court stated that there existed other possible compelling reasons, such as negligent loss or destruction of community property and unauthorized gifts of community property. Although these cases do not specifically hold that gambling can constitute waste or address pre-separation misconduct, it is nevertheless implicit that “compelling reasons” can include gambling as an activity that typically involves a substantial loss of a spouse’s property.

Further, this position has been substantiated by rulings in other states. The Court of Appeals of Arizona held in Gutierrez v. Gutierrez, 193 Ariz. 343, 972 P.2d 676 (Ct. App. 1999), that a wife who was unaware of the fact her husband gambled and lost a portion of the parties’ retirement was entitled to reimbursement for half of the account. The Court of Appeals of Iowa also held in the case of In re Marriage of Bell, 576 N.W.2d 618 (Iowa Ct. App. 1998), cited by In re Marriage of Olson, 705 N.W. 312 (Iowa Sup. 2005), that when a spouse gambles with community property, without the knowledge of the other party, such an act constitutes waste. This principle has, to varying degrees, even been codified in some states:

[See Minn. Stat. Ann. §518.58 (1996); 750 Ill. Comp. Stat. 5/503(d) (West 2000); N.M. Stat. Ann. §40-3-9.1. (Michie 2005). See also Stremski v. Stremski, 1994 Minn. App. LEXIS 1042 (Minn. Ct. App. 1994) (Under Minn. Stat. §518.58, the trial court properly determined that funds that the husband used in gambling during the pendency of the proceedings were to be treated as if they still existed); Lehrer v. Lehrer, 2000 Minn. App. LEXIS 507 (Minn. Ct. App. 2000) (the trial court did not have to make equal division of marital property, but rather a “just and equitable” division, and in light of the facts that the wife incurred the debt by writing bad checks on a gambling spree and a separate credit card debt was assigned solely to the husband, the division was just and equitable); In re Marriage of Carter, 317 Ill. App.3d 546, 740 N.E.2d 82 (Ill. Ct. App. 2000)(in accordance with Illinois statute, in part defining gambling as a dissipation of marital assets for one spouse’s benefit or for a purpose unrelated to the marriage.]

Unfortunately, not all cases involving waste are as straight forward as the fact patterns in Gutierrez and Bell in their outcome. For instance, what does one do when a client has some knowledge of an offending spouse’s gambling history or when the client was complicit in their “wrongful” actions? As the saying goes, the devil is in the details and special attention must be paid to whether or not an offending spouse’s gambling truly was “unauthorized” and “secretive” in nature. Lofgren and Putterman, supra. Therefore, anticipating the factors that an opposing party or the court will look at in evaluating the merits of the case is essential to advising one’s client.

The most obvious objection to a request for an unequal distribution of marital assets based on waste via gambling is a general consent to an offending spouse’s gambling lifestyle. Along these lines, being complicit by gambling with the offending spouse can also create a presumption that gambling was authorized. This was the position of the Court of Civil Appeals of Alabama in Pate v. Guy, 2005 Ala. Civ. App. LEXIS 784, when the Court took into consideration the evidence divulged at trial that the parties “lived a very extravagant lifestyle during their marriage, regularly taking expensive vacations and gambling trips . . .” Therefore, a client’s direct involvement in the offending spouse’s gambling is of importance. It is hard to imagine a judge feeling sympathetic for a party who regularly went gambling with their spouse but is now crying foul over the monies lost.

The Court of Appeals of Washington took a similar position in the case of In the Marriage of Williams, 84 Wn. App. 263, 927 P.2d 679 (Wash. App. 1996), when it considered whether gambling on the part of the wife constituted waste. In that case, the Court of Appeals held the wife’s gambling lifestyle did not amount to waste, but was rather more in the nature of entertainment costs, when it took into consideration that gambling is legal and encouraged in Washington. 84 Wn. App. at 270. The Court in essence reasoned that gambling, when consistent with the overall marital standard of living, is not materially different from any other expenditure for entertainment. The case also appears to stand for the proposition that in states where gambling is legal, the more minimal the amount spent on gambling is, the less reason for a disproportionate property award. At a certain point, however, the losses may be so great as to cause a court to find it to be more a waste of marital assets than a legitimate entertainment expense. This point is usually crossed when the losses cause significant debts to the parties as a result of addictive gambling. The Court looked to the wife having three jobs as a mitigating factor in that the monies lost through gambling were apparently offset by her additional income from her numerous jobs. Id. Similarly, and by the same reasoning, in the event a party won more than they lost gambling, or at least won in proportion to their losses, they could argue “no harm, no foul,” since the community was not detrimentally affected.

Also brought up by the Court was the three year length of time the wife had gambled. Id. The Court seems to imply that if an offending spouse has gambled seriously for an extended period of time, the mere fact the non-offending spouse had not filed for a divorce sooner, with the goal of protecting herself financially, would reasonably be held against her. Id. A counter argument to this reasoning based on equity, however, seems to have been suggested by the Court of Civil Appeals of Alabama in the case of Wheeler v. Wheeler,831 So. 2d 629; 2002 Ala. Civ. App. LEXIS 262.

In that case, the court found it fair and equitable to award the wife a majority of their assets when the husband’s gambling caused the wife to invade her separate inheritance funds. Id. at 634. The court also determined the disparity in earning potential and education between husband and wife had an impact on her ability to support herself from her half of the remainder of the marital estate. Id. at 634. The lower court’s rulings were upheld despite the fact the husband had gambled for over five years.

Another question that can potentially be raised by a trial court is that if a client did not have direct knowledge of the offending spouse’s gambling, should they have been diligent when there was reason to be suspicious? The Court of Appeals in Williams did not find a dissipation of assets related to gambling based on the fact that the husband, even though he did not know the extent of the wife’s gambling, nevertheless had reason to conclude she had gambled substantial assets. 84 Wn. App. at 271. In the case, husband admitted that he knew his wife regularly made withdrawals from several credit cards and that he had access to the cards. Therefore, as the Court stated, the husband knew or should have known “approximately what was going on.” Id.

There could potentially exist other scenarios similar to the one in Williams in which a spouse would have a difficult time playing dumb. A court might reasonably conclude that a client who alleges they did not know their spouse gambled on-line but knew of multiple unexplained billing charges on credit cards would have a difficult case. The fact an offending spouse never deposited their checks into their checking account but rather cashed them at a casino, pay day loan center or another undisclosed location, would be highly suspicious. Even a failure by a client to inquire into the grounds of a spouse’s bankruptcy prior to marriage could be interpreted as a clear warning sign based on the significant financial impact a bankruptcy can have on a marriage.

Contrast these fact patterns to the case of Keathley v. Keathley, 76 Ark. App. 150; 61 S.W.3d 219 (Ark. App. 2001). In that case, the Court of Appeals of Arkansas disagreed with a husband’s argument that his wife should have known he was gambling and therefore a disproportionate division of marital assets was not justified. Id. at 160. Specifically, the court upheld the lower court’s finding that the parties had little debt when they married, the wife thought their only debts were a car and house payment, her income was sufficient to cover these expenses and the husband handled the parties’ finances. Id. at 160. Even though the husband alleged otherwise, the evidence further showed the wife did not have access to the parties’ check book and therefore did not know of her husband’s ATM withdrawals. Id. at 160.

Even though there does not appear to be any specific case law on the topic, another factor that should be taken into consideration is whether the non-offending party took it upon themself to address and try to remedy the other spouse’s gambling problem. Acts that could constitute remedial measures would be participation in such organizations as Gamblers Anonymous or Al-Anon; attending marital and credit counseling; discussions directly with the offending spouse, friends and family; attempts by the client to separate the client’s marital funds from the offending spouses or restricting the offending spouse’s access to bank accounts or canceling credit cards. Although this list is not all inclusive, it is a starting point in evaluating a client’s case and could be argued when appropriate as mitigating circumstances even though they had knowledge of gambling.

Potentially, an offending party could assert that since gambling is recognized as an addiction and disease, it was beyond their control. Therefore, there was no intentional misconduct on their part that could be held against them. Such an argument seems plausible. As suggested in Wheeler, however, a court might be unwilling to leave the non-gambling, financially limited spouse out in the cold based on the conduct of the offending party, regardless of a lack of control on their part. Further, a gambling spouse’s ability to prevail on this argument would only seem likely in extreme cases and where an expert can testify convincingly to the court. See Williams, 84 Wn. App. at 270.

As demonstrated, numerous factors that can limit a court’s finding of waste by an offending spouse and care must be taken before sounding the proverbial bell regarding a dissipation of marital property through gambling. Only by identifying and evaluating these components will an attorney be in the best position to not only properly advise the client but successfully argue waste before a court.