The
recent California appellate court case of Marriage of DELLARIA and BLICKMAN
[D&B] raised some interesting issues and teaches some important lessons
about spouses entering into agreements when they get divorced, when they don't
follow strict legal procedures. I question the reasoning in the case, but
it has a certain correctness about it that is hard to ignore.
The
parties married in 1989, filed for divorce in 2000, and actually separated in
2001. The trial judge heard their testimony, and found that they had
reached an oral agreement dividing their major assets in 2003, and to carry out
that agreement they transferred title to properties between themselves, and
Wife borrowed $220,000 and used it to pay an equalization payment to Husband.
In the
division, she got the family home and two brokerage accounts - he got a two
pieces of real estate. He kept two vehicles and she got one. Each
was to keep his or her own retirement. They exchanged title documents to
carry out their agreement.
Pretty
sweet deal for Husband, according to the court - he received more than one-half
the value of the assets. The wrinkle was that the issue didn't come to
court until 2007, and Husband no longer liked the deal. Maybe his two
pieces of property had gone down in value, while Wife's stocks were doing
pretty well? The opinion is silent on this point that most of us would
find pretty significant.
The
impediment to such agreements is usually the lack of documentation, but here
there was plenty - the trial judge didn't find the husband's explanation for
the transactions believable. "There is no rational explanation for
this other than that the parties were dividing their major community
assets." Husband appealed, claiming that only a written agreement
could divide their assets based on California Family Code section 2550.
The court of appeal agreed with him, concluding that once the parties had filed for divorce they could not orally resolve their dispute, except on the record in open court - otherwise, their agreement had to be in writing. The lesson to take from this? No matter how fair you are in settling your dispute, you better get it in writing because circumstances change.
In California, disclosure documents listing assets and estimating values are required before the court can approve an agreement - doing it in writing is another layer of protection, at least theoretically. In D&B, the person "protected" was the one who benefitted from the original agreement - obviously, his circumstances changed.
A competent lawyer will ensure you don't resolve these matters except in a way that you are protected.
Section 2550 says that except on written agreement or oral stipulation in open court, in a proceeding for dissolution of marriage the court shall divide the community estate of the parties equally. According to the court of appeal, since there was no written agreement, and a divorce action had been filed, the court was prohibited from confirming the parties' division of their assets.
"Thus, Family Code section 2550 contemplates that the parties in a marital dissolution action can agree on a lopsided division of community property, but only if it is evidenced: (1) by a written agreement of the parties; or (2) by an oral stipulation of the parties in open court.... There is no evidence that the statutory requirements...were met here...." It also went on to quote an older case: "The purpose of the statute is to prevent overreaching by one of the parties and to ensure that the rights of a party are not dependent on faulty recollection or false testimony."
In D&B, the division was unequal, but the party complaining is the one who got the advantage; and, faulty memory wasn't the issue since there were plenty of documents supporting the agreement, and husband couldn't explain them away.
The court rejected the wife's argument that requiring strict compliance with section 2550 runs counter to the policy of encouraging settlements: "To the contrary, we believe that strictly enforcing...section 2550's requirements will actually promote the policy of encouraging the parties to arrive at an out-of-court resolution....Requiring the parties' settlement agreement to be committed to writing or recited in court...prevents the risk of the court enforcing an agreement that never was made. Such was the danger encountered by the court here, where the court heard self-serving testimony by both spouses on the question of whether the parties previously had reached an oral agreement affecting the disposition of a significant amount of property."
All of this reasoning runs counter to the thousands of appeals rejected because the trial judge who heard the testimony of the parties was in the best position to decide what had happened: "Judgment Affirmed." The court referred to the "alleged oral agreement" and the husband's vehement disagreement that the division was favorable to him, without explanation of how the trial judge screwed that up, with the simple statement that "Because David has fulfilled his duty to tender a proper prejudice argument, we find the error here is not cured by the 'miscarriage of justice' standard in...our state Constitution."
This is the type of case that normally ends up unpublished, but apparently not here.
What we learn is that you need to know the rules and follow them. They are technical, and can be applied to your disadvantage. Here, the wife had gotten the worse of the negotiations, but the passage of time helped her - by failing to get their agreement in writing, her husband was able to have the property re-divided - essentially, he got the upside on the original agreement, and the right to set it aside if it turned out to be a bad deal.
I'm a professional: Don't try this at home. :)
