Thursday, March 10, 2016

Supreme Court upends precedent on divorce property division without being asked

Posted By on Thu, Mar 10, 2016 at 10:48 AM

click to enlarge TAKING CHARGE: Without being asked to do so, Justice Rhonda Wood led a Supreme Court majority that upended decades of precedent on division of property in divorce cases.
  • TAKING CHARGE: Without being asked to do so, Justice Rhonda Wood led a Supreme Court majority that upended decades of precedent on division of property in divorce cases.
The Arkansas Supreme Court today, with two special justices appointed by Gov. Asa Hutchinson in the majority, upended precedent on division of property in a divorce without having first been asked to do so.

This is news in domestic law. It  also sends a signal, I think, of court members', particularly those influenced by the governor and others with similar political outlook, intention to defer carefully to the legislature. That could have large implications across the statute books.

The court, in a case from Logan County pitting John Davis Moore against Nancy Moore, reversed a property division that considered the appreciation of the value of property in a mail hauling company the husband owned before marriage as marital property and thus to be equally divided. The majority opinion, which included votes from appointed Special Justices Chad Atwell and Dan Greenberg, said the past precedents on marital property departed from a clear reading of the statute that says property held prior to marriage was not marital property and not subject to division. Previous court rulings have said active participation in the increase in value could be taken into account and the legislature has made no effort over several decades to dispute this holding. In the Logan County case, the judge also cited the support from the wife in her husband's endeavor as supporting a finding it was marital property. The majority also rejected that finding.

The decision, written by Justice Rhonda Wood, said in part:

Additionally, some courts have confused the rule in Layman by weighing the efforts of the owning and nonowning spouse when determining whether nonmarital property should be reclassified as marital. Indeed, in this case the circuit court considered Nancy's contributions to the company, in addition to David's, in concluding that the increase in value in the company was a marital asset. This was erroneous even under Layman. 

Accordingly, we find it appropriate to return to the statute's plain language, which states that "the increase in the value of properry acquired prior to marriage" is nonmarital. Accordingly, to the extent that Layman, Farrell, and Brown redefined marital property through the "active appreciation" rule, which conflicts with section 9-12-315, we expressly overrule them.

Chief Justice Howard Brill and Justice Robin Wynne dissented from the part of the decision that overturned precedent. (They agreed on a technical argument on whether the lower court ruling was final.) Justices Courtney Goodson and Paul Danielson did not participate in the case. Brill and Wynne defended the importance of stare decisis, or adhering to past precedent.

Adherence to precedent is necessary to promote "stability, predictability, and respect for judicial authority," Brill wrote. Wood responded:

in this case, because the court has taken the statutory language and rewritten it to achieve a contrary result, we are compelled to serve justice by retuning to the statute's clear language.
Brill countered, while also noting that the majority had overruled precedent though those appealing the decision had not asked for it:

Under the separation-of-powers doctrine, the legislature has the power and responsibility to proclaim the law through statutory enactments, and the judiciary has the power and responsibility to interpret legislative enactments. lt was up  to the legislature to amend the statute if it disagreed with our interpretation declining to reverse our construction of the marital-property statute and leaving change, if any, in the word "property" to the General Assembly). The General Assembly has not done so, and this court should not act in its stead.

Brill, in his dissent, quoted from a law review article, "Playing Cod: A Critical Look at Sua Sponte Decisions by Appellate Courts." The case today was a sua sponte decision, or one taken up unbidden on the majority's own accord. 

Wynne's dissent noted explicitly that the husband had not only not sought to overturn precedent, but had differentiated his own case from the key precedent.

Wood did note that nonmarital property can be divided on an equitable basis after taking various factors into consideration, including the length of marriage, age, health, station in life, vocational skills and others.

Here, the circuit court did not make findings under section 9-12-315(a)(2) to justify a distribution of nonmarital property. Instead, the court considered it marital property. For these reasons, we reverse and remand for the circuit court to enter an order awarding David the growth of his business as his nonmarital property absent a specific statutory finding to justify any distribution to Nancy
John Moore had also challenged the judge's award of $5,000 monthly alimony until his ex-wife turned 65. The Supreme Court majority said this did not abuse discretion given factors cited, but said the lower court should reconsider alimony when it reconsiders property division because "property division and alimony [are] complementary devices that the circuit court may utilize in combination to make the dissolution of marriage equitable."

UPDATE: Alarms are already going out in domestic law circles and accountants are already devising ways for people to set up holding companies in advance of marriage into which subsequent creations can be moved to avoid future property divisions. More law will be made before this is over, but the tremors seem seismic.

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