Tuesday, July 31, 2007

Case Law Development: Dividing Increase in Asset Value

In a case that would provide a fine basis for a class discussion problem, the Supreme Court of Iowa considers equitable distribution of asset appreciation in a 15-year marriage.  The court held that the trial court had erred in not dividing the increase in the value of both spouses’ premarital assets.  The trial court had awarded each spouse the passive increase in the value of their premarital assets but had divided the increase it attributed to marital efforts. 

The Supreme Court reversed, finding that marital contributions were of little help in determining what was equitable in a 15-year marriage: 

We do not find the parties’ respective contributions to the marriage justify treating the parties differently. Michele’s biggest criticism of Ted is his “failure without good cause to contribute financially to the marriage consistent with his earning capacity.” However, we have never held or even insinuated that spouses should maximize their earning potential or risk being punished in the distribution of the parties’ property.

Iowa is a no-fault state. … It is important to remember marriage does not come with a ledger. … Spouses agree to accept one another “for better or worse.” Each person’s total contributions to the marriage cannot be reduced to a dollar amount. Many contributions are incapable of calculation, such as love, support, and companionship. “Financial matters . . . must not be emphasized over the other contributions made to a marriage in determining an equitable distribution.” … Nor do we find it appropriate when dividing property to emphasize how each asset appreciated—fortuitously versus laboriously—when the parties have been married for nearly fifteen years.

The court did, however, allocate to husband $22,000 of debt that he had incurred after wife’s petition for divorce.  Because husband was unable to explain why he had incurred this debt or how it had been spent, the court found it equitable to allocate this debt exclusively to husband.  The opinion provides a fine summary of Iowa law on dissipation of marital assets and division of debt.

In Re Marriage of Fennelly, (July 20, 2007)

Opinion online (last visited July 30, 2007 bgf)

http://lawprofessors.typepad.com/family_law/2007/07/case-law-deve-3.html

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