Reconsidering Property Division in Divorce Under Nebraska Law in Light of the Ali's Principles of the Law of Family Dissolution: Analysis and Recommendations

• Publication year: 2022

37 Creighton L. Rev. 1. RECONSIDERING PROPERTY DIVISION IN DIVORCE UNDER NEBRASKA LAW IN LIGHT OF THE ALI'S PRINCIPLES OF THE LAW OF FAMILY DISSOLUTION: ANALYSIS AND RECOMMENDATIONS

Creighton Law Review

Vol. 37

Craig W. Dallon(fn*)

I. INTRODUCTION

An important aspect of many divorce proceedings is the division and distribution of the parties' property. Admittedly, not all divorces involve significant property division issues.(fn1) In many divorces, because of the duration of the marriage or other factors, the parties have not acquired or retained significant amounts of property to divide.(fn2) In a large majority of cases, the parties by mutual agreement stipulate to the division of the property and judicial involvement is minimal.(fn3) Nevertheless, many cases are marked by sharp disagreements over division of the parties' assets, and the impact of property division on the parties may be substantial.(fn4) These disagreements typically arise in determining which property should be subject to division, the value of particular assets, or the appropriate overall allocation of assets. The law regarding property division is important even in cases where the parties stipulate to property division because property settlement agreements are influenced by what the parties would expect to receive if their cases were tried.

Little has been written in legal literature specifically about Nebraska law as it concerns division of property in marriage dissolution, but there is an abundance of helpful Nebraska case law available to guide lawyers and judges.(fn5) This article has two purposes. First, in Part II, it attempts to identify current Nebraska law as it concerns property division in marriage dissolution. Second, in Parts III and IV, it compares Nebraska law with the recent American Law Institute's Principles of the Law of Family Dissolution: Analysis and Recommendations.(fn6) This article suggests that the Nebraska equitable division approach is preferable to the ALI approach but argues that Nebraska should unambiguously embrace a presumption of equal division subject to equitable considerations.

II. NEBRASKA PROPERTY DIVISION LAW

A. PROPERTY DIVISION IN NEBRASKA COURTS

1. Purpose of Property Division and Reasonable Division

Fundamentally, Nebraska by statute authorizes courts to divide the parties' property when dissolution of marriage is decreed regardless of who acquired or possesses the property and regardless of whose name appears on any formal title.(fn7) The purpose of property division in an action for marriage dissolution "is to distribute the marital assets equitably between the parties."(fn8) The courts are directed to make a "reasonable" property division:(fn9)

having regard for the circumstances of the parties, duration of the marriage, a history of the contributions to the marriage by each party, including contributions to the care and education of the children, and interruption of personal careers or educational opportunities, and the ability of the supported party to engage in gainful employment without interfering with the interests of any minor children in the custody of such party.(fn10)

These same criteria are used for determining the propriety and amount of alimony.(fn11)

2. Enforcement and Review of Property Settlement Agreements

Happily for the parties and the courts,(fn12) in many divorces the parties by mutual agreement divide their property and debts through written property settlement agreements.(fn13) These agreements are sometimes referred to as, or incorporated in, broader "separation agreements."(fn14) Written property settlement agreements are endorsed by statute and are favored under Nebraska law.(fn15) Parties to such agreements may voluntarily agree to terms which courts would otherwise lack authority to order in contested cases.(fn16) The courts play a limited but important role in property divisions when there are property settlement agreements. An agreement is binding unless it is "unconscionable;"(fn17) the trial court has a duty to scrutinize a property settlement agreement to determine whether it is unconscionable.(fn18) The burden to produce evidence on the issue of conscionability rests squarely on the parties, although a trial court does have the discretion to request production of further evidence.(fn19)

An unconscionable agreement is one that is "manifestly unfair or inequitable."(fn20) Put differently, "the question is whether the evidence shows "any circumstance, economic or otherwise, which operates to render the effect of the agreement unjust to either party or obviously excessive in respect to benefits or burdens on either side.' "(fn21) Circumstances supporting unconscionability are fraud, intimidation,(fn22) ignorance,(fn23) passion, or improvidence.(fn24)

Nebraska courts on several occasions have found agreements dividing property unconscionable.(fn25) In Weber v. Weber,(fn26) a 1978 case, the Nebraska Supreme Court found a written property settlement agreement unconscionable based on unequal bargaining power coupled with objectively unfair results. In Weber, the parties divorced after a twenty-five year marriage. The husband, who was an experienced attorney, drafted the property settlement agreement which granted the wife $12,600 alimony,(fn27) a car, a life estate in the family residence, and certain child support.(fn28) Under the agreement, the husband received all other marital property(fn29) in the marital estate with a total value of $449,000.(fn30) The wife signed the agreement without consulting an attorney.(fn31) The Nebraska Supreme Court agreed with the trial court that the property settlement agreement was unconscionable. The husband's superior position of knowledge both as to the law and the value of the marital estate and the "manifestly unfair" results for the wife were determinative.(fn32)

Similar themes of superior bargaining power or ignorance coupled with unfair results were the basis for invalidating agreements in other cases. In an early case, Brun v. Brun,(fn33) the Nebraska Supreme Court held a deed conveying land to a wife was unconscionable. The deed was part of a settlement leading to the dismissal of the parties' first divorce action. In the second divorce action, the trial court "canceled" the deed where the husband could not read or write English, had difficulty understanding English, and where he misunderstood the contents of the deed.(fn34) The Nebraska Supreme Court in Pittman v. Pittman,(fn35) set aside a decree dividing property pursuant to a property settlement where the husband was not represented by an attorney and the agreement "on its face [was] unfair and inequitable."(fn36) The court was strongly influenced by the fact that the agreement was prepared by the wife's attorney, and the husband was not represented by an attorney.(fn37)

Again, in Moran v. Moran,(fn38) the Nebraska Supreme Court affirmed an order vacating a decree based on a property settlement agreement where the wife allegedly suffered from mental illness and had recently been committed to a hospital.(fn39) The wife claimed that she signed the agreement because the husband threatened that he would have her committed to the hospital again if she did not sign.(fn40) The court affirmed the trial court's order vacating the decree.(fn41)

In Martin v. Martin,(fn42) the Nebraska Supreme Court held an agreement dividing property invalid where the agreement was coerced and resulted in unfair and inequitable provisions. In Martin, the agreement was prepared by the husband; the wife was afraid she would lose everything if she did not sign it, and she feared physical harm if she did not sign it.(fn43)

In some cases, the Nebraska Supreme Court seems to hold that unfair results alone may support a finding of unconscionability. In Diers v. Diers,(fn44) the court affirmed rejection of a property settlement agreement that provided $13,000 to the wife from a marital estate worth $80,000 to $82,000.(fn45) The wife signed the agreement against the advice of her lawyer.(fn46) The trial court by not awarding property in the amount provided for in the settlement implicitly found the agreement unconscionable,(fn47) and the Nebraska Supreme Court agreed. Beyond the disproportionate terms of the agreement itself, there was no additional information in the opinion supporting unconscionability.

Again in Smith v. Ganz,(fn48) the Nebraska Supreme Court implied that unfavorable terms of a settlement alone may support a finding of unconscionability. In Smith, the court held that failure to communicate a divorce property settlement offer would not support a professional malpractice claim absent evidence that the settlement offer was not unconscionable.(fn49) The net marital estate was valued at $147,000 and the undisclosed settlement offer was for $20,000 as property settlement and $5,000 in alimony.(fn50) According to the plaintiff's own expert witness, in view of the value of the marital estate, the property settlement offer "might border" on unconscionable.(fn51) The court held that the malpractice plaintiff had failed his burden to establish that the offer was not unconscionable and therefore likely to be accepted by the court.(fn52)

Normally, when a party to a property settlement agreement is represented by a competent attorney(fn53) it is difficult to claim that an agreement is unconscionable.(fn54) As Diers...