The Conundrum of Gifted, Inherited and Premarital Property in Divorce
| Publication year | 1998 |
| Pages | 16 |
David S. Dolowitz, J.
On August 16, 1988, the Utah Supreme Court issued its opinion in Mortensen v. Mortensen, 760 P2d 304 (Utah 1988), apparently to serve as the seminal opinion in resolving conflicting decisions regarding award of gifted, inherited and premarital property in a divorce proceeding. Justice Howe, speaking for the majority, reviewed virtually all prior Utah Supreme Court decisions on this subject and, after observing that these decisions were inconsistent, declared:
[The decisions] can be reconciled because of the effort made by the nondonee or nonheir spouse to preserve or augment the asset, Dubois v. Dubois, supra, or because of the lack of such effort, Burke v. Burke, supra. Also, in Weaver v. Weaver, supra, the award to the wife of part of the assets given to the husband during the marriage by his family was in lieu of alimony and attorney fees. Significantly, no case has been found where this Court has reversed a trial court's disposition of gifts or inherited property received by one party during the marriage. In almost every case, we have emphasized the wide discretion trial courts have in property division and have refrained from laying down any general rules for the disposition of gifts and inherited property.
760 P.2d at 306-07. Then, after reviewing decisions from other jurisdictions, the Court articulated what was to be the I prospective rule in Utah:
We conclude that in Utah, trial courts making 'equitable' property division pursuant to section 30-3-5 should, in accordance with the rule prevailing in most other jurisdictions and with the division made in many of our own cases, generally award property acquired by one spouse by gift and inheritance during the marriage (or property acquired in exchange thereof) to that spouse, together with any appreciation or enhancement of its value, unless (1) the other spouse has by his or her efforts or expense contributed to the enhancement, maintenance, or protection of that property, thereby acquiring an equitable interest in it, Dubois v. Dubois, supra, or (2) the property has been consumed or its identity lost through commingling or exchanges or where the acquiring spouse has made a gift of an interest therein to the other spouse. Cf. Jesperson v. Jesperson, 610 P.2d 326 (Utah 1980). An exception to this rule would be where part or all of the gift or inheritance is awarded to the nondonee or nonheir spouse in lieu of alimony as was done in Weaver v. Weaver, supra. The remaining property should be divided equitably between the parties as in other divorce cases, but not necessarily with strict mathematical equality. Teece v. Teece, 715 P.2d 106 (Utah 1986). However, in making that division, the donee or heir spouse should not lose the benefit of his or her gift or inheritance by the trial court's automatically or arbitrarily awarding the other spouse an equal amount of the remaining property which was acquired by their joint effort to offset the gifts or inheritance. Any significant disparity in the division of the remaining property should be based on an equitable rationale other than on the sole fact that one spouse is awarded his or her gifts or inheritance. The fact that one spouse has inherited or donated property, particularly if it is income-producing, may properly be considered as eliminating or reducing the need for alimony by that spouse or as a source of income for the payment of child support or alimony (where awarded) by that spouse. Such property might also be utilized to provide housing for minor children or utilized in other extraordinary situations where equity so demands. These rules will preserve and give effect to the right that married persons have always had in this state to separately own and enjoy property. It also accords with the normal intent of donors or deceased persons that their gifts and inheritances should be kept within their family and succession should not be diverted because of divorce.
760 P.2d at 308-09.
In concurring with this general rule, Justice Zimmerman, speaking for himself and Justice Durham, stated:
As I read the majority opinion, the rules articulated today require only that in the usual case not fitting within one of the exceptions spelled out by Justice Howe, property acquired by one spouse during the marriage through gift or inheritance should be awarded to that spouse upon divorce. I take this to be nothing more than a variation on the analogous rule applicable to property brought into the marriage by one party: in the usual case, that property is returned to that party at divorce, absent exigent circumstances. Preston v Preston, 646 P.2d 705, 706 (Utah 1982). 760 P.2d at 310.
Factually, Mr. Mortensen's parents had organized a corporation and conveyed the family farm to it. They gave 50% of the stock to themselves and divided 50% among their five children, one of whom was Mr. Mortensen. A stock certificate, bearing his name alone, was issued to him for 10% of the outstanding shares. Mrs. Mortensen was not involved with the corporation except for some minor secretarial duties. The issue that came before the trial court was whether that gifted stock was part of the marital estate. The trial court ruled that the stock was property of the marriage and should be taken into consideration in dividing the marital property. The stock thereafter was awarded to the defendant and Mrs. Mortensen was awarded about two-thirds of the value of the remaining property. This was done by stipulation reserving the issue presented to the Supreme Court in the appeal as to whether or not the stock should have been considered marital property or outside the marital estate.
After making the clear articulation of the rule governing an award of gifted, premarital or inherited property quoted above, the court promptly proceeded to violate this articulated rule, application of which would have excluded the stock from the marital estate and any adjusting property award because the stock belonged to Mr. Mortensen. The court based its decisions on the equitable factors that the parties had married at a young age, that the defendant had continued his education and obtained a Ph.D., taught and was teaching at a private university while the plaintiff, after the last of their four children was born, went back to school and obtained a bachelors degree and teaching certificate, that the defendant was earning approximately twice what the plaintiff earned each month, yet agreed to the receipt of no alimony and child support for the three minor children in her custody and that while there was no evidence in the record regarding the retirement benefits to which the parties may have become entitled, the Court thought the defendant's benefits would have been greater because of his higher salary and longer years of employment. The Court ruled:
"The stock thereafter was awarded to the defendant and Mrs. Mortensen was awarded about two-thirds of the value of the remaining property. This was done by stipulation reserving the issue presented to the Supreme Court in the appeal as to whether or not the stock should have been considered marital property or outside the marital estate."
In view of these factors, it would not have been inequitable for the trial court to award plaintiff two-thirds of the remaining property and defendant one-third, giving no weight at all to the fact that he received his shares of stock.
760 P.2d at 309. Thus, while the Supreme Court had articulated a seminal rule, it did not apply the rule just articulated to the facts before it nor did it explain that it was applying the articulated rule yet accepting the decision of the trial court.
The Mortensen ruling affirming an unequal distribution of marital property was fully in accord with precedent, e.g., Pope v. Pope, 589 P.2d 752, 753 (Utah 1978), Kerr v. Kerr, 610 P.2d 1380, 1382-1383 (Utah 1980) and Henderson v. Henderson, 576 P.2d 1289, 1290 (Utah 1978), but the failure of the Court to describe why the just articulated rule was not being applied continued the confusion the decision was to end. Had the Court gone on to explain why it was not applying the just articulated principle and the exception being utilized rather than presuming that everyone would understand it, the rule could have been established and applied, not ignored. The governing principle articulated by Justice Howe for the Court could have been applied in the fashion that Justices Zimmerman and Durham anticipated. However, rather than either explaining or articulating why the Court varied from its just articulated rule, it simply made the declaration quoted above. 760 P.2d at 309. By doing so, the Court in reality turned back to its prior decision of one year earlier, Burke v. Burke, 733 P.2d 133 (Utah 1987).
In Burke, the Court ruled that any appreciation during the marriage of the value of the property which the wife had inherited did not become part of the marital estate in which the husband was entitled to share based upon equitable principles. The specific facts in Burke were that three-and-a-half acres of unimproved land were inherited by the wife in 1979. No improvements were made on the property and the parties did nothing to enhance its value. At the time of its inheritance, the land had a value of $5,000.00. By the time of the divorce, it had appreciated to $35,000.00 an acre due solely to inflation in real estate values in the area. Dealing with the specific issue we are now examining, the Supreme Court explained:
Defendant first contends that while it was proper for the court to preserve the plaintiff's ownership of the property she inherited, any appreciation in its value during the marriage became a part of the marital estate in which he is entitled to share. The version of the statute governing the disposition of...
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