Disclosure Statements Pre-Divorce
HandelontheLaw.com Staff Writer
One of the most important reasons for consulting an attorney is the constant evolution of law. One way it which it involves is through court decisions on issues of “first impression.” An issue of “first impression” is one that has not previously been decided by a court; therefore, the first court to address the issue will write new case law by its decision.
One recent example in California involves disclosure statements between spouses who subsequently file for divorce. Chapter 9 of California’s Family Code requires that parties to a divorce must prepare and serve a preliminary disclosure declaration and a final disclosure declaration of their assets and liabilities on the other party. In the case of William and Joy Evans (In re the Marriage of Joy and William Evans), the issue of “first impression” is whether the disclosure requirement applies to pre-divorce agreements.
William and Joy Evans were married in July 1985 and separated in March 2007. On May 5, 2007, without exchanging any disclosure statements, they both signed a “Pre-Divorce Agreement” typed by Joy. The agreement contained their wishes, including the division of their sole major asset – the marital residence – and stated that it was made in contemplation of their marriage’s dissolution through divorce. Specifically regarding the marital residence, they agreed: that William would pay Joy 50% of the marital residence’s net equity; that the marital residence had $600,000 in net equity; that William would therefore pay $300,000 to Joy in exchange for her interest in the marital residence. After the agreement was signed but before either of them filed for divorce, William paid $197,000 to Joy, leaving a balance of $103,000 unpaid for her 50% interest in the marital residence.
Joy filed a petition for divorce in February 2009. In 2010, William and Joy served preliminary disclosure statements on each other. In 2012, Joy served her final disclosure declaration on William but William never served a final disclosure declaration. At time of dissolution proceedings the marital residence had an estimated fair market value of $420,000 and was also encumbered by a promissory note by a first deed of trust with an unpaid balance of $350,000, making the net value of the marital residence only about $70,000. William, who still owed $103,000 per the pre-divorce agreement, moved to set aside the pre-divorce agreement based on the fact that the couple did not exchange preliminary and final disclosure declarations before signing the agreement.
The trial court denied the motion, holding that the requirement for exchanging declarations is triggered by filing a petition for dissolution of marriage and since the pre-divorce agreement was executed before filing, there was no requirement for exchanging declarations. The trial court incorporated the terms of the pre-divorce agreement into the judgment of dissolution.
William appealed to the Court Of Appeal Of The State Of California, Fifth Appellate District. The court had to examine an issue of “first impression,” the question of whether the requirement for preliminary and final disclosure declarations applies to pre-divorce agreements. In order to reach its decision, the court considered the plain meaning of the statute’s language and the statute’s interpretation within the entire statutory scheme of Chapter 9 of the Family Code. The court concluded that the trial court ruled correctly: the requirement for exchanging declarations is triggered by filing for dissolution; therefore, there was no such requirement when the parties reached their pre-divorce agreement; consequently, the agreement is binding and should be incorporated in the judgment of dissolution. In this instance, the Court of Appeals wrote new case law by addressing an issue of “first impression,” and divorce lawyers will be aware of that new case law.
By Kathy Catanzarite
Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.