Thursday, November 15, 2012

Why should a Decree of Dissolution include all assets and liabilities of the parties?

One of the main mistakes people make when they get a divorce without attorneys’ help is failure to disclose all property and debt in the Decree of Dissolution. I think, in the majority of cases people do not want to inform their future-to-be-ex-spouses about wealth that they have due to the fear that their spouses will want to get those assets.  

Unfortunately, judges at ex parte departments of the courts, who finalize agreed upon divorces, generally do not have much time and desire to read an entire Decree. They would approve even a deficient Decree on the assumption that when both parties sign the document, those parties made sure that the document is full and clear. Moreover, neither judges nor commissioners can give legal advice.

As both spouses agreed to the deficient Decree of dissolution, why then it might be a problem? For one very important reason: people change their minds pretty often. The usual scenario is as follows:

Spouses decide to get a divorce. One of them drafts the documents. The other one signs the documents. Neither one consults an attorney. Several months later, one of the spouses finds out that the other one has a lot more property then the first spouse knew or the spouses cannot agree to how exactly the property should be divided (and the Decree is silent, of course). One of them consults an attorney, who recommends a do-over.

This is exactly what happened in an unpublished opinion In Re the Marriage of Petranek and Blatchley. In that case, Petranek and Blatchley did not divide majority of the assets that they had. When time came to become truly financially separate from each other, Petranek, with attorney’s help, filed a motion to vacate decree of dissolution and redo division of assets and liabilities. The trial court agreed. Blatchley appealed.

The court of appeals upheld trial court’s decision on the following grounds (quote from the court order, all citations are omitted to ease reading):

“RCW 26.09.170(1)(b) provides that a property disposition in a dissolution decree “may not be revoked or modified, unless the court finds the existence of conditions that justify the reopening of a judgment under the laws of this state.

 CR 60(b), which allows the courts to vacate prior judgments, is one such law allowing courts to reopen dissolution decrees. In relevant part it provides:

“On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons:


                (11) any other reason justifying relief from the operation of judgment.”

A dissolution decree may be vacated for extraordinary circumstances to overcome a manifest injustice. A trial court should exercise authority liberally and equitably to preserve the parties’ substantial rights.  

The operation of CR 60(b)(11) is confined to situations involving extraordinary circumstances not covered by any other section of the rule. The extraordinary circumstances must relate to irregularities extraneous to the action of the court. Errors of law may not be used to vacate a judgment. Typically, CR 60(b)(11) applies in situations involving reliance on mistaken information.

An ambiguity in a dissolution decree can constitute extraordinary circumstances where there was a manifest injustice the parties did not contemplate at the time of the original decree.

In the present case, the original dissolution decree’s only property disposition was the South Edwards property, but it only awarded “1/3 equity” to Blatchely and “2/3 equity” to Petranek. The court held “this created an ambiguity because this reference to equity does not purport to divide the real property itself or any ownership interest thereof. While the decree awarded some monetary award, it did not award title or ownership.

Further, the decree is silent to any other property, personal or real, and the findings of fact incorrectly state there is no other separate or community property. The decree thus left out the bank accounts, all the personal property, the Hawaii property, and even the South Edwards property title and ownership.

The court held that in these circumstances the trial court’s decision to vacate the original decree was proper. The dissolution decree’s misstatements, ambiguity, and incomplete disposition qualify as an extraordinary circumstance, where the trial court could not equitably divide the property. Although a partition action on each property could be used to determine ownership of each property, the trial court’s decision to vacate the original decree so that it could consider all of the property together and then divide it, for the first time, was reasonable. When the parties drafted the dissolution decree, they obviously did not force these problems. There were “extraordinary circumstances in this case which justified remedial action by the trial court to overcome a manifest injustice which was not contemplated by the parties at the time of the original decree.”

This case demonstrates two things:

1.       If you signed a Decree without disclosing all assets and now regret that decision (because your ex-spouse has significantly more then you though they did), there is a way to fix the problem.

2.       It if more cost effective and efficient and certainly less time consuming and stressful to fill out the paperwork correctly the first time, when you file for divorce. Do-overs are expensive but they are possible.