Dear Nick and Dear Nora:
I’m pleased that you both say you’ll start reading my letters about your divorce. I still have plenty to say, but at this point it might not be very useful to you. It’s been 27 months since separation, so you are well within the window where your case becomes “ripe for settlement.” The only professional help you’ll need should be someone to write up the agreement you’ve reached on your own and someone to complete the grotesque set of forms the legal bureaucracy has created for transforming an agreement into a judgment. (The forms come from the state; our local court has to use them but had nothing to do with their creation.)
I know you are in the settlement window because of factual evidence collected from Superior Court files in South County Santa Barbara. The complete version of the following information, and much more, can be found at SBDivorceArchives.com.
» In the monster six-year longitudinal census of the first 356 cases filed in 1997, the overall average interval between separation and entry of judgment was 29.90 months.
This finding was validated in the replication study using a random sample from the first 356 cases filed in 2001; the overall average interval was 28.85 months.
» For long-term marriages like yours, the census found an average interval of 31.6 months.
» Long-term marriages were divided into those with and without children. For long-term marriages without children, the mean interval was 20.61 months.
. . .
You both say that, with the exception of occasional and brief relapses, the depression (so much a part of divorce grieving) has lifted. You both feel good — and you both believe it’s unresolved legal issues that are blocking the completion of your legal divorce. They are:
» Who gets reimbursed when inherited money was used for your mutual benefit? Both of you inherited about $200,000 during marriage. Nick used his money as a down-payment on the house you purchased in 1988. Title was taken as “Nick and Nora, Husband and Wife.”
» Nora received her inheritance in 1995. You already had the house, so she used her money to pay for orthodontia, tuition for both children at Santa Barbara Middle School and an extravagant trip around the world for all four of you.
Both lawyers say Nick gets reimbursed for $200,000 off the top of community assets, and Nora gets nothing.
» Because of business travel, Nick has accumulated lots and lots of “airline miles.” You say you live in Santa Barbara because that’s where you want to be. But you hated the travel, and Nora could have taken the trips and conducted the necessary business, but she didn’t want to leave Santa Barbara and wouldn’t. Nora agrees with your recollection. You insist that you’re entitled to the miles as a meager reward for the misery you endured.
Both lawyers and Nora say your position is absurd. You are unmoved, and you won’t even disclose how many miles you’ve accumulated. The lawyers also agree that any refusal to disclose financial information is a bad move.
» Seven years ago, you decided to buy a San Francisco company that makes sequins. You agree that you should not attempt to continue to own the “Sequin Factory” together, but you can’t agree on what it is worth or who should get it as part of his or her half of the community estate.
You haven’t admitted it yet, but the real problem is that you are both tired of sequins and want to get out of the business. You have six very loyal employees who depend on the operation of the factory for their livelihood. If the company were to shut down, there is no demand in the labor market for “sequin makers.”
. . .
I’ll use the balance of this letter to discuss the reimbursement issue. It’s a lawyerly subject.
Between 1970 and 1984, the property values in California were soaring. The courts developed two different rules for dealing with cases where there was a separate property contribution to the acquisition of a house that had tripled or quadrupled in value when the couple divorced.
The first solution used the ratio between separate and joint contributions to apportion gain. As an illustration, assume that wife used $200,000 of her money for the down payment and $200,000 of joint savings to remodel. At divorce the property has appreciated by $800,000. Under the first rule, she put in three-fourths of the investment so she’d get $600,000 of the appreciation. He put in one-fourth, so he would get $200,000.
The second rule came from the Supreme Court, which started with the premise, “Couples who take joint title to property intend to have equal interests, so that’s what the law will enforce at divorce.” Thus, if every penny used to acquire the jointly titled property was Wife’s separate property, at time of divorce Husband gets half of all the appreciation and half of the separate property Wife used for the down payment.
The only good thing about this rule is that it is simple to apply: divide by two. But that benefit was lost when the Supreme Court expanded their decision to allow couples to change the effect of the title document with either an oral or written agreement. The law otherwise requires important agreements to be in writing so they can be enforced on the basis of a writing and not on “he said; she said” testimony. In other words, the court encouraged trials on separate property reimbursement issues to be decided on the basis of pillow talk.
Putting cases like these before a court is like tossing a coin. The rule increases the number of trials because the lawyers can’t predict the outcome. One characteristic of a good Rule of Law is that it promotes the resolution of conflict; however, this Rule from the Supreme Court generated conflict.
The Supreme Court’s rule was so dysfunctional that Democrats and Republicans actually agreed on the creation of a principle that returned a separate property contribution if it could be traced into the acquisition of a jointly held asset. All appreciation was divided equally. This principle, now Family Code Section 2640, went into effect on Jan. 1, 1984. The Legislature actually made a finding that the Supreme Court’s treatment of this particular issue was so inept that Section 2640 had to be retroactive.
The Supreme Court couldn’t do anything to wreck the substance of Section 2640, but in 1995 — 11 years after Section 2640 went into effect — it had an opportunity to decide that the retroactive effect was unconstitutional and that its own dreadful Rule applied to any case where the property was purchased before 1984.
Occasionally we see an odd set of facts, but for the most part the reimbursement problem has been solved. Or has it? What about Nora? Nick, you acknowledge that she used her $200,000 for the benefit of the whole family, but she can’t trace the money into a jointly titled asset because there is no asset.
I’ll say it again. The lawyers actually agree. Nick gets reimbursed, and Nora gets nothing. Nick, you, of course, agree with the lawyers, saying, “I’ll just go along with The Law.” Nora, you, as only you can do it, insist that the law is preposterous. You have some colorful words and phrases to describe people who take advantage of an unjust law, which, at this moment, includes Nick.
. . .
Even if you just glance at what I’ve written about “reimbursement,” it’s possible that I’ve still made my point. It’s this: law is essential for us to live and to do business with each other, but it isn’t magic or sacred. It’s contrived; we all drive on the left side or on the right side of the road.
Nick, you have the law on your side. You also have a red hot Nora on your back. Your case is not going to settle until you give up or until you can look at Nora and tell her that you’re going to get your money back but she’s not getting hers — and then you must find a way to convince her you are capable of enduring her sincere, vehement, and relentless loathing. I wonder if your lawyer, or the Superior Court, or the Court of Appeal, or the Supreme Court or the entire California Legislature will be able to protect you from that?
. . .
In the next letter I’ll tell you why the “airline miles issue” is both common and difficult, even though the law is clear and logical and should prevent conflict and promote resolution.
The Sequin Factory is something else; it will serve as an example of why the law can’t solve every legal problem.
Your friend,
Bucky
— Brian H. Burke is a certified family law specialist practicing family law and mediation in Santa Barbara. A researcher and educator in the field of divorce and family conflicts, he is also the creator of the Legal Road Map™. Click here for more information, call 805.965.2888 or e-mail info@burkefamilylaw.com. Click here to read previous columns. The opinions expressed are his own.