There are two types of property, and courts treat them differently at the time of divorce.  The first type and largest class of property is “marital property”, which is everything the parties own, regardless of how it is titled, when it was acquired, or how the asset was handled during the marriage.

The second type is a a small class of property within the category of marital property called “marital assets.”  Martial assets are property that was acquired during the marriage.

These property definitions matter because courts apply a presumption of equal contribution to “marital assets” but not to marital property acquired before the marriage date.  People and lawyers still argue about the presumption of equal contribution and the division of marital assets, but the difference in how property is categorized can make the difference between retaining the property as a separate asset, or having the property divided by the court.

Note that divorce courts are courts of equity, and have the responsibility to work a property division that is fair, or “just and proper in all the circumstances.”  Because of this obligation to be fair, the court can and does sometimes award a premarital asset of one party to make sure a property division is fair.

If you have questions about how your property may be divided by the court in a divorce case, you should consult with an experienced family law lawyer. The lawyers of Stephens Margolin PC have extensive experience representing Oregon clients in the division of property during divorce.

There are some limited exceptions where the court can revisit part of a property award.  One exception is for “omitted” assets.  The court has the authority under ORS 107.452 to reopen the property distribution if a significant asset is left out of the division. What authority the court has depends on whether the asset was omitted accidentally or concealed and omitted intentionally.

It is critical to make sure you are aware of the nature and extent of the marital property, and that you have good advice from a lawyer about what property division is fair in your case. You should consult with an experienced divorce lawyer before signing any final property agreement.

“I still haven’t decided how to split the cow,” he told the newspaper. “She should just say what she wants — the part with the horns or the part with the tail.”

On March 19, 2008, the Oregon Court of Appeals, in Ornelas and Ornelas, explained the difference between awarding attorney fees in arbitration appeals and appeals to the court of appeals.

In an Oregon divorce case where the parties have no children and no spousal support award is requested by either party the case is sent to mandatory arbitration. If either party disagrees with the result in arbitration, that party can appeal the arbitrator’s ruling for a trial de novo at the circuit court level. That means that a judge will look at the case without referring to the arbitrator’s ruling.

ORS 36.425(4)(c) provides:

“If a party requests a trial de novo under the provisions of this section, the action is subject to arbitration under ORS 36.405(1)(b), and the position of the party is not improved after judgment on the trial de novo, the party shall not be entitled to an award of attorney fees or costs and disbursements and shall be taxed the costs and disbursements incurred by the other parties after the filing of the decision and award of the arbitrator.”

This means that the trial court must make an award of attorney fees to a party who asks for a trial after arbitration and does not receive a better result.

In Ornelas, the husband was upset because his wife not only asked for trial de novo after she was unhappy with the arbitrator’s ruling, but also appealed the trial court’s ruling. She received a worse result on appeal than she did at arbitration or at the trial court level. Therefore, husband argued that wife must pay his attorney fees.

The court of appeals ruled that the attorney fee award language in ORS 36.425(4)(c) only applies to trial de novo and not to appeals. This is because the court of appeals has discretion to award or not award attorney fees on appeal pursuant to ORS 107.105. Meaning that even if you do worse on appeal that at arbitration, you can still receive an attorney fee award.

The court ended up not awarding attorney fees to either party since the final distribution of martial assets put husband and wife on roughly equal financial footing.

The entire opinion can be reviewed at http://www.publications.ojd.state.or.us/A128901A.htm.

Let’s start with what seems like the easy part: what are domestic partnerships? Under OFFA, same-sex couples over 18 may register as partners. However, heterosexual couples may not register as partners (primarily because they already have the ability to receive these benefits through marriage). Because the Oregon Constitution limits marriage to heterosexual couples, a separate mechanism for uniting families was required. (Check out the Basic Rights Oregon website for a wonderful guide to the legislation.)

But what are these automatic rights married couples get that unmarried and unregistered domestic partners don’t have?

Some rights are obvious: for example, to make medical decisions for a partner when the partner is unable to make those decisions him or herself or to automatically inherit property if a partner dies without a will. Others aren’t as obvious, like the ability to claim wrongful death benefits or crime victim survivor benefits if a partner is killed.

Some rights are provided by the state, like the automatic inheritance of a partner or how custody would be determined in a partnership dissolution, because inheritance and family laws are set by the state. Other rights are federal, like the ability to file jointly on federal income taxes. Oregon’s domestic partnership law can only affect state-provided rights. Subsection 9 of the legislation provides that “any privilege, immunity, right or ben3efit granted by statute, administrative or court rule, policy, common law or any other law to an individual because the individual is or was married….is granted on equivalent terms, substantive and procedural, to an individual because the individual is or was in a domestic partnership…”

It doesn’t get more equal than that in Oregon, save in name alone. Additionally, registered partners also have all the same responsibilities as married couples!

But since this is a legal blog, we’re mostly concerned about the juicy bits – those rights dealing with estate planning, wrongful death claims, adoptions, custody, and, of course, dissolution of the partnership.

But first, a little history. Some readers might be surprised to learn that domestic partnerships in family law courts aren’t new in Oregon. In fact, Oregon family law courts have dissolved an increasing number of heterosexual domestic partnerships. In doing so, the court would look back and determine whether or not the parties actually intended to form a domestic partnership: even though these are relationship dissolutions, frequently one party argues it was not a partnership (usually the party with assets) and the other argues that it was (usually the party with fewer assets). To find out what the parties intended, the court uses a test usually used in the context of business partnerships – did the parties intend to pool resources and share liabilities? If the answer is yes, then the court tries to find an equitable way to divvy up the parties’ resources. If no, then the parties keep their separate property.

Sounds easy, right? But it’s not. The court can’t order spousal support. Custody of children is very complex, because for a non-biological parent to receive custody or visitation, another action must be filed (although in fairness, it may be joined to the dissolution of domestic partnership action). Basically, in the absence of a clear statute, the family law court exercises its equity powers — basically, whatever the court thinks is fair on that day. This means results can vary even more widely than they can with the assistance of statutes.

What OFFA does for same-sex couples is give the court all of the well-developed tools the legislature has enacted over the years for the dissolution of marriage cases, as well as providing more options for determining custody of children in a partnership dissolution. (If you want to know just how busy the legislature has been in developing and honing those family laws, take a gander at ORS 107 and ORS 109!)

We hope domestic partnerships thrive. However, if you have registered a partnership and wish to dissolve it, think carefully about your next steps and consult with an attorney well versed in dissolution of marriage procedures. Due to the sensitivity of the subject matter, don’t be shy about asking your attorney what he or she thinks of your lifestyle. It does matter. It’s important that there be an open and trusting atmosphere in your dealings with your dissolution attorney.

*Although states are supposed to give each other’s laws “full faith and credit” under the US Constitution – and this includes honoring marriages – states do not have to do so when another state’s laws violate public policy in that state. This was, generally, the way the law was practiced before the enaction of the so-called “Defense of Marriage Act” (or DOMA) in 1996, but it’s now the law of the land. So, for example, if a couple marries at the age of 14, and that is legal in the state in which they reside, but is illegal in another state, the question of the marriage’s validity in the second state is up for grabs, depending on the policy implication of 14 year olds marrying. If thinking about this makes your head hurt, you’re not alone: the topic of marriages alone took up weeks in my Conflicts of Law class.

The Olson decision dealt with husband’s appeal from a trial court ruling equally dividing husband’s inheritance (an 80 acre estate consisting of timber and a residence.) The trial court (in Lane county) treated the 80 acres as a marital asset and divided the inherited value and post-inheritance appreciation equally between the parties. Husband appealed in light of the Oregon Supreme Court’s ruling in Kunze and Kunze, 337 Or 122, 92 P3d 100 (2004), arguing the court should have excluded the inherited property from division, or awarded wife only a small fraction of the property’s value.

Wife and husband married in 1995, and divorced in 2006. In 1995, husband’s father (“grandfather”) lived on an 80 acre timber property. Father’s relationship with grandfather was strained, but father was closer to grandfather than other family members. The parties jointly considered buying the property from grandfather, but did not complete the purchase. They spent $3000 investigating the purchase. Husband and wife’s relationship with grandfather soured in 1997, and the parties shelved their plans to move to the property. Husband’s relationship with grandfather improved, but cwife’s did not.

Grandfather died in 2000, and husband inherited the entire estate. Husband transferred the 80 acres to himself in his sole name (the property was worth $330,000 at the time.) Wife was not put on title. Other proceeds of the estate were mixed with the parties’ finances. Husband sold equipment and deposited it into a joint account, and the parties spent $10,000 in joint funds on an attorney for the estate. Husband and wife continued to file joint income taxes. At the time of trial in 2006, husband’s inherited property was worth $465,000.

In Oregon, property division at trial is controlled by ORS 107.105(1)(f). Under the property division statute, property received by a party during the marriage (by inheritance, gift, wages, or otherwise) is considered a “marital asset”, which means the court assumes both contributed equally to earning the asset, and that the asset should be divided equally. This is a “rebuttable” presumption, meaning that either spouse can challenge the other spouse’s contribution to an asset (and thus argue to receive a larger share of the asset.) Herein lies the main dispute in Olson. The trial court held that wife, through her labor on the property, and the use of the joint account in maintaining the property, had established that the property was “marital” and subject to equal division. The trial court equally divided both the premarital value of the property, and the appreciation on the property during the marriage. The trial court did not make specific findings as to WHY it had exercised its’ discretion in awarding wife half of the inherited value and the appreciation on the property during the marriage.

In reducing wife’s property award, the Oregon Court of Appeals quoted the Oregon Supreme Court’s construction of ORS 107.105(1)(f):

In dividing the parties’ property, we follow ORS 107.105(1)(f), as construed in Kunze, 337 Or at 134-36. Under that case, we undertake a series of inquiries, described by the Supreme Court:

“If a party establishes that the property at issue is a marital asset * * *, then the court must apply the rebut table presumption of equal contribution under ORS 107.105(1)(f) as its next step in the analysis.* * * [T]he presumption directs the court that, unless proven otherwise, the court must find that both parties have contributed equally to the acquisition of marital assets. When the statutory presumption is not rebutted, this court has determined that, absent other considerations, the ‘just and proper’ division of the marital assets is an equal division between the parties. * * *

“Because the presumption of equal contribution under ORS 107.105(1)(f) is rebut table, either or both of the parties may seek to overcome it. If a party seeks to overcome that presumption, then that party has the burden of proving by a preponderance of the evidence that the other spouse’s efforts during the marriage did not contribute equally to the acquisition of the disputed marital asset. In assessing whether a party has satisfied that burden, ORS 107.105(1)(f) requires the court to consider both economic and non-economic espousal contributions, including the contributions of a spouse as a homemaker. ORS 107.105(1)(f) (court shall consider contribution of spouse as homemaker). If a party ultimately rebuts the presumption that the other spouse contributed equally to a disputed marital asset, then the court decides how to distribute that marital asset without regard to any presumption and, instead, considers only what is ‘just and proper in all the circumstances,’ including the proven contributions of the parties to the asset. When a party has proved that a marital asset was acquired free of any contributions from the other spouse, however, this court has determined that, absent other considerations, it is ‘just and proper’ to award that marital asset separately to the party who has overcome the statutory presumption.

“After the court makes its preliminary determination of the appropriate division of the marital assets by applying the statutory presumption, ORS 107.105(1)(f) next requires that the court consider what division of all the marital property–that is, both the marital assets and any other property that the parties had brought into the marriage–is ‘just and proper in all the circumstances.’ By contrast to the focus upon the parties’ respective contributions under the statutory presumption, the court’s final inquiry as to the ‘just and proper’ division concerns the equity of the property division in view of all the circumstances of the parties. * * * The trial court’s ultimate determination as to what property division is ‘just and proper in all the circumstances’ is a matter of discretion.”

The Oslon court held that for Wife to benefit from the premarital value of the property, she must show that her contribution to the property influenced the inheritance, and that grandfather intended for her to receive the estate. Wife did not show that her work on the property influenced the inheritance, or that she was the intended recipient of the estate. The court thus concluded that she did not influence the inheritance and also did not contribute equally to the acquisition of the property.

The Oslon court next considered whether Wife was entitled to a portion of the appreciation on the property during the marriage. The Olson court held that it must consider both economic and non-economic contributions in considering whether the presumption of equal contribution has been rebutted. Wife, without compensation, had primarily raised the partes’ children. She contributed her earned income to the family. She made substantial contributions of labor to grandfather’s property. The Olson court held that husband had not rebutted wife’s contribution to the appreciation on the 80 acres.

The court went on to award wife 25% of the pre-inheritance value of the property because it was “just and proper in all the circumstances.” In awarding wife a portion of the pre-inheritance value of the property, the court primarily considered that the property had been treated as “commingled” by the parties. While held in husband’s name alone, the parties had intermingled the property with their personal affairs, and jointly labored on the property. Wife has separately researched whether they were eligible for a Ballot Measure 37 claim. In considering what was “just and proper” the court found that some fraction of the inherited value, less than half, should be awarded to wife. The Court of Appeals awarded wife 25% of the inherited value, and 50% of the appreciation between inheritance and divorce. The Court of Appeals then reduced wife’s equalizing judgment.

The Court of Appeals went out of its way to explain that the trial court’s decision had been modified because the rationale for the decision was not clear in the court’s record. Normally, the Appellate court respects the lower court’s rulings as to husband and wife’s credibility, both express and implied. If the trial court record does not reflect why it made a credibility decision, it is subject to adjustment at the appellate level.

What lesson does Olson offer for a husband or wife facing a divorce trial in Oregon? First, present the court in a trial memorandum with the proper property division analysis under ORS 107.105(1)(f) and the Kunze case. Second, make sure the court’s ruling is clear in the final judgment (see our earlier post on well drafted judgments.) Third, make sure the court’s record and the divorce judgment includes findings as to WHY the court is making the specific property division. Make sure your lawyer asks the court to make specific findings of fact! If the trial court exercises discretion in dividing property, but does not explain why, you are leaving your decision open to reconsideration by a higher court.