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Principle of Equity Trumps Contractual Agreement
- by Erin Herbold
March 15, 2010
In this case, the parties divorced after 39 years of marriage. Before their marriage, the couple executed a pre-marital agreement. Both parties were represented by legal counsel, and it was agreed that the real property in the possession of each party would remain separate property upon a divorce. There was no statement of the real property ownership attached to the document, but both parties agreed that the husband owned 160-acres of farmland before the marriage. Years later, the elderly husband went to the nursing home and was scheduled to be released in May 2008. But, a week before he was to be discharged from the nursing home, his wife left him.
The wife subsequently filed for divorce. Unable to agree on the property allocation, the parties proceeded to trial to resolve their numerous disputes. The trial court ruled that the 160-acres belonged to the husband in accordance with the premarital agreement. The wife appealed, arguing that she should have been awarded “her share” of the farm, because, in spite of being represented by legal counsel, she “misunderstood” the intent of the pre-marital agreement. The wife claimed that she only saw the agreement the day it was signed, and also argued that the agreement should not be enforceable given the length of the marriage.
In divorce matters, Iowa is an “equitable distribution” jurisdiction. That is certainly the case when a premarital agreement is not involved. But, premarital agreements are valid if both parties were represented by legal counsel and other outside factors aren’t present and can change the outcome of an “equitable” distribution between spouses upon divorce. So, while the question before the appellate court was whether the wife was treated equitably in the divorce proceedings, the broader issue was the impact of a valid and enforceable premarital agreement. The appellate court determined that the existence of the premarital agreement was only part of the analysis. Iowa Code §598.21 (5) directs the courts to look at several factors in reaching an equitable division of property – including the provisions of a premarital agreement. Here, the appellate court looked at several factors, including the efforts of the parties with respect to the farm and home, social security benefits, the parties’ health, pensions, expected gifted or inherited property, and other assets. Ultimately, the court determined that the most equitable outcome for both parties was for the husband to pay the wife a sum of $100,000 which would immediately become a lien against his property until paid. Thus, in essence, the appellate court ignored the language of the premarital agreement despite the statutory instruction to consider such an agreement’s provisions and focused on the policy of “equity” in dividing marital property. In re Marriage of Balichek, No. 9-1061/09-0926, 2010 Iowa App. LEXIS 126 (Iowa Ct. App., Mar. 10, 2010).