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Family Law Reader

Family Law Reader

July 2003

Choice of Law in Property Division

Laura W. Morgan

Divorce cases can present many choice of law questions. The validity of an antenuptial agreement is determined by the lex loci contractus. Under UIFSA, the law of the forum applies, except to the termination date of the order, which is determined under the law of original issuing state.

When parties own property in a state other than the forum, should the court apply the law of the state where the property is located to value and divide it? No. The law of the forum applies its own law to the question of classification, valuation, and distribution. The only exception is where property is acquired by the parties in a community property state while they are domiciled in that community property state. This exception is basically a rule of title and ownership, which does not apply in equitable distribution proceedings.

The traditional rule is that title to real property is determined under the law of the jurisdiction in which it is located, and title to personal property is determined by the law of the owner’s domicile at the time of acquisition. This rule has been applied in a number of cases where the parties acquired property in community property states, since community property law governed ownership. For example, in In re Marriage of Zahm, 138 Wash.2d 213, 978 P.2d 498 (1999), while domiciled in Idaho, the parties opened a joint bank account. The court held that the bank account’s characterization would be determined under Idaho community property law. See also Restatement (Second) of Conflict of Laws §§ 258-259 (1971) (adopting choice of law rule of “most significant relationship test” in divorce cases for property acquired in community property states). The traditional rule makes sense with regard to community property, in that the ownership of property should remain constant and not change merely because the property move from state to state. See Annotation, Change of Domicile as Affecting Character of Property Previously Acquired as Separate or Community Property, 14 A.L.R.3d 404, 414 (1967); J. Thomas Oldham, Conflict of Laws and Marital Property Rights, 39 Baylor L. Rev. 1255, 1273 (1987) (at common law interests in personal property acquired during marriage were determined by the law of the marital domicile at the time of acquisition).

Since the advent of equitable distribution in the 1980’s however, the rule developed that when parties acquire property in other non-community property states, the law of the forum is used to characterize, value, and distribute the property. The public policy reason for this rule was stated as follows:

Equitable distribution law is by any standard complex and difficult to apply. Judges in many states have had substantial difficulties construing their own law correctly, let alone understanding the law of other jurisdictions. Under the traditional rules, however, the courts of each state must learn the equitable distribution law of 49 other jurisdictions. This learning process would result in wrong decisions, and it would pose an immediate administrative burden which would greatly increase the cost of trying equitable distribution cases.

Brett R. Turner, Equitable Distribution of Property § 3.08 at 71 (2d ed. 1994), citing Homer C. Clark, The Law of Domestic Relations in the United States § 16.7 at 214. More recently, the rule has been expanded to state that the law of the forum governs the classification, valuation, and distribution in divorce cases, regardless of where the property is located. J. Thomas Oldham, Divorce, Separation, and the Distribution of Property § 13.01[5] at p. 13-8.2 (2001) (“A divorce court normally applies its law to govern the division of spouses’ property, regardless of whether the spouses were married in another jurisdiction or lived elsewhere during the marriage.”)

Most equitable distribution states now follow the rule of applying the law of the forum to classification, valuation, and division in divorce. The rule of applying the law of the forum was applied in New York in Karp v. Karp, N.Y.L.J., June 16, 1987, p. 12, col. 2, 13 Fam. L. Rep. (BNA) 1448 (Sup. Ct., N.Y. Co., Stecher, J.). In that case, the court held that property acquired in California, a community property state, would be classified and valued under New York law. The rule was also applied in Merrick v. Merrick, 180 A.D.2d 546, 579 N.Y.S.2d 411 (1st Dept. 1992). In that case, the court held that under New York conflicts of law rules, New York and not Connecticut law determined whether a woman who married a man under the supervision or control of a conservator without first obtaining the conservator’s consent acquired any rights in the conservatee’s property and was entitled to equitable distribution upon her divorce. “Admittedly, in this case, the parties did not obtain the consent of plaintiff’s conservator, and thus plaintiff’s proposed cause of action for a declaratory judgment that the remarriage is void under Connecticut law was properly allowed. However, the Connecticut statute does not control distribution of the parties’ marital assets.” 180 A.D.2d at 547, 579 N.Y.S.2d at 411 (emphasis added).

A few states have declined to follow this rule. The exceptions to this rule are Iowa, In re Marriage of Whelchel, 476 N.W.2d 104 (Iowa App. 1991) (adoption Restatement rule to apply law of Texas, not Iowa, to classification of parties’ bank account located in Texas), and the District of Columbia, Anderson v. Anderson, 449 A.2d 334 (D.C. 1982) (it was error for the court to apply District of Columbia rather than Maryland law on the disposition of the marital home in located in Maryland).

Other cases support the application of the general rule. In In re Marriage of Day, 137 Or. App. 264, 904 P.2d 171 (1995), the court engaged in a rather lengthy discussion of choice of law rules in equitable distribution cases. The court considered the husband’s argument that California law should apply to the classification, valuation, and division of the parties’ California house. The court disagreed, holding that community property law is one of ownership, not equitable distribution, and equitable distribution must be determined by the law of the forum:

In this case, because the Scotts Valley house was acquired during the marriage, it is a marital asset, subject to the presumption of equal contribution. Husband argues, however, that the trial court correctly applied California law to distribute the equity in the Scotts Valley house, because the property at issue is real property, and the law of the situs of such property should apply to resolve any issue about it.

That argument might have force if the California law at issue dealt with the ownership of the property, because, in appropriate cases, the law of the situs can be used to determine the ownership of such property. See, e.g., Jacobs v. Jacobs, 82 Or. App. 333, 336, 728 P.2d 89 (1986). However, the California law at issue does not address the ownership of the Scotts Valley house. Rather, it determines how the equity in the house should be distributed on dissolution. See Cal. Fam. Code § 2640 (1994). In an Oregon dissolution case, that issue is governed by Oregon law, specifically ORS 107.105(1)(f), and not by California law. Hence, the trial court erred in applying California law and carving out a portion of the equity in the house from the marital estate. Having determined that Oregon’s statutory presumption of equal contribution applies to the Scotts Valley house, we turn to whether husband rebutted that presumption.

137 Or. App. at 268-69, 264, 904 P.2d at 174.

In In re Marriage of Scott, 254 Mont. 81, 835 P.2d 710 (1992), Montana the court held that the law of Montana would apply to property located in Washington. The wife argued that property owned by the parties located in the state of Washington should be divided according to community property standards under Washington law. “This Court is not bound by Washington law. The dissolution proceeding was initiated by Aileen in Montana and the proceeding is now subject to adjudication accordingly.” 254 Mont. at 86, 835 P.2d at 714. Accord Chirekos v. Chirekos, 33 Ill. App.3d 606, 338 N.E.2d 140 (3d Dist. 1975) (because the Illinois court had proper in personam jurisdiction of both parties and of the marriage relationship they sought to dissolve, the court could equitably divide their joint tenancy property pursuant to Illinois law even though a portion of this property division concerned Arizona real property); Meissner v. Meissner, 759 So. 2d 225 (La. Ct. App. 2000) (law of Louisiana applied to distribution of parties’ property, some of which was located in Brazil); Savelle v. Savelle, 650 So. 2d 476 (Miss. 1995) (Mississippi law applied to valuation and division of husband’s pension, though it was acquired in Louisiana where the parties lived when the pension accrued); Ismail v. Ismail, 702 S.W.2d 216 (Tex. App. - Houston (1 Dist.) 1985) (court did not err in refusing to apply Egyptian law to property acquired in Egypt); Dority v. Dority, 645 P.2d 56, 58 (Utah 1982) (“it is equally clear that Utah law governs such equitable division where the Utah courts properly have jurisdiction over the parties”). See also Grappo v. Coventry Financial Corporation, 235 Cal. App.3d 496, 286 Cal. Rptr. 714 (1st Dist. 1991) (where husband sued to obtain declaration that his interest in certain property owned by his wife was prior and superior to that of mortgagee, court held that law of California applied, although property was located in Nevada).

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