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Change In Financial Circumstances Makes Marital Property Agreement Unfair

The court of appeals recently issued a decision in a local La Crosse County case, Zernia v. Zernia, 2012AP838, regarding whether a marital property agreement (MPA) can be enforceable as to a single provision and unenforceable as to the remaining provisions.

The circuit court held that the Zernia MPA was enforceable as to the provisions regarding the parties’ retirement accounts; however the MPA was unenforceable as to the remaining provisions.  As a result, the circuit court awarded indefinite maintenance to Ms. Zernia.  Dr. Zernia appealed, arguing that 1) the entire agreement was enforceable; 2) the circuit court improperly considered the value of his retirement account when determining maintenance; and 3) the court erred in awarding permanent maintenance.  Ms. Zernia cross-appealed, arguing that the entire agreement is unenforceable.

The court of appeals started its discussion with a review of Button v. Button, 131 Wis.2d 84, 388 N.W.2d 546 (1986).  In Button, the court held that in order for a MPA to be considered equitable, and therefore enforceable, the following three elements must be met:  1) each party made a full and accurate financial disclosure; 2) each party entered into the agreement voluntarily; and 3) the substantive provisions are fair to each party.  In this case, the court of appeals held that the third element of fairness was not satisfied, and therefore the entire agreement was unenforceable

To determine if an agreement is fair, the court must consider the facts as they existed at the time the parties entered into the agreement.  In this case, the court of appeals examined the record to determine if the agreement, when executed, contemplated a reasonable change in circumstances to the parties.  In this case, the record indicated that the parties contemplating living on a farm and having children, which the court of appeals noted would likely affect the ability of one party to continue working full-time, and thus this was not a change in circumstances thereby rendering the agreement unenforceable.  The MPA indicates that each party contemplated that they could each financially support themselves; however, Ms. Zernia left the workforce to raise children and tend to the family home.  As a result, there was a financial change in circumstances and the agreement was now unfair to Ms. Zernia. 

In addition, the court of appeals noted that the parties deviated from the terms of the agreement by having joint bank accounts and Dr. Zernia being the sole provider, financially, for the family.  Brandt v. Brandt,145 Wis.2d 394, 427 N.W.2d 126 (Ct.App. 1988) held that when parties ignore the prior agreement and manage their finances in a manner that was acceptable to all during the marriage, it is inequitable to enforce the agreement at the time of the divorce.

While this is an unpublished decision, it may be used for its persuasive value.  It is important to note that when entering into a MPA, the terms must be fair to both parties at the time of execution and the parties must have reasonably contemplated and addressed a possible change in circumstances.

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