Recent Changes to Marital Property Law in Arkansas

by admin on May 26, 2016 in Family Law, News

In March 2016, the Supreme Court of Arkansas decided Moore v. Moore, a case involving marital property division after a divorce. The Court held that the growth of a husband’s business, to which both spouses contributed, was not marital property. In doing so, the Court overturned an analysis used for decades in the state and indicated a significant change to Arkansas family law.

Property Division in Arkansas

Arkansas property division is governed by statute, specifically A.C.A§ 9-12-315. The statute essentially requires that all marital property be divided in half (unless such division is inequitable) while non-marital property be returned to the party who owned it before the marriage. A natural source of dispute, then, is what exactly constitutes marital property.

The Now-Old Rule: Layman’s “Active Appreciation” Test

A.C.A §9-12-315(b)(5) states that marital property does not include an “increase in value of property acquired prior to marriage.” However, starting in 1987, Arkansas courts used an “active appreciation” analysis to create an exception to this provision of the statute.  Developed in Layman v. Layman, “active appreciation” essentially stated that if non-marital property appreciated in value during the marriage due to significant time and effort of one of the spouses, such appreciation became part of the marital estate. Layman v. Layman, 731 S.W.2d 771 (Ark. 1987).  The Court utilized the Layman analysis in a number of subsequent cases, including Farrell v. Farrell, 231 S.W.3d 619 (Ark. 2006) and Brown v. Brown, 284 S.W.3d 17 (Ark. 2008).

However, the Court in Moore, cited hereinabove, stated this appreciation analysis “directly conflict[ed]” with statutory law and thus explicitly overturned the near 30-year precedent of Layman.

Why the Change? The Reasoning of Moore

Moore v. Moore involved the divorce of David and Nancy Moore.  The creation of David’s company occurred prior to the marriage; however, Nancy argued she was entitled to half of the business’s growth in value since their marriage. The circuit court, citing Layman, sided with Nancy, awarding her half of the $556,365 value increase.  Nonetheless, David argued this ruling was a misinterpretation of A.C.A §9-12-315, and the Supreme Court agreed.

The Moore Court directly acknowledged that it was overturning precedent.  However, it stated that its intent was to construe A.C.A §9-12-315 “just as it reads” to try to mirror the intent of the legislature and to prevent confusion.  According to the Court, because A.C.A §9-12-315 was a fairly clear and unambiguous statute, precedent cases developing non-statutory tests were in error.  Reading A.C.A §9-12-315(b)(5) literally and without exception, the Court found the property at issue in Moore to be an increase in the value of non-marital property and therefore explicitly not marital property itself.

Though the Moore decision’s interpretation of A.C.A §9-12-315 was correct and straightforward, its decision to overturn Layman was not without disagreement.  Indeed, the dissenters, including the Chief Justice, expressed concern about such a significant “break from precedent” after almost three decades and when neither party requested such an overruling.

Are Spouses Entitled to Increases in Value? Not Any-Moore

The Moore decision is incredibly significant for marital property division in Arkansas. For 29 years, spouses could utilize the Layman test to reach the value of property acquired prior to marriage; Moore intentionally did away with this.

However, it is important to recognize that the Moore decision did not necessarily make property division unreasonably severe and black-and-white. Under A.C.A §9-12-315 and mentioned by the Moore court, non-marital property may still be divided if a court finds such a choice equitable given a number of factors, such as the parties’ age, occupation, income, and needs.

That is, post-Moore, it is still possible for divorcing parties to reach one another’s property from before the marriage, but this can no longer be done via Layman’s active appreciation analysis.

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