Marital Property Valued as of Date of Divorce, Not Date of Property Resolution, Holds Divided Illinois Supreme Court
Under Illinois law, courts may under certain circumstances enter a judgment of dissolution in a divorce case and wait until later, as part of a bifurcated proceeding, to enter a property distribution judgment. The problem with that is that sometimes the parties' sense of urgency to get the proceeding over with dims once the marriage has been dissolved. Even worse, if a business (or the economy) is either growing or contracting quickly, one party or another may assume he or she will do better in the property distribution by waiting.
So in such cases, as of what date should courts value the marital property -- the date of dissolution, or the date of the trial on the property issues? On Friday morning, a divided Illinois Supreme Court held in In re Marriage of Mathis [pdf] that property is valued on the date of the grounds trial. Our detailed summary of the facts and lower court holdings in Mathis is here. Our report on the oral argument is here.
In Mathis, the husband filed for divorce in November 2000; the judgment of dissolution was entered four months later. But then, a long series of delays followed, and the trial court ultimately set a valuation date for the marital property of December 31, 2010 -- nearly ten years after the judgment of dissolution. On the husband's motion, the trial court certified a question for interlocutory appeal: when there is a "lengthy delay" in a bifurcated divorce between the dissolution trial and the ancillary issues trial, what date governs valuation? The Appellate Court held that the date of trial for the ancillary issues governs.
With Justice Mary Jane Theis writing for a four-Justice majority, the Supreme Court reversed. As we've noted in our earlier posts, the statute isn't much help. According to Section 503(f) of the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/503(f), in a bifurcated dissolution period, the valuation date is "the date of trial or some other date as close to the date of trial as is practicable." But it doesn't say which "trial" is intended when there are two as part of a bifurcated proceeding.
The majority found it significant that since Section 503(f) was enacted, a "long and consistent line of cases" have held that the relevant valuation date is the date of dissolution. The legislature has amended the statute at least ten times during the twenty years it's been on the books -- presumably with knowledge of this line of authority -- and has never changed the relevant language. The majority pointed to other provisions of the statute as well, including the language of section 503(b)(1) providing that property acquired by either spouse "after the marriage and before a judgment of dissolution" was presumptively marital property.
The majority also worried that setting the valuation date as the date of the ancillary proceedings created perverse incentives, giving parties a reason to allow the proceedings to drift, hoping that the property would change in value. On the other hand, setting the valuation date as the date of dissolution encouraged the parties to "stop litigating" and "discourages gamesmanship." Therefore, the date of valuation should be the date of dissolution, even in bifurcated divorce proceedings.
The majority acknowledged that although bifurcated proceedings were justified in some cases, courts should be reluctant to allow bifurcation:
[T]he systematic interests in achieving finality, promoting judicial economy, and avoiding piecemeal litigation will typically militate in favor resolving all ancillary issues before entering a judgment of dissolution . . . we encourage the parties and their attorneys, as well as future litigants and their counsel, to remain mindful of the pitfalls associated with bifurcation.
Justice Rita B. Garman dissented, joined by Chief Justice Thomas L. Kilbride and Justice Robert R. Thomas. The dissenters concluded that "the parties marital and nonmarital property should be valued as of the date of the trial on that issue or on a date as near as practicable to that date."
The dissenters analyzed the line of cases relied upon by the majority, arguing that several were decided before Section 503(f) was adopted in 1993, and the remainder were distinguishable. The rule "has never been applied," the dissenters argued, in circumstances where a significant change in value of the marital asset had occurred between dissolution and the ancillary proceedings.
After analyzing the structure of the statute, the dissenters concluded that Section 503 did not speak to situations where bifurcation was the result of the agreement of the parties, or was granted upon motion by one party and a finding of appropriate circumstances. That "gap in the legislative scheme" should be resolved by valuing property under such circumstances as of the date of the ancillary proceedings distributing the parties' marital property. If the property either increased or decreased significantly in value as the result of the efforts of one party between the dissolution and the ancillary proceedings, that would be taken into account in distributing the property.