Can an Agreement to Divide Property Be Valid Without Exchanging Declarations of Disclosure?

In a recent case, Husband and Wife were married in July 1985 and separated in March 2007. In what was termed a “Pre-Divorce Agreement,” they agreed that Husband would buy out Wife’s interest in the family residence. Neither party actually conducted any formal investigation into the net equity or exchanged any documents, but agreed on a net equity of $600,000 and Husband would then pay Wife one-half, or $300,000, for her interest.

After signing the agreement, Husband made a partial payment to Wife. The parties then filed the dissolution and exchanged the required Preliminary Declaration of Disclosure. During the dissolution proceeding, it was determined the residence had only $70,000 of net equity and Wife’s interest was only $35,000. So the question to the trial court was whether or not the Pre-Divorce Agreement was enforceable since it was executed before the required Preliminary Declaration of Disclosure documents were exchanged.

Husband argued that certain code sections require parties seeking dissolution of their marriage to prepare and serve both preliminary and final disclosure declarations of assets and liabilities on the other and since they were seeking to dissolve their marriage and did not disclose the required documents prior to the agreement, the agreement must be struck down. The trial court disagreed with Husband and held that by signing the Agreement prior to filing a petition for dissolution, the parties’ failure to exchange disclosure declarations was irrelevant and did not prevent the enforcement of the Agreement.

The appellate court held that the governing code section explicitly mandates the exchange of the disclosure documents after or concurrently with the service of the Petition for Dissolution – not before. In other words, the filing of the Petition is what requires the exchange of the disclosure documents and, thus, there being no violation, the agreement was upheld.

So while it is admirable the parties tried to reduce the adversarial nature of their divorce proceeding and the attendant cost associate therewith, handling such legal actions on your own can cost more in the long run – both emotionally and financially. Remember that hiring the correct attorney does not necessarily mean your dissolution will be contested and expensive.