Arkansas Supreme Court reverses itself on active appreciation in divorce

Moore v. Moore, 2016 Ark. LEXIS 82 (March 10, 2016)

Too activist? In a controversial move involving the valuation of nonmarital property, a majority of the Arkansas Supreme Court recently decided to overturn precedent even though neither of the parties, in petitioning for review, asked for a change in case law. The dissenting judges thought the majority's dramatic about-face was inappropriate under the circumstances.

Under Arkansas statutory law, the increase in the value of nonmarital property is nonmarital property. But, in a line of decisions going back nearly 30 years, the Arkansas Supreme Court created an exception to the statutory rule by way of the active appreciation doctrine, which says that if the growth in value is the result of the owner spouse's efforts, the appreciation is subject to marital distribution.

This was the law until a recent divorce case came along. The husband owned a business that was separate property. The trial court, following Supreme Court precedent, decided to award half of the $556,000 appreciation in the business's value to the wife, finding the increase was the result of the husband's significant efforts and the wife's contribution during the marriage.

The case eventually found its way to the state Supreme Court. In contesting the trial court’s ruling on appreciation, the husband argued that, under the applicable state statute (Ark. Code Ann. § 9-12-315(b)(5)), any increase in the value of a nonmarital business remained nonmarital property. But he also acknowledged the Supreme Court cases that applied the active appreciation rule. The husband, rather than arguing the controlling cases were wrong as a matter of law, contended the active appreciation exception was inapplicable to the facts of this case.

A majority of the state Supreme Court decided an altogether different analysis was in order—one that nixed the active appreciation rule and returned to the plain language of the statute.

Find out more about the court's analysis here.