COOK VS. COOK (DIVORCE PROPERTY & ALIMONY)

Statutes cited

Key holdings

Practitioner summary

The court reversed the denial of an NRCP 60(b) motion to vacate the property-settlement portion of a divorce decree. Review is for abuse of discretion, which cannot be sustained where there is no competent evidence to justify the court's action. Stoecklein v. Johnson Electric, Inc., 109 Nev. 268, 271, 849 P.2d 305, 307 (1993). The court held no competent evidence supported the finding that Jane was represented by independent counsel: she signed both her answer and the property settlement agreement in proper person, no attorney signed on her behalf as required by NRCP 11, and the record contained no notice of representation. The court held the case controlled by Williams v. Waldman, 108 Nev. 466, 836 P.2d 614 (1992). Where an attorney and a non-attorney divorce, the attorney drafts the property settlement representing it is fair, and the non-attorney signs without independent counsel, the agreement is the product of an attorney-client relationship (established through detrimental reliance and not precluded by a close or blood relationship), which gives rise to a fiduciary relationship. Id. at 471-72, 836 P.2d at 618. Consequently the agreement is subject to the court's close scrutiny on appeal, the attorney has a duty of full and fair disclosure, and the attorney must demonstrate by clear and satisfactory evidence that the transaction was fundamentally fair and free of professional overreaching. Applying that standard, the court held that Frank's awarding himself the law practice without valuing it, having Jane waive any interest in his 1990-1992 income (of which she had no knowledge) while making her liable for half the income tax on that income, demonstrated as a matter of law that Frank breached his duty of full and fair disclosure and that the transaction was fundamentally unfair. Because that ground alone required reversal, the court did not reach Jane's coercion claim. Pursuant to NRS 125.130(2), the reversal did not affect dissolution of the marriage itself; it voided only the property-settlement portion of the decree.

In plain language

Jane and Frank Cook married in 1978, and Frank started his own Las Vegas law practice that same year. When they decided to divorce in 1992, Frank - a lawyer - drafted the property settlement agreement. It gave him the law practice as his separate property and had Jane waive any interest in his income for 1990-1992. Frank and his own attorney signed the agreement, but Jane signed it herself, in proper person (without a lawyer signing for her). Frank filed for divorce through his counsel, Jane answered in proper person, and the court granted the divorce the same day. Jane later moved to vacate the decree under NRCP 60(b), claiming the agreement was fundamentally unfair and that Frank had coerced her into signing by threatening that hiring an attorney would cost him his practice and land him in prison for tax evasion. She submitted an accountant's affidavit showing that, of roughly $700,000 in net community property, Frank received about $600,000 and she got about $100,000. The district court denied her motion, finding she had independent counsel and was not coerced. Jane appealed. The Nevada Supreme Court reversed. It held there was no competent evidence that Jane was represented by independent counsel: no attorney signed her answer or the settlement agreement, and there was no notice of representation in the record. Relying on Williams v. Waldman, the court explained that when an attorney divorces a non-attorney, drafts the property settlement, and represents that it is fair while the non-attorney signs without independent counsel, the agreement is treated as the product of an attorney-client (and fiduciary) relationship - subjecting it to close scrutiny and requiring the attorney to prove by clear and satisfactory evidence that the deal was fundamentally fair and free of overreaching. Here, Frank awarded himself the law practice without valuing it, had Jane waive any interest in income she knew nothing about, yet made her liable for half the taxes on that same income. The court held these provisions showed, as a matter of law, that Frank breached his duty of full and fair disclosure and that the transaction was fundamentally unfair. It reversed, vacated the property-settlement portion of the decree (leaving the divorce itself intact), and remanded.