JENSEN VS. JENSEN (DIVORCE PROPERTY & ALIMONY)

Key holdings

Practitioner summary

The court affirmed as modified. First, on the wife's claim that the husband's wholly owned company owed her $83,040 for her part-time work, the court held that even assuming an agreement to compensate her existed, substantial evidence showed she was fully compensated as agreed: by testimony that her compensation would be lumped with the husband's income, which was deposited into the joint account and used for community expenses. Second, the court held the wife's post-agreement conduct modified the parties' antenuptial agreement (which had required each spouse's earnings to remain separate). The agreement expressly permitted subsequent modification and did not require modifications to be in writing. Parties to a written contract may orally modify it, and consent to modification may be implied from conduct consistent with the asserted modification. Joseph F. Sanson Inv. Co. v. Cleland, 97 Nev. 141, 142, 625 P.2d 566, 567 (1981); Clark County Sports Enter. v. City of Las Vegas, 96 Nev. 167, 171, 606 P.2d 171, 175 (1980). The wife's oral consent to combine income, acquiescence in depositing it into the joint account, use of the funds for community expenses, and failure ever to demand a separate salary established a modification treating her income as community property. Third, the court held the district court exceeded proper bounds by ordering the wife (the custodial parent) to execute yearly IRS forms enabling the husband to claim the child's dependency exemption. The custodial parent is normally entitled to the exemption absent waiver, I.R.C. sec. 152(e), and coercive equitable relief is appropriate only when the legal remedy is inadequate; the court could have achieved the same economic result by adjusting alimony. See Leftwich v. Leftwich, 442 A.2d 139 (D.C. 1982). The court reversed that portion without remand. It affirmed the $500-per-month child support and the equitable division of community property, reviewing the division for abuse of discretion and the factual findings for substantial evidence. Shick v. Shick, 97 Nev. 352, 354, 630 P.2d 1220, 1221 (1981); Johnson v. Johnson, 89 Nev. 244, 246, 510 P.2d 625, 626 (1973).

In plain language

Barbara and Donald Jensen married in September 1981 and, on their wedding day, signed an antenuptial (prenuptial) agreement designed to keep each spouse's income and property separate. Soon after, Barbara began working part-time for Donald's company, Jensen Precast (Donald was its sole owner). About a year in, according to Donald and the company accountant, Barbara agreed she would not receive a separate salary; instead her earnings would be lumped in with Donald's income - avoiding separate payroll taxes. Throughout the marriage, that income went into the couple's joint account and paid community (shared) expenses. Barbara filed for divorce in 1986. On appeal, Barbara made several arguments. First, she claimed the company owed her $83,040 for her work. The court held that even if there had been an agreement to pay her, the evidence showed she was fully compensated as agreed, because her earnings were combined with Donald's and used for the couple's shared expenses. Second, Barbara argued that combining her income violated the antenuptial agreement, which required her income to stay separate. The court disagreed. The agreement itself allowed changes and did not require them to be in writing. Parties to a written contract can orally modify it, and their agreement to a modification can be inferred from their conduct. By orally consenting to combine income, letting it go into the joint account, using it for community expenses, and never demanding a separate salary, Barbara had effectively agreed to modify the agreement and treat her income as community property. Third, Barbara challenged the order requiring her - as the parent with primary physical custody of their daughter Megan - to sign IRS forms each year letting Donald claim the child as a tax dependent. The court agreed with Barbara on this point. Normally the custodial parent gets the exemption, and forcing her to sign the forms was an inappropriate use of the court's coercive power when the same economic result could have been reached simply by adjusting alimony. The court reversed that part of the order. It affirmed the $500-a-month child support and the division of community property, which were supported by substantial evidence.