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CORNELL ECON 4040 - Haugan

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Econ 4040 1st Edition Lecture 19Outline of Previous Lecture I. PeevyhouseCurrent LectureII. HauganThe couple, Patricia and Gordon Haugan, were married on August 4, 1973. About a month later the husband entered medical school and the wife began gainful employment. Each already had a bachelor's degree. For the first four years of their marriage the wife taught elementary school while the husband attended medical school in South Dakota and then in Minnesota. The wife's total earnings of between $26,187 and $28,974 supported the couple during these four years. The husband received a stipend of $2,200 and borrowed money to pay education expenses.[117 Wis.2d 203]The wife continued to teach school for the next three years of their marriage while the husband, having graduated from medical school, was in a medical residency in Chicago. The husband's aggregate earningsfor that three-year period were between $49,254 and $49,548, and the wife's were between $43,339 and $45,056. In addition to working full time outside the home, the wife performed virtually all of the household duties over the seven years.In 1980, in anticipation of the husband's completing his medical training and beginning this practice of medicine, the couple bought a house in Green Bay, Wisconsin, and the wife resigned from her teaching job. On May 13, 1980, however, about two months before the husband completed his medical residency,the couple separated. In August 1980 the husband began practicing pediatric medicine in Green Bay at an annual salary of $48,000 ($4,000 a month) plus bonuses, for a total annual compensation of $55,498. The wife was unemployed until February 1981, when she began a job with IBM in Green Bay at an annual salary of $19,680 ($1,640 a month). Between August 1980 and August 1981 the husband voluntarily paid the wife a total of $10,150 ($817 a month in temporary maintenance plus half of a joint income tax refund of $693).The wife testified that at the time of the marriage she and her husband shared the expectation that she would support him while he obtained his medical education and that he would support her after he began his medical practice, allowing her to pursue the career of a homemaker, wife, and mother. The husband argued that the record did not establish a "mutual agreement" since it contained no evidence These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.of a written or formalized agreement. The trial court concluded that "no mutuality of such `contract' had been established" and that the wife's expectation was "not an express or implied contractual[117 Wis.2d 204]arrangement." Nonetheless, cognizance must be taken of the fact that the husband had a general idea ofthe wife's expectations. Roberto v. Brown, 107 Wis.2d 17, 20, 318 N.W.2d 358 (1982).At the time of the divorce the couple had acquired few assets and substantial liabilities.The couple's assets included cars (valued at $4,650), furniture (valued at $10,675), an interest in a teacher's retirement fund (valued at $2,808), shares of stock in the clinic where the husband worked (valued at $4,000), and the house in Green Bay (valued at $102,000). The couple's total assets were valued at $124,133.The couple's liabilities included debts the husband incurred before marriage ($1,365), debts incurred during marriage for living expenses and acquisition of property ($28,529), debts incurred for the husband's medical education ($13,457),1 the land contract on the Green Bay home ($80,013), and the 1981 real estate taxes ($2,812). The couple's total liabilities at the time of the divorce amounted to approximately $126,176, thus exceeding the value of the assets.2The trial court divided the parties' assets as follows: It treated the $20,000 equity in the house as an asset subject to property division and awarded the wife $10,000, payable by the husband in four equal annual[117 Wis.2d 205]installments, with interest at 10 percent. The husband was awarded the other $10,000 equity by being awarded the house subject to the land contract liability.The trial court divided the tangible personal property as follows: It awarded the wife one car (valued at $1,800) and furniture (valued at $7,300); it awarded the husband two cars (valued at $2,850) and furniture (valued at $3,375). The wife received the interest in the teacher's retirement funds (valued at $2,808 before taxes); the husband received the clinic stock (valued at $4,000). Thus she received assets valued at $11,908 plus the $10,000 payable in installments that represented one half of the equity in thehouse; he received assets valued at $10,225, plus one half of the equity in the house valued at $10,000.All of the debts of the parties—the debts the husband incurred before marriage, the debts the parties incurred during marriage, and the debts the husband incurred for medical education—were assigned to the husband.The trial court's explanation of its division of the marital property—assets and liabilities—was limited. The trial court stated that although it was not enumerating all the factors set forth in secs. 767.255 and 767.26, Stats. 1981-82, it had considered all the statutory factors and it intended to award the wife morethan 50 percent of the marital property.The trial court denied the wife's request for maintenance payments on the grounds that her post-divorceincome would exceed her pre-divorce income and she would not be in financial need after the divorce.On appeal from the portion of the judgment denying maintenance and awarding property division, the court of appeals affirmed the judgment of the circuit court. It concluded that the circuit court had not abused its discretion in denying maintenance since the wife was employed and in good health. It concluded that the property[117 Wis.2d 206]division was equitable because the marital estate had a negative value; the husband's net property award was a negative figure because he had to pay the debts; and the wife's share of the assets valued at $21,908 was greatly in excess of the 50-50 marital property division set forth in the statutes.The problem this case poses is not uncommon.3 University degree-divorce decree cases are frequent. In many marriages, while one spouse pursues an undergraduate, graduate, or professional degree or license, the other works to support the couple and foregoes his or her own education or


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