There are few, if any, cases in Oklahoma family law more frequently cited than Thielenhaus v. Thielenhaus.[1] This decision was published (as modified) on Sept. 1, 1995 – just over 30 years ago. While Thielenhaus may be cited for a great many issues, its central and most enduring holding is the one related to in-marriage enhancement of a separate asset. After 30 years, it seemed only fitting to take a fresh look at Thielenhaus and consider whether there might be a need for a different approach.

In Thielenhaus, the late Justice Marion Opala synthesized existing case law to create a clear and ostensibly workable rule governing the division of premarital property that has increased in value during the marriage:

Where, as here, a spouse brings separate property to the marriage, its increased or enhanced value, produced by investment managed by neither spouse or by appreciation, inflation, changing economic conditions, or circumstances beyond the parties’ control, cannot be treated as a divisible marital asset unless, of course, there be proof that the increase resulted from efforts, skills or funds of either spouse. The non-owning spouse’s interest in the increased separate estate of the other, when established through efforts, skills or expended funds, stands confined to the enhanced value of that separate property.[2]

The rule set forth in Thielenhaus was largely a combination of the rules set out in Templeton v. Templeton,[3] Moyers v. Moyers[4] and May v. May.[5] In that sense, it was largely a restatement of existing law.

However, the Thielenhaus opinion included a far more significant departure from existing law when it advised, “The burden is upon the non-owning spouse to show that the enhancement is the result of either spouse’s endeavors.”[6] Further, Thielenhaus held that this burden of proof extended to the “three critical value-assessment elements,” which are: 1) the value at the date of marriage, 2) the increase in value due to market forces and 3) the increase in value related to the funds, skills and efforts of the parties.[7] This, in effect, created a presumption that the increase in the value of separate property during marriage is separate property. Since this rule was pronounced 30 years ago, it has become the foundation of Oklahoma’s law on in-marriage enhancement of separate assets.

However, placing the burden of proof in a manner designed to protect the separate estate from marital claims is highly unusual. Oklahoma marital property law contains a number of evidentiary presumptions, and virtually every one of those supports the acquisition of marital property rather than the protection of separate property.[8] Oklahoma law presumes that property acquired during marriage is marital.[9] The burden to show otherwise is on the party claiming a separate property interest.[10] The transfer of separate property into shared ownership with a spouse is presumed to create marital property.[11] The burden to prove otherwise is on the spouse claiming that the property retained its separate character.[12] The spouse seeking to trace a separate property interest bears the burden to trace such property and prove that it remains separate.[13] Looking at these presumptions, the rule announced in Thielenhaus is wholly inconsistent with the remainder of Oklahoma’s equitable distribution law.

By assigning the burden of proof to the nonowning spouse in this fashion, Thielenhaus has, in practical effect, created a unique presumption that all growth of separate property is separate property, which in many cases is determinative. This suggests the obvious question: Why does this rule of law exist, given its inconsistency with the remainder of Oklahoma domestic property law? Research into the origins of that rule suggests it is inconsistent because it is not based on careful judicial consideration but instead upon a series of unintended alterations.

DUBIOUS ORIGINS OF AN UNUSUAL RULE 

The Thielenhaus opinion cites two cases, Templeton v. Templeton[14] and Estate of Hardaway,[15] as the basis for imposing the burden of proof against the nonowning spouse and treats the matter as settled Oklahoma law.[16] The Estate of Hardaway opinion, likewise, cites Templeton as its support, again treating the issue as settled law.[17] However, looking to the origin of this rule suggests that imposing the burden of proof on the nonowning spouse was not the settled law of Oklahoma prior to Thielenhaus.

The Templeton opinion, upon which Thielenhaus relies, cites two sources as authority: Williams v. Williams[18] and a 1979 Oklahoma Law Review note on jointly acquired property.[19] However, the Williams opinion does not place the burden of proof for in-marriage enhancement on the nonowning spouse, nor do any of the cases cited by Williams.[20]

In-marriage enhancement is addressed in Williams. The Williams opinion reversed the trial court with respect to the parties’ homestead, part of which “was separate property inherited by defendant, but which appreciated substantially in value by reason of changing economic conditions and through these parties’ joint industry,” while other portions were acquired jointly during the marriage.[21] The Williams court held that “the lack of evidence” on the issue made it impossible to resolve.[22] The court remanded the issue for a new trial and directed that “any enhancement in value of the separate property resulting from joint efforts of the parties should be adjudicated by the trial court.”[23] The Williams court did not place the burden to show such enhancement on either party. Thus, the “burden of proof” rule ultimately cited in Thielenhaus does not have its origins in Williams.

The other source cited by Templeton, a note from the Oklahoma Law Review, includes a discussion of case law with respect to in-marriage enhancement. The note contains a passing comment (without citation to legal authority) that provides, “When inflation or other circumstances beyond the parties’ control cause an increase in value of separate property, or income or profits from it, there is no jointly acquired property, unless the non-owning spouse can prove that his or her contributions were also a causal factor.”[24] This comment was later included, almost verbatim, in Templeton and appears to be the origin of the burden of proof rule, although it differs significantly from the rule in Thielenhaus.[25]

Later in the note, the author suggests that the source of this rule may be the case of Kirkland v. Kirkland.[26] However, again, Kirkland does not allocate the burden of proof to the nonowning spouse. In that case, the court relied almost exclusively on evidence presented by the owning spouse, who testified that he did not invest any marital earnings in stocks inherited from his father and that the gains were purely from passive and market forces, while the wife presented little, if any, evidence on this issue.[27] The Kirkland opinion does not suggest that the wife, as the nonowning spouse, was required to meet any particular burden.

This shifting burden approach is not a strictly accurate interpretation of the then-existing case law. None of the cases cited in the discussion of in-marriage enhancement place any special burden upon the nonowning spouse.[28] Rather, taken as a whole, the cases teach that while there must be evidence to support the in-marriage enhancement, the amount of any jointly acquired increase is an issue of fact and within the discretion of the trial court.[29] Further, this note suggests (as was echoed in Templeton) that the owning spouse must first show that the cause of the increase is due to “inflation or other circumstances beyond the parties’ control,” and only then must the nonowning spouse demonstrate that their efforts were “also a causal factor.”[30] This formulation suggests a shifting burden of proof with respect to primarily passive separate assets.

This state of law was recognized in Templeton, which advises:

In order for a spouse to successfully prove that enhanced value is the result of joint endeavors, it must be shown that the net worth of the property increased during the marriage as the direct result of substantial contribution by the spouse of effort, skill or funds.[31]

The language of the opinion is phrased neutrally, using “it must be shown” rather than language suggesting that it must necessarily be shown by the nonowning spouse. Thus, the language of Templeton does not assign the burden of proof to the nonowning spouse. At most, Templeton suggests a shifting burden approach, where the owning spouse must first demonstrate that the increase is the result of passive forces before the nonowning spouse must present evidence of joint efforts. While the shifting burden was not necessarily set out in prior case law, it was attributed to the Williams case and was adopted as if it were settled law by the Templeton opinion.

At the time Templeton was decided, there does not appear to have been any recognition that the opinion intended to apply a particular presumption or burden of proof to in-marriage enhancement. Supreme Court cases following Templeton did not interpret Templeton as placing the burden of proof on the nonowning spouse.[32] In 1988, following Templeton in 1982 but prior to Thielenhaus in 1995, Professor Robert G. Spector wrote that existing Oklahoma law favored a presumption that in-marriage enhancement was marital, but treating the issue as undecided in Oklahoma law:

Many states apply a presumption that property acquired during the marriage is marital. Therefore, in the absence of evidence that inflation or other natural market conditions caused the increase in value of the separate property, the entire amount is presumed to be marital. This approach clearly favors the marital estate and furthers modern policy approaches to the marriage relation. Under the source of funds rule, the process of acquisition of property is an ongoing process. Therefore, the increase in property acquired during marriage seems to require this placing of the burden of proof.[33]

Thus, the shifting burden set forth in Templeton, which applied only where there was evidence of primarily passive appreciation, appeared to be the law, but the presumption with respect to non-passive increases remained unresolved. In the absence of evidence that the increase in value was created by passive growth, such increases should – consistent with Oklahoma law – be treated presumptively as jointly acquired.

In 1994, the Oklahoma Supreme Court released Estate of Hardaway.[34] The shifting burden set out in Templeton was significantly truncated; rather than expressing the shifting burden outlined in Templeton, the Hardaway court simply stated, “The burden of proof is upon the non-owning spouse to prove such enhancement is the result of joint endeavors,” relying on Templeton as authority for this rule.[35] This pronouncement significantly changed the prior rule, as it does not require proof of passive increases and does not shift the burden but instead places the entire burden on the nonowning spouse from inception. Notably, the Hardaway opinion does not suggest any intent to depart from Templeton’s passive asset/shifting burden approach.[36] This apparently inadvertent reframing would have significant consequences for Oklahoma family law.

The next year, the Hardaway “burden of proof” formulation, which placed the burden of proof on the nonowning spouse from inception, became the version adopted in Thielenhaus, rather than the more nuanced shifting burden version set out in Templeton.[37] The requirement that there must be evidence that the increase in value was primarily due to passive forces was eliminated; the new rule placed the burden of proof entirely on the nonowning spouse, even in cases where the evidence suggested appreciation was primarily or entirely the result of joint efforts. The Thielenhaus opinion then applied this new burden of proof to the newly emphasized “three critical value elements” and placed that burden solely on the party seeking to prove in-marriage enhancement, without any requirement that the owning spouse prove the existence of any passive appreciation.[38] Following Thielenhaus, the nonowning spouse was required to show the value at the time of marriage and the value at the time of divorce; tie the increase in value to the funds, skills or efforts of the parties; and exclude growth generated by passive forces. If any of these elements are not satisfactorily proven, the entire increase would be awarded to the owning spouse as separate property.[39]

This newly created presumption and allocation of the burden of proof were a significant departure from existing law. However, it is not clear that Thielenhaus was actually intended to alter prior law. The opinion does not indicate that any intent to depart from Templeton and even cites Templeton as support for the burden of proof.[40]

This burden of proof rule can be traced from Kirkland and Williams, which created a shifting burden approach where evidence showed the appreciation was primarily passive. Those cases were then summarized, perhaps unclearly, in a 1979 law review note. This new shifting burden approach was adopted by Templeton, apparently believing it was derived from settled Oklahoma law. Later, the Hardaway opinion reframed the shifting burden approach and imposed the burden of proof solely on the nonowning spouse without discriminating between primarily active and primarily passive appreciation. Then, Thielenhaus adopted the version of this rule set out in Hardaway and tied that burden to a series of elements that effectively created a presumption that all growth on separate assets during marriage is separate property. None of the authors appeared to have intended to affect a change to existing law; rather, they all appeared to believe they were simply restating settled Oklahoma law. Thus, the shift in this rule appears to have occurred by inadvertence and accident rather than through careful judicial consideration.

THIRTY YEARS OF THIELENHAUS 

As noted by Professor Spector in 1988, “The burden of proof is usually determinative.”[41] Cases in which inequitable results occur as a result of Thielenhaus’ presumption are underrepresented in published case law. However, in unpublished cases and anecdotally amongst practitioners, there is concern that the presumption leads to inequitable results, particularly with respect to businesses actively managed by one or both parties. Requiring the party with the least knowledge or access to information to bear the burden of proof seems inherently unfair. Comparatively, the owning spouse has knowledge of the asset, the operations of the business, access to the accounts, access to documents, relationships with employees and other information relevant to a Thielenhaus analysis.

An excellent illustration of the inherent flaws in the burden of proof rule can be seen in the recent case of Williams v. Williams.[42] In that case, the husband opened a business in his name just prior to the parties’ marriage. It was undisputed that the value of the business increased in value by at least $584,000 and perhaps by as much as $2.8 million during the parties’ six-year marriage.[43] It was undisputed that the wife expended significant time actively working for the business but was not paid for her labor.[44] It was further undisputed that the husband “undertook tremendous efforts during the marriage directly related to the operation and growth of the business.”[45] The husband was “described essentially as the keyman and sole executive – ran the company, controlled its direction, met with its customers and communicated regularly with its bankers.”[46] At trial, two expert witnesses presented significant valuation testimony.[47] The husband appears to have relied in substantial part on the wife’s inability to meet the burden – including a claimed inability to recall the wife’s contributions as an employee, which the trial court found “questionable.”[48] Following trial, the trial court found that the wife did not meet her burden under Thielenhaus and awarded the business, including the appreciation, to the husband as his separate property.

While the Court of Civil Appeals ultimately reversed the decision on appeal, this case demonstrates that the burden of proof, as required in Thielenhaus, is deeply problematic when applied to actively managed assets like the small business at issue in Williams. There is no logical or principled reason that an asset managed as the full-time occupation of a spouse should be presumed by Oklahoma law to generate only passive growth in the absence of proof to the contrary. Rather, in-marriage enhancement of an actively managed asset should, consistent with Oklahoma’s marital property scheme, be presumed to be marital property.[49] With some very rare exceptions, businesses do not increase their value by 400% to 1,300% within six years as a result of passive appreciation or market forces. Parties who manage businesses as their primary occupation do not do so in hopes that market forces and circumstances beyond their control will generate passive growth. They do so because they believe their efforts will increase the value and profitability of the business. The presumption required by Thielenhaus entirely fails to reflect this reality.

The Oklahoma Supreme Court has not addressed in-marriage enhancement to any significant extent since the Thielenhaus decision in 1995. Cases regarding in-marriage enhancement have been left to the Oklahoma Court of Civil Appeals, which is not in a position to alter Thielenhaus. However, the Court of Civil Appeals has, at times, appeared to recognize the limitations of the separate property presumption and the inequitable results that can result from its application. In the case of Dancer v. Dancer,[50] the court found that the evidence necessary to support the wife’s in-marriage enhancement claim as required by Thielenhaus was not present in the record. Rather than denying the wife’s claim for failure to meet the burden of proof, the court remanded the matter for presentation of further evidence:

[W]e reiterate dissolution of marriage proceedings are equitable in nature ... this Court will not proscribe Wife from claiming an equitable portion of the marital home’s enhanced value. Instead, we remand the marital home issue to the trial court to ensure the enhanced value of the marital home is fairly and equitably divided.[51]

In light of the equitable nature of dissolution of marriage proceedings, the court chose to permit additional evidence rather than bar the wife’s claim. However, a rule that creates situations in which equity requires trial and retrial in hopes of reaching an equitable result is not a practical solution.[52]

CONCLUSION

Thielenhaus has governed the division of in-marriage enhancement of separate assets for 30 years. As noted above, the allocation of burden of proof does not appear to be the result of careful judicial consideration, but rather the result of accident and inadvertence. The presumption that in-marriage enhancement of a separate asset is separate property is largely contrary to Oklahoma’s marital property scheme. Perhaps after 30 years, the Thielenhaus decision is due for reconsideration.

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ABOUT THE AUTHOR

Ryan J. Reaves is a partner at Mullins Mullins Sexton & Reaves PC.  His practice focuses almost exclusively on family law matters with an emphasis in appellate representation. Since graduating from the OU College of Law in 2008, Mr. Reaves has represented clients in more than 70 appellate and original jurisdiction matters, resulting in seven published decisions. Mr. Reaves is a regular presenter at the OBA Family Law Section Annual Meeting.

 

 

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ENDNOTES

[1] 1995 OK 5, 890 P.2d 925. Research suggests that Thielenhaus has been cited in at least 61 published decisions in Oklahoma; by courts in other jurisdictions, including Virginia, West Virginia and Nebraska; and by bankruptcy courts in both Oklahoma and Texas.

[2] Thielenhaus, ¶9, 931 (emphasis added). The “three critical value-assessment elements” were derived from May v. May, 1979 OK 82, 596 P.2d 536. https://bit.ly/44bZGFp.

[3] 1982 OK 127, 656 P.2d 250.

[4] 1962 OK 146, 372 P.2d 844.

[5] 1979 OK 82, 596 P.2d 536.

[6] Thielenhaus, ¶10, 931.

[7] Id.

[8] Matter of Burgess’ Estate, 1982 OK CIV APP 22, 646 P.2d 623, favoring prenuptial agreements being a possible exception.

[9] Colclasure v. Colclasure, 2012 OK 97, 295 P.3d 1123; Sien v. Sien, 1994 OK CIV APP 159, 889 P.2d 1268.

[10] Manhart v. Manhart, 1986 OK 12, 725 P.2d 1234.

[11] Smith v. Villareal, 2012 OK 114, 298 P.3d 533; Larman v. Larman, 1999 OK 83, 991 P.2d 536.

[12] Gray v. Gray, 1996 OK 84, 922 P.2d 615.

[13] Catron v. First National Bank & Trust Co. of Tulsa, 1967 OK 107, 434 P.2d 263; Gillett v. McKinney, 2019 OK CIV APP 24, 440 P.3d 69.

[14] 1982 OK 127, 656 P.2d 250.

[15] 1994 OK 30, 872 P.2d 395.

[16] Thielenhaus, ¶9, 930 (“The burden is upon the non-owning spouse to show that the enhancement is the result of either spouse’s endeavors.”).

[17] Hardaway, ¶10, 398 (“The burden of proof is upon the non-owning spouse to prove such enhancement is the result of joint endeavors.”).

[18] 1967 OK 97, 428 P.2d 218.

[19] Templeton, ¶5, 252, n. 4 (citing Lee Kuzel Simpson, “Domestic Relations: The Role Of Joint Industry In The Determination Of What Is Jointly Acquired Property” 32 Okla. L. Rev. 214, 216 (1979).

[20] See Harden v. Harden, 1938 OK 54, 77 P.2d 721; Moyers v. Moyers, 1962 OK 146, 372 P.2d 844; Longmire v. Longmire, 1962 OK 219, 376 P.2d 273; Funk v. Funk, 1957 OK 320, 319 P.2d 599; Champion v. Champion, 1950 OK 81, 218 P.2d 354; Kupka v. Kupka, 1942 OK 137, 124 P.2d 389; Van Horn v. Van Horn, 1941 OK 284, 119 P.2d 825; Tobin v. Tobin, 1923 OK 164, 213 P. 884; Bruce v. Bruce, 1930 OK 38, 285 P. 30.

[21] Williams, ¶19, 222 (1967).

[22] Id. ¶21, 222 (1967).

[23] Id. at ¶19, 222 (1967).

[24] Simpson, 32 Okla. L. Rev. at 216.

[25] Templeton, ¶5, 252.

[26] Simpson, 32 Okla. L. Rev. at 217 (“Kirkland v. Kirkland recognized that such appreciation could be subject to division if a spouse proved that it was the result of his or her contribution of skills or funds.”). Referencing Kirkland v. Kirkland, 1971 OK 98, 488 P.2d 1222.

[27] Kirkland, ¶5, 1225.

[28] Kirkland v. Kirkland, 1971 OK 98, 488 P.2d 1222; Moyers v. Moyers, 1962 OK 146, 372 P.2d 844; Collins v. Okla. Tax. Comm., 1968 OK 148, 446 P.2d 290; Haynes v. Haynes, 1946 OK 174, 169 P.2d 563.

[29] Haynes, ¶11, 223; Moyers, ¶11, 847; Kirkland, ¶18, 1227.

[30] Templeton at ¶5, 252.

[31] Id. This portion of Templeton is supported by citation to Wright v. Wright, 1978 OK CIV APP 10, 577 P.2d 922 and Armstrong v. Armstrong, 1969 OK 193, 462 P.2d 656. In both cases, a complete lack of evidence with respect to in-marriage enhancement was fatal to the claims of the nonowning spouses. Wright appears to suggest the nonowning spouse bears the burden of proof but has not been cited as authority for that proposition to any significant extent.

[32] The case of Mothershed v. Mothershed, 1985 OK 23, 701 P.2d 405 seems to have adopted the burden shifting approach. There was substantial evidence that the increase in value was due solely to passive appreciation of separately acquired stock but little evidence of joint efforts. The case of Ford v. Ford, 1988 OK 103, 766 P.2d 950 did not suggest the existence of a burden of proof with respect to in-marriage enhancement, simply noting, “Where one spouse brings separate property to a marriage and an increased value of the property occurs as a result of joint efforts of the husband and wife, the other spouse is entitled to an interest in the appreciation of the property.” Id., ¶4, 952.

[33] Robert G. Spector, “Apportionment of the Increase in Value of Separate Property During Marriage: The Effect of Ford v. Ford,” 59 OBJ 3683, 3688 (December 1988). This article was cited in Thielenhaus, though, as noted below, Thielenhaus reached a contrary result.

[34] 1994 OK 30, 872 P.2d 395.

[35] Hardaway, ¶10, 398.

[36] The assets at issue were primarily oil and gas interests and certificates of deposit, which were not active ventures by the owning spouse. The nonowning spouse presented no evidence to suggest any in-marriage enhancement. Hardaway, ¶¶11-12, 298-9.

[37] Thielenhaus, ¶9, 930.

[38] Thielenhaus, ¶10, 931 (relying on May v. May, 1979 OK 82, 596 P.2d 536).

[39] See, e.g., Murphy v. Murphy, 2010 OK CIV APP 1, ¶¶28-29, 225 P.3d 820, 828.

[40] Thielenhaus, ¶10, 931, n. 18.

[41] Spector, 59 OBJ at 3688.

[42] 2024 OK CIV APP 8, 544 P.3d 960.

[43] Williams, ¶26, 967-8 (2024).

[44] Id., ¶27, 968, n. 8 (2024).

[45] Id. (2024).

[46] Id. (2024).

[47] Id., ¶25, 967 (2024).

[48] Id., ¶5, 963 (2024).

[49] Spector, 59 OBJ at 3688; Manhart v. Manhart, 1986 OK 12, 725 P.2d 1234 (“there is a presumption that property acquired during coverture is property acquired by the joint efforts of husband and wife.”).

[50] 2022 OK CIV APP 25, 513 P.3d 569.

[51] Dancer, ¶18, 575 (internal citations omitted).

[52] This was the identical solution utilized in the case of Williams v. Williams, 1967 OK 97, 428 P.2d 218 (the apocryphal source of Thielenhaus’ burden of proof rule) almost 30 years before Thielenhaus was decided.