A special property regime between the spouses – the so-called community of property – is created upon marriage. This special regime for the acquisition and disposal of property during the marriage is established by law. In case the spouses do not want such a regime, there is the possibility of contractual modifications, possibly modified by the court. This article will deal with the statutory matrimonial property regime (i.e. the property regime without any modifications) and the manner of its settlement. The dissolution of the community of property and its division is based on the assumption that the shares in the property are equal for both spouses. However, this need not always be the case. The so-called special rule of disparity of shares serves this purpose.
Marital property – what do I mean by it?
Although there is no definition of community property in the law itself, the provisions of § 708 CC nevertheless define what is included in community property. It is everything that belongs to the spouses, has a property value and is not excluded from the legal relationship. SJM includes both assets and liabilities acquired by one or both spouses during the marriage. The specific definition of assets and liabilities belonging to the SJM can be found in Sections 709 and 710 CC.
The principle of SJM is that each spouse is the owner of the whole of the property included in their community property, but both spouses are mutually limited by the equal ownership of the other.[1] In contrast to community of property, the amount of the share in the common property cannot be determined in community of property. Both spouses dispose of the community property equally. Thus, if, for example, a property is registered in the Land Register as being held in community of property, the amount of the spouses’ shares is not indicated under the names of the spouses, as is the case with joint ownership, since the shares do not exist as such.
The creation of SJM is normally linked to the moment of marriage. However, its commencement can be contractually fixed at other times, even at the date of dissolution of the marriage. It usually ends with the dissolution of the marriage. However, if, for example, a bankruptcy is declared on the property of one of the spouses or a court decree forfeits the property of one of the spouses in criminal proceedings, the community property could be divided even during the marriage.
SJM may be subject either to a statutory regime, a regime established by a court decision, or the spouses may also regulate it contractually, in which case it is a contractual regime.
The SJM does not only regulate the rights and obligations between the spouses, but also affects the content of the relations between the spouses and third parties.
How to settle the matrimonial property?
After the dissolution of the matrimonial property, the matrimonial property must be divided. However, the division also takes place after the matrimonial property has been reduced by an agreement between the spouses under the contractual regime or if the matrimonial property is dissolved by a court (see above). Settlement means the liquidation of the spouses’ previously common rights and obligations.
The methods of settlement of SJM under our legislation are as follows:
- By agreement of the spouses
- By judicial decision
- Presumption of settlement according to § 741 CC.
The different methods can be combined in the settlement, for example, the spouses agree to divide a certain part of the property and the remaining part is settled by a court decision. A presumption of division arises if the SJM is not settled either by agreement or by court decision.
How to determine the shares in the settlement of SJM?
The basic rule for the division of the matrimonial property, on which the statutory regulation is based, is that the shares of both spouses in the property to be divided are equal.[2] Such a presumption does not apply if the spouses have agreed on a different settlement in the contractual regime or if the presumption of § 741 CC has been invoked.
Equality of shares is therefore the default rule in the division of the matrimonial property, applied in particular in the division of property by court decision. It is clear from the wording of the law that the spouses are given the possibility to agree on the division of the property as they see fit and only then, if they do not agree, it is at the discretion of the court how to divide the property. The court is guided by the rules of settlement under Art.742 CC. This provision, which creates a presumption of equal shares, is a dispositive provision. The court is therefore free to depart from this statutory provision.
Disparity of shares
Parity of shares as a general basis for the settlement of the matrimonial property therefore represents the equality of the shares of both spouses in the property to be settled.
By disparity of shares we mean the opposite, i.e. a situation where the settlement of SJM deviated from the assumption of equality of shares and the amount of shares was determined unequally.
The spouses can contractually adjust the disparity of shares at the beginning of the marriage. This option is based on the general principle of contractual freedom and autonomy of will. However, it may also arise by agreement between the spouses in the course of the division of the community property. This is not unusual, since it is difficult to divide everything exactly in half when dividing property.
The issue of the adjustment of shares by agreement is also addressed by case law, which generally confirms that the division of property by agreement, whereby one spouse receives a smaller share than the other, is not contrary to the law and confirms the contractual freedom of the parties. However, their freedom does have certain limits, which are defined by case-law. For example, an agreement contrary to good morals can no longer be accepted. However, it is not possible to lay down a general criterion for when an agreement is contrary to good morals, since the conflict with good morals is always assessed in the context of the specific circumstances of the case. The conflict between the agreement on the settlement of the matrimonial property with good morals was dealt with, for example, in the Supreme Court’s resolution of 09.12.2015, Case No. 22 Cdo 4527/2015, which states that: “The assessment of whether a legal act is contrary to good morals, or whether it is contrary to the law, is not a matter of good morals. Whether a deed is contrary to good morals depends in each particular case on the discretion of the court, which is given wide discretion by the law to take into account all the circumstances of the case under consideration, in accordance with the rules of equity. A legal act is contrary to good morals if its content is contrary to the generally accepted opinion which, in the relations between people, determines what the content of that act should be so as to be in conformity with the fundamental principles of the moral order of a democratic society, irrespective of the freedom (liberty) of contract, who caused the conflict with good morals, and whether the other party was in good faith when the contract was formed, and that the court’s corresponding judgment here must be supported by thorough findings of fact and must at the same time conclusively demonstrate that those findings allow it to (conclude) in the particular case that the legal act in question is in fact contrary to good morals.”
Apart from the agreement, the disparity of shares in the settlement of the SJM can also be determined by a court decision. However, it is clear from the courts that they prefer an equal division, often in situations where it would be fairer to proceed to an unequal division.
Types of disparity
The unequal division of the matrimonial property may consist of several procedures:
- An object is assigned to only one spouse without the other spouse being entitled to financial compensation.
- A certain debt is assigned to one spouse without the obligation of the other spouse to fulfil half of the debt.
- Each spouse is allocated a certain part of the value of the community property, expressed as a percentage or fraction.[3]
Circumstances justifying the disparity of shares
The case law generally rests on the principle that the fundamental starting point is the principle of equality of shares. However, if the courts depart from this principle, the particular circumstances of the case must justify it.[4] Such circumstances of the case include the negative circumstances of the marriage, the principle of merit or any other circumstances.[5]
Negative circumstances in marriage
Negative circumstances capable of giving rise to a disparity of shares are those negative circumstances which have a significant impact on the matrimonial property or on the care of the family.[6] Even a circumstance which does not directly affect the matrimonial property may give rise to a disparity of shares if it is so morally strong that its disregard by the court in the context of the division of the matrimonial property would be contrary to good morals. [7]
In the judgment of the Supreme Court of the Czech Republic of 5 March 2012, Case No. 22 Cdo 3637/2010, the court defined the negative circumstance of the act according to the then effective Section 18 of Act No. 94/1963 Coll., on the Family. According to this provision, a man and a woman have the same rights and the same obligations in marriage, they are obliged to live together, be faithful to each other, respect each other’s dignity, help each other, care for children together and create a healthy family environment. Actions contrary to this provision may, in the discretion of the court, be considered as grounds for disparity of shares only if they have a significant impact on the management of the common property or on the care of the family. However, the circumstances must always be assessed in the light of each individual case.
The individual circumstances may also include, for example, gambling, alcoholism or substance abuse by the spouse, unwillingness to work, debt of the community property, as well as infidelity of one spouse or domestic violence against the other spouse. However, it cannot be automatically concluded that if any of the above acts have occurred, the subsequent division of the property will be unequal. The conduct in itself is not a reason for disparity of shares. It must be assessed in the light of the particular circumstances and must have a significant impact on the matrimonial property or on the care of the family, as already mentioned above.
The infidelity of one spouse, which was the cause of the breakdown of the marriage, is not in itself a ground for reducing his share[8] , although the court should take into account the causes of the breakdown of the marriage. Indeed, such a cause originating in the intimate sphere is difficult to establish and has its own causes. The judgment of the Supreme Court of 26 February 2014, Case No. 22 Cdo 1683/2013 states that: “It is not excluded, however, that the infidelity of one of the spouses, in conjunction with other facts, may lead the court to consider the disparity of shares, e.g. If it would lead to significantly reduced care for the children and the family, if it would result in a negative impact on the management of the common property or if it would be a moment of such moral strength that it would be contrary to good morals if the court did not take them into account in the settlement.”
The Supreme Court recently commented on domestic violence against a family member in its judgment of 25 August 2022, Case No. 22 Cdo 3652/2021, which again emphasised the importance of the individual circumstances of the case. Although there were several proven assaults by the husband in the marriage in question, the division of the community property was equitable despite the wife’s objections. It has been previously held by the Supreme Court that domestic violence is one of the circumstances that “may be the basis for any consideration of disparity of shares, although even they may not always, without more, be the basis for disparity of shares”.[9] The intensity, duration and all other circumstances of the case which may affect the assessment of the case in accordance with the principle of good morals must be taken into account.[10] The judgment establishes that the purpose of the division of the matrimonial property is not to punish one of the spouses; that is not its primary purpose. Therefore, domestic violence against family members is not always a fact leading to disparity of shares.
The principle of merit
The principle of merit is based on the situation where one of the spouses, by his or her increased efforts, has ensured the acquisition and maintenance of property of considerable value.[11] It is not always the case that one spouse merely cared for the joint household and the other earned the family’s income. The contribution of the spouse to the acquisition of the property, where the other has properly looked after the household, must be exceptional in order to give rise to a disparity of shares. Even when assessing the disparity of shares on the basis of the principle of merit, the particular circumstances of each case are crucial. Again, no general conclusions can be drawn which can be applied to every case. However, where one of the spouses fails to fulfil his or her obligations towards the family and the common property without a reason acceptable from the point of view of good morals, the case-law is inclined to the conclusion that it is then appropriate to rule on the disparity of shares.[12]
An example of a decision in which the court favoured the disparity of shares in the settlement of SJM on the basis of a higher degree of merit of one spouse is the judgment of the Supreme Court of 17 January 2001, Case No. 22 Cdo 2433/99. The case concerned a world-renowned athlete who, during his sporting career, had achieved a high status, an income ensuring a high standard of living for the whole family and had acquired property of considerable value. His great success was due to the considerable efforts he made and maintained. In the present case, although the athlete’s wife did not neglect the care of the family or the joint household, the husband’s merits were so extraordinary as to justify an unequal adjustment of the shares in the final settlement.
Other circumstances
The law or case law also suggests some other circumstances in which a disparity of shares may arise.
An example would be taking into account the needs of a dependent child. Section 742(1)(d) CC refers directly to the need to take into account the needs of dependent children when settling the SJM. However, the law does not specify how these needs will affect the settlement or how they are to be taken into account when determining the spouses’ shares. The question of the effect of the needs of dependent children on the settlement of SJM is addressed in case law. Earlier court decisions took into account the needs of the children by providing that specific items necessary for the upbringing of the child should be entrusted to the spouse to whom the child is entrusted.[13] However, case-law has developed in a direction whereby the qualitative division of property according to an assessment of which items are necessary for the child is no longer the sole consideration, but the needs of the child may also justify a departure from the principle of equal shares. The decision that broke the previous practice was the Supreme Court’s judgment of 14 December 2011, Case No. 22 Cdo 3272/2010. In the case in question, two minor daughters close to the age of majority were entrusted to the father’s custody, with the result that the father’s share in the settlement of the matrimonial property on appeal was reduced by the amount determining the settlement share necessary to pay the wife, thus creating a disparity of shares. The reduction in the amount reflected consideration of the needs of the dependent daughters. The applicant then appealed to the Supreme Court on the ground, inter alia, that the custody of the children by one parent could not affect the amount of the shares in the division of the matrimonial property and lead to disparity. However, the Supreme Court did not agree with her. It pointed out that the legislation does not expressly provide how the needs of the minor children are to be taken into account in determining the amount of the shares. Although the needs of the child had been taken into account in the case-law up to that point by assigning specific items to the spouse caring for the child, the court considered that the option of taking the needs into account by setting unequal shares was not excluded.
However, as in other cases, the specific circumstances of individual cases must be taken into account.
Entries and credits
Other statutory rules governing the settlement of the matrimonial property, unless the spouses have agreed otherwise or the provisions of Section 741 CC do not apply, are the so-called entries and credits. A credit is a reimbursement to the spouse of what has been spent from the community property on the sole property of the other spouse.[14] Contributions, on the other hand, represent what one of the spouses has spent from his or her sole property on the matrimonial property.[15] The spouse who spent his/her resources has the right to claim reimbursement in the context of the settlement. The settlement of both these claims is based on the principle of claimability.[16] This means that if one of the spouses wants to assert one of the claims in the settlement of the community property, he or she must propose it in the proceedings. If, for example, one of the spouses had purchased a joint asset from his/her sole resources, but did not propose to the court to set off the purchase price of the asset against his/her share of the settlement, the court is not entitled to make such a set-off.[17]
The issue of entries and credits is not a simple matter, as evidenced by a wealth of case law. For example, in the Supreme Court’s judgment 22 Cdo 3428/2020, the court ruled in a situation where one of the spouses had acquired a house in his/her sole ownership by means of loan financing and the spouses and their family subsequently lived together in the house. During the marriage, the husband then repaid his exclusive loan from the SJM funds. After the dissolution of the SJM, the wife sought reimbursement of the funds used from the SJM for the husband’s exclusive loan. Both the courts of first and second instance accepted the wife’s claim, as it was an amount that should be set off under the law. The Supreme Court, however, departed from the purely statutory assessment and also took into account the fact that the family lived in the house and used it for their needs. According to the Supreme Court, money spent from the SJM for the family’s living and household needs is not compensated as it is not an exclusive asset. Therefore, funds spent to provide for the family’s living expenses cannot be subject to settlement. However, it is necessary to consider whether the amount spent on an exclusive loan by one spouse would be comparable to the amount the family would spend on, for example, rent. In the above-mentioned judgment, the court held that: ‘If, therefore, during the period of the SJM, the mortgage on the property in which the spouses’ family lives or uses is paid for out of joint funds, and is therefore also money spent on the needs of family life and the family household, it is necessary to establish what would have been spent on providing the same or similar accommodation on another legal basis (in particular rent). If the amount spent on the mortgage repayments would have been the same or even less, the person on whose property the money was spent would not, in principle, be obliged to reimburse that input. However, if, for example, the monthly mortgage repayments were higher than the (potential) rent, a pro rata reimbursement of what was spent on the mortgage repayments would be necessary.”
Despite the brevity and clarity of the statutory provisions, there are situations in which we cannot rely solely on the wording of the statute and must take into account other facts established by case law.
Conclusion
Although there are many situations where an unequal division of property is an option and can often be considered fairer, the basic principle underlying it is still equality of shares. If the spouses agree on the division of the community property, disparity is often the preferable and easier option and there is nothing to prevent its negotiation within the limits of good morals. In practice, however, court proceedings are more likely to occur in which the disparity is claimed by one of the spouses without a prior agreement on the division of the spouses’ matrimonial property. It is clear from the case law that lower courts are often reluctant to apply the disparity and tend to stick to the parity of shares, which they perceive as the basic starting point. They regard disparity as an exceptional measure and often do not resort to it even in cases where it would appear to be justified and desirable. On the other hand, the work of the courts of appeal often allows for a departure and the establishment of unequal shares, but with an emphasis on taking into account the specific circumstances and maintaining the fairness of the division of the matrimonial property. However, case-law is still evolving in this respect too, and brings new conclusions, not only as regards the circumstances underlying the disparity of shares.
Personally, we see the possibility of setting different shares as fair and necessary. If the method of division is agreed between the spouses by agreement before or during the marriage, it expresses their common will and consent to the arrangement for the division of the community property. It is more problematic if the court determines the amount of the shares after the dissolution of the SJM subject to the statutory regime. In that situation, it is often difficult for the former spouses to agree on the method of division and it is therefore up to the court to decide which method is the fairest. However, it is difficult to ascertain in hindsight all the relevant circumstances of the case, the course of the marriage, the merits of which spouse and other specifics necessary for a properly reasoned decision on the disparity of shares. Perhaps this is the reason why practice unfortunately shows us that courts of first instance are more likely to settle SJM with equal shares than unequal shares. However, the possibility of a disparity of shares must be taken into account and care must be taken to establish and take into account all relevant facts in any settlement so that both methods of settlement are sufficiently assessed and the most appropriate and fair one is chosen.
JUDr. Kateřina Valdecká
Julie Králová
[1] FRANCOVÁ, Marie; DVOŘÁKOVÁ ZÁVODSKÁ, Jana. Divorce, break-ups and dissolution of partnership. Prague: Wolters Kluwer ČR a.s., 2008. p. 48
[2] § 742(1)(a)
[3] KRÁLÍK, Michal. Judicature of the Supreme Court: Parity and disparity of shares in the settlement of SJM (BSM). In Soudní rozhledy, 2012, vol. 18, no. 11 – 12, p. 385
[4] See e.g. the Supreme Court judgment of 30 May 2005, Case No. 22 Cdo 1781/2004
[5] Decision of the Supreme Court of 25.01.2023, Case No. 22 Cdo 2772/2022
[6] Ibid
[7] Judgment of the Supreme Court of 26 February 2014, Case No. 22 Cdo 1683/2013
[8] Judgment of the Supreme Court of 19 March 2007, Case No. 22 Cdo 2921/2005
[9] Judgment of 27 March 2018, Case No. 22 Cdo 6109/2017
[10] Judgment of the Supreme Court of 27 June 2012, Case No. 22 Cdo 1137/2012
[11] Judgment of the Supreme Court of 30 May 2005, Case No. 22 Cdo 1781/2004
[12] Supreme Court judgment of 28 November 2012, Case No. 22 Cdo 1096/2011
[13] Supreme Court Opinion R 42/1972
[14] § 742(1)(b)
[15] § 742(1)(c)
[16] Civil Code, 2nd edition (2nd update, 2023): M. Králík, § 742
[17] Judgment of the Supreme Court of 9 November 2006, Case No. 22 Cdo 999/2006
