house upside down.jpgIt should have been a dead giveaway.  Court of Appeals Judge Victoria Graffeo warned us that in Fields v Fields (PDF), New York’s highest court was about to apply public policy principles to “unique facts.”  The result: a decision likely to keep Equitable Distribution litigators busy for years to come.

8 years into the Fields’ 35-year marriage, Mr. Fields bought a 10-apartment Manhattan townhouse for $130,000.  For the $30,000 purchase down payment, Mr. Fields used a $15,000 gift from his grandparents, and a $15,000 loan from those grandparents, which Mr. Fields’ mother agreed to repay.  Six days later, Mr. Fields conveyed a half interest in the property to his mother.  The $100,000 balance of the purchase was paid using two mortgages.

There the parties resided, paying rent to the partnership of Mr. Fields and his mother. The Fieldses, however, lived in separate apartments beginning 5 years after purchase.

  • Would the holding have been any different had the Fieldses not lived there?
  • What if the purchase was purely for investment and managed by others?
  • Does purchasing stocks on margin using an inheritance render the property marital?

The Court affirmed that the townhouse was marital property on the date of its purchase.  Because the husband financed a portion of the townhouse, it was not acquired “in exchange for separate property.”  As a result, the husband was only entitled to a dollar-for-dollar credit for his down payment contribution.  Timothy Tippins, in his September 2, 2010 New York Law Journal article, has characterized this decision as “sympathy run amok.”

The Court affirmed the award of 35% of all marital property to Mrs. Fields, noting that it was “not for the courts to dictate what type of lifestyle a ‘normal’ marriage should reflect” when considering the parties lived separately for their final 22 years of marriage.  Why, if only the down payment was separate, and the lifestyle was to be overlooked, was Mrs. Fields entitled to only 35% in this very long marriage in which she made both economic and noneconomic contributions to the marriage and the upbringing of their son?

Contrary to the opinion, the facts in Fields are not unique.  These issues will continue to surface regularly.  The lesson to be learned: no asset should be purchased using separate property in whole or part,` without a postnuptial agreement.