In its December 13, 2012 decision in Murrary v. Murray, the Appellate Division, Third Department, affirmed the determination to deny a husband an equitable distribution credit for the value of a home which he owned before the marriage and which, after the marriage, he deeded to himself and his wife jointly.
The parties were married in 1986 and have four children. 15 months before the marriage, the husband purchased a residence in Queens County. Tthe parties lived there together for several years after their marriage. In 1991, the husband conveyed the home to himself and his wife jointly. The parties thereafter refinanced the Queens County property and used the proceeds to purchase their ultimate marital residence in Sullivan County, keeping and renting out the Queens County property. In 2003 the parties separated. The husband commenced this divorce action in 2005.
In resolving equitable distrution issues, Sullivan County Supreme Court Justice Robert A. Sackett denied the husband a credit for the premarital value of the Queens County property. On appeal, the Third Department found that that determination was within Justice Sackett’s discretion.
The transfer of that property into joint ownership created a presumption that it was marital property, placing the burden upon the husband to rebut this presumption with clear and convincing proof that the transfer was solely a matter of convenience.
Here, the appellate court noted, the husband’s testimony regarding the Queens County property (characterized by Supreme Court as evasive and questionable) failed to rebut the presumption. The entire Queens County property was thus part of the parties’ marital property and subject to the court’s substantial discretion in fashioning an equitable distribution award.
While the appellate court noted that a credit is often given for the value of former separate property, such a credit is not strictly mandated. The property is no longer separate, but is part of the total marital property. Quoting the 2010 Court of Appeals decision in Fields v. Fields, 15 NY3d 158, it was stated:
There is no single template that directs how courts are to distribute a marital asset that was acquired, in part or in whole, with separate property funds.
Upon review of the record and the entirety of the equitable distribution award, the Third Department was unpersuaded that Justice Sackett abused his discretion.
That analysis was also applied in this case to Justice Sackett’s decision to liquidate and equally divide the parties’ Verizon stock. The husband testified that he owned at least some of this stock before the marriage, but had offered no specific evidence supporting this claim. Most significantly to the court, all of the stock was placed in joint ownership during the marriage. The husband failed to rebut the resulting presumption that this asset was marital property by clear and convincing evidence.
One view of the Court of Appeals decision in Fields is that it ended the rules; there are no fundamental principles for the treatment of separate property.
It is extremely common, if not a rule, to give a dollar-for-dollar credit for a contribution of separate property dollars towards the purchase of jointly-titled marital residence. If, for example, $100,000 of a spouse’s pre-marital funds is used after the marriage to purchase a home owned by the parties jointly, that spouse will be given “back” that $100,000 upon a subsequent divorce. See, for example, Lurie v. Lurie (3rd Dept. 2012), Pelcher v. Czebatol (4th Dept. 2012), the subject of a prior blog post; Kost v. Kost (2nd Dept. 2009).
Should a distinction be made between pre-marital funds contributed to a purchase and deeding a pre-marital home into joint names?
Almost uniformly (and often treating the marital residence differently than other types of assets), the courts give credits for separate property contributions, even of an individually-owned home transferred to the spouses jointly. Post v Post, (2nd Dept. 2009]; Coffey v Coffey, 119 AD2d 620, 622-23, 501 NYS2d 74, 77 (2nd Dept. 1986); Parsons v Parsons, 101 AD2d 1017, 476 NYS2d 708 (4th Dept 1984).
Without rules, equitable distribution issues become very difficult to settle. Parties may roll the dice to see what the trial judge will decide is equitable.
Here, did the husband knowingly waive his rights to a separate property credit; did he intentionally give it away; did he even understand that such rights might be effected?
Must every lawyer representing a couple in the purchase or other title transfer of a home specifically assess the separate property components, advising the couple of issues that may be raised upon a divorce? May a single attorney represent the couple? Must the real estate attorney advise each spouse to consult an independent matrimonial attorney?
Suggesting that “equity” may not be appropriate may be tantamount to denigrating the American flag, motherhood, or apple pie. But the idea of unwittingly taking steps which may change rights to hundreds of thousands of dollars is also very troublesome.
Justin E. Kimple, Esq., of Levinson, Reineke & Ornstein, PC, of Central Valley, represented the husband; Michael D. Altman, Esq., of South Fallsburg, represented the wife.