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Fields v. Fields

June 10, 2010

RONALD FIELDS, APPELLANT,
v.
LUCILLE FIELDS, RESPONDENT.



The opinion of the court was delivered by: Graffeo, J.

This opinion is uncorrected and subject to revision before publication in the New York Reports.

The principal issue raised in this matrimonial case is whether husband's one-half interest in the parties' residence --a Manhattan townhouse that husband purchased during the marriage and where the parties have lived for nearly thirty years -- is marital property. We conclude that the value of husband's one-half interest in the townhouse constitutes marital property subject to equitable distribution and we therefore affirm the Appellate Division order.

I.

As we have previously observed, although the manner in which marital property is distributed falls within the discretion of the trial court, "the initial determination of whether a particular asset is marital or separate property is a question of law, subject to plenary review on appeal" (DeJesus v DeJesus, 90 NY2d 643, 647 [1997]).

Domestic Relations Law § 236 defines "marital property" as "all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held" (Domestic Relations Law § 236 [B] [1] [c] [emphasis supplied]), and the definition of marital property includes a "wide range" of tangible and intangible interests (DeJesus, 90 NY2d at 647). It is telling that the Legislature chose to initially categorize all property, of whatever nature, acquired after parties marry as marital property. As we have repeatedly emphasized, the Equitable Distribution Law "recognizes that spouses have an equitable claim to things of value arising out of the marital relationship and classifies them as subject to distribution by focusing on the marital status of the parties at the time of acquisition" (O'Brien v O'Brien, 66 NY2d 576, 583 [1985]). This marital property designation is in keeping with the fundamental purpose of the Equitable Distribution Law -- the recognition of marriage as an economic partnership (see Gov's Approval Mem, L 1980, ch 281), in which "both parties contribute as spouse, parent, wage earner or homemaker" (O'Brien, 66 NY2d at 585).

The Legislature did provide for several exceptions to this general classification. Section 236 specifies that marital property does not include "separate property" and the statute sets forth four categories of property that constitute separate property:

"(1) property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse;

(2) compensation for personal injuries;

(3) property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse;

(4) property described as separate property by written agreement of the parties pursuant to subdivision three of this part" (Domestic Relations Law § 236 [B] [1] [d]).

When the Legislature enacted Domestic Relations Law § 236, it sought "to recognize the direct and indirect contributions of each spouse" (Hartog v Hartog, 85 NY2d 36, 47 [1995] [citing Gov's Approval Mem, L 1980, ch 281; Assembly Mem, 1980 NY Legis Ann, at 129-130]). Hence, we have stressed that marital property should be "construed broadly in order to give effect to the 'economic partnership' concept of the marriage relationship" (Price v Price, 69 NY2d 8, 15 [1986] [emphasis omitted]). By contrast, separate property -- denoted as an exception to marital property -- should be construed "narrowly" (id. [emphasis omitted]; see Majauskas v Majauskas, 61 NY2d 481, 489 [1984]). The structure of section 236 therefore creates a statutory presumption that "all property, unless clearly separate, is deemed marital property" and the burden rests with the titled spouse to rebut that presumption (DeJesus, 90 NY2d at 652).

With these principles in mind, we turn to the unique facts presented in this case.

II.

Husband and wife, who are 60 and 69 years old, respectively, were married in 1970 and they have a son who was born in 1973. In 1978, the parties decided to purchase a home on the Upper West Side of Manhattan, selecting a five-story townhouse with ten apartments and a basement. Wife agreed to the acquisition of the townhouse only if husband consented to certain preconditions because she believed that working outside the home and caring for their son, together with maintaining the townhouse, would be too burdensome. Because of wife's reticence, husband decided to purchase the townhouse with his mother's assistance.

Husband paid $130,000 for the townhouse, making a $30,000 down payment. The down payment came from funds husband received from his grandparents -- half in lieu of a bequest and half on loan, which his mother agreed to repay. The balance of the purchase price was paid through two mortgages held jointly by husband and his mother. Husband took title solely in his name but later conveyed a one-half interest in the building to his mother. From 1982 to 2001, husband and his mother managed the townhouse as a formal partnership. They deposited rent proceeds into a partnership bank account and made mortgage payments from that account. But the partnership bank account was not used exclusively for the building's income and expenses; husband acknowledges that he commingled marital funds in the account.

In September 1978, husband and wife moved into the townhouse, initially residing in apartment 2 and, in 1979, the couple converted the basement into an apartment where they lived together for five months until wife became ill and moved into apartment 3. In 1983, after apartment 3 was burglarized, wife relocated to apartment 2. Husband remained in the basement apartment and the couple shared occasional meals until 1997. Husband paid rent to the partnership for the basement apartment until 2002; he used his income from employment to make rental payments. Wife also paid rent using her wages while she was living in apartment 3. Husband's mother and stepfather resided in the building as well and paid rent for three apartments that they combined into a single residence. The remaining apartments were leased to various tenants. Husband and wife were continuously employed outside of the home, although they each took periods of parental leave to care for their son. It is not disputed that the couple shared child care expenses and responsibilities as parents.

III.

Husband commenced this divorce action in February 2005 and Supreme Court referred the matter to a Special Referee. After a hearing on issues of equitable distribution, the Referee found that both parties contributed to the long-term marriage, their son's upbringing and the townhouse. The Referee recommended that husband's one-half interest in the townhouse be classified as marital property, less the $30,000 down payment, which the Referee deemed as husband's separate property because those funds had been received from husband's grandparents. He also found that husband's one-half interest in the partnership bank account was marital property. The Referee awarded wife 35% of the value of all marital assets because he concluded that wife had made direct and indirect contributions to the townhouse, including services as a spouse and mother.*fn1 Supreme Court confirmed the Referee's Report and directed entry of a judgment of divorce. Upon husband's failure to pay wife her distributive award, Supreme Court entered a money judgment in wife's favor.

The Appellate Division, with two Justices dissenting, affirmed (65 AD3d 297 [1st Dept 2009]). The court held that husband's interest in the townhouse, less the $30,000 down payment, was properly categorized as marital property subject to equitable distribution. The majority emphasized that husband purchased the townhouse during the parties' marriage, that the couple continuously lived in the townhouse and raised their son in the home, and that wife made direct and indirect contributions to the upkeep of the townhouse. Rejecting husband's assertion that his interest in the townhouse should be viewed as separate property, the court explained that "[t]he fact that the marital residence can also be used to generate income . . . does not therefore reclassify marital property into separate property" (id. at 304).*fn2 The two dissenting Justices disagreed and concluded that husband rebutted the statutory presumption by showing that the townhouse, purchased with funds that were separate property, remained separate property and that wife failed to establish that any appreciation in the townhouse's value was caused by her direct or indirect contributions (see McGuire, J., dissenting, id. at 305). This appeal ensued.

IV.

Husband argues that his one-half interest in the townhouse is separate property because he owns and manages the building with his mother and because wife did not contribute to its purchase or its appreciation in value. We disagree and conclude that the value of husband's one-half interest in the townhouse is marital property subject to equitable distribution.

This case involves the application of the well-settled statutory presumption that all property acquired by either spouse during the marriage, unless clearly separate, is deemed marital property (see DeJesus, 90 NY2d at 652). Here, husband purchased the townhouse in 1978, approximately eight years into the marriage, and therefore, on the date of acquisition, the presumption of marital property arose. Indeed, New York courts have long treated a marital residence that was purchased after the marriage as marital property subject to equitable distribution (see e.g. Murphy v Murphy, 4 AD3d 460, 461 [2d Dept 2004], lv denied 3 NY3d 612 [2004]; Judson v Judson, 255 AD2d 656, 657 [3d Dept 1998]; see also Juhasz v Juhasz, 59 AD3d 1023, 1024 [4th Dept 2009], lv dismissed 12 NY3d 848 [2009]; Heine v Heine, 176 AD2d 77, 84 [1st Dept 1992], lv denied 80 NY2d 753 [1992]). Even where one spouse contributed monies derived from separate property toward the acquisition of the marital residence, this has not precluded its classification as marital property where the ...


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