Gabriele v. Gabriele
| Decision Date | 31 January 2018 |
| Docket Number | NO. A-1-CA-34523,A-1-CA-34523 |
| Parties | Johnny A. GABRIELE, Petitioner-Appellant, v. Deborrah L. GABRIELE, a/k/a Debbie Gabriele, Respondent-Appellee. |
| Court | Court of Appeals of New Mexico |
Michael Danoff & Associates, P.C., Michael L. Danoff, Albuquerque, NM, for Appellant.
Kamm & McConnell, L.L.C., Terrence R. Kamm, Raton, NM, for Appellee.
{1} The formal opinion filed in this case on January 3, 2018, is hereby withdrawn, and this opinion is substituted in its place.
{2} Husband appeals the district court's division of property that resulted from the parties' dissolution of marriage. Specifically, Husband contends the district court erred by failing to distribute all property and finding that four sole and separate property agreements that Husband signed shortly before Husband filed for divorce were valid. For the reasons discussed below, we affirm in part, reverse in part, and remand for further proceedings.
{3} Johnny Gabriele (Husband) and Deborrah Gabriele (Wife) were married on February 15, 2006. Husband filed a petition for divorce on July 22, 2013. A trial was held to determine how the marital property would be divided, after which the parties submitted proposed findings of fact and conclusions of law. The district court issued its decision and order in which it granted dissolution of the parties' marriage and distributed the marital property, including real estate, cash, other assets, and liabilities.
{4} Husband appealed and makes the following claims: (1) the district court erred by concluding that the sole and separate property agreements (SSPAs) that Husband signed were valid, enforceable contracts; (2) the district court erred in its distribution of the parties' marital residence—known as the Francis Home—which Husband had acquired prior to marriage; and (3) the district court failed to address Husband's claimed interests—both separate and community—in various other property, including a 1955 Chevrolet that Wife had given him as a birthday gift, a property located in Texas (the Texas property), and Wife's income earned during the marriage. We address each of Husband's claims in turn, reserving discussion of more specific facts when pertinent to our legal analysis.
{5} In 2007, Wife—who had a background as a nursing home administrator and a Master's degree in business—started an assisted living business called Colfax Senior Care, LLC (CSC), a limited liability company (LLC) in which Wife was the single registered member. CSC purchased a residential property (262 Francis) out of which to operate an assisted living facility for $92,000. Wife testified that the "start-up money" for CSC came from $50,000 of her separate savings and a $20,000 loan from her children. Husband testified that he contributed $29,000 from his smaller retirement fund for the down payment on 262 Francis and that he participated in the business by helping to remodel and maintain the facility. Wife disputed that Husband contributed any funds to purchase 262 Francis. The district court resolved this dispute in Husband's favor, finding that Husband "contributed approximately $29,000 of his separate funds to [the] purchase [of 262 Francis]."
{6} CSC was expanded in 2009-10 in order to meet growing demand in the community, and the business purchased a lot (251 Francis) on which to construct a new, larger facility. Both parties agree that Husband contributed $10,000 from his retirement savings to purchase 251 Francis and loaned CSC $80,000 to construct the new facility. CSC took out a $528,000 bank loan to finance the remainder of the construction project. 262 Francis was sold after 251 Francis opened.
{7} In July 2012, Wife started making plans to expand the business again, including construction of a new, $1.5 million facility. According to Wife, when she discussed her expansion plans with Husband, he was "adamant that [she] not do it" because he was concerned about "[s]o much liability[,]" both financial and legal. Wife consulted a business lawyer about forming a new LLC for the expanded business that could be Wife's separate property in order to release Husband from all liability associated with the new business. The lawyer helped Wife "draw up the new LLC" and informed her that she "could create a document" that would put "all the liability, financial, legal" on Wife. Wife testified that Husband was
{8} On April 25, 2013, the parties signed four SSPAs. In addition to two SSPAs designating, respectively, the new LLC (Colfax Senior Living, LLC (CSL) ) and the property for the new facility (the State Street property) as the separate property of Wife, there were two SSPAs that designated CSC (the existing LLC) and 251 Francis (the existing assisted living facility) as Wife's separate property. The SSPAs provided that Husband "expressly waives, relinquishes, and releases any and all right, title, claim, or interest in and to" both pieces of real property as well as the LLCs' "Membership Interest." After Husband and Wife signed the SSPAs, Wife continued with the development of CSL.1 She purchased the State Street property in May 2013 for $120,000 with money from "[her] business" and two bank loans. However, once divorce proceedings commenced in July 2013, Wife decided not to go forward with the expansion project.
{9} At the time of trial, CSC was under contract for sale for $620,000. Subsequent to trial, after the sales transaction was completed and CSC's debts were paid off, $257,461.26 was placed in the registry of the court. Regarding CSL, Wife testified that she believed the plans for the State Street project that she had commissioned were sellable but that she was not aware of anyone who was interested in purchasing the project. She also described CSL's outstanding debts, but the district court did not make any specific findings or conclusions regarding the amount of those debts.
{10} Husband argued to the district court that he "received no consideration" under the SSPAs, thereby invalidating them, and that Wife "breached her fiduciary duty to [Husband ] by her conversion of community property to her sole and separate property." Wife contended that "[t]he consideration for the [SSPAs] was to free [Husband] of all liability and debt associated with the business then and in the future, which was considerable." The district court found that Husband "desired to be relieved of responsibility for existing debt and liability of both companies, and future debt and liability of the businesses and the property" and concluded that "[b]y signing the agreements [Husband] was relieved of responsibility for the debt as well as the liability."2 As such, the district court awarded Wife, among other things, 251 Francis, the State Street property, CSL and its assets, and CSC—including the entire $257,461.26 of proceeds from the sale of CSC—all subject to debt thereon.
{11} Husband relies on general principles of contract law and argues that the district court erred in concluding that the SSPAs are valid because (1) they lacked mutual assent, and (2) Wife's promise of releasing Husband from liability was illusory, thus they also lacked valid consideration. Wife relies on the definition of "separate property" contained in NMSA 1978, Section 40-3-8 (1990), to support the validity of the designation of the businesses and properties identified in the SSPAs as Wife's separate property.3 Neither party has addressed the import of NMSA 1978, Section 40-2-2 (1907), wherein the Legislature statutorily set forth the contract rights of married persons. We begin with the statute. See Hughes v. Hughes , 1981-NMSC-110, ¶ 19, 96 N.M. 719, 634 P.2d 1271 (); Primus v. Clark , 1944-NMSC-030, ¶ 13, 48 N.M. 240, 149 P.2d 535 ().
{12} In New Mexico, "[e]ither husband or wife may enter into any engagement or transaction with the other, or with any other person respecting property, which either might, if unmarried[.]" Section 40-2-2. However, such transactions between spouses are subject to "the general rules of common law which control the actions of persons occupying confidential relations with each other." Id. Interpreting this statute, our Supreme Court has held that transactions between spouses in which one spouse "secured a decided advantage over the [other]" are "presumptively fraudulent." Beals v. Ares , 1919-NMSC-067, ¶¶ 73, 82, 90, 25 N.M. 459, 185 P. 780. That is because a husband and wife are fiduciaries upon whom are imposed " ‘the obligation of exercising the highest good faith towards [each other] in any dealing between them, and [which] preclude[s each] from obtaining any advantage over [the other] by means of any misrepresentation, concealment, or adverse pressure.’ " Id. ¶ 76 (); see Primus , 1944-NMSC-030, ¶ 15, 48 N.M. 240, 149 P.2d 535 (). In such cases, in order to overcome the presumption of fraud, it is the duty of the spouse who has gained the advantage "to show (a) the payment of an adequate consideration, (b) full disclosure by him [or her] as to the rights of the [other] and the value and extent of the community property, and (c) that the [other] had competent and independent advice in conferring the benefits upon [him or her]." Beals , 1919-NM...
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