Smith v. Villareal

• Decision Date: 04 March 2013
• Docket Number: No. 108,829.,108,829.
• Citation: 298 P.3d 533
• Parties: In re the Marriage of Mary Elias SMITH, Petitioner/Appellee, v. Morey J. VILLAREAL, Respondent/Appellant.
• Court: Oklahoma Supreme Court

298 P.3d 533

In re the Marriage of Mary Elias SMITH, Petitioner/Appellee,

v.Morey J. VILLAREAL, Respondent/Appellant.

No. 108,829.

Supreme Court of Oklahoma.

Dec. 18, 2012.

Rehearing Denied March 4, 2013.

Certiorari to the Court of Civil Appeals Division II; Carl Funderburk, Trial Judge.

¶ 0 Petitioner wife filed a Petition for Dissolution of Marriage from husband on January 4, 2007. The trial court disposed of the marital estate and found it to include the third home the parties occupied during marriage as well as two rental properties the husband purchased with his separate funds for the benefit of his two daughters from a previous marriage. Husband appealed the trial court's ruling and the Court of Civil Appeals affirmed. We granted certiorari to address the issue of whether the trial court's inclusion of the two rental properties as part of the marital estate was against the clear weight of the evidence. We hold that: 1) the husband rebutted the presumption by clear and convincing evidence that the two rental properties, purchased with the husband's separate funds, were intended as a gift to the marital estate because husband and wife took title as joint tenants; and 2) as a result their inclusion by the trial court in the marital estate was against the clear weight of the evidence.

CERTIORARI PREVIOUSLY GRANTED; OPINION OF COURT OF CIVIL APPEALS VACATED; AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

William G. LaSorsa, Sara C. Smith, Tulsa, Oklahoma, for Petitioner/Appellee.

Joseph R. Farris, Curtis R. Roberts, Tulsa, Oklahoma, for Respondent/Appellant.

KAUGER, J.:

¶ 1 The dispositive issue presented is whether two properties purchased by husband using his separate funds for the benefit of his two daughters from a previous marriage were properly included within the marital estate by the trial court. Because husband provided clear and convincing evidence that it was not his intent that the rental properties be included in the marital estate, or even that the property be acquired in joint tenancy in the first place, husband successfully rebutted the presumption that a gift is assumed when real property purchased with the separate property of one spouse is acquired in joint tenancy by both spouses. The decision of the trial court that the two rental properties constituted part of the marital estate was against the clear weight of the evidence. The trial court's disposition of the remainder of the marital estate and the inclusion of the third marital home is affirmed.

FACTS

¶ 2 Morey J. Villareal (husband) appeals a decision of the Court of Civil Appeals affirming the trial court's September 21, 2010, decree of divorce which divided the marital estate between himself and Mary E. Smith (wife). They were married on November 22, 2003. The parties filed for divorce on January 4, 2007, although they did attempt reconciliation for a time after filing. Wife moved out of the parties' home on January 8, 2008, and the parties resumed divorce proceedings in the trial court. They had no children together.

¶ 3 During the marriage, the parties lived in three successive homes. The first home was purchased before the marriage using a combination of a mortgage, as well as proceeds from the sale of husband's previous separate home and money from his personal investment account. Twice during the marriage, the couple “traded up,” purchasing new homes in part with funds from the sale of the previous home, combined with new mortgages. Husband made mortgage payments on the homes and improvements on them using earnings from his business which were held in his personal trust.

¶ 4 After the initial start of divorce proceedings, but during the period of attempted reconciliation, husband purchased two homes for his daughters from a prior marriage in June and October of 2007. The husband paid for these homes with his separate property, consisting of the proceeds from the sale of his parents' home. Wife does not dispute that the properties were purchased with husband's separate funds. However, both husband's and wife's names appear on the warranty deeds, signed by the sellers of the properties and notarized. Pursuant to the deed, husband and wife took title to the properties as joint tenants.

¶ 5 The divorce decree, entered on July 19, 2010, found the parties' third home, and the two homes purchased for the benefit of husband's two daughters by a previous marriage, to be included within the divisible marital estate. ¹ Husband appealed the ruling of the district court that the marital homes and two rental properties were part of the marital estate, and the Court of Civil Appeals affirmed the decision on August 28, 2012. Husband filed his Petition for Certiorari with this Court on September 17, 2012.

I. CLEAR AND CONVINCING EVIDENCE EXISTS THAT HUSBAND DID NOT INTEND A GIFT TO THE MARITAL ESTATE WHEN HE PURCHASED TWO PROPERTIES WITH HIS SEPARATE FUNDS FOR THE BENEFIT OF HIS DAUGHTERS, EVEN THOUGH HUSBAND AND WIFE TOOK TITLE AS JOINT TENANTS.

¶ 6 The trial court erred in holding that because husband and wife took title to the two rental properties as joint tenants, the properties automatically became part of the divisible marital estate. Clear and convincing evidence exists that indicates husband did not intend the two rental properties to become marital property. Despite husband and wife taking title as joint tenants, he rebutted the presumption of a gift that arises when spouses take title as joint tenants to property acquired with separate funds or originally held separately. The ruling of the trial court regarding the two rental properties was against the clear weight of the evidence indicating that husband did not intend a gift to the marital estate.

¶ 7 A divorce suit is one of equitable cognizance in which the trial court has discretionary power to divide the marital estate.² In an action of equitable cognizance there is a presumption in favor of the trial court's findings and they will not be set aside unless the trial court abused its discretion or the finding is against the clear weight of the evidence.³

¶ 8 Title 43 O.S.Supp. 2006 § 121 requires a fair and equitable division of property acquired during the marriage by the joint industry of a husband and wife.⁴ Jointly-acquired property is that which is accumulated by the joint industry of the spouses during the marriage. ⁵ The determination of the issue as to separate ownership of property acquired during the marriage is dependent on the original source of the property.⁶ Wife does not dispute that the two rental properties were purchased with separate property of the husband.

¶ 9 A transfer by one spouse of separate property to another does not by itself erase the separate character of the asset or real property transferred; rather, the original ownership regime must be respected unless there is proof of an interspousal gift.⁷ The law provides a rebuttable presumption of a gift where title to separately held real estate is placed by one owner-spouse in both spouses' names as joint tenants.⁸ This presumption arises even if the property in question was purchased with one spouse's separate funds, as in this case.⁹

¶ 10 The presumption in favor of a gift can be overcome by clear and convincing evidence of contrary intent, including evidence of a purpose for placing the property in joint tenancy that is collateral to making a gift. ¹⁰ In Larman v. Larman, 1999 OK 83, 991 P.2d 536, the Court held that the presumption of a gift was overcome where the wife included the husband's name upon deeds as a joint tenant to property she held separately for the sole purpose of refinancing the mortgage loans on both properties, because the lender required that in order to qualify, both spouses had to be record owners and sign the loan related documents.¹¹ In Larman, the wife spoke to a loan officer about refinancing, and the officer advised her that the loans could not be made if title to both the properties remained solely in her name.¹² The lending institution prepared the deeds and mortgages, which were then signed by both spouses. The deeds conveyed title to them in the properties at issue as joint tenants.¹³

¶ 11 The husband in Larman confirmed by his testimony that: 1) the wife did not tell him she was making a gift to him of her inherited real estate; 2) he was not aware that the property was in joint tenancy or that he even had a claim of ownership in it until after his wife had commenced the divorce action; and 3) the husband first learned he was listed on the three deeds as a joint tenant when, at the suggestion of counsel, he obtained a copy of the documents.¹⁴

¶ 12 Clear and convincing evidence exists in this cause that the husband did not possess donative intent when title was conveyed to both spouses in joint tenancy. Husband provides ample evidence beyond his own testimony indicating why the inclusion in the divisible marital estate by the trial court of the two rental properties purchased for his daughters was an error, and something that he did not intend. Husband argues that the closing company in charge of handling the transaction erroneously placed the properties in joint tenancy, against his intent. During trial, Husband called Larry Johnson, President of Guaranty Abstract Company (Guaranty), to testify regarding the two properties purchased for Husband's daughters. Johnson stated that in his review of Guaranty's files, that he did not find any instructions or other indications that either one of the properties was to be acquired by Husband and Wife jointly.¹⁵ In his view, the placing of the properties in joint tenancy on the Warranty Deed was a mistake made by Guaranty. He stated during trial:

Q: With respect to the two rental properties we talked about however, the deeds that Guarantee Abstract prepared and that were field were not done consistent with what you were supposed to do?

A: That is correct ¹⁶

¶ 13 During cross-examination, Johnson did state...