Wierman v. Wierman
| Decision Date | 04 June 1986 |
| Docket Number | No. 84-1400,84-1400 |
| Citation | 130 Wis.2d 425,387 N.W.2d 744 |
| Parties | In re the Marriage of Kay J. WIERMAN, Petitioner-Respondent, v. Frank S. WIERMAN, Appellant-Petitioner. |
| Court | Wisconsin Supreme Court |
James J. Podell, Milwaukee, argued, for appellant-petitioner; Law Offices of James J. Podell, on brief.
William R. Powell, Sheboygan, argued, for petitioner-respondent; Hopp, Hodson, Powell & Raftery, on brief.
This is a review of an unpublished decision of the court of appeals filed March 19, 1985, which summarily affirmed a judgment of the circuit court for Milwaukee county, Leander J. Foley, Jr., circuit judge, dividing property on divorce. 1 The dispute in this case centers on whether Kay Wierman's interest in a real estate venture is her property that is not divisible upon divorce, or property that is divisible upon divorce.
The circuit court's judgment excluded the value of Kay Wierman's interest in the real estate venture from the divisible marital estate, pursuant to sec. 767.255, Stats.1983-"84, characterizing it as her property acquired by gift. The court of appeals affirmed the judgment of the circuit court.
We affirm the circuit court's determination that Kay Wierman acquired her interest in the real estate venture as a gift. Furthermore, we conclude that the sales of real estate owned by the venture and the reinvestment of the proceeds from the sales in other assets owned by this venture did not change Kay Wierman's interest in the real estate venture from her property acquired by gift to property subject to division on divorce. Accordingly, we affirm the decision of the court of appeals.
Sec. 767.255, which provides for division of property upon divorce, designates certain property as property subject to division on divorce (hereinafter referred to as marital property) and other property as separate property generally not divisible upon divorce (hereinafter referred to as separate property). Sec. 767.255 provides that property acquired by a spouse by gift remains the separate property of the donee-spouse and is usually not subject to division upon divorce. The statute provides as follows:
2
In applying sec. 767.255 to this case, the court must decide two issues. First, was the wife's interest in the real estate venture originally acquired by gift? Second, if the interest was acquired by gift, was it separate property or marital property at the time of the divorce?
We shall briefly recite the facts relevant to the first issue of whether the interest was acquired as a gift. The Wiermans were married on June 28, 1958, in Sheboygan County, Wisconsin. In 1970, Eugene Koning, a real estate developer in Sheboygan county, transferred one-half of his interest in a real estate venture to his two daughters, Kay Wierman and Carmen Neese, creating the venture then known as K-"N-"W (Koning-Neese-Wierman). Between 1970 and 1975 Mr. Koning made additional transfers of real estate to his daughters' half share of K-"N-"W. In 1975 Mr. Koning transferred his remaining one-half interest in K-"N-"W to his daughters, completely divesting himself of any ownership interest in the venture, and the real estate venture then became known as N-"W (Neese-Wierman).
Mr. Koning's transfers were generally structured as part gift and part purchase, with the purchase price payable in installments. Mr. Koning structured the transactions this way in order to minimize gift taxes. Each year Mr. Koning "forgave" a part of Kay Wierman's indebtedness, and Mr. Koning filed gift tax returns showing any gifts of real estate and any forgiveness of the indebtedness. Mr. Koning never received any payment from his daughters for the transfers of the real estate or for the transfer of his ownership interest in the venture. Mr. Koning testified that at no time did he ever contemplate receiving any money from either daughter and that as far as he was concerned the transfers constituted gifts.
The essential element of a gift challenged here is the intent of the donor. 3 Intent is a fact, and the circuit court's findings of fact concerning the transferor's intent will be sustained unless clearly erroneous. In the Matter of Estate of Alphonse Reist, 91 Wis.2d 209, 218, 281 N.W.2d 86 (1979); sec. 805.17(2), Stats.1983-"84. The circuit court found that although the transfers were structured as part gift and part purchase for tax purposes, "the real estate in question was gifted to Kay [Wierman] by her parents and not sold to her as [Frank Wierman] argues."
There is no evidence in this record to support Frank Wierman's assertion that any "sale" ever took place. The record shows that Mr. Koning has never received any money from his daughters for the transfers and never intended to "sell" the property to his daughters. His sole intention was to make a gift of the property in question to his daughters. We conclude that the circuit court's finding that Kay Wierman acquired her interest in the real estate venture by gift was not clearly erroneous. Sec. 805.17(2), Stats.1983-"84.
We turn now to the second issue. Frank Wierman asserts that even if the transfers from 1970 to 1975 were gifts, Kay Wierman's interest in the real estate venture was marital property at the time of the divorce. He contends that because the originally gifted real estate was sold and the proceeds from these sales were used to acquire additional real estate (which in turn may have been developed and sold by the venture), Kay Wierman's interest in the real estate venture was changed from separate property to marital property subject to division upon divorce.
We briefly summarize the facts that are relevant to this issue. All parcels of real estate originally transferred to Kay Wierman and her sister (except for one lot) have been sold by the venture and the proceeds from the sales have been invested in other real estate, in life insurance policies, in bank accounts, in an IRA account, and in a Keogh account, all held by N-"W. 4
No income has been distributed by N-"W to the Wiermans except sums needed to pay income taxes incurred by Kay Wierman. Under the law she is required to report the profits from the venture on her personal tax returns. The circuit court concluded that the way these tax payments were handled "is evidence of a genuine effort to prevent the commingling of funds to the financial detriment of the partnership."
The circuit court found that Mr. Koning had exclusive managerial control over the venture, both before and after he transferred his one-half interest to his daughters. He kept the books, made the business decisions, developed the real estate, sold lots and reinvested the proceeds from these sales. He operated the business without any aid or assistance from his daughters or their families, and without any compensation for his efforts. Neither Kay Wierman nor Frank Wierman participated in any way in the real estate venture. Neither of them procured buyers for the real estate, or participated in the sale or acquisition of land; neither of them signed any checks or drafted any deeds; and neither of them received any proceeds from the venture other than some money for tax purposes.
When the venture experienced financial difficulties from 1979 to 1981, with expenses exceeding proceeds from the sale of real estate, Mr. Koning advanced $181,500.00 to the venture--without interest--in order to meet those expenses. At the time of trial N-"W owed him $83,000. The Wiermans never contributed funds to the venture.
The essence of Frank Wierman's argument is that separate property is exempt from property division upon divorce only if it retains its character as separate property at the time of the divorce. A change in the character of the property from separate property to marital property is often referred to as transmutation. See Bonnell v. Bonnell, 117 Wis.2d 241, 344 N.W.2d 123 (1984); Weiss v. Weiss, 122 Wis.2d 688, 365 N.W.2d 608 (Ct.App.1985); Trattles v. Trattles, 126 Wis.2d 219, 376 N.W.2d 379 (Ct.App.1985). In effect Frank Wierman asserts that the originally gifted property has been "transmuted" from separate property to marital property by the sale of the originally gifted property and reinvestment of the proceeds. Frank Wierman's transmutation argument rests on the following reasoning: The originally gifted real estate is separate property; proceeds from the sale of the real estate (which is separate property) constitute income; income from separate property is marital property under Arneson v. Arneson, 120 Wis.2d 236, 355 N.W.2d 16 (Ct.App.1984); assets acquired with marital property (the income) are marital property; and at the time of the divorce the venture consisted entirely of marital property, that is, assets acquired with the proceeds from the sales of the originally gifted real estate. 5
Sec. 767.255 specifically provides that gifts are the donee's separate property not subject to division. The statute is silent, however, on whether to treat income derived from the gifted property, appreciation in value of the gifted property, and proceeds from the sale of gifted property as separate property or marital property.
We must therefore interpret sec. 767.255 and apply sec. 767.255 to the facts of this case to determine the character of Kay Wierman's interest in N-"W, that is whether it is...
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