Wednesday, March 10, 2010

Case law - Marital Property Titled to Someone Else

Krstin Nicevski v. Greta Nicevski was decided last year on July 9. My apologies for the delay in writing this one up - put it down to the turmoil of last Summer and Fall. However, the case points out something important and so I am going ahead on write on the case.

The Indiana Court of Appeals opinion sets out the issue quite well:

Appellant-respondent Krstin Nicevski appeals from the decree of dissolution of his marriage to appellee-petitioner Greta Nicevski. Krstin argues that the trial court erred by including the value of a residence titled in his parents' name in the marital estate and directing him, among other things, to pay Greta $40,000, or half of the value of the residence. Finding that the trial court was without authority to include the residence in the marital estate because Krstin's parents were not joined as necessary nonparties pursuant to Indiana Trial Rule 7(B), we reverse and remand with instructions to revise the decree of dissolution consistently with this opinion.
Note that the property held by the parents is not automatically removed from the possibility of being included in the marital pot, but there was procedural and evidence problems in including the parents' property in this marital pot.

The Nicevski Court relied upon In re Marriage of Dall, 681 NE 2d 718 (1997) and Indiana Trial Rule 7(B). Trial Rule 7(B) reads as follows:
Motions and other papers. Unless made during a hearing or trial, or otherwise ordered by the court, an application to the court for an order shall be made by written motion. The motion shall state the grounds therefor and the relief or order sought. The requirement of notice is satisfied by service of the motion.
Vadas v. Vadas, 762 NE 2d 1234 (Ind. Supreme Court 2002) provides more on this point and about Dall:

The Court of Appeals reversed, holding that "an equitable interest in real property titled in a third-party, although claimed by one or both of the divorcing parties, should not be included in the marital estate." Id. at 722. Although the couple "may have hoped eventually to acquire legal title to 1236 the property ... they did not have a definite agreement that title would be transferred to them." Id. at 721 (distinguishing Sovern v. Sovern, 535 N.E.2d 563 (Ind.Ct. App.1989), where "the owners of record title disclaimed any interest in the real estate."). Therefore, in Dall, "neither Husband nor Wife possessed the definite interest necessary for the home to be included in the marital estate." 681 N.E.2d at 721.

The holding of Dall promotes predictability, consistency and efficiency by excluding "remote and speculative" interests from the marital estate. See 681 N.E.2d at 722. The property at issue here is just such a speculative interest. Rita's investment and James' labor increased the home's value during the marriage, but general market conditions before and after the marriage would also account for some part of the appreciation. (R. at 146-47, 279, 284.) The sale to James and Rita was to occur at some unspecified future date, contingent upon James' getting back "on his feet" financially. (R. at 144.) Neither price nor terms had been discussed, although John wanted to recover what he put into the property (unlike the record owner in Sovern, who did not claim any interest in the property in question). (R. at 147.)

If property is titled to another, is there evidence showing that the property should be included in the marital estate?

In Re Marriage of England v. England gives an idea of how to answer that question:

Husband contends that his interest in the Rumpke property is akin to those in Loeb and Fiste that were excluded from the marital pot. He contends that his interest is completely defeasible and that he has no present interest of possessory value. We disagree. To the extent Husband's interest in the property is defeasible, he for the most part controls the defeasance. In Loeb and Fiste, the defeasance would occur because of an act over which the remaindermen had no control — death or a change in beneficiary. Here, Husband loses his interest in the property if he abandons the property, ceases to use it as his primary residence, or opposes Rumpke's plans to expand its landfill, all of which are choices Husband would make of his own accord.[1] Husband also loses his interest if both dwellings on the property are destroyed or become uninhabitable. Although it is true, as Husband points out, that the dwellings could be destroyed by fire or weather tomorrow, it is also true that they may never be destroyed and Husband will live on the property virtually rent-free for the remainder of his life. Finally, Husband also loses his interest when he dies, but in that case, it is possible he may have enjoyed the use of the property for a nominal rent up to the time of his death. See Hacker, 659 N.E.2d at 1111 (noting that husband was "correct in asserting that there are no guarantees he will be granted continued residence [on a farm owned by his parents, but] [c]onversely, he may also be allowed to live there rent-free for the remainder of his life" and therefore, the trial court did not err in considering husband's continued use and occupancy of the farm in dividing the marital assets).

In addition to this situation being unlike Loeb and Fiste because here, Husband controls the defeasance, this case is also unlike Loeb and Fiste because those cases dealt with future interests. Here, Husband presently has a possessory interest in the property for his use and enjoyment. Husband is able to live on the property, farm the land, and cut the timber. The fact that the property is available for Husband's continued use and occupancy at a minimal yearly rent is relevant under Indiana Code section 31-15-7-5(c) as an economic circumstance of the parties and the trial court did not abuse its discretion in considering this interest in dividing the marital estate.

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