The divorce battle between celebrity Chef Bobby Flay and his Wife of a little over 10 years, Stephanie March, have been anything but civil. At the heart of the divorce is a premarital agreement executed by the parties before they said their nuptials. The agreement clearly lays out what Stephanie is entitled to receive with regard to property and support. The jury is still out on whether the premarital agreement will hold up, but that is a blog for another day.
The most recent fight (of which there have been many) revolves around a racehorse named "Dad's Crazy" which Bobby allegedly purchased for Stephanie back in 2009. Stephanie alleges the horse was purchase as a 4th anniversary gift. Apparently the horse was quite successful, raising in excess of $130,000 in winnings, which according to Stephanie, Bobby kept to himself. The horse has subsequently sold for $60,000 and, again according to Stephanie, Bobby kept the sale's proceeds as well.
If you have followed our blog for any amount of time, you will know that any property acquired during marriage that was acquired by way of "gift" is the separate property of the recipient of the gift (Family Code §770). Seems pretty simple, right? Bobby (allegedly) gave the horse to Stephanie as a gift and therefore it is her separate property. It would then follow that the winnings and the sale's proceeds would also be her separate property.
You know if it were that simple I would not be writing this blog. You see gifts between spouses do not work the same as gifts to a spouse from a third party. Gifts from third parties are almost always the separate property of the recipient. I say "almost always" because this is family law after all, and nothing is ever perfectly certain.
When you have a gift between spouses you need to have writing transferring the property from either the separate property or community property of the giver of the gift to the separate property of the recipient for there to be a valid transmutation; which is just a fancy word for changing the character of the property. The simple reason (and yes, I am simplifying this a great deal - I could spend several blogs discussing transmutations) is that you need to be able to prove intent. Generally this comes in the form of a writing of some kind.
The exception to the requirement for a valid transmutation is found in Family Code §852(c) which says:
"This section does not apply to a gift between the spouses of clothing, wearing apparel, jewelry, or other tangible articles of a personal nature that is used solely or principally by the spouse to whom the gift is made and that is not substantial in value taking into account the circumstances of the marriage."
This short code section is the reason why parties, almost without exception, keep their engagement and wedding rings, jewelry, personal property and clothing acquired during marriage. These items are easy to distinguish, because they are specifically mentioned in the statute. The analysis becomes more difficult when you get to the line "or other tangible articles of a personal nature."
This is one of those sentences that absolutely defies a precise definition, but as Justice of the Supreme Court of the United States, Potter Stewart, said when he was asked to describe the threshold test for obscenity, "I'll know it when I see it." That's just it, it will always be a case by case basis.
As an example, in the case Marriage of Buie and Neighbors, Husband argued that Wife's gift of a Porsche given to him for his birthday was his separate property under the exception in Section 852(c). The court disagreed holding that an automobile is not an article of a personal nature within the meaning of the section. Though it probably would not have changed the court's holding, it is worth noting that Husband purchased the car with Wife's separate property as a birthday gift, without first asking Wife if that was okay.
So, how will "Dad's Crazy" be worked out? If I was a betting man (and I am...I was raised in Las Vegas after all), I would bet on the horse being deemed community property, and Bobby will be entitled to recoup any money he put into the horse's purchase. As for the money that was earned by "Dad's Crazy," that will also be community property subject to reimbursement by Bobby. This all assumes there is no provision in the premarital agreement about purchases made during marriage and how they are treated upon dissolution.