When in Love Make the Gift “Insubstantial”

“True Value-Court Decides Whether Diamonds Are Forever”
Los Angeles Daily Journal, Vol.114, Issue 222, November 13, 2001

In re the Marriage of BUFF and JAMES MARK STEINBERGER. BUFF JONES, Respondent, v. JAMES MARK STEINBERGER, August 31,2001 COURT OF APPEAL OF CALIFORNIA, SIXTH APPELLATE DISTRICT

2001 Cal. App. LEXIS 699; 111 Cal. Rptr. 2d 521; 2001 Daily Journal DAR 9571

“Gifts of one who loved me,— Twas high time they came; When he ceased to love me, Time they stopped for shame. It is said that the world is in a state of bankruptcy,…”
Emerson, Ralph Waldo. Essays and English Traits. The Harvard Classics. 1909-14

The rules governing the making of gifts of jewelry between spouses and the specific application of Family Code Section 852 (c) was recently commented upon and its limitations discussed and applied in the case of Marriage of Steinberger.

The Steinberger case dealt in part with the application of Family Code section 852 (section 852)

[another portion of the case not commented upon herein dealt with apportionment of stock rights]. Family Code Section 852 provides, in pertinent part: “Requirements [¶] (a) A transmutation of real or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected. [¶] . . . [¶] (c) 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.”

During the marriage of the parties, Mr. Steinberger purchased a diamond The trial court found that the diamond, with ring, to be the separate property of the wife “Buff” by way of gift from Husband to Wife.

The court made the following findings:

“[James] purchased a diamond of substantial value using community funds and unilaterally gave it [to Buff] at or about the time of their fifth wedding anniversary as a gift, with a card announcing his congratulations. Prior to the presentation of this gift, [James] had the stone mounted in a gold setting configured in a ring for [Buff] to wear. [Buff] understood the ring and stone to be a gift to her and accepted it as such. [James] never, prior to separation, stated that the ring and stone were purchased as an investment, rather than a gift, as he now contends. On this issue, the court finds the testimony of [Buff] credible and the testimony of [James] not to be credible.”

The court further stated that the ring was a ‘true gift’.

Notwithstanding these rather absolute findings of donative intent, supported by facts, the reviewing court reversed the trial court and found the diamond and ring to be a community asset. Was there something else Buff should have done at the time the “gift” was make in addition to saying thank you to, as Emerson said, the “one who loved me”?.

The answer lies in the value placed on the item by the parties, and in this case by the testimony of “Buff” at the trial, and the courts integration of the word “substantial” in its findings. Buff’s husband’s attorney had asked her the following question, “Ok in regards to the ring Mr. Steinberger was testifying to yesterday, did you understand when you received that ring that it had some substantial value to you?” and Buff answered, “Yes, I did.” She confirmed that after the bill came, she had the understanding that the ring was worth “a range of at least” $13,000 or $14,000. After this testimony was reread to the trial court, the court stated: “Just a minute. This refreshes my recollection about the value and [Buff's] concession, that even from the amount of money they had, it was substantial, and I think, accordingly, it would be appropriate for me to say that the ring, or the stone, was of substantial value even taking into account the circumstances of the marriage.”

James argument was clear, “the plain meaning of section 852, [Fam. Code, § 852, subd. (a)], is that if the gift between spouses consists of a substantial asset, it is not going to [be] held to be a gift unless there is a written expressed declaration transmuting the property from community to separate. There was not, in this case, such a sufficient writing.” . The statutory exception for jewelry applies only to a gift that is “not substantial in value taking into account the circumstances of the marriage. The testimony regarding “substantiality” was from Buff. She had not argued in the appeal that the evidence was insufficient to support the trial court’s finding that the ring was substantial in value taking into account the circumstances of the marriage, or that the trial court’s factual finding was erroneous.

The reviewing court commented on the impact of this “bright line test”, recognizing that this statute by application to transmutations, may seem “harsh in light of the informal, everyday practices of spouses making gifts during a marriage.” The court went on to examine the legislative history of the statue which sought to balance the public policy of easy transmutation which also generates extensive litigation in dissolution proceedings. The Reviewing Court stated that by not applying this “harsh rule” it encourages a spouse, after the marriage has ended, to transform a passing comment into an ‘agreement’ or even to commit perjury by manufacturing an oral or implied transmutation.

Section 852, as enacted, makes it clear that the Legislature chose to balance the various policy concerns (allowance for convenience and informality within marriages, while preventing or minimizing disputes, fraud and perjury) by enacting a clear, bright-line test regarding transmutations of property. “In light of the Legislature’s decision and the clear language of the statute, it would be inappropriate to hold that a transmutation of jewelry that was substantial in value taking into account the circumstances of the marriage occurred here without the writing required by section 852.”

Various issues are raised by this decision for the Family Lawyer. Firstly, a new “standard” question must now be asked of all recipient spouses with regards to jewelry. What was it worth, was it substantial. Secondly, when should substantiality be determined so as to apply the writing requirement of Fam. Code, § 852, subd. (a)? In the Steinberger. case the circumstances of value and its substantial nature were determined based on the date of the making of the gift. Is such a determination date required in all cases?

What happens if a gift of jewelry is given during marriage, without a writing, and at the time of the giving it is substantial, but at the time of the property trial its worth, taking into account the circumstances of the marriage is now found to be insubstantial. Should Fam. Code,§ 852, subd. (a), apply?. Can counsel for the donee argue that the public policy supporting the “bright-line” application, of preventing or minimizing disputes, fraud and perjury, is now not as compelling, assuming all other indices of the making of the gift are present. The reverse of this scenario would have the insubstantial gift appreciate in value, so that it was substantial at the time of the trial. Should Fam. Code,§ 852, subd. (a), be applied, even though the “necessity” of a writing was not evident to the donor or donee at the time of the making of the gift.

Contact Us for a consultation