This past June marked 10 years since Fields v. Fields, 15 N.Y.3d 158 (2010)—a Court of Appeals ruling that left the New York matrimonial bar scratching its collective head (the ruling). Indeed, practitioners continue to wonder how someone who had done little more than "sweep the stoop" of a multi-unit Manhattan townhouse, purchased by her husband through an LLC with funds borrowed from his mother, landed a windfall when the townhouse was deemed marital property during the parties' divorce.

Background

The facts of the case are worthy of review, in concert with Justice Robert Smith's scathing dissent to the ruling, and the First Department order that precipitated the ruling (65 A.D.3d 297 [1st Dept. 2009]), all of which provide valuable insight into the factual realities that underscored this baffling outcome.

The Fields court based the ruling on four main factors:

Timing: the property—a townhouse located on the Upper West Side of Manhattan that contains 10 apartments—was purchased during the marriage, thus it is presumed to be marital property by the statutory language of DRL §236(B);

Transaction: the townhouse was not "acquired in exchange for" the husband's $30,000 down payment; rather the down payment constituted only a portion of the purchase;

Tenancy: the parties paid rent to the LLC, as owner and landlord of the townhouse, and the LLC, in turn, used the rent to pay the townhouse's mortgage; and

Teamwork: during the marriage, the wife contributed in unspecified ways to the parties' economic partnership (although the majority never specified the Wife's contributions, Judge Smith detailed her decidedly minimal efforts, facetiously remembered as "sweeping the stoop" of the townhouse).

Matrimonial practitioners will recall that Fields caused consternation the moment it was handed down. Before Fields, practitioners generally counseled clients and analyzed settlements more in line with Justice Smith's dissent, i.e. that property: (i) purchased with separate property funds; and (ii) a mortgage repaid with funds separate from marital monies, ought retain its character as separate property. In a post-Fields world however, matrimonial attorneys are set adrift. Indeed, Fields has raised more issues than it has answered, among them:

1. Requiring that property be "acquired in exchange for separate property" seems directly at odds with the later comment that "there is not a single template that directs how courts are to distribute a marital asset that was acquired, in part or in whole, with separate property funds";

2. Characterizing the rent paid by the parties to the LLC, which rent was used to pay the townhouse's mortgage, as co-mingling marital funds seems illogical;

3. Granting the wife a windfall when it awarded her a portion of the value of the property based on her stunningly minimal assistance in the caretaking of the townhouse, which the Court deemed sufficient "contributions". As Justice Smith succinctly observed in this regard:

[n]o doubt well-cleaned lobbies, well-kept backyards and attractive furnishings can enhance the value of a building, but they do not cause a Manhattan real estate holding to increase forty-fold in value over 30 years. What does that, obviously, is the real estate market. A court-appointed expert…testified that 'the greatest increase in value' came from 'market forces.' He added that another contributing factor was renovations that had been done in the building—renovations with which the wife had little, if anything, to do.

Courts Interpret 'Fields'

Despite emanating from the highest Court in New York, Fields has largely faded into the tapestry of benign and well-settled propositions of matrimonial law, such as "marriage is an economic partnership" (see, e.g., Ceravolo v. DeSantis, 125 A.D.3d 113 [3rd Dept. 2015]); "[w]here a marital asset was acquired, in part or in whole with separate property funds, courts have usually given the spouse who made the sperate property contribution a credit for such payment" (Alliger-Bograd v. Bograd, 180 A.D.3d 975 [2d Dept. 2020]); and "[t]he initial determination of whether a particular asset is marital or separate property is a question of law, subject to plenary review on appeal" (Pooler v. Pooler, 154 A.D.3d 1305 [4th Dept. 2017]).

The foregoing notwithstanding, there is a fair amount of noteworthy caselaw left in the wake of Fields that proves we were right to be curious about its fallout.

Judge Linda Christopher, while sitting in the Westchester County Matrimonial Part, regularly cited Fields with the following summary:

the husband purchased a one-half interest in a townhouse with his mother…The fact that the husband used $30,000 of his separate property as a downpayment did not rebut the presumption, as the remaining $100,000 of the purchase price was paid through mortgages with funds that were commingled.

See, e.g., E.G. v. D.G., 53 Misc.3d 1201(A)(Sup. Ct. Westchester Co. 2014) and E.R.S. v. B.C.S., 51 Misc.3d 1210(A) (Sup. Ct. Westchester Co. 2016). Notably, Judge Christopher's reference to the "mortgages [paid] with funds that were commingled" glosses over the fact that it was through their rental payments as tenants residing in the townhouse that the parties in Fields acquired marital equity in the townhouse, which obviously is not the same as a couple's co-mingled funds. If Fields teaches us anything, it is how effortlessly "separate" property can, with the judicial stroke of a pen, become "marital" property.

In LL v. BH, 33 Misc.3d 930 (Sup. Ct. Nassau Co. 2011) the court interpreted Fields as having found that it was due to the Wife's contributions as homemaker which led to the ruling that the townhouse was marital property, "even though the husband used separate property for the down payment and owned and managed the building with his mother." This analysis conflates the issues of "classification" and "distribution" and suggests that any property, whenever and however acquired can be converted to marital property by virtue of the non-titled spouse's noneconomic contributions.

Fields has not been limited to distribution of a marital residence, as many matrimonial attorneys prophesized at the time. Indeed, Fields has been cited as authority in distributions of other assets as well, including but not limited to bank accounts (see, e.g., Renck v. Renck, 131 A.D.3d 1146 [2d Dept. 2015]); life insurance policies (see, e.g., Weintraub v. Weintraub, 79 A.D. 3d 856 [2d Dept. 2010]); and the ashes of a still-born child (Jackson v. Jackson, 42 Misc.3d 931 [Sup. Ct. Albany Co. 2013]).

When Fields has been relied upon with more than passing reference, it is often in the context of real property and, more specifically, investment property. In classifying and distributing investment properties, Courts will first look to Fields for guidance regarding that analysis. See, e.g. Nadasi v. Nadel-Nadasi, 153 A.D.3d 1346 (2d Dept. 2017); Iwasykiw v. Starks, 2020 N.Y. Slip Op. 00744 (4th Dept. 2020).

Courts have also used Fields to deny a separate property credit where the separate property was not "in exchange for" marital property. See, e.g. Maddaloni v. Maddeloni, 142 A.D.3d 646 (2d Dept. 2016) Murray v. Murray, 101 A.D.3d 1320 (3d Dept. 2012); See also, Desouza v. Desouza, 163 A.D.3d 1185 (3d Dept. 2018).

In Klauer v. Abeliovich, 149 A.D.3d 617 (1st Dept. 2017), the Court denied a separate property credit for funds used to purchase a coop, which had allegedly originated from a separate account. Citing Fields, the Could held that such funds "lost" their separate character upon being used to purchase the coop, which was then "flipped" and the proceeds used to purchase a subsequent property.

Above all, Fields indelibly reinforced the rule that classifying marital versus separate property begins with timing; property acquired during the marriage is marital property. See A.B. v. D.B., 54 Misc.3d 1204(A)(Sup. Ct. Queens Co. 2016); Dabo v. Sibblies, 142 A.D.3d 459 (1st Dept. 2016). The re-emphasis on timing led the trial court in Pensmore Invs., LLC v. Gruppo, Levey & Co., 2015 N.Y. Slip Op 30650(U) (Sup. Ct. NY Co. [2015]) (modified on appeal 137 AD3d 558 [1st Dept. 2016]) to end its analysis upon finding that because the Wife had acquired certain property during the marriage, it was deemed marital, without crediting that it was gifted to her. See also, Spielfogel v. Spielfogel, 96 A.D.3d 443 (1st Dept. 2012).

Finally, although we do not here address the prolifically analyzed Commodity Futures Trading Commn v. Walsh, 17 NY.3d 162 (2011) ruling, it deserves honorable mention.

Conclusion

A decade later, the landscape of distributing a marital residence or rental property funded from sources other than clearly identifiable marital dollars (e.g., employment income earned during the marriage), remains as muddled today as in the immediate aftermath of Fields.

Let Fields stand as an alarm bell for matrimonial and real estate attorneys, married developers and real estate investors, and every in-law contributing to a real estate interest with a married child — plan ahead, record your contributions, document your intentions, and set expectations. Preserving your interest can be as simple as a postnuptial agreement establishing a road map for distributing the property in any set of circumstances and eliminating the mystery as to how a court, attempting to apply Fields and its progeny, will analyze and classify the property.

Ally Hack is a partner at Warshaw Burstein. Elizabeth E. Erickson, is an associate at the firm.