Megan Murphy and Joseph McGoldrick began dating in July 2010 and eventually decided to marry. In late 2016, Megan and Joseph decided to purchase a home for \($205,000.\) Because Joseph had the financial means necessary to close on the home and Megan was more creditworthy than Joseph, the two agreed that Joseph would withdraw the needed money from his retirement fund, and Megan would solely execute the mortgage note. Joseph withdrew \($5,000\) from an Ameriprise Financial account that he owned. As part of the mortgage loan application, the bank required Megan and Joseph to execute a gift letter to document the source of the \($5,000\) and to verify that Megan’s receipt of the \($5,000\) constituted a gift to be applied toward the purchase of the home and not a loan. The \($5,000\) gift letter reflects that Joseph certified to the bank that he withdrew \($5,000\) from his Ameriprise Financial account; gifted that \($5,000\) to Megan, whose relationship to him is set forth on the gift letter as “fiancé”; and that the \($5,000\) “gift is to be applied toward the purchase of the [home].” The \($5,000\) gift letter further states that “[n]o repayment of the gift is expected or implied in the form of cash or by future services of the recipient.” Later that month, Joseph withdrew another \($47,000\) following the same procedure, resulting in a total of \($52,000\) given to Megan.
In 2016, Megan and Joseph closed on the home, taking it as joint tenants. However, the engagement would fall apart in 2018, leading to the house being sold at a loss. Joseph sought to recover the \($52,000,\) arguing that it was a gift to Megan conditioned on their marriage, which was no longer occurring. Megan refused and pointed to the language of the gift letter stating no repayment is expected. The trial court ruled in favor of Joseph, and Megan appealed.
JUDGE ELLIOTT Megan claims that the trial court erred when it concluded that the \($52,000\) Joseph contributed to purchase the Home was a conditional gift in contemplation of marriage because the plain language of the gift letters executed by the parties constituted an “express waiver of repayment” which “trumps case law on conditional gifting.” According to Megan, Joseph’s waiver of repayment as evidenced by the gift letters entitles her to 50 percent of the settlement proceeds, plus the \($5,688.43\) that she was already awarded. The [Restatement provides] that “[i]t is suggest[ed] that gifts of considerable size may be assumed to be conditional, that other gifts not involving peculiar features, such as heirlooms, and not for the primary purpose of being used after marriage by the parties, should be regarded as absolute and should be incapable of recovery.” Additionally, in affirming this court’s decision in Lindh, our supreme court adopted a nofault approach to gifts given in contemplation of marriage which requires such a gift to be returned to the donor regardless of who was at fault for ending the relationship.
The facts of this case are similar to those in Nicholson. There, Nicholson and Johnston, intending to marry, purchased a home as joint tenants with the right of survivorship. Johnston supplied the down payment and closing costs and agreed to be financially responsible for the mortgage. The marriage never occurred.
Nicholson filed a partition action and litigation ensued. This court ultimately affirmed the trial court’s finding that Johnston’s down payment constituted a conditional gift contingent upon the occurrence of the marriage, and because the marriage did not occur, Johnston was entitled to recover the down payment.
Here, Megan contends that the execution of the gift letters constituted a waiver by Joseph that his gift of \($52,000\) toward the purchase of the Home was conditioned on marriage because the gift letters that they signed state that “no repayment is expected or implied.”
By their very nature, however, gifts are given without the expectation of repayment. Indeed, Joseph testified that at the time he transferred the funds, he did not expect to be repaid because he “felt [he and Megan] were going to live in the [Home] forever. Get married and have a great life.” Megan echoed Joseph’s testimony and stated that when the parties signed the gift letters, she was Joseph’s fiancé and that she and Joseph were purchasing the Home because they intended to live together as a married couple. Megan and Joseph also consistently testified that the sole purpose of the gift letters was to secure the mortgage loan to buy the Home that they intended to live in together as a married couple.
The record clearly demonstrates that Joseph made the \($52,000\) gift for the purpose of purchasing a marital residence for him and Megan to live in as husband and wife. The gift letters were necessary to achieve that purpose and did not extinguish the condition upon which the gift was given—the occurrence of marriage.
Therefore, when the relationship between Megan and Joseph ended, the gift’s purpose could no longer be achieved. Consequently, Joseph was entitled to recover the remaining escrow balance in the amount of \($36,297.42\) which represented partial reimbursement of his payment of the hand money and down payment needed to purchase the Home.
CRITICAL THINKING:
Why did the court ignore the clear language in the gift letter that Joseph did not expect repayment? Do you agree with the court’s reasoning?
ETHICAL DECISION MAKING:
Do you think it would be more ethical for a court to consider who is at fault in an engagement’s termination when deciding whether to require the return of a gift conditioned on marriage? What ethical guideline is shaping your answer?