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Gibson v. Gibson

Supreme Court of Georgia

June 5, 2017

GIBSON et al.

          PETERSON, Justice.

         Alina Gibson (Wife) appeals from the trial court's order granting her requested divorce from Stewart Gibson (Husband). She argues that the trial court erred by excluding from the marital estate approximately $3.2 million in assets that Husband previously had placed into two trusts. Wife argues that exclusion of the trust assets was erroneous because (1) property placed in trust by one spouse without the other's knowledge and consent remains marital property; (2) Husband's transfer of assets into the trusts was fraudulent; and (3) Husband failed to transfer properly the assets in question into the trusts. Contrary to Wife's argument, trusts like those here are exempt from equitable division absent a finding of fraud. Because the trial court's finding that Husband's transfers of assets into the trusts were not fraudulent is supported by evidence in the record, we affirm the trial court's rejection of Wife's fraudulent transfer claim. Wife's other claims are unavailing, as well, with one exception: we agree with her that transfers of the contents of two brokerage accounts into the trusts were ineffective under OCGA § 53-12-25 (a) because the accounts erroneously listed Husband as trustee. We therefore remand for the trial court to redistribute the marital assets, including the assets in those two accounts.

         Husband and Wife were married in 1993 and had one child, born in 2004. Husband and Wife had a rocky marriage and began sleeping separately following their daughter's birth. Husband testified that, although Wife threatened to divorce him many times, he never took her threats seriously and did not consider them to be separated until she actually filed for divorce in 2014.

         This litigation concerns two trusts created by Husband. In March 2008, Husband created an irrevocable trust, the Gibson Family Trust (the "GF Trust"), naming his mother, Julia Gibson, as trustee and Wife, their daughter, and their daughter's descendants as beneficiaries. The terms of the trust gave the trustee the discretion to distribute income and principal to Wife and their daughter during Husband's life and in the event of his death, and stripped Wife of her rights and interests in the trust if Husband and Wife divorced or legally separated. The trust also provided certain rights of withdrawal to the Gibsons' child or her legal guardian. In July 2012, Husband created a second irrevocable trust, the SLG Trust, again naming his mother as trustee, and naming multiple beneficiaries, including his spouse and his descendants. The trust gave all beneficiaries a right of withdrawal subject to certain limits. Between 2010 and 2013, Husband purported to place approximately $3.2 million worth of assets, including bank and brokerage accounts, life insurance policies, and an ownership interest in a certain entity, S. Gibson Properties LLC, into the GF Trust and SLG Trust ("the Trusts") collectively. Husband was neither a trustee nor a beneficiary of either trust.

         Wife filed for divorce in July 2014. In her petition, as amended, Wife raised a conversion claim against Husband and fraudulent transfer claims against Husband and the trustee of the Trusts.[1] Wife claimed that the conveyances to the Trusts were fraudulent because they were made with the intent to hinder, delay, or defraud Wife in the event of divorce. At the six-day bench trial, Husband testified that the GF Trust was set up for liability protection purposes and for the benefit of his daughter. Husband testified that he and Wife never discussed financial matters. The undisputed trial testimony was that Wife did not know about the Trusts or her beneficiary status under them until she filed for divorce, save for an envelope bearing the name of the GF Trust that she saw earlier in 2014; Husband told her it was "for tax purposes."

         Following the trial, the trial court found that $2.2 million in assets was marital property subject to equitable distribution. The court involuntarily dismissed Wife's fraudulent transfer and conversion claims, denying her request that the additional $3.2 million in assets placed in the two Trusts be subjected to equitable division. The trial court found that Husband and Wife did not have a confidential relationship because they did not maintain joint financial accounts or share financial information. The court found that Husband did not form or fund the Trusts at a time when he knew Wife was contemplating divorce or with actual intent to defraud her, that he did not actively conceal the transfers from Wife, and he delivered dominion and control of the assets to the trustee before Wife filed for divorce. The court also found that, although two Charles Schwab accounts purportedly in the Trusts listed Husband as trustee, this was due to the brokerage firm's administrative error, and Husband demonstrated his intention to convey the assets to the Trusts because he listed the Trusts' federal tax identification numbers on the accounts. Wife filed an application for discretionary appeal, which we granted.[2]

         In reviewing a bench trial, we view the evidence in the light most favorable to the trial court's rulings, defer to the trial court's credibility judgments, and will not set aside the trial court's factual findings unless they are clearly erroneous. McDonald v. McDonald, 289 Ga. 387, 387 (1) (711 S.E.2d 679) (2011); Bloomfield v. Bloomfield, 282 Ga. 108, 108 (646 S.E.2d 207) (2007). "It is a question of law for the court whether a particular category of property may legally constitute a marital or non-marital asset, but whether a particular item of property actually is a marital or non-marital asset may be a question of fact for the trier of fact." Highsmith v. Highsmith, 289 Ga. 841, 842 (1) (716 S.E.2d 146) (2011) (citation and punctuation omitted); see also Bloomfeld, 282 Ga. at 108 (1) (factual finding as to whether a particular item is marital or non-marital property must be upheld if supported by any evidence).

          The trial court's involuntary dismissal of Wife's fraudulent transfer and conversion claims pursuant to OCGA § 9-11-41(b) may be reversed only if "the evidence demands a contrary finding." Smith v. Ga. Kaolin Co., 269 Ga. 475, 476 (1) (498 S.E.2d 266) (1998) (citation and punctuation omitted).

         Wife argues that the trial court erred in failing to classify the trust assets as marital assets, contending that the assets are subject to equitable distribution irrespective of any fraud on the part of Husband. She also argues that Husband's actions amounted to fraud as a matter of law. As an alternative basis for reversal, Wife argues that for a host of reasons Husband did not legally deliver the assets to the trustee before Wife filed for divorce.

         1. Property in the Trusts is subject to equitable division only if Wife can show that the transfers into the Trusts were fraudulent.

         Wife first argues that, irrespective of Husband's motives, the property in the Trusts are marital property because he placed the property in trust during the marriage without her knowledge and consent. Saying the matter is an issue of first impression for this Court, Wife cites decisions from other states for the proposition that other jurisdictions routinely construe marital assets placed in trust as marital property subject to equitable division in a divorce proceeding.

          This is not an issue of first impression for our Court, which has permitted property placed in certain types of trusts to be exempt from equitable division. "The law of contracts and titles is respected in divorce cases." Armour v. Holcombe, 288 Ga. 50, 52 (701 S.E.2d 169) (2010). Therefore, property that has been conveyed to a third party is not subject to equitable division absent a showing of fraudulent transfer. See id. If a spouse places property in a trust of which he is the sole beneficiary, that property may be subject to equitable division. See Speed v. Speed, 263 Ga. 166 (430 S.E.2d 348) (1993). But if a spouse is not the sole beneficiary of a trust, the corpus of the trust is not subject to the other spouse's claim of distribution. See McGinn v. McGinn, 273 Ga. 292, 292 (540 S.E.2d 604) (2001).[3]

          Here, Husband is not a beneficiary of the Trusts at all. He is not a trustee of the Trusts. Therefore, for equitable division purposes, the transfers of property to the Trusts were the equivalent of transfers to a third party, such that the property is subject to equitable division only if Wife can show that the transfers were fraudulent.[4]

         2. The trial court's rejection of Wife's fraudulent transfer claim is supported by evidence in the record.

         To that end, Wife argues that Husband's actions in placing the assets in question in trust amounted to fraud. She relies on our case law emphasizing the "confidential relationship" between spouses, saying this means that Husband's failure to tell her about the transfers made those transfers fraudulent as a matter of law. See Murray v. Murray, 299 Ga. 703, 705 (791 S.E.2d 816) (2016); Beller v. Tilbrook, 275 Ga. 762, 762-763 (3) (571 S.E.2d 735) (2002); Adair v. Adair, 220 Ga. 852, 855 (1) (142 S.E.2d 251) (1965). In finding that there is generally a confidential relationship between spouses, we have relied in part on OCGA § 23-2-58, which provides

Any relationship shall be deemed confidential, whether arising from nature, created by law, or resulting from contracts, where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another or where, from a similar relationship of mutual confidence, the law requires the utmost ...

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