Major household purchases, as we have seen, typically involve most or all household members and sometimes draw in other kin as well. When trouble starts, the nature of those purchases and payment for them often become acute matters of legal dispute. In divorce settlements, for example, whether a household automobile belonged to one spouse or both often hinges on whether they purchased it separately, whether they used it separately, or whether one spouse gave it to the other as a gift (see Hadden 1993-94).
Another recurrent form of property dispute is the attempt of parties in a legal case to decide whether a given person’s collaboration in a purchase constituted a gift, a loan, an entitlement, or a co-purchase. When the legal action involves a divorce, a house is usually by far the largest single piece of property up for division. At that point, who paid for the house, how, and why becomes the crucial legal issue. When parents, for instance, gave their child and the child’s spouse money for a down payment, did they expect repayment as they would of any loan, or was that money a gift? If a gift, was it a conditional gift, with the expectation that the child would eventually help out the donors? Did they and the children purchase the house jointly? If the child later divorces, what happens to the parents’ investment? If the payment qualifies as a loan, the divorcing couple is equally responsible for repayment, but if a gift, much depends whether it was a joint or individual gift. In the absence of strong evidence concerning the donor’s intentions, however, courts commonly rely on the doctrine of gratuity: the presumption that transfers of property between close relatives constitute gifts (see Marvel 1979). Thus, if parents buy a house for their married child, without further evidence of intentions, courts commonly decide that the house purchase was a gift.
Some of these issues come forth dramatically in an unusual dispute over home ownership decided in 2002 (Hudak v. Procek, 806 A.2d 140 (Del. 2002); see also Hudak v. Procek, 727 A.2d 841 (Del. 1999); Elder Law 2002). At issue was parents’ investment in a house purchased by a child and surviving family members’ claims on that house. Anna and John Procek, the parents, migrated from Czechoslovakia, settling in an ethnic New Jersey neighborhood with other fellow Czechs, where they raised three daughters. The Proceks never learned much English, nor how to drive a car. In 1978, when they were in their mid-seventies, the couple decided to sell their New Jersey home and move to Delaware near their eldest daughter Helen Hudak. Helen had promised to take care of them in their old age. Unfamiliar with complex financial transactions (they only used cash for their purchases), the Proceks delegated Helen to purchase their new home—one block away from her own—with the proceeds from the sale of the New Jersey property. The house was titled in daughter Helen’s name alone, although she had been married to John Hudak Jr. for over two decades. After the Proceks moved in, they paid all the new house’s expenses, but relied on Helen and John for various forms of routine help. Helen drove her parents “to stores and to medical appointments.. .. The Proceks gave cash to Helen who wrote checks to pay [their] bills” (Hudak, 806 A.2d 145), while John took care of occasional house repairs.
In April 1990, tragedy struck: after a short illness Helen died of cancer. Before she died, Helen had offered to transfer the house’s ownership to her parents, but they declined. Therefore, after Helen’s death, the house title passed to her surviving husband. A few months later, concerned that Hudak might remarry and evict them, John Procek persuaded his widowed son-in-law to sign an agreement guaranteeing that the older couple could remain in the house until their death. Procek died just three years later. Three years after that, the now ninety-two-year-old Anna decided to move out and live with Irene, another of her daughters. That’s when the trouble started. Irene and Annie (the third daughter) asked Hudak to sell the house and divide the proceeds equally among the three of them. Hudak rejected the proposal and moved into the disputed property with his son. Anna went to court, claiming the house was hers, not Hudak’s. She had not, Anna testified, purchased the house as an outright gift for her daughter: “See, I pay every penny for my house. She not pay nothing, just take care of me, you know.” When the court asked her why she and her husband had put the house in Helen’s name, Anna answered: “I think she needs to take care of me but she die so quick” (148). The Proceks would have gifted the house to their daughter as reward for her care, but after their own deaths, not hers.
Three court decisions sided with the older woman: first, the Delaware trial court in 1998, and twice, on appeal, Delaware’s Supreme Court. Yet the odds had been against Anna: after all, she had to counter the strong legal presumption that when a parent transfers property to a child, that transfer is an outright gift, not a conditional donation. In reaching their decisions, the courts took into account the elderly Proceks’ lack of familiarity with the American legal system to explain why they probably had not understood the legal implications of putting the house in Helen’s name. Nor was there a record of a gift tax filing. In addition, the courts were skeptical that parents of three daughters would privilege only one of them to such an extent. The courts based a significant part of their decision on their reading of the Proceks’ intentions and thus found themselves fitting a complex set of household transactions into the narrower niches supplied by the law.