Legal Ground: When does a gift confer ownership?

The children were surprised to see Gold Filament claiming the house in lieu of a debt of the jewelry company.

By DR. HAIM KATZ
Bella A. established and managed a successful jewelry company. For many years the company thrived and flourished, so she felt confident signing a personal guarantee to her one major supplier, Gold Filaments, Ltd. When business began to slow down and then slow down significantly, Mamma Bella gathered her children around her armchair and set aside her needlework. "Kinderlach," she said to the parents of her adult grandchildren, "things just don't look as good as they once did. Now if I don't have a robust company to leave for you when I go, I won't be too sad. But if I can't even leave you the house where you grew up, now that will leave me disappointed. I'm giving it to you as a present, today. There's one condition, though, and that's that Papa and I will live our lives out here." Naturally, the children agreed, the deal was done and written up between the parties. Secure in the knowledge of their mother's generous gift, they were surprised, shortly after her death, to see Gold Filament claiming the house in lieu of a debt of the jewelry company. "Not so fast" the children said to the creditor company. "We have a contractual right and the payment was made in full, which is tantamount to a quasi-proprietary right. Step aside, creditor!" "You paid?" "In full. Zero shekel and zero agorot; it was a gift. A gift is paid for as soon as it's declared, and the declaration is in writing. It's a contract for all intents and purposes." "Your mom just promised it to you to keep it out of our reach. It's a contract just for show. It's a facade, and we never saw any document, either." The company retaliated. And they sung that tune all the way to the Tel Aviv District Court and from there to Jerusalem, to the Supreme Court. "Your Honor, this apartment was a present to us from our late matriarch who even wrote up her decision at the time. It's ours." "It's not a present, it's a pretense!" argued the conglomerate. "She gave it away, so to speak, and kept living in it. What kind of present is that?" Supreme Court Justice Yosef Elon weighed these arguments carefully. "Giving the house to the children as a gift, rather than allowing them to inherit it when the time comes, may seem questionable." Beads of sweat appeared on the plaintiffs' brows. "However, my determination is that there was a clear intent to give it to them, and not merely to create an illusion." Sweat evaporated into joy as the conglomerate squirmed uneasily in its chair. "When does a commitment to give a present actualize into ownership?" the judge continued. "Or, in our case, as the property was never registered in the children's name, does the commitment become a proprietary right? "Inasmuch as the gift was not recorded in the Lands Registry in any form, we must examine the surrounding circumstances. Did anyone behave differently for the present having been promised. Did anyone sell their home, knowing that a new one will be theirs soon? Did anyone inform the creditors that they'll need to seek alternate securities? If they had, their claim would prevail over the creditor's. "However," the judge continued as the joy began to ebb, "that was not the case here. And whereas the creditor was never informed of the commitment nor was the commitment registered in the Lands Registry, the creditor very legitimately regarded the apartment as a satisfactory security and did not seek any other guarantee. Thus the creditor prevails." Justice Elyakim Rubinstein complimented Elon's ruling with legal opinions from the Rambam, the Shulhan Aruch and Rabbi Moshe Isserles (the "Rema"), all of whom insist that a present must be publicized to acquire legal status. The moral of the story? I've said it before, I'll say it now and I'll probably have to say it again: Don't feel at home until you've got your name on the title deed, in the Lands Registry. Only then will you be on firm Legal Ground. Israelaw@netvision.net.il