Saturday, June 19, 2010

The Presumptions of Gift vs. Loan

Brad Barnes sued Rose Michalski to enforce the repayment of an alleged loan. Plaintiff's complaint alleged that he lent defendant $27,000 and that she had not repaid the money. Defendant's answer alleged that the money was a gift.

There was considerable testimony at trial concerning the relationship of the parties. Both plaintiff and defendant were swingers. They were both married to other people and the four of them routinely met at their houses, hotels, or certain campgrounds to practice their self-described lifestyle of "swinging."

The appellate opinion spent considerable time examining the presumptions that should have arisen at trial. The court found the law presumes a gift if someone transfers property to his or her spouse or family member. The burden would then shift to the transferor to prove that it was a loan and not a gift.

However, there is no presumption of a gift to a friend, even a close friend. Their apparently is also no presumption of a gift to a swinging colleague. In this case because the parties were not related, the presumption was of a loan. The burden then shifted to the defendant to prove it was a gift. The only evidence offered in support of the gift theory were defendant's own self-serving statements.

Also as there was no written contract, nor was there ever any discussion of the repayment terms when the money was exchanged, defendant argued that plaintiff could not meet its burden in proving that it was a loan.

The court found that the common law does not require plaintiff to prove the "terms of repayment" to obtain a judgment for repayment of a loan. Pursuant to the Restatement of Contracts, if a loan omits the terms of repayment, the court can supply the terms.

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