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The Division of Lottery Winnings - Joint Venture
2003 National Legal Research Group, Inc.

NEW YORK: Parker v. Parker, 196 Misc. 2d 672, 766 N.Y.S.2d 315 (Sup. Ct. 2003).

Even though an antenuptial agreement provided that all property owned separately by either party was separate property, the court granted a motion to restrain the wife from disposing of $3 million in lottery winnings held in her name alone. The husband had alleged a valid claim that the parties had a joint venture to play the lottery, so that the husband had an ownership interest in at least some of the proceeds.

When the parties were married, they executed a prenuptial agreement whereby each party waived their respective rights in the separately held property of the other, whether arising before or subsequent to the marriage. "Marital property" was defined as property held jointly.

During the marriage, a lottery ticket purchased by the wife was the sole winning ticket of a $25 million New York State Lottery prize. A check in the amount of $8,590,077, made payable to the wife alone, was presented to her. Thereafter, she purchased a condominium in Florida. She created a living trust which contained as its assets the condominium, as well as approximately $8 million of the winnings held in a brokerage account. The wife made gifts of the lottery winnings to her children from a prior marriage. The husband then filed for divorce. The husband then moved for an order to restrain the wife from making any disposition of separate or marital funds, including the $8 million in lottery winnings, and to place $3 million of such winnings in an escrow account.

The court noted that the law was well settled that a lottery prize won during a marriage is generally considered property "acquired" during the marriage subject to equitable distribution. However, it found that the question of what effect should be given to a prenuptial "opting-out" agreement and the husband's entitlement in light of such an agreement to equitable distribution of the proceeds was a matter of first impression in New York. The court first noted that the husband had not challenged the validity of the agreement; nor had he claimed that the agreement was unconscionable or otherwise subject to being set aside. As the agreement clearly stated that the only property subject to equitable distribution was property held in the joint names of the parties, the lottery winnings must be considered, prima facie, the wife's separate property.

However, the husband's motion could be considered as one claiming that the lottery winnings are, nevertheless, joint property under a theory that the parties entered into a "joint venture." The husband claimed that, in the past, the parties had purchased lottery tickets with joint funds, and that it was he who contributed the funds with which the wife purchased the winning ticket. The court recognized that an oral agreement to share lottery winnings is valid and enforceable, but that the husband had the burden of proving that the parties made specific mutual promises to share the winnings, that the purchase of the winning ticket was in furtherance of the parties' joint venture, and that the wife breached the agreement in refusing to share the winnings. While this standard for obtaining a restraining order is a high one in a breach-of-contract action, in the context of a matrimonial action, a party seeking an interim restraint on the disposition of assets is not required to meet that same burden. A matrimonial litigant need only demonstrate that an interim restraint is required to preserve his or her rights to an equitable share of the marital assets. N.Y. Dom. Rel. Law 234. In the event that the husband should succeed in his joint venture claim to the lottery winnings, such winnings would constitute a marital asset subject to equitable distribution. A court has the authority during the pendency of such an action to restrain the disposition of an asset that is claimed to be marital, without weighing the merits of the claim, if it finds that such restraint is necessary to protect the claimant's possible entitlement to an equitable share of the asset upon the disposition of the action. Here, it was undisputed that the wife had assumed unilateral ownership and control of the lottery winnings, had gifted portions thereof to her children, and had insulated the bulk of the winnings from any claim of the husband by the creation of the trust.

The court, therefore, granted the husband's motion for an interim restraint, although it limited the extent of the restraint to $3 million from the lottery winnings, presumably one-half of the amount which the husband could lay claim if successful in establishing a joint venture.

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