Legal Viewpoint... How to divide the stock purchased by one party before marriage in the event of divorce.
Published:
2022-02-09
Basic case Ms. Li and Mr. Wang are in free love. They registered for marriage in October 2010 and have a son after marriage. Ms. Li filed a lawsuit with the court in May 2020, claiming that the relationship between the couple had broken down and requesting a divorce. Mr. Wang said the relationship is not broken, do not agree to divorce. The court ruled against divorce. Six months after the verdict came into effect, Ms. Li filed a divorce lawsuit again, requesting a divorce and raising a legitimate child. Mr. Wang agreed to the divorce and agreed that the legitimate child would be raised by Ms. Li and that she would pay monthly support, but asked to split the market value of the shares purchased by Ms. Li before marriage in the fund account of a securities business department of a certain securities company limited. · Lawyer's Views The author represents Ms. Li, in the process of receiving Ms. Li, the author told Ms. Li that if the stock account set up before marriage did not buy and sell after marriage, the value-added part of the stock belongs to the natural value-added, the other party has no right to divide. If there is a buy and sell, and the time and energy spent to maintain the value of the stock, the other party has the right to divide the value-added part. Ms. Li told the author that after marriage, buying and selling frequently, and the amount of value added is very large. So the author according to the actual situation of the case analysis of the stock should be owned by Ms. Li, but Ms. Li needs to pay half of Mr. Wang's stock appreciation. · Views of the People's Court of the Supreme Court The key to how to define whether the value-added portion of the stock purchased before marriage is the joint property of the husband and wife is whether the stock account has been moved after marriage. If the stock account has not been moved, it is the purchaser's premarital property and the other party has no right to request a division of the value-added portion; if the stock account has been operated and managed after marriage, the value-added shall be treated as the joint property of the husband and wife, and the other party may request a division of the value-added portion. Value added is the increase in price of a thing or right. According to the causes of value-added, it can be divided into natural value-added and active value-added. Natural value-added means that the value-added occurs as a result of inflation or changes in market conditions, and has nothing to do with whether one or both spouses put material, labor, effort, management, etc. into the property. For example, the house, antiques, calligraphy and painting, jewelry, gold, etc. owned by the husband and wife before marriage are increased in value due to the increase in market prices during the marriage relationship. Active value-added means that the reason for the value-added is not only inflation or changes in market conditions, but also related to the labor, investment, management, etc. paid by one or both spouses to the property. For example, the value-added part of the pre-marital house of the husband and wife due to the decoration during the marriage relationship. Specific to the issue of stock appreciation, the reasons for stock appreciation should be analyzed. If the stock is held before marriage and has not been operated, the value-added of the stock is entirely caused by changes in market conditions, and this value-added should be understood as natural value-added, and it is more appropriate to identify it as personal property before marriage by applying the provisions of Article 26 of the Judicial Interpretation I of Marriage and Family. If the stock has been bought and sold many times after marriage, it is more appropriate to understand the appreciation of the stock as an investment behavior. Because in this case, the appreciation of the stock often requires one of the husband and wife to invest a lot of time and energy, and its income often depends on the management of the stock speculator, which requires the other party of the husband and wife to pay more in other aspects, such as the upbringing of children and the income of family daily expenses. If it is unilaterally understood as natural appreciation, it may be unfair. And in real life, there are professional stock speculators, who specialize in stock speculation, or simply rely on stock speculation income to survive, if the value-added income of the stock does not distinguish the situation, all as the property of one of the husband and wife, will not be conducive to the protection of the rights and interests of the other party. Therefore, it is more appropriate to understand the return on stocks as the return on investment operations. Investment is divided into direct investment and indirect investment. Direct investment refers to the direct investment of money or in kind in the production and operation activities of an enterprise, and its investment income is usually accompanied by the investor's business behavior, and the income obtained by this investment method is usually known and accepted as the joint property of the husband and wife. Indirect investment is more hidden, it does not directly invest in enterprises, its income is usually not directly related to the business activities of enterprises, mainly in the purchase of stocks, bonds, investment funds and other securities to obtain dividends, dividends, fund investment income and the difference between the transfer of the above-mentioned securities and the deduction of principal. In this case, the proceeds of the appreciation of the stock as an indirect investment should belong to the joint property of the husband and wife, and the other party may of course request a division. · The court of first instance held As of the plaintiff's lawsuit, the market value of the shares in the capital account of a securities business department of XXX Securities Co., Ltd. was 349768 yuan. The account was opened in 2009 and the market value was 55555 yuan at the time of opening the account. As both parties did not provide a transaction list and the shares rose or fell, the current market value could not distinguish between income, interest and natural appreciation. Defendant Wang received half of the market value of the account, that is, 174884 yuan. · Second instance Ms. Li appealed against the verdict. In the second instance, after court mediation, Mr. Wang only got half of the stock appreciation, that is, 147106.50 yuan. · Legal provisions 1. Article 1062 of the the People's Republic of China Civil Code stipulates: "The following property acquired by the husband and wife during the existence of the marriage relationship shall be the joint property of the husband and wife and shall be jointly owned by the husband and wife: (1) wages, bonuses and remuneration for labor services; Income from (II) production, operation and investment; Income from (III) of intellectual property rights; Property inherited or donated by the (IV), except as stipulated in Item 3 of Article 1063 of this Law; (V) other property which shall be owned jointly. Husband and wife have equal rights to deal with common property." 2. Article 26 of the Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Code of the the People's Republic of China Civil Code stipulates: "The income generated by the personal property of one spouse after marriage shall be recognized as the joint property of the husband and wife, except for fruits and natural appreciation."
Basic case
Ms. Li and Mr. Wang are in free love. They registered for marriage in October 2010 and have a son after marriage. Ms. Li filed a lawsuit with the court in May 2020, claiming that the relationship between the couple had broken down and requesting a divorce. Mr. Wang said the relationship is not broken, do not agree to divorce. The court ruled against divorce. Six months after the verdict came into effect, Ms. Li filed a divorce lawsuit again, requesting a divorce and raising a legitimate child. Mr. Wang agreed to the divorce and agreed that the legitimate child would be raised by Ms. Li and that she would pay monthly support, but asked to split the market value of the shares purchased by Ms. Li before marriage in the fund account of a securities business department of a certain securities company limited.
· Lawyer's Views
The author represents Ms. Li, in the process of receiving Ms. Li, the author told Ms. Li that if the stock account set up before marriage did not buy and sell after marriage, the value-added part of the stock belongs to the natural value-added, the other party has no right to divide. If there is a buy and sell, and the time and energy spent to maintain the value of the stock, the other party has the right to divide the value-added part. Ms. Li told the author that after marriage, buying and selling frequently, and the amount of value added is very large. So the author according to the actual situation of the case analysis of the stock should be owned by Ms. Li, but Ms. Li needs to pay half of Mr. Wang's stock appreciation.
· Views of the People's Court of the Supreme Court
The key to how to define whether the value-added portion of the stock purchased before marriage is the joint property of the husband and wife is whether the stock account has been moved after marriage. If the stock account has not been moved, it is the purchaser's premarital property and the other party has no right to request a division of the value-added portion; if the stock account has been operated and managed after marriage, the value-added shall be treated as the joint property of the husband and wife, and the other party may request a division of the value-added portion.
Value added is the increase in price of a thing or right. According to the causes of value-added, it can be divided into natural value-added and active value-added. Natural value-added means that the value-added occurs as a result of inflation or changes in market conditions, and has nothing to do with whether one or both spouses put material, labor, effort, management, etc. into the property. For example, the house, antiques, calligraphy and painting, jewelry, gold, etc. owned by the husband and wife before marriage are increased in value due to the increase in market prices during the marriage relationship. Active value-added means that the reason for the value-added is not only inflation or changes in market conditions, but also related to the labor, investment, management, etc. paid by one or both spouses to the property. For example, the value-added part of the pre-marital house of the husband and wife due to the decoration during the marriage relationship. Specific to the issue of stock appreciation, the reasons for stock appreciation should be analyzed. If the stock is held before marriage and has not been operated, the value-added of the stock is entirely caused by changes in market conditions, and this value-added should be understood as natural value-added, and it is more appropriate to identify it as personal property before marriage by applying the provisions of Article 26 of the Judicial Interpretation I of Marriage and Family. If the stock has been bought and sold many times after marriage, it is more appropriate to understand the appreciation of the stock as an investment behavior. Because in this case, the appreciation of the stock often requires one of the husband and wife to invest a lot of time and energy, and its income often depends on the management of the stock speculator, which requires the other party of the husband and wife to pay more in other aspects, such as the upbringing of children and the income of family daily expenses. If it is unilaterally understood as natural appreciation, it may be unfair. And in real life, there are professional stock speculators, who specialize in stock speculation, or simply rely on stock speculation income to survive, if the value-added income of the stock does not distinguish the situation, all as the property of one of the husband and wife, will not be conducive to the protection of the rights and interests of the other party. Therefore, it is more appropriate to understand the return on stocks as the return on investment operations. Investment is divided into direct investment and indirect investment. Direct investment refers to the direct investment of money or in kind in the production and operation activities of an enterprise, and its investment income is usually accompanied by the investor's business behavior, and the income obtained by this investment method is usually known and accepted as the joint property of the husband and wife. Indirect investment is more hidden, it does not directly invest in enterprises, its income is usually not directly related to the business activities of enterprises, mainly in the purchase of stocks, bonds, investment funds and other securities to obtain dividends, dividends, fund investment income and the difference between the transfer of the above-mentioned securities and the deduction of principal. In this case, the proceeds of the appreciation of the stock as an indirect investment should belong to the joint property of the husband and wife, and the other party may of course request a division.
· The court of first instance held
As of the plaintiff's lawsuit, the market value of the shares in the capital account of a securities business department of XXX Securities Co., Ltd. was 349768 yuan. The account was opened in 2009 and the market value was 55555 yuan at the time of opening the account. As both parties did not provide a transaction list and the shares rose or fell, the current market value could not distinguish between income, interest and natural appreciation. Defendant Wang received half of the market value of the account, that is, 174884 yuan.
· Second instance
Ms. Li appealed against the verdict. In the second instance, after court mediation, Mr. Wang only got half of the stock appreciation, that is, 147106.50 yuan.
· Legal provisions
1. Article 1062 of the the People's Republic of China Civil Code stipulates: "The following property acquired by the husband and wife during the existence of the marriage relationship shall be the joint property of the husband and wife and shall be jointly owned by the husband and wife: (1) wages, bonuses and remuneration for labor services; Income from (II) production, operation and investment; Income from (III) of intellectual property rights; Property inherited or donated by the (IV), except as stipulated in Item 3 of Article 1063 of this Law; (V) other property which shall be owned jointly. Husband and wife have equal rights to deal with common property."
2. Article 26 of the Interpretation (I) of the Supreme People's Court on the Application of the Marriage and Family Code of the the People's Republic of China Civil Code stipulates: "The income generated by the personal property of one spouse after marriage shall be recognized as the joint property of the husband and wife, except for fruits and natural appreciation."
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