Charlton v. Charlton

413 S.E.2d 911, 186 W. Va. 670

• Court: West Virginia Supreme Court
• Decided: January 6, 1992
• Docket: 19763
• Status: Published

Opinions

MILLER, Chief Justice:

This is an appeal from a final order of the Circuit Court of Marion County which granted the parties, Howard S. Charlton, Jr., and Estaline Charlton, a divorce. The primary question on appeal is whether the circuit court erred in ruling that funds inherited by each of the parties during the marriage and placed in jointly titled investments were the separate property of the respective parties. We conclude that the funds were not marital property, and we affirm the judgment of the circuit court.

I.

The facts are not in any substantial dispute. The parties were married on November 23, 1956, and thereafter lived in Fair-mont, Marion County. It appears Mr. Charlton was employed as a teacher and/or school administrator, while Mrs. Charlton did not work outside the home. The parties had two children, both of whom were emancipated at the time of the proceedings below.

During the marriage, Mrs. Charlton inherited $139,331 from her mother and an additional $21,000 from her husband’s aunt. Mr. Charlton inherited $40,000 from his parents and an additional $7,000 from his aunt. All of these funds were placed in investment accounts in the joint names of the parties and were managed by Mr. Charlton. It does not appear that the corpus of these investments was used for marital purposes, but some of the income from the investment accounts was used for marital living expenses.

On February 4, 1988, the parties separated. Mrs. Charlton subsequently instituted divorce proceedings on grounds of adultery, cruelty, and desertion in the Circuit Court of Marion County. The matter was referred to a family law master.

On June 29, 1988, the family law master issued his decision recommending that Mrs. Charlton be granted a divorce on the ground of adultery. The law master apparently concluded that treating the investment accounts as marital property would unjustly enrich Mr. Charlton. The law master found Mr. Charlton to be the party solely at fault for the dissolution of the marriage. He recommended that each party withdraw from the joint investment accounts the amount he or she inherited during the marriage.

By order entered September 11,1989, the circuit court adopted the family law master’s findings and conclusions. The court awarded Mrs. Charlton $160,331 from the investment accounts as her separate property and awarded Mr. Charlton $47,000 as his separate property from the same source. The remainder of the parties’ assets were ordered equally distributed between them. By order dated November 9, 1990, the circuit court refused Mr. Charl-ton’s motion for reconsideration.

II.

A.

In reaching his conclusion that Mrs. Charlton’s inheritance was her separate property, the family law master relied upon the principles of unjust enrichment, which we outlined in Patterson v. Patterson, 167 W.Va. 1, 277 S.E.2d 709 (1981), overruled on other grounds, LaRue v. LaRue, 172 W.Va. 158, 304 S.E.2d 312, 41 A.L.R.4th 445 (1983). The factual basis for the claim of unjust enrichment was that the husband was at fault for the breakup of the marriage. In Patterson we impressed a constructive trust in favor of the wife on property acquired during the marriage partially by the wife’s contributions, but titled solely in the name of the husband. In the course of our discussion, we recognized that the presumption of gift between husband and wife under W.Va.Code, 48-3-10 (1931), would not defeat such a constructive trust where the husband would be unjustly enriched.¹

We note, however, that Patterson was decided before the adoption in 1984 of our equitable distribution statute, W.Va.Code, 48-2-32. W.Va.Code, 48-2-32(c), states:

“In the absence of a valid agreement, the court shall presume that all marital property is to be divided equally between the parties, but may alter this distribution, without regard to any attribution of fault to either party which may be alleged or proved in the course of the action, after a consideration of the following .¡factors]_” (Emphasis added.)

This provision goes on to identify a number of economic factors, including homemaker and child care services, that can be considered in determining whether an unequal distribution of the marital property is warranted. W.Va.Code, 48-2-32(c)(l)-(3). The factors listed in W.Va.Code, 48-2-32(c)(4), also permit an unequal distribution to the extent one of the parties has been found to have dissipated or depreciated the value of marital assets. This section specifies that “except for a consideration of the economic consequences [of such dissipation or depreciation of assets], fault or marital misconduct shall not be considered by the court in determining the proper distribution of marital property.”²

These statutory provisions remove fault in the conduct of the parties as a factor in determining the appropriate division of marital property. This is consistent with the overall statutory structure regarding the equitable distribution of marital property between husband and wife. The purpose of the equitable distribution statute is to achieve a proper economic distribution of marital assets. Consequently, the Legislature chose to focus solely on economic factors, excluding consideration of fault as a factor in altering the distribution.

We are reinforced in this conclusion by the contrasting language in W.Va.Code, 48 — 2—15(i) (1986), which specifically authorized a court making an award of alimony to consider the fault of either party:

“In determining whether alimony is to be awarded, or in determining the amount of alimony, if any, to be awarded under the provisions of this section, the court shall consider and compare the fault or misconduct of either or both of the parties and the effect of such fault or misconduct as a contributing factor to the deterioration of the marital relationship.”³ (Emphasis added).

Even before the adoption of this provision, we had indicated that fault or misconduct could be considered in awarding alimony. In those instances where there were traditional fault grounds for the divorce, we awarded alimony to the wife if she was the innocent party. See State ex rel. Cecil v. Knapp, 143 W.Va. 896, 105 S.E.2d 569 (1958). With the advent of no-fault grounds for divorce, we have held, based on statutory language, that inequitable conduct which caused the dissolution of the marriage can be considered as a factor in the alimony consideration. Under W.Va. Code, 48-2-4(a)(7) (1981), which recognizes living separate and apart without cohabitation for a year as a ground for divorce, “the court may inquire into the question of who is the party at fault and may award alimony according to the right of the matter[.]” Based on this language, we held in Syllabus Point 1 of Peremba v. Peremba, 172 W.Va. 293, 304 S.E.2d 880 (1983):

“When alimony is sought under W. Va. Code, 48-2-4(a)(7), the court may consider substantial inequitable conduct on the part of the party seeking alimony as one factor in its decision. Substantial inequitable conduct is conduct which the trier of fact may infer caused the dissolution of the marriage.”

Likewise, W.Va.Code, 48-2-4(a)(10) (1981), which specifies irreconcilable differences as a ground for divorce, provides that the court may make orders as to alimony which are “just and equitable.” In the Syllabus of Haynes v. Haynes, 164 W.Va. 426, 264 S.E.2d 474 (1980), we stated:

“W.Va. Code, 48-2-4(a)(10) [1977] which provides for a consensual divorce based upon irreconcilable differences allows the court to make a ‘just and equitable’ award with regard to alimony, and since divorce on this ground is consensual, it is not necessary to find fault or inequitable conduct on the part of the spouse to be charged with an alimony award, although consideration may be given by the trial court to fault or inequitable conduct as one of many factors to be considered in determining what is ‘just and equitable.’”⁴ (Emphasis added).

From the foregoing discussion, we believe it is clear that in enacting our equitable distribution statute, the Legislature did not intend fault to be considered as a factor in determining the division of marital property. However, the Legislature did designate marital fault as a factor to be considered in awarding alimony under the provisions of W.Va.Code, 48 — 2—15(i).

B.

Mr. Charlton contends that the circuit court erred in not characterizing the investment accounts as marital property and dividing them in accordance with our equitable distribution statute. Mrs. Charlton counters that the accounts were separate property under W.Va.Code, 48-2-1(f)(4) (1986), which refers to “[pjroperty acquired by a party during marriage by gift, bequest, devise, descent or distribution[.]”

Mr. Charlton argues this case is controlled by Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990), where we discussed at some length the statutory concepts of marital and separate property. We also discussed the consequences of titling one spouse’s separate property in the joint names of both spouses and stated in Syllabus Point 4:

“Where, during the course of the marriage, one spouse transfers title to his or her separate property into the joint names of both spouses, a presumption that the transferring spouse intended to make a gift of the property to the marital estate is consistent with the principles underlying our equitable distribution statute.”

In Whiting, we recognized that joint titling of separate property gives rise only to a rebuttable presumption of a gift to the marital estate, and we outlined some factors that would overcome the presumption:

“The presumption may be overcome by a showing that the transferring spouse did not intend to transfer the property to joint ownership or was induced to do so by fraud, coercion, duress, or deception. See Bonnell v. Bonnell, [117 Wis.2d 241, 344 N.W.2d 123 (1984)]; Trattles v. Trattles, 126 Wis.2d 219, 376 N.W.2d 379 (App.1985).” 183 W.Va. at 459, 396 S.E.2d at 421. (Footnote omitted).

A coercive transfer of separate property to a joint account was considered in Wood v. Wood, 184 W.Va. 744, 403 S.E.2d 761 (1991). There, the wife claimed that certain bank stock which she had inherited was placed into a Treasury bill jointly titled with her husband at his insistence. The record on appeal was not sufficiently developed to make a final determination of this issue. We did, however, recognize that if Mrs. Wood can show that she was coerced into dividing the stock proceeds, the presumption of gift [to the marital estate] would be overcome.” 184 W.Va. at 752, 403 S.E.2d at 769.

In the domestic relations area, we have recognized that there exists a fiduciary relationship between husband and wife with regard to dealing with each other’s property. For example, in Marshall v. Marshall, 166 W.Va. 304, 273 S.E.2d 360 (1980), the husband and wife were separated. The wife, who was depressed over the separation, sought a reconciliation. The husband refused to agree to a reconciliation unless she turned over her stocks and interest in real property to him. This she did, but about one year later, the parties again separated, and a divorce action was filed.

The husband claimed that the wife had made a bona fide gift to him of the property. The trial court agreed, but we reversed, holding that there existed a confidential relationship which required the transaction to be scrutinized to see if it was fair and executed in good faith. We summarized these principles in the Syllabus of Marshall:

“1. One who receives property from another with whom he has a confidential relationship has the burden of showing that the transfer was fair and made with utmost good faith.

“2. The relationship between husband and wife is one of confidence and trust.

“3. Where persons occupy a fiduciary or confidential relationship the lack of independent advice on the part of the person who claims to be disadvantaged by the transaction may be a significant factor in a court’s evaluation of the overall bona fides of the transaction.”

While Marshall was decided before our equitable distribution statute was enacted, other courts have applied these principles to equitable distribution issues. For example, in Burgess v. Burgess, 710 P.2d 417 (Alaska 1985), the husband induced the wife to sign a quitclaim deed conveying to him her interest in the marital home, their only substantial asset. The wife was told that the transfer was necessary to protect against a possible lawsuit and that she would ultimately receive her one-half interest. The trial court held the quitclaim deed to be valid. The Alaska Supreme Court reversed this holding in a rather summary fashion: “The existence of the quitclaim deed does not change this result because the deed is fraudulent and the product of undue influence. In marital relationships a transaction in which one spouse gains an advantage over the other is presumptively fraudulent.” 710 P.2d at 421. (Footnote omitted; citation omitted).

California, a community property state, followed much the same rule in In re Marriage of Saslow, 40 Cal.3d 848, 221 Cal. Rptr. 546, 710 P.2d 346 (1985). The wife induced her husband to set up a $30,000 trust as her separate property. The Supreme Court of California found that the husband was not competent to enter into the trust agreement and set the transaction aside:

“However, transactions between spouses are ‘subject to the general rules which control the actions of persons occupying confidential relations to each other....’ (Civ.Code, § 5103.) To support a finding of undue influence, ‘[t]he evidence, in addition to a showing of marriage relationship, must also show such unfairness of the transaction as will tend to establish that the wrongful spouse made use of the confidence reposed for the purpose of gaining an unreasonable advantage over the mate.’ (Snyder v. Snyder (1951) 102 Cal.App.2d 489, 492 [227 P.2d 847]) [.]” 40 Cal.3d at 863-864, 221 Cal.Rptr. at 553, 710 P.2d at 354.

See also Chrestman v. Chrestman, 4 Ark. App. 281, 630 S.W.2d 60 (1982); In re Marriage of Rink, 136 Ill.App.3d 252, 91 Ill. Dec. 34, 483 N.E.2d 316 (1985). See generally 41 Am.Jur.2d Husband & Wife § 270 (1968); 41 C.J.S. Husband & Wife § 87 (1991).

In the present case, there are several critical factors that bring this rule into play. First, Mr. Charlton was the primary financial planner in the family. He handled the investments and prepared the income tax returns. Mrs. Charlton acknowledged her ignorance in this area and that she was willing to entrust her funds to her husband, who placed them in joint investment accounts. Second, the principal of Mrs. Charlton’s inherited money was not spent for marital purposes. Some of the income was expended, but Mrs. Charlton maintained she was led to believe that the principal would be left intact. The evidence supports this conclusion because the principal sum of the inheritance was not spent, but remained in the investment accounts.

We are not confronted with a joint account in which separate property has been placed and used for marital purposes. As we stated in Whiting, we decline to trace the source of funds in a joint account where that joint account has been utilized as a repository for both marital and non-marital property. Moreover, the investment accounts total more than Mrs. Charl-ton’s inheritance and include an amount sufficient to cover Mr. Charlton’s separate inheritance of $47,000.

Thus, we conclude that where a spouse inherits property and entrusts the investment of that property to the other spouse, who is more financially knowledgeable, and the property itself is not used for marital purposes, the fact that the property is titled in the joint names of the spouses will not convert it to marital property. Under this rule, the evidence adduced in the proceedings below was sufficient to overcome the presumption that Mrs. Charlton made a gift to the marital estate of her separate inheritance.

III.

The other assignments of error raised by Mr. Charlton may be disposed of in a more summary fashion.

First, Mr. Charlton asserts that the trial court’s award of $1,500 in alimony is excessive. At the time of the final order, Mr. Charlton was employed as superintendent of the Hancock County schools at a yearly salary of $56,000 per year. Mrs. Charlton, who apparently did not work outside the home during the marriage, was unemployed. Mr. Charlton’s particular complaint is that the trial court failed to take into account the income received by Mrs. Charlton from the interest on the investment accounts awarded to her in the property division.

We are advised that Mr. Charlton has recently filed a petition for modification in the circuit court based on the termination of his employment in Hancock County. We granted his motion for leave to proceed on the modification on July 17, 1991. Consequently, because the alimony issue is before the circuit court, we decline to address it further.⁵

Error is also asserted in the trial court’s ruling requiring Mr. Charlton to pay his wife $2,500 in attorney’s fees and $1,500 in expert witness fees. As we have already noted, Mrs. Charlton is not employed. Her situation is analogous to that in Bettinger v. Bettinger, 183 W.Va. 528, 396 S.E.2d 709 (1990), where we concluded in Syllabus Points 14 and 15 as follows:

“14. The purpose of W.Va.Code, 48-2-13(a)(4) (1986), is to enable a spouse who does not have financial resources to obtain reimbursement for costs and attorney’s fees during the course of the litigation.

“15. Reimbursement for reasonable expert witness fees is permissible under similar financial considerations as those used in awarding attorney’s fees.”

We find no error on this point.

C.

The final claim raised by Mr. Charlton is that the court ordered personal property to be distributed to third parties. It appears that certain articles, such as the children’s bedroom furniture, were awarded to the parties’ children. A review of the record fails to disclose that Mr. Charlton contested this distribution in his petition for review filed in the circuit court. In Syllabus Point 2 of Duquesne Light Co. v. State Tax Department, 174 W.Va. 506, 327 S.E.2d 683 (1984), cert. denied, 471 U.S. 1029, 105 S.Ct. 2040, 85 L.Ed.2d 322 (1985), we stated:

“ ‘This Court will not pass on a nonju-risdictional question which has not been decided by the trial court in the first instance.’ Syllabus Point 2, Sands v. Security Trust Co., 143 W.Va. 522, 102 S.E.2d 733 (1958).”

Consequently, we need not discuss this point.

IV.

For the foregoing reasons, the judgment of the Circuit Court of Marion County is affirmed, but in view of the modification petition filed by Mr. Charlton in the circuit court, this case is remanded for further proceedings consistent with this opinion.⁶

Affirmed and remanded.

1 . The family law master quoted the following passage from Roig v. Roig, 178 W.Va. 781, 785, 364 S.E.2d 794, 798 (1987), which in turn quoted from Patterson, 167 W.Va. at 11-12, 277 S.E.2d at 716:

. The court cannot be blind to the obvious fact that most married persons do not contemplate divorce throughout the entire course of a marriage, and that transfers of property between spouses is usually intended for the joint benefit of both. While we must retain the presumption of gift in order to avoid difficult third-party claims (since spouses usually do intend to confer the benefit of property on their other spouse in the event of their death), the presumption of gift is probably best rebutted in a suit between spouses by a clear showing of unjust enrichment. Most people do not intend unjustly to enrich the other man.”’

2 . W.Va.Code, 48-2-32(c)(4), provides, in its entirety, for consideration of

“[t]he extent to which each party, during the marriage, may have conducted himself or herself so as to dissipate or depreciate the value of the marital property of the parties: Provided, That except for a consideration of the economic consequences of conduct as provided for in this subdivision, fault or marital misconduct shall not be considered by the court in determining the proper distribution of marital property.”

3 . The remaining text of W.Va.Code, 48 — 2—15(i) (1986), is as follows:

"However, alimony shall not be awarded in any case where both parties prove grounds for divorce and are denied a divorce, nor shall an award of alimony under the provisions of this section be ordered which directs the payment of alimony to a party determined to be at fault, when, as a grounds granting the divorce, such party is determined by the court:

“(1) To have committed adultery; or

"(2) To have been convicted for the commission of a crime which is a felony, subsequent to the marriage, if such conviction has become final; or

"(3) To have actually abandoned or deserted his or her spouse for six months.”

Amendments to W.Va.Code, 48-2-15 in 1990 and 1991 did not substantially alter these provisions. See 1991 W.Va.Acts ch. 45; 1990 W.Va. Acts ch. 40.

4 . Our cases have recognized that even though a party is not at fault, alimony can still be awarded against such party. In Syllabus Point 1 of F.C. v. I.V.C., 171 W.Va. 458, 300 S.E.2d 99 (1982), we stated: "Alimony may be awarded under W.Va.Code, 48-2-4(a)(7) against a ‘faultless’ party if 'principles of justice’ so require, considering the financial needs of the parties and other factors listed in Code, 48-2-16 [ (1969) ]." We emphasized that the “[c]oncrete financial realities of the parties must be a court’s primary inquiry in any alimony award." 171 W.Va. at 460, 300 S.E.2d at 101. This observation would certainly retain its validity under our present alimony statute, W.Va.Code, 48-2-16 (1984).

5 . Mr. Charlton also contends that he should not be required to pay additional alimony in the form of medical expenses incurred by Mrs. Charlton. This issue is basically subsumed by the petition for modification which we have permitted Mr. Charlton to pursue in the circuit court. Consequently, we decline to discuss it here. However, we do direct the parties’ attention to W.Va.Code, 48 — 2—15(b)(3), which outlines in some detail how health care needs are to be handled in a divorce.

6 . Had the author of the dissent taken the time to look in this Court’s record on Charlton, he would have discovered that, after repeated requests from our Clerk’s office, the transcript of the testimony taken below was filed here on October 1, 1991. From a review of the dissent, the author appears not overly concerned with the facts. The real complaint in the dissent is that no one will even join him in his byzantine analysis, much less join with him to overturn Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990).