COURT OF APPEALS OF VIRGINIA
Present: Judges Willis, Bumgardner and Agee Argued at Salem, Virginia
EARL DEAN ROBERTS MEMORANDUM OPINION * BY v. Record No. 0095-01-3 JUDGE G. STEVEN AGEE OCTOBER 23, 2001 PATRICIA LEE ROBERTS
FROM THE CIRCUIT COURT OF LEE COUNTY Birg E. Sergent, Judge
Lonnie L. Kern (Kern & Kern, P.C., on brief), for appellant.
Charles L. Bledsoe for appellee.
Earl Dean Roberts (husband) appeals the December 14, 2000
decision of the Lee County Circuit Court on the issue of
equitable distribution upon the termination of his marriage to
Patricia Lee Roberts (wife). Husband contends on appeal that
the circuit court erred by accepting the appointed
commissioner's findings and determinations as to the equitable
distribution of the parties' property. It is his contention
that the commissioner failed to properly classify real property
in Kentucky, failed to properly value real and personal property
in the marital estate, and made the equitable division without
considering the mandatory factors in Code § 20-107.3. As the
* Pursuant to Code § 17.1-413, this opinion is not designated for publication. commissioner's report, which was adopted by the circuit court,
fails in most instances to fully specify the marital, separate
and hybrid interests of the parties in all properties in
dispute, with attendant values, and because we do not find
support in the record that the statutory factors were properly
considered or applied in this matter, we remand this matter for
further consideration. Certain aspects of the court's decree
are affirmed as set out below.
As the parties are fully conversant with the record in this
case (such as it is) and because this memorandum opinion carries
no precedential value, only those facts necessary to a
disposition of this appeal are recited. The Court notes the
preparation of the record made disposition of this case
unnecessarily difficult.
I. BACKGROUND
Husband and wife have been involved in an acrimonious
divorce proceeding for several years. On August 9, 1999, the
circuit court appointed a special commissioner to consider the
basis for the divorce, to determine equitable distribution and
spousal support. The parties submitted depositions to the
commissioner for her consideration, and she presented her final
report on March 15, 2000. Exceptions were filed, and various
hearings held during 2000 over claimed deficiencies in the
commissioner's report.
- 2 - The commissioner's report set out an equitable distribution
scheme to which both parties initially objected. The parties'
property in Lee County was valued at $120,700, based on the only
submitted appraisal at the time, with a secured deed of trust
lien against it in the amount of $52,000 1 at the time of
separation. While husband paid approximately $12,000 toward
that secured debt during the separation, the commissioner added
the total amount of the payments to the equity determined by
appraisal of that property. Then, the commissioner recommended
the parties equally divide the revised "equity" of $80,700.
Husband was given the option to purchase wife's interest in that
property and declined. The commissioner determined real
property in Middlesboro, Kentucky, to be the separate property
of wife.
The commissioner and the circuit court failed to classify
the personal property but proceeded to divide it. Wife was
awarded a 1990 Ford pickup truck valued at $6,200, a Honda
four-wheeler valued at $4,500, a horse trailer valued at $5,000,
three horses collectively valued at $4,000, the horses' tack
valued at $2,500, and one-half the cow herd valued at $275 a
head. In addition, wife was awarded the following items, which
1 It appears that the assigned number of secured claims and the amount of secured indebtedness against the property at the time of separation was clearly erroneous and was actually much greater. Apparently the parties agree this is marital property although neither the commissioner nor the circuit court made a finding of its classification.
- 3 - were not classified as marital or separate property nor were
they valued by the commissioner: a salt holder, stall mats, a
cherry bedroom suite, a cedar chest, a set of dishes, quilts, a
clown collection, a Mr. and Mrs. Claus set, a computer, a
tobacco setter, and everything else in her possession.
Husband was awarded a 1989 Bronco valued at $4,000, a 1986
Ford pickup truck valued at $750, a Kawasaki four-wheeler valued
at $2,000, a hay baler valued at $4,000, farm equipment valued
collectively at $8,000 and one-half the cow herd. In addition,
husband was awarded all furniture and furnishings in the marital
home not specifically awarded to wife. These items were not
identified nor were they valued.
Each party was to "share equally in the retirement benefit
of the other accrued during the course of the marriage."
However, no values were assigned.
The commissioner determined that all debt in either of the
parties' names at the time of separation was marital debt and
made the following division: wife was responsible for $12,050
of the indebtedness, with husband to be responsible for the
remaining $30,500. No rationale was given for the allocation of
debt.
By a final order dated May 22, 2000, the circuit court
awarded both parties a divorce a vinculo matrimonii, yet
referred the equitable distribution determination back to the
commissioner for further consideration regarding the
- 4 - identification, classification, valuation and distribution of
the parties' assets and liabilities pursuant to Code § 20-107.3.
A more specific referral order to the commissioner was entered
May 26, 2000. However, no changes were made by the commissioner
to her initial report, and there is no evidence in the record
that the matter was given any further consideration other than
the commissioner's testimony before the court, on July 24, 2000,
that she felt she had "covered all the required factors to be
reviewed between the parties" and she was "not prepared to
modify [her] opinion unless there [was] new evidence that . . .
changes what [was] reviewed." Nothing appears in the record to
reflect the disposition of the specific assignments in the
circuit court's May 26, 2000 order.
After several additional hearings regarding husband's
objections to the commissioner's findings, the circuit court
judge stated, on December 13, 2000, that he saw "no reason that
the marital property should not be divided equally, 50/50
. . . . I have considered the statutory factors set out in [Code
§ 20-107.3]" and "in considering all the statutory factors of
the contributions, monetary and non-monetary of each party to
the well being of their family, this is a successful family."
He also found "most of [the] debts were made during the
marriage, and like assets, anything acquired during the marriage
is presumed to be marital property and marital liabilities."
Finally, the judge stated, "it was the finding of the
- 5 - [c]ommissioner, and [it is] the finding of the court that
[husband and wife] should share equally insofar as possible."
On December 14, 2000, an order was issued providing as
follows:
[T]he Court FINDS the Special Commissioner's Report to be reasonable and consistent with the provisions of Section 20-107.3 of the Code of Virginia, as amended, and more particularly, the factors enumerated in 20-107.3(e) [sic] were considered and addressed by the Special Commissioner . . . .
II. STANDARD OF REVIEW
On appeal, we review the evidence in the light most
favorable to the party prevailing below. See, e.g., Anderson v.
Anderson, 29 Va. App. 673, 678, 514 S.E.2d 369, 372 (1999).
Where the evidence was considered by a commissioner and not ore
tenus by the circuit court, the decree is not given the same
weight as a jury verdict, but if the decision is supported by
substantial, competent and credible evidence in the depositions,
it will not be overturned. McLaughlin v. McLaughlin, 2 Va. App.
463, 466-67, 346 S.E.2d 535, 536 (1986) (citations omitted).
See also Collier v. Collier, 2 Va. App. 125, 127, 341 S.E.2d
827, 828 (1986) (a decree based upon depositions rather than
evidence heard ore tenus nonetheless is presumed correct and
will not be overturned if supported by the evidence). Moreover,
a judgment of the circuit court will not be set aside on the
ground that it is contrary to the law and the evidence unless it
- 6 - appears from the evidence that such a judgment is plainly wrong
or without evidence to support it. Code § 8.01-680.
III. ANALYSIS
In any equitable distribution proceeding, the circuit court
must follow three basic steps. First, the court must classify
the property (the assets and liabilities) as separate, marital,
or hybrid (part separate and part marital property). A value
must then be assigned to every item or portion deemed martial
property, and the value must be based upon evidence presented by
the parties. Finally, the court is to divide the property
between the parties, taking into consideration all the
specifically enumerated factors in Code § 20-107.3(E). It is
reversible error for the court not to do so. Alphin v. Alphin,
15 Va. App. 395, 405, 424 S.E.2d 572, 577 (1992).
A circuit court may assign a commissioner in chancery to
receive and consider the evidence for equitable distribution.
The commissioner, upon consideration of the statutory factors,
will then make a recommendation to the court for the appropriate
disposition of the martial estate. Generally, the court should
affirm a commissioner's report unless the evidence does not
support the findings. Price v. Price, 4 Va. App. 224, 355
S.E.2d 905 (1987). However, when the court refers a case to a
commissioner, it does not delegate its judicial functions to the
commissioner, but rather, "the court must review the evidence,
apply the correct principles of law, and make its own
- 7 - conclusions as to the appropriate relief required." Dukelow v.
Dukelow, 2 Va. App. 21, 26-27, 341 S.E.2d 208, 211 (1986). We
cannot say that standard has been met in this case.
A. CLASSIFICATION
We consider husband's contentions on appeal in the order in
which they would arise pursuant to a proper equitable
distribution process.
1. Kentucky Real Property
We begin with husband's contention that the commissioner
and circuit court erroneously classified real property in
Middlesboro, Kentucky, as separate property belonging to wife.
For the following reasons we find the court did not commit
reversible error in making this classification.
Marital property is all property titled in the names of
both parties and all other property acquired by each party
during the marriage, which is not separate property (received
during the marriage by bequest, devise, descent, survivorship or
gift from someone other than the spouse). Code
§ 20-107.3(A)(2). "All property . . . acquired by either spouse
during the marriage . . . is presumed to be marital property in
the absence of satisfactory evidence that it is separate
property." Id. This presumption applies to the debt
liabilities of the parties as well.
For property claimed by the other spouse as separate
property, the non-owning spouse bears "the burden of proving
- 8 - that (i) contributions of marital property or personal effort
were made and (ii) the separate property increased in value."
Code § 20-107.3(A)(3)(a).
The Middlesboro property was formerly titled to wife's
mother and father, who deeded it into wife's name alone during
the parties' marriage. A current deed of trust, in both
parties' names, is a lien on the property. However, wife's
parents, who reside on the property, make the payments. Due to
this debt liability, and husband's voluntary payment of one
insurance bill, 2 husband contends the property was transmuted
from wife's separate property by gift to marital property and,
therefore, the commissioner's classification as separate
property was in error. We disagree.
The depositions presented to the commissioner and the court
reflect that the property was purposefully conveyed only to
wife, during the marriage, as a gift from her parents. Thus
there was evidence in the record to rebut the presumption the
Kentucky real estate was marital property. The burden then
shifted to husband to prove marital contributions were made,
which increased the value of the property. While husband may
have made a de minimus monetary and labor contribution, we
cannot say the court erred in finding that husband did not meet
2 Husband paid one bill during the separation without the knowledge of wife or her parents.
- 9 - his burden to show a transmutation of the separate property to
marital or hybrid property.
There was evidence that wife's parents made all the
mortgage payments, paid for all maintenance and improvements to
the home and land, with the exception of one insurance payment
made by husband unbeknownst to them during the parties'
separation. There is no evidence that the property was acquired
by wife in exchange for valuable consideration, i.e., that wife
obtain a mortgage on the property and pay the loan funds over to
her parents. In addition, the evidence showed that wife only
purchased a replacement dishwasher for the home when it was
needed, just as the parents had purchased furniture and
appliances for the parties' home in Virginia; and folded laundry
or helped in the flower garden when she visited. Husband helped
to install a ceiling fan and the dishwasher at the Kentucky
property.
The co-signing of a loan against the property and the
purchase of the replacement dishwasher for the parents' use are
not substantial and did not measurably increase the property
value. There is no evidence that wife commingled debt
liability, funds, and joint income with regard to the Kentucky
property, as to change the nature of the property from separate
to marital. Services performed by the parties with regard to
the property were not substantial, and the commissioner and the
court did not err in finding them insufficient to establish
- 10 - transmutation. See Lambert v. Lambert, 6 Va. App. 94, 103-05,
367 S.E.2d 184, 190-91 (1988); Code § 20-107.3(A)(1) (personal
efforts must be significant and result in substantial
appreciation).
2. Other Property
Husband also complains that the equitable distribution
award is erroneous because the commissioner failed to classify
other items distributed as either marital or separate. We
agree. Upon a review of the record, it was wife's contention
that several items, including bedroom suites, dishes,
collectibles, etc., were gifts to her and should be classified
as her separate property. These items were awarded to wife, but
we are unable to determine whether the commissioner or court
determined their classification.
Prior to the equitable distribution of property, the
circuit court must classify the parties' property as marital,
separate, or hybrid. See Code § 20-107.3(A). If no evidence is
presented upon which the court can properly classify each item,
faced with the statutory presumption and the lack of
satisfactory evidence to rebut it, the property should be
classified as marital. Stainback v. Stainback, 11 Va. App. 13,
396 S.E.2d 686 (1990). Neither the commissioner's report nor
the court's orders classify any of the parties' personal
property. As we reverse the award on other issues for further
- 11 - consideration, on remand the circuit court should determine the
classification of each asset.
B. VALUATION
Husband also contends that the commissioner and court erred
in assigning value to certain property and in failing to assign
any value to other items, which is required if classified as
marital property. We agree.
We will not disturb a finding of value of an asset,
however, unless the finding is plainly wrong or unsupported by
the evidence. See Traylor v. Traylor, 19 Va. App. 761, 763-64,
454 S.E.2d 744, 746 (1985).
1. The Lee County Real Property
In this case, conflicting expert appraisals of the real
property in Lee County were presented to the commissioner and
court. The commissioner and court chose to accept the first
appraisal submitted. Husband, who disliked the first appraisal
and submitted a second, contends the commissioner and the court
arbitrarily disregarded the credible evidence of his appraisal.
He argues the court's acceptance of the commissioner's valuation
was error. We disagree with the contention that the acceptance
of the original appraisal was error; however, the determination
of equity was plainly wrong.
A court may "choose among conflicting assessments of value
as long as its finding is supported by the evidence." McDavid
v. McDavid, 19 Va. App. 406, 413, 451 S.E.2d 713, 718 (1994);
- 12 - see also Reid v. Reid, 7 Va. App. 553, 563, 375 S.E.2d 533, 539
(1989) (commissioner may find one of several conflicting expert
appraisals more credible so long as credible evidence supports
selected appraisal); Brown v. Brown, 11 Va. App. 231, 236, 397
S.E.2d 545, 548 (1990) ("The commissioner has the authority to
resolve conflicts in the evidence and to make factual
findings.").
The chosen value was based on an expert appraisal, with
credible evidence of value. We cannot say that the court was
plainly wrong or without evidence to select the initial
valuation. The court was not required to reject the appraisal
merely because husband believed his "evidence might be more
accurate, convincing, desirable, or persuasive." Bowers v.
Bowers, 4 Va. App. 610, 618, 359 S.E.2d 546, 551 (1987); see
also Zipf v. Zipf, 8 Va. App. 387, 395, 382 S.E.2d 263, 268
(1989).
While the selection of the appraisal was not reversible
error, we do hold the valuation of equity in the property is
plainly wrong. There is credible evidence in the record of a
lower net equity amount than computed by the commissioner and
adopted by the court. There is credible evidence of additional
secured loans to Southwest Farm Credit against the property not
addressed by the fact finder and clear evidence that the total
amount of husband's post-separation loan payments were added to
the "marital" equity, without any allocation between principal
- 13 - and interest to accurately reflect decreased liability and
increased equity. In response to our inquiry at oral argument
as to whether the husband's representation of indebtedness was
correct, wife's counsel gave three separate responses:
"correct," "incorrect" and "don't know." It is very clear from
the record there is a discrepancy in fact between the
commissioner's determination and actual equity. The record does
not indicate this discrepancy was addressed.
On remand, the court should make specific findings as to
the secured debt against the property and the lien balances as
it determines the proper equity amount as of the valuation date.
As more fully discussed in Section C, the court should also make
findings as to the change in equity created by husband's
post-separation secured lien payments and whether that portion
of the equity attributable to such payments is marital, separate
or hybrid property. The court should also make findings as to
the valuation and classification of that portion of husband's
post-separation secured lien payments, which are not found to be
part of the Virginia real property's equity.
This process may require the taking of additional evidence
caused by the passage of time while additional payments have
been made, but that is a determination best made by the trial
court.
- 14 - 2. Other Property
We further find that is was error to make the equitable
distribution without valuing all the martial property.
Obviously, this was made difficult by the failure to classify
all the property as previously discussed. The circuit court on
remand should specify the properties and associated values for
every marital asset and liability in the new award. See
Gottlieb v. Gottlieb, 19 Va. App. 77, 95, 448 S.E.2d 666, 677
(1994). The values of the assets and liabilities should be
based on credible evidence provided by both parties if they so
choose. The valuation assigned to marital property cannot be
based on "mere guesswork." 3 Bosserman v. Bosserman, 9 Va. App.
1, 5, 384 S.E.2d 104, 107 (1989). However, where the parties
have been given a reasonable opportunity to provide the
necessary evidence to prove valuation and through their lack of
diligence have failed to do so, the court may make an award
without giving consideration to the value of every item of
property. Bowers, 4 Va. App. at 618, 359 S.E.2d at 551.
Therefore, assets such as the bedroom suite, dishes, etc., if
deemed martial property during the classification stage, should
be assigned a value based on submitted evidence from the
parties.
3 For example, it appears under the court's award, which was based on the commissioner's report, husband was allocated all of the Southwest Farm Credit debt, but it was not taken into account in computing the equity of the Lee County property.
- 15 - C. CONSIDERATION UNDER § 20-107.3
Finally, husband contends the circuit court erred in
accepting the commissioner's report without evidence that it
considered all the appropriate factors in Code § 20-107.3. He
requests that the award be remanded for further consideration.
As we are unable to find identifiable support in the record that
the statutory factors were considered, we agree that the
equitable distribution award should be reversed and remanded.
The appropriate consideration of the factors by the
commissioner and the circuit court entails more than a mere
recitation in the record or decree that all the statutory
factors have been considered or reviewed.
The enumerated factors are intended to guide the court's exercise of discretion, and substantive consideration of these factors should be incorporated into the decision-making process. See Woolley v. Woolley, 3 Va. App. 337, 345, 349 S.E.2d 422, 426 (1986). "This does not mean that the [circuit] court is required to quantify or elaborate exactly what weight or consideration it has given to each of the statutory factors." Id. However, when [the circuit court] fails to articulate sufficiently the consideration he or she has given to the statutory criteria, "we must examine the record to determine if the award is supported by evidence relevant to those factors." Gibson v. Gibson, 5 Va. App. 426, 435, 364 S.E.2d 518, 523 (1988).
Alphin, 15 Va. App. at 405, 424 S.E.2d at 578. Based on the
record before us, such as it is, we cannot determine how or if
- 16 - the commissioner or the court applied the Code § 20-107.3(E)
factors to this case.
Except for general, non-specific statements that the
statutory factors were considered, the record does not reflect
that the commissioner or the court considered and applied Code
§ 20-107.3(E) to distribute the marital estate. Few findings
were made, and the court's deliberative process is not
identified so as to facilitate appellate review. It is
difficult, if not impossible, for an appellate court to review
the statutory requirements as applied in equitable distribution
proceedings when the circuit court announces only the end
product of its deliberations. We cannot tell upon what evidence
the recommended distribution was based or why. While the court
is not expected to do a law review article on the rationale for
the equitable distribution award, it needs to give some
identifiable written rationale. For example, we cannot find in
the record where the issues referred to the commissioner, by the
May 26, 2000 order, were answered.
While the asset division may be adequate based on the fact
that each worked during the marriage and all income earned was
spent by the parties, the failure to classify and value all the
assets does not allow for verification that the court's intended
division was properly done. We cannot determine that the
liability division is supported by substantial and credible
- 17 - evidence. 4 While husband does not specifically complain of this
assignment, and while it is within the court's discretion to
make such a division, it is evident to us that the court failed
to identify adequate consideration of the statutory factors.
Under such circumstances, we are unable to conduct a proper
appellate review of the disputed award and must reverse the
award and remand for further consideration by the court, guided
by Code § 20-107.3. 5 "There must be a proper foundation in the
record to support the granting of an award and the amount of the
award." Stumbo v. Stumbo, 20 Va. App. 685, 693, 460 S.E.2d 591,
595 (1995).
An indication of the inadequate assessment of the statutory
factors is an absence in the record of any consideration given
to husband's request for a credit in recognition of his
post-separation mortgage payments. We find it was an abuse of
discretion for the commissioner and court to fail to consider
husband's request for a credit for these post-separation
payments. The separate contribution of one party to the
acquisition, care, and maintenance of marital property is a
factor that the court must consider when making its award of
4 The debt division proposed by the commissioner's report and adopted by the court seems contrary to the court's bench statements about equal division. 5 Our disposition does not presuppose that the present division is erroneous but results only from the inability to conduct a proper appellate review.
- 18 - equitable distribution. Upon remand, the court should give due
consideration of these payments in its equitable distribution
award. 6
Accordingly, the decree appealed from is affirmed in part
as noted above and reversed in part. The case is remanded for
such further proceedings as the circuit court considers
appropriate to make an award concerning the property of the
parties that is consistent with the principles expressed in this
opinion.
Affirmed in part, reversed in part, and remanded.
6 We note, however, Code § 20-107.3 does not mandate that the circuit court award a corresponding dollar-for-dollar credit for such contributions. von Raab v. von Raab, 26 Va. App. 239, 249-50, 494 S.E.2d 156, 161 (1997).
- 19 -