Wallace, A. v. Wallace, R.

• Court: Superior Court of Pennsylvania
• Decided: November 18, 2019
• Docket: 3264 EDA 2018
• Status: Unpublished

Opinion

J-A17005-19

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

AMY WALLACE : IN THE SUPERIOR COURT OF : PENNSYLVANIA : v. : : : RICKIE P. WALLACE, : : Appellant : No. 3264 EDA 2018

Appeal from the Order Dated October 30, 2018 In the Court of Common Pleas of Wayne County Domestic Relations at No(s): 77-DR-2014

BEFORE: PANELLA, P.J., OLSON, J., and FORD ELLIOTT, P.J.E.

MEMORANDUM BY PANELLA, P.J.: FILED NOVEMBER 18, 2019

Rickie Wallace (“Husband”) appeals from the October 30, 2018 amended

order entered in the Wayne County Court of Common Pleas. Husband

contends: (1) a corporate entity formed during the marriage is included in the

marital estate; (2) the imposition of a resulting trust is warranted; (3)

$8,395.30 in rental payments is marital property subject to equitable

distribution; and (4) sale proceeds from an auction should not be applied first

to tax obligations. After careful consideration, we reverse the trial court’s

determination that the business in question is not marital property, vacate the

equitable distribution portion of the judgment of divorce, and remand for

further proceedings.

This appeal involves the equitable distribution of marital property.

Husband married Amy Wallace (“Wife”) in 1993. During their marriage, the

parties jointly owned and operated Wallace Tractor and Equipment, Inc. J-A17005-19

(“Wallace Tractor”), which sold and serviced tractors and construction

equipment. Wallace Tractor operated on land owned by Wife’s parents, Dave

and Donna Durkovic (collectively “the Durkovics”), who also operated a self-

storage business on the property, Mt. Cobb Self-Storage.

During the marriage, Wife assumed responsibility for managing her

parents’ self-storage business. She incorporated Double DW, Inc. (“Double

DW”) to collect rental fees from customers of Mt. Cobb Self-Storage, which

amounted to approximately $5,700 each month. Although Wife was the only

corporate officer listed in the articles of incorporation, Husband contributed to

the operation of the self-storage business by laying gravel, plowing snow, and

weed whacking around the property. Husband also used Wallace Tractor’s

forklift to offload customers’ personal property into storage units.

After relinquishing day-to-day operations of Mt. Cobb Self-Storage to

Wife, the Durkovics entered into a lease purchase agreement with Double DW.

Under the agreement, Double DW would lease the property on which the self-

storage business and Wallace Tractor was situated. In return, Double DW was

obligated to pay the Durkovics $3,794.75 monthly for twenty-years, plus

taxes and insurance on the property. Then, upon termination of the lease,

Double DW would own the premises.

For several years, Double DW made monthly payments to the Durkovics

as required under the lease agreement. However, due to Wallace Tractor’s

poor financial performance, Double DW was forced to loan money to Husband

and Wife’s business to keep it afloat. As a result of the loans, Double DW

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missed several payments under the agreement and eventually surrendered its

lease with the Durkovics.

The financial hardships suffered by Wallace Tractor and Double DW

placed considerable strain on the parties’ marriage. As a result, Wife filed for

divorce. However, once separated, the parties resumed living together and

attempted to reconcile their differences. But the parties separated again soon

afterward and proceeded with the divorce.

The parties’ equitable distribution of their marital estate was conducted

by a Master. Following several equitable distribution hearings, the Master

issued a report and recommendation and proposed order. In that report, the

Master determined that Husband did not have an interest in Double DW and

therefore it was not marital property. The Master also concluded that the

doctrine of resulting trust did not apply to the Durkovics’ property because

Husband did not pay rent for his use of the parcel or make improvements to

it. Finally, the Master decided that the parts obtained by Husband from

Douglas Dynamics, which were worth $31,672, should be returned to the

company and credited against debt. However, if Douglas Dynamics refused

return, then the parts should be liquidated and the proceeds applied to

outstanding tax obligations.

Husband filed eleven exceptions to the Master’s report and

recommendation, and the trial court denied all but one of his exceptions.

Thereafter, the trial court entered a divorce decree on October 13, 2018 and

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an amended decree on October 30, 2018 incorporating the Master’s February

23, 2018 report and recommendation. This timely appeal followed.

In this appeal, Husband raises four issues for our review:

1. Whether the trial court abused its discretion . . . or erred, as a matter of law, in adopting the Master’s [r]ecommendation [] that Double DW [] was not marital property []?

2. Whether the trial court abused its discretion . . . or erred, as a matter of law, in adopting the Master’s recommendation regarding the determination that $8,395.30 received in rental payments [was not] a marital asset subject to equitable distribution?

3. Whether the trial court abused its discretion . . . or erred, as a matter of law, in adopting the Master’s recommendation that a [r]esulting [t]rust does not apply in this case since [] Wallace Tractor paid no fixed rent []?

4. Whether the trial court abused its discretion . . . or erred, as a matter of law, in adopting the Master’s recommendation [that] the property owned by Douglas Dynamic be returned, but if not returned, sold and the [taxes] be paid from the funds received instead of . . . us[ing] [the funds] to pay debt owed to Douglas Dynamics []?

Appellant’s Brief, at 3. (edited for clarity and reordered to facilitate

disposition).

Our standard of review for a challenge to the trial court’s equitable

distribution order is whether the trial court abused its discretion by

misapplying the law or failing to follow proper legal procedure. See Childress

v. Bogosian, 12 A.3d 448, 455 (Pa. Super. 2011). Generally, “[w]e do not

lightly find an abuse of discretion, which requires a showing of clear and

convincing evidence.” Brubaker v. Brubaker, 201 A.3d 180, 184 (Pa. Super.

2018) (citation omitted). However, we will find an abuse of discretion if the

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law has been overridden or misapplied or the judgment exercised was

manifestly unreasonable, or the result of partiality, prejudice, bias, or ill will,

is shown by the evidence in the certified record. See Carney v. Carney, 167

A.3d 127, 131 (Pa. Super. 2017).

In determining the propriety of an equitable distribution award, we must

consider the distribution scheme as a whole. See Brubaker, 201 A.3d at 184.

As a result, this Court must measure the circumstances of the case against

the objective of effectuating economic justice between the parties and

achieving a just determination of their property rights. See Carney, 167 A.3d

at 131.

Moreover, it is within the province of the trial court to weigh the

evidence and decide credibility, and we will not reverse those determinations

so long as they are supported by the evidence. See Brubaker, 201 A.3d at

184. Further, a master’s report and recommendation, while only advisory,

must be given the fullest consideration, particularly on the question of

credibility of witnesses, because the master had the opportunity to observe

and assess the behavior and demeanor of the parties. See Moran v. Moran,

839 A.2d 1091, 1095 (Pa. Super. 2003).

We address the first two issues together, as they concern Husband’s

alleged marital interest in Wife’s business. Husband contends that Double DW,

which was incorporated during the parties’ marriage, is marital property. In

addition, he argues the parties treated Double DW as marital property rather

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than as separate property. Accordingly, Husband concludes Double DW is

marital property subject to equitable distribution.

Wife responds that Double DW is not marital property, but rather

separate property. Therefore, Wife concludes that Husband is not entitled to

$8,395.30 in rental payments received from the self-storage business because

Double DW is not a marital asset.

The definition of marital property is found in 23 Pa. C.S.A. § 3501 and

it provides in relevant part that marital property includes “all property

acquired by either party during the marriage, including the increase in value,

prior to the date of final separation. . . .” Nagle v. Nagle, 799 A.2d 812, 818

(Pa. Super. 2002). Although there are exceptions to this definition, none apply

here. See id. The Divorce Code also provides that “[a]ll real or personal

property acquired by either party during the marriage is presumed to be

marital property regardless of whether title is held individually. . . .” 23 Pa.

C.S.A. § 3501(b). Therefore, “bare title may not be used as a shield to protect

for the benefit of one party that which in reality belongs to the marriage.”

Fitzpatrick v. Fitzpatrick, 547 A.2d 362, 367 (Pa. Super. 1988).

In the instant case, the record does not support the trial court’s decision

to exclude Double DW from the marital estate. Based on the record, it is

undisputed that Double DW was formed by Wife during the parties’ marriage

and prior to the date of final separation. See Hearing, 12/27/17, at 5-6; see

also Nagle, 799 A.2d at 818. Although Wife held title individually, this fact

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does not defeat the presumption that Double DW is marital property. See 23

Pa. C.S.A. § 3501(b). Indeed, title alone does not determine if an asset is

marital property. See Fitzpatrick, 547 A.2d at 367.

Moreover, we have held that the parties’ demonstrated intent also

determines if an asset is marital property. See id. Hence, if the property is

accessible, available to both parties, and placed in a position where both

parties have use or enjoyment of the property, it is to be treated as marital

property. See id.

Here, the record shows that Husband and Wife treated Double DW as a

joint marital venture. In fact, the evidence establishes that the parties

intended for there to be a nexus between Wallace Tractor, which they owned

jointly, and Double DW, which Wife owned individually. For example,

customers of Double DW had to pay for their storage units at Wallace Tractor’s

office, which at times required Husband to collect the rent. See Hearing,

12/27/17, at 9, 13. Double DW also used Wallace Tractor’s bank account to

deposit rents, thereby commingling funds. See id., at 12. And Double DW

relied on Husband for landscaping and snowplowing as well as offloading

customers’ property into storage units. See id., at 24. Therefore, Double DW

was accessible to Husband and Wife and placed at the service of the parties’

marriage. See Fitzpatrick, 547 A.2d at 367.

In addition, the record also shows that Double DW was incorporated to

benefit the parties’ marriage. For a period of time, Wallace Tractor paid $1,000

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in monthly rent to the Durkovics for use of their property. See id., at 26.

However, at some point, Husband and Wife sought to buy the 13 acres of

property, but were unable to finance the purchase of the land. See id., at 34.

That is why Double DW entered into a lease purchase agreement with the

Durkovics, whereby the company would use the rental fees it collected from

the self-storage business to pay Wife’s parents for the land. See id., at 34-

35. As such, Double DW acted as a conduit between Husband and Wife and

the Durkovics for the purpose of acquiring the property on which the parties

operated Wallace Tractor. See id., at 34-35.

Based on the foregoing, we conclude that Double DW is a marital asset

as it was acquired during the marriage. See 23 Pa. C.S.A. § 3501(b).

Moreover, the parties’ course of conduct further demonstrates that they

treated Double DW as marital property. See Fitzpatrick, 547 A.2d at 367.

Therefore, Husband has an equitable interest in Double DW and is entitled to

$8,395.30 in rental payments from the self-storage business.

In light of our conclusion that Double DW is marital property, we need

not reach Husband’s remaining issues as our conclusion alters the size of the

parties’ marital estate. Therefore, on remand, the trial court must determine

whether Wife dissipated Husband’s interest in Double DW and what effect, if

any, such finding has on the equitable distribution of the marital estate. In

addition, we vacate the portion of the trial court’s order regarding tax liabilities

and direct the court to clarify the manner in which Double DW should settle

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its tax and debt obligations. The trial court retains the power to revisit its

balancing of the equities pursuant to these considerations.

Order reversed in part and vacated in part. Case remanded. Jurisdiction

relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 11/18/19

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