ROBERT W. HIGGINS v. KATHY MUSSO HIGGINS n/k/a KATHY P. MUSSO , 2017 Fla. App. LEXIS 12045 ( 2017 )

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
ROBERT W. HIGGINS,
Appellant,
v.
KATHY MUSSO HIGGINS n/k/a KATHY P. MUSSO,
Appellee.
No. 4D16-69
[August 23, 2017]
Appeal and cross-appeal from the Circuit Court for the Nineteenth
Judicial Circuit, Martin County; Laurie E. Buchanan, Judge; L.T. Case
No. 11000031DRAXMX.
Troy William Klein of the Law Office of Troy W. Klein, West Palm
Beach, for appellant.
Benjamin T. Hodas of the Law Office of Benjamin T. Hodas, LLC, West
Palm Beach; and Tara S. Pellegrino of Broad and Cassel LLP, West Palm
Beach, for appellee.
CIKLIN, J.
This appeal and cross-appeal arise from an amended final judgment
of dissolution of marriage. We agree with the former husband that the
trial court erred by (1) failing to assign a value to a business which was
deemed marital property, (2) including a dissipated asset in equitable
distribution, and (3) failing to provide reasons for its finding that a boat
was a marital asset. We also agree with the former wife that the trial
court erred in designating as a marital asset all of the proceeds from the
sale of a nonmarital property. We otherwise affirm.
The only issues raised at trial and on appeal relate to equitable
distribution. We review a trial court’s determination of equitable
distribution for an abuse of discretion. Kovalchick v. Kovalchick, 841 So.
2d 669, 670 (Fla. 4th DCA 2003). “Distribution of marital assets and
liabilities must be supported by factual findings in the judgment or order
based on competent substantial evidence.” Bardowell v. Bardowell, 975
So. 2d 628, 629 (Fla. 4th DCA 2008) (citing § 61.075(3), Fla. Stat.). “A
trial court’s legal conclusion that an asset is marital or nonmarital is
subject to de novo review.” Mondello v. Torres, 47 So. 3d 389, 392 (Fla.
4th DCA 2010).
For his first issue on appeal, the former husband argues that the trial
court erred in awarding a marital asset, a business, to the former wife
based on a finding that the business’s value is based on personal
goodwill of the former wife and without assigning a value to the business
(aside from the former wife’s goodwill). When there is evidence that a
marital business has value aside from one spouse’s goodwill, the court
must make a finding regarding that value for purposes of equitable
distribution. See Niekamp v. Niekamp, 173 So. 3d 1106, 1108-09 (Fla.
2d DCA 2015) (reversing and remanding to trial court to value marital
property, excluding any goodwill attributable to one party, where there
was evidence that the business had other assets).
Although there was evidence that the business had tangible assets,
the trial court inexplicably found that no such evidence was offered. The
former wife acknowledges that the business is a marital asset, and she
appropriately concedes that the asset has a value aside from her
goodwill. 1 Accordingly, we reverse and remand to the trial court to value
the business for purposes of equitable distribution.
The former husband next contends that the trial court erred in
including the parties’ 2010 tax refund in its equitable distribution
scheme when the refund was dissipated before trial and the trial court
did not make a finding of misconduct. We agree. See Tradler v. Tradler,
100 So. 3d 735, 740 (Fla. 2d DCA 2012) (recognizing that it is generally
error to include assets in equitable distribution which have been
dissipated during the dissolution proceedings in the absence of a finding
of misconduct). Therefore, we reverse and remand for the trial court to
omit the tax refund from its equitable distribution analysis.
The former husband’s final point on appeal relates to a boat that he
purchased during the marriage to replace one he owned prior to the
marriage. He argues that the trial court erred in treating the new boat as
a marital asset. During trial, the former husband testified that he
purchased the replacement boat using insurance proceeds he received
after the premaritally-purchased boat was irreparably damaged. The
former wife did not dispute that insurance proceeds related to the
premarital boat were used to purchase the second boat. Instead, she
testified that the former husband gifted her the new boat as a Christmas
1 The parties dispute the specific value of the business’s assets.
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gift.
Nonmarital assets include “[a]ssets acquired . . . by either party prior
to the marriage, and assets acquired . . . in exchange for such assets.” §
61.075(6)(b)1., Fla. Stat. (2011); see also Steiner v. Steiner, 746 So. 2d
1149, 1151 (Fla. 2d DCA 1999) (recognizing that properties purchased
during the marriage with proceeds from the sale of nonmarital property
acquired before the marriage are nonmarital assets “to the extent that
their purchase prices were paid with proceeds that are traceable” to the
party’s sale of that premarital property).
In deeming the new boat to be a marital asset, the trial court stated
that the former husband “claims he used” insurance proceeds “to
purchase the [new] boat,” and it further found that the boat was titled in
the former husband’s name but currently in the former wife’s possession.
It is unclear from these findings why the trial court designated the boat
as a marital asset. The former wife argues that the trial court made a
credibility determination and believed her, but the court did not make
any findings relating to the former wife’s testimony that the former
husband gifted her the new boat. This lack of findings makes review
impossible. For that reason, we must reverse and remand for the trial
court to either make factual findings that support designation of the new
boat as a marital asset or amend the equitable distribution scheme. See
§ 61.075(3)(d), Fla. Stat. (requiring trial court, with respect to equitable
distribution, to make “[a]ny other findings necessary to advise the parties
or the reviewing court of the trial court’s rationale for the distribution of
marital assets and allocation of liabilities”).
The former wife raises two issues in her cross-appeal. We affirm on
one issue and decline to further address it, but we reverse with respect to
her claim that the trial court erred in treating as a marital asset all of the
proceeds from the sale of nonmarital real property.
The former wife was divorced before marrying the former husband.
She and her ex-husband owned what she calls the Bittern Street
property. Her parents loaned her $100,000 to buy out her ex-husband’s
interest in the property. There was conflicting evidence regarding
whether her parents held a mortgage on the property. Transcripts of
depositions and a pre-trial hearing were entered into evidence. During
one deposition, the former wife testified that on the date she married the
former husband, her parents held a mortgage on the property. She could
not recall whether she made monthly mortgage payments to her parents.
In another deposition, she again confirmed that her parents held a
mortgage on the property during the parties’ marriage. She testified that
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she did not make monthly mortgage payments and that the entire loan
was paid off with proceeds from the sale of the Bittern Street property.
During a pre-trial hearing, the former wife testified that the property
carried a mortgage on the date the parties married, and that she used
her income during the parties’ marriage to make mortgage and tax
payments on the property.
At trial, the former wife testified that she borrowed $119,000 from her
parents and that her parents did not ever have a mortgage on the
property. She introduced into evidence a claim of lien filed by her
mother, which reflects that the former wife borrowed $455,000 to
“purchase, renovate, and repair [the] dwelling,” and that the loan was “to
be repaid upon sale and closing of [the Bittern Street property].”
According to the former wife, she did not borrow that amount from her
parents; rather, that amount represented the value of the property when
the former wife divorced her ex-husband. The former wife also
introduced a release of claim purported to be signed by her mother in
2000.
The evidence also showed the following. The former wife used marital
funds to repair the property from damage it suffered during two
hurricanes. She replaced the roof, removed a screen enclosure and
wallpaper, painted damaged ceilings, and installed new carpeting in a
portion of the home. Some of the repairs were paid for using insurance
proceeds.
The parties took out a home equity line of credit utilizing the equity in
the Bittern Street property. They used funds from the line of credit to
construct the marital home. Subsequently, they took out a “construction
loan” utilizing the marital home as security and used those funds to
satisfy the line of credit. The Bittern Street property sold during the
marriage for $1,050,000. The amount remaining on the mortgage held
by the former wife’s parents was satisfied with proceeds from the sale.
The former wife then deposited proceeds from the sale into a bank
account. 2
According to the former wife, the property depreciated in value during
the marriage. It was worth $450,000 when the former wife and her ex-
husband divorced, and any appreciation in the property’s value occurred
before the former wife married the former husband. According to the
former husband, the former wife told him at some point that the property
2The trial court did not find, and the former husband does not argue on appeal,
that the funds were commingled with marital funds in the bank account.
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was worth $1,000,000 when the parties were married.
The trial court found that all of the proceeds from the sale constituted
a marital asset. The trial court provided the following reasons for
designating the proceeds as a marital asset: (1) the former wife used
marital funds to pay down the mortgage and make repairs to the
property; (2) the former wife had the burden to establish whether any
part of the enhanced value is exempt from distribution and failed to meet
her burden; (3) the equity in the Bittern Street property was used to
obtain a line of credit, the funds from which were used to construct the
marital home; and (4) the parties took out a loan using the marital home
as security and used loan funds to satisfy the line of credit. Based on
these factors, the trial court found that the “parties absolutely, positively
commingled these assets,” and “[a]s such, the value of the Bittern home
is a marital asset.”
Marital assets include “[t]he enhancement in value and appreciation
of nonmarital assets resulting either from the efforts of either party
during the marriage or from the contribution to or expenditure thereon of
marital funds or other forms of marital assets, or both.” §
61.075(6)(a)1.b., Fla. Stat. Additionally, an increase in the equity value
of property is a marital asset subject to equitable distribution. Somasca
v. Somasca, 171 So. 3d 780, 782 (Fla. 2d DCA 2015). “However,
improvements or expenditures of marital funds to a nonmarital asset
does not transform the entire asset into a marital asset; rather, it is only
the ‘enhancement in value and appreciation’ which becomes a marital
asset.” Martin v. Martin, 923 So. 2d 1236, 1238-39 (Fla. 1st DCA 2006)
(quoting Strickland v. Strickland, 670 So. 2d 142, 143 (Fla. 1st DCA
1996)).
The party asserting entitlement to an increase in the value of
nonmarital property has the burden of proving the enhancement.
Robertson v. Robertson, 78 So. 3d 76, 77 (Fla. 5th DCA 2012). Once a
party establishes that marital labor or funds were used to enhance the
nonmarital property’s value, the burden shifts to the other party to show
that some, if any, portion of the enhanced value is exempt from equitable
distribution. Yitzhari v. Yitzhari, 906 So. 2d 1250, 1254 (Fla. 3d DCA
2005).
“[T]o make an award for the enhancement in value and appreciation of
a nonmarital asset, the court must make specific findings as to the value
of such enhancement and appreciation during the marriage, as well as
which portion of that enhanced value is attributable to marital funds and
labor.” Martin, 923 So. 2d at 1239. “When improvements are made to
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real property, the court should make findings regarding the current value
of the property and the value of the property prior to the marital
enhancements. The court should then make findings regarding the
amount of the appreciation that was attributable to the marital
enhancements.” Hall v. Hall, 962 So. 2d 404, 405 (Fla. 2d DCA 2007)
(citations omitted).
Here, there was scant evidence regarding the enhanced value of the
Bittern Street property. The former wife testified that the value
depreciated between the parties’ marriage and the date the property was
sold. The former husband testified that the former wife told him the
property was worth $1 million when the parties married. The property
sold for $1,050,000. Additionally, although any increase in equity due to
mortgage payments made by the former wife using marital funds would
be subject to equitable distribution, there was no evidence as to the
amount by which the equity increased.
Instead of taking additional evidence and making the required
findings as to enhanced value, the trial court designated as a marital
asset all of the proceeds from the sale of the Bittern Street property. On
remand, after taking additional evidence, the trial court must make
findings as to the enhanced value of the property, including any increase
in equity that is due to the former wife’s use of marital funds to pay down
the mortgage held by her parents. See id. at 406 (observing that on
remand, trial court “may take additional evidence if necessary to
determine the value of the marital asset”). After taking additional
evidence, if the trial court finds that the former husband has established
the amount of increase in value and equity from the date of marriage to
the sale date, the former wife will then have the burden of showing that
any portion of those respective increases were not due to marital
contribution.
The trial court’s finding of commingling was also based on the use of
the Bittern Street property to obtain a line of credit from which funds
were used to construct the marital home, and the use of marital funds to
satisfy that line of credit. We agree with the former wife that the use of
her nonmarital property to obtain the line of credit was not, standing
alone, reason to deem the proceeds of the sale of the Bittern Street
property a marital asset. See Fashingbauer v. Fashingbauer, 19 So. 3d
401, 402 (Fla. 1st DCA 2009) (finding that husband’s use of nonmarital
property to obtain a line of credit used to purchase marital property did
not transform nonmarital property into marital property). We also agree
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that the use of marital funds to satisfy a marital debt 3 secured by the
nonmarital property did not transform the entire value of the Bittern
Street property into a marital asset. Nor do we find, under these
circumstances, that all of the factors considered by the trial court, taken
together, constituted a commingling of marital and nonmarital assets. It
is not apparent to us that the Bittern Street property lost its nonmarital
character. Instead, it simply appears that the former husband is entitled
to a share of any enhanced value and equity in the property. The
amount of the enhancement and the share to which the former husband
is entitled remains to be determined.
The former wife also argues that the trial court erred in finding there
was a mortgage on the property. We find that the trial court did not err
in rejecting the former wife’s contention that there was no mortgage on
the property where there was a conflict in the evidence on this point.
Based on the foregoing, we affirm in part, reverse in part, and
remand. On remand, the trial court must make additional findings
regarding the boat. After taking additional evidence, it must make the
required findings regarding any enhanced overall and equity value in the
Bittern Street property. The trial court shall further amend the final
judgment consistent with this opinion and modify the equitable
distribution scheme to the extent necessary.
Affirmed in part, reversed in part, and remanded for further
proceedings.
DAMOORGIAN, J., and HANZMAN, MICHAEL A., Associate Judge, concur.
* * *
Not final until disposition of timely filed motion for rehearing.
3 The former husband does not dispute the former wife’s contention that the
line of credit was a marital debt.
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