Diana M L Turonis v. John J Turonis ( 2003 )

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judges Elder and Humphreys
Argued at Alexandria, Virginia
DIANA M. L. TURONIS
MEMORANDUM OPINION * BY
v. Record No. 2110-02-4 JUDGE LARRY G. ELDER
MARCH 11, 2003
JOHN J. TURONIS
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Marcus D. Williams, Judge
Douglas E. Bywater (Tate & Bywater, Ltd., on
briefs), for appellant.
David H. Fletcher (Gannon & Cottrell, P.C.,
on brief), for appellee.
Diana M.L. Turonis (wife) appeals from an order equitably
distributing property from her marriage to John J. Turonis
(husband) and denying her request for spousal support. On
appeal, she contends the trial court erroneously (1) found a
portion of the equity in the marital home was husband's separate
property or, in the alternative, improperly calculated the
amount that was separate; (2) required her to pay a portion of
husband's credit card debt; (3) failed to treat as separate
property monies wife received from the sale of two parcels of
real property; (4) failed to divide the parties' respective
* Pursuant to Code § 17.1-413, this opinion is not
designated for publication.
military pensions; (5) failed to award spousal support; and (6)
failed to award attorney's fees. 1
We hold the trial court erroneously calculated the equity
in the marital residence by allowing the deduction of selling
expenses absent evidence the home was likely to be sold, and we
remand for division of the equity in the marital residence in
keeping with this opinion. We affirm on all others issues but
direct the court to reconsider the spousal support and equitable
distribution awards as necessary based on its ultimate
distribution of the equity in the marital residence.
I.
EQUITABLE DISTRIBUTION
On appeal from an equitable distribution award, 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).
Unless it appears from the record that the
chancellor has abused his discretion, that
he has not considered or has misapplied one
of the statutory mandates, or that the
evidence fails to support the findings of
fact underlying his resolution of the
conflict in the equities, the chancellor's
equitable distribution award will not be
reversed on appeal.
Smoot v. Smoot, 233 Va. 435, 443, 357 S.E.2d 728, 732 (1987).
1
Wife also claimed the trial court erred by ordering her to
sign a deed transferring the marital residence to husband
without requiring husband to assume the mortgage indebtedness.
However, wife concedes this issue is now moot.
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A.
VALUATION AND CLASSIFICATION OF EQUITY IN THE MARITAL RESIDENCE
On appeal, wife contends the trial court erroneously (1)
concluded that husband retraced the $60,000 in the A.G. Edwards
account and that she failed to prove a gift of that money to
her; (2) used the Brandenburg formula to divide the increase in
value of the home; and (3) reduced the equity it divided by
$46,800 in alleged selling costs.
1. Tracing and Evidence of Gift
"[T]he party claiming a separate interest in transmuted
property bears the burden of proving retraceability." von Raab
v. von Raab, 26 Va. App. 239, 248, 494 S.E.2d 156, 160 (1997).
"This process involves two steps: a party must first (1)
establish the identity of a portion of hybrid property and (2)
directly trace that portion to a separate asset." Rahbaran v.
Rahbaran, 26 Va. App. 195, 208, 494 S.E.2d 135, 141 (1997). "If
the party claiming a separate interest in the transmuted
property proves retraceability, the burden shifts to the other
party to prove that the transmutation of the separate property
resulted from a 'gift.'" von Raab, 26 Va. App. at 248, 494
S.E.2d at 160.
Wife contests the retraceability of husband's separate
contribution to the extent that she and husband were jointly
liable on a short-term loan for $48,000, the proceeds from which
were used to purchase the marital residence. Wife appears to
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contend that her legal liability on that note, for however brief
a time, entitles her to have "that portion of the equity
purchased with the proceeds of the joint loan . . . categorized
as marital property." We disagree. Adopting wife's argument
would require us to ignore uncontradicted evidence that husband
used funds from the A.G. Edwards account to pay off the
short-term loan when the treasury note in that account matured
less than a month after closing and would deprive husband of the
share of equity retraceable to that separate contribution. Wife
has failed to prove what portion of the equity, if any, is
attributable to the fact that she was jointly liable on the
$48,000 loan for one month. See, e.g., Moran v. Moran, 29
Va. App. 408, 512 S.E.2d 834 (1999). In the absence of such
proof, we hold the evidence supports the trial court's
conclusion that husband retraced the subject contributions by a
preponderance of the evidence.
Wife also contends that husband gifted to her the $60,000
he put into the A.G. Edwards account, which was titled jointly,
and various other jointly held accounts before using the funds
to purchase the marital residence. Per Code
§ 20-107.3(A)(3)(g), however, "[n]o presumption of gift arises
from the fact that the property was retitled." Theismann v.
Theismann, 22 Va. App. 557, 565, 471 S.E.2d 809, 813, aff'd on
reh'g en banc, 23 Va. App. 697, 479 S.E.2d 534 (1996). The
party claiming the existence of a gift "must prove by clear and
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convincing evidence '(1) intention on the part of the donor to
make a gift; (2) delivery or transfer of the gift; and (3)
acceptance of the gift by the donee.'" Utsch v. Utsch, 38
Va. App. 450, 458, 565 S.E.2d 345, 349 (2002) (quoting
Theismann, 22 Va. App. at 566, 471 S.E.2d at 813).
Thus, the fact that husband and wife were joint owners of
the A.G. Edwards account and that some of the funds husband
claimed as separate were subsequently placed in other accounts
jointly owned by the parties and ultimately used to purchase the
jointly titled residence did not establish that husband intended
to make a gift of the funds to wife. Further, husband expressly
denied intending to make a gift of the funds to wife, and wife
offered no evidence that husband ever expressed such an intent,
either contemporaneously with the transfers or at any other
time. Wife testified merely that husband never said that the
subject funds were "his separate money" or that "either of
[them] [had] any more of an interest in [the] house than the
other." This evidence established, at most, that husband was
silent on the issue of whether he intended a gift of the funds
to wife. The fact that wife participated in discussions with
husband and the A.G. Edwards broker when the account was first
opened as to how the money should be invested does not compel
the conclusion that husband intended to make a gift of the funds
to the marriage. The fact that wife was jointly obligated with
husband on the short-term loan, the proceeds from which were
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used to purchase the marital residence and which husband
subsequently paid off with funds from the A.G. Edwards account,
also does not compel such a conclusion. Thus, the evidence was
sufficient to support the trial court's finding that wife failed
to meet her burden of proving husband's intent to make a gift by
clear and convincing evidence.
2. Use of Brandenburg Formula to Calculate Equity
Wife also contends the trial court's use of the Brandenburg
formula is inequitable because the parties signed a note for
almost eighty percent of the purchase price of the property and
because wife's "superior income enabled the parties to take on
such an obligation." We disagree.
As wife concedes, we have held "that the Brandenburg
formula is an acceptable method of tracing and determining the
value of the marital and separate property components of hybrid
property under Code § 20-107.3(A)(3)." Hart v. Hart, 27
Va. App. 46, 66, 497 S.E.2d 496, 505 (1998) (citing Brandenburg
v. Brandenburg, 617 S.W.2d 871 (Ky. Ct. App. 1981)). The
Brandenburg formula does not take into account the extent to
which the parties are obligated on a loan used to purchase the
property; it considers only the degree to which payment on that
loan reduces the loan principle, thereby resulting in the
acquisition of equity, marital or nonmarital, in the property.
See id.- 6 -
Although we have recognized methods other than the
Brandenburg formula also may be used to retrace separate
contributions and apportion equity in marital property, see id.at 66 n.4, 497 S.E.2d at 505 n.4, we have never held that proper
application of the Brandenburg formula was unfair in a
particular case. Under the facts of this case, where the
parties had roughly the same annual income at the time the
mortgage was obtained and made a down payment on the residence
of approximately twenty percent, we conclude the trial court's
application of the Brandenburg formula to calculate the parties'
respective shares of the equity was not error.
3. Deduction of Selling Expenses
We hold the court erred in allowing a deduction for selling
expenses. Deductions for "[e]xpenses of sale, such as a
broker's fee in the sale of real estate" are improper unless
"the asset is actually being sold or is likely to be sold."
Peter N. Swisher, Lawrence D. Diehl & James R. Cottrell,
Virginia Family Law § 11-25(a), at 492 (3d ed. 2002).
Our holdings in Arbuckle v. Arbuckle, 22 Va. App. 362, 470
S.E.2d 146 (1996), and Barnes v. Barnes, 16 Va. App. 98, 428
S.E.2d 294 (1993), cited by husband, support this result.
Arbuckle involved the valuation of a dental practice for
purposes of equitable distribution. 22 Va. App. at 366, 470
S.E.2d at 147. The valuation was hypothetical only; no evidence
indicated that "a sale would occur in the near future" or even
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that Mr. Arbuckle desired to sell his practice. Id. at 365-66,
470 S.E.2d at 147-48. Under these circumstances, we held that
consideration of the potential tax consequences of a sale, which
the trial court expressly recognized "indulged a 'legal
fiction[,]' . . . were too speculative to be considered." Id.Further, in Arbuckle, we distinguished our holding in Barnes, 16
Va. App. at 105-06, 428 S.E.2d at 300, in which we recognized
that awarding the marital residence to husband shifted to him
the potential capital gains tax liability wife would have
incurred if the sale had occurred while she retained an
ownership interest. We noted in Arbuckle that "potential
liability for capital gain tax upon sale . . . is a proper
consideration in the determination of a property division and an
award, if it is not speculative." Arbuckle, 22 Va. App. at 367,
470 S.E.2d at 148 (emphasis added). Thus, Arbuckle and Barnes
stand for the proposition that the deduction of selling expenses
constitutes error where sale is unlikely and, therefore,
speculative.
Here, although husband testified he was seeking selling
expenses, he never testified that he intended to sell the house,
and his attorney represented in both opening and closing that
husband wanted to keep the house. Finally, the trial court
ruled that husband could purchase the house because "[the court
doesn't] believe that fixing [up] the house and public sale of
the house is . . . financially feasible." Husband represented
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in his brief filed December 26, 2002, that he still owns the
home and has obtained a new mortgage in his name alone.
Because the sale of the house was speculative at best, 2 we
hold the trial court erred in deducting selling expenses in
calculating the equity in the property, and we remand to the
trial court to divide equity of $340,997 in the marital
residence in a manner consistent with this opinion.
B.
APPORTIONMENT OF CREDIT CARD DEBT
"The court shall . . . have the authority to apportion and
order the payment of the debts of the parties, or either of
them, that are incurred prior to the dissolution of the
marriage, based upon the [ten] factors listed in [Code
§ 20-107.3(E)]." Code § 20-107.3(C). Those factors include
"the basis for such debts and liabilities" and "[s]uch other
factors as the court deems necessary or appropriate." Code
§ 20-107.3(E)(7), (10).
Wife contends the court's ruling holding her responsible
for $2,200 of the debt on husband's Chase credit card "lacked
any evidentiary basis." We disagree. Although the card was in
husband's name, husband represented that approximately $8,350 of
the debt on the card, the balance at the time of separation, was
2
Wife also contends husband failed to offer evidence to
support his claim that selling expenses would equal eight
percent. Because wife failed to object on this ground at trial,
we hold this issue is barred by Rule 5A:18.
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marital debt. Wife does not expressly dispute that the debt was
marital and argues only that she paid off the credit cards she
held in her name only, implying that husband should be required
to do the same. She also claims that husband, without her
knowledge or permission, transferred a $9,000 balance of his own
to one of her accounts. However, husband denied wife's claim.
Under these circumstances, we hold the trial court did not abuse
its discretion in holding wife responsible for approximately
twenty-five percent of the remaining marital credit card debt.
C.
PROCEEDS FROM WIFE'S REAL ESTATE SALES
The evidence established that wife owned two pieces of real
estate prior to the parties' marriage and sold both shortly
after the parties were married. In 1993, she sold an Illinois
property and received $19,074.11, which she used to pay back a
loan she had taken from the trust of one of her children from
her first marriage and also to pay off the costs of the parties'
wedding and honeymoon. Wife's exhibit 7 represented these funds
as monetary contributions to the parties' marriage, but no other
evidence indicated that the loan from the trust was used for a
marital purpose or, assuming the wedding and honeymoon costs
were marital and the trust loan was not, what portion of the
loan proceeds were used for which purpose. Thus, the trial
court did not abuse its discretion in failing expressly to award
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wife a credit for these separate funds in the equitable
distribution.
In 1994, wife sold a Florida property for $34,851.71, which
she used to purchase a 1995 Chevrolet Surburban while husband
was overseas. In the equitable distribution, the trial court
stated that wife "shall receive the 1995 Chevrolet Suburban
. . . free and clear of any claims of [husband], with a value of
$13,125.00." Thus, contrary to wife's claim that the trial
court gave her no credit for the funds she used to buy the
vehicle, the trial court awarded the vehicle to her in the
equitable distribution. It also awarded wife $22,000 more of
the marital equity in the residence than it awarded to husband.
Under these facts, we hold the court's failure expressly to
credit wife for the contribution of funds used to purchase the
Suburban did not constitute an abuse of discretion.
D.
DISTRIBUTION OF MILITARY PENSIONS
Code § 20-107.3(A) provides that the trial court "upon
request of either party, shall determine the . . . value of all
property, real or personal, tangible or intangible, of the
parties." Subsection (G)(1) provides that "[t]he court may
direct payment of a percentage of the marital share of any
pension, profit-sharing or deferred compensation plan or
retirement benefits, whether vested or nonvested, which
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constitutes marital property and whether payable in a lump sum
or over a period of time."
"We have recognized two methods for valuing and dividing a
defined benefit plan . . . ." Torian v. Torian, 38 Va. App.
167, 176, 562 S.E.2d 355, 360 (2002). Under the "'immediate
offset approach,'" the trial court determines the present value
of the marital share of the benefits and considers this value in
making the monetary award. Id. (quoting Gamer v. Gamer, 16
Va. App. 335, 342-43, 429 S.E.2d 618, 624 (1993)). The court
must determine present value even "[w]here an award of the
entire pension is made to the owning spouse." Johnson v.
Johnson, 25 Va. App. 368, 374, 488 S.E.2d 659, 662 (1997).
Under the "deferred distribution approach," the court
awards "a percentage of the marital share of the pension, in
which case payment is to be made only as retirement benefits are
paid." Gamer, 16 Va. App. at 342-43, 429 S.E.2d at 624. "If a
trial court orders deferred distribution of the marital share of
the pension, it need not determine the pension's present value."
Torian, 38 Va. App. at 177, 562 S.E.2d at 360.
Here, the parties offered no evidence of present value. As
a result, wife contends, the trial court was required to divide
the pensions under the deferred distribution method. Under the
facts of this case, we disagree. Both parties had defined
benefit military pensions, and the only evidence as to value was
wife's testimony that, as a starting point, her pension as a
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Navy Reservist was half that of husband's as an active duty
member of the Navy. She admitted other factors such as points
earned or months of service affected the ultimate benefit
calculation but provided no evidence of the actual benefit
amount either could expect to receive. Although the record
contained sufficient evidence to allow the trial court to award
each party a percentage of the marital share of the other's
pension without abusing its discretion, we hold that its
decision not to make an award, based on a lack of evidence of
the respective values of the pensions, also was not an abuse of
discretion. See, e.g., Bowers v. Bowers, 4 Va. App. 610, 618,
359 S.E.2d 546, 551 (1987). Nevertheless, the trial court
remains free to make a different distribution of the pension
when it revisits the equitable distribution on remand.
II.
SPOUSAL SUPPORT
In awarding spousal support, the trial court must consider
the factors set out in Code § 20-107.1. Decisions concerning
spousal support "rest within the sound discretion of the trial
court and will not be reversed on appeal unless plainly wrong or
unsupported by the evidence." Calvert v. Calvert, 18 Va. App.
781, 784, 447 S.E.2d 875, 876 (1994).
A spouse's voluntary underemployment may serve as a basis
for imputing income to the underemployed spouse when calculating
spousal support. See Code § 20-107.1; see also Stubblebine v.
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Stubblebine, 22 Va. App. 703, 708, 473 S.E.2d 72, 74 (1996) (en
banc). The fact that the spouse has custody of a minor child
and wishes to stay home with that child rather than work does
not prevent a court from imputing income to that spouse for
purposes of determining whether an award of spousal support is
appropriate. Cf. Bennett v. Dep't of Soc. Servs., 22 Va. App.
684, 692-93, 472 S.E.2d 668, 672 (1996) (in case involving
imputation of income for purposes of calculating child support,
recognizing that "the trial court shall impute income to a
custodial parent who is voluntarily unemployed or underemployed
where the age of the child and circumstances permit the
custodial parent to be gainfully employed" but holding principle
did not apply under facts of case, which involved "profoundly
disabled" child).
On brief, wife contends solely that her age and the age of
her child justify her voluntary unemployment. When the final
decree was entered on July 24, 2002, wife was 46 years old and
the parties' minor child was 19 months old. Wife asserts that
Code § 20-107.1(E)(4) and (5), which require the court to
consider the age, physical and mental condition of the parties
and age, physical and mental condition, and special
circumstances of the child, compel an award of spousal support
so that she will be able to stay at home until the child enters
school.
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We disagree. In imputing income to wife and denying her
request for spousal support, the trial court specifically stated
that it considered all the statutory factors. It found that
wife was "intelligent," "eminently qualified to work" and "has
done extremely well" in the work force. It observed further,
This is not a case of a child with special
needs, nor was this a marriage involving a
stay-at-home mom, [n]or was there an
agreement in this marriage that [wife] would
be a stay-at-home mom. Indeed, she has
worked and brought home a substantial amount
of the income during the marriage, . . .
[which was one] of short duration [7 years
and 8 months] . . . .
The trial court also commented, "Given the financial stress of
both parties, [wife] has no choice but to work." The court
acknowledged evidence that wife had ongoing health problems but
found "none have [rendered her] in any way debilitated or
incapacitated," and wife does not challenge this finding on
appeal.
The court heard evidence that wife was capable of earning
$100,000 to $130,000 per year in the Washington, D.C., area,
where she and husband resided at the time of their separation,
and $75,000 per year in the Atlanta, Georgia, area, where she
moved after the parties' separation in order to be closer to her
family.
Based on the evidence, we hold the trial court did not
abuse its discretion in imputing $75,000 in income to wife.
However, because we reverse and remand the trial court's
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equitable distribution award, we direct the trial court to
reconsider wife's spousal support request in light of its final
resolution of the equitable distribution. See Code
§ 20-107.1(E)(8).
III.
ATTORNEY'S FEES
Whether to award attorney's fees is left to the sound
discretion of the trial court. See, e.g., Lightburn v.
Lightburn, 22 Va. App. 612, 621, 472 S.E.2d 281, 285 (1996).
Here, the trial court found wife was capable of earning $75,000
per year, and the evidence established that wife earned more
than husband during the majority of their marriage. Husband
substantially prevailed on the disputed equitable distribution
and spousal support issues. Finally, husband incurred
attorney's and expert witness fees totaling $116,121.25, whereas
wife concedes on brief her attorney's fees and costs were only
"a fraction" of husband's. Under these circumstances, we hold
the trial court did not abuse its discretion in ordering that
the parties be responsible for their own attorney's fees.
However, we direct the trial court to reconsider this ruling, if
necessary, in light of its resolution of the equitable
distribution and spousal support issues on remand.
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IV.
For these reasons, we hold the trial court erroneously
calculated the equity in the marital residence, and we remand
for further proceedings consistent with this opinion.
Affirmed in part,
reversed in part
and remanded.
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