Case Title: David v. David

Citation: 

Docket Number: 122145

State: virginia

Court: Virginia Supreme Court

Date: 2014-02-27T00:00:00Z

Document:
PRESENT:  Kinser, C.J., Lemons, Goodwyn, Millette, Mims, and 
Powell, JJ. 
 
CHERI GINA DAVID 
 
 
 
 
 
 
 
 
     OPINION BY 
v.  Record No. 122145 
 
 
  JUSTICE S. BERNARD GOODWYN 
 
 
 
 
 
 
 
 
  February 27, 2014 
ROBERT C. DAVID 
 
 
FROM THE COURT OF APPEALS OF VIRGINIA 
 
In this appeal, we consider whether a non-owning spouse, 
who seeks to establish that an appreciation in value of separate 
property during marriage is marital property, has the burden of 
proving that significant personal effort during marriage or 
marital property proximately caused such appreciation. 
Procedural Background 
 
On December 3, 2010, Robert C. David (Husband) filed a 
complaint in the Circuit Court of Hanover County seeking a 
divorce from Cheri Gina David (Wife).  Among other things, he 
requested that the court equitably distribute his and Wife’s 
property pursuant to Code § 20-107.3.  The court granted 
Husband’s request for a divorce and equitably distributed 
Husband’s and Wife’s property and debt. 
 
Husband appealed the circuit court’s equitable distribution 
award to the Court of Appeals because it classified the increase 
in value of Husband’s “Investment/Brokerage Account” (the 
account) as marital property, although Husband owned the account 
 
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before the marriage and both parties agreed that the account was 
separate property. 
In an unpublished opinion, David v. David, Record No. 0653-
12-2 (Nov. 20, 2012), the Court of Appeals reversed the circuit 
court.  The Court of Appeals ruled that Wife, the non-owning 
spouse, had failed to carry her burden of proving that the 
substantial appreciation in the value of the account, 
approximately $316,000, was proximately caused by Husband’s 
significant personal efforts during the marriage, and was 
therefore marital property.  Wife appeals. 
Facts 
Husband and Wife were married on November 16, 2002.  
Husband owned the account when he married Wife, and at that 
time, it was worth $234,783.16.  Husband and Wife separated in 
November 2010.  At that time, the account was worth $551,521.42. 
During the marriage, Husband worked at Prudential 
Securities as a branch manager, then as a financial advisor and 
manager before transferring to the development group.  He left 
Prudential Securities to work for the Horse’s Mouth, “a company 
that specializes [in] helping financial advisors.”  There, he 
created a program, wrote articles and conducted seminars over 
the Internet to help financial advisors.  After two years at 
the Horse’s Mouth, Husband started his own business and wrote a 
 
3 
book.  For a period of time in 2009 and 2010, Husband was 
unemployed. 
Wife entered into evidence tax information (1099s or tax 
forms) for the account from every year of the marriage except 
2010.  These tax forms detailed Husband’s stock trading in the 
account from 2002 until 2009.  The 1099s indicated that Husband 
bought or sold stocks in 2003, 2006, 2007, 2008 and 2009 and 
sold an Exchange Traded Fund (ETF) in 2009.1 
Wife’s deposition was entered into evidence, in which Wife 
testified that during the marriage “[Husband] spent many hours 
researching emerging companies” for investment purposes.  Wife 
admitted to not knowing the exact number of hours spent on 
these activities.  She also testified that he had twenty to 
twenty-five years’ experience “as an investment broker” and was 
licensed to trade securities until 2010.  According to Wife, 
Husband had represented to her during their marriage that he 
was “really good at the merging market.” 
 
On the other hand, Husband testified that he “[does] very 
little trading” because he is a “long-term investor.”  Husband 
admitted that for a “brief period of time” he had used the 
account to “hedg[e] against a market crash.”  He also testified 
                     
1 In 2004 and 2005, although Husband did not buy or sell 
stock, the 1099s indicate that dividends were reinvested.  It is 
not clear from the record whether these dividends were 
automatically reinvested or whether Husband directed the 
reinvestments. 
 
4 
to selling his ETF in 2009 and reinvesting the money.  When 
repeatedly asked whether he was skilled at stock trading, 
Husband responded “[n]o,” pointed out his tax losses and said, 
“Knowing what you’re doing[] doesn’t prohibit you from 
purchasing stock [that ultimately underperforms].” 
 
The circuit court found that Husband had acquired the 
account before marriage but that the increase in value during 
the marriage was marital property because the Husband’s personal 
efforts during the marriage caused the increase in value.  The 
circuit court awarded Wife half of the amount of appreciation. 
In the Court of Appeals, Husband claimed that the circuit 
court “misapplied the burdens of proof” and that the evidence 
did not support the circuit court’s findings.  Specifically, 
Husband argued that there was insufficient evidence to support 
the circuit court’s findings 1) that he made significant 
personal efforts, 2) that the value of the account 
substantially increased and 3) that his personal efforts 
proximately caused the increase. 
The Court of Appeals held that “the trial court erred in 
finding that the entire appreciation of husband’s separate 
property was due to his personal efforts.”  David, slip op. 
at 1.  Without addressing Husband’s argument that the evidence 
did not support a finding of substantial appreciation or 
significant personal effort, the court stated, “Assuming without 
 
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deciding that husband’s research and trading activity constitute 
[‘personal effort’]” for purposes of Code § 20-107.3(A)(3)(a), 
Wife failed to satisfy her burden of proof concerning the extent 
to which the increase in value was due to Husband’s personal 
efforts.  Id., slip op. at 4-5.  The Court of Appeals reversed 
the circuit court and remanded the case for reclassification of 
the account consistent with its opinion.  Id., slip op. at 6. 
Wife’s sole assignment of error states: 
 
The Court of Appeals erred in finding that 
Virginia Code § 20-107.3, as amended, requires a non-
owning spouse to prove that the personal efforts of a 
spouse during marriage are the proximate cause of 
substantial appreciation in the value of an owning 
spouse's separate assets in order to establish the 
increase in value as marital property. 
 
Analysis 
 
Wife argues that the Court of Appeals misinterpreted Code § 
20-107.3(A) in holding that Wife had to prove “[H]usband’s 
personal efforts were the proximate cause of the entire increase 
in the value of the [account].”  She maintains that the Court of 
Appeals’ holding is contrary to the plain language of Code §§ 
20-107.3(A)(3)(a)(i) and (ii), which only requires the non-
owning spouse to prove that personal efforts were made and that 
the separate property increased in value, after which the burden 
shifts to the owning spouse to disprove causation. 
 
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To support her interpretation of Code § 20-107.3(A)(3)(a), 
Wife cites to legislative history2 indicating the purpose of a 
1991 amendment, which added a burden of proof provision to that 
subsection.  That purpose was to create a presumption of 
causation upon an initial showing by the non-owning spouse of 
personal efforts and increase in value and to place the burden 
of rebutting this presumption on the owning spouse.  See 1991 
Acts ch. 698.3  Wife maintains that the Court of Appeals’ 
interpretation of the statute defeats the purpose of the 1991 
amendment. 
 
Husband responds to Wife’s arguments by insisting that this 
Court should uphold the Court of Appeals’ longstanding 
interpretation of Code § 20-107.3(A).  Husband argues that, 
pursuant to Court of Appeals precedent, Wife had to prove three 
elements before the burden of proof shifted to Husband: “(1) 
significant personal efforts were contributed to the property, 
(2) a substantial appreciation in the value of the property and 
                     
2 Family Law Section of the Virginia State Bar, Report to 
the Governor and General Assembly: Equitable Distribution of 
Property in Divorce Proceedings, House Doc. No. 19 (1991), 
available at 
http://leg2.state.va.us/dls/h&sdocs.nsf/By+Year/HD191991/$file/H
D19_1991.pdf (last visited February 24, 2014).  The report was 
produced and presented to the Governor and the General Assembly 
in response to a request made in House Joint Resolution No. 57 
(1990). 
 
3 Two other Acts of Assembly also amended Code § 20-107.3 in 
1991.  See 1991 Acts chs. 632, 640.  However, neither affected 
subsection (A)(3)(a). 
 
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(3) a causal connection between the personal efforts and the 
appreciation (i.e., personal efforts were the ‘proximate cause’ 
of the appreciation).”  Husband claims that the legislative 
history cited by Wife does not demonstrate an intent for the 
1991 amendment of the statute to change the effect of causation 
language in other parts of the statute. 
 
Questions regarding the evidentiary presumptions and 
burdens of proof created by Code § 20-107.3 are pure questions 
of law concerning statutory interpretation, which this Court 
reviews de novo.  See Gilliam v. McGrady, 279 Va. 703, 708, 691 
S.E.2d 797, 799 (2010).  As we have stated in the past, the 
Court’s main concern in statutory interpretation is to give 
effect to the legislature’s intent as evidenced by the plain 
meaning of statutory language, “unless a literal interpretation 
would result in manifest absurdity.”  Hollingsworth v. Norfolk 
S. Ry. Co., 279 Va. 360, 366, 689 S.E.2d 651, 654 (2010).  
Furthermore, the Court has recognized that its duty consists of 
“constru[ing] the law as it is written.”  Hampton Roads 
Sanitation Dist. Comm’n v. City of Chesapeake, 218 Va. 696, 702, 
240 S.E.2d 819, 823 (1978). 
The purpose of Code § 20-107.3 is to provide for the 
equitable distribution upon divorce of the parties’ property 
based upon each party’s contributions to the marriage.  Pursuant 
to the statute, a court must classify the parties’ assets as 
 
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“marital,” “separate” or “part separate and part marital.”  Code 
§ 20-107.3(A).  A court equitably classifies property based upon 
statutory guidelines, not according to which party holds legal 
title.  Robinson v. Robinson, 46 Va. App. 652, 661, 621 S.E.2d 
147, 152 (2005). 
Spouses have a right upon divorce to an equitable share of 
marital property, and Code § 20-107.3 creates a rebuttable 
presumption that “[p]roperty acquired by either spouse during 
marriage is marital property.”  Gilliam, 279 Va. at 708, 691 
S.E.2d at 799.  On the other hand, when property was acquired 
before marriage, the statute creates a rebuttable presumption 
that it is separate property.  Code § 20-107.3(A)(1).  We have 
not directly addressed the proper allocation of the burden of 
proof in determining whether income received from separate 
property or the increase in value of separate property during 
the marriage is marital property for purposes of equitable 
distribution.  Cf. Gilliam, 279 Va. at 706, 691 S.E.2d at 798 
(resolving a question about the burden of proof for the 
distribution of debt pursuant to Code § 20-107.3). 
Code § 20-107.3(A)(1) states: 
 
Separate property is (i) all property, real and 
personal, acquired by either party before the 
marriage; (ii) all property acquired during the 
marriage by bequest, devise, descent, survivorship or 
gift from a source other than the other party; (iii) 
all property acquired during the marriage in exchange 
for or from the proceeds of sale of separate property, 
 
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provided that such property acquired during the 
marriage is maintained as separate property; and (iv) 
that part of any property classified as separate 
pursuant to subdivision A 3. Income received from 
separate property during the marriage is separate 
property if not attributable to the personal effort of 
either party. The increase in value of separate 
property during the marriage is separate property, 
unless marital property or the personal efforts of 
either party have contributed to such increases and 
then only to the extent of the increases in value 
attributable to such contributions. The personal 
efforts of either party must be significant and result 
in substantial appreciation of the separate property 
if any increase in value attributable thereto is to be 
considered marital property. 
 
Code § 20-107.3(A)(3)(a) specifically addresses how a court 
is to classify the appreciation in value of separate property 
during the marriage, providing in relevant part that: 
In the case of the increase in value of separate 
property during the marriage, such increase in value 
shall be marital property only to the extent that 
marital property or the personal efforts of either 
party have contributed to such increases, provided 
that any such personal efforts must be significant 
and result in substantial appreciation of the 
separate property. 
For purposes of this subdivision, the nonowning 
spouse shall bear the burden of proving that (i) 
contributions of marital property or personal effort 
were made and (ii) the separate property increased in 
value.  Once this burden of proof is met, the owning 
spouse shall bear the burden of proving that the 
increase in value or some portion thereof was not 
caused by contributions of marital property or 
personal effort. 
The second paragraph of Code § 20-107.3(A)(3)(a) quoted above, 
which allocates the burdens of proof, was added to the statute 
in 1991.  1991 Acts ch. 698. 
 
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The Court of Appeals has interpreted Code §§ 20-107.3(A)(1) 
and (3) together to “[establish] a three-tiered burden of 
proof.”  Cirrito v. Cirrito, 44 Va. App. 287, 296, 605 S.E.2d 
268, 272 (2004).  In the first tier, the owning spouse must 
prove that the property is separate pursuant to subsection 
(A)(1).  Id.  This creates a presumption that the increase in 
value is also separate property.  See Martin v. Martin, 27 Va. 
App. 745, 751, 501 S.E.2d 450, 453 (1998).  Here, the parties do 
not dispute that the account itself is Husband’s separate 
property. 
 
In the second tier, the Court of Appeals has interpreted 
Code §§ 20-107.3(A)(1) and (3) as placing a burden on the non-
owning spouse to prove not only that “(i) contributions of 
marital property or personal efforts were made and (ii) the 
separate property increased in value,” but also to prove that 
the personal efforts caused the increase in value.  See Cirrito, 
44 Va. App. at 296-97, 605 S.E.2d at 272-73; Gilman v. Gilman, 
32 Va. App. 104, 120-21, 526 S.E.2d 763, 771 (2000).  The Court 
of Appeals held in this case that Wife failed to meet this 
burden. 
 
The third tier consists of a burden shift back to the 
owning spouse to rebut with proof “that the increase in value or 
some portion thereof was not caused by contributions of marital 
property or significant personal effort.”  Martin, 27 Va. App. 
 
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at 751, 501 S.E.2d at 453; see also Cirrito, 44 Va. App. at 296-
97, 605 S.E.2d at 272. 
 
Upon review of the plain language of Code § 20-
107.3(A)(3)(a), we conclude that it does not require the non-
owning spouse to prove causation.  See Code §§ 20-
107.3(A)(3)(a)(i) and (ii).  Code § 20-107.3(A)(3)(a) does not 
include causation as an issue upon which the non-owning spouse 
has a burden of proof, and it explicitly places the burden of 
disproving causation on the owning spouse.  See Code §§ 20-
107.3(A)(3)(a) (“[T]he owning spouse shall bear the burden of 
proving that the increase in value or some portion thereof was 
not caused by contributions of marital property or personal 
effort.”). 
 
The Court of Appeals’ interpretation of Code § 20-107.3(A) 
adds a requirement to the non-owning spouse’s burden not stated 
in the statute.  Courts must not construe the plain language of 
a statute in a way that adds a requirement that the General 
Assembly did not expressly include in the statute.  Vaughn, Inc. 
v. Beck, 262 Va. 673, 678-79, 554 S.E.2d 88, 91 (2001) (“[An 
unintentional result], however, cannot be remedied through 
judicial construction by imposing a . . . requirement that 
effectively would add new language to the statute.  Any such 
change to the statute must be a legislative, rather than a 
judicial, undertaking.”). 
 
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The General Assembly chose to explicitly state that 
causation must be disproved by the owning spouse after the non-
owning spouse satisfies his or her statutorily imposed burden of 
proof, which does not include causation.  See Code §§ 20-
107.3(A)(3)(a)(i) and (ii).  The Court presumes that the 
legislature has purposefully chosen the precise statutory 
language, “and we are bound by those words when we apply the 
statute.”  Halifax Corp. v. First Union Nat’l Bank, 262 Va. 91, 
100, 546 S.E.2d 696, 702 (2001).  “[W]hen the General Assembly 
has used specific language in one instance, but omits that 
language or uses different language when addressing a similar 
subject elsewhere in the Code, we must presume that the 
difference in the choice of language was intentional.”  Zinone 
v. Lee’s Crossing Homeowners Ass’n, 282 Va. 330, 337, 714 S.E.2d 
922, 925 (2011). 
Code § 20-107.3(A)(3)(a) indicates that a presumption of 
causation is created upon the non-owning spouse’s satisfying his 
or her statutorily imposed burden of proof.  Interpreting Code § 
20-107.3(A)(3)(a) as creating a burden on the owning spouse to 
disprove causation is not manifestly absurd.  Cf. Parfitt v. 
Parfitt, 277 Va. 333, 340, 672 S.E.2d 827, 829 (2009) 
(explaining the burden shift that occurs in cases involving 
claims of undue influence after a plaintiff presents evidence of 
weakness of mind and grossly inadequate consideration, 
 
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suspicious circumstances or confidential relationship); see also 
Bass v. City of Richmond Police Dep’t, 258 Va. 103, 112, 515 
S.E.2d 557, 561-62 (1999) (recognizing a rebuttable presumption 
of causation created by a workers’ compensation statute).4 
 
Code § 20-107.3(A)(3)(a) places the burden of disproving 
causation on the owning spouse, once the non-owning spouse makes 
a prima facie showing of a spouse’s personal efforts during the 
marriage or the contribution of marital property and an increase 
in value of the separate property.  The plain language of Code § 
20-107(A)(3)(a) does not require the non-owning spouse to prove 
causation.  Thus, the Court Appeals erred in assigning the 
burden to prove causation to Wife and holding that Wife failed 
to meet that burden.  To the extent that the Court of Appeals 
has in its decisions interpreted Code § 20-107.3(A) in a manner 
                     
4 We do not consider the legislative history of a statute if 
the statutory language is plain and unambiguous.  Newberry 
Station Homeowners Ass’n v. Board of Supervisors, 285 Va. 604, 
614, 740 S.E.2d 548, 553 (2013).  While it is not necessary to 
resort to legislative history, we note that the legislative 
history of Code § 20-107.3(A)(3)(a) is consistent with the 
Court’s ruling today.  The report to the General Assembly 
regarding the 1991 amendment, which added the burden of proof 
provision to Code § 20-107.3(A)(3)(a), explicitly states, “Once 
[the non-owning spouse’s] burden of proof is met, there [will] 
be . . . a presumption of ‘active’ appreciation by presuming a 
causal nexus between the efforts . . . and the appreciation in 
value during the marriage.”  House Doc. No. 19, at 11.  The 
report states that the rationale behind allocating the burden of 
proof in this manner is that the owning spouse is better-
equipped to prove “that the increase in value was due to 
‘passive’ or ‘economic’ reasons.”  Id. 
 
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inconsistent with the holding we express here, we overrule those 
portions of any such decisions. 
Conclusion 
 
For the reasons stated above, the Court of Appeals erred in 
interpreting Code § 20-107.3(A)(3)(a) as placing an initial 
burden on the non-owning spouse to prove that significant 
personal efforts or marital contribution caused a substantial 
increase in the value of separate property.  Therefore, the 
judgment of the Court of Appeals will be reversed, and this case 
will be remanded to the Court of Appeals for further proceedings 
consistent with this opinion. 
Reversed and remanded.