Opinion ID: 2498442
Heading Depth: 1
Heading Rank: 6

Heading: Determining an Award of Passive Appreciation

Text: We now turn to the method that a trial court should employ as it determines whether a nonowner spouse is entitled to a share of the passive appreciation and calculates the proper allocation. We note that the trial court's task in this regard is an extremely fact-intensive one, and there are certain steps that each court must take. First, the court must determine the overall current fair market value of the home. Second, the court must determine whether there has been a passive appreciation in the home's value. Third, the court must determine whether the passive appreciation is a marital asset under section 61.075(5)(a)(2). This step must include findings of fact by the trial court that marital funds were used to pay the mortgage and that the nonowner spouse made contributions to the property. Moreover, the trial court must determine to what extent the contributions of the nonowner spouse affected the appreciation of the property. Fourth, the trial court must determine the value of the passive appreciation that accrued during the marriage and is subject to equitable distribution. Fifth, after the court determines the value of the passive appreciation to be equitably distributed, the court's next step is to determine how the value is allocated. Based on the circumstances of this case, we approve the methodology in Stevens, which addresses the disposition of nonmarital real property assets and provides the following method for determining how the appreciated value is to be allocated: If a separate asset is unencumbered and no marital funds are used to finance its acquisition, improvement, or maintenance, no portion of its value should ordinarily be included in the marital estate, absent improvements effected by marital labor. If an asset is financed entirely by borrowed money which marital funds repay, the entire asset should be included in the marital estate. In general, in the absence of improvements, the portion of the appreciated value of a separate asset which should be treated as a marital asset will be the same as the fraction calculated by dividing the indebtedness with which the asset was encumbered at the time of the marriage by the value of the asset at the time of the marriage. If, for example, one party brings to the marriage an asset in which he or she has an equity of fifty percent, the other half of which is financed by marital funds, half the appreciated value at the time of the petition for dissolution was filed, § 61.075(5)(a) 2, Fla. Stat. (1993), should be included as a marital asset. The value of this marital asset should be reduced, however, by the unpaid indebtedness marital funds were used to service. Stevens, 651 So.2d at 1307-08 (emphasis added). Applying this language from Stevens to Kaaa, we note that the home was financed almost entirely by borrowed money that was repaid almost entirely by marital funds. Moreover, there appears to be ample evidence in the record of contributions made by Katherine Kaaa that affected the passive appreciation of the home's value. In sum, when a marital home constitutes nonmarital real property, but is encumbered by a mortgage that marital funds service, the value of the passive, market-driven appreciation of the property that accrues during the course of the marriage is a marital asset subject to equitable distribution under section 61.075(5)(a)(2), Florida Statutes (2007). For the foregoing reasons, we quash the Second District's decision in Kaaa and approve the First District's decision in Stevens. Consequently, we remand this case for proceedings consistent with this opinion. It is so ordered. CANADY, C.J., and PARIENTE, LEWIS, QUINCE, POLSTON, and PERRY, JJ., concur.