Opinion ID: 2276677
Heading Depth: 2
Heading Rank: 1

Heading: Whether AutoBody is Marital Property

Text: Sherman's cross-appeal asserts that the trial court erred in finding that AutoBody, formed after he separated from Barnes, was marital property subject to equitable distribution. Sherman argues that the trial court's determination that AutoBody was marital property is inconsistent with the terms of the in-court agreement concerning the wind-up of FuelLine reached by the parties on May 7, 1996. Under that agreement, each party was to receive FuelLine's list of subscribers and advertisers and each had the opportunity to bid on the FuelLine name and logo and purchase corporation property at fair market value. The intent of the agreement, Sherman contends, was to permit each party to begin a new, separate business. The trial court found that AutoBody was marital property because 1) the funds used by Sherman to begin AutoBody were not his separate property; they were either marital funds reimbursed from his brother and sister-in-law ($14,000), see supra note 4, or received from his mother ($40,000) for an interest in the business, and 2) Sherman used the artboards and layout from FuelLine to create the first editions of AutoBody as virtual clones of the FuelLine magazine, [5] which prior to dissolution was undoubtedly marital property. Sherman disputes the trial court's finding that to the extent Barnes had made contributions to FuelLine, and the extent to which these contributions permitted [Sherman] to establish AutoBody, the new venture was marital property subject to equitable distribution. The party who claims sole and separate ownership has the burden of establishing that the property is his or her separate property. See Jordan v. Jordan, 616 A.2d 1238, 1239 (D.C.1992); see also Hemily v. Hemily, 403 A.2d 1139, 1141 (D.C.1979) (noting threshold requirement for property exempt from distribution is that it be `the sole and separate property' of one spouse). The court assigns each party his or her separate property, see D.C.Code § 16-910(a), and then distributes all other property accumulated during the marriage, i.e. marital property, § 16-910(b). The trial court found that funds Sherman received from his mother and brother to establish AutoBody constituted all other property within the meaning of § 16-910(b). [6] Because the money received from his brother mirrored the amount Sherman had previously given his brother and sister-in-law out of marital funds, the trial court found these funds merely to be a reimbursement of the marital funds and, therefore, not Sherman's sole and separate property. See Cox v. Cox, 639 A.2d 97, 99 (D.C.1994) (A spouse may not circumvent the equitable distribution of the marital estate by concealing marital assets or by manipulating title to them.). This finding is not clearly erroneous. According to the trial court, because the $40,000 given by Sherman's mother to AutoBody was consideration for a one-half interest in AutoBody, it did not qualify as Sherman's separate property by gift or otherwise under § 16-910(a). Although we question whether the evidence established that the $40,000 received by AutoBody from Sherman's mother was intended as an investment reflective of AutoBody's value, see infra Part III. C., the trial court's finding that the funds received by AutoBody from Sherman's mother in exchange for stock was an investment in the company, and not simply a gift to Sherman, is not clearly erroneous. Based on the trial court's finding that the $40,000 from Sherman's mother was an investment in AutoBody, we understand the trial court's reasoning as follows: Because marital funds (the loan to Sherman's brother) and assets (FuelLine's artboards) were used to start up AutoBody, the business was marital property. The $40,000 invested by Sherman's mother was in exchange for a half interest in the business. This established the value of the concern at $80,000, of which the court awarded Barnes $40,000. Although we agree with Sherman that the May 7, 1996, agreement permitted each party to begin a new business, because Sherman began his business, at least in part, with marital assets, we conclude that the trial court's finding that AutoBody was marital property is supported by the record and not clearly erroneous. [7] We now turn to the valuation of that property.