Court Opinion

ID: 9406988
Source: CourtListenerOpinion
Date Created: 2023-07-05 15:05:35.723954+00
Date Added: 2024-06-11T17:20:33.547634
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                             FOURTH DISTRICT

                           ROSA H. NARANJO,
                               Appellant,

                                     v.

                         FREDDY RAUL OCHOA,
                              Appellee.

                              No. 4D21-3084

                              [July 5, 2023]

  Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Laura Johnson, Judge; L.T. Case No. 502020DR005681.

   Christopher R. Bruce and Ashley M. Bustamante of Bruce Law Firm,
P.A., West Palm Beach, for appellant.

  Michael S. Dyer of Law Office of Michael Samuel Dyer, West Palm
Beach, for appellee.

GERBER, J.

   The former wife appeals from the circuit court’s final judgment of
dissolution of marriage. The former wife primarily argues the circuit court
erred by equitably distributing, as a marital asset, the appreciation on the
former wife’s nonmarital advanced inheritance. The former wife more
specifically argues the former husband failed to prove by competent
substantial evidence that the investment of the advanced inheritance into
four mutual funds, and then employing a buy-and-hold strategy,
constituted the requisite “efforts”—as that term is used in section
61.075(6)(a)1.b., Florida Statutes (2020), and interpreted by our court and
other district courts—to have allowed the circuit court’s determination
that the advanced inheritance’s appreciation was a marital asset.

   We agree with the former wife’s argument. Thus, we reverse the final
judgment’s equitable distribution determination as to the advanced
inheritance’s appreciation. We remand for the circuit court to enter an
amended final judgment determining that the advanced inheritance’s
appreciation shall be treated as the former wife’s nonmarital asset.
                           Procedural History

   In December 2012 and February 2013, the former wife’s mother gifted
a total of $665,000.00 to the former wife as an advanced inheritance.
Within weeks of the February 2013 transfer, the former wife transferred
$660,000 of those funds into a brokerage account which was separate
from the former wife’s and the former husband’s joint bank account. Over
the next two months, the majority of the $660,000.00 in the former wife’s
brokerage account was used to purchase shares in three mutual funds.

   In 2016, the former wife’s mother gifted another $170,000 to the former
wife as a further advanced inheritance. Within a few days, the former wife
transferred the $170,000 into her separate brokerage account. The
$170,000 was then used to purchase shares in a fourth mutual fund.

   In 2020, the former husband filed a petition for dissolution of marriage,
and the former wife filed a counterpetition for dissolution of marriage. By
the time the parties had proceeded on their petitions, the mutual funds
had generated $892,687.94 in appreciation.

   At trial, for purposes of the circuit court’s equitable distribution
determination, the former husband and the former wife contested whether
the circuit court should deem the $892,687.94 appreciation as a marital
asset or a nonmarital asset.

   The former husband argued that pursuant to section 61.075(6)(a)1.b.,
Florida Statutes (2020)—which defines marital assets as including “[t]he
enhancement in value and appreciation of nonmarital assets resulting
from the efforts of either party during the marriage” (emphasis added)—the
circuit court should deem the appreciation as a marital asset because he
had performed the research and purchased the four mutual funds which
had generated the appreciation. According to the former husband, “I did
the research all by myself. This took hours.” The former husband later
testified that his investment strategy as to the couple’s investments during
the marriage was “typically buy and hold. I was not a day trader and I
wasn’t looking to invest small sums.”

   In contrast, the former wife testified that she, and not the former
husband, had performed the research and purchased the four mutual
funds which had generated the appreciation. Further, the former wife’s
testimony sought to establish—for what would be her later argument—
that regardless of who had performed the research and selected the mutual
funds, the circuit court should deem the appreciation as a nonmarital
asset because neither party’s “efforts” had resulted in the “enhancement

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in value and appreciation” of the invested funds under section
61.075(6)(a)1.b., Florida Statutes (2020). The former wife testified:

        It was a buy and hold strategy. I selected some funds,
      purchased them and left them alone.

         …

         Because I didn’t want to be tracking this every day or every
      week or every month, I work full time. I was not in finance. I
      just wanted something that would grow the money in a better
      way than just leaving it in CDs or in [a] money market
      account.

   In closing arguments, the former husband’s counsel emphasized that
regardless of the parties’ factual dispute over who had researched and
selected the mutual funds, the fact that either of them had done so should
cause the circuit court to deem the advance inheritance’s appreciation to
be a marital asset:

         [The former husband] is … saying he picked the [mutual
      funds]. The [former] wife says she picked the [mutual funds].

          But, Your Honor, it actually doesn’t make much of a
      difference because if [a spouse] take[s] an asset and …
      enhance[s] the value of the asset and that enhancement is
      made during the marriage, then you have marital
      enhancement.

         So even if the [former] wife did pick the [mutual funds], she
      took her mother’s money and she’s enhanced the value by
      picking these [mutual funds]. If [the former husband] did
      that, then he took the money and he enhanced it as well.

         So the appreciation in these [mutual funds] is twofold.

         One, passive appreciation because the market has gone
      up.

        Two, active appreciation because these [mutual funds]
      were picked by one [spouse] or the other.

         There is no such thing as a nonmarital picking of [mutual
      funds] that occurs during the marriage.

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    During the former wife’s closing argument, the former wife’s counsel
relied on Oxley v. Oxley, 695 So. 2d 364 (Fla. 4th DCA 1997), and other
cases for the general proposition—using counsel’s words—that if a spouse
delegates the investment management of a nonmarital asset to somebody
else, “there is not marital effort that makes … an otherwise nonmarital
asset’s enhancement [into a] marital [asset].” According to the former
wife’s counsel:

        The [former] wife outsourced the management of her
     investments [to] the four fund managers.

        … [M]y suggestion is the Court should look at her … four
     one-time trades as no different than the husband in Oxley
     picking a trustee to manage his investments.

        She picked four investment advisors and her only
     responsibility with managing this money after that was to let
     those advisors do their jobs. And they did that through the
     four funds.

         And, you know, some did it better than the others, but my
     client’s role was to delegate that out and that’s basically what
     happened in the Oxley case.

        ...

        And in [Steele v. Steele, 945 So. 2d 601 (Fla. 4th DCA
     2006),] the appellate court affirm[ed] a trial court’s findings
     that the husband’s three trades in a nonmarital investment
     account over an almost six-year marriage were extremely de
     minimis and found that those three trades did not represent
     marital effort that would allow the wife in that case to
     entitlement of the enhancement of the account.

        And here we have four trades during the intact marriage.
     [Steele] had three. My suggestion is that the wife’s efforts[,] to
     the extent they could be considered the type of efforts that are
     marital efforts that could lead to enhancement[,] are de
     minimis in nature based on that case.

        …

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        And then there’s … [Doerr v. Doerr, 751 So. 2d 154 (Fla. 2d
      DCA 2000)].

         And what the Doerr decision … stands for is that the mere
      act of a non-owner spouse giving minor investment advice --
      in that case it was the wife telling her husband to reinvest[]
      dividends during the marriage of his nonmarital stock -- [the
      appellate court] said that minor investment advice does not
      constitute marital effort, creating entitlement to the
      appreciation of nonmarital stock on behalf of the non-owner
      spouse.

         …

          … [T]hose cases all apply to create a situation of here[,] the
      enhancement in this account is not as a result of marital
      efforts. I think it was the testimony, at least of [the former
      wife], that the investments were made, it was a buy and hold
      strategy, it is not like somebody was trading commodities
      every day or anything like that. And the money went up and
      down with the market. Fund managers did their job, however
      it was, and that’s all that happened here with that.

   Following the final hearing, the circuit court entered a final judgment
of dissolution of marriage. As part of the final judgment’s equitable
distribution determination, the circuit court made the following pertinent
findings of fact and conclusions of law:

          The statements for [the former] [w]ife’s [brokerage]
      [a]ccount and other evidence showed that [the former] [w]ife
      adopted a “buy and hold” investment strategy. The only [pre-
      dissolution] trades of the investment account were the four
      purchases of securities detailed above ….

         …

         … [T]he Court finds that all enhancements to [the former]
      [w]ife’s $830,000 advance inheritance received from [her]
      mother … including interest and gains on the $830,000[,] is a
      marital asset to be divided equally between the parties.

         The Court finds that the gifts were made to [the former]
      [w]ife as part of an early inheritance for the purpose of
      enhancing the investments and that the evidence shows that

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      the investments were done as a joint marital venture and that
      both parties contributed to the enhancement of the $830,000
      [which the former] [w]ife received from [her mother].

         …

         … [Thus,] the Court determines [the] $830,000 [principal
      in] the [brokerage account] represent[s] [the former] [w]ife's
      nonmarital assets[,] and the remaining $892,687.94 in the
      [brokerage account] shall be considered marital assets to be
      divided between the parties. These findings are reflected on
      the Court’s alternative equitable distribution scenarios
      detailed herein below.

(emphasis added; paragraph lettering omitted).

   The circuit court’s final judgment did not refer to section
61.075(6)(a)1.b., Florida Statutes (2020). The final judgment also did not
address this court’s and other district courts’ cases interpreting what
actions constitute “efforts of either party” which would cause a nonmarital
asset’s appreciation to be considered a marital asset under that statute.

                                This Appeal

   This appeal followed. The former wife primarily argues the circuit court
erred by equitably distributing the $892,687.94 appreciation on the former
wife’s advanced inheritance, because the former husband failed to prove
by competent substantial evidence that either party had contributed the
requisite “efforts” to have allowed the circuit court’s determination that the
advanced inheritance’s appreciation was a marital asset.               See §
61.075(6)(a)1.b., Fla. Stat. (2020) (“‘Marital assets[’] … include … [t]he
enhancement in value and appreciation of nonmarital assets resulting
from the efforts of either party during the marriage ….”) (emphasis added).

   The former husband summarizes his response as follows: “The parties
invested the monies based on their marital efforts to educate themselves,
and selected the investments based on marital efforts. Therefore, any
appreciation would be a marital appreciation and would be subject to
equitable distribution.”

   Our standard of review is mixed. See Gromet v. Jensen, 201 So. 3d 132,
135 (Fla. 3d DCA 2015) (“A trial court’s determination that an asset is
marital or nonmarital involves mixed questions of law and fact. Although
[an appellate court] defer[s] to the trial court’s factual findings if [those

                                      6
findings] are supported by competent, substantial evidence, [an appellate
court] review[s] the trial court’s legal conclusions de novo.”) (citations
omitted).

   Applying the foregoing mixed standard of review, we defer to the circuit
court’s factual findings that: the former wife’s mother provided $830,000
as a gift to the former wife as part of an early inheritance for the purpose
of enhancing that sum; the choice to invest that sum into four mutual
funds was done as a joint marital venture; a buy-and-hold investment
strategy was adopted such that the only pre-dissolution trades were the
four purchases detailed above; and both parties “contributed”—the circuit
court’s chosen word—to the resulting appreciation of $892,687.94.

   However, applying de novo review, we hold the circuit court erred in its
concluding from those facts that the $892,687.94 appreciation was a
marital asset to be divided equally between the parties. As stated above,
the circuit court’s final judgment did not address our and other district
courts’ precedent—some of which the former wife’s counsel cited during
closing arguments—interpreting what “efforts” are required for an
enhancement in value and appreciation of a nonmarital asset to be deemed
as a marital asset under section 61.075(6)(a)1.b., Florida Statutes (2020).
Consideration of those cases guides our conclusion of why the
$892,687.94 appreciation was, as a matter of law, a nonmarital asset.

   Thus, we will summarize four cases applying prior mirror versions of
section 61.075(6)(a)1.b. to the issue of whether enhancement of similar
appreciable assets should be deemed marital or nonmarital. Three of these
cases found an asset’s enhancement to be nonmarital due to the lack of a
party’s efforts to enhance the asset’s value. The fourth case found an
asset’s enhancement to be marital due to a party’s efforts to enhance the
asset’s value. After summarizing those four cases, we will explain why this
case’s facts result in us concluding the $892,687.94 enhancement to the
wife’s nonmarital advanced inheritance was also a nonmarital asset.

   A. Oxley v. Oxley

   In Oxley v. Oxley, 695 So. 2d 364 (Fla. 4th DCA 1997), the husband’s
nonmarital assets included fifty percent of a corporation of which he was
the president, and a trust. Id. at 365. During the parties’ marriage, the
trust appreciated by over five million dollars and the corporation’s value
appreciated by several million dollars. Id. A trustee managed the trust’s
assets, with investment guidance from the husband’s father and brother.
Id. However, on one occasion, the husband invested $400,000.00 of the
trust’s funds with a separate money manager. Id. The husband’s

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involvement in the corporation also was limited. While the husband was
the corporation’s “president,” “his activities ha[d] been largely ministerial
and ceremonial, leaving the management and investment decisions to
others, although at one time he did briefly manage the business.” Id. The
circuit court ruled that the trust, the corporation, and the increased value
of both were nonmarital assets. Id. at 367.

   In affirming the circuit court’s judgment, we agreed that the husband
did not contribute marital “efforts” as that term was used in a prior version
of section 61.075(6)(a)1.b. Id. As to the corporation, we concluded that
although the husband had been the corporation’s president, he had relied
on business managers who had made decisions for him, and the increase
in the corporation’s value was due to market forces or the business
managers, and not the husband. Id. We similarly concluded, “[w]ith
regard to the increased value of the trust, it is clear that the increased
value and income resulted from the business decisions and management
of others. The husband’s only active role was deciding to maintain the
trust and trustee, and to permit the trustee to take his father’s and
brother’s advice and to continue to manage the corpus, and retained
income, for his benefit.” Id.

   B. Doerr v. Doerr

   In Doerr v. Doerr, 751 So. 2d 154 (Fla. 2d DCA 2000), the husband
inherited certain stock during the course of the marriage. Id. at 155. The
stock was at all times held solely in the husband’s name. Id. The stock
had an initial value of $4,000, but during the course of the marriage, grew
by passive appreciation and reinvestment of dividends to $35,000. Id.
Upon the marriage’s dissolution, the circuit court found the stock to be a
marital asset and distributed one half of the stock’s value to the wife. Id.

   The Second District reversed, concluding, under a prior version of
section 61.075(6)(a)1.b., the inherited stock was the husband’s separate
nonmarital asset when acquired and continued to be his nonmarital asset
at the time of dissolution. Id. The Second District reasoned the stock
remained at all times solely in the husband’s name, and the wife, other
than advising the husband to reinvest the dividends, did nothing to
enhance the stock’s value. Id.

   C. Steele v. Steele

  In Steele v. Steele, 945 So. 2d 601 (Fla. 4th DCA 2006), the circuit court
was asked to determine whether the accumulated value of the former
husband’s pre-marriage 401(k) contributions was a nonmarital asset and

                                     8
therefore not subject to equitable distribution. Id. at 602. During the
marriage, the former husband’s employer modified the 401(k) plan to
provide its employees with the ability to monitor and control their
investments. Id. The new plan also allowed employees to move assets
among nineteen different mutual funds. Id. The former husband utilized
this feature and, during the almost six-year marriage, made three such
transfers, without withdrawing any funds. Id. At trial, the former wife
argued the three transfers represented “marital effort” and therefore
transformed the former husband’s entire 401(k), including contributions
made and value accumulated, into a marital asset. Id. The circuit court
disagreed, finding the transfers were “extremely de minimis” in light of the
relatively small amount which the former husband contributed to the plan
during the marriage. Id. at 602-03.

    Applying a prior version of section 61.075(6)(a)1.b., we affirmed,
reasoning, “the husband in this case did not actively trade stocks or bonds.
He only made three transfers during the six-year marriage, and these
transfers had only a minimal impact on the value of his 401(k).” Id. at 603
(internal citation omitted).

   D. Chapman v. Chapman

   In contrast, in Chapman v. Chapman, 866 So. 2d 118 (Fla. 4th DCA
2004), a circuit court held that an increase in value of a husband’s
premarital securities resulted from the husband’s efforts during the
marriage, thereby making the increased value a marital asset under a prior
version of section 61.075(6)(a)1.b. Id. at 118. On appeal, the husband
claimed his efforts regarding the securities were limited to replacing
investment grade bonds, as they became due, with similar bonds. Id. The
husband therefore contended the enhancement in value was passive and
should not be considered a marital asset under the statute. Id.

   We affirmed, observing that the husband’s claim had been contradicted
by his brokerage account records, which revealed he had been actively
trading stocks and bonds, enabling him to achieve a greater annual return
than the benchmark for stocks. Id. We concluded, “[t]he evidence that
the husband was actively trading stocks and bonds was sufficient to
support the trial court’s finding that enhancement resulted from his efforts
during the marriage.” Id. at 119.

                                     9
   E. The Instant Case

    Applying the foregoing cases here, the former husband did not meet his
burden to prove that either party’s “efforts” resulted in enhancing the value
and appreciation of the wife’s $830,000 advanced inheritance. See Palmer
v. Palmer, 316 So. 3d 411, 416 (Fla. 5th DCA 2021) (“The spouse asserting
a claim that the appreciation in value of the other spouse’s separate,
nonmarital property is a marital asset bears the initial burden of proving
that marital labor or funds were used to improve [the] assets.”) (citation
and internal quotation marks omitted).

   While the circuit court found the research and selection of the mutual
funds were done as a “joint marital venture” which had “contributed” to
the $892,687.94 enhancement to the invested funds, we conclude such
“contribution” was not sufficient to be deemed as “efforts of either party”
under the prior interpretations and applications of section 61.075(6)(a)1.b.

   Unlike Chapman, where the husband’s brokerage account records
revealed he had been “actively trading” stocks and bonds, enabling him to
achieve a greater annual return than the benchmark for stocks and
resulting in that enhancement being deemed marital, here it is undisputed
that the $830,000 advanced inheritance was invested in the four mutual
funds using a “buy-and-hold” strategy which the former husband typically
had utilized and the former wife testified she had utilized, without active
trading by either party during the marriage.

    Instead, as in Oxley, where the increases in the values of the husband’s
corporation and trust were respectively due to “market forces or the
business managers” and “the business decisions and management of
others,” here the increase in the $830,000 advanced inheritance’s value
was attributable to the persons who were managing the four mutual funds
in which the advanced inheritance had been invested. Further, as in
Doerr, where the stock grew in part by passive appreciation, here the value
of the $830,000 invested in the four mutual funds also grew by passive
appreciation. And lastly, as in Steele, where the former husband made
three “de minimis” mutual fund transfers without withdrawing any funds,
here the four mutual fund purchases also occurred without any
withdrawal of those funds or other trading activity.

                                Conclusion

   Based on the foregoing, we conclude that while the circuit court
correctly determined the wife’s $830,000 advanced inheritance was the
former wife’s nonmarital asset, the circuit court erred in determining the

                                     10
$892,687.94 appreciation from the advanced inheritance was a marital
asset to be divided between the parties.

   Thus, we reverse the final judgment’s equitable distribution
determination as to the $892,687.94 appreciation. We remand for the
circuit court to enter an amended final judgment which determines that
the $892,687.94 appreciation also shall be treated as the former wife’s
nonmarital asset. We further direct the circuit court to adjust the
equitable distribution calculations in the amended final judgment
accordingly. We do not reach the former wife’s alternative argument for
reversal, which we deem to be moot based on this opinion.

  Reversed and remanded with directions.

WARNER and ARTAU, JJ., concur.

                          *        *       *

  Not final until disposition of timely filed motion for rehearing.

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