Court Opinion

ID: 2654950
Source: CourtListenerOpinion
Date Created: 2014-02-27 15:04:34.315518+00
Date Added: 2024-06-11T12:59:01.105847
License: Public Domain

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
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     In an unpublished opinion, David v. David, Record No. 0653-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

                                  2
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.

                                    3
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

                                  4
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.

                                   5
     To support her interpretation of Code § 20-107.3(A)(3)(a),

Wife cites to legislative history 2 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).

                                 6
(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

                                 7
“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,

                                 8
     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.

                                9
     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.
10
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.”).

                                11
     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,

                                12
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.

                                13
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.

                                  14