Court Opinion

ID: 2747179
Source: CourtListenerOpinion
Date Created: 2014-10-31 02:47:46.707688+00
Date Added: 2024-06-11T12:17:40.535453
License: Public Domain

J-A19018-14

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

EUGENE J. KUBAN,                                        IN THE SUPERIOR COURT OF
                                                              PENNSYLVANIA
                            Appellant

                       v.

DIEDRE L. KUBAN,

                            Appellee                        No. 1325 WDA 2013

                  Appeal from the Decree Entered July 13, 2013
              In the Court of Common Pleas of Washington County
                         Civil Division at No(s): 2011-40

BEFORE: BENDER, P.J.E., OLSON and FITZGERALD,* JJ.

MEMORANDUM BY OLSON, J.:                                 FILED OCTOBER 30, 2014

       Appellant, Eugene J. Kuban (Husband), appeals from the divorce

decree entered on July 13, 2013.               On appeal, Husband challenges certain

aspects of an equitable distribution award entered on July 8, 2013.              We

affirm in part, vacate in part and remand for further proceedings.1

       Husband and Diedre L. Kuban (Wife) were married on August 8, 1994.

Husband was born in February 1937 and Wife was born in September 1947.

The parties’ final separation date is July 8, 2011. No children were born of

the marriage and both parties have adult children from previous marriages.

____________________________________________

1
  On June 12, 2014, counsel for Husband filed a motion for leave to file
erratum to reply brief. We grant the motion.

* Former Justice specially assigned to the Superior Court.
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      The parties entered into a prenuptial agreement on August 4, 1994.

The agreement provided, among other things, that any marital property,

including increases in value of premarital property, would be divided equally.

In addition, either party could make a gift to the marital estate or to the

other spouse by placing money in joint names or the name of the other

spouse.       Spousal support, separate maintenance, alimony pendent lite

(APL), counsel fees, and alimony were waived.

      Husband filed a complaint in divorce on January 5, 2011, which

included a claim for equitable distribution. Thereafter, Wife filed a petition,

which also alleged a claim for equitable distribution.              Both parties filed

affidavits of consent and waivers of notice.            Wife subsequently filed an

amended petition that requested APL, alimony, and counsel fees in addition

to equitable distribution.        Wife challenged the validity of the parties’

prenuptial agreement.

      After a hearing, the trial court determined that the parties entered a

valid prenuptial agreement.        Accordingly, the court dismissed all economic

claims, except for matters relating to equitable distribution of the marital

estate.

      The case was referred to a standing master who heard the parties’

equitable distribution claims on February 20, 2013. The master calculated

the   total   value   of   the   parties’   marital   estate   as   $344,347.00   and

recommended the following distributional scheme.

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     To Wife:

     Increase in value of 711 Valley View Road                  68,150
     MorganStanley/Sharebuilder IRA                             51,746
     ShareBuilder account                                       14,542
     Advance from Topseed Kennel account                         3,700
     Less decrease in value of interest in
       Williamsport Road property                               -4,833
     Less PNC Credit account                                    -6,920

     Total:                                                  $126,385

     Cash from Husband                                        $45,789

     Total Distribution to Wife:                             $172,174

     To Husband:

     Increase in value of Hamtom Road property                  22,900
     MorganStanley [IRA][] account                             130,004
     Ameriprise Financial Services account                        4,609
     MorganStanley account                                      29,756
     ING life insurance                                         18,447
     ShareBuilder IRA                                             9,492
     Joint personal property                                      5,000
     Less Home Depot credit account                              -2,246

     Total:                                                   $217,962

     Less cash payment to Wife                                 $45,789

     Net distribution to Husband:                             $172,173

Master’s Report and Recommendation, 4/3/13, at 15-16.

     Both parties filed exceptions with the trial court.   The court denied

Husband’s exceptions and sustained one of Wife’s exceptions. Specifically,

the court held that the increase in value of Husband’s Hamtom Road

property was $122,900.00, not $22,900.00 as the master determined.

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Because of this adjustment, the court added $50,000.00 to the amount

Husband was obligated to pay to Wife. In addition to the cash payment, the

equitable distribution order entered on July 8, 2013 directed that Husband

should transfer to Wife a joint Morgan Stanley account valued at $29,755.79

and that Wife should receive $20,244.21 from Husband’s Morgan Stanley

IRA. This appeal timely followed entry of the parties’ divorce decree on July

13, 2013.2

        Husband’s brief raises the following questions for our review:

        Should Wife’s misappropriation from the joint checking account
        have been treated as an advancement against equitable
        distribution?

        Was Husband entitled to credit for his payoff of the mortgage
        balance on Wife’s premarital residence?

        Was there an increase of $122,900[.00] in the combined value
        of the real estate on which Husband’s residence is situated and
        the boarding kennel business at the same location?

        Did the premarital portion of Husband’s IRA become joint and
        thereby marital?

Husband’s Brief at 4.3

        Husband’s claims on appeal challenge certain aspects of an equitable

distribution award entered by the trial court. Our review of such claims is

guided by the following well established principles.
____________________________________________

2
 Both Husband and the trial court have complied with the requirements of
Pa.R.A.P. 1925.
3
    We have re-ordered Husband’s claims to facilitate our discussion.

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     A trial court has broad discretion when fashioning an award of
     equitable distribution. Our standard of review when assessing
     the propriety of an order effectuating the equitable distribution
     of marital property is whether the trial court abused its
     discretion by a misapplication of the law or failure to follow
     proper legal procedure. We do not lightly find an abuse of
     discretion, which requires a showing of clear and convincing
     evidence. This Court will not find an abuse of discretion unless
     the law has been overridden or misapplied or the judgment
     exercised was manifestly unreasonable, or the result of
     partiality, prejudice, bias, or ill will, as shown by the evidence in
     the certified record. In determining the propriety of an equitable
     distribution award, courts must consider the distribution scheme
     as a whole. We measure the circumstances of the case against
     the objective of effectuating economic justice between the
     parties and achieving a just determination of their property
     rights.

     Moreover, it is within the province of the trial court to weigh the
     evidence and decide credibility and this Court will not reverse
     those determinations so long as they are supported by the
     evidence.     We are also aware that a master's report and
     recommendation, although only advisory, is to be given the
     fullest consideration, particularly on the question of credibility of
     witnesses, because the master has the opportunity to observe
     and assess the behavior and demeanor of the parties.

Childress v. Bogosian, 12 A.3d 448, 455-456 (Pa. Super. 2011) (internal

citations and quotations omitted).

     Husband’s first claim asserts that the trial court erred in refusing to

treat Wife’s alleged misappropriation of $34,821.73 from marital funds as an

advance to Wife against her equitable share of the marital estate. During

the marriage, the parties maintained a joint checking account.         Husband

claims that from September 1999 through August 2009, Wife made false

register entries with respect to 259 checks. Husband maintains that these

checks were drawn for amounts larger than those reflected in the

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corresponding register entries. Specifically, Husband claims that the actual

amounts withdrawn totaled $57,575.28 while the amounts entered in the

check resister totaled $22,753.55, for a difference of $34, 821.73. Husband

also claims that the check register did not accurately reflect payees.

        The trial court refused to disturb the master’s finding that the record

did not support Husband’s claim that Wife used the joint checking account to

misappropriate nearly $35,000.00, noting that the record supported the

master’s findings and credibility determinations.      We concur in the trial

court’s assessment.      The master summarized the relevant testimony as

follows:    1) Husband wrote checks on the parties’ account, logged those

checks in the ledger, and enjoyed access to the parties’ bank statement at

all relevant times; 2) Husband was content to have Wife manage the joint

checking account; 3) Husband never questioned Wife’s expenditures for her

children or otherwise as represented by the 259 checks throughout the

ten-year period that Wife managed the account; 4) funds from the parties’

joint checking account were used to pay Wife’s daughter for work performed

at a kennel business Husband operated from his residence; and 5) Wife

made substantial deposits to the joint account throughout the parties’

marriage.     See Master’s Report and Recommendation, 4/3/13, at 11-12

¶ 33.    Since the master’s determinations find support in the record, we

discern no abuse of discretion in the trial court’s refusal to alter the master’s

findings.

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      Husband next claims that the trial court erred in failing to give him

credit for paying off the balance on Wife’s premarital mortgage. At the time

of the parties’ marriage, Wife owned real estate located on Valley View Road

in Eighty-Four, Pennsylvania.   That property was subject to a mortgage in

Wife’s name and served as Wife’s primary residence before she moved into

Husband’s home.      In January 2003, the parties decided to satisfy the

mortgage so that Wife’s property would generate a positive rental income.

To carry out this plan, Husband and Wife paid $47,906.14 from their joint

checking account on January 8, 2003 to retire Wife’s mortgage obligation.

      Husband admits that the check used to pay off Wife’s mortgage was

drawn on the parties’ joint checking account.    See Appellant’s Brief at 26.

Nevertheless, Husband points out that the funds came from a $73,518.26

deposit he made nine days before the parties tendered their satisfaction

payment. Husband inherited these funds from his mother. Husband argues

that he is entitled to credit for the $47,906.14 payment (which increased

Wife’s equity in the property by that amount) because the source funds were

originally non-marital and passed only briefly through the parties’ joint

account.

      The master rejected Husband’s contention, concluding that he was not

entitled to credit for satisfying Wife’s obligation since the funds used to pay

the mortgage came from a joint account.            See Master’s Report and

Recommendation, 4/3/13, at 7-8 ¶ 22.       The trial court declined to disturb

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this ruling. See Trial Court Opinion, 7/8/13, at 1-2. Paragraph 6.03 of the

parties’ prenuptial agreement plainly provides that transfers of non-marital

property to jointly held accounts constitute gifts to the marital estate.

Pursuant to the plain language of the parties’ agreement, Husband is not

entitled to relief on his second claim.

      Husband’s next claim focuses upon the appreciated value assigned to

his residence and the boarding kennel business he operated at that location.

Specifically, Husband claims that the trial court erred in concluding that

there had been an increase of $122,900.00 in the combined value of

Husband’s residential property and his boarding kennel business. Husband

alleges that the estimated values for his residence and the kennel business

that appear in the parties’ prenuptial agreement represented merely a rough

apportionment of value between the realty and the business. It is Husband’s

position that since the current value of the kennel business is far less than

the estimate stated in the prenuptial agreement, the reduced value of the

business should offset any increase in the value of Husband’s residential

property.

      The relevant background of this claim is as follows. Husband resides

on a 5.29 acre tract on Hamtom Road in Eighty-Four, Pennsylvania.         He

acquired the property prior to the parties’ marriage. In addition, before the

parties were married, Husband started a boarding kennel business, known

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as Topseed Kennels, at the Hamtom Road property.         Husband operated

Topseed Kennels as a sole proprietorship and continues to do so today.

     Through counsel, the parties reached certain stipulations regarding the

value of Husband’s residential property.     The parties agreed that the

residence had a value of $140,000.00 at the time of the marriage, which

value is also reflected in the parties’ prenuptial agreement.   Although the

parties disputed the increase in the value of the property during the course

of the marriage, they agreed that the current value of the property is

$262,000.00, which represented the average of Husband’s and Wife’s

property appraisals.

     The prenuptial agreement valued Topseed Kennels as a separate

business asset worth $100,000.00.     The agreement further provided that

Husband would buy a term life insurance policy equal to the value of the

residence and Topseed Kennels with Wife as the named beneficiary.        Wife

promised under the prenuptial agreement to pay the proceeds of the policy

to Husband’s estate for the purchase of the residence and Topseed Kennels.

Neither party offered a current value for Topseed Kennels during testimony

before the master.

     In view of the foregoing circumstances, the master fixed the value of

Husband’s residential property at $240,000.00 at the time of marriage.

Consequently, the master calculated the appreciated value of the property to

be $22,900.00 during the course of the marriage.          Pursuant to the

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prenuptial agreement, the master deemed this sum to be marital property

that was subject to equitable distribution.

      The trial court granted Wife’s exception to the master’s determination,

finding that the master erred in establishing the increase in value of

Husband’s residence.      Citing the parties’ prenuptial agreement and their

stipulation, the court found that the premarital value of Husband’s residence

was $140,000.00 and the current value totaled $262,900.00.       Because of

this, the court determined that the increase in the value of Husband’s

residence equaled $122,900.00 and not $22,900.00, as the master found.

The court reasoned that the parties’ prenuptial agreement (the source of the

premarital valuation of Husband’s residence) treated the kennel as a

separate asset classified as a “business,” not “real estate.” Moreover, the

parties’ stipulation (the basis for the current valuation of Husband’s

property) was based upon an average of Husband’s and Wife’s real estate

appraisals, which did not include an assessment of Topseed Kennels’ value.

Neither party offered testimony or evidence about the value of Topseed

Kennels and, based upon the gross receipts of the kennel, the court found

the value of the business unchanged during the relevant period. For each of

these reasons, the court concluded that the value of Husband’s realty was

independent of the value of the kennel business.      We concur in the trial

court’s determination, which finds support in the record. Hence, Husband is

not entitled to relief on his third claim.

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      Husband’s fourth claim alleges that the trial court improperly failed to

correct the master’s error in concluding that the premarital portion of

Husband’s Morgan Stanley Individual Retirement Account (IRA) should be

treated as marital property because it was included in a joint account. Prior

to the marriage, Husband maintained an IRA account with Dean Witter

Reynolds valued at $46,060.00 as of August 31, 1994.        This account was

subsequently transferred, “together with funds from other joint accounts,” to

Morgan Stanley Smith Barney (MSSB).            As of December 31, 2010,

Husband’s IRA account at MSSB had a value of $130,004.00. The master

determined that these funds were held in a joint account in the names of

Husband and Wife. Accordingly, the master concluded that Husband’s IRA

had a value of $130,004.00 for purposes of equitable distribution.

      Husband filed exceptions to the master’s ruling which the trial court

denied. The trial court reasoned that Husband failed to designate his IRA as

non-marital property in the parties’ prenuptial agreement. In addition, the

court believed it would be inequitable to construe the prenuptial agreement

so as to permit Husband to exclude a portion of his IRA as non-marital

property given that he failed to list the account within the agreement. We

address the master’s and the trial court’s determinations in turn.

      We are unable to agree with the master’s determination that

Husband’s IRA account at MSSB is held in a joint account under the names

of Husband and Wife. Our review of the brokerage documents reveals that

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the MSSB consolidated summary form included in the record refers to three

separate accounts titled in different names. In particular, the consolidated

form reflects a personal account titled to “Husband and Wife as joint

tenants.”   The form also shows two IRA accounts, one titled to Husband,

individually, and the other titled to Wife, individually. Not only do the three

accounts bear different titles, each account bears a distinct account number.

The account referenced in the master’s report at paragraph 18 corresponds

to an IRA account valued at approximately $130,004.00 and held in

Husband’s name only. Under these circumstances, we cannot agree with the

master’s conclusion that Husband’s IRA is held in a joint account.

      We turn now to the trial court’s disposition of Husband’s claim. Again,

we find error. The trial court concluded that the entirety of Husband’s IRA

had to be classified as marital property in view of Husband’s failure to list

the   account   as   non-marital   property   within   the   parties’   prenuptial

agreement. Paragraph 5.01 of the prenuptial agreement provides, however,

that all property which is not defined as non-marital property under

paragraph 14.01 and which is acquired during the marriage shall be

considered marital property.   The plain terms of paragraph 5.01 impose a

two-part requirement for mandatory classification of an asset as marital

property:   1) failure to identify the property or asset pursuant to the

prenuptial agreement, and 2) acquisition after the marriage. Husband failed

to identify a portion of his IRA as non-marital property; however, it is

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undisputed that he possessed a portion of his IRA account prior to the

marriage. Thus, the premarital portion of Husband’s IRA was not subject to

equitable distribution.

      Having concluded that the master and the trial court erred in

concluding that the entirety of Husband’s IRA was subject to equitable

distribution, it would seem to follow that we should order the relief

requested by Husband. We decline this invitation, however. In his report,

the master states that Husband’s IRA account with Dean Witter Reynolds

was “transferred together with funds from other joint accounts” to MSSB.

Master’s Report and Recommendation, 4/3/13, at 6 ¶ 18 (emphasis added).

After careful review of the testimony of the parties, the arguments of

counsel, the appellate submissions of the litigants, the master’s report, and

the trial court’s opinion, we are unable to definitively exclude the possibility

that, during the transfer process referred to by the master, Husband’s

premarital IRA account merged into an account held jointly by Husband and

Wife. A transfer to a jointly held account would constitute a gift of separate

property to the marital estate under paragraph 6.03 of the prenuptial

agreement.     The trial court should inquire into this possibility during

proceedings on remand.      If the premarital portion of Husband’s IRA was

never held in a joint account, then those funds should not be subject to

equitable distribution. If the premarital portion of Husband’s IRA was held in

a joint account, then the funds should be treated as a gift to the marital

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estate.   For these reasons, we vacate the equitable distribution award

entered by the trial court and remand for further proceedings consistent with

this memorandum.

      July 8, 2013 order affirmed in part and vacated in part.          Case

remanded. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 10/30/2014

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