Court Opinion

ID: 1065797
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:21:44.965627+00
Date Added: 2024-06-11T15:26:44.397991
License: Public Domain

COURT OF APPEALS OF VIRGINIA

Present: Judge Bray, Senior Judges Cole and Overton
Argued at Richmond, Virginia

W. PETTUS GILMAN

v.    Record No. 0733-99-2

JUDITH COCHRANE GILMAN
                                               OPINION BY
and                                       JUDGE MARVIN F. COLE
                                              APRIL 4, 2000
JUDITH COCHRANE GILMAN

v.    Record No. 0766-99-2

W. PETTUS GILMAN

              FROM THE CIRCUIT COURT OF HANOVER COUNTY
                     Richard H. C. Taylor, Judge

           L. B. Cann, III (Christopher L. Perkins;
           George B. Little; LeClair Ryan, P.C.; Little,
           Parsley & Cluverius, on briefs), for
           W. Pettus Gilman.

           Donald K. Butler (Ann Brakke Campfield;
           Morano, Coleman & Butler, on briefs), for
           Judith Cochrane Gilman.

      W. Pettus Gilman (Pettus) and Judith Cochrane Gilman (Judy)

each appeal from the final equitable distribution decree entered

by the Hanover County Circuit Court (trial court).     We have

consolidated these appeals for the purposes of this decision.

Pettus contends the trial court erred by 1) rejecting the 56%/44%

division of marital property recommended by the commissioner; 2)

classifying certain property as marital instead of as his separate
property; and 3) finding that his separate interest in Assets 4

and 5 was not traceable.   Judy contends the trial court erred by

1) classifying 220 shares of Overnite Transportation stock that

Pettus purchased during the marriage as his separate property; 2)

classifying the Stone note as Pettus' separate property; 3)

failing to award her more than one-half of the marital estate; and

4) failing to award her attorney's fees and expert witness fees.

For the reasons that follow, we affirm the trial court in part and

reverse it in part.

                             Background

     The parties married on July 25, 1959.    Pettus brought into

the marriage 600 shares of Overnite Transportation stock that he

had purchased on the advice of Judy's father (the founder of

Overnite Transportation), and shares of Southern States

Cooperative, Inc., preferred stock.    Pettus also had a savings

account, and he had substantial land holdings he inherited from

his father prior to the marriage.   Pettus' total income for 1959

was $1,850.74.   He earned approximately $4,800 in 1960.

     On or about January 4, 1960, Pettus sold his Southern States

preferred stock for approximately $5,000.    Between February 29 and

March 16, 1960, Pettus purchased 220 additional shares of Overnite

Transportation stock for $2,250.    He testified that he purchased

                               - 2 -
the additional shares using the proceeds from the sale of the

Southern States stock. 1

     During the marriage, the parties maintained separate stock

ledgers on which they listed the stocks they owned individually

and jointly.   Judy entered the 220 shares of Overnite

Transportation stock in Pettus' stock ledger.    Judy's accounting

expert, William King Stephens, testified that he found no instance

where Pettus used his own money to purchase stock for Judy, and

Stephens found no "definitive proof" that Judy ever used her money

to buy stock for Pettus.   Judy told Stephens that she "wasn't

sure" whether she used her own money to buy the 220 shares of

Overnite Transportation stock.

     Sometime after March 16, 1960, Judy used her separate funds

to buy shares of stock in the Country Club of Virginia.    She put

the stock shares in Pettus' name, but had Pettus give her a letter

indicating that her funds were used to purchase the stock.     Judy

admitted she had no such documentation from Pettus regarding the

220 shares of Overnite Transportation stock.

     In 1963, Pettus embarked on a career in the insurance

business.   He started by working as an insurance agent with

Travelers Insurance.   In 1968, he and Russell Childress formed the

Gilman & Childress insurance agency.     Pettus testified that he

     1
       Due to stock splits, the number of Overnite Transportation
shares Pettus held eventually increased to 30,000, but he
purchased no additional shares after March 16, 1960.

                                 - 3 -
worked between forty and fifty hours per week at Gilman &

Childress. 2

     Pettus invested in a series of real estate development

ventures during the course of the marriage.   In 1971, Pettus and

Bob Downing purchased a 79.9 acre tract of land for $97,000, with

each man contributing $5,000 of a $10,000 downpayment.    Pettus

borrowed his share of the downpayment from Hanover National Bank.

Because, at the time, the bank would not lend money secured by

undeveloped land, Pettus pledged shares of his Overnite

Transportation stock as collateral.    Pettus and Downing financed

the balance of the purchase price with a five-year balloon note

in the amount of $87,000 issued by the sellers.

     The 79.9 acre tract remained undeveloped for the next twelve

years.   In 1983, Pettus and Downing formed Dow-Gil, LTD (Dow-Gil),

to develop the property.   The men deeded the property to Dow-Gil

and subsequently obtained a $750,000 loan from Union Bank & Trust

(UB&T) to develop the land.   Pettus testified that UB&T appraised

the value of the undeveloped property at $487,392.     The $750,000

loan financed the construction of a road and a water and sewer

pumping station on the property.   After these improvements were

completed, the bank appraised the property at $2,487,795.

_____________________
     2
       The commissioner classified the insurance agency as
marital property.

                               - 4 -
        Pettus submitted a personal financial statement during the

loan application process and pledged 3,500 shares of Overnite

Transportation stock and all his shares in Dow-Gil as security for

the UB&T loan.    The balance of the loan was secured by the land.

Judy (and Downing's wife, Betty) co-signed a guaranty, but Judy

did not submit a financial statement as part of the loan

application process.    The bank required the wives' signatures as

a matter of procedure because of its concern about dower rights

in the event either Pettus or Downing died.     Pettus neither

included Judy's separate assets nor her share of the couple's

joint assets in the financial statement he submitted to obtain the

loan.

        Pettus testified that the $750,000 loan was repaid from sales

proceeds as Dow-Gil began selling parcels of the original 79.9

acre tract.    He further testified that in 1983, when Dow-Gil

started receiving funds from the loan and proceeds from the sale

of lots, money was distributed to the owners (Pettus and Downing),

who used it to pay off the $5,000 and $87,000 acquisition loans. 3

There was no evidence that marital property or Judy's separate

property was used to repay any of the purchase-price obligations.

        3
       Pettus testified that subsequent to 1971, he had borrowed
money from First Virginia Bank to pay the interest due on the
$5,000 downpayment loan. In a trial court pleading, Pettus
represented to the commissioner that the balloon note was paid
off in 1976, when Pettus refinanced his share of the obligation.

                                 - 5 -
     Pettus presented evidence regarding several other pieces of

property that were acquired, in whole or in part, with Dow-Gil

distributions, including the Goodwill property (asset 16), 4

Roberts/Gardner (asset 17), Tuffy Muffler (asset 20), and the

Ashcake Village Shopping Center (Gilman Investments, asset 23). 5

Judy was not involved in the acquisition of any of these assets.

     Pettus did not play an active role in the development or

management of Dow-Gil.   After the Dow-Gil acreage was purchased in

1971, Pettus' involvement in developing the land was essentially

limited to providing the name for the main road paved on the

property:   Dow-Gil Road.   Downing was an engineer and surveyor,

and he used his talents and expertise to oversee the actual

development of the property.   Downing also "kept the books, made

the requisitions and managed the money."

     In 1972, Pettus, Downing, and attorney Judson Vaughan formed

Virginia Commonwealth Investors (VCI) for the purpose of

constructing an office building.   To pay the $12,500 cost of the

     4
       Virginia Commonwealth Investors, of which Pettus was a
part-owner, actually purchased the Goodwill property from
Dow-Gil, but Pettus used a $25,000 distribution from Dow-Gil to
purchase his share of Goodwill.
     5
       Pettus testified that part of his contribution toward the
purchase price of Ashcake Village was a $36,000 disbursement
from Dow-Gil and $40,000 he withdrew from his Alex Brown
account. The Alex Brown account was classified by the
commissioner as marital property because Pettus deposited a
$200,000 Dow-Gil distribution into the account in early 1989.
The account also contained proceeds from the sale of Pettus'
Overnite stock.

                                - 6 -
land upon which the office was to be constructed, plus other

associated costs, each participant contributed $5,000.      Pettus

borrowed his contribution from Hanover National Bank and pledged

his Overnite Transportation stock as collateral for the loan. 6

        Pettus, Downing and Vaughan subsequently borrowed $85,000 to

construct an office building on the property.      This loan was

secured by a deed of trust on the property, was not guaranteed by

Judy, and was repaid with rents paid by the office building's

tenants. 7     Downing performed all the engineering and surveying

work and supervised the construction of the office building.

Downing was also responsible for collecting rents once the

building was completed.

        In 1975, VCI obtained a $185,000 loan from United Virginia

Bank.       The loan was secured by a deed of trust on the VCI

property.      Judy's credit was not involved in securing this loan,

and she did not sign a guaranty.      The loan proceeds were used to

refinance the original $85,000 construction loan and to expand the

existing office building.      The remaining balance of $40,000 was

used to purchase property that was leased to Clayton Mobile Homes

(asset 18a).      The $185,000 loan was repaid with tenant rents.

        6
       Pettus explained that he had a "blanket pledge" of
Overnite Transportation stock to cover his regular borrowing
from Hanover National Bank.
        7
       The tenants included Gilman & Childress, Downing's
engineering business, and Vaughan's law practice.

                                   - 7 -
     In 1988, using financing arrangements essentially identical

to the two prior VCI loans, VCI purchased the Wilson-Finley

property.   Vaughan located the property.   Judy did not participate

in the financing of this acquisition.

     Pettus indicated that he was essentially a silent partner in

VCI, uninvolved in the day-to-day operations of the business.

Downing handled VCI's bookkeeping until his death, at which time

his widow, Betty Downing, took over these responsibilities.

Vaughan performed any necessary legal work for the corporation.

     The commissioner in chancery found that the 220 shares of

Overnite Transportation stock that Pettus purchased during the

marriage were Pettus' separate property.    With regard to Dow-Gil

and VCI, the commissioner held that Pettus' use of stock pledges

to obtain downpayment loans did not constitute an "exchange" under

Code § 20-107.3.   The commissioner concluded, therefore, that

Dow-Gil and VCI were marital property.

     The commissioner further found that, regardless of the merits

of Pettus' argument regarding the stock pledges,

            [Pettus] contributed substantial marital
            effort, skill and expertise toward the
            development of Dow-Gil and all other real
            estate investments during the marriage to
            Judy and the expenditure of that "personal
            effort" would certainly transform the vast
            bulk of the value of those assets to marital
            property.

The commissioner concluded that the marital effort Pettus used

in these investments made it impossible to trace Pettus'

                                - 8 -
separate contribution.   Because the commissioner classified

Dow-Gil and VCI as marital property, other assets funded in-part

or completely with Dow-Gil or VCI funds were classified as

either hybrid or marital property. 8

     The commissioner found the total value of the parties'

property to be $11,171,896.   Of this amount, the commissioner

classified $6,003,094 as Judy's separate property, $1,944,797 as

Pettus' separate property, and $3,224,005 as marital property.

The commissioner found that Judy's adultery had been the

preponderant cause of the parties' divorce.    Based on this and

the other statutory factors, the commissioner recommended that

56% of the marital estate be awarded to Pettus, and 44% to Judy.

     The commissioner ruled that the parties would share equally

in the commissioner's expenses and the cost of transcripts, and

he declined to award Judy any costs or fees.

     The trial court affirmed the commissioner's report, with

the exception of the division of the marital estate.   The trial

     8
       The assets classified as marital or hybrid due to the
commissioner's finding that Dow-Gil and VCI were marital
properties included: Springmeadow (assets 4 and 5); the
Commonwealth Building (asset 15); Goodwill (asset 16);
Roberts/Gardner (asset 17); Wilson-Finley (asset 18); Clayton
Homes (asset 18a); Tuffy Muffler (asset 20); Gilman Investments
(asset 23); 4.35A Dow-Gil, the land remaining from the original
Dow-Gil purchase (asset 26); Alex Brown (asset 35); Crestar
Dow-Gil (asset 45); Gilman Investments CD (asset 46a); Savings
Account w/ Downing (asset 46c); Checking Account w/ Downing
(asset 46d); Dow-Gil Note (asset 68a); and Dow-Gil Distribution
(asset 68b).

                               - 9 -
judge explained that he believed the commissioner had sufficient

"evidence on every call he made except the marital split, and I

agree with [counsel for Judy], it ought to be a 50/50 split and

not a 56/44 split."

                         Standard of Review

     "In reviewing an equitable distribution award on appeal, we

have recognized that the trial court's job is a difficult one, and

we rely heavily on the discretion of the trial judge in weighing

the many considerations and circumstances that are presented in

each case."   Klein v. Klein, 11 Va. App. 155, 161, 396 S.E.2d 866,

870 (1990).   "A decision regarding equitable distribution . . .

will not be reversed unless it is plainly wrong or without

evidence to support it."   Rahbaran v. Rahbaran, 26 Va. App. 195,

205, 494 S.E.2d 135, 139 (1997).   See also Barker v. Barker, 27
Va. App. 519, 531, 500 S.E.2d 240, 245-46, (1998).

     "We review the evidence in the light most favorable to . . .

the party prevailing below and grant all reasonable inferences

fairly deducible therefrom."   Anderson v. Anderson, 29 Va. App.
673, 678, 514 S.E.2d 369, 372 (1999).   Although the report of a

commissioner in chancery does not carry the weight of a jury's

verdict, see Code § 8.01-610, "'an appellate court must give due

regard to the commissioner's ability, not shared by the

chancellor, to see, hear, and evaluate the witnesses at first

hand.'"   Jarvis v. Tonkin, 238 Va. 115, 121-22, 380 S.E.2d 900,

                               - 10 -
904 (1989) (citation omitted).    "A commissioner's findings of fact

which have been accepted by the trial court 'are presumed to be

correct when reviewed on appeal and are to be given "great weight"

by this Court.    The findings will not be reversed on appeal unless

plainly wrong.'"    Barker, 27 Va. App. at 531, 500 S.E.2d at 245-46

(citation omitted).

           220 Shares of Overnite Transportation Stock

     "[A]ll property acquired by either spouse during the marriage

and before the last separation of the parties is presumed to be

marital property . . . ."   von Raab v. von Raab, 26 Va. App. 239,

248, 494 S.E.2d 156, 160 (1997).    "The party claiming that

property should be classified as separate has the burden to

produce satisfactory evidence to rebut this presumption."      Stroop

v. Stroop, 10 Va. App. 611, 615, 394 S.E.2d 861, 863 (1990).

     Pettus testified that he purchased the 220 shares of Overnite

Transportation stock using the proceeds from the sale of his

Southern States preferred stock, which he sold for $5,000 shortly

before acquiring the additional Overnite Transportation shares.

The income tax records indicate that Pettus' income as of the

dates of purchase was insufficient to enable him to afford the

stock purchases.    Moreover, the evidence proved the parties

maintained meticulous records to keep track of their separate

assets and that Judy had recorded these shares in Pettus' separate

stock ledger.    Stephens, a certified public accountant employed by

                                 - 11 -
Judy to examine all of her financial records from the date of the

marriage, testified that he could not trace to Judy the source of

the funds used to purchase this stock.

     Judy contends the commissioner impermissibly shifted to her

the burden of proving that the shares were marital property.    We

disagree.    In his report, the commissioner specifically noted that

Pettus had the burden of rebutting the statutory presumption that

the shares were marital property.    While the commissioner

commented that Judy presented no evidence that the shares were

purchased with her separate property, a fact finder does not shift

the burden of proof merely by comparing the relative weight of

evidence presented by the parties.    Accordingly, we conclude the

commissioner did not shift the burden of proof to Judy and that

Pettus presented sufficient evidence to prove that the 220 shares

of Overnite Transportation stock were his separate property.

                           Dow-Gil and VCI

     Separate property is defined, in part, as "all property, real

and personal, acquired by either party before the marriage" and

"all property acquired during the marriage in exchange for or from

the proceeds of sale of separate property, provided that such

property acquired during the marriage is maintained as separate

property."    Code § 20-107.3(A)(1) (emphasis added).

     Pettus contends his pledge of his Overnite Transportation

stock as security for the Dow-Gil and VCI downpayment loans

                                - 12 -
constituted an "exchange" under Code § 20-107.3(A)(1).     Judy

responds that, because the bank never obtained title to the

shares, there was no exchange.    Judy further contends that, with

regard to the Dow-Gil property, the evidence was insufficient to

prove Pettus borrowed the "seed" loans or pledged Overnite

Transportation shares as security for the loans.

     As a preliminary matter, despite the fact that Judy prevailed

on this issue, we reject her argument regarding the sufficiency of

the evidence.   Pettus testified that he borrowed the Dow-Gil and

VCI downpayments and pledged his stock as security for these

loans.   This testimony was neither impeached nor rebutted and was

accepted by the commissioner and the trial court.   Accordingly, we

must determine whether, based on Pettus' evidence, an "exchange"

occurred.

                 A pledge is a bailment of personal
            property as security for a debt. It is the
            lien created by the delivery of personal
            property by the owner to another upon an
            express or implied agreement that it shall
            be retained as a security for an existing or
            future debt. The essential elements of a
            pledge are that possession of the pledged
            property passes from the debtor to his
            creditor, that legal title remains with the
            debtor and that the creditor has a lien for
            payment of the debt due him by the debtor
            . . . .

68A Am. Jur. 2d Secured Transactions § 119 (2d ed. 1993).

     Whether a stock pledge constitutes an "exchange" is an issue

of first impression in Virginia.    We were confronted with a

                                 - 13 -
roughly analogous situation involving the mortgaging of real

property in Hurt v. Hurt, 16 Va. App. 792, 433 S.E.2d 493 (1993).

There, one of the issues was whether any marital assets had been

commingled with a bank account that the husband claimed as his

separate property.   One of the sources of the husband's "income"

was loan proceeds the husband obtained by mortgaging his separate

real estate.

          Husband's standard practice was to borrow up
          to one hundred percent of any equity in the
          properties he held. This provided him with
          liquid assets without realizing "income" for
          taxation purposes. Generally, borrowed
          funds produced from this method of
          "cashing-out" the equity of husband's
          separate property is not considered "earned
          income" for services rendered during the
          marriage. As such, these funds are
          classified as separate property unless
          commingling has occurred.

Id. at 797 n.2, 433 S.E.2d at 496 n.2 (emphasis added).

     The commissioner reasoned that Hurt was distinguishable

because in Hurt the husband lost equity in the property and the

lender obtained legal title to the mortgaged asset.    Under the

circumstances, however, we see this as a distinction without a

difference.

     Although Pettus retained legal title to the pledged shares,

he surrendered rights to the stock that full legal title

normally entails, namely, the unrestricted right to sell or

transfer the shares to a third party.   Pettus surrendered

possession of the stock, and his right to unilaterally sell the

                               - 14 -
stock, in exchange for the loan proceeds.   As in Hurt, Pettus

used separate property to obtain loan proceeds without

permanently alienating the collateral.   Although the

transactions are structured differently, they share the common

element of compromising the borrower's full ownership rights in

an asset in order to use that asset as security for a loan.

     We are satisfied that treating a stock pledge as an

exchange is consistent with the legislative intent behind Code

§ 20-107.3(A)(1).   Where no marital property, effort, or credit

is involved, a stock pledge is simply a method to use separate

property to acquire additional property.    We see no equitable

rationale for classifying property acquired in this manner as

marital property.   Accordingly, we hold that the Dow-Gil and VCI

stock pledge agreements constituted exchanges of separate

property under Code § 20-107.3(A)(1).

     Judy nevertheless asserts that Dow-Gil should be considered

marital property because Pettus presented no evidence on how the

balloon note was repaid.   She contends that, in the absence of

any evidence from Pettus, there is a presumption that marital

funds were used to pay that debt.

     The discharge of a debt secured by an asset that results in

an increase in equity in the asset constitutes an "increase in

value."   See Code § 20-107.3(A)(1); Moran v. Moran, 29 Va. App.
408, 413-14, 512 S.E.2d 834, 836 (1999); Peter N. Swisher et

                              - 15 -
al., Virginia Family Law, app. to Chapter 11, p. 564 (2d ed.

1970).   "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."    Code § 20-107.3(A)(1).

The non-owning spouse has the burden of proving that the

increase in value was attributable to the contribution of

marital property.   See Code § 20-107.3(A)(3)(a).

     The repayment of the purchase-price loans increased the

"value" of the Dow-Gil land.   Because Pettus purchased this

asset using loan proceeds that were his separate property, the

land was his separate property, and Judy had the burden of

proving that marital funds were used to discharge the loans.

See Moran, 29 Va. App. at 413-14, 512 S.E.2d at 836 (finding

that the parties acquired "value" in the house that wife

purchased prior to the marriage when marital funds were used to

pay down the mortgage on the house and that husband had proved

"that a portion of the equity in the . . . property could be

traced to marital funds").

     Judy presented no evidence that marital funds were used to

pay any portion of the balloon note.    Indeed, the evidence when

viewed as a whole established that Pettus was scrupulous in not

                               - 16 -
using marital funds to satisfy any of the monetary obligations

incurred when purchasing his separate investment properties.

     Judy finally contends, and the trial court and commissioner

so found, that Pettus contributed substantial personal effort

toward the development of Dow-Gil, VCI, and the other investment

properties.

     Where a party alleges that the increase in value of an

asset is attributable to the personal efforts of one of the

parties, that personal effort "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)(1).

          [T]he 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.

          "Personal effort" of a party shall be deemed
          to be labor, effort, inventiveness, physical
          or intellectual skill, creativity, or
          managerial, promotional or marketing
          activity applied directly to the separate
          property of either party.

Code § 20-107.3(A)(3)(a).

               The increase in value of separate
          property becomes marital if the expenditure
          of marital funds or a married party's
          personal efforts generated the increase in

                              - 17 -
            value. The significant factor, however, is
            not the amount of effort or funds expended,
            but rather the fact that value was generated
            or added by the expenditure or significant
            personal effort.

Moran, 29 Va. App. at 412, 512 S.E.2d at 836.   The non-owning

spouse has the burden of proving that the contribution of

personal effort caused the increase in value.    See Martin v.

Martin, 27 Va. App. 745, 751, 501 S.E.2d 450, 453 (1998) (en

banc).   "To the extent the non-owning spouse claims that the

increase in value was attributable to personal efforts, the

non-owning spouse must prove that the personal efforts were

'significant' and resulted in 'substantial appreciation' of the

owning spouse's separate property interest."    Id. (citation

omitted).

     Judy presented no evidence regarding the scope of Pettus'

activities with regard to his separate investment properties.

Pettus, on the other hand, stressed that he focused his marital

efforts on the Gilman & Childress insurance agency.   Pettus

repeatedly testified that his fellow shareholders handled the

day-to-day development and operation of the various investment

properties.   While Pettus undoubtedly employed intellectual

skill in selecting properties to be purchased, the evidence was

insufficient to prove that Pettus contributed "significant"

personal effort that was the proximate cause of "substantial

appreciation" in the value of these assets.

                               - 18 -
     Accordingly, we hold that Pettus proved that Dow-Gil and

VCI were his separate property.   Judy failed to prove that any

marital property was contributed to increasing the value of

these assets.   She also presented insufficient evidence to prove

a substantial increase in value in Dow-Gil or VCI that could be

attributed to the significant personal efforts of either party.

                           Assets 4 & 5

     On May 24, 1989, the parties purchased a 62.53 acre parcel

of land (Assets 4 and 5) that adjoined the parties' residence,

Springmeadow.   Pettus paid for this property with a $78,275

check written from his First Virginia Bank (FVB) account. 9    The

evidence proved that Pettus deposited $25,000 from his Alex

Brown account into the FVB account on April 14, 1989, and

$20,000 from Alex Brown on May 22, 1989.   He also deposited

$103,989.04 into FVB on April 24.   Ninety percent of that

deposit was his separate money.   Immediately prior to the

$20,000 May 22 deposit, the FVB account contained insufficient

money to purchase Assets 4 & 5.

     Although recognizing that some separate funds had been

utilized to purchase this parcel, the commissioner ruled that

there was "no possible way for the Court to determine the

precise separate amount and as such, that separate amount

     9
       The commissioner's report reflects that the parties agreed
to the classification of this account as a marital asset.

                              - 19 -
'transmutes by commingling' and the entire parcel becomes

marital."

     "According to Code § 20-107.3(A)(3)(e), '[w]hen marital

property and separate property are commingled into newly

acquired property resulting in the loss of identity of the

contributing properties, the commingled property shall be deemed

transmuted to marital property,' unless the contributed property

is retraceable and not a gift."     Barker, 27 Va. App. at 531, 500

S.E.2d at 246 (citation omitted).

            In order to trace the separate portion of
            hybrid property, a party must prove that the
            claimed separate portion is identifiably
            derived from a separate asset. This process
            involves two steps: a party must (1)
            establish the identity of a portion of
            hybrid property and (2) directly trace that
            portion to a separate asset.

Rahbaran, 26 Va. App. at 207, 494 S.E.2d at 141.     "[T]he party

claiming a separate interest in transmuted property bears the

burden of proving retraceability."      von Raab, 26 Va. App. at

248, 494 S.E.2d at 160.

      In light of our holding that Dow-Gil is Pettus' separate

property, the proceeds of the Alex Brown account as of April and

May 1989 would have been Pettus' separate property.      See Code

§ 20-107.3(A)(3)(a) (income produced by separate assets is

marital property only to the extent that it can be traced to

marital effort).   Moreover, because the FVB account contained

insufficient funds to purchase Assets 4 & 5 prior to the May 22,

                               - 20 -
1989 Alex Brown deposit, at the very least, part of the purchase

price can be traced to that deposit.     Accordingly, on remand,

the trial court should, in the exercise of its sound discretion,

reassess Pettus' separate share of Assets 4 and 5 consistent

with this opinion and the rules of tracing.

                            The Stone Note

     In 1987, Pettus purchased a mortgage note for $51,000.

Accountant Charles Walton traced $35,000 of the purchase price

to Pettus' separate property but could not ascertain the origin

of the remaining $16,000.    At oral argument, Pettus conceded the

commissioner erred by classifying the entire note as Pettus'

separate property.   Accordingly, in dividing the parties'

property on remand, the trial court should classify $16,000 (or

31.4%) of the Stone note as marital property.

            Equitable Division of the Marital Property

     Both parties contend the trial court erred in dividing the

parties' marital property.    Because of our holding that a

substantial amount of Pettus' separate property was

mis-classified as marital property, the trial court will have to

reconsider the division of the parties' marital property on

remand.   See Code § 20-107.3(E).   The specific contentions of

the parties are, therefore, moot.    On remand, however, in

considering the circumstances that contributed to the

dissolution of the marriage, see Code § 20-107.3(E)(5), the

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trial court should be cognizant of the Supreme Court's decision

in Hill v. Hill, 227 Va. 569, 318 S.E.2d 292 (1984):

          While the report of a commissioner in
          chancery does not carry the weight of a
          jury's verdict, it should be sustained
          unless the trial court concludes that the
          commissioner's findings are not supported by
          the evidence. This rule applies with
          particular force to a commissioner's
          findings of fact based upon evidence taken
          in his presence . . . . [W]here the
          chancellor has disapproved the
          commissioner's findings, this Court must
          review the evidence and ascertain whether,
          under a correct application of the law, the
          evidence supports the findings of the
          commissioner or the conclusions of the trial
          court. Even where the commissioner's
          findings of fact have been disapproved, an
          appellate court must give due regard to the
          commissioner's ability, not shared by the
          chancellor, to see, hear, and evaluate the
          witnesses at first hand.

Id. at 576-77, 318 S.E.2d at 296-97.     See Jones v. Jones, 26 Va.

App. 689, 694, 496 S.E.2d 150, 153 (1998).

             Judy's Attorney and Expert Witness Fees

     In the course of litigating this matter, Judy incurred

litigation expenses exceeding $290,000, including nearly

$170,000 in attorneys' fees and more than $65,000 in

accountants' fees.   The commissioner valued Judy's separate

estate at over $6,000,000. 10   Pettus' separate property was

valued at just under $2,000,000.    Noting that both sides had

     10
       Pettus does not challenge on appeal the classification of
those assets included in Judy's separate estate.

                                - 22 -
incurred substantial litigation-related expenses and that an

award of legal fees was not necessary to enable Judy to carry on

this suit, the commissioner recommended that Judy's fee request

be denied.   The trial court accepted this recommendation.

     "An award of attorney's fees to a party in a divorce suit

is a matter for the exercise of the trial court's sound

discretion after consideration of the circumstances and equities

of the entire case."   Davis v. Davis, 8 Va. App. 12, 17, 377
S.E.2d 640, 643 (1989).   Factors to be considered include the

respective financial positions of the spouses and their degree

of fault in precipitating the end of the marriage.    See

Theismann v. Theismann, 22 Va. App. 557, 574, 471 S.E.2d 809,

817 (holding that husband's "clearly superior financial

position" and the fact that his infidelity caused the break-up

of the marriage justified an award of attorney's fees to wife),

aff'd upon reh'g en banc, 23 Va. App. 697, 479 S.E.2d 534

(1996).

     The record reflects that Judy's separate estate vastly

exceeds Pettus' separate estate, and she has adequate financial

resources to pay for her own litigation expenses.    "The facts of

this case evince no unusual circumstances such as bad faith or

gross disparity of financial resources which would warrant

disturbance of the trial court's judgment."   Brooks v. Brooks,

27 Va. App. 314, 319, 498 S.E.2d 461, 464 (1998).    Accordingly,

                              - 23 -
we affirm the trial court's decision to deny Judy's request for

her fees and costs.

                              Conclusion

     For the foregoing reasons, we hold that the trial court did

not err when it found that the 220 shares of Overnite

Transportation stock Pettus purchased during the marriage were

his separate property.   We hold, however, that the trial court

erred in finding that Dow-Gil and VCI were marital property.

Accordingly, we remand this matter to the trial court to

re-classify in a manner consistent with this opinion all assets

whose original classification turned, in whole or in part, on

the trial court's classification of Dow-Gil and VCI as marital

property.   We likewise hold that the trial court erred in

classifying the Stone note.    Upon re-classifying the parties'

assets, the trial court shall, upon complying with the statutory

mandate of Code § 20-107.3(E), divide the marital property in

the exercise of its sound discretion.      Because the

re-classification of the parties' property will result in a

substantially lower amount of marital property, we need not

address the propriety of the trial court's initial proportional

division of the marital estate.    Finally, we affirm the trial

court's denial of Judy's request for fees and costs.

                                                 Affirmed in part,
                                                 reversed in part,
                                                 and remanded.

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