Court Opinion

ID: 9855018
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:18:19.647702+00
Date Added: 2024-06-11T09:23:38.806805
License: Public Domain

ANNUNZIATA, Judge,
concurring in part, and dissenting in part.
I concur in the opinion of the majority except with respect to the correctness of the trial court’s final equitable distribution of the “gifted” assets. On that point, I respectfully dissent.
In its initial opinion, issued January 26, 1995, the trial court found that the husband had made a gift during the marriage to the wife of an interest in certain jointly titled property. *575The court properly classified this “gifted” property as marital. See Code § 20-107.3(A)(8)(d), (e), and .(f). After considering the parties’ rights and interests in the marital property, see Code § 20-107.3(D), and the statutory factors governing distribution, see Code § 20-107.3(E), the court found that wife was entitled to a monetary award in the amount of $130,000. The award represented approximately 5% of the value of the entire marital estate and was based on the value of both “gifted” and “non-gifted” property.7
The court, on its own motion, decided to reconsider its award, having reached the conclusion that it did not give “due weight” to the property husband “gifted” to wife. Wife also filed a motion to reconsider the court’s equitable distribution award, contending that the award, in effect, “revoked” husband’s gift of property to her. Wife cited McClanahan v. McClanahan, 19 Va.App. 399, 451 S.E.2d 691 (1994), in support of her position that her interest in the “gifted” property was equal to that of husband and that the gift could not be “reclaimed” by him in the divorce proceeding.
Upon reconsideration, the court reversed its earlier decision, citing Aster v. Gross, 7 Va.App. 1, 371 S.E.2d 833 (1988), and McClanahan. The trial court found that,
... Mr. Theismann gifted to Mrs. Theismann a joint interest in both real and personal property. The Court is of the opinion that it did not give due weight to these gifts in its prior decision.
By reasons of his own marital fault, Mr. Theismann now seeks to have the court revoke, to a significant degree, what were unconditional, irrevocable gifts when made during the marriage. There is nothing fair, equitable or reasonable in such an outcome.
(Emphasis added.) Thus, having considered the interest given by gift to be irrevocable, the court amended its equitable distribution award to wife, increasing it to $950,000.
*576The amended award was subsequently the subject of husband’s motion to reconsider. In denying the motion to reconsider, the trial judge made further comments from the bench on the analysis he had applied in amending the award:
I went back over all of those [§ 20.107.3] factors [governing distribution], and know [counsel for wife] was very unhappy with my analysis of the factors. I still am firmly convinced that my analysis of those factors is correct. So, then I went back to this McClanahan case again and tried to see where this case fit into McClanahan .... So where do these gifts fit in?
And I really think where McClanahan is coming from is an area that really has been unexplored, at least in reported decisions, and that is the first part of the considerations that go into fixing an equitable distribution award, because the statute says under [§ 20-107.3(D) ] that the award is based on, one, the equities and the rights and interests of each party in the marital property. And that is the provision that McClanahan really focused on.
So, what you gentlemen have is the benefit of, quite frankly, not only an analysis of the factors and what I deem to be under part two an analysis of the factors and how this marriage fits into an equitable distribution scheme; but secondly, you have the benefit of a re-analysis of what I consider ... to be the nature of the interests of the parties. And I think that is where gifts fit in.
* * * * * #
The court went back through an analysis looking at the gift in terms of what was it and what were the interests of the parties in that gifted property, taken in conjunction with its analysis .. . of Part Two which is the [§ 20-107.3(E) ] factors, and overlaying [the] factors under Part One [the equities and rights and interests of each party], and came up with the award that I did.
(Emphasis added.)
It is evident from the court’s March 28, 1995 letter opinion that, in re-determining the amount of the award, the court did *577not evaluate the “gifted” property in light of the statutory factors set forth in Code § 20-107.3(E). In its opinion letter, the court stated that it did not think it was necessary to reevaluate the Code § 20-107.3(E) factors, which had resulted in a monetary award to wife of $130,000. Rather the court determined the rights and interests of each party in the “gifted” property and “overlaid” that determination on the earlier result obtained by applying the factors set out under § 20-107.3(E). Furthermore, notwithstanding its finding that the property was marital, the court concluded that the acquisition by “gift” defined the wife’s personal interest in the property and that the irrevocable nature of gifts precluded distribution inconsistent with that interest. The approach urged by wife and adopted by the trial court is neither in keeping with the statutory scheme governing equitable distribution adopted in Virginia nor compelled by this Court’s decision in McClanahan.
A determination of the equities, rights, and interests of the parties in the marital property under Code § 20-107.3(D) is relevant only with respect to whether a monetary award should be made. See McClanahan, 19 Va.App. at 404, 451 S.E.2d at 694; Brinkley v. Brinkley, 5 Va.App. 132, 136-37, 361 S.E.2d 139, 140 (1987). Thus, where the evidence in the case shows that a party has equities, rights, and interests in the marital property, the court may not exercise its discretion to effectively exclude the property from the marital estate. See McClanahan, 19 Va.App. at 404, 451 S.E.2d at 694. However, once the court has determined that an award should be made, the amount of the award is determined by applying the factors set forth in Code § 20-107.3(E), not by applying Code § 20-107.3(D). Brinkley, 5 Va.App. at 137, 361 S.E.2d at 141 (“If the trial court determines after its examination [of Code § 20-107.3(D) ] that a monetary award is warranted, ‘the amount of the award ... shall be determined ... after *578consideration of the [Code § 20-107.3(E) ] factors”) (emphasis added).8
Code § 20-107.3(A)(3)(d), (e), (f), and (g) addresses the classification of property obtained by gift, particularly as such property may have been subject to transmutation principles. See generally Report of the Family Law Section of the Virginia State Bar on Equitable Distribution of Property in Divorce Proceedings, House Document No. 19, at 12-13 (1991). Following the Maryland rule on the question, see Grant v. Zich, 300 Md. 256, 477 A.2d 1163 (1984), Virginia rejected the view that when separate property is jointly retitled, a common law presumption of gift applies. Code § 20-107.3(A)(3)(g); see also Brett R. Turner, Equitable Distribution of Property § 5.19 (2d ed.1994). Instead, under the statutory scheme adopted, the party seeking to have property acquired by interspousal transfer retain its classification as marital under § 20-107.3(A)(3)(g) must prove the property was a gift. Once a recipient spouse proves that a gift was made, the property is subject to distribution based on an analysis of the relevant factors. Id.; see also McClanahan, 19 Va.App. at 404-05, 451 S.E.2d at 694.
It does not follow, however, that the adoption of gift law principles to govern the classification of property in the context of divorce evinces a legislative intent that the same principles are to govern the distribution of the property. Neither the statutes nor existing case law supports the position that it is improper, where warranted by all the evidence and the application of the Code § 20-107.3(E) factors, to effectively “revoke” the gift by awarding the donor all or the greater portion of the “gifted” property’s value. Marital *579property acquired by gift is no less subject to a disproportionate division, if warranted, than any other property in the marital estate, notwithstanding the “irrevocable” nature of the transfer, which must be proved for the purposes of classification.9
The equitable distribution statute compels this result. The statute does not treat property acquired by gift as an interest personal to the recipient but as an interest acquired by the marital estate. Code § 20-107.3(A)(3)(d), (e), and (f). Wife’s position that an interest in marital property acquired by gift is “irrevocably” hers has the effect of taking the interest received by gift out of the marital estate and rendering it her separate property. While this position may be consistent with common law principles governing gifts, it is inconsistent with equitable distribution principles.10
The majority adheres to the position that the trial court’s reconsidered award was based on an application of the Code § 20-107.3(E) factors and, therefore, it defers to the trial court’s determination that a disproportionate award was not warranted. Had the reconsidered award been based on an application of the factors, and assuming the evidence supported the reconsidered result, I would agree that the matter would involve a question of discretion. However, in my opinion, it is clear the trial court’s reconsideration of the award did not involve a reevaluation of the Code § 20-107.3(E) factors. The trial court considered those factors in determining to *580award wife $130,000. The court then reconsidered the award on the ground that it failed to give due weight to the fact that the property in question had been transferred by gift. The court increased the amount of the award by approximately 730% based not on a reconsideration of the Code § 20-107.3(E) factors but, rather, on the fact that the property was transferred by gift.
The trial court’s decision was constrained by its view that, under McClanahan, the making of an interspousal gift of jointly titled property must be treated as creating an irrevocable personal interest in the property in each spouse for the purpose of distribution. In my opinion, the trial court’s reliance on McClanahan was misplaced and resulted in a decision which reflects a limitation the law does not impose.
McClanahan involved both the proper classification of property acquired during the marriage and the proper exercise of discretion by the trial court in making a monetary award. 19 Va.App. at 403-04, 451 S.E.2d at 693-94. In addressing the proper classification of the asset in McClanahan, this Court made clear that where the evidence establishes that a gift of separate property has been made from one spouse to the married couple jointly, each party acquires an interest in the property which precludes effectively treating the asset as separate at distribution. Id. at 403-05, 451 S.E.2d at 693-94; see also Code § 20-107.3(A)(3)(d), (e), and (f).
In McClanahan, the husband used real property, known as Covesville Orchard, as consideration for the acquisition of the parties’ marital home. 19 Va.App. at 401-02, 451 S.E.2d at 692-93. The orchard was titled in his name only but it was substantially acquired during the marriage. Id. at 401, 451 S.E.2d at 692. In the transaction, husband conveyed his one-half, undivided interest in the orchard, valued at $548,400, as consideration for the transfer of the interest in the marital home, by deed, to him and his wife. Id. at 402, 451 S.E.2d at 692-93. Although classifying the marital home as a marital asset, the trial court ultimately held that the monetary award to the husband should include the $548,000 value of the one-*581half interest in the orchard which husband had used to acquire the marital home, having concluded that the interest in the orchard was husband’s separate property. Id. at 400-03, 451 S.E.2d at 692-93. In effect, the trial court in McClanahan completely disregarded the interest the wife acquired in the marital home during the years of the marriage and disregarded her rights under Code § 20-107.3(E) to an award of a portion of that asset. Instead, the court made its award based solely on the source of funds used to acquire the marital home. It then awarded husband the entire value of his “separate” contribution used to acquire the marital home.
This Court reversed the award, concluding that the trial court had no discretion to enter the award which treated the asset as husband’s separate property. Id. at 405, 451 S.E.2d at 694. However, McClanahan does not stand for the proposition that, when a joint interest in property is acquired by gift, the interest is beyond the reach and effect of the factors outlined in Code § 20-107.3(E) or that the distribution pursuant to those factors may not result in an unequal division.11
Finally, in my opinion, the trial court erred in considering husband’s “fault” in deciding that husband could not revoke what the court considered unconditional, irrevocable gifts. In its initial opinion, the court found that husband’s fault had no bearing on the distribution because wife failed to demonstrate that husband’s adultery had an economic impact on the marital property. See Aster, 7 Va.App. at 5-6, 371 S.E.2d at 836. The court’s later consideration of the economic impact of husband’s fault on wife’s rights to the marital estate is unexplained. Such an analysis differs markedly from one which turns on the diminution in the value of the marital estate as a result of the fault of one of the parties, and it is not supported in the case law. Id. (concluding that only circumstances affecting the partnership’s economic condition are factors to *582be considered); see also Donnell v. Donnell, 20 Va.App. 37, 41-42, 455 S.E.2d 256, 258 (1995); Gamer v. Gamer, 16 Va.App. 335, 341, 429 S.E.2d 618, 622 (1993); Marion v. Marion, 11 Va.App. 659, 664, 401 S.E.2d 432, 436 (1991). Even a divorce on no-fault grounds is likely to have an impact on the ultimate personal estate each of the parties will be awarded; certainly, neither will enjoy all of the interest and rights they had in the total marital estate before the divorce.
In summary, because (1) the procedure the trial court used to re-determine the amount of the monetary award contravenes the statutory scheme; (2) the trial court’s discretion in making the equitable distribution award was exercised in accordance with its misconception that wife’s interest in the “gifted” property was “irrevocable” and not subject to a distribution that may effectively divest her of that interest; and (3) the trial court misapplied the principles of Aster v. Gross, I would reverse and remand the case for reconsideration of the equitable distribution award.

. The value of the gifted property alone was approximately $2.036 million.

. The analysis adopted in Brinkley is compelled by the language of the statute. Section 20-107.3(D) does not address in any respect how the amount of the award shall be determined. Code § 20-107.3(D) provides, in part, "based upon (i) the equities and the rights and interests of each party in the marital property, and (ii) the factors listed in subsection E, the court has the power to grant a monetary award." (Emphasis added.) How the monetary award should be determined is posited solely in Code § 20-107.3(E), which provides, in part, “the amount of any monetary award ... shall be determined ... after consideration of the following [ten] factors.” (Emphasis added.)

. It is well recognized that the division of property under equitable distribution law is not constrained by legal principles developed in other contexts which define a party's interest in property. For example, equitable distribution of property held during the marriage in a tenancy by the entirety does not compel an equal division of the total value. See Lightburn v. Lightburn, -Va.App. -, - S.E.2d-(1996) (contrasting principles directing division of such property prior to enactment of Code § 20-107.3).

. Were common law principles to be applied and the gift treated as one to the recipient spouse rather than to the marital estate, the entire property could be viewed as separate, not marital, with each spouse obtaining a one-half separate interest. Turner, supra, § 5.19, at 218. Such results are inconsistent with the equitable distribution scheme.

. The McClanahan Court merely found that the wife obtained the same interest in the martial home as had the husband and that, therefore, an award of the asset to wife as well as to husband was warranted. The fact that wife’s interest was acquired by gift, however, was not dispositive of the proper amount of the award.