Court Opinion

ID: 6829626
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:44:30.684834+00
Date Added: 2024-06-11T16:04:31.136305
License: Public Domain

COLEMAN, Judge,
dissenting.
I agree with and join in the majority’s basic construction of Code § 20-107.3, which governs how courts shall classify an increase in value of separate property. That statute as amended in 1990 authorized, for the first time, the dual classification of property as part marital and part separate, see Smoot v. Smoot, 233 Va. 435, 357 S.E.2d 728 (1987), and specified how trial courts are to classify an increase in the value of separate property or property that is classified as part marital and part separate.
As the majority notes, Code § 20-107.3(A)(3)(e) provides that when separate and marital property are commingled to acquire new property, the newly acquired property shall retain its original classification to the extent that the commin*560gled property is retraceable by a preponderance of the evidence. Here, the parties traced the commingled funds which they used to purchase the home to the husband’s $80,100 investment of separate funds and to the investment of $30,000 in marital funds, which they borrowed. Under Code §§ 20-107.3(A)(1) and 20-107.3(A)(3)(a), the increase in value of the husband’s separate property interest is deemed to be separate unless the nonowning party proves that the increase was attributable to contributions of marital property or to the personal efforts of either party. In order for the nonowning spouse to rebut the presumption that the increase in value of separate property is also separate property, Code §§ 20-107.3(A)(1) and 20-107.3(A)(3)(a) require that the nonowning spouse prove that marital property or significant personal efforts by the parties resulted in a substantial increase in the value of the property.
In my opinion, no credible evidence proved that the wife’s personal efforts were significant or that they resulted in a substantial increase in the value of the property. The wife’s vague, non-specific claim that over a twelve year period she purchased paint, wallpaper, and carpeting and that she personally painted, wallpapered, and carpeted parts of the home was insufficient to prove that her personal efforts were “significant” or that they caused or “result[ed]” in the “substantial” increase in the value of the property. The wife’s evidence proved nothing more than that she performed general maintenance and upkeep of the home over the years. She did not prove that she made improvements, renovations, or additions which, in my opinion, are the types of personal efforts that would be “significant” and would be necessary to cause the property to substantially appreciate in value.
In Lambert v. Lambert, 6 Va.App. 94, 103, 367 S.E.2d 184, 190 (1988), we held that marital contributions or efforts, no matter how insubstantial, that were commingled with separate property were sufficient to transmute separate property into marital property. The concept of transmutation enabled trial courts to grant a monetary award to a party in order to reimburse that party for all his or her contributions, no matter *561how great or insubstantial, to the other spouse’s separate property. By transmuting the property to marital, the trial courts were able to do equity between the parties for their efforts or contributions in maintaining or improving the property.
However, after the 1990 revisions of Code § 20-107.3, which provided for dual classification, the law no longer provides that any contribution of marital property or marital effort, regardless of how “insignificant,” will transmute separate property to marital property. Now, the party claiming that personal efforts contributed to the increase in value of separate property must prove that these personal efforts were “significant” and that they “resulted] in substantial appreciation of the separate property.” See Code § 20-107.3(A)(l) (“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) (“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.”).
As the majority observes, Code § 20-107.3(A)(3)(a), which states, “[f]or 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,” does not relieve the nonowning spouse from proving that the personal efforts were “significant” and that they “resulted] in substantial appreciation of the property.” Although Code § 20-107.8(A)(3)(a) provides that the owning spouse shall have the burden of going forward with evidence to prove specifically or the extent to which the nonowning spouse’s efforts or contributions did not cause or contribute to the increase, that provision applies only after the nonowning spouse has proven “significant” efforts and that they “result[ed] in substantial appreciation.” *562Code §§ 20.107.3(A)(1) and 20-107.3(A)(3)(a), which require proof of a “significant” personal effort that “result[ed] in substantial appreciation,” must be read together.
In my opinion, no credible evidence exists on this record to support a finding that the wife’s personal efforts were “significant” or that her efforts effected or resulted in any part of the $50,000 “substantial appreciation of the separate property.” “Significant” is defined as “having or likely to have influence or effect; deserving to be considered; important, weighty, notable.” Webster’s Third New International Dictionary, 2116 (1981). The wife’s evidence that during the twelve years of marriage she personally painted, wallpapered, and carpeted parts of the house proves only that she contributed to customary maintenance and upkeep of the home. In order for personal efforts contributed to a home to be “significant” and to cause or result in a substantial increase in value would require, in my opinion, improvements, additions, or renovations to the property.
The wife offered no evidence as to the value of property before or after her work. Furthermore, the fact that the wife testified that she had “some real estate knowledge and ‘acumen’ ” and that, in her opinion, the property was worth $79,000 when they purchased it for $60,100 should be accorded no weight in proving a “significant personal effort” by her as required by Code § 20-107.3. The wife offered no evidence that she had any training or experience in real estate, or that she had done or was capable of doing an appraisal, a market study, or comparison of sales to determine the fair market value of the property when they purchased it. Other than the wife’s conclusory assertion that she had some real estate “acumen,” she offered no evidence to prove that the husband relied upon her “personal efforts” as his reason for purchasing the property. Accepting the wife’s assertion and according it its greatest evidentiary value, in my opinion, proves nothing more than that she and her husband decided to purchase the property because she thought it to be a good investment. She has not proven that her “intellectual skill, creativity, or mana*563gerial, promotional or marketing activity [was] applied directly to the separate property.” Code § 20-107.3(A)(3)(a).
Likewise, the $5,000 contribution of marital property to purchase paint, wallpaper, and carpet for the house is, in my opinion, the cost of customary maintenance and upkeep which was not proven to have caused or “resultfed] in [the] substantial appreciation [in value] of the separate property.” This expenditure of marital funds for maintenance and upkeep is not the type of addition, renovation, improvement, or capital expenditure to a home or property that is necessary under the statute to account for an increase in the property’s value.
The effect of the trial court’s award is to attribute none of the $50,000 increase in the property’s value to market forces or to a passive increase in property values. Thus, the trial court’s award of $26,634.22 not only fails to return to the husband his $30,100 separate property investment, but, in terms of real dollars he actually is receiving, considerably less than he invested twelve years earlier, although the investment appreciated in value by $50,000. Accordingly, I would hold that the wife failed to prove that her personal efforts were significant or that they, or the contribution of marital property, caused or resulted in any portion of the $50,000 appreciation. In the absence of such evidence, Code §§ 20-107.3(A)(l)(iv) and 20-107.3(A)(3)(a) require, in my opinion, that the $50,000 appreciation be classified as 50% marital and 50% separate.
Moreover, even if the majority were correct that the wife had proven that her personal efforts were significant and that they resulted in a substantial increase in the value of the property, in my opinion, it would be error on the record for the trial court in making the equitable distribution award to disallow the husband a reasonable return on his investment. Although Code § 20-107.3(A)(8)(a) may place the burden upon the owning spouse of going forward with the evidence to disprove what part of the substantial increase in value was not attributable to the wife’s efforts, the evidence proved the very limited nature of the wife’s personal efforts, and that together *564with the fact that no additions or improvements were made to the house is sufficient to prove that at least a significant portion of the property’s appreciation was attributable to market forces which should have required the trial court to award the husband a reasonable return on his investment.