COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Felton, Judges Elder and Beales
Argued at Richmond, Virginia
S. DAVID McILWAIN
OPINION BY
v. Record No. 2682-07-2 JUDGE RANDOLPH A. BEALES
SEPTEMBER 16, 2008
SUSAN BLAIR PENICK McILWAIN
FROM THE CIRCUIT COURT OF HANOVER COUNTY
John Richard Alderman, Judge
David M. Branch for appellant.
Brian H. Jones (Ann Brakke Campfield; Barnes & Diehl, P.C., on
brief), for appellee.
S. David McIlwain (husband) appeals from a final decree granting a divorce to Susan
Blair Penick McIlwain (wife). He asks this Court to determine whether the trial court erred in
(1) awarding to wife a monetary sum equal to half of the fair market rental value of the marital
home as part of the overall equitable distribution of the marital property, (2) finding the
receivables from loans to two companies were marital assets and distributing them accordingly,
and (3) awarding wife credit for tax payments that she made with marital funds. 1 We find the
trial court did not err as to Issues 1 and 2. However, based on this record, we reverse and
remand the trial court’s award to wife regarding the amount of credit that she received for
making tax payments.
1
Husband listed five questions presented in his brief. We have consolidated two of the
five questions, as they both addressed the loans to the companies. In his reply brief, husband
withdrew the remaining question presented, which dealt with $44,000 withdrawn from a marital
account.
I. Rental Value of Marital Home
Husband and wife married in 1988. According to wife, she performed most of the
household duties, including cooking, cleaning, and yard work. Husband spent most of his time
“on the computer.”
Husband generally had no income during the marriage. In 1996 he began to receive an
income from a trust, amounting to approximately $8,000 annually. Husband also owned some
real estate, but the evidence at trial suggested that these properties did not net any significant
rental income. He also owned two businesses during the marriage, but these companies
produced little or no income for the couple.
While husband earned little income during the marriage, his irresponsibility with the
family’s income taxes created significant marital debt. Although he took responsibility for filing
their federal and state income tax returns, for several years husband did not enclose a check for
the taxes that were owed, although wife believed he was paying the taxes. Finally, in 1999, wife
discovered the problem. She then began filing her federal income tax return separately because
husband “would not finish the ‘99 taxes” and because husband “wasn’t paying any taxes.” 2
The parties had saved money from the sale of various parcels of real estate to use towards
the purchase of a new home. They kept this money in an account at Crestar Bank. They used
some of the money to reduce the income tax debt that they owed to the federal government, once
wife realized that they had not been paying the taxes. However, at various times prior to
December 2000, husband also made large withdrawals from this Crestar account and loaned that
money to his two companies, without wife’s knowledge or consent. Although their marriage had
problems prior to this, when wife discovered the withdrawals, the problems became critical.
2
By March 2004, husband still had not filed his tax returns for 1999 through 2003. At a
hearing in October 2005, husband admitted that he still had not filed either personal or corporate
tax returns for 2003 or 2004.
-2-
When wife decided to go on vacation with her family and asked husband to stay at home, he
threatened to “leave [her] furniture outside” if she went without him. At that point, she agreed to
move out of the home when she returned from the vacation. The parties then separated on
August 1, 2001.
Husband remained in the marital home, which was jointly titled, until entry of the final
decree in 2007. At the time of their separation, the home was owned outright by the parties, so
husband did not have to make mortgage payments on the house. He changed the deadbolt locks
on the doors and insisted that wife come to the home only with prior notice to him and only
while he was there. Given husband’s actions, wife was essentially pushed out of the marital
home.
Wife rented a separate residence and later purchased a house using separate funds. The
parties agree that wife did not use the marital home after the separation. The trial court found
that husband had lived in the home “at virtually no cost since August 1, 2001, while [wife] has
had to pay for housing since the separation.”
As a result of husband’s failure to send a payment with the income tax returns, the parties
owed a substantial amount of federal taxes, increased by interest and late payment fees, when
they separated. They were still paying taxes owed as far back as 1996. Wife continued to pay
off the parties’ tax debt after their separation, using her separate income and some marital funds.
Husband made one minor payment toward this marital tax debt after the parties separated.
Based on all this evidence, the trial court found wife “was the actual and princip[al]
income earner during the marriage, and she bore the burden of [husband’s] negative
contributions, i.e. his financial contribution to the marriage was to create debt or financial
liabilities (negative income).” The court also found, “The [wife] has had to bear a substantially
disproportionate financial burden following the separation.”
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At trial, wife requested that the court credit her with one-half of the fair market rental
value 3 of the marital home, as part of the overall distribution of the parties’ marital property.
The trial court included this amount in its overall division of the marital estate, explaining:
[Wife] seeks remedy under Va. Code 20-107.3, not under the
accounting statute Va. Code 8.01-31.
The Court took into consideration all of the factors set forth in Va.
Code 20-107.3(E)(1-11), including monetary and nonmonetary
contributions by each spouse to the marriage in determining the
equitable distribution. Specifically, Va. Code 20-107.3(E)(11)
calls upon this Court to take into consideration such factors as the
court deems necessary or appropriate to consider in order to arrive
at a fair and equitable monetary award.
[Husband] solely has benefited from exclusive occupation of the
marital residence at virtually no cost since August 1, 2001, while
[wife] has had to pay for housing since the separation. [Wife] has
had to bear a substantially disproportionate financial burden
following the separation.
In its overall equitable distribution award, the trial court included in the calculation of wife’s
portion of that award a figure of $19,725.62 – the sum equal to half of the fair market rental
value of the home from August 1, 2001 through March 31, 2007, based on the rental value
provided by husband’s expert. The trial court clearly stated that it was not using the accounting
statute, Code § 8.01-31, to do so, but rather was doing so out of fairness after considering all of
the factors in the equitable distribution statute, Code § 20-107.3(E).
3
Husband does not question on appeal the particular amount of the credit (half of the fair
market rental value of the home) used by the trial court as part of the calculations for the overall
equitable distribution. Instead, he questions the court’s authority to even consider his five-plus
years’ use of the marital home during the pendency of the divorce when deciding the appropriate
division of the marital property. At trial, husband presented evidence from an expert on the fair
market rental value of the property, and the trial court actually used that expert’s testimony to
calculate the final amount of the sum awarded to wife as part of the overall equitable distribution
of the property. Husband did not present the trial court with any other suggestion for valuing his
use of the marital home.
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On appeal, husband argues that, under the decisions of this Court, a spouse cannot be
credited with the fair market rental value of marital property from the date of separation. He
contends that such a credit can begin no earlier than the date of the final decree of divorce.
Given the relevant statute and case law, the particular facts in this case, and the appropriate
standard of review, however, we cannot find that the trial court erred.
The trial court, in reaching its decision, took into account husband’s exclusive use of the
marital home in the context of a long-pending divorce and equitable distribution under Code
§ 20-107.3. That code section requires that a trial court consider several factors when
determining the equitable division of marital property:
E. The amount of any division or transfer of jointly owned marital
property, and the amount of any monetary award, the
apportionment of marital debts, and the method of payment shall
be determined by the court after consideration of the following
factors:
1. The contributions, monetary and nonmonetary, of each party
to the well-being of the family;
2. The contributions, monetary and nonmonetary, of each party
in the acquisition and care and maintenance of such marital
property of the parties;
3. The duration of the marriage;
4. The ages and physical and mental condition of the parties;
5. The circumstances and factors which contributed to the
dissolution of the marriage, specifically including any ground for
divorce under the provisions of subdivisions (1), (3) or (6) of
§ 20-91 or § 20-95;
6. How and when specific items of such marital property were
acquired;
7. The debts and liabilities of each spouse, the basis for such
debts and liabilities, and the property which may serve as security
for such debts and liabilities;
8. The liquid or nonliquid character of all marital property;
-5-
9. The tax consequences to each party;
10. The use or expenditure of marital property by either of the
parties for a nonmarital separate purpose or the dissipation of such
funds, when such was done in anticipation of divorce or separation
or after the last separation of the parties; and
11. Such other factors as the court deems necessary or
appropriate to consider in order to arrive at a fair and equitable
monetary award.
Code § 20-107.3. The trial court here explicitly stated that all of these factors were considered in
determining the division of the marital property, including a means to provide wife with a
remedy for husband’s exclusive use of the marital home during the five and a half years that the
divorce was pending. When a trial court has considered the statutory factors, this Court will not
reverse that court’s ruling unless the record indicates that the trial court abused its discretion.
Ranney v. Ranney, 45 Va. App. 17, 47, 608 S.E.2d 485, 499-500 (2005).
The evidence in this record is sufficient to support the trial court’s findings. Wife was
the only person who earned a regular salary during the marriage, and she made most of the
nonmonetary contributions to the marriage. Husband, on the other hand, unnecessarily increased
the family’s debt by refusing to pay the taxes in a timely manner, and he made very few
nonmonetary contributions to the marriage. He also loaned huge sums of money to his
companies without wife’s knowledge, money that the parties had agreed would be used to pay
their past-due taxes or to make a down payment on a new home. Once the parties separated,
wife made substantial progress toward the elimination of the tax debt, using both marital and
non-marital funds, even though she also had the added expense of rent or a mortgage. Husband
made de minimus payments toward this marital debt, even though he lived in the marital home
and did not have to pay rent or a mortgage. We cannot find that the trial court abused its
discretion in its factual findings under subsection E or in the weight it gave to particular factors.
See id.
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Husband, in fact, does not argue that the trial court misapplied the statutory factors.
Instead, he argues that several decisions of this Court preclude consideration in equitable
distribution of his exclusive use of the marital home during the pendency of the divorce.
However, Code § 20-107.3 does not prevent a trial court from considering one spouse’s
exclusive possession of the marital home during the divorce. The trial court here determined that
the use of the home, which was retained solely by husband and lost to wife during the pendency
of the divorce, was important to consider under factor 11 of Code § 20-107.3, “other factors as
the court deems necessary or appropriate to consider in order to arrive at a fair and equitable
monetary award.” Nevertheless, husband argues that Gaynor v. Hird, 15 Va. App. 379, 424
S.E.2d 240 (1992), Traylor v. Traylor, 19 Va. App. 761, 454 S.E.2d 744 (1995), and Anderson v.
Anderson, 42 Va. App. 643, 593 S.E.2d 824 (2004), support his position that a trial court abuses
its discretion when it considers one party’s use of a jointly-owned, marital home before the
granting of a divorce, no matter what the circumstances. We disagree with this interpretation of
these cases.
In Gaynor, 15 Va. App. at 380, 424 S.E.2d at 241, the parties were divorced in September
1985, after which they continued to own the marital home as tenants in common. Mr. Hird
continued to live in the home to the exclusion of his former wife, Mrs. Gaynor. Id. As part of a
partition action in 1991, Mrs. Gaynor asked that she be awarded one-half of the fair market rental
value of the home, starting October 1, 1985, and the trial court denied her request. Id. at 381,
424 S.E.2d at 242. This Court reversed the trial court, finding Mrs. Gaynor’s request fell under
Code § 8.01-31 and, therefore, she was entitled to an accounting and to credit for the fair market
rental value of the commonly owned property from the date that they had become tenants in
common, i.e., the entry date of their final decree of divorce. Id. at 382, 424 S.E.2d at 242.
-7-
Gaynor was not a divorce action. The parties’ divorce had been finalized many years
earlier. When Mrs. Gaynor requested half the fair market value of the property she owned with
Mr. Hird, the equitable distribution statutes no longer applied. The fact that the two parties in
Gaynor were previously married was relevant only to explain how they became tenants in
common. That fact had no relevance to the legal analysis. Gaynor raised no issue regarding
Mr. Hird’s possession of the home prior to their divorce.
In contrast, Anderson, 42 Va. App. 643, 593 S.E.2d 824, arose in the context of a divorce
action. There, this Court affirmed a credit to Mrs. Anderson for the rental value of the marital
home, based on her husband’s exclusive possession of the home during the pendency of their
divorce. The Court noted, “[N]othing in the equitable distribution statute or cases cited by
appellant prevents a trial court from considering rental income or fair rental value and associated
expenses of the marital home, conceded to be marital property, in fashioning a fair and just
award.” Id. at 649, 593 S.E.2d at 827.
Husband attempts to distinguish Anderson by arguing that he did not receive actual rental
income, whereas Mr. Anderson actually leased portions of the marital property and received
rental income. The Court in Anderson, however, noted that although Mr. Anderson had rented
portions of the property, he also continued to live there. Id. at 646, 593 S.E.2d at 825. The
Court then approved the credit to Mrs. Anderson, which was based on the total rental value of
the entire property, although the entire property was never rented out, from the time of the
separation to the entry of the divorce, rather than using the actual amount of the rents collected
by Mr. Anderson or the fair market value of only that portion of the property that Mr. Anderson
rented to other people. Id. Therefore, Anderson does not support husband’s position here that
credits based on rental value must be based on collected rents.
-8-
Husband also cites Traylor, 19 Va. App. 761, 454 S.E.2d 744, in support of his argument.
In that case, this Court cited Gaynor and Code § 8.01-31, but did not discuss the equitable
distribution statute. Id. at 765, 454 S.E.2d at 747. Here, wife asked the trial court to apply Code
§ 20-107.3 rather than the accounting statute, and the trial court applied the equitable distribution
statute. 4 As the parties in Traylor did not ask this Court to address the application of Code
§ 20-107.3, that case does not apply here.
In addition, the equitable distribution statute has been amended since Traylor. Code
§ 20-107.3(E)(10) now allows the court to consider “[t]he use or expenditure of marital property
by either of the parties for a nonmarital separate purpose or the dissipation of such funds, when
such was done . . . after the last separation of the parties.” 5 (Emphasis added.) This subsection
was added to the equitable distribution statute in 2004, after our opinion in Traylor. See 2004
Va. Acts, ch. 654.
4
Traylor can be distinguished factually. The Traylors’ home was mortgaged, and
Mr. Traylor paid the mortgage while the divorce was pending, while Mrs. Traylor apparently
lived with her parents for a length of time. Traylor v. Traylor, No. 0120-91-2 (Va. Ct. App.
Dec. 17, 1991) (inter alia, reversing and remanding the initial equitable distribution award).
Here, husband lived in the marital home without a mortgage, while wife was required to rent and
then purchase a new place to live.
5
Wife did not argue, and the trial court did not find, that husband dissipated a marital
asset. Dissipation normally involves a “deliberate waste of marital assets,” squandering of
marital money, or use of marital assets “for improper purposes.” Amburn v. Amburn, 13
Va. App. 661, 666, 414 S.E.2d 847, 850 (1992) (finding Mrs. Amburn’s use of a line of credit,
established prior to the parties’ separation, was not dissipation of a marital asset, especially as
Mr. Amburn had refused to comply with the parties’ written agreement that he would pay all the
tuition and living expenses for Mrs. Amburn’s daughter). If a party dissipates a marital asset,
then “the court must value the property at a date other than the date of the evidentiary hearing so
as to achieve an equitable result,” in effect adding the dissipated asset back into the marital
estate. Clements v. Clements, 10 Va. App. 580, 587, 397 S.E.2d 257, 261 (1990). Instead of
dissipation of the value of marital property, this case involves the equities that should be
balanced in dividing the existing marital property when one spouse receives all of the benefit of a
marital asset for a number of years, without any attending financial obligation, to the exclusion
of the other spouse, who has effectively been denied use of the marital asset by the other spouse
and who must expend funds because she receives no benefit from the asset.
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Here, after the parties’ last separation, husband essentially used the marital home as his
own separate residence, 6 would not allow wife to remain in the home, changed the locks, and
refused to accept responsibility for the marital tax problems that he created by refusing to make
timely payments to the IRS as the taxes came due. Wife, in contrast, expended her separate
funds to pay rent and, at the same time, used her separate funds to reduce the marital tax debt
that husband had refused to pay. While the trial court gave wife credit for her separate payments
of the marital tax debt, see infra, the fact that wife had to address this problem, a problem of
husband’s creation, for years after their separation, limiting her ability to use her separate funds
during that time, created additional equity concerns.
Other states’ courts have found it appropriate to consider the fair market rental value of
the marital home in the overall equitable distribution of the marital property, especially where
one spouse ousts the other spouse out of the home, which effectively happened here.
Where one spouse has sole use of the marital home during the
pendency of the divorce action, some states give the trial court
discretion to credit the nonoccupying spouse with a fair rent for the
occupying spouse’s use of the premises. This credit is generally
not awarded when exclusive use was awarded by the court as an
incident of spousal or child support.
If rental value is deducted and the home in question is jointly
titled, the deduction should cover only the rental of the
nonoccupying spouse’s interest. Thus, only half of the rental of for
[sic] the entire premises should be deducted. Where a jointly
owned home is occupied by one spouse alone during the divorce
proceedings, but the nonoccupying spouse has not been formally
ousted from possession, an award of rent is not required.
Of course, an [sic] rental credit is especially appropriate when one
spouse alone has been collecting rent during separation for leasing
a marital asset to third parties.
6
For example, by threatening to put wife’s furniture out in the yard if he could not
accompany her and her family on a vacation, at a time when the couple was having problems due
to husband’s mismanagement of their taxes and his loans of marital funds to his companies,
husband effectively claimed the home as his exclusive possession.
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2 Brett R. Turner, Equitable Distribution of Property 450-52 (3d ed. 2005) (emphasis in
original).
We find the trial court did not abuse its discretion in crafting the overall equitable
distribution of the parties’ marital property by including in the division of that property an
amount to wife equal to one-half of the fair market rental value of the marital house from the
date that the McIlwains separated. The trial court did not find that awarding such an amount was
required, but instead considered the factors in Code § 20-107.3(E), weighed them accordingly,
and included this amount as part of the overall equitable distribution of the marital property.
Given the standard of appellate review required here and the facts in this case, we cannot find the
trial court erred.
II. Receivables from Loans
Husband argues that the receivables from two loans that he made to two different
companies were his separate property. While he acknowledges that the loans were made during
the marriage, he contends that he traced the proceeds used for those loans to his separate funds.
We hold the trial court did not err in finding husband failed to adequately trace the loans to his
separate funds.
Prior to the marriage, wife owned one house, and husband owned two houses. The
parties also purchased a house during the marriage that they owned jointly. All four homes were
sold during the marriage. Wife made $36,772 on the sale of her house. Husband made $174,580
on the sale of his two houses. The parties made $72,993 on the sale of the jointly owned house.
The proceeds of these sales were deposited into a corporate account at Crestar Bank (now
Suntrust) under the name of Creative Building Products, a company that husband started during
the marriage. Both parties had signatory power over this account. Wife does not dispute that the
proceeds from the sale of husband’s houses were his separate property when they were deposited
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into the account. She testified, however, that the parties intended to use the money in this
account to purchase a new marital home.
After the last home was sold and the proceeds deposited in January 1999, the parties had
a balance of $210,271 in the Crestar account. In April 1999, almost half of that money ($99,000)
was used to pay the parties’ 1998 taxes. In August 1999, $15,000 was transferred out of this
account, apparently to Creative Building Products. In November 1999, $20,000 was deposited
into the account. 7 In December 1999, $54,000 was taken out of the account. In August 2000, an
additional $14,000 was taken out.
Husband admits that he withdrew a total of approximately $160,000 from this account
and loaned that money to Creative Building Products and to his separate company, Creative
Environment Company. He concedes that the loans were made during the marriage. When wife
discovered that husband had withdrawn those funds, and only $44,000 remained in the account,
she withdrew the remaining funds and used them to pay taxes that the parties jointly owed.
When the parties separated, the Crestar account was effectively empty.
At trial husband presented an exhibit, titled “Taxes on Sale of Rental Property,” to the
trial court. The trial court found the exhibit confusing and concluded that the separate and
marital funds in the Crestar account were so commingled that tracing the loans to husband’s
separate property was impossible. The court concluded that the receivables from the loans were
marital property and divided them accordingly.
7
The record does not indicate the source of these funds.
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On appeal, husband argues that he provided sufficient evidence to trace the proceeds used
for the loans to the sales of his separate property. 8 Husband claims that he proved the money for
the loans was taken from his separate funds in the Crestar account. We disagree.
If the trial court ignores the applicable law or the evidence presented by the parties, thus
abusing its discretion in determining the classification of the property, then this Court will
reverse that court’s equitable distribution award. Asgari v. Asgari, 33 Va. App. 393, 403, 533
S.E.2d 643, 648 (2000). Here, husband’s exhibit addressed only the tracing of his separate funds
deposited into the Crestar account, not whether marital or separate (either his or wife’s) funds
were then withdrawn and loaned to the two companies. As this Court has previously explained:
When a spouse commingles separate and marital funds in a single
account created during the marriage, the spouse claiming a
separate share must shoulder the burden of tracing. If he cannot do
so, the account remains wholly marital.
Proof of the separate classification of source funds may be
straightforward enough. Proving the classification of withdrawn
funds can be more difficult. It requires an examination of where
the withdrawn funds went, when and why they were transferred,
for what purpose they may have been ultimately used, as well as
what contemporaneous financial records show about each. In
either context while classifying source funds or withdrawn funds a
failure of proof undermines any rational basis for tracing. Whether
that occurs while tracing source funds or withdrawn funds, the
result is the same. The pro rata withdrawal theory goes wrong
because it seeks not to infer actual intent, but rather serves as a
substitute for it.
Robbins v. Robbins, 48 Va. App. 466, 478-79, 632 S.E.2d 615, 621-22 (2006) (citations
omitted).
8
On brief, husband also argues that the trial court erred in using the face values of the
loans because the companies themselves were worth less. However, at trial, neither party
presented evidence of the value of the companies. Husband also contends that the loans are not
worth more than the value of the companies’ tangible assets, but he presented no testimony on
this assertion at trial and provides no authority for this proposition on appeal. During oral
argument before this Court, neither argument was addressed more fully. Therefore, we find no
evidence in the record for these arguments and do not address them further.
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Husband is correct that he proved his separate property was deposited into the Crestar
account. However, husband’s analysis ignores the purpose of the account and the effect of
activity in the account after the deposits. He does not trace his separate funds directly to the
withdrawals. This Court has held that if:
separate property is contributed to marital property, contributed to
the acquisition of new property, or retitled in the names of both
parties, and suffers a “loss of identity,” the commingled separate
property is transmuted to marital property. Code
§ 20-107.3(A)(3)(d)-(f). In other words, if a party “chooses to
commingle marital and non-marital funds to the point that direct
tracing is impossible,” the claimed separate property loses its
separate status. Melrod v. Melrod, 83 Md. App. 180, 574 A.2d 1,
5 (Md. App. 1990). Even if a party can prove that some part of an
asset is separate, if the court cannot determine the separate amount,
the “unknown amount contributed from the separate source
transmutes by commingling and becomes marital property.”
Rahbaran v. Rahbaran, 26 Va. App. 195, 208-09, 494 S.E.2d 135, 141 (1997) (quoting Brett R.
Turner, Equitable Distribution of Property 268 (1994)).
Here, the separate funds of the parties were so commingled with the marital funds as to
no longer permit tracing of any separate property out of the account. Initially, both parties
contributed separate property to the account as well as marital money. The account was the
marital property of the parties, titled in the name of a company that was started during the
marriage. The parties intended to use these funds to build a new marital home. The parties
actually used a significant portion of the Crestar account to pay marital debt owed to the federal
government. Nothing in the record suggests that husband intended to keep “his” portion of these
funds separated from the marital funds and from wife’s separate funds.
At some point prior to January 1999, based on the evidence in this record, approximately
$74,074 was withdrawn from the account. No evidence suggested that money was taken from
wife’s separate proceeds, husband’s separate proceeds, the marital proceeds, or some
combination thereof. Once the proceeds from the sale of the jointly owned house were
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deposited, withdrawals of $99,000 and $44,000 were taken from the account to pay taxes.
Again, no evidence in the record suggests that the parties assumed these amounts were taken
from separate funds, marital funds, or some combination of funds. Instead, the parties treated the
account as a unified source of funds to pay marital debt, effectively treating the entire account as
marital.
As in Asgari, where Mr. Asgari contributed separate funds to a joint account that
contained marital funds, husband here commingled assets in a marital account, and the parties
then deposited and withdrew funds from the account without concern for the separate or marital
nature of those funds, “the balance regularly ebbing and flowing for months.” 33 Va. App. at
403, 533 S.E.2d at 648. Thus, the separate nature of husband’s proceeds was lost, the funds
mixing together with each transaction, “resulting in the irreversible transmutation of separate
into marital property.” Id.
To trace his separate assets, husband needed to do more than prove that at one point he
had deposited approximately 60% of the source funds for the account. He also needed to prove
that, even though those funds were commingled with funds from other sources, his separate fund
proceeds remained discernibly separate in character. Husband did not meet his burden here. The
evidence did not prove that only husband’s separate funds were withdrawn from the Crestar
account and loaned to the companies. The trial court did not err in finding the receivables from
these loans were a marital asset.
III. Tax Credits
Wife made various payments toward the parties’ outstanding tax bills after the parties
separated. She made some of these payments with her separate funds, and she made some
payments with marital funds. Husband concedes that she was entitled to credit for the payments
she made using her separate funds. However, he argues that the trial court’s award of those
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credits included $18,500 that was paid with marital funds. 9 We agree with husband and find that
the trial court erred. Thus, we remand for a recalculation of this credit.
After husband and wife separated, wife made one withdrawal of $6,000 and one
withdrawal of $12,500 from marital funds in a Wachovia securities account. Wife claimed she
used all this money in 2002 to reduce the parties’ outstanding joint tax liability. At trial, while
reviewing Exhibit 23, which summarized the tax debts and the payments that she made, wife
conceded that she used part of the $12,500 for a $9,579 tax payment in April 2002.
In her trial brief, wife’s calculation of her credit for reducing the marital tax debt included
the $9,579 payment. The only 2002 marital tax payment that wife did not include in her
calculations was a payment of $559. 10 Wife noted in her trial brief that any payments made with
marital funds should not be included in the credit calculation.
The trial court adopted wife’s calculation and awarded her a credit of $23,457.09 toward
the equitable distribution of the parties’ assets. Although husband asked that the Wachovia
securities account be valued as of the time of the separation, i.e., prior to wife’s withdrawal of
$18,500, so that the withdrawn funds would be divided in the distribution of that account, the
trial court denied his request and valued the account as of the 2006 hearing date.
“On appeal, we will not overturn a trial court’s monetary award of marital property
unless we find an abuse of discretion, misapplication or wrongful application of the equitable
distribution statute, or lack of evidence to support the award.” Fowlkes v. Fowlkes, 42 Va. App.
9
Wife claims husband did not preserve this argument. However, during the April 5,
2007 hearing, husband clearly objected to the calculation of this credit, arguing that it included
the $18,500 of marital money that she withdrew from the Wachovia securities account (an
account consisting of marital funds) and noting that, because the court used a valuation date for
this account after these withdrawals, those marital funds were not properly considered in the
overall distribution of marital property.
10
Wife did not know who made this payment, so she did not claim it.
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1, 7, 590 S.E.2d 53, 56 (2003). Here, the evidence proved that wife used $18,500 of marital
funds to make tax payments in 2002. She included all her 2002 payments toward the joint tax
debt when she calculated the credit that she argued she was owed for making payments with her
separate funds. She did not subtract the $18,500 in payments that she made with marital funds.
Therefore, wife’s calculations gave her credit for making payments of $18,500 with her separate
funds when those payments were actually made with marital funds. As she withdrew the
$18,500 from the Wachovia securities account before the valuation date used by the trial court to
determine the value of the marital property, which prevented the court from including these
funds in equitable distribution, wife in effect received the entirety of the $18,500. Therefore, we
reverse the trial court’s award of a $23,457.09 credit to wife and remand this case to the court for
recalculation of that award consistent with this opinion.
IV. Conclusion
We find the trial court did not err in its consideration of the factors under Code
§ 20-107.3(E) in the overall equitable distribution of the marital property, given the facts in this
case and our standard of review, and did not err in classifying the receivables from two loans as
marital property. We find the trial court did err, however, in determining the amount of its award
to wife of a credit for tax payments, and we reverse and remand the case for recalculation of the
correct amount of that credit. We deny wife’s request for attorney’s fees and costs.
Affirmed in part;
reversed and
remanded in part.
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