COURT OF APPEALS OF VIRGINIA
Present: Judge Clements, Senior Judges Willis and Annunziata
Argued at Alexandria, Virginia
DENNIS G. KING
OPINION BY
v. Record No. 2933-04-4 JUDGE JERE M. H. WILLIS, JR.
NOVEMBER 1, 2005
MARIAN R. KING
FROM THE CIRCUIT COURT OF LOUDOUN COUNTY
James H. Chamblin, Judge
Matthew P. Snow (Biberaj & Snow, PC, on brief), for appellant.
Peter W. Buchbauer (James J. McGuire; Kelly C. Ashby;
Buchbauer & McGuire, P.C., on brief), for appellee.
Dennis G. King appeals the trial court’s division of the parties’ income tax refunds. He
contends the trial court erred (1) “in its determination that $9,781 of the federal income tax refund
was jointly titled equally owned property rather than his separate property,” (2) “in its determination
that $2,520 of the state income tax refund was jointly titled equally owned property rather than his
separate property,” (3) “in its determination that the federal and state tax refunds were simply a
return of income,” and (4) in denying him an award of attorney’s fees. Both parties seek attorney’s
fees and costs associated with this appeal.
For reasons that follow, we affirm the judgment of the trial court.
BACKGROUND
On appeal, we view the evidence and all reasonable inferences in the light most favorable
to appellee as the party prevailing below. See McGuire v. McGuire, 10 Va. App. 248, 250, 391
S.E.2d 344, 346 (1990).
Dennis G. King (husband) and Marian R. King (wife) were married on September 19,
1998. Prior to the marriage, they executed a premarital agreement, expressly stating their
intention to maintain their respective premarital property as separate after the marriage. The
agreement provided that “all . . . issues, profits, increases, appreciation, and income from the
Separate Property of [each]” should remain the separate property of that one. Furthermore, “[i]n
the event of separation, divorce or death” either spouse should “be free from any claim, demand,
lien, interest and right of and by [the other].” The agreement provided that in the event of
litigation to enforce its provisions, “the prevailing party shall be entitled to be reimbursed by the
losing party for [attorney’s fees].”
The parties separated on March 7, 2000. Nevertheless, they filed joint federal and state
income tax returns for tax year 1999. By claiming on their joint returns a loss to husband’s
separately owned beach property, they generated a federal tax refund of $25,447 and a state
refund of $8,526. A dispute arose concerning their respective entitlements to the proceeds of
those refunds.
In her bill for divorce, wife asked the trial court to determine the division of the federal
and state tax refunds. The trial court held that although the losses that gave rise to the refunds
were generated by husband’s separate property, the tax refunds were jointly-titled marital
property, equally owned by the parties. Accordingly, as provided by paragraph 14 of the
premarital agreement, it divided the refund proceeds equally between them. It awarded wife a
portion of her attorney’s fees as the “prevailing party.” Husband appealed.
In King v. King, 40 Va. App. 200, 578 S.E.2d 806 (2003) (King I), we held that under the
terms of the parties’ premarital agreement “[t]he designation of separate property extended to all
increases in value and changes in form.” Id. at 206-07, 578 S.E.2d at 810. We reversed the
division of the tax refunds and remanded this issue to the trial court, holding “[t]he trial court
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should have given husband a credit for the portion of the refunds he was thus able to trace to his
separate income.” Id. at 211, 578 S.E.2d at 812. We “h[e]ld that any portion of the refunds in
excess of what husband is able to trace to his separate earnings and losses is marital property and
should be distributed in accordance with Paragraph 14 of the agreement . . . .” Id.
On remand, the trial court found that had the parties filed separate tax returns, husband
would have received a federal tax refund of $14,987 and a state tax refund of $6,006, and wife
would have received a federal tax refund of $679 and would have owed $175 in state taxes.
These findings were based on credible evidence in the form of “dummy” returns. The trial court
concluded that the amounts the parties would have received had they filed separately constituted
separate property and that the remaining refund amount, $12,301, was marital property to be
divided equally, as provided by their agreement. Holding that “[n]either party prevailed,” the
trial court made no award of attorney’s fees.
ANALYSIS
Tax Refunds
Husband argues on appeal that the trial court’s division of the tax refunds fails to follow
the mandate of King I.
In King I, we explained
that tracing is the appropriate method to determine the correct
distribution of the tax refunds. To the extent that husband is able
to show that any of the joint refunds are directly traceable to his
earnings and income, he is entitled to those funds as his separate
property. Here, the “dummy” returns under the “Married, filing
separately” status that husband offered into evidence provided the
trial court with an appropriate basis to trace what was properly
attributable to husband’s separate estate. The trial court should
have given husband a credit for the portion of the refunds he was
thus able to trace to his separate income.
Id. at 210-11, 578 S.E.2d at 812.
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Husband argues that “but for” the loss to his separately owned property, the parties would
not have received the federal tax refund of $25,447 and the state refund of $8,526. However, the
loss to husband’s property was but one of the factors that produced the amount of the tax refund.
As the evidence demonstrates, had the parties not filed jointly, the tax refunds would have been
substantially less. Joint filing, a marital act, combined with the wage withholding of both
parties, also contributed to the size of the refunds. Thus, husband succeeded in tracing to his
separate property only a portion of the total tax refunds, the portion that he would have received
had he filed separately. The federal refund of $14,987 and the state refund of $6,006 derived
from his separate property, the loss to his beach property. The remaining $12,301 in tax refunds
derived from the parties’ marital state and their marital act in filing jointly. The trial court
accurately calculated and correctly divided those amounts.
Accordingly, we hold that the trial court correctly followed the King I mandate in its
division of the tax refunds.
Attorney Fees
The trial court in King I made wife an award of attorney’s fees, concluding that she was
the “prevailing party” in that action. Our ruling in King I noted the split victory on appeal and
therefore remanded the attorney’s fees issue for reconsideration. The parties’ premarital
agreement provides for an award of attorney’s fees and costs to the “prevailing party” in any
action seeking enforcement of the contract.
We find no abuse of discretion in the trial court’s conclusion that neither party prevailed
in King I and that therefore neither party was entitled to an attorney’s fees award. The trial court
proceedings now on appeal were the execution of the mandate of King I, a complete victory for
neither party. In following the remand mandate, the trial court awarded each party less than he
or she sought.
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Both parties request costs and attorney’s fees associated with this appeal.
The rationale for the appellate court being the proper forum to
determine the propriety of an award of attorney’s fees for efforts
expended on appeal is clear. The appellate court has the
opportunity to view the record in its entirety and determine
whether the appeal is frivolous or whether other reasons exist for
requiring additional payment.
O’Loughlin v. O’Loughlin, 23 Va. App. 690, 695, 479 S.E.2d 98, 100 (1996). In this context,
and upon consideration of the entire record in this case, we hold that neither party is entitled to
an award of costs or attorney’s fees.
The judgment of the trial court is affirmed.
Affirmed.
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