Wiese v. Wiese

COURT OF APPEALS OF VIRGINIA

Present: Judges Benton, Haley and Senior Judge Annunziata
Argued at Alexandria, Virginia

JEFFREY DAVID WIESE
OPINION BY
v. Record No. 2251-04-4 JUDGE JAMES W. HALEY, JR.
AUGUST 23, 2005
MARGARET ANNE WIESE

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
J. Howe Brown, Judge Designate

Kimberley A. Murphy (Dana J. Carlson; Hale, Hassan, Carlson &
Penn, P.L.C., on briefs), for appellant.

David M. Levy (Surovell, Markle, Isaacs & Levy, PLC, on brief), for
appellee.

Jeffrey D. Wiese, husband, appeals a decision of the trial court concerning the equitable

distribution of the marital residence. Appellant asserts that the trial court erred in the following:

1) in finding that husband failed to prove the amount of separate property that he contributed toward

the purchase of the residence; 2) in finding that a refinance of the residence transmuted the house

into a wholly marital asset; 3) in refusing to apply the Brandenburg (or similar) analysis to divide

the equity in the residence; and 4) in ruling that Margaret A. Wiese, wife, had a right of first refusal

to purchase husband’s share of the residence. We reverse in part, affirm in part, and remand to the

trial court for further proceedings consistent with this opinion.

I.

Prior to the parties’ marriage in 1989, husband purchased a town home, the Ivy Oak town

home, in his sole name. The town home remained titled in his sole name after the marriage.

Husband and wife resided at the town home until July 1990. The town home was subsequently
sold, and the parties purchased the Thunder Chase house in their joint names (the residence at issue

in this matter). The parties resided at the Thunder Chase residence for thirteen years, after which

the parties separated and filed for divorce based on one-year separation.

At the equitable distribution hearing, wife testified that she contributed marital funds to the

town home’s mortgage payment for the year she lived in the Ivy Oak town home. Wife did not

present the specific dollar amount she contributed. Both husband and wife testified that wife made

non-monetary contributions (e.g., wallpapering, painting, etc.) to the Ivy Oak town home. Wife did

not present evidence to establish the amount by which the value of the Ivy Oak town home

increased as a result of her personal efforts.

Husband realized $45,483.57 from the 1990 sale of the Ivy Oak town home. The sale of the

Ivy Oak town home and the purchase of the Thunder Chase residence were simultaneous

transactions. The down payment of $41,624.30 was wired from the Ivy Oak settlement to the

Thunder Chase settlement. Husband testified that at least $35,097 of the down payment was his

separate property resulting from the sale of the town home. Wife did not dispute the source of the

down payment. Husband testified that the remainder of the net gain realized from the town home

went to closing costs and a checking account. Wife’s attorney stated at trial, “We know that was a

hybrid property and there was some separate money in that.”

The parties refinanced the Thunder Chase residence three times over the thirteen-year

occupancy period. After the third refinance, the parties removed $32,696.93 in equity from the

home and, as wife testified, we “mutually agreed” to divide these proceeds evenly, apparently

treating these proceeds as marital property. At the hearing, the evidence showed that the parties

contributed equally to the mortgage payments and expenses for renovations and repairs. Wife

testified that she made non-monetary contributions such as painting and wallpapering to the

Thunder Chase house. The parties agreed that the value of the home was $465,000.

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 The trial court held that husband, even if able to prove an amount of contributed separate

property, had “so commingled [these funds] that it lo[st] its character.” The trial court continued,

“Those refinances, if nothing else, change[d] the character of the contribution and end[ed] the

possibility of tracing.” The trial court classified the Thunder Chase home as “wholly marital”

property but noted husband’s “large contribution” toward the purchase of the home. The court

awarded fifty-five percent of the equity in the home to husband and forty-five percent to wife. The

trial court granted wife a right of first refusal to purchase husband’s share of the home, citing the

fact that wife currently lived in the home with the parties’ children and the children had lived in the

home their entire lives.

II.

Code § 20-107.3(A)(1) reads, in pertinent part, “Separate property is (i) all property, real

and personal, acquired by either party before the marriage . . . .” In Barnes v. Barnes, 16

Va. App. 98, 104, 428 S.E.2d 294, 299 (1993), this Court held that: “Code § 20-107.3 provides

that property acquired during the marriage is presumed to be marital and property acquired

before marriage is presumed to be separate.” As noted above, wife failed to present any

evidence as to the increase in value of the Ivy Oak town home as a result of her personal efforts

or monetary contributions. Accordingly, she failed to meet her burden of proving a transmutation,

in whole or in part, of the Ivy Oak town home from separate to marital, as required by Code

§ 20-107.3(A)(3)(a-d). See Moran v. Moran, 29 Va. App. 408, 412, 572 S.E.2d 834, 835-36 (1999);

Rowe v. Rowe, 24 Va. App. 123, 136, 480 S.E.2d 760, 766 (1997). Thus, it was established that

the Ivy Oak town home was husband’s separate property.

As noted, the Thunder Chase property was titled in both parties’ names. However, Code

§ 20-107.3(A)(1)(e) reads,

When marital property and separate property are commingled into
newly acquired property resulting in the loss of identity of the
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 contributing properties, the commingled property shall be deemed
transmuted to marital property. However, to the extent the
contributed property is retraceable by a preponderance of the
evidence and was not a gift, the contributed property shall retain its
original classification.

In von Raab v. von Raab, 26 Va. App. 239, 248, 494 S.E.2d 156, 160 (1997), this Court

summarized the concept of tracing as follows:

Whether a transmuted asset can be traced back to a separate
property interest is determined by the circumstances of each case,
including the value and identity of the separate interest at the time
of the transmutation. . . . [T]he party claiming a separate interest
in transmuted property bears the burden of proving retraceability.
If the party claiming the separate interest in transmuted property
proves retraceability, the burden shifts to the other party to prove
that the transmutation of the separate property resulted from a
“gift.”

(Citations omitted).

Husband testified that the funds realized from the sale of the town home were wired at

settlement for down payment on the Thunder Chase home. Wife did not dispute the source of

the funds used for the down payment. The evidence sufficiently demonstrated that husband

advanced his separate property by wire transfer as the down payment on the Thunder Chase

residence. Wife’s attorney conceded in argument that, as a result of husband’s contribution, the

Thunder Chase property was in part separate and thus hybrid at the time of its acquisition. Thus,

husband met his burden of tracing the proceeds of the sale of his separate property, the Ivy Oak

town home, into the acquisition of the Thunder Chase residence. See Fowlkes v. Fowlkes, 42

Va. App. 1, 590 S.E.2d 53 (2003). “‘Code § 20-107.3(A)(3) addresses hybrid property, that is,

property which is by definition part marital and part separate. The concept of hybrid property

presupposes that separate property has not been segregated but, rather, combined with marital

property.’” Id. at 7, 590 S.E.2d at 56 (quoting Rahbaran v. Rahbaran, 26 Va. App. 195, 207, 494

S.E.2d 135, 141 (1997)). See also Bchara v. Bchara, 38 Va. App. 302, 313, 563 S.E.2d 398, 403

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(2002). “When the tracing process succeeds, the property has both marital and separate

interests.” B. Turner, Equitable Distribution of Property 276 (2d ed. 1994).

Husband having retraced his contribution, the burden shifts to wife to demonstrate that

the $35,097 was a gift. “The three elements of a gift are: (1) intention on the part of the donor to

make a gift; (2) delivery or transfer of the gift; and (3) acceptance of the gift by the donee.”

Theismann v. Theismann, 22 Va. App. 557, 566, 471 S.E.2d 809, 813, aff’d on rehearing

en banc, 23 Va. App. 697, 479 S.E.2d 534 (1996). See also Utsch v. Utsch, 266 Va. 124, 128, 581

S.E.2d 507, 509 (2003).

Here, wife introduced no evidence to prove that these funds were a gift to her. The funds

were advanced directly, by wire transfer, from husband’s account to an account at settlement of the

Thunder Chase home. Husband clearly did not intend to make these funds a gift to wife, nor did he

deliver the amount directly to her, nor did she accept them. Accordingly, wife failed to prove the

$35,097 was a gift.

Because wife did not carry her burden of proving that husband gifted her with the proceeds

derived from the sale of the town home, those proceeds remained husband’s separate property.

And, because husband carried his burden of retracing his contribution of separate property to the

purchase of the marital residence, the residence was, at least prior to the multiple refinancings, part-

marital and part-separate property. See Code § 20-107.3(A)(3)(e).

III.

Though apparently a matter of first impression in Virginia, courts in other jurisdictions have

concluded that refinancing does not necessarily preclude the possibility of tracing separate property,

or constitute an independent transmutation, even if proceeds of refinancing may become marital

property.

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 In Hubby v. Hubby, 556 S.E.2d 127 (Ga. 2001), husband had made the down payment on

the marital residence with his separate funds, the home was refinanced, and a portion of the

proceeds taken out by the parties. The Supreme Court of Georgia stated:

Also, a refinancing of the mortgage during the marriage does not
prevent an equitable division. Even though a refinancing may
increase the debt and reduce the equity, the net effect is to convert
the then-existing equity in the marital home into cash. Of the
$68,500 Husband and Wife received by refinancing, $63,017 was
used to pay off the original mortgage, leaving them with a balance
of $5,483. If they retained that cash in an account or used it to
purchase other marital assets, then that account or property may be
subject to equitable division in this divorce action. Insofar as the
marital home is concerned, however, the important elements are
the increase in net equity during the marriage and the respective
contributions from personal and marital funds, rather than any
conversion of the equity into other forms of property over the
course of the marriage.

Id. at 129.

Likewise, in Griffin v. Griffin, 642 P.2d 949 (Idaho Ct. App. 1982),

The wife claims that even if the . . . home originally was William
Griffin’s separate property there was a transmutation of its status
from separate to community when it was refinanced in September,
1979 . . . [and] both parties signed a loan application form, as well
as a note and deed of trust . . . [and] the loan application form
[recited the property would be held by joint title].

Id. at 952. The Court of Appeals of Idaho held that transmutation had not occurred.1

The refinancing of a home has become a common practice. Refinancing does not per se

constitute a transmutational alteration of the parties’ respective interests in real property, or preclude

a tracing of those interests. We hold that husband traced the sum of $35,097 as separate property

used for the down payment on the Thunder Chase property, and neither the refinancings, nor the

equal division of a portion of the proceeds from the third refinancing, standing alone or in

1
We recognize that Idaho is a community property state. Nonetheless, Idaho courts
follow principles of tracing and transmutation in equitable distribution.
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conjunction, transmuted the equity in its entirety into marital property. We find the trial court erred

when it concluded: “Those refinancings, if nothing else, change[d] the character of the contribution

and end[ed] the possibility of tracing.” Accordingly, we reverse the decision of the trial court on

this issue and remand for equitable distribution under either Brandenburg or similar analysis.

IV.

Husband asserts that, contrary to the intent of Code § 20-107.3(F), the trial court considered

the child support award as a factor in granting wife the right of first refusal to purchase the

husband’s share of the marital residence. That section reads: “The court shall determine the

amount of any such monetary award without regard to . . . support for the minor children of both

parties.” Code § 20-107.3(F). In William v. Williams, 4 Va. App. 19, 24, 354 S.E.2d 64, 66

(1987), this Court held:

The clear legislative intent embodied in this Code section is to
maintain an appropriate separation between considerations of child
or spousal support and considerations of an equitable division of
marital wealth. This is appropriate because support and equitable
distribution awards are based on entirely different considerations
and serve entirely different purposes. . . . In short, different and
distinct types of interests are involved between adjusting the
wealth of the marriage and providing spousal and child support and
the statutory scheme of Code § 20-107.3 recognizes this.

The record fails to show that the trial court improperly considered child support in

granting wife the right of first refusal. The trial court stated that it granted the right of first

refusal because wife lived at the home, had primary custody of the children, and the children

would benefit by staying in the only house they had ever known. We find no error in the trial

court’s decision.

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 V.

For the foregoing reasons, we affirm in part, reverse in part, and remand to the trial court

the issue of the equitable distribution of equity in the martial home.

Affirmed, in part,
reversed, in part,
and remanded.

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