King v. King

COURT OF APPEALS OF VIRGINIA

Present: Chief Judge Fitzpatrick, Judges Elder and Humphreys
Argued at Alexandria, Virginia

DENNIS G. KING
OPINION BY
v. Record No. 2071-02-4 CHIEF JUDGE JOHANNA L. FITZPATRICK
APRIL 1, 2003
MARIAN R. KING

FROM THE CIRCUIT COURT OF LOUDOUN COUNTY
James H. Chamblin, Judge

Christine Mougin-Boal (Paice & Mougin-Boal,
P.C., on briefs), for appellant.

Peter W. Buchbauer (James J. McGuire;
Buchbauer & McGuire, P.C., on brief), for
appellee.

In this domestic appeal, husband contends the trial court

erred in awarding wife (1) one half of the parties' 1999 federal

and state tax refunds; (2) a reimbursement of $921.66 for

personal property; and (3) a portion of her attorney's fees.

For the reasons that follow, we affirm the trial court's

personal property award; we reverse the trial court's award of

the 1999 tax refunds and attorney's fees, and remand for an

award consistent with this opinion.

"On appeal, we construe the evidence in the light most

favorable to wife, the prevailing party below, granting to her

evidence all reasonable inferences fairly deducible therefrom."
Donnell v. Donnell, 20 Va. App. 37, 39, 455 S.E.2d 256, 257

(1995) (citing McGuire v. McGuire, 10 Va. App. 248, 250, 391
S.E.2d 344, 346 (1990)). 1 The essential facts are undisputed.

The parties were married on September 19, 1998, and they have one

child. Prior to the marriage, on January 10, 1998, the parties

executed a comprehensive Pre-Marital Agreement (agreement), which

expressly outlined their intention to maintain their separate

property as separate after the marriage. 2

Husband's separate estate included any and all income and

earnings 3 acquired during the marriage, as well as a house in

Kure Beach, North Carolina 4 (beach property). Additionally, the

parties expressly agreed that any appreciation in the beach

property or any additional property acquired from the proceeds,

equity or income from the beach property would remain husband's

separate property. The parties further agreed that any

liabilities arising from the beach property would be husband's

separate responsibility and would be paid with separate funds.

The beach property sustained substantial damage in 1999 during

Hurricane Floyd, resulting in a $127,317 diminution in value and

a $25,000 loss of rental income.
The parties separated on March 7, 2000. Despite their

separation, the parties filed joint tax returns with the federal

1
There is no transcript of the trial. The record before us
is a statement of facts, and the parties are limited to the
recitations in the statement.
2
Neither party disputes the validity of the agreement.
Instead, their dispute turns on the appropriate application of
the agreement to the disputed property.
3
Pre-Marital Agreement ¶10.
4
Pre-Marital Agreement ¶8.

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and state taxing authorities for tax year 1999. 5 On the joint

returns, the parties claimed the loss to the beach property. By

claiming this loss, the parties generated a federal tax refund of

$25,447 and a state refund of $8,526. They agreed to claim the

loss on their joint tax returns after they calculated their taxes

without including the loss and determined they would have had a

tax liability of at least $9,779 if they did not claim the loss. 6

Both the federal and state refund checks were issued to the

parties jointly. Because they could not agree on how the refunds

should be allocated, the parties had not negotiated the refund

checks when wife filed the instant divorce suit.
Wife filed her bill of complaint for divorce on September 2,

2001 and requested that the trial court determine, inter alia, a

proper division of: the 1999 federal and state tax refunds, the

cost of a mower deck for a tractor purchased during the marriage,

and some shelving and storage containers. At their ore tenus

hearing, both parties asked the trial court to make an award of

the disputed property pursuant to the terms of the agreement. At

the hearing, husband offered two joint tax returns into evidence,

one calculating the liability without claiming the loss to the

beach property and the one the parties filed, which generated the

disputed refunds. Additionally, husband offered into evidence

5
The record also showed that the parties filed joint tax
returns in tax year 1998; but is silent as to how any refunds or
liabilities were apportioned between them.
6
The federal tax liability would have been $9,779; the
record is silent regarding any potential liability to the
Commonwealth. In both cases, wife's brother-in-law prepared the
returns and neither party disputes the accuracy of these numbers
in the statement of facts.
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"dummy" tax returns using the "Married, filing separate" tax

status that showed that husband would have received a federal

refund of $14,987 and a state refund of $6,006 for tax year 1999

had he filed separately. Husband also contested the value of the

personal property.

In a letter opinion, the trial court found that even though

the losses that gave rise to the refund were generated by

husband's separate property, the tax refunds were jointly-titled

marital property that were equally owned by the parties, pursuant

to the terms of the agreement. Although the trial court

acknowledged that this award was not "fair" and possibly not

compelled by the express terms of the agreement, it "fe[lt]

compelled to decide this issue as argued by the parties." The

trial court further ordered husband to pay wife a total of

$921.66 for the mower deck and the storage items. Finally, the

trial court awarded wife a portion of her attorney's fees as the

prevailing party, as provided for in the agreement. Husband

appealed.
I. 1999 Income Tax Refunds

Husband first contends that the trial court erred in

finding that the federal and state tax refunds were equally

owned marital property. Husband argues that because the refunds

are directly attributable to the losses sustained by his

separate property, he was entitled to the entire refund in

accordance with paragraph 8 of the agreement. Wife counters

that the checks themselves, regardless of the reason for the

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refund, were issued in joint names. Thus, the funds became

joint property acquired during the marriage and entitled her to

an equal division of the refunds in accordance with paragraph

14(a). Wife's argument, however, fails to give effect to the

express terms of the parties' agreement, specifically paragraphs

10 and 13.

"Antenuptial agreements, like marital property settlements,

are contracts subject to the rules of construction applicable to

contracts generally, including the application of the plain

meaning of unambiguous contractual terms." Pysell v. Keck, 263

Va. 457, 460, 559 S.E.2d 677, 678 (2002). "When a written

marital agreement is presented, a court applies the same rules of

formation, validity and interpretation used in contract law,

except where specified by the Code." Shenk v. Shenk, 39 Va.

App. 161, 170, 571 S.E.2d 896, 901 (2002) (internal citations and

quotations omitted).

A well-settled principle of contract law
dictates that where an agreement is complete
on its face, is plain and unambiguous in its
terms, the court is not at liberty to search
for its meaning beyond the instrument
itself. A contract is not deemed ambiguous
merely because the parties disagree as to
the meaning of the language they used to
express their agreement."

Ross v. Craw, 231 Va. 206, 212-13, 343 S.E.2d 312, 316 (1986)

(internal citations and quotations omitted). Furthermore,

"courts cannot read into contracts language which will add to or

take away the meaning of words already contained therein."

Pysell, 263 Va. at 460, 559 S.E.2d at 678. "In reviewing the

agreement, we must gather the intent of the parties and the
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meaning of the language . . . from an examination of the entire

instrument, giving full effect to the words the parties actually

used." Layne v. Henderson, 232 Va. 332, 337-38, 351 S.E.2d 18,

22 (1986) (emphasis added).

Under the express terms of the agreement, each party

clearly retained as his or her separate property all the assets

owned at the time they executed the agreement. The designation

of separate property extended to all increases in value and

changes in form. Specifically, Paragraph 8 states:

DENNIS G. KING and MARIAN R. KERN agree that
any interest, present or future, legal or
equitable, vested or contingent, in all
property, real, personal or other, wherever
situated, including without limitation, the
property set out in the attached schedules
belonging to DENNIS G. KING at the
commencement of the marriage and any
property acquired by DENNIS G. KING during
the marriage by gift, bequest, devise,
survivorship, descent, purchase, as the
beneficiary of a trust or by any other
means, including property that is acquired
during the marriage as Separate Property in
Paragraphs 10 and 14, shall be and remain
his Separate Property. The parties further
acknowledge and agree that all interest,
dividends, rents, issues, profits,
increases, appreciation, and income from the
Separate Property of DENNIS G. KING and any
other assets purchased or otherwise acquired
with the foregoing assets or proceeds shall
be and remain DENNIS G. KING's separate
property. The parties agree that a change
in the form of DENNIS G. KING's assets as a
result of the sale, exchange, investment,
reinvestment, hypothecation, or other
disposition of such assets, or a change of
form of doing business shall not constitute
any change of property characterization, and
such assets shall remain DENNIS G. KING's
Separate Property regardless of any change
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of form. MARIAN R. KERN shall have no
right, title, interest, lien, or claim under
the laws of any state or foreign country in
or to any of DENNIS G. KING's Separate
Property assets.

* * * * * * *

The co-mingling of any property with the
Separate Property of MARIAN R. KERN shall
not cause the loss of the identity of the
property, and it shall remain DENNIS G.
KING's Separate Property.

The parties understand and agree that it is
impossible to foresee all appreciation,
changes in value or income. The lack of
foreseeability shall not be the basis to
avoid provisions of this Agreement.

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Pre-Marital Agreement ¶8. 7 The agreement further stipulates that

each party will retain his or her income as separate property

during the marriage.

The parties agree that any earnings or
income of either party of whatsoever nature,
kind or source before and after the
marriage, including but not limited to
distributions from trusts, salary, increases
in value, appreciation, capital gains,
interest, dividends, bonuses, stock options,
deferred compensation, and pension,
profit-sharing and retirement benefits shall
be the Separate Property of the party
earning or acquiring such earnings or income
as though the contemplated marriage had
never occurred. There shall be no
allocation made of any such earnings or
income between community property and
Separate Property as such earnings or income
shall be entirely the Separate Property of
the party earning or acquiring the same.

The parties agree that it is impossible to
foresee all appreciation, changes in value
or income. The lack of foreseeablility
shall not be the basis to avoid provisions
of this Agreement.

Pre-Marital Agreement ¶10. Finally, the agreement provides:

All obligations incurred due to or as a
consequence of the purchasing, encumbrance,
or hypothecation of Separate Property of
either party, whether real, personal or
mixed, and all taxes, insurance premiums,
and maintenance costs arising from or
related to the Separate Property of either
party shall be paid from such party's
Separate Property income or from such

7
Paragraph 9 makes the same provision for wife's separate
property.
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 party's separate property funds at such
party's election.

Pre-Marital Agreement ¶13 (emphasis added).

These provisions make clear that the parties intended that

every aspect of their separate assets, including "changes in

value," would remain separate property. Although the language of

the agreement specifically addresses increases in value, a

"change in value" need not be a positive one. Indeed, the

agreement expressly states that unforeseen changes in value do

not void other operative provisions of the agreement.

Accordingly, the loss on the beach property was an aspect of

husband's separate property. This determination, however, does

not end our inquiry.
We have not yet addressed the precise question of whether

filing a joint tax return necessarily converts any refund

generated by the separate property of one party into marital

property. We have, however, had the opportunity to consider an

analogous situation where one spouse was the sole wage earner.

In Decker v. Decker, 17 Va. App. 12, 435 S.E.2d 407 (1993), we
held that the wife, who had "no taxable obligation or income,"

was not entitled to half of the subsequent tax refund. Id. at

21, 435 S.E.2d at 414. "[I]t offends the sense of fairness that

the [wife] . . . should somehow receive a [substantial] refund

check . . . merely because of the technical form in which the tax

vouchers were filed, which filings were required because of the

income reported by and attributable to [husband]." Id. The

analysis adopted in Decker is equally applicable to the instant

case and is consistent with the intent of the parties' agreement

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to keep all aspects of the parties' separate holdings in fact

separate.

The Supreme Court of Georgia in Schwartz v. Schwartz, 561

S.E.2d 96 (Ga. 2002), is also instructive. In that case, the

court considered whether wife was entitled to one-half of an

income tax refund when the parties' divorce settlement agreement

stated that husband would pay all state and federal income taxes

for 1997 and none of the income would be considered the wife's

income for tax purposes. Id. at 97. In Schwartz, the wife

"argue[d] that if taxes were still owed after withholding, then

[husband] would have to pay them, but if a refund was in order,

he would have to divide it with her." Id. at 98. The court held

that where the parties have contractually agreed for only one of

them to be liable for taxes, only that party was entitled to reap

the benefit of a refund. "To construe the agreement as [wife]

urges would clearly result in a windfall to her that was not

contemplated by the parties." Id.

Like Schwartz, the agreement expressly places the onus for

any liability "arising from or related to" the beach property on

husband. See Pre-Marital Agreement ¶13. Accordingly, any

benefit that derives from the beach property should go to husband

just as any liability would. An equal division of the loss to

the beach property would, as in Schwartz, "result in a windfall

to [wife] that was not contemplated by the parties." Schwartz,

561 S.E.2d at 98.

The filing of a joint income tax return must
. . . be viewed in the circumstances of the
general financial background of the
marriage; moreover, it should be construed
as a response to the tax statutes designed
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 to confer a benefit to the married couple.
In itself the exercise of the option by the
spouses to file a joint return should not be
interpreted as the conclusive memorial of
the intent to create a joint tenancy or to
make a gift by one for the other. We should
look beyond the simple execution of the
return to the circumstances of the marriage.

Angelo v. Angelo, 428 N.Y.S.2d 14, 17-18 (N.Y. App. Div. 1980).

The financial background of this marriage is memorialized in the

parties' agreement. Clearly they intended all separate assets to

remain separate, even if co-mingled with marital assets and all

earning and income on these assets were to be segregated. They

took the further step of agreeing that all their earnings and

income would also remain separate property.
"An income tax refund is nothing more that a return of

income." Phillips v. Phillips, 351 S.E.2d 178, 180 (S.C. App.

1986). Where, as here, the parties have expressly agreed that

their respective incomes are and remain separate property, it

follows that refunds specifically attributable to that separate

property should also be part of each party's separate estate. As

the trial court noted, what is required in this case "is similar

to tracing in equitable distribution cases." We agree 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
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trial court should have given husband a credit for the portion of

the refunds he was thus able to trace to his separate income.

We are, nevertheless, cognizant of the fact that "Married,

filing joint" is a special tax status that "reflects the view of

the Congress that the family should be considered as both a

social and economic unit." Angelo, 428 N.Y.S.2d at 16. Indeed,

"the parties were no doubt swayed by the pecuniary advantage to

the family as a whole in filing jointly." Nill v. Nill, 584

N.E.2d 602, 605 (Ind. App. 1992). "But where the advantages are

taken, the burdens must also be accepted. The statute

authorizing the filing of the marital joint return provides that

upon filing, the liability of each spouse is joint and several."
Angelo, 428 N.Y.S.2d at 16. Therefore, we hold 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,

which provides in pertinent part:

All property acquired during the marriage
(but excluding property defined as separate
under this Agreement) shall be owned as
follows irrespective of monetary or
non-monetary contributions made by either
party:

(1) If there is written evidence of
title such as a deed, will, trust, car
title, bank account, brokerage account,
trust account, management agreement, bill of
sale, etc., then such property shall be
owned in accordance with the written
evidence of title. If property is jointly
titled, it shall be equally owned. If
property is individually titled, it shall be
the sole property of such party possessing
such title and deemed his or her Separate
Property.
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Pre-Marital Agreement ¶14(a)(1). This distribution gives full

effect to all the provisions of the parties' agreement, while

recognizing the benefit to husband and the consequences to wife

of filing joint tax returns. Accordingly, we remand the question

of the tax refunds to the trial court for an award consistent

with this opinion.

II. Personal Property Award

Husband next contends that the trial court erred in awarding

wife $651.15 for a mower deck and $270.51 for storage

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bins and shelving because wife did not present evidence to

support the values assigned to these items. 8

"A trial court's determination of matters within its

discretion is reversible on appeal only for an abuse of that

discretion, . . . and a trial court's decision will not be set

aside unless plainly wrong or without evidence to support it."

Albert v. Albert, 38 Va. App. 284, 294, 563 S.E.2d 389, 394

(2002). "[W]hen a court hears evidence at an ore tenus hearing,

its decision is entitled to great weight and will not be

disturbed on appeal unless plainly wrong or without evidence to

support it." Goodhand v. Kildoo, 37 Va. App. 591, 599, 560

S.E.2d 466, 466 (2002).

It is generally recognized that the opinion
testimony of the owner of property, because
of his relationship as owner, is competent
and admissible on the question of the value
of such property, regardless of his
knowledge of property values. It is not
necessary to show that he was acquainted
with the market value of such property or
that he is an expert on values. He is
deemed qualified by reason of his
relationship as owner to give estimates of
the value of what he owns.

Haynes, Executrix v. Glenn, 197 Va. 746, 750, 91 S.E.2d 433, 436

(1956).

At trial, wife presented evidence that she purchased the

mower deck for $651.15. Although husband argued the item was no

longer worth that amount, he failed to offer an alternative value

for the trial court to consider. The trial court found as a fact

8
We note that the approximate cost, excluding any
attorney's fees, to address this issue exceeds that total amount
the trial court awarded.
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that the tractor "was acquired with the joint credit of the

parties. Hence the tractor is jointly owned." Under paragraph

14 of the agreement, wife was entitled to an equal division of

the value of the tractor. Wife, however, requested "merely the

return of the $651.15 she contributed to the purchase of the

tractor." The trial court further found that the tractor was

worth more than $1,302.30. Husband offered no proof to the

contrary. The only evidence in the record supports the trial

court's finding.
The shelves and storage containers were wife's separate

property under paragraph 9 of the agreement. At trial, wife

stated that husband asked her to leave these items in the marital

home when she left and that husband agreed to pay her $270.51 for

the items. The trial court found that husband agreed to pay this

amount and had not done so. Accordingly, the award for the

personal property is affirmed.

III. Attorney's Fees Award

Lastly, husband argues the trial court erred in awarding

wife her attorney's fees as the prevailing party under the

agreement. Because we reverse the trial court on the issue of

the tax refunds, the amount of attorney's fees award must also be

recalculated.

The parties' agreement includes a provision for an award of

counsel fees in the event of a dispute.

Should any party hereto retain counsel for
the purpose of enforcing or preventing a
breach of any provision hereof including but
not limited to by instituting any action or
proceeding to enforce any provision hereof
for damages by reason of any alleged breach

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 or any provision hereof for a declaration of
such parties' [sic] rights or obligations
hereunder or for any judicial remedy, then
the prevailing party shall be entitled to be
reimbursed by the losing party for all costs
and expenses incurred thereby including but
not limited to reasonable attorney's fees,
expert fees and other reasonable costs for
the services rendered to such prevailing
party.

Pre-Marital Agreement ¶20. The trial court awarded wife $1,885

in attorney's fees as the prevailing party under the terms of the

agreement. Because we reverse and remand for further

consideration of the disbursement of the tax refund checks, we

also reverse the attorney's fees award and remand for an award

consistent with this opinion. 9

Affirmed in part,
reversed in part
and remanded.

9
Wife requests an award of attorney's fees incurred on
appeal pursuant to paragraph 20 of the agreement. Husband made
no request for appellate fees. As wife was not the "prevailing
party," paragraph 20 is not implicated. Based on the record as
a whole, we decline to award additional appellate attorney's
fees.
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