COURT OF APPEALS OF VIRGINIA
Present: Judges Benton, Coleman and Lemons*
Argued at Richmond, Virginia
CHARLES S. ROWE
v. Record No. 0981-99-2
MARY ANN ROWE OPINION BY
JUDGE SAM W. COLEMAN III
MARY ANN ROWE AUGUST 22, 2000
v. Record No. 1028-99-2
CHARLES S. ROWE
FROM THE CIRCUIT COURT OF THE CITY OF FREDERICKSBURG
Richard H. C. Taylor, Judge Designate
Carl F. Bowmer (Christian & Barton, L.L.P.,
on briefs), for Charles S. Rowe.
E. Duncan Getchell, Jr. (Robert H.
Patterson, Jr.; Richard Cullen; Paul G.
Watson, IV; McGuire, Woods, Battle and
Boothe, L.L.P., on briefs), for Mary Ann
Rowe.
Both Charles S. Rowe and Mary Anne Rowe appeal the circuit
court's order, which essentially reaffirmed and reinstated the
trial court's prior equitable distribution and spousal support
awards that we reversed in an earlier appeal and remanded for
reconsideration. See Rowe v. Rowe, 24 Va. App. 123, 480 S.E.2d
*
Justice Lemons participated in the hearing and decision of
this case prior to his investiture as a Justice of the Supreme
Court of Virginia.
760 (1997). For the reasons set forth below, we again reverse
the trial court and remand the case for further proceedings in
accordance with the following rulings.
I. BACKGROUND
The pertinent underlying facts are set forth in our prior
opinion. See 24 Va. App. at 130-34, 480 S.E.2d at 763-64.
Husband and wife were married on May 1, 1970. The parties'
major assets were obtained with funds received from husband's
position as co-editor, co-publisher, and a principal stockholder
of the Free Lance-Star, a family-owned newspaper in
Fredericksburg. After husband and his brother inherited the
newspaper from their father in 1949, they divided its operation
between them; husband assumed responsibility for the
news-editorial side, while his brother served as business
manager. Over the years, the newspaper grew substantially and
profited. Husband's expert witness calculated that the
newspaper's stock increased in value from $500 per share in 1970
to $9,500 per share in 1991. Also, during the course of the
parties' marriage, husband received $14,000,000 in salary and
dividends from the newspaper. When the parties married, they
moved into husband's home on Ingleside Drive. Four years later,
husband sold the Ingleside Drive property for $82,000, and the
parties purchased the marital home on Hanover Street, in which
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husband invested the $82,000 proceeds from the Ingleside Drive
home.
The parties were divorced by final decree on December 1,
1993. In March 1996, the circuit court entered its equitable
distribution and spousal support decree. The trial court made
an equitable distribution award to wife of $4,204,530, awarded
wife $10,000 per month in spousal support, and awarded her
$50,000 for attorney's fees and court costs. In doing so, the
trial court affirmed the Commissioner in Chancery's report,
which recommended that one-half, or $41,000, of the Ingleside
Drive sale proceeds remain husband's separate property. Both
parties appealed from that decree. We reversed the trial
court's rulings on several issues and remanded the case with
instructions. On remand, the trial judge, with few exceptions,
reaffirmed his prior rulings and the equitable distribution and
spousal support awards. The trial judge's disregard of our
opinion and mandate on remand has prompted and necessitated the
parties' second appeal.
To place matters in a proper context, we note that in the
parties' first appeals, wife asserted, inter alia, that the
trial court erred by accepting husband's valuation of the
newspaper stock. Husband asserted that the trial court erred by
classifying the entire increase in value of the newspaper stock
between 1970 and 1991 as marital property. He argued the
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$14,000,000 in salary and stock dividends that he received as
compensation from the newspaper during the marriage represented
the actual value of his marital effort and, thus, precluded
classification of the entire increase of the stock appreciation
as a marital asset. Husband also contended the trial court
erred by classifying only $41,000 in value of the parties'
marital residence as his separate property because the entire
$82,000, constituting the proceeds from the sale of his
premarital home, was the value of his separate interest. He
also asserted the trial court erred in determining the amount of
the monthly spousal support award.
On appeal, we held that: (1) the trial court did not err
in the valuation of the newspaper stock; however, it erred in
classifying the entire increase in value of husband's stock as
marital property because fifty percent or more of the increase
was attributable to the efforts of husband's brother and/or
passive economic factors; (2) the amount of compensation paid to
husband by the newspaper for his services, whether inadequate or
excessive, was but a factor to consider in determining the
amount of marital wealth attributable to marital effort; (3) the
trial court erred in treating only $41,000 of the $82,000 of the
Ingleside Drive sale proceeds invested in the parties' marital
home as gifted, marital property; (4) the court properly refused
to award wife one-half of husband's retirement benefits and the
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court had the power to order the husband to pay wife's designee,
if wife predeceased husband; (5) the court erred in classifying
all of husband's post-separation pension contributions as
marital but did not err in refusing wife's proffer concerning
husband's separate contributions because wife failed to timely
offer supplemental evidence; and (6) the trial court correctly
deducted wife's litigation expenses from her list of other
expenses in valuing her accounts because she failed to timely
present evidence concerning her litigation expenses. Because
the trial court had to reconsider, on remand, classification of
the increase in the value of husband's stock and distribution of
the $82,000 proceeds from the Ingleside Drive home gifted by
husband, we also held that the spousal support award must be
reconsidered.
While the case was pending on appeal, husband sold his
newspaper stock for an amount far in excess of that valued by
the experts in 1991. On remand, wife filed a motion for
re-valuation of the stock. The trial court denied that motion.
In denying wife's motion for re-valuation of the stock, the
trial judge ruled, "The change in value of the Free Lance-Star
stock based upon Husband's sale of the Free Lance-Star stock to
his brother long after the separation, divorce and opinion by
the Court of Appeals does not affect the value as determined by
the Commissioner and set forth in the distribution order." The
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trial judge specifically noted that we had ruled the trial court
erred by finding "the entire increase in [value of] Husband's
stock was due to his personal efforts" and that we instructed
the trial court to consider on remand, as a factor in
determining the extent to which husband's personal efforts had
contributed to the increase in value of his stock, the fact that
husband may have been overcompensated for his efforts by
receiving $14,000,000 in salary and stock dividends during the
marriage. Disregarding our decision, the trial judge held that
"[b]ecause the Commissioner and [the trial court] considered
both factors and with sufficient evidence, the ultimate finding
[that the entire increase in value of the stock was marital] was
a judgment call properly considered and supported."
Additionally, the trial court ruled on remand that:
(1) husband shall pay wife 25.6 percent of each of his pension
payments; (2) the "entire sum of $82,000.00 invested in 'Hanover
Street' by Husband and classified by the Court of Appeals as
marital property shall be distributed to Wife"; (3) wife's
motion for updated discovery and valuation of marital assets was
denied; and (4) the "findings concerning spousal support,
litigation expenses, and post-separation deposits and
withdrawals have been reconsidered, and the Court FINDS that the
original determination as set forth in the Final Decree of
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March 15, 1996 constitutes a distribution which is fair and
equitable to each party."
A trial judge is bound by a decision and mandate from this
Court, unless we have acted outside our jurisdiction. A trial
court has no discretion to disregard our lawful mandate. When a
case is remanded to a trial court from an appellate court, the
refusal of the trial court to follow the appellate court mandate
constitutes reversible error. See 1B Michie's Jurisprudence
Appeal and Error § 349 (M.J. Divine & G.E. Legner eds. 1995);
see also Nassif v. Board of Supervisors, 231 Va. 472, 480, 345
S.E.2d 520, 525 (1986) (stating that "[w]hen this Court rules
that the judgment of a trial court is erroneous it does not
matter whether that judgment is erroneous for one reason or ten;
it is no longer viable").
Furthermore, a trial judge violates his or her oath of
office by willfully refusing to abide by the rulings of an
appellate court concerning the very case on appeal from the
trial court, regardless of how erroneous the trial judge may
consider the appellate ruling to be. Moreover, the Canons of
Judicial Conduct provide that "[a] judge shall be faithful to
the law . . . ," Canons of Judicial Conduct for the State of
Virginia Canon 3(B)(2) (1999), and "[a] judge should respect and
comply with the law and shall act at all times in a manner that
promotes public confidence in the integrity and impartiality of
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the judiciary." Canon 2(A). Here, the trial judge expressly
refused to follow or abide by our opinion, mandate, and
instructions on remand.
II. ISSUES
In the present appeal, husband contends the trial court
erred in its remand decree: (1) by classifying a portion of the
increase in value of the Free Lance-Star stock as marital
property; (2) in awarding wife the entire sum of $82,000,
representing the proceeds from the sale of husband's separate
property, which he invested in the marital home; and (3) in
failing to modify its previous spousal support award. Wife also
appeals, contending that the trial court erred by: (1) failing
to re-value the Free Lance-Star stock to determine the actual
fair market value because husband had sold the stock while the
case was pending on appeal; (2) failing to determine the
post-separation increases in value of other marital assets;
(3) failing to reconsider the award of attorney's fees; and
(4) refusing to allow discovery or to conduct an evidentiary
hearing.
III. ANALYSIS
A. Appreciation in Value of Newspaper Stock
1. Classification
The trial judge classified the entire $3,933,000 increase
in value of the newspaper stock during the marriage as marital
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property and awarded wife one-half of that increased value or
$1,966,500. We held in the first appeal that "the trial court
erred in classifying the entire increase in the value of
husband's stock as marital property because fifty percent or
more of the increase was attributable to the efforts of
husband's brother and/or passive economic factors." Rowe, 24
Va. App. at 129-30, 480 S.E.2d at 763.
Husband contends that the foregoing ruling became the law
of the case and, based on that holding, no more than fifty
percent of the increase in value of the stock can be considered
marital property. Husband contends that the trial court erred
on remand in failing to abide by that holding. Husband also
asserts that the trial court erred on remand by failing to give
proper consideration to the extent to which the marital estate
was overcompensated by husband having received $14,000,000 in
salary and dividends during the marriage. Husband contends
that, when properly considered, this factor reduces the extent
to which his personal efforts should account for the increase in
the stock's value.
We held in the first appeal that a substantial portion of
the increase in the stock's value was attributable to the growth
in value of husband's original separate investment due to market
forces and the efforts of third parties. We concluded that the
increase in value was not entirely attributable to husband's
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personal efforts and, therefore, intimated that a substantial
portion of the increase in value was attributable to the passive
growth of husband's original separate asset at the time of the
marriage. We expressly pointed out that "Code
§ 20-107.3(A)(3)(a) provides that '[i]n 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." Id. at 133, 480 S.E.2d at 764
(emphasis added). It was clear on the record before us in the
prior appeal that husband's personal efforts did not solely
account for the increase in value of his stock from $500 per
share in 1970 to $9,500 per share in 1991. We directed that on
remand the "increase classifiable as marital should reflect only
that [appreciation] attributable to husband's personal efforts
and not those of husband's brother or passive efforts, such as
population growth and minimal inflation." Id. at 134, 480
S.E.2d at 765.
At trial, husband contended and presented evidence that a
significant portion of the increase in value of the stock was
not attributable to his personal efforts, but rather was
attributable to the increase in the circulation of the
newspaper, the dramatic population growth in the Fredericksburg
area, and slow inflation. Husband also asserted that his
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brother was more responsible for the increase in the value of
the newspaper's stock than he was. Husband produced evidence
that during the marriage his responsibilities at the newspaper
had steadily decreased as he became more involved in "national
newspaper activities," which took him away from the
Fredericksburg area and away from the Free Lance-Star. He
contends that those efforts should not be considered marital
efforts attributable to his duties with the Free Lance-Star or
affecting the increase in value of his interest in the
newspaper. Husband also introduced evidence that, during this
period, his brother's efforts and duties at the newspaper had
increased. As we previously noted, "Husband's brother was
solely responsible for the three expansions of the newspaper
plant and was in charge of every other activity and function of
the paper, with the exception of the news department." Id. at
134, 480 S.E.2d at 765. Indeed, we further noted that "Wife
indicated at trial that husband's brother was at least equally
responsible for the increase in the value of the paper." Id.
From that evidence, the panel held as follows:
[W]e hold that the trial court erred in
finding that the entire increase in the
value of husband's Free Lance-Star stock was
due to his personal efforts. The increase
classifiable as marital should reflect only
that attributable to husband's personal
efforts and not those of husband's brother
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or passive factors, such as population
growth and minimal inflation.
Id.
Despite our holding, on remand, the trial court held that
"the ultimate finding [in the prior decision] was a judgment
call properly considered and supported." In a letter opinion
dated June 8, 1998, the trial judge stated:
The Court of Appeals failed to recognize the
weight of the factor of excessive
compensation balanced the finding as to the
value of the increase in [husband's] stock
during marriage. Having taken days to review
the inordinate amount of evidence, this Court
is convinced that those factors were
appropriately considered in the original
findings.
It is clear from the record that the trial judge, on
remand, did not re-examine the issue or make any effort to
classify how much of the appreciation in value was marital and
how much separate. In fact, it appears the trial judge did not
comprehend that a significant portion of the increase in value
of the stock, based on the facts in this record, necessarily had
to be based on a passive increase in value of the original
investment, even if the evidence showed that the brothers'
personal efforts in expanding the paper in 1980 and 1990 were
the major factors causing the appreciation in value.
Under the law of the case doctrine, we and the parties are
bound by our previous determination that the trial court erred
by finding the entire increase in value of husband's stock was
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due to his personal efforts and that the "increase classifiable
as marital should reflect only that attributable to husband's
personal efforts."
"The [law of the case] doctrine,
briefly stated, is this: Where there have
been two appeals in the same case, between
the same parties, and the facts are the
same, nothing decided on the first appeal
can be re-examined on a second appeal.
Right or wrong, it is binding on both the
trial court and the appellate court, and is
not subject to re-examination by either.
For the purpose of that case, though only
for that case, the decision on the first
appeal is law."
American Filtrona Co. v. Hanford, 16 Va. App. 159, 164, 428
S.E.2d 511, 514 (1993) (quoting Steinman v. Clinchfield Coal
Corp., 121 Va. 611, 620, 93 S.E. 684, 687 (1917)). To allow a
trial judge to disregard the holding of a previous panel would
be an inefficient administration of justice, increasing the
"labor of appellate courts and the costs to litigation,"
Steinman at 621, 93 S.E.2d at 687, and would promote uncertainty
in a court's decision.
Without deciding the extent to which husband's active
personal efforts over the years increased the value of his
stock, we remanded the case with instructions to the trial court
to consider the extent to which the increase in value was
attributable to factors other than husband's personal efforts.
On remand, however, the trial court disregarded our holding and
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instructions. 1 Accordingly, the trial court's ruling on remand
was erroneous, and we again reverse and remand the issue of the
classification of the appreciation in value of husband's
newspaper stock.
2. Re-valuation
While the case was on appeal, husband sold the newspaper
stock in 1997 for $41,184.04 per share as compared to the
estimated value of $9,500 per share in 1991, which the trial
court had accepted for valuation purposes. Upon remand, wife
filed a motion for re-valuation of the stock because in the
interim, her interest in the marital share of the stock had sold
for a much higher price and she had not received her share of
the stock or the proceeds from the stock. She claimed that she
was entitled to the increase in value of this marital asset
which husband continued to hold.
1
We note that in the preliminary summary of the case, the
panel held as follows: "the trial court erred in classifying
the entire increase in the value of husband's stock as marital
property because fifty percent or more of the increase was
attributable to the efforts of husband's brother and/or passive
economic factors." Rowe, 24 Va. App. at 129-30, 480 S.E.2d at
763. While this statement was not based on a factual finding by
the trial court, it clearly was a summary of our analysis of the
evidence and our "hold[ing] that the trial court erred in
finding that the entire increase in value of husband's . . .
stock was [attributable] to [husband's] personal efforts." Id.
at 134, 480 S.E.2d at 765. As we further held, "The increase
classifiable as marital should reflect only that attributable to
husband's personal efforts and not those of husband's brother or
passive factors, such as population growth and minimal
inflation." Id. at 134, 480 S.E.2d at 765.
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In a letter opinion dated June 8, 1998, the trial judge
stated:
Stock is what you can get for it. Here
the memorandum of the [wife] establishes a
baseline. This was paid for by [husband].
But what made it happen was the employment
of the evaluator by [husband] and
[husband's] position that if you don't buy
at that price, you must sell and whoever
wins gets all control. This is what
establishes the value and none of it can be
assigned to any cause or person other than
[husband].
The trial court ruled in its final decree after remand that
"[t]he change in value of the Free Lance-Star stock based upon
Husband's sale of the . . . stock to his brother long after the
separation, divorce and opinion by the Court of Appeals does not
affect the value as determined by the Commissioner and set forth
in the distribution order."
We hold that the trial judge abused his discretion and
erred by failing to re-value the stock on remand when the asset
had been held by one party for such a lengthy period of time and
its value, including the value to which wife was entitled, had
greatly changed. "We have stressed that the trial judge in
evaluating marital property should select a valuation 'that will
provide the Court with the most current and accurate information
available which avoids inequitable results.'" Gaynor v. Hird,
11 Va. App. 588, 593, 400 S.E.2d 788, 790-91 (1991) (quoting
Mitchell v. Mitchell, 4 Va. App. 113, 118, 355 S.E.2d 18, 21
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(1987)); see also Wagner v. Wagner, 16 Va. App. 529, 531, 431
S.E.2d 77, 78 (1993) (en banc) (stating that "the reasons for
re-valuation on remand are the same as in the original hearing
-- to obtain the most accurate valuation and equitable
distribution"). We held that because the Code "does not fix a
date for determining the value of [the parties' assets], the
trial court must select a valuation date if the parties cannot
agree to one." Mitchell, 4 Va. App. at 118, 355 S.E.2d at 21.
The 1998 amendments to Code § 20-107.3(A) codified the rule
announced in Mitchell. Code § 20-1047.3(A) provides:
The court shall determine the value of any
such property as of the date of the
evidentiary hearing on the evaluation issue.
Upon motion of either party made no less
than twenty-one days before the evidentiary
hearing the court may, for good cause shown,
in order to attain the ends of justice,
order that a different valuation be used.
In Wagner, the trial court valued husband's pension
benefits before the first appeal and, on remand, the trial court
re-valued the property. On appeal, husband argued that the
trial court erred in re-valuing the property because the
increase in value was due to his efforts. We held that the
trial court did not err in re-valuing the asset to obtain the
most accurate valuation at the time of the equitable
distribution of the asset. See Wagner, 16 Va. App. at 531-32,
431 S.E.2d at 78-79.
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In the present case, we find that the trial judge erred in
failing to re-value the stock on remand. Where an asset that is
subject to equitable distribution is retained by one of the
parties for a period of time after valuation but before the
equitable division occurs and the asset significantly increases
or decreases in value during that time through neither the
efforts or fault of either party, neither party should
disproportionately suffer the loss or benefit from the windfall.
Under those circumstances, a trial court abuses its discretion
by failing to re-value the property when a party has made a
timely motion to do so and is prepared to present evidence on
the issue. Here, the value of the stock was readily
ascertainable because husband sold the stock in 1997. Not only
did the value of the stock increase, but in those six years it
increased more than four times the value estimated by the expert
witnesses in 1991. Generally, there can be no better guide to
determine an asset's worth than the price it commanded in an
arm's-length sale. While a trial court will usually have
discretion to determine the date on which an asset will be
valued, the date chosen "should be one that will provide the
Court with the most current and accurate information available
which avoids inequitable results." Mitchell, 4 Va. App. at 118,
355 S.E.2d at 21.
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In his letter opinion dated June 8, 1998, the trial judge
found that the appreciation in value of the stock, since its
$9,500 per share value in 1991 and its $41,184.04 per share
value in 1997 when it was sold, was due solely to husband's
active efforts in employing an evaluator and his hard-line
bargaining with his brother to avoid bringing a stranger into
the company. This evidence does not support the trial judge's
finding that the increase in value was due to husband's active
efforts. Merely bargaining to obtain the best price for an
asset is not the type of active effort that adds intrinsic value
to an asset or increases its worth. No evidence supports the
trial judge's conclusion that husband's efforts caused the stock
to increase in value between 1991, the date it was valued for
equitable distribution purposes, and 1997, when it was sold.
The evidence is consistent with the conclusion, however,
that the increase was due to passive economic factors and the
fact that the sale between the brothers as major stockholders in
the closely-held corporation enabled husband to demand and
receive a premium price for the stock. "Where marital property
appreciates pending the appeal because of inflation, market
forces, or other passive cause, . . . both parties should share
in the gain in value." Brett R. Turner, Equitable Distribution
of Property § 7.02, at 430 (2d ed. Supp. 1999). While the sales
price may reflect the value the stock could command in this
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particular situation, rather than an actual appreciation in
value in those six years, the issue is the value of the stock to
these parties when the asset is divided between them. One clear
measure of the true value to them obviously is the value for
which it sells. We, therefore, instruct the trial judge on
remand, after determining what portion of the stock is
classified as marital in accord with our holding in Part 2, to
receive evidence of the actual sales price of the stock in
determining its value for purposes of the equitable distribution
award.
Furthermore, because the evidence has changed concerning
the value of the stock in light of its being sold, the law of
the case doctrine does not apply in determining the appreciation
in value of the stock, which includes the estimated value of the
stock in 1970 when the parties married. We note that in the
first appeal, we held that the trial judge did not abuse his
discretion in accepting husband's expert's valuation that the
stock was valued at $500 per share in 1970 and $9,500 per share
in 1991 and that the expert's valuations were not plainly wrong.
See Rowe, 24 Va. App. at 140-41, 480 S.E.2d at 768. However,
where material facts have changed between the first appeal and
the second, the law of the case doctrine is inapplicable.
Nothing is more common than a material
difference between the facts presented on a
second trial from those shown on the first
trial, and the "law of the case" is
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applicable to the state of facts existing at
the time the law is announced. There is
nothing in the rule to inhibit a party, on a
second trial, from supplying omitted facts
or from averring a different state of facts.
Steinman, 121 Va. at 622, 93 S.E.2d at 688 (citation omitted).
The previously-determined values in 1970 and 1991 were
based upon the opinions and estimates of expert witnesses and
were, according to the witnesses, deflated values, in part
because the stock was discounted due to generally limited
marketability of stock in a closely-held corporation. As it
developed, the fact that the brothers in this closely-held
corporation did not want strangers owning stock in the
corporation resulted in the stock being sold at a premium price,
rather than a discounted price. It is the premium price that we
are requiring the court to consider on remand for purposes of
determining the appreciated value of the stock. However, it
would be manifestly unfair on remand for the court to use the
discounted estimated value of $500 per share as the basis for
determining how much the stock appreciated in value between 1970
and 1997 and to deduct that value from the premium sales price
of $41,184.04 per share in 1997 in order to determine how much
the stock appreciated. To the extent the estimated value of the
stock at the time of the marriage in 1970 should bear some
relationship to its actual sales price twenty years later, we
hold that, on remand, the trial court shall reconsider and
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determine the premium value of the stock at the time of the
marriage in 1970. To do otherwise would unjustifiably inflate
the amount the stock had appreciated between its estimated
discounted value in 1970 and the premium sale price value in
1997.
B. Hanover Street Property
After their marriage, the parties lived in husband's home
on Ingleside Drive. Four years later, the parties moved to a
new home on Hanover Street, in which husband invested the
$82,000 sale proceeds from the Ingleside Drive home. The
parties held the Hanover Street home as joint tenants. For
equitable distribution purposes, the Hanover Street property was
valued at $512,992.
The trial court found that $41,000 of the Hanover Street
property was husband's separate property. The balance of
$41,000 was marital property. Husband argued that the entire
$82,000 from the sale of the Ingleside Drive home should be
treated as separate property. We held in the first appeal that
the trial court erred in finding that only $41,000 of the sale
proceeds was gifted marital property, and we held that the
entire $82,000 was marital property. See Rowe, 24 Va. App. at
138, 480 S.E.2d at 767. Although the entire $82,000 was
retraceable as property husband owned before marriage, it was
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marital because husband had made a gift of one-half undivided
interest in the Hanover property to wife. We stated that,
the parties purchased the home to serve as
their home and that the new home was
purchased in order to accommodate the
parties' growing family. Husband placed no
reservations on the transfers of title
permitting him to reclaim the property upon
divorce or any other circumstance. Further,
wife testified that husband had said to her
that his property was also her property.
These circumstances, in combination with the
fact that the house was conveyed by joint
title, are evidence that a gift was intended
and therefore that the entire sum of $82,000
was marital property.
Id. at 137-38, 480 S.E.2d at 766-67.
While we found that the entire $82,000 was marital
property, we specifically held that, on remand, "the trial court
was not bound to make an equal distribution of the property."
Id. at 138, 480 S.E.2d at 767. We remanded the issue to the
trial court to properly classify the entire asset as marital
property and then to determine how the asset should be equitably
distributed. Moreover, by ruling that the court erred in
classifying $41,000 as husband's separate property, we did not
hold or imply that husband was not entitled to a portion of that
marital asset. We stated that, "[t]he trial court must give
careful consideration to the gifted status of martial property,
but the equitable award of marital property is ultimately to be
determined by the trial court's consideration of the evidence
and application of the Code § 20-107.3(E) factors." Id.
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On remand, the trial judge, in a letter opinion dated
January 20, 1999, stated:
The Court of Appeals found that the entire
sum of $82,000.00 invested in "Hanover
Street" by husband was originally separate
property, then gifted to wife becoming
marital property, but the division should be
reexamined. Considering factors necessary
to arrive at a fair and equitable award, and
examining the evidence in that light, this
Court finds that the entire $82,000.00,
classified as marital, must be distributed
to wife.
Without considering the statutory factors of Code § 20-107.3(E)
in determining how to distribute marital property, in
particular, the rights and equities of the parties, the trial
judge merely awarded wife the entire marital asset of $82,000.
Although the trial judge stated that he considered the
"factors necessary to arrive at a fair and equitable award,"
nothing in the record suggests that the trial court considered
or applied the statutory factors. See generally Theismann v.
Theismann, 22 Va. App. 557, 568, 471 S.E.2d 809, 814 (1996),
aff'd en banc, 23 Va. App. 697, 479 S.E.2d 534 (1996). We,
therefore, find that the trial judge again erred in distributing
the $82,000 portion of the Hanover property. Accordingly, on
remand, we instruct the trial judge to consider the evidence and
the factors set forth in Code § 20-107.3(E) in distributing the
$82,000, which is a discreet marital asset apart from the
remaining value of the Hanover home.
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C. Spousal Support Award
Husband argues that, on remand, the trial court erred in
reaffirming its prior spousal support award, after being
directed by us to reconsider the award. Specifically, he argues
that the trial judge failed to consider the "income generating
potential of the marital award."
In the first appeal, we found that, although the trial
judge heard evidence addressing the factors in Code § 20-107.1, 2
it was "unclear from the record whether the court considered the
impact of the final . . . equitable distribution award on the
spousal support needs of wife." Rowe, 24 Va. App. at 139, 480
S.E.2d at 767. We noted that failure to consider the factors
set forth in Code § 20-107.1 constitutes reversible error, see
Woolley v. Woolley, 3 Va. App. 337, 344, 349 S.E.2d 422, 426
(1986), and we instructed the court to consider "the income
generating potential of the marital award as well as other
income and expenses generated by the asset assignment
constituting the equitable distribution award." Rowe, 24
Va. App. at 139, 480 S.E.2d at 767. We also held that because
"the trial court erred in classifying the full appreciation of
husband's Free Lance-Star stock as marital property, a new
2
Code § 20-107.1(8) provides that in determining the amount
of a spousal support award, the court shall consider the
provisions made with regard to the marital property under Code
§ 20-107.3.
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equitable distribution award must be made, requiring
reconsideration of the spousal support award." Id.
On remand, the trial court stated that the spousal support
award had been reconsidered and found that "the original
determination as set forth in the Final Decree of March 15, 1996
constitutes a distribution which is fair and equitable to each
party." (Emphasis added.) Apparently, because the trial court
left its original equitable distribution award intact, other
than effectively awarding wife an additional $41,000 from the
value of the Hanover property, the trial court determined that
it was unnecessary to reconsider the spousal support issue.
Because the trial court must reconsider the classification of
the increase in value and must re-value the newspaper stock, the
court will necessarily be required to reconsider spousal support
as provided by Code § 107.1(8).
D. Value Post-Separation Increase in Assets
Wife contends that, on remand, the trial judge failed to
value the post-separation increase in the marital assets,
including dividends from the Free Lance-Star stock as well as
the parties' investment accounts. We held in the first appeal
that if "property or some portion thereof which generated the
dividends was marital, the dividends attributable to the marital
property would properly be classified as marital." Id. at 143,
480 S.E.2d at 769. Accordingly, because the stock had not been
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distributed or the cash equivalent disbursed to wife, we
instruct the trial court as stated in part A, to determine what
portion of the appreciation in the stock's value is marital and
what portion is husband's separate property and then to classify
the earnings attributable to the martial portion as marital.
Husband concedes that the trial court erred by failing to
include the post-separation dividends received on the marital
share of the Free Lance-Star stock. However, husband argues
that re-valuation of other marital assets, specifically the
investment accounts, would be improper because those accounts
were equitably distributed between the parties by agreement and
distributed pursuant to the final decree by wife having received
the value of those accounts. Thus, he asserts, the rights of
wife in the funds extinguished when she was paid her share and
she is not entitled to the increase in value of those funds.
Husband argues that the "assets have lost their character as
marital property, and are no longer subject to further division
or valuation." Wife asserts that the "reversed award valued the
assets at issue instead of distributing them and awarded cash
equivalents."
In the March 1996 final decree, the trial judge noted that
"[a]lthough the Commissioner's report directed that the marital
assets are to be divided equally, the Report fails to value and
classify certain assets and to specify how the division of
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marital assets shall be accomplished." At the trial judge's
direction, the parties prepared a proposed plan of distribution,
which they designated as Schedule A. Schedule A classified and
valued all of the marital assets. The trial judge ordered that
the assets be valued, classified, and distributed in the manner
set forth in the document, stating that "the interest of each
party in the property distributed or ordered transferred to the
other is hereby extinguished."
We cannot ascertain on this record which of the assets have
been distributed or liquidated or which assets have been valued
and the cash equivalents paid. To the extent the assets have
not been distributed or the cash equivalent has not been
disbursed, the trial judge on remand shall consider whether
re-valuation is appropriate to determine the most accurate
valuation and equitable distribution. See Gaynor, 11 Va. App.
at 593, 400 S.E.2d at 790-91. In the event that remaining
assets have not been disbursed or the cash equivalent has not
been paid, then the asset retains its character as marital
property and, therefore, any increase or decrease in the value
of the marital portion should be determined and proportionately
attributed to the parties. However, to the extent the assets or
the cash equivalents have been distributed in accordance with
the equitable distribution award, the assets should not be
re-valued.
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E. Award of Attorney's Fees
Wife argues that the trial court erred in failing to
reconsider its award of attorney's fees on remand. Wife asserts
that, although we found that the trial court's failure to deduct
wife's litigation expenses from the valuation of her accounts
was not reversible error and that the award of $50,000 in
attorney's fees was not inadequate, the trial court was
instructed to reconsider the award of attorney's fees on remand.
Wife contends the trial court should again be instructed to
reconsider the award of attorney's fees.
On appeal, we held that the trial judge did not abuse his
discretion in refusing to receive additional evidence after the
close of the record. We stated, however, that "in view of our
remand of the equitable distribution award and the spousal
support award, the trial court should reconsider the attorney's
fees award." Rowe, 24 Va. App. at 146, 480 S.E.2d at 771. We,
therefore, instruct the trial court to reconsider the award of
attorney's fees on remand from this appeal.
F. Discovery and Evidentiary Hearing
Wife contends the trial court erred by refusing to allow
discovery and by refusing to conduct an evidentiary hearing
regarding the re-valuation of the newspaper stock, the
post-separation increase in the value of other assets, and the
award of attorney's fees. Wife asserts that she was "not given
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time to develop evidence through discovery and was not permitted
to present evidence to the trial court because the trial court
unexpectedly ruled on all issues before allowing for any discovery
or an evidentiary hearing." Wife requests that, on remand, the
trial judge be directed to permit discovery and hold an
evidentiary hearing.
"Generally, the granting or denying of discovery is a matter
within the discretion of the trial court and will not be
reversed on appeal unless 'the action taken was improvident and
affected substantial rights.'" O'Brian v. Langley School, 256
Va. 547, 552, 507 S.E.2d 363, 366 (1998) (quoting Rakes v.
Fulcher, 210 Va. 542, 546, 172 S.E.2d 751, 755 (1970)). Because
we reverse and remand the case to the trial court for
re-valuation of the stock and reconsideration of the spousal
support and equitable distribution awards, we need not address
whether the court erred in the last remand in failing to permit
additional discovery or to conduct an evidentiary hearing.
However, because the value of the stock and the classification
of the stock's appreciation are material and relevant issues on
remand, the parties will necessarily need to conduct discovery
and the trial court will necessarily need to conduct an
evidentiary hearing.
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For the foregoing reasons, we reverse and remand the case
to the trial court for such further proceedings as are necessary
in accordance with this opinion.
Reversed and remanded.
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