COURT OF APPEALS OF VIRGINIA
Present: Judges Elder, Annunziata and Agee
Argued at Alexandria, Virginia
JOHN ZALUSKY
MEMORANDUM OPINION * BY
v. Record No. 0199-02-4 JUDGE LARRY G. ELDER
NOVEMBER 19, 2002
DONNA ZALUSKY
FROM THE CIRCUIT COURT OF ARLINGTON COUNTY
Benjamin N. A. Kendrick, Judge
Mary M. Benzinger (Raymond B. Benzinger;
Benzinger & Benzinger, P.C., on briefs), for
appellant.
Susan M. Butler (Margolius, Mallios, Davis,
Rider & Tomar, L.L.P., on brief), for
appellee.
John Zalusky (husband) appeals from a final decree of
divorce classifying, valuing, and equitably distributing
property owned by him and his former spouse, Donna Zalusky
(wife). On appeal, he contends the trial court (1) erroneously
classified various assets, (2) erroneously calculated the value
of the marital residence and (3) erroneously refused to allow
him a credit for his post-separation expenditures for the
marital residence. Both parties seek attorney's fees and costs
incurred on appeal.
* Pursuant to Code § 17.1-413, this opinion is not
designated for publication.
We hold the trial court failed expressly to classify a
patent and its proceeds and may have applied an incorrect legal
standard in holding that "no award shall be given to [husband]"
from the proceeds of the patent's sale. Also, the court erred
in holding wife succeeded in retracing her entire separate
contribution to the Wheat First account and in calculating the
earnings thereon.
Further, it erred in classifying as marital property
husband's pickup truck and Charles Schwab brokerage account and
in granting wife a credit for sums husband was allowed to
withdraw from the brokerage account during the pendency of these
proceedings. Finally, husband failed to preserve for appeal his
argument that no evidence supported the finding that expenses
for selling the marital residence would equal seven percent, and
we do not consider this issue on the merits.
In all other respects before us on appeal we affirm, and we
deny the parties' competing requests for attorney's fees and
costs. Thus, we affirm in part, reverse in part, and remand for
further proceedings consistent with this opinion.
I.
"Fashioning an equitable distribution award lies within the
sound discretion of the trial judge . . . ." Srinivasan v.
Srinivasan, 10 Va. App. 728, 732, 396 S.E.2d 675, 678 (1990).
On appeal, we review the evidence in the light most favorable to
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the party prevailing below. See, e.g., Anderson v. Anderson, 29
Va. App. 673, 678, 514 S.E.2d 369, 372 (1999).
A.
CLASSIFICATION OF THE PATENT
Pursuant to Code § 20-107.3, a court dissolving a marriage,
"upon request of either party, shall determine the legal title
as between the parties, and the ownership and value of all
property" and classify that property as separate property,
marital property, or part separate and part marital property.
Code § 20-107.3(A).
"All property . . . acquired by either spouse during the
marriage . . . is presumed to be marital property in the absence
of satisfactory evidence that it is separate property." Code
§ 20-107.3(A)(2). "A partner in a marriage owes his labor
during the marriage to the marital partnership[, and] [t]he
fruits of that labor, absent express agreement, are marital
property." Stainback v. Stainback, 11 Va. App. 13, 24, 396
S.E.2d 686, 693 (1990). Conversely, property acquired by a
party after the last separation is presumed to be separate
property, but that presumption is rebuttable. Code
§ 20-107.3(A); Dietz v. Dietz, 17 Va. App. 203, 211-12, 436
S.E.2d 463, 468-69 (1993). Where property, although acquired
post-separation, is acquired with marital assets or as a result
of the efforts of either party expended during the marriage, the
property is marital. See Dietz, 17 Va. App. at 210, 436 S.E.2d
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at 468; see also, e.g., Luczkovich v. Luczkovich, 26 Va. App.
702, 708-09, 496 S.E.2d 157, 160 (1998) (severance package);
Banagan v. Banagan, 17 Va. App. 321, 324-25, 437 S.E.2d 229,
230-31 (1993) (retirement benefits).
These principles are equally applicable to the
classification of
intellectual property interests[, which are]
acquired when the owning spouse expends the
necessary effort and not when they are
actually received. Thus, a copyright
received shortly after the marriage begins
should be separate property if the owning
spouse performed the necessary work before
the marriage. Similarly, if a spouse
expends all of the necessary effort during
the marriage, but actually receives the
patent a week after the date of
classification, the patent should be marital
property. Where the work is done partly
before and partly after the marriage, a
patent would logically have both marital and
separate interests.
Brett R. Turner, Equitable Distribution of Property § 6.23, at
433-34 (2d ed. 1994) (emphasis omitted).
Here, the trial court held that "no award shall be given to
[husband]" from the proceeds of the sale of the "Twistee" patent
but did not indicate the basis for that decision. Wife argues
that this statement constituted a ruling that the patent was her
separate property. We are unable to determine whether the trial
court's ruling constituted a classification of the property as
separate. However, the trial court had a duty to classify all
property, see Code § 20-107.3(A), and to the extent the trial
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court's statement constituted a ruling that the patent was
wife's separate property, that ruling was erroneous based on the
principles discussed above.
The evidence, viewed in the light most favorable to wife,
supports the court's findings that "the device was [wife's]
idea" and that "the patent was granted after the parties'
separation." However, these facts do not support the conclusion
that no portion of the patent proceeds were marital or that
husband was not entitled to any share of the marital portion.
Uncontradicted evidence proved that the idea for an earlier
version of the "Twistee" came into being during the parties'
marriage, that husband created several prototypes in his shop,
that husband completed an application for a provisional patent
for the device in wife's name, and that the provisional patent
protected wife's interest in the device until she was able to
finalize the design and to apply for and receive the patent
itself.
Thus, we conclude from this evidence that some portion of
the proceeds from the sale of the patent was marital, and we
remand to the trial court to apply the proper legal standard to
a classification and division of those proceeds. We note,
however, that the classification of some or all of an asset as
marital does not prevent a trial court from awarding the full
value of that asset exclusively to one party as long as the
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decision to do so does not constitute an abuse of discretion
under the facts of the particular case.
B.
CLASSIFICATION OF WHEAT FIRST BROKERAGE ACCOUNT
Husband contends the trial court erred in finding wife
provided sufficient evidence to establish the fact and amount of
her initial separate contribution to the Wheat First brokerage
account and to retrace a portion of the funds in the account at
the time of separation to that initial contribution. He asserts
that wife's testimony, with only minimal supporting
documentation, was insufficient to allow her to meet her burden
of proof. He also emphasizes that the account balance fell
below the amount of wife's claimed initial contribution and that
the exhibit purporting to track the growth of this contribution
improperly calculated interest on a negative marital
contribution.
Wife's testimony, if believed by the trial court, was
sufficient to establish that wife opened the Wheat First
brokerage account with $27,107 in separate funds, proceeds from
the sale of a house she owned prior to the parties' marriage.
"It is well established that the trier of fact ascertains
[witnesses'] credibility, determines the weight to be given
their testimony, and has the discretion to accept or reject any
of the [witnesses'] testimony[, whether in whole or in part]."
Street v. Street, 25 Va. App. 380, 387, 488 S.E.2d 665, 668
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(1997) (en banc); see also Anderson, 29 Va. App. at 684-88, 514
S.E.2d at 375-77 (affirming trial court's rejection of Mr.
Anderson's tracing testimony). "Where a particular link in the
tracing chain is based solely upon the unsupported testimony of
one spouse, the trial court is free to credit that testimony and
find the asset to be separate property." Turner, supra, § 5.23,
at 274.
Although the evidence was sufficient to establish wife's
initial separate contribution, it also established that wife
withdrew substantial amounts of those separate funds to pay
marital bills, significantly depleting her initial separate
contribution. Because subsequent deposits of marital funds into
that account were retraceable and no evidence established that
the parties intended for those deposits to be repayments of a
loan from wife's separate funds, those subsequent marital
deposits remained marital property.
"[P]roperty which is marital may become separate only
through 'a valid, express agreement by the parties,' Wagner[ v.
Wagner], 4 Va. App. [397,] 404, 358 S.E.2d [407,] 410 [(1987)];
Code § 20-155 (marital provisions of Premarital Agreement Act),
or as provided in Code § 20-107.3(A)(3)(d)." McDavid v.
McDavid, 19 Va. App. 406, 411, 451 S.E.2d 713, 716-17 (1994).
That subsection provides as follows:
d. When marital property and separate
property are commingled by contributing one
category of property to another, resulting
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in the loss of identity of the contributed
property, the classification of the
contributed property shall be transmuted to
the category of property receiving the
contribution. However, to the extent the
contributed property is retraceable by a
preponderance of the evidence and was not a
gift, such contributed property shall retain
its original classification.
Code § 20-107.3(A)(3)(d) (emphasis added).
Wife's act of depositing marital funds, her earnings during
the marriage, into her separately titled Wheat First brokerage
account, which initially contained only her separate funds,
resulted in the presumption that the marital funds were
transmuted back into wife's separate property. See Moran v.
Moran, 29 Va. App. 408, 413, 512 S.E.2d 834, 836 (1999).
However, Code § 20-107.3(A)(3)(d) provides that the contributed
property, here the marital funds in the form of wife's earnings,
shall retain its classification as marital to the extent it is
retraceable by a preponderance of the evidence and was not a
gift.
We hold the property was retraceable because the evidence
showed the net marital transactions for most years during the
marriage and no evidence established that the deposits of
marital funds were a gift or even repayment of a loan resulting
from wife's earlier use of separate funds to pay marital
expenses. Although wife's exhibit 30 treated the funds as if
they were repayment of a loan, no evidence tended to show that
either party had such an intent contemporaneous with any of the
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transactions. Thus, wife was entitled to reclaim as her
separate property only the minimum account balance, as shown by
wife's exhibit 30, which was accepted by the trial court.
Correspondingly, wife was entitled to growth only on that
separate property which remained in the account.
C.
CHARLES SCHWAB BROKERAGE ACCOUNT
1. CLASSIFICATION OF HUSBAND'S SCHWAB ACCOUNT AND INHERITANCE
Husband contends the trial court erroneously classified his
individual Charles Schwab brokerage account as marital,
especially in light of its statement that the inheritance
husband received from his mother, which he deposited in the
Charles Schwab account, was his separate property and had been
maintained as separate property. We agree with husband.
As set out above, property acquired by a party after the
last separation is presumed to be separate property. Dietz, 17
Va. App. at 211-12, 436 S.E.2d at 468-69. Uncontradicted
evidence, in the form of account statements for Charles Schwab
brokerage account #9725-0653, established that husband opened
the account in the year 2000, after the parties' separation in
1998, entitling him to the presumption that all funds in the
account were his separate property. Wife proved that husband
transferred $269.62 from the parties' joint Charles Schwab
brokerage account into husband's new individual Schwab account,
and she sought a credit for half that amount. However, she did
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not seek any interest on that amount and offered no evidence to
establish that any other funds in that account were marital.
Thus, husband was entitled to the presumption that the funds in
the account beyond the $269.62 were his separate property.
Although husband had no duty to prove a non-marital source of
the remaining funds in the account, he testified that he
received an inheritance of approximately $40,000 upon his
mother's death in August 2000.
2. WITHDRAWALS FROM THE SCHWAB ACCOUNT FOR FEES AND COSTS
Husband contends the trial court erroneously awarded wife a
credit of $25,000 for monies husband was permitted to withdraw
from the Schwab brokerage account. Based on our conclusion
above, that all but $269.62 of this account was husband's
separate property, we hold the trial court erred in awarding
wife a credit for $25,000. Because the account was husband's
separate property, wife had no interest in it, and husband was
free to spend it as he wished.
D.
HUSBAND'S PICKUP TRUCK
Husband contends the trial court erroneously classified his
1990 Ford pickup truck, which he purchased after the separation,
as marital property. Wife concedes the pickup truck was
husband's separate property and that she should not have been
awarded $2,875, which represents half the equity in the truck.
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Based on this concession, we remand to the trial court for an
appropriate adjustment in the equitable distribution award.
E.
MARITAL RESIDENCE
1. VALUATION: DEDUCTION OF SELLING EXPENSES
The court did not err in allowing a deduction for selling
expenses simply because it awarded the marital residence to wife
without requiring her to sell it. Deductions for "[e]xpenses of
sale, such as a broker's fee in the sale of real estate," are
proper "if the asset is actually being sold or is likely to be
sold." Peter N. Swisher, Lawrence D. Diehl & James R. Cottrell,
Virginia Family Law § 11-25(a), at 492 (3d ed. 2002). Here,
uncontradicted evidence established that wife wished to sell the
property and that two offers of purchase had already been made,
making wife's sale of the property likely.
Our holding in Arbuckle v. Arbuckle, 22 Va. App. 362, 470
S.E.2d 146 (1996), cited by husband, does not require a
different result. Arbuckle, in which we distinguished our
holding in Barnes v. Barnes, 16 Va. App. 98, 105-06, 428 S.E.2d
294, 300 (1993), supports the conclusion that the trial court's
deduction of selling expenses was not error because sale was
likely and, therefore, not speculative. Arbuckle, 22 Va. App.
at 365-66, 470 S.E.2d at 146-48.
Husband also contends no evidence supported wife's
representation, adopted by the trial court, that selling
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expenses would equal seven percent. However, husband failed to
preserve this issue for appeal. "In order to be considered on
appeal, an objection must be timely made and the grounds stated
with specificity." Marlowe v. Commonwealth, 2 Va. App. 619,
621, 347 S.E.2d 167, 168 (1986) (emphasis added). "It is the
duty of a party . . . to state the grounds of his objection, so
that the trial judge may understand the precise question or
questions he is called upon to decide." Jackson v. Chesapeake &
Ohio Ry. Co., 179 Va. 642, 651, 20 S.E.2d 489, 492-93 (1942).
Here, husband specifically objected to the court's
deduction of selling expenses only on the ground that the court
awarded the residence to wife and did not require her to sell
it. He objected only generally to the court's reliance on three
of wife's exhibits, including the one purporting to calculate
the parties' interests in the marital residence, on the ground
that they "contain[ed] assertions of fact that receive no
support in testimony or . . . elsewhere in the record and
exhibits, or in attachments thereto." We hold these objections
were insufficient to permit the trial court to "understand the
precise question or questions [it] is called upon to decide."
Id. Thus, we affirm the trial court's calculation of the value
of husband's share of the marital residence and its award of the
residence to wife.
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2. CREDIT FOR EXPENSES FOR MARITAL RESIDENCE
"Although the separate contribution of one party to the
acquisition, care, and maintenance of marital property is a
factor that the trial court must consider when making its award
of equitable distribution, Code § 20-107.3 does not mandate that
the trial court award a corresponding dollar-for-dollar credit
for such contributions." von Raab v. von Raab, 26 Va. App. 239,
249-50, 494 S.E.2d 156, 161 (1997). Here, the evidence
established that when the parties separated, they agreed husband
would stay in the house and make the mortgage payments. Husband
remained in the house for only six months and then moved to
Florida. Although he rented out the basement apartment and two
of the bedrooms in the main part of the house, he maintained a
bedroom for his own use when he returned to visit his children
and grandchildren, and he allowed his forty-year-old son to
occupy a fourth bedroom without paying rent.
Husband received rent of $1,350 per month for the apartment
and two bedrooms, which exceeded the monthly mortgage obligation
of approximately $1,150. Although he alleged a net loss of
$37,640.46, the expenses he claimed included costs the court was
entitled to find were unnecessary, inappropriate, or incredible.
He included as expenses $2,736 he paid to wife for a joint tax
obligation and $2,340 in mileage expenses for three round trips
from Florida to care for the house. He included monthly
expenses for cable television and telephone but testified that
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he paid these expenses on a property he rented to others
"[b]ecause [he] use[d] the property." He also included expenses
for water, gas, electricity, housekeeping and household
supplies. He claimed that these items were "part of the rent,"
but he did not indicate what portion of those expenses was paid
in exchange for rent received from his tenants and what portion
was attributable to his and his son's use of the house.
Husband testified that in addition to "maintaining [the]
marital property," some of his expenditures were "to get the
house back in shape to make it attractive to potential buyers."
However, he offered no evidence that these post-separation
expenditures increased the value of the house.
Because husband (1) had exclusive possession of the marital
residence and all rental income therefrom and (2) furnished
evidence of expenses to maintain and improve the property which
the trial court could properly find were unnecessary,
inappropriate, or incredible, the court did not abuse its
discretion in awarding wife a credit for four months of mortgage
payments without giving husband a corresponding credit.
F.
ATTORNEY'S FEES AND COSTS
Both parties seek an award of attorney's fees and costs on
appeal. Because we affirm in part and reverse in part, we find
it appropriate that the parties bear their own fees and costs,
and we deny the parties' requests.
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II.
CONCLUSION
We hold the trial court failed expressly to classify a
patent and its proceeds and may have applied an incorrect legal
standard in holding that "no award shall be given to [husband]"
from the proceeds of the patent's sale. Also, the court erred
in holding wife succeeded in retracing her entire separate
contribution to the Wheat First account and in calculating the
earnings thereon.
Further, it erred in classifying as marital property the
Charles Schwab brokerage account opened by husband after the
parties' separation where wife's evidence established that only
$269.62 of the funds in that account were marital and that the
bulk of the account was derived from husband's inheritance from
his mother. Because this account was husband's separate
property, the court erred in granting wife a credit for the sums
husband was allowed to withdraw from that account during the
pendency of these proceedings. As conceded by the parties, the
court erred in classifying husband's pickup truck as marital
property. Finally, husband failed to preserve for appeal his
argument that no evidence supported the finding that expenses
for selling the marital residence would equal seven percent, and
we do not consider this issue on the merits.
In all other respects before us on appeal we affirm, and
deny the parties' competing requests for attorney's fees and
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costs. We remand to the trial court for further proceedings
consistent with this opinion.
Affirmed in part,
reversed in part,
and remanded.
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