COURT OF APPEALS OF VIRGINIA
Present: Judges Coleman, Frank and Senior Judge Hodges
Argued at Salem, Virginia
DARRELL E. NOELL
MEMORANDUM OPINION * BY
v. Record No. 0918-99-3 JUDGE WILLIAM H. HODGES
FEBRUARY 15, 2000
DEBORAH H. NOELL
FROM THE CIRCUIT COURT OF BEDFORD COUNTY
James W. Updike, Jr., Judge
Lance M. Hale (Kenneth N. Hodge; Lance M.
Hale & Associates, on briefs), for appellant.
Valeria L. Cook for appellee.
Darrell E. Noell (husband) appeals the final decree of
divorce entered by the circuit court. Husband contends that the
trial court abused its discretion by (1) classifying the marital
residence as marital property; (2) classifying a $60,000 second
deed of trust on the marital residence as husband's separate debt;
(3) classifying a $30,000 note as husband's separate debt;
(4) classifying the business Jordantown Market as husband's
separate property; (5) classifying the business Happy Hair Salon
as the separate property of Deborah H. Noell (wife) and
determining that the business had only nominal value; and (6)
calculating wife's annual income for purposes of determining child
* Pursuant to Code § 17.1-413, recodifying Code
§ 17-116.010, this opinion is not designated for publication.
and spousal support. In her response, wife contends that the
trial court erred by (1) ordering an assets-only evaluation of
Jordantown Market; and (2) classifying any portion of the marital
residence as husband's separate property. We find no error by the
trial court requiring reversal of its decisions on equitable
distribution or support. Therefore, we affirm.
On appeal, "[t]he judgment of a trial court sitting in
equity, when based upon an ore tenus hearing, will not be
disturbed on appeal unless plainly wrong or without evidence to
support it." Box v. Talley, 1 Va. App. 289, 293, 338 S.E.2d 349,
351 (1986). "Fashioning an equitable distribution award lies
within the sound discretion of the trial judge and that award will
not be set aside unless it is plainly wrong or without evidence to
support it." Srinivasan v. Srinivasan, 10 Va. App. 728, 732, 396
S.E.2d 675, 678 (1990).
Classification of Marital Residence
Husband contends that the trial court abused its discretion
by classifying the marital residence as primarily marital
property. In support of his contention, husband presented
evidence that he purchased the house on November 5, 1976, a month
before the parties' marriage, and that the home remained titled
solely in his name throughout the marriage. Husband claimed that
he made a down payment, which the trial court determined to be
$2,700, towards the purchase price of $38,500. The first mortgage
amount of $35,800 was reduced to $19,334 by the time of the
- 2 -
equitable distribution hearing. While the trial court found that
husband "exclusively made the payments on the first mortgage from
his income from his employment," the court noted that income
earned during the marriage is marital property. See Code
§ 20-107.3(A)(1) and (2)(iii). The marital residence had a value
of $107,000 at the time of the hearing. Using the Brandenburg
formula, the court computed the equity attributable to husband's
separate property as $12,349.90 and that attributable to marital
property as $75,316.10. See generally Hart v. Hart, 27 Va. App.
46, 64-66, 497 S.E.2d 496, 504-06 (1998).
We find no error in the trial court's classification of the
marital residence as part separate property and part marital
property. Mortgage payments made during the marriage using income
earned during the marriage were contributions of marital, not
separate, property. See Code § 20-107.3(A)(2)(iii). Therefore,
the trial court properly viewed the reduction in the mortgage
during the marriage as marital contributions. While wife contends
that husband failed to produce evidence supporting his claim that
he made a contribution of separate property by a down payment at
the time the property was purchased, we cannot say that the trial
court's determination that husband contributed $2,700 is
unsupported by the evidence. Therefore, we affirm the trial
court's hybrid classification of the marital residence.
- 3 -
Second Deed of Trust Equity Loan
Husband contends that the trial court erred when it
determined the value of the marital residence because the court
failed to reduce the residence's equity by $53,889, which was
the remaining value of a second deed of trust equity loan.
Husband cites Trivett v. Trivett, 7 Va. App. 148, 371 S.E.2d 560
(1988), to support his contention that the trial court should have
reduced the equity of the marital residence by the amount of this
outstanding debt secured by the residence. In Trivett, this Court
reversed and remanded a monetary award because the record failed
to demonstrate whether the trial court considered the effect of
an outstanding deed of trust on the value of a piece of marital
property. Under the circumstances of this case, we find no
grounds to reverse the trial court's decision regarding the second
deed of trust.
The evidence established that the second deed of trust was
not fraudulent or incurred for any improper purpose. See
generally Hodges v. Hodges, 2 Va. App. 508, 347 S.E.2d 134
(1986). It was incurred during the marriage in order to obtain
funds for the Jordantown Market. Husband characterized the
equity loan in his Summation and Arguments memorandum prepared
for the trial court as part of the "Total Jordantown Market
Debt" of $85,889 in order to reduce the net equity value of
Jordantown Market. At trial, he requested that he receive the
Jordantown Market as his separate property and wife agreed.
- 4 -
While the second deed of trust was secured by the marital
residence, the funds so obtained were used for the property
which by agreement was awarded to husband. But for the parties'
agreement to this classification, the debt and its corresponding
asset would have been appropriately characterized as marital.
These factual circumstances are distinguishable from those of
Trivett.
Code § 20-107.3(C) provides that "[t]he court shall also have
the authority to apportion and order the payment of the debts of
the parties, or either of them, that are incurred prior to the
dissolution of the marriage, based upon the factors listed in
subsection E." Thus, the trial court had the discretionary
authority under the statute to apportion between the parties their
marital and separate debts. Under the circumstances of this case,
where the practical effect of the parties' agreement that husband
would receive the Jordantown Market as his separate property was
to separate the second deed of trust from its corresponding asset,
we find no error in the trial court's decision not to reduce the
value of the marital residence by the amount of the second deed of
trust.
$30,000 Note
Husband also contends that the trial court abused its
discretion when it assigned to him the $30,000 note to his father.
The parties did not contest the fact that the note was signed
shortly before the parties' final separation or that the note was
- 5 -
intended to finance the Jordantown Market. Husband does not
contend that the funds were used for any other purposes, but
contends that wife as co-signer should bear some liability for the
note. The trial court was acting within its statutory authority
in apportioning this debt to husband. We find no abuse of
discretion in the decision to allow the unsecured liability to
follow the corresponding assets. See Code § 20-107.3(C).
Jordantown Market
Because operation of the Jordantown Market was begun during
the marriage using marital assets, it could properly be classified
as a marital asset. See Code § 20-107.3(A)(2). However, the
parties agreed that the market would be husband's separate
property. While wife contends that the trial court erred by
valuing the business solely on an assets-only basis rather than as
an ongoing business, she agreed at trial that the business would
be awarded to husband as his separate property. Therefore, any
error in the trial court's valuation of the business is irrelevant
to the equitable distribution issues on appeal. Moreover, we
agree with husband that wife failed to preserve any objection to
the court's decision to value the business on an assets-only
basis.
Happy Hair Salon
Husband contends that the trial court erred by classifying
the Happy Hair Salon as wife's separate property and by
determining that the salon had only nominal value. We find no
- 6 -
error. The evidence indicated that wife worked as an apprentice
with a licensed hair stylist until after the parties separated.
Only in March 1997, after the final separation in December 1996,
did wife sit for her state boards and open her salon. See Code
§ 20-107.3(A)(1).
We find no error in the trial court's determination that
wife's hair salon had minimal value. Husband conceded in his
post-hearing memorandum that the salon had few assets. He argued,
however, that the salon should be valued based upon its cash flow
and goodwill. Husband relied largely on extrapolations based upon
one year's income. He presented no evidence as to any value
attributable to goodwill. The trial court ruled that the earning
capacity represented by the stream of income was more
appropriately considered under the spousal support factors set out
in Code § 20-107.1(E). We find no error in the trial court's
decision to value the hair salon on an assets-only basis.
Spousal Support
Husband contends that the trial court erred by failing to
impute income to wife for purposes of calculating child support
and spousal support. We find no error. In its opinion letter,
the trial court detailed why it found no merit in husband's
contention that wife had substantially higher earnings in previous
years. Husband argued that wife's income should be based upon the
gross sales and bonuses received by wife as a Tupperware sales
executive, without any diminution for the costs of the items sold.
- 7 -
The trial court noted that, using the same logic, husband's
"income" would jump to $705,377 based upon the net sales of
Jordantown Market prior to a reduction for the costs of goods.
Wife presented evidence that her current income was approximately
$611 a month. Based upon the statutory factors, the trial court
awarded wife $650 in monthly spousal support.
Accordingly, the decision of the trial court is affirmed.
Affirmed.
- 8 -
Darrell E. Noell v. Deborah H. Noell
Combined Opinion