COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Moon, Judges Willis and Fitzpatrick
Argued at Alexandria, Virginia
CHARLES STUART DeHAVEN, JR.
MEMORANDUM OPINION * BY
v. Record No. 0997-96-4 JUDGE JOHANNA L. FITZPATRICK
APRIL 8, 1997
PAMELA BUSH DeHAVEN
FROM THE CIRCUIT COURT OF FREDERICK COUNTY
James L. Berry, Judge
Jeffery R. Patton (Louthan & Patton, P.C., on
brief), for appellant.
Stephen G. Butler (Kuykendall, Johnston,
McKee & Butler, P.L.C., on brief), for
appellee.
On appeal from a final decree granting the parties a divorce
and distributing their property, Charles Stuart DeHaven, Jr.
argues that the trial court erred in: (1) its classification of
the value of the marital residence; (2) its classification of 200
shares of corporate stock; (3) its determination that the
increase in the corporate stock value was attributable to the
efforts of the parties, and (4) its determination that the
increase in the corporate stock value was not attributable, in
part, to the efforts of other persons. For the reasons that
follow, we affirm in part and reverse in part.
I. BACKGROUND
Charles Stuart DeHaven, Jr. (husband) and Pamela Bush
*
Pursuant to Code § 17-116.010 this opinion is not
designated for publication.
DeHaven (wife) were married in 1976, and two children were born
of the marriage. In 1978, the parties constructed a family
residence on land belonging to Charles Stuart DeHaven, Sr.
(Charles Sr.), husband's father. Husband received funds from his
father and labor from his father's plant nursery business when
constructing the residence. In 1979 and 1980, Charles Sr. and
his wife, Jane DeHaven, deeded the property ("land with
improvements thereon") by deeds of gift to both husband and wife.
Charles Sr. was the sole proprietor of the nursery from 1966
to 1986. In 1986, the business was incorporated, and the
corporation leased land from Charles Sr. on which it constructed
approximately $171,000 worth of improvements. The improvements
became Charles Sr.'s property pursuant to a one-year lease. To
service its operation, the corporation used water from a well
situated on land belonging to husband and wife.
Wife worked for the nursery business from 1979 and was a
director of the corporation from 1986 until 1994, when she was
"removed." Wife was paid a small salary throughout her
employment with the corporation. Husband worked for the business
from 1976 throughout the parties' married life. At the time of
incorporation in 1986, husband owned twenty-five percent of the
business. By 1993, husband owned ninety-five percent of the
corporation, as a result of gifts of stock made to him by his
parents. Additionally, during this time period, the corporation
paid husband a substantial salary.
2
On March 29, 1996, the trial court entered a final decree of
divorce. The final decree incorporated the court's letter
opinion dated December 29, 1995. The trial court's findings
included the following:
The Court determines the first 200
shares issued in 1986 to be marital property
. . . . It is the opinion of the Court from
the evidence that [the increase in value of
the shares of stock received by the
defendant], excluding inflation, is due to
the personal efforts of the parties.
It is the further opinion of the Court
that the residence, built in 1978, and gifted
to both parties in October of 1979 and
February 1980 is entirely marital property.
Additionally, the court classified as marital property a
life insurance policy valued at $7,694.74, husband's IRA valued
at $23,933.58, and wife's IRA valued at $17,917.36. The court
found that husband possessed separate property of one hundred
acres of real estate valued at $100,000, and his separate share
of DeHaven Nursery, Inc. valued at $184,898.20. Finally, the
court found that the "credit line debt of $39,555.78 [was]
entirely within the control of the [husband]" and attributed this
debt solely to husband. The court stated its consideration of
the statutory factors as follows:
Considering the factors set out in
§ 20-107.3 the Court finds Factors 3, 4, 5,
6, 7, 8, and 9 to be either non-determinative
or not applicable. Factor 1, strongly in
favor of the complainant, Factor 2, slightly
in favor of the defendant and Factor 5 in
favor of the complainant. In addition, the
Court has considered under Factor 10 that
defendant holds net separate property
totaling $245,343 and that the corporation
3
has constructed $171,000 worth of
improvements on the defendant's parents'
property.
4
II. THE MARITAL RESIDENCE
Husband's first assignment of error is that the marital
residence should have been classified as part separate and part
marital property because it was "retraceable by a preponderance
of the evidence." He contends that his "contributions of
separate property commingled with marital property" to become
"newly acquired property." Thus, husband argues, because the
trial court erred in the classification of the marital residence,
it therefore erred in the valuation and distribution of the
marital residence.
"Code § 20-107.3(A) gives the court the authority, '[u]pon
decreeing the dissolution of a marriage,' to value and apportion
marital property and marital debts. The distribution
contemplated by the General Assembly is predicated on the
philosophy that marriage represents an economic partnership
requiring that, upon dissolution, each partner should receive a
fair proportion of the property . . . ." Floyd v. Floyd, 17 Va.
App. 222, 226, 436 S.E.2d 457, 459 (1993) (quoting Roane v.
Roane, 12 Va. App. 989, 994, 407 S.E.2d 698, 701 (1991)). Under
Code § 20-107.3, all property acquired during the marriage and
before the last separation of the parties is presumed to be
marital property in the absence of satisfactory evidence that it
is separate property. See Stainback v. Stainback, 11 Va. App.
13, 17, 396 S.E.2d 686, 689 (1990). Property that is titled in
the names of both husband and wife, as well as all other property
5
acquired by either of them during the marriage which is not
separate property is marital property. See Dietz v. Dietz, 17
Va. App. 203, 208, 436 S.E.2d 463, 467 (1993).
"Generally, the character of property at the date of
acquisition governs its classification pursuant to Code
§ 20-107.3." Stratton v. Stratton, 16 Va. App. 878, 881, 433
S.E.2d 920, 922 (1993). "Although property is initially
classified as of the date of acquisition, once acquired, its
character may change." McDavid v. McDavid, 19 Va. App. 406, 410,
451 S.E.2d 713, 716 (1994). The party claiming that property
should be classified as separate has the burden to produce
satisfactory evidence to rebut the presumption that the property
acquired during the marriage is marital. See Stratton, 16 Va.
App. at 882, 433 S.E.2d at 922.
The trial court specifically found that, "the residence,
built in 1978, and gifted to both parties in October of 1979 and
February 1980 is entirely marital property." We agree. It is
undisputed that the parties built their residence in 1978 upon
land owned by husband's parents. Husband and his father
testified that the property at issue was gifted to both husband
and wife in 1979 and 1980, and the deeds of gifts clearly reflect
the two transactions:
THIS DEED OF GIFT, made and dated this 10th
day of October, 1979, by and between CHARLES
STUART DeHAVEN and JANE METZ DeHAVEN, . . .
and CHARLES S. DeHAVEN, JR., and PAMELA BUSH
DeHAVEN . . . . [T]he Grantors make this Deed
of Gift and hereby grant and convey, . . .
unto the Grantees in fee simple, jointly, as
6
tenants by the entireties with common law
right of survivorship, an undivided one-half
interest in the . . . described real estate
. . . [a]ll of that lot or parcel of land
with improvements thereon . . . . The
Grantors covenant that . . . the property
. . . is free from all liens and encumbrances
. . . .1
Although husband testified that he contributed funds he had
accumulated prior to his marriage to the costs of building the
marital residence, the trial court determined that this testimony
did not sufficiently rebut the presumption that, upon
acquisition, the marital residence and land was, in fact, marital
property.
"Property which is initially separate may become marital
property either by express agreement, or by the manner in which
it is maintained." McDavid, 19 Va. App. at 410-11, 451 S.E.2d at
716 (citations omitted). "Great consideration should be given to
the actions, or non-action, of the parties with regard to
exercising control over the property in question." Stainback, 11
Va. App. at 21, 396 S.E.2d at 691. The mere fact that husband
maintained a separate bank account for the funds to be used in
the home's initial construction does not in and of itself
transmute the marital property into husband's separate property.
Rather, despite husband's contentions, the evidence demonstrated
that the home and the land, once deeded to husband and wife,
1
The deed of gift dated February 4, 1980 contains the same
language.
7
remained marital. Neither party treated it otherwise. 2 At the
time of conveyance, or any time thereafter, husband could have
documented his interests to reflect his belief of a separate
ownership interest. Neither he nor his parents did so. At no
time during the marriage did either party indicate in any way
that husband possessed a separate interest in the home or that he
possessed a greater share in the home's value due to his
contributions.
"'[T]he finding of the judge, upon the credibility of the
witnesses and the weight to be given their evidence, stands on
the same footing as the verdict of a jury, and unless that
finding is plainly wrong, or without evidence to support it, it
cannot be disturbed.'" Yates v. Commonwealth, 4 Va. App. 140,
143, 355 S.E.2d 14, 16 (1987) (quoting Lane v. Commonwealth, 184
Va. 603, 611, 35 S.E.2d 749, 753 (1945)). "In this case, the
chancellor was confronted with conflicting testimony from
2
Compare McDavid, a case in which we held that where the
wife executed a deed of gift transferring her interest in the
marital property to husband, the marital property was transmuted
to separate property. In McDavid, we upheld the chancellor's
determination that property, marital when acquired by the
parties, became separate during the marriage. The husband and
wife executed a deed of gift transferring the wife's interest to
husband immediately after closing. The deed provided that the
husband would hold the property "'in his own right as his
separate and equitable estate as if he were an unmarried man
. . . free from the control and marital rights of his present
. . . spouse . . . .'" Id. at 411, 451 S.E.2d at 717. In the
instant case, no such evidence supports the husband's contention
that the marital residence and land attained or retained the
character of separate property.
8
interested witnesses on each side of the case, and it was his
province alone, as the finder of fact, to assess the credibility
of the witnesses and the probative value to be given their
testimony. We treat the factual determinations of a chancellor
based on ore tenus evidence in the same manner as factual
determinations made by a jury; we reverse them only if they are
plainly wrong or without evidence to support them." Richardson
v. Richardson, 242 Va. 242, 246, 409 S.E.2d 148, 151 (1991)
(citations omitted). See, e.g., Rowe v. Rowe, Record Nos.
0843-96-2, 0845-96-2 (Va. Ct. App. February 4, 1997) (where we
held the trial court erred by not classifying the marital
residence, purchased with $82,000 of husband's separate funds, as
completely marital property). We held that the cumulative
evidence demonstrated that a gift was intended: (1) the parties
purchased the home to accommodate their growing family; (2)
husband placed no reservations on the transfers of title
permitting him to reclaim the property upon divorce or any other
circumstance; and (3) the house was conveyed by joint title.
Viewing the evidence and all reasonable inferences in the
light most favorable to the prevailing party, the wife, and
attributing great weight to the trial court's findings, see
Pommerenke v. Pommerenke, 7 Va. App. 241, 244, 372 S.E.2d 630,
631 (1988), we conclude that the property was marital in
character when acquired by deed of gift from husband's parents.
The evidence proved that the property was a gift to both parties
9
at the time it was deeded to the parties. The trial court was
entitled to attribute greater weight to wife's testimony than to
husband's, and credible evidence supports the trial court's
determination. Accordingly, we hold that husband failed to rebut
the presumption that the parties' marital residence was entirely
marital property.
III. 200 CORPORATE STOCK SHARES
Husband next argues that the trial court should have
classified the initial 200 shares of corporate stock as the
separate property of the husband. To support this argument, he
asserts the evidence confirmed that all the shares, including the
initial 200 shares, of corporate stock were gifted solely to him
from his parents, and that he retained these shares in his name
throughout the parties marriage. We agree.
The statutory definition of separate property includes "all
property acquired during the marriage by . . . gift from a source
other than the other party. . . ." Code § 20-107.3(A)(1). The
party claiming that property acquired during the marriage is a
gift has the burden of proving it. Stainback, 11 Va. App. at 18,
396 S.E.2d at 689-90. "In the case of a gift to one of the
spouses, if there is credible evidence presented to show that the
property was intended by the donor to be the separate property of
one of the spouses, the presumption is overcome, and the burden
shifts to the party seeking to have the property classified as
marital to show a contrary intent on the part of the donor." Id.
10
at 17-18, 396 S.E.2d at 689. "[I]f the donee presents sufficient
evidence to rebut the statutory presumption of marital property,
and the other party presents no evidence to the contrary, . . .
the presumption is rebutted." Huger v. Huger, 16 Va. App. 785,
788, 433 S.E.2d 255, 257 (1993) (citing Stainback, 11 Va. App.
13, 396 S.E.2d 686 (1990)). Thus, if the wife presents no
evidence contrary to the husband's that the shares from his
parents' gifts were intended to be separate property, the
presumption that the shares were marital property is rebutted.
See id.
The evidence established that husband owned 950 outstanding
shares of DeHaven Nursery, Inc. at the time of the dissolution of
the parties' marriage, and that these shares had been gifted to
husband from his parents during the period of July 1, 1986
through April 1, 1994. The testimony confirmed that husband's
parents gave him 200 shares of the original issue of stock, and
that each year thereafter, husband's parents gave husband 100
shares annually as birthday gifts. Moreover, it is undisputed
that the initial 200 shares were issued in husband's name. Wife
presented no evidence to challenge husband's assertion that these
shares were meant to be other than a gift solely to the husband.
Additionally, "'when we are required to review on appeal an
issue arising under [Code § 20-107.3][, w]e must be able to
determine from the record that the trial court has given
substantive consideration to the evidence as it relates to the
11
provisions of this Code section.'" Donnell v. Donnell, 20 Va.
App. 37, 42, 455 S.E.2d 256, 258 (1995) (quoting Trivett v.
Trivett, 7 Va. App. 148, 153, 371 S.E.2d 560, 563 (1988)). In
the case at bar, the trial court gave no explanation of how it
arrived at its disposition of the 200 shares, and no evidence
supports the court's finding that these 200 shares were marital
property. Rather, the evidence presented at trial confirmed the
gifting by husband's parents of all shares of corporate stock
solely to the husband, including the initial 200 shares as his
separate property. Accordingly, we hold that the trial court
erred in classifying these 200 shares of stock as marital
property.
IV. INCREASE IN VALUE OF SHARE OF CORPORATE STOCK
Lastly, husband argues that the trial court erred in
determining that the increase in the stock value was attributable
to the efforts of the parties and was not attributable in part to
efforts of other persons. Code § 20-107.3(A)(3)(a) provides, in
pertinent part, as follows:
In 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, provided that
any such personal efforts must be significant
and result in substantial appreciation of the
separate property.
For purposes of this subdivision, the
nonowning spouse shall bear the burden of
proving that (i) contributions of marital
property or personal effort were made and
(ii) the separate property increased in
12
value. Once this burden of proof is met, the
owning spouse shall bear the burden of
proving that the increase in value or some
portion thereof was not caused by
contributions of marital property or personal
effort.
Thus, "[i]f husband prove[s] that passive factors . . . account[]
for a portion of the increase in the value of his stock, such
increase cannot be properly classified as marital property.
Similarly, . . . where third parties contribute to the increase
in value of separate property, the marital portion is to be
reduced proportionately." Rowe v. Rowe, Record Nos. 0843-96-2,
0845-96-2, slip op. at 3 (Va. Ct. App. February 4, 1997) (citing
Decker v. Decker, 17 Va. App. 12, 435 S.E.2d 407 (1993)). "The
increase classifiable as marital should reflect only that
attributable to [the parties'] personal efforts and not those of
[others] or passive factors. . . ." Id., slip op. at 4.
At trial, husband's expert stated that a number of factors
accounted for the increase in valuation, including market factors
such as inflation. Wife testified regarding her role in the
family business, but husband and his parents presented differing
views of wife's efforts and contributions. The trial court found
"from the evidence that such increase in value, excluding
inflation, is due to the personal efforts of the parties."
(Emphasis added). The evidence supports the trial court's
conclusion that other than inflation, the efforts of both parties
increased the value of the stock. Husband failed to establish or
otherwise quantify efforts made by third parties towards the
13
increase in the stock value.
Thus, based upon the record, we cannot say that the trial
court was plainly wrong in determining that the parties' joint
efforts enhanced the value of the stock. For the reasons stated
above, we reverse the trial court's classification of the initial
14
200 shares of stock as marital, and affirm the trial court's
determinations on the remaining issues.
Affirmed in part
and reversed in part.
15