J-A19018-14
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
EUGENE J. KUBAN, IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellant
v.
DIEDRE L. KUBAN,
Appellee No. 1325 WDA 2013
Appeal from the Decree Entered July 13, 2013
In the Court of Common Pleas of Washington County
Civil Division at No(s): 2011-40
BEFORE: BENDER, P.J.E., OLSON and FITZGERALD,* JJ.
MEMORANDUM BY OLSON, J.: FILED OCTOBER 30, 2014
Appellant, Eugene J. Kuban (Husband), appeals from the divorce
decree entered on July 13, 2013. On appeal, Husband challenges certain
aspects of an equitable distribution award entered on July 8, 2013. We
affirm in part, vacate in part and remand for further proceedings.1
Husband and Diedre L. Kuban (Wife) were married on August 8, 1994.
Husband was born in February 1937 and Wife was born in September 1947.
The parties’ final separation date is July 8, 2011. No children were born of
the marriage and both parties have adult children from previous marriages.
____________________________________________
1
On June 12, 2014, counsel for Husband filed a motion for leave to file
erratum to reply brief. We grant the motion.
* Former Justice specially assigned to the Superior Court.
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The parties entered into a prenuptial agreement on August 4, 1994.
The agreement provided, among other things, that any marital property,
including increases in value of premarital property, would be divided equally.
In addition, either party could make a gift to the marital estate or to the
other spouse by placing money in joint names or the name of the other
spouse. Spousal support, separate maintenance, alimony pendent lite
(APL), counsel fees, and alimony were waived.
Husband filed a complaint in divorce on January 5, 2011, which
included a claim for equitable distribution. Thereafter, Wife filed a petition,
which also alleged a claim for equitable distribution. Both parties filed
affidavits of consent and waivers of notice. Wife subsequently filed an
amended petition that requested APL, alimony, and counsel fees in addition
to equitable distribution. Wife challenged the validity of the parties’
prenuptial agreement.
After a hearing, the trial court determined that the parties entered a
valid prenuptial agreement. Accordingly, the court dismissed all economic
claims, except for matters relating to equitable distribution of the marital
estate.
The case was referred to a standing master who heard the parties’
equitable distribution claims on February 20, 2013. The master calculated
the total value of the parties’ marital estate as $344,347.00 and
recommended the following distributional scheme.
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To Wife:
Increase in value of 711 Valley View Road 68,150
MorganStanley/Sharebuilder IRA 51,746
ShareBuilder account 14,542
Advance from Topseed Kennel account 3,700
Less decrease in value of interest in
Williamsport Road property -4,833
Less PNC Credit account -6,920
Total: $126,385
Cash from Husband $45,789
Total Distribution to Wife: $172,174
To Husband:
Increase in value of Hamtom Road property 22,900
MorganStanley [IRA][] account 130,004
Ameriprise Financial Services account 4,609
MorganStanley account 29,756
ING life insurance 18,447
ShareBuilder IRA 9,492
Joint personal property 5,000
Less Home Depot credit account -2,246
Total: $217,962
Less cash payment to Wife $45,789
Net distribution to Husband: $172,173
Master’s Report and Recommendation, 4/3/13, at 15-16.
Both parties filed exceptions with the trial court. The court denied
Husband’s exceptions and sustained one of Wife’s exceptions. Specifically,
the court held that the increase in value of Husband’s Hamtom Road
property was $122,900.00, not $22,900.00 as the master determined.
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Because of this adjustment, the court added $50,000.00 to the amount
Husband was obligated to pay to Wife. In addition to the cash payment, the
equitable distribution order entered on July 8, 2013 directed that Husband
should transfer to Wife a joint Morgan Stanley account valued at $29,755.79
and that Wife should receive $20,244.21 from Husband’s Morgan Stanley
IRA. This appeal timely followed entry of the parties’ divorce decree on July
13, 2013.2
Husband’s brief raises the following questions for our review:
Should Wife’s misappropriation from the joint checking account
have been treated as an advancement against equitable
distribution?
Was Husband entitled to credit for his payoff of the mortgage
balance on Wife’s premarital residence?
Was there an increase of $122,900[.00] in the combined value
of the real estate on which Husband’s residence is situated and
the boarding kennel business at the same location?
Did the premarital portion of Husband’s IRA become joint and
thereby marital?
Husband’s Brief at 4.3
Husband’s claims on appeal challenge certain aspects of an equitable
distribution award entered by the trial court. Our review of such claims is
guided by the following well established principles.
____________________________________________
2
Both Husband and the trial court have complied with the requirements of
Pa.R.A.P. 1925.
3
We have re-ordered Husband’s claims to facilitate our discussion.
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A trial court has broad discretion when fashioning an award of
equitable distribution. Our standard of review when assessing
the propriety of an order effectuating the equitable distribution
of marital property is whether the trial court abused its
discretion by a misapplication of the law or failure to follow
proper legal procedure. We do not lightly find an abuse of
discretion, which requires a showing of clear and convincing
evidence. This Court will not find an abuse of discretion unless
the law has been overridden or misapplied or the judgment
exercised was manifestly unreasonable, or the result of
partiality, prejudice, bias, or ill will, as shown by the evidence in
the certified record. In determining the propriety of an equitable
distribution award, courts must consider the distribution scheme
as a whole. We measure the circumstances of the case against
the objective of effectuating economic justice between the
parties and achieving a just determination of their property
rights.
Moreover, it is within the province of the trial court to weigh the
evidence and decide credibility and this Court will not reverse
those determinations so long as they are supported by the
evidence. We are also aware that a master's report and
recommendation, although only advisory, is to be given the
fullest consideration, particularly on the question of credibility of
witnesses, because the master has the opportunity to observe
and assess the behavior and demeanor of the parties.
Childress v. Bogosian, 12 A.3d 448, 455-456 (Pa. Super. 2011) (internal
citations and quotations omitted).
Husband’s first claim asserts that the trial court erred in refusing to
treat Wife’s alleged misappropriation of $34,821.73 from marital funds as an
advance to Wife against her equitable share of the marital estate. During
the marriage, the parties maintained a joint checking account. Husband
claims that from September 1999 through August 2009, Wife made false
register entries with respect to 259 checks. Husband maintains that these
checks were drawn for amounts larger than those reflected in the
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corresponding register entries. Specifically, Husband claims that the actual
amounts withdrawn totaled $57,575.28 while the amounts entered in the
check resister totaled $22,753.55, for a difference of $34, 821.73. Husband
also claims that the check register did not accurately reflect payees.
The trial court refused to disturb the master’s finding that the record
did not support Husband’s claim that Wife used the joint checking account to
misappropriate nearly $35,000.00, noting that the record supported the
master’s findings and credibility determinations. We concur in the trial
court’s assessment. The master summarized the relevant testimony as
follows: 1) Husband wrote checks on the parties’ account, logged those
checks in the ledger, and enjoyed access to the parties’ bank statement at
all relevant times; 2) Husband was content to have Wife manage the joint
checking account; 3) Husband never questioned Wife’s expenditures for her
children or otherwise as represented by the 259 checks throughout the
ten-year period that Wife managed the account; 4) funds from the parties’
joint checking account were used to pay Wife’s daughter for work performed
at a kennel business Husband operated from his residence; and 5) Wife
made substantial deposits to the joint account throughout the parties’
marriage. See Master’s Report and Recommendation, 4/3/13, at 11-12
¶ 33. Since the master’s determinations find support in the record, we
discern no abuse of discretion in the trial court’s refusal to alter the master’s
findings.
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Husband next claims that the trial court erred in failing to give him
credit for paying off the balance on Wife’s premarital mortgage. At the time
of the parties’ marriage, Wife owned real estate located on Valley View Road
in Eighty-Four, Pennsylvania. That property was subject to a mortgage in
Wife’s name and served as Wife’s primary residence before she moved into
Husband’s home. In January 2003, the parties decided to satisfy the
mortgage so that Wife’s property would generate a positive rental income.
To carry out this plan, Husband and Wife paid $47,906.14 from their joint
checking account on January 8, 2003 to retire Wife’s mortgage obligation.
Husband admits that the check used to pay off Wife’s mortgage was
drawn on the parties’ joint checking account. See Appellant’s Brief at 26.
Nevertheless, Husband points out that the funds came from a $73,518.26
deposit he made nine days before the parties tendered their satisfaction
payment. Husband inherited these funds from his mother. Husband argues
that he is entitled to credit for the $47,906.14 payment (which increased
Wife’s equity in the property by that amount) because the source funds were
originally non-marital and passed only briefly through the parties’ joint
account.
The master rejected Husband’s contention, concluding that he was not
entitled to credit for satisfying Wife’s obligation since the funds used to pay
the mortgage came from a joint account. See Master’s Report and
Recommendation, 4/3/13, at 7-8 ¶ 22. The trial court declined to disturb
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this ruling. See Trial Court Opinion, 7/8/13, at 1-2. Paragraph 6.03 of the
parties’ prenuptial agreement plainly provides that transfers of non-marital
property to jointly held accounts constitute gifts to the marital estate.
Pursuant to the plain language of the parties’ agreement, Husband is not
entitled to relief on his second claim.
Husband’s next claim focuses upon the appreciated value assigned to
his residence and the boarding kennel business he operated at that location.
Specifically, Husband claims that the trial court erred in concluding that
there had been an increase of $122,900.00 in the combined value of
Husband’s residential property and his boarding kennel business. Husband
alleges that the estimated values for his residence and the kennel business
that appear in the parties’ prenuptial agreement represented merely a rough
apportionment of value between the realty and the business. It is Husband’s
position that since the current value of the kennel business is far less than
the estimate stated in the prenuptial agreement, the reduced value of the
business should offset any increase in the value of Husband’s residential
property.
The relevant background of this claim is as follows. Husband resides
on a 5.29 acre tract on Hamtom Road in Eighty-Four, Pennsylvania. He
acquired the property prior to the parties’ marriage. In addition, before the
parties were married, Husband started a boarding kennel business, known
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as Topseed Kennels, at the Hamtom Road property. Husband operated
Topseed Kennels as a sole proprietorship and continues to do so today.
Through counsel, the parties reached certain stipulations regarding the
value of Husband’s residential property. The parties agreed that the
residence had a value of $140,000.00 at the time of the marriage, which
value is also reflected in the parties’ prenuptial agreement. Although the
parties disputed the increase in the value of the property during the course
of the marriage, they agreed that the current value of the property is
$262,000.00, which represented the average of Husband’s and Wife’s
property appraisals.
The prenuptial agreement valued Topseed Kennels as a separate
business asset worth $100,000.00. The agreement further provided that
Husband would buy a term life insurance policy equal to the value of the
residence and Topseed Kennels with Wife as the named beneficiary. Wife
promised under the prenuptial agreement to pay the proceeds of the policy
to Husband’s estate for the purchase of the residence and Topseed Kennels.
Neither party offered a current value for Topseed Kennels during testimony
before the master.
In view of the foregoing circumstances, the master fixed the value of
Husband’s residential property at $240,000.00 at the time of marriage.
Consequently, the master calculated the appreciated value of the property to
be $22,900.00 during the course of the marriage. Pursuant to the
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prenuptial agreement, the master deemed this sum to be marital property
that was subject to equitable distribution.
The trial court granted Wife’s exception to the master’s determination,
finding that the master erred in establishing the increase in value of
Husband’s residence. Citing the parties’ prenuptial agreement and their
stipulation, the court found that the premarital value of Husband’s residence
was $140,000.00 and the current value totaled $262,900.00. Because of
this, the court determined that the increase in the value of Husband’s
residence equaled $122,900.00 and not $22,900.00, as the master found.
The court reasoned that the parties’ prenuptial agreement (the source of the
premarital valuation of Husband’s residence) treated the kennel as a
separate asset classified as a “business,” not “real estate.” Moreover, the
parties’ stipulation (the basis for the current valuation of Husband’s
property) was based upon an average of Husband’s and Wife’s real estate
appraisals, which did not include an assessment of Topseed Kennels’ value.
Neither party offered testimony or evidence about the value of Topseed
Kennels and, based upon the gross receipts of the kennel, the court found
the value of the business unchanged during the relevant period. For each of
these reasons, the court concluded that the value of Husband’s realty was
independent of the value of the kennel business. We concur in the trial
court’s determination, which finds support in the record. Hence, Husband is
not entitled to relief on his third claim.
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Husband’s fourth claim alleges that the trial court improperly failed to
correct the master’s error in concluding that the premarital portion of
Husband’s Morgan Stanley Individual Retirement Account (IRA) should be
treated as marital property because it was included in a joint account. Prior
to the marriage, Husband maintained an IRA account with Dean Witter
Reynolds valued at $46,060.00 as of August 31, 1994. This account was
subsequently transferred, “together with funds from other joint accounts,” to
Morgan Stanley Smith Barney (MSSB). As of December 31, 2010,
Husband’s IRA account at MSSB had a value of $130,004.00. The master
determined that these funds were held in a joint account in the names of
Husband and Wife. Accordingly, the master concluded that Husband’s IRA
had a value of $130,004.00 for purposes of equitable distribution.
Husband filed exceptions to the master’s ruling which the trial court
denied. The trial court reasoned that Husband failed to designate his IRA as
non-marital property in the parties’ prenuptial agreement. In addition, the
court believed it would be inequitable to construe the prenuptial agreement
so as to permit Husband to exclude a portion of his IRA as non-marital
property given that he failed to list the account within the agreement. We
address the master’s and the trial court’s determinations in turn.
We are unable to agree with the master’s determination that
Husband’s IRA account at MSSB is held in a joint account under the names
of Husband and Wife. Our review of the brokerage documents reveals that
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the MSSB consolidated summary form included in the record refers to three
separate accounts titled in different names. In particular, the consolidated
form reflects a personal account titled to “Husband and Wife as joint
tenants.” The form also shows two IRA accounts, one titled to Husband,
individually, and the other titled to Wife, individually. Not only do the three
accounts bear different titles, each account bears a distinct account number.
The account referenced in the master’s report at paragraph 18 corresponds
to an IRA account valued at approximately $130,004.00 and held in
Husband’s name only. Under these circumstances, we cannot agree with the
master’s conclusion that Husband’s IRA is held in a joint account.
We turn now to the trial court’s disposition of Husband’s claim. Again,
we find error. The trial court concluded that the entirety of Husband’s IRA
had to be classified as marital property in view of Husband’s failure to list
the account as non-marital property within the parties’ prenuptial
agreement. Paragraph 5.01 of the prenuptial agreement provides, however,
that all property which is not defined as non-marital property under
paragraph 14.01 and which is acquired during the marriage shall be
considered marital property. The plain terms of paragraph 5.01 impose a
two-part requirement for mandatory classification of an asset as marital
property: 1) failure to identify the property or asset pursuant to the
prenuptial agreement, and 2) acquisition after the marriage. Husband failed
to identify a portion of his IRA as non-marital property; however, it is
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undisputed that he possessed a portion of his IRA account prior to the
marriage. Thus, the premarital portion of Husband’s IRA was not subject to
equitable distribution.
Having concluded that the master and the trial court erred in
concluding that the entirety of Husband’s IRA was subject to equitable
distribution, it would seem to follow that we should order the relief
requested by Husband. We decline this invitation, however. In his report,
the master states that Husband’s IRA account with Dean Witter Reynolds
was “transferred together with funds from other joint accounts” to MSSB.
Master’s Report and Recommendation, 4/3/13, at 6 ¶ 18 (emphasis added).
After careful review of the testimony of the parties, the arguments of
counsel, the appellate submissions of the litigants, the master’s report, and
the trial court’s opinion, we are unable to definitively exclude the possibility
that, during the transfer process referred to by the master, Husband’s
premarital IRA account merged into an account held jointly by Husband and
Wife. A transfer to a jointly held account would constitute a gift of separate
property to the marital estate under paragraph 6.03 of the prenuptial
agreement. The trial court should inquire into this possibility during
proceedings on remand. If the premarital portion of Husband’s IRA was
never held in a joint account, then those funds should not be subject to
equitable distribution. If the premarital portion of Husband’s IRA was held in
a joint account, then the funds should be treated as a gift to the marital
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estate. For these reasons, we vacate the equitable distribution award
entered by the trial court and remand for further proceedings consistent with
this memorandum.
July 8, 2013 order affirmed in part and vacated in part. Case
remanded. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/30/2014
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