Balderston v. Balderston

GARRITY, Judge. On the parties’ fourth trip before this court, we are asked to determine whether the Chancellor erred in limiting reimbursement for capital improvements made by Mrs. Balderston to the former marital home to $359.86, in denying Mrs. Balderston’s request for attorney’s fees, and in failing to determine whether Mrs. Balderston was entitled to prejudgment interest on the judgment for mortgage payment arrearages. Mr. Balderston cross-appeals that the Chancellor erred in honoring the District of Columbia URESA order. Facts Mr. and Mrs. Balderston were divorced in 1975 by the Circuit Court for Montgomery County.

The divorce was pursuant to a separation and property settlement agreement incorporated into the divorce decree. 1 The agreement reads in pertinent part: (4) That he agrees to give possession of the home of the parties presently held as tenants by the entirety, and known as 11 Hilltop Road, Silver Spring, Maryland, to the Wife, with right of privacy and control of the premises, until the youngest child reaches the age of eighteen (18) years or in the event of a divorce between the parties, until the Wife shall remarry whichever event first occurs. Upon the happening of either of them or at any time prior to the happening of either event, upon the request of the Wife, the Husband agrees to join with the Wife in listing ³⁹³ the property for sale at the best price obtainable, to execute, acknowledge and deliver all papers required in the sale of same, and, after reimbursement to the Wife, the costs of any capital improvements made to the property by the Wife after the date of this Agreement, to divide the net proceeds realized from the sale equally between the parties. (5) That he agrees to pay, and maintain on a current basis, the monthly mortgage payments including V12 of annual taxes and fire insurance premiums as now charged or may hereafter be charged, as required by the lender; the mortgage referred to above is identified as that instrument recorded in the Land Records of Montgomery County, Maryland, as a lien of encumbrance against the home of the parties known as 11 Hilltop Road, Silver Spring, Maryland. In addition, the Husband agrees to pay and maintain on a current basis, the existing mortgage insurance policy covering the said lien or encumbrance against the said home of the parties. * * * * * * (2) That the Wife promises and agrees to join with the Husband in listing for sale at the best price obtainable, at such time as the youngest child of the parties reaches the age of eighteen (18) years or in the event of a divorce between the parties, at such time as she should remarry, whichever event first occurs, to execute, acknowledge and deliver all papers required in the sale of same, and, after reimbursement to her of the cost of any capital improvements she made to the property after the date of this Agreement, to divide the net proceeds realized from the sale equally between the parties.

On April 24, 1985, Mrs. Balderston filed a Petition for Contempt with the Circuit Court for Montgomery County requesting that she be granted a judgment for mortgage payment arrearages and for expenditures for capital improvements. The parties subsequently appeared before Domestic Relations Master James L. Ryan. At the hearing before the Master Mrs. Balderston introduced cancelled ³⁹⁴ checks for mortgage payments she had made since June, 1976 which amounted to $34,388.47. She also introduced receipts for work performed on the house totaling $22,-097.57. 2 Although Mr. Balderston proferred evidence concerning child support payments pursuant to a District of Columbia Superior Court URESA order and argued that the excess of the amount paid under the District of Columbia order over that payable under the Montgomery County child support order should be applied to his mortgage payment arrearages, the Master excluded this evidence.

The Master awarded Mrs. Balderston $34,388.47 in mortgage arrearages, $22,097.50 reimbursement for capital improvements made to the Silver Spring property by Mrs. Balderston, and $700 for attorney’s fees. Mr. Balderston took exception to the Master’s Report contending that he was not liable to his former wife for $22,097.57 because the work performed was for ordinary repairs and not capital improvements; he also took exception to the Master’s award of attorney’s fees contending that there was no showing of need made by his former wife. 3 Pursuant to Mr. Balderston’s filing of exceptions, the parties appeared before the Honorable Stanley Frosh in the Circuit Court for Montgomery County. Chancellor Frosh found that, “the only true capital improvements [Mrs. Balderston] made were the addition of a dishwasher and new lighting fixtures where none had previously existed.” The Chancellor awarded Mrs. Balderston $359.86 reimbursement for these two expenditures. The Chancellor also granted Mrs. Balderston a judgment in the amount of $34,388.47 for ³⁹⁵ mortgage arrearages.

Mrs. Balderston’s request for attorney’s fees was, however, denied without explanation. Additionally, Mrs. Balderston’s request for prejudgment interest on the mortgage payment she had made in behalf of Mr. Balderston was not part of the lower court’s order. I. Capital Improvements The separation agreement contemplated that upon sale of the premises Mr. Balderston would reimburse Mrs. Balderston for any expenditures she made for capital improvements to the property. The agreement provided, in pertinent part: Upon the happening of either of them [the youngest child reaches eighteen or the Wife remarries] or at any time prior to the happening of either event, upon the request of the Wife, the Husband agrees to join with the Wife in listing the property for sale at the best price obtainable, to execute, acknowledge and deliver all papers required in the sale of same, and, after reimbursement to the Wife, the costs of any capital improvements made to the property by the Wife after the date of this Agreement, to divide the net proceeds realized from the sale equally between the parties, (emphasis added).

Mrs. Balderston sought to recover funds she had spent on such items as kitchen remodeling, rebuilding the hot water heating system, repaneling the foyer, plumbing work performed in the bathroom, rebuilding a gate, installation of electrical wiring, refinishing walls in the master bedroom, installation of a new roof, electrical work performed in the attic, replacement of water pipes, sanding and staining wood floors, a new basement door, several window air conditioners, new lighting fixtures, and the installation and servicing of a new dishwasher for the kitchen. Mrs. Balderston described each project she had undertaken and offered justification for the expenditures. As an example, in explaining why the kitchen had been remodeled, she stated: ³⁹⁶ [Bjecause the ceiling had fallen through the kitchen because we had a bad leak in the bathroom. The floor had entirely come up in the kitchen because of there being a leakage under the kitchen sink, and we only had metal cabinets at the time which were all rusted out which had to be replaced, and the kitchen was pretty much falling apart.

Mrs. Balderston further related that the furnace and hot water heating system had to be “totally rebuilt,” that the “bathroom plumbing had to be replaced because the sink was broken,” that a new roof was installed because the old one leaked, that new water pipes were installed because the old pipes were cracked, and that the foyer had to be repaneled because “all the cracks that were in there were very bad.” In reaching his decision as to whether the work performed by Mrs. Balderston on the property was “repair” or a “capital improvement,” the Master utilized the following definition of “improvement”: [A] valuable addition made to property, amounting to more than mere repairs or replacement, and intended to enhance its value. An expenditure to extend the useful life of an asset. Such expenditures are capitalized as part of the asset’s costs, (emphasis added). Black’s Law Dictionary 682 (5th ed. 1979).

The Master concluded that the “improvements made by Mrs. Balderston fit within this definition,” and recommended that a judgment in the amount of $22,097.57 for capital improvement reimbursement be awarded to Mrs. Balderston. The Chancellor had a different view. He regarded the distinction between recoverable improvements and non-recoverable repairs thusly: Maryland courts have not clearly articulated the distinction between capital improvements and repairs. A generalized view of the case law indicates that a capital improvement is a permanent addition or betterment which is more extensive than an ordinary repair and substantial ³⁹⁷ ly enhances the value of real property. 42 C.J.S. Improvements § 1.

The Internal Revenue regulations provide that amounts paid or incurred for incidental repairs and maintenance of property are not capital expenditures. Internal Revenue reg. § .263(a)-l (1986). Apparently applying that standard, he concluded: The fact that the kitchen was remodeled because of age, leakage, rust, and general disrepair is an indication that the work can only be characterized as repair/replacement. The same is true of the furnace and hot water system, of which Mrs. Balderston said, “I had problems with the furnace which had to be totally rebuilt.

I had to have a new water heater installed because the other one was broken____” As for the paneling of the foyer, Mrs. Balderston said, “I had the halls stripped. I had colonial paneling put in. All the cracks that were in there were very bad. It had to be totally redone____” Again Plaintiff’s own testimony shows that the work was in the nature of repair.

Regarding bathroom plumbing, Plaintiff said, “[T]he bathroom plumbing had to be replaced. The sink was broken. We had to have a new vanity put in the sink. A lot of regrouting had to be redone____” From the testimony, there is every indication that the work was repair or replacement.

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