Bangs v. Bangs

BLOOM, Judge. The Circuit Court for Baltimore County granted the appellee, Antonina Bangs, a divorce a vinculo matrimonii from the appellant, Herbert Pancoast Bangs, on the ground of voluntary separation. The court also awarded appellee custody of the parties’ minor child, alimony, child support, a monetary award which included part of appellant’s pension as he receives it, and counsel fees. In this appeal, Mr. Bangs has launched a multi-pronged attack on the decree.

He presents a total of nine issues in his brief, the first eight of which relate to the propriety of the monetary award and the ninth to the award of alimony. He will prevail on none of them. Facts The parties were married on February 28, 1970. On August 12, 1971, the husband’s mother made a gift to him of an undivided interest in real estate by conveying her home to herself and him as joint tenants.

The property, then unencumbered, was valued at $37,500. Shortly thereafter, the husband and his mother borrowed $25,000, secured by a mortgage on the jointly owned property, and built a second, smaller house on the property. The husband’s mother then lived in the newer house, referred to by ³⁵⁵ the parties as the “small house”; and the parties occupied the original house, referred to as the “large house.” During their marriage, the parties used $8,740 of marital funds to make payments on the mortgage. They also made improvements to the large house.

At trial, the wife testified that the kitchen was redesigned, a wall was built in the living room, and a new bathroom was added, all at a cost of between $5,000 and $8,000. In addition, she testified that a new closet system was installed at a cost of several hundred dollars and that landscaping was done at a cost of $4,000. A fire on June 25, 1979, destroyed the large house and all of the couple’s personal property. They received $151,-721.89 in insurance proceeds after the fire and before their separation.

Of that total, $95,613 was for destruction of the house and $53,092 was for loss of the contents. Payment of the insurance proceeds was received in checks payable to the parties jointly. The checks were endorsed and deposited in a money market account titled in the husband’s name. It is undisputed that the entire amount of $95,613 received by reason of damages to the building was spent by the husband in reconstructing the large house.

What happened to the $53,092 received for loss of the contents, however, was the subject of considerable controversy. The husband asserted that much of that money was “spent for or on behalf of [the wife].” She, on the other hand, while agreeing that some of the money was spent on her behalf, denies that such expenditures were to the extent alleged by the husband. It was undisputed that a total of $120,000 was spent in rebuilding the large house. Since the home insurance proceeds totaled $95,613, about $25,000 over and above that amount was spent in the reconstruction.

The husband claimed that “the additional monies [were] provided from ‘contents money and salary,’ but principally from contents money.” After the fire, the parties lived at first in a hotel and then later in a trailer located on the property. In late June 1980, the husband moved out of the trailer and into the small house with his mother. He later began living with another ³⁵⁶ woman in a motel. Eventually, he and his girlfriend then moved into the reconstructed large house upon its completion.

In addition to granting appellee a divorce, the decree ordered appellant to pay appellee $350 per month in alimony and $300 per month in child support. Appellee was granted a monetary award of $32,900 plus a future sum or sums of money equal to a fractional share of appellant’s retirement pension if, as and when he receives it. The fractional share payable to appellee out of each pension payment appellant receives is: one-half of a fraction of which the number of years and months of the marriage (12 years, 7 months) is the numerator and the total number of years and months of employment credited toward retirement is the denominator: [[Image here]] If appellant voluntarily takes his pension as a lump sum, either before or after retirement, then, upon receipt of that lump sum, he must pay to appellee the sum of $22,500 plus simple interest thereon at the rate of 10 percent per annum from July 1, 1983, to the date of payment. I. Monetary Award The Maryland General Assembly enacted the Property Disposition in Divorce and Annulment Act, Md.Cts. & Jud.

Proc.Code Ann. §§ 3-6A-01 through 3-6A-07, in 1978 “to protect the interests of spouses who had made nonmonetary contributions to the marital residence.” Harper v. Harper, 294 Md. 54, 63 , 448 A.2d 916 (1982). The statutory provisions which are relevant to our inquiry are §§ 3-6A-01(e) and 3-6A-05(a)(l), (b), and (c). Section 3-6A-01(e) provides: (e) Marital Property. — “Marital Property” is all property, however titled, acquired by either or both spouses during their marriage. It does not include property acquired prior to the marriage, property acquired by inheritance or gift from a third party, or property ³⁵⁷ excluded by valid agreement or property traceable to any of these sources.

(Emphasis added). Section 3-6A-05(a)(l) provides in pertinent part that “[i]n granting an absolute divorce or annulment ... the court shall determine which property is marital property if the division of property is an issue.” Section 3-6A-05(b) and (c) provide: (b) The court shall determine the value of all marital property. After making the determination, the court may grant a monetary award as an adjustment of the equities and rights of the parties concerning marital property, whether or not alimony is awarded. The amount of the award and the method of its payment shall be determined after considering each of the following factors: (1) The contributions, monetary and nonmonetary, of each party to the well-being of the family; (2) The value of all property interests of each spouse; (3) The economic circumstances of each spouse at the time the award is to be made; (4) The circumstances and facts which contributed to the estrangement of the parties; (5) The duration of the marriage; (6) The age and the physical and mental condition of the parties; (7) How and when specific marital property was acquired, including the effort expended by each party in accumulating the marital property; (8) Any award or other provision which the court has made under this Subtitle 6A with respect to family use personal property or the family home, and any award of alimony; and (9) Such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award. ³⁵⁸ (c) A monetary award made under this section may be reduced to a judgment to the extent that any part of the award is due and owing.

Section 3-6A-05, therefore, directs the chancellor to embark upon a three-step process, see Harper, 294 Md. at 79 , 448 A.2d 916 , and Ward v. Ward, 52 Md.App. 336, 339, 449 A.2d 443 (1982): (1) If a party seeks an equitable adjustment beyond the distribution of the parties’ property in accordance with its legal title, the chancellor shall determine which property is marital property; (2) the chancellor must then determine the value of all marital property; and (3) the chancellor may then make a monetary award as an adjustment of the parties’ equities and responsibilities, whether or not alimony is awarded. If the chancellor determines that a monetary award is to be given, he must then consider each of the nine factors found in § 3-6A-05(b) in determining a fair and equitable amount and the method of its payment. In the instant case, the parties agreed, and the chancellor consequently found, that the real property, improved with the two houses, had a value of $156,000 at the time of trial. The chancellor then determined that since appellant had only a one-half undivided interest in the property that interest had a value of $78,000.

At the time of trial, the property was subject to a mortgage balance of $16,260. Subtracting half of that figure from appellant’s $78,000 interest, the chancellor determined that appellant’s equity in his one-half undivided interest was approximately $70,000. The parties also agreed that the property was worth $37,500 at the time that appellant and his mother took title to it as joint tenants. Therefore, appellant’s initial nonmarital 1 contribution toward the acquisition of the property was one-half of $37,500 or $18,750.

The chancellor then determined that the parties, as a marital unit, contributed $18,- ³⁵⁹ 750 to the property. That determination was based on the mortgage payments of $8,740 made by the marital entity and the value of the improvements they had made to the house and grounds. The chancellor thus determined that the husband’s undivided one-half interest in the property was one-half marital and one-half nonmarital property. Consequently the husband’s nonmarital interest in the property was worth $35,000 (one-half of $70,000) and the marital interest was also worth $35,000.

The chancellor then decided to award one-half of the marital interest, $17,500, to the wife because I’m convinced that the marriage relationship was such that it was a 50/50 partnership and that the non-monetary contributions that she made were equal to the monetary contributions — the monetary and non-monetary contributions that she made were equal to the monetary and non-monetary that he made, and I will award seventeen thousand five hundred dollars. In addition to the marital property interest in the real property, the chancellor also awarded appellee a proportionate share of the insurance proceeds that were received as compensation for the loss of the parties’ personal property in the 1979 fire. After the submission of a detailed exhibit listing the items of personal property that were destroyed, the chancellor found that $49,911 (39.4 percent) of the personalty was the nonmarital property of the husband, $26,696 (16.4 percent) was the nonmarital property of the wife, and $55,897 (44.2 percent) was marital property. The chancellor then proceeded to compute what part of the $53,092 received from the parties’ contents insurance coverage should have been received by appellee.

He determined that 38.5 percent of the proceeds, 2 or $20,440 should have ³⁶⁰ gone to- the wife. The husband contended that after the fire over $16,000 was spent by or on behalf of the wife for personal property. He also contended that much of the contents proceeds was expended in the reconstruction of the house. Therefore, he argued, by recovering part of the appreciation of the real property that was created by the contents proceeds, the wife had already been compensated for her share of the contents proceeds.

The wife contended, and the chancellor agreed, that she had only received about $5,000 from the contents insurance proceeds. Thus, she was awarded $15,440, which was added to the $17,500 for a total award of $32,900. Although appellant voices several objections to this portion of the monetary award, his two major complaints concern (1) the chancellor’s conclusion that part of the real property was marital property and, (2) that having awarded appellee part of the value of the real property’s appreciation, the chancellor erroneously duplicated that award by giving her a share of the contents insurance proceeds that had been expended to improve the property and thus cause the appreciation. A. Marital property determination Appellant contends that the chancellor, in finding that part of the real property was marital property, misconstrued the holding of the Court of Appeals in Harper v. Harper, 294 Md. 54 , 448 A.2d 916 (1982).

That case “presented] the question whether real property, purchased under an installment contract and paid for in part before ³⁶¹ marriage and in part during marriage, is marital property. Additionally, it presented] the question whether a marital residence constructed on that real property during marriage is marital property.” Id. at 56 , 448 A.2d 916 . The answers to those questions necessitated an analysis of the Property Disposition in Divorce and Annulment Act, Md.Cts. & Jud. Proc.Code Ann. §§ 3-6A-01 through 3-6A-07 and case law from sister jurisdictions.

The Court “rejected] the inception of title theory employed by a majority of community property states and at least one equitable distribution state.” Id. at 78-79, 448 A.2d 916 . That theory provides “that real property paid for in part before marriage and in part during marriage remains the separate property of the spouse who made the payments before marriage.” Id. at 64 , 448 A.2d 916 (citations omitted). Property, under that theory, is “acquired” at the inception of title. Similarly, under the inception of title theory; improvements made during marriage on the separate real property of a spouse are the separate property of that spouse even if the improvements were made with marital funds.

Rejecting that theory, the Court noted that § 3-6A-01, which defines marital property, “expressly establishes that a determination of what constitutes marital property under § 3-6A-05(a) is not dependent upon the legalistic concept of title.... Accordingly, under § 3-6A-01(e), property is not necessarily ‘acquired’ on the date that a legal obligation to purchase is created.” Id. at 78-79, 448 A.2d 916 . The Court also rejected the Illinois transmutation of property theory. The Illinois courts have determined their state legislature has indicated that a preference should be given to classifying property as marital.

The Illinois courts then concluded that the preference could “best be served by presuming that the contributors of marital property to nonmarital property intended that the commingled property be treated as marital.” Id. at 75-76, 448 A.2d 916 [quoting In re Marriage of Smith, 86 Ill.2d 518, 531 , 56 Ill.Dec. 693, 699 , 427 N.E.2d 1239, 1245 (1981) (emphasis ³⁶² added) ]. The Court of Appeals, in rejecting the transmutation of property theory, determined that “[although the Illinois Act is similar in many respects to the Maryland Act, we find nothing in the Maryland Act that indicates a legislative preference for the classification of property as marital.” Harper, 294 Md. at 79 , 448 A.2d 916 . Rather, the 'Court noted that “the language of § 3-6A-01(e), which sets forth an exclusive list of nonmarital property, indicates a legislative intent that the value of certain property not be subject to equitable distribution, and that the interests of spouses making nonmonetary contributions be protected without depriving the other spouse of nonmarital property.” Id. at 80, 448 A.2d 916 . The Court in Harper concluded that transmutation of nonmarital property into marital property subject to equitable distribution deprives a spouse of nonmarital property and is, therefore, contrary to that legislative intent.

The Court of Appeals then stated that under the Maryland Act the appropriate analysis to be applied is the source of funds theory. Under that theory, when property is acquired by an expenditure of both nonmarital and marital property, the property is characterized as part nonmarital and part marital. Thus, a spouse contributing nonmarital property is entitled to ap interest in the property in the ratio of the nonmarital investment to the total nonmarital and marital investment in the property. The remaining property is characterized as marital property and its value is subject to equitable distribution.

Thus, the spouse who contributed nonmarital funds, and the marital unit that contributed marital funds each receive a proportionate and fair return on their investment. Id. The Court then recognized that the application of the source of funds theory requires “an interpretation that defines the term ‘acquired/ appearing in § 3-6A-01(e), as