Blake v. Blake

ROSALYN B. BELL, Judge. This domestic dispute, decided in the Circuit Court for Anne Arundel County, raises four questions—two under the Property Disposition in Annulment and Divorce Act, Md. Fam.Law Code Ann. § 8-201 et seq. (1984,1989 Cum.Supp.), one dealing with alimony under Md.Fam.Law Code Ann. § 11-106 (1984), and the fourth on counsel fees under Md.Fam.Law Code Ann. § 11-110 (1984). Specifically, George Blake, appellant, articulates the issues as: — Whether a nonmarital portion of a family home is determined by the percentage of the original purchase price or whether the portion is altered by later repairs and improvements. — Whether direction to pay an amount representing a portion of her marital share and a nonmarital interest to one spouse out of the proceeds of the sale of the parties’ jointly held bank account constituted a prohibited transfer of ownership under the Act. — Whether indefinite alimony is appropriate when the dependent spouse offered neither expert testimony nor testimony relative to whether she could secure a better job in other lines of work. — Whether counsel fees may be awarded when a monetary award sufficient to cover her fees is also made.

Since we conclude that the direction to pay what should have been designated a monetary award out of the proceeds of jointly held property is an impermissible transfer, a remand is necessary. While this remand will probably result in no ultimate relief to Mr. Blake, the judgment as entered must be corrected. We explain. George and Betty Blake were divorced following a separation of over two years.

Mr. Blake was a few weeks shy of age 57 at the time of trial, while Mrs. Blake was already ⁷¹⁷ 57. The marriage had lasted nearly 37 years, during which they had raised two sons to adulthood. At the completion of the trial, the court rendered an oral opinion that was followed by a written order prepared by counsel for Mrs. Blake. We will relate the detailed relevant facts when and as they pertain to the specific issues.

MARITAL PROPERTY The determination of the marital property and nonmarital property is a primary issue in this case. Section 8-201(e) defines “marital property” as follows: “(1) ‘Marital property’ means the property, however titled, acquired by 1 or both parties during the marriage. “(2) ‘Marital property’ does not include property: (i) acquired before the marriage; (ii) acquired by inheritance or gift from a third party; (iii) excluded by valid agreement; or (iv) directly traceable to any of these sources.” In the instant case, Mr. and Mrs. Blake purchased their home property as tenants by the entirety in 1969 for $25,-000. Mrs. Blake thereafter inherited property from her family. The sale of that inherited property resulted in proceeds of sale of $5,811.

The trial judge found, and Mr. Blake does not disagree, that Mrs. Blake applied that sum to the mortgage on the home of the parties; that this sum was traceable to the inheritance; and that no gift was made or intended. The balance of the mortgage was paid wholly by family funds. On the question of the gift, prior to trial Mr. Blake contended this was a gift. On appeal, however, he has abandoned that position and focuses on whether the computation of the nonmarital property is correct and whether the order of the court required an impermissible transfer of assets.

We will first consider the computation of the nonmarital share. Valuation of the Nonmarital Interest Mr. Blake challenges the court’s findings which led to the valuation of the nonmarital portion and the computation. ⁷¹⁸ The computation was based on the oft-cited footnote 9 in Grant v. Zich, 300 Md. 256, 276 , 477 A.2d 1163 (1984), which provides: “A husband and wife acquired real property for a purchase price of $40,000. The wife contributed a down payment of $10,000 from property that she acquired prior to marriage. The remaining $30,000 was financed by a mortgage signed by both the husband and the wife.

One-quarter of the value of the property is the wife’s nonmarital property and three-quarters of the value of the property is marital property. “If, at the time of the dissolution of the marriage, the property has appreciated in value to a fair market value of $60,000 and the mortgage indebtedness has been reduced to $20,000 by the payment of $10,000 of marital funds, the following division would be appropriate. One-quarter of the $60,000 fair market value of the property, or $15,000, would be the wife’s nonmarital property, not subject to equitable distribution.” See also Harper v. Harper, 294 Md. 54, 81-82 , 448 A.2d 916 (1982). Here, the real property was acquired for $25,000. Mrs. Blake contributed $5,811.

That contribution was directly traceable to the inheritance and hence, was not marital property. The proceeds of the sale of the family home were $314,000, which grew to $325,166 by the time of the divorce. The trial judge calculated the amount of nonmarital property attributable to the $325,166 by determining the ratio that the nonmarital investment ($5,811) bears to the total nonmarital and marital investment in the property ($25,000), resulting in 23.24 percent. Applying 23.24 percent to $325,166, the trial judge determined the nonmarital amount in the property to be $75,568.

We find no error in this apportionment. 1 ⁷¹⁹ While a generalized complaint is made about the apportionment, Mr. Blake offers no alternative method of ascertaining the portion. In view of the absence of any real controversy on the method of computation, we move next to Mr. Blake’s complaint that the trial judge should have added the cost of repairs and improvements made on the house to the original purchase price before he calculated Mrs. Blake’s nonmarital investment ratio. As an example, in explaining why the improvements should be considered, Mr. Blake posits that the house when purchased was in a state of deterioration and run down. He contends it required extensive work, including installation of new floors, stripping the interior walls down to the bare block and redoing them, installation of new windows and doors, installation of two new roofs, and construction of a bulkhead over a period of years using over two hundred tons of rock.

Mr. Blake argues that the cost of those renovations were undertaken jointly by the parties, but that he alone did the work. Thus, he contends it is inequitable to ignore the benefits and improvements to the property that accrued thereby, which significantly increased its value. Mr. Blake argues that the trial court may infer that the property in question was purchased cheaply, because of its condition. He further contends that it was not habitable while the floors, walls, windows, doors and roof were being replaced, and that the cost of the repairs should be considered in determining the amount of the marital investment, or the true cost of the home.

On habitability, he has a problem as admittedly, he, his pregnant wife, and Ms young son were all living in the home throughout the time the repairs were being accomplished. On the repairs and improvements, he asks us to assume that those repairs and improvements cost $50,000 and were marital property. Thus, the proportion of the nonmarital contribution by Mrs. Blake would be calculated in relation to $75,000 (purchase price of $25,000 plus repairs and improvements), rather than solely the amount of the original purchase price, or 7.75 percent instead of 23.24 percent. ⁷²⁰ Mrs. Blake, however, points out that Mr. Blake is not correct and that she and the children did the major part of the work. The son of the parties supported this position, positing that Mr. Blake was the superintendent and Mrs. Blake and the children were the backbone or laborers.

While interesting, all this makes no difference here— there simply is no credible evidence of the costs of the repairs or improvements, labor or materials, or the change in value resulting therefrom. Moreover, the $50,000 figure is presented for the first time on appeal. Despite Mr. Blake’s contention that the trial judge is responsible for determining the value of the marital property, this responsibility does not carry the burden of producing such evidence. Mrs. Blake established the cost of the property and her contribution to it.

It was then Mr. Blake’s obligation, if he wished to do so, to controvert that evidence by showing the increased value resulting from improvements and, in appropriate circumstances, from repairs. As the party seeking the monetary award, Mrs. Blake had the burden of establishing (1) the value of the marital property, (2) that a portion of this property was nonmarital, and (3) its (the nonmarital property) value. Although that ultimate burden of proof did not shift, once evidence sufficient to establish those facts was presented by Mrs. Blake, the burden of producing evidence to the contrary fell on Mr. Blake. See generally McLain, Maryland Evidence, § 300.1 (1987).

While the trial judge found that both parties did work on the house, he did not attribute any specific value to that work. Since he was not confronted with any evidence of that increased value, he was not clearly erroneous in his finding. Mr. Blake also argues that the trial court did not consider the full amount of his payments on the mortgage as modifying the basic marital share. Certainly, the principal payments were reflected as being made out of marital property.

The court did not discuss the mortgage contributions other than principal, but it was not obliged to, since there was no specific claim made on those payments. Mr. ⁷²¹ Blake contends on appeal for the first time that the court should credit taxes and interest payments. Taxes and interest are not ordinarily capital investments and, in the absence of some compelling reason to consider them as such, we decline to depart from the norm. Ample evidence supported the ruling of the trial judge.

We cannot and do not find him clearly erroneous. Prohibited Transfer The trial judge in his oral opinion after trial found that the total assets of the parties amounted to $460,418. 2 From that, he deducted the nonmarital portion of the proceeds of the sale of the home as computed to determine marital property of $384,850. He then reviewed the appropriate factors and stated that one-half of the $384,850 or $192,425 3 would be Mrs. Blake’s portion and $192,425, Mr. Blake’s portion. The trial judge directed counsel to prepare an order on this basis.

He instructed counsel then to subtract the assets in Mrs. Blake’s sole name and the balance “she’ll be entitled to take that out of the money that’s held jointly. That money that’s being held in the bank account. The balance to belong to Mr. Blake.” The order implemented this ruling and specified that Mrs. Blake was “entitled to take the value of her portion of the joint marital property ($176,768.00) from the parties’ Sovran ac ⁷²² count containing proceeds of sale” of the parties’ home. No designated monetary award was made.

Mr. Blake contends this amounts to an impermissible transfer of assets from him to Mrs. Blake. We agree. The ownership of the proceeds in the savings account ($325,166) was held jointly by the parties. While a monetary award may be made to adjust the equities of the parties, the ownership cannot be changed.

Although the trial in this case was had after the filing of Watson v. Watson, 77 Md.App. 622 , 551 A.2d 505 (1989), apparently neither the trial court nor trial counsel referred to the case. In Watson, 77 Md.App. at 632, 632-33, 633 , 551 A.2d 505 (citations omitted), we said: “Once the gift is complete, ordinarily the donee spouse has a vested interest in the property that cannot be divested. A divorce court cannot later take away the legal interest that had been given earlier, on the theory that the property remains ‘nonmarital,’ because to do so would violate § 8-202(a)(3), which expressly forbids the divorce court to ‘transfer the ownership of personal or real property from one party to the other.’ ****** “[T]he presumption of gift arising from the titling of property in both spouses so that in the event of divorce the donee spouse legally owns a one-half interest as his or her sole and separate property ‘has no application when characterizing property as nonmarital or marital under § 8-201(e) for the purpose of granting a monetary award under § 8-205(a).’ ****** “A question as to whether property is either marital or nonmarital (or partly marital and partly nonmarital, as in this case) arises only in connection with a divorce, and is of consequence only if the divorce court deems it appropriate to ‘grant a monetary award as an adjustment of the equities and rights of the parties concerning marital property____’ § 8-205(a).” ⁷²³ Faced with this holding, counsel for Mrs. Blake would have us conclude that the issue was not preserved. Rule 8-131(a).

While this position might be an attractive solution, it is not correct. The thrust of Mr. Blake’s case was that the proceeds of the sale should be divided equally and, while not with great precision, he does preserve the issue. Mrs. Blake also contends we are dealing with form over substance. While under these facts that may turn out to be so, that does not make the verdict correct; hence, we will need to remand to the trial judge. 4 We will articulate the process as it applies here and remand for the trial judge to enter the monetary award in light of the process.

In Harper , the Court of Appeals enunciated the three-step process that must be followed in establishing a monetary award. “[ (1) ] [T]he trial court must initially characterize all property owned by the parties, however titled, as either nonmarital or marital____ [ (2) ] Once characterized, the value of the marital property must be determined. Thereafter, [ (3) ] the value of the nonmarital property of each spouse is assigned to that spouse and the value of the marital property is equitably distributed between the spouses____ In making this equitable distribution, the trial court must consider nine relevant factors, including the monetary and nonmonetary contributions of each spouse, the value of the property interests of each spouse, and the effort expended by each spouse in accumulating the marital property.” ⁷²⁴ Harper, 294 Md. at 79, 448 A.2d 916 . Since that time, some case law refinements and some legislative modifications have been made, but the basic process has not changed. By applying the steps precisely, while the end result appears the same, we avoid the pitfall of an impermissible transfer.

The Three Steps Step One: the characterization of all property as either marital or nonmarital. § 8-203. In this case, the court, applying the source of the funds theory under Harper , found a portion of the house owned by the parties to be nonmarital property, namely, traceable to inherited