Gravenstine v. Gravenstine

ALPERT, Judge. Over 200 years ago Benjamin Franklin observed that “[wjhere there’s marriage without love, there will be love without marriage.” 1 Having experienced the former, appellant sought and temporarily found the latter. The affair begat divorce. Divorce begat a squabble over “marital property.” Resolution of the squabble begat this appeal.

The Facts This childless marriage commenced on December 28,1973. Charles Gravenstine, appellant, is a minister employed by a District of Columbia university as a supervisor of pastoral ministry. He also conducts an independent practice as a marriage counselor. The chancellor determined that: [Appellee] earns $22,000.00 per year; [Appellant], in addition to his $12,600 salary, has an untaxed housing allowance of $8,015.00, a lucrative (and unreported) marriage counselling practice, and substantial interest and dividend income.

Brigitte Gravenstine, appellee, is a legal secretary. Both parties were monetary contributors to the marriage, both having been employed throughout the marriage. Appellee was the major nonmonetary contributor, as she performed most of the household chores, although appellant was responsible for the gardening and banking. Their funds were pooled, carefully budgeted and they lived frugally.

For example, appellee canned vegetables grown by the par ¹⁶⁵ ties, and made most of her own clothes and the appellant’s underwear. Due to their parsimonious lifestyle, the parties were able to accumulate a significant amount of property including bank accounts, securities, a home and vehicles, and could afford to reinvest the dividends from the stocks owned by the appellant. Of all the property, only a home, a 1978 Volkswagen Rabbit and a credit union account were titled in joint names as of the time of trial. All other property was titled solely in the name of the appellant.

For the first six years of their marriage the parties pooled their earnings, enabling the appellant to make substantial deposits of his other income plus portions of appellee’s salary into the husband’s savings account at Madison National Bank, a joint savings account at Chevy Chase Savings and Loan, and the credit union at Catholic University. In 1979 the parties separated their funds and thereafter each paid for his or her personal expenses and his or her share of the household expenses and the mortgage. In June of 1981 the parties separated on what appellee believed to be a temporary basis. She testified that the parties agreed that she should leave the marital home and find an apartment because appellant had a dog and he was better able to maintain the parties’ garden.

Appellant subsequently asked appellee for her one-half share of the mortgage payment. When she responded that she could not afford to pay rent and at the same time continue to pay her share of the mortgage payment, appellant agreed that he would assume full responsibility for the mortgage. In the summer of 1981 the parties divided three certificates of deposit and the funds in their joint savings account at Chevy Chase Savings and Loan. At trial appellee contended and proved the existence of other bank accounts containing funds which would later be determined to be marital property.

In the fall of 1981 appellee’s attempts at reconciliation were thwarted in that appellant continued having sexual relations with another woman; this relationship precipitated ¹⁶⁶ what we perceive to be the straw that broke the camel’s back. In the early morning hours of January 10, 1982, appellee decided to visit the marital home, only to find appellant in the marital bed with his paramour. This event apparently triggered the divorce proceedings, as appellant filed her Bill of Complaint on February 8, 1982, in the Circuit Court for Montgomery County, seeking divorce a vinculo matrimonii and a division of property. The acrimony which characterized the litigation that followed was exemplified in the hypersensitive discovery proceedings.

See discussion of Cross-Appeal infra. Proceedings After two difficult days of trial which reflected the animosity that had built up over the past two years, the chancellor awarded the appellee a divorce a vinculo matrimonii on the grounds of adultery, a monetary award in the amount of $52,302.00 and a contribution for costs and attorney’s fees from appellant in the amount of $2,500. The chancellor denied appellant’s request for contribution towards mortgage and maintenance payments made by appellant on the parties’ former marital home. The granting of the divorce is not an issue in this appeal; the parties continue to disagree only over the marital award and denial of appellant’s request for contribution towards the mortgage and maintenance expenses on the parties’ former marital home.

Appellant contends that the chancellor erred in: I. Concluding that the portion of appellant’s pension earned prior to marriage was marital property.

II

Concluding that certain real estate acquired by appellant before the marriage was marital property.

III

Valuing the New Jersey real estate.

IV

Holding that all of the securities acquired during the marriage were marital property. ¹⁶⁷ V. Valuing the securities.

VI

Determining that ten thousand dollars in cash (and interest thereon) disbursed three years prior to the divorce was marital property.

VII

Valuing appellant’s truck.

VIII

Determining that appellant was not entitled to contribution from appellee for the carrying charges and maintenance expenses of jointly owned property- In her cross-appeal, appellee contends that the chancellor’s award of costs and attorney’s fees was insufficient. I. The Pension Appellant contends that only a portion of appellant’s pension should have been considered marital property and that the court erred in determining that the full value of the pension constituted marital property and was thus subject to equitable distribution. At trial when the issue of valuation of the marital portion of the pension arose, a dispute ensued over appellee’s right to call her expert witness. Rather than have the issue of marital property referred to a special master for later determination, the parties stipulated to the “total value” of the pension in the amount of $30,948.00.

Before determining the amount of the monetary award, the chancellor, while analyzing the facts to determine which property was marital, stated: [Appellant’s] pension with the Lutheran Church in America has a present value of $30,948.00. [Appellee’s] testimony that she followed [appellant] from city to city as he furthered his career with the Lutheran Church was uncontradicted. Although [appellee] worked as a secretary in a number of different places throughout the marriage, she had not, until very recently, worked in any one place long enough to acquire any retirement rights at all. Clearly, [appellee] is entitled to one-half the value of [appellant’s] pension. ¹⁶⁸ Although it was undisputed that appellant’s pension rights began to accrue (prior to the marriage) in 1968, the chancellor did not consider what if any portion of the pension might be nonmarital property. Section 3-6A-05 of Maryland’s Marital Property Act contemplates that a chancellor engage in a three-step analysis when equitably distributing marital property.

First, the chancellor must categorize the property owned by the parties as marital or non-marital. Next, the value of the marital property must be determined. Finally, the chancellor by means of a monetary award based on the value of that property, makes an equitable distribution of it between the spouses. Harper v. Harper, 294 Md. 54, 79 , 448 A.2d 916 (1982).

A spouse’s pension rights, to the extent accumulated during the marriage, constitute “marital property” subject to consideration by the chancellor unless otherwise prohibited by statute. Deering v. Deering, 292 Md. 115 , 437 A.2d 883 (1981). Where property is purchased and paid for in part before marriage and in part during marriage with nonmarital and marital funds, the property is nonmarital in part and marital in part. Harper v. Harper, supra, 294 Md. at 81 , 448 A.2d 916 .

In Harper, supra, the husband had purchased and partly paid for certain real property before the marriage. The marital residence was constructed on that property after the marriage by the expenditure of both nonmarital and marital funds. Marital property is defined as: 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 excluded by valid agreement or property directly traceable to any of these sources.

Md.Cts. & Jud.Proc.Code Ann. Section 3-6A-01(e) (1980 Repl.Vol., 1983 Cum.Supp.). ¹⁶⁹ The Court of Appeals in its analysis rejected the “inception of title theory” and “transmutation of property theory” in favor of the “source of funds theory”: We conclude 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 an 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. Harper, 294 Md. at 80 , 448 A.2d 916 . The Court went on to recognize that in order to apply the source of funds theory in Maryland it is necessary to define the term “acquired” appearing in § 3- 6 A 01(e) as “the ongoing process of making payment for property.” Id. It is uncontroverted that payments made toward the pension by appellant prior to the marriage were nonmarital contributions and thus constitute nonmarital property.

On the other hand, that portion of appellant’s pension that accrued after the date of marriage having been paid for by marital contributions was “acquired during the marriage” and thus was clearly marital property. Harper makes clear that the chancellor must determine the total nonmarital and marital investment as only the marital property is subject to equitable distribution. Rather than arguing the merits of the chancellor’s decision, appellee asserts that appellant’s present position is inconsistent with his position at trial and, therefore, he is precluded from obtaining appellate review on this issue. ¹⁷⁰ Although appellant did indeed attempt to exclude evidence to be elicited from appellee’s expert, he did make an attempt to stipulate to that expert’s evaluation of the marital portion of the pension, as illustrated by the following colloquy: [APPELLANT’S COUNSEL]: Before we proceed, Your Honor, I think there’s a lot of confusion in the file about the defendant’s pension. We are willing to stipulate that the report which [Appellee’s counsel] tried to introduce yesterday, that part of that is marital and part of it isn’t marital; we’ve never contended otherwise, and we’re willing to stipulate that $9,000 — not 9,000, but $18,000 of the pension is marital property.

Now, we’re not willing to stipulate that she has a right to that, but I think it would save a lot of testimony on the part of — since there seems to be no dispute as to that; it came from [Appellee’s counsel], we would be willing to stipulate to that, and I assume she would be willing to so stipulate. [APPELLEE’S COUNSEL]: Your Honor, we offered the letter from the actuary in evidence; it was not moved in; you took a value; I would like to stand by that value. We’ve tried to stipulate, threw out the pension; we got nowhere. I think this is after the fact and I object to it, and I’d like to request the Court to stand by its value of yesterday. THE COURT: All right.

You may proceed. [APPELLEE’S COUNSEL]: If that’s the case, Your Hon- or, then we would move to withdraw our stipulation of yesterday as to the total value, because it presents a distorted picture. The total value — he was employed six years before he married her. THE COURT: I understand that. [APPELLANT’S COUNSEL]: And I don’t think Your Honor can have any way to determine what is the marital portion and what isn’t without some stipulation or some evidence on our part, and we don’t have any expert. THE COURT: All right.

You may proceed. ¹⁷¹ As there was no specific proof of the value of the marital portion, the case must be remanded to the trial court to determine first the value of the marital portion of the pension and then to make an equitable distribution of the newly established value of that marital property, with due regard being given to all the relevant factors.

II

The New Jersey Real Estate In 1972, prior to marriage, appellant purchased an unimproved lot in Cape May County, New Jersey. The parcel was purchased with $5,100 of appellant’s funds and was titled in his name. While the parties discussed building a house on this property, the parcel was used only as a garden. Both parties apparently enjoyed visiting the New Jersey land on summer weekends.

Appellee testified that she helped to mow the grass, maintain the garden and assist in the picking, cooking, and canning of vegetables grown on the land. During the course of the marriage, taxes amounting to $1856.08 were paid from joint funds. Evidently applying the Harper ratio discussed supra, the chancellor declared that “the property is marital in the ratio of taxes paid during the marriage [$1856.08] to the total investment in the property [$5100].” Appellant posits that the property was fully “acquired prior to marriage” and thus nonmarital property. Section 3-6A-01(e), supra.

He further asserts that “in no sense was the property . . . ‘purchased and paid for’ either in whole or in part during the marriage.” Appellee replies that the New Jersey land was “part marital property” since she contributed to the payment of taxes. Resolution of this issue requires scrutiny of the word “acquired” as used in Section 3-6A-01(e). As previously explained, the Court of Appeals has defined the term as “the on-going process of making payment for property.” Harper, supra at 80 , 448 A.2d 916 . We hold under the facts of this case that the payment of taxes is not a part of the on-going process of paying for property fully purchased prior to the marriage.

Property tax is the “charge on the owner of a ¹⁷² property by reason of his ownership alone without regard to any use that might be made of it.” Weaver v. Prince George’s Co., 281 Md. 349, 357 , 379 A.2d 399 (1977) (emphasis added) (and cases cited therein). “A tax on the mere right to own or have property is a property tax.” Id. (emphasis added). Simply stated, payment of property tax does not involve the acquisition of land. We do not believe that the legislature intended that the joint payment of a tax incident to ownership of property would change the characterization of nonmarital to marital property.

This holding, however, does not leave appellee without a remedy for her joint payment of the property tax. Section 3-6A-05(b)(9) allows the chancellor the flexibility to consider this payment when arriving at a monetary award. This provision sufficiently protects appellee’s payments in behalf of property manifestly nonmarital. On remand, we direct the chancellor to characterize the New Jersey property as nonmarital property and to consider appellee’s joint payment of the property taxes when computing a fair and equitable monetary award.

III

Valuing of New Jersey Property Ordinarily, because we have concluded that the New Jersey parcel was not marital property, we would not address the issue of proof of its value. On remand, however, the chancellor in adjusting the amount of the monetary award would have to consider “the value of all property interests of each spouse.” Section 3-6A-05(b)(2) (emphasis supplied). Appellant argues that the chancellor incorrectly relied on New Jersey tax assessment records to assign a value to the property. We agree.

The general rule is that the value of property cannot be proven by assessments made for tax purposes. See, Mayor and City Council of Baltimore v. Himmel, 135 Md. 65, 75-76 , 107 A. 522 (1919) (tax assessment inadmissible to show value ¹⁷³ in condemnation proceedings). See also cases collected at 39 A.L.R.2d 209 , 214-20 (1955) (and Later Case Service). On remand we suggest that the parties present the testimony of a real estate dealer or appraiser or any other person engaged in this business who possesses special knowledge in this area to assist the chancellor in valuing the property in question.

Preske v. Carroll, 178 Md. 543, 552 , 16 A.2d 291 (1940).

IV

Securities Prior to marriage, appellant purchased 50 shares of Gulf Oil stock, 174 shares of Enterprise Fund, 75 shares of Atlantic City Electric, and 212 shares of Putnam Growth Fund. At trial appellant testified that the parties now possessed 75 shares of Gulf Oil, 314 shares of Enterprise Fund, 300 shares of Atlantic City Electric, and 428 shares of the Putnam Growth Fund. All shares are titled in appellant’s name. The additional shares were acquired while the parties were married through the addition of marital cash and dividend reinvestments.

Appellee testified that the parties both decided to reinvest the stock dividends. Income tax generated from these dividends were paid from marital funds. Appellee further testified that the reason the dividends were reinvested was because the parties’ financial arrangement obviated the need for the dividend money. The chancellor ruled that the securities acquired during the course of the marriage were marital property and that appellant held an interest in fifty percent of that marital portion.

Appellant points out that the stocks were originally purchased before marriage and were consequently non-marital property. § 3-6A-01(e), supra. Thus, he posits, the dividends generated from those stocks should also be considered nonmarital because they are directly traceable from nonmarital property. Appellee responds that the stocks acquired during marriage were marital property because “but for her monetary contribution to the family’s finances, ¹⁷⁴ the parties would have needed the dividends for other purposes.” Applying the “source of the funds” theory articulated by the Court of Appeals in Harper, supra, we make the following observations. The chancellor correctly determined that the securities purchased before marriage were nonmarital property.

The chancellor also correctly found that the securities acquired during the marriage are marital property. The evidence adduced demonstrated that the marital unit was able to purchase the additional securities due to