Hart v. Hart

¹⁵⁵ ADKINS, J. Appellant James K. Hart challenges a judgment of divorce awarding appellee Cynthia M. Hart, inter alia, two-thirds of the proceeds from the sale of the family home and indefinite alimony. We shall vacate that judgment, and in doing so, hold that a court ordering the sale of a jointly titled family home once the use and possession period for that property expires may not divide those sale proceeds unequally rather than adjusting the equities between the parties via a separate monetary award. FACTS AND LEGAL PROCEEDINGS James and Cynthia Hart divorced after 24 years of marriage. They resolved custody, visitation, and support issues regarding their children, 1 only one of whom remained a minor at the time of the divorce.

Our focus is on the property matters that were resolved at trial and are the subject of this appeal. During their separation, the Harts agreed that Cynthia would have use and possession of the marital home held as tenants by the entireties, which they stipulated to be worth $856,000. Under the terms of the agreement, Cynthia’s use and possession period ends August 15, 2006, shortly before the youngest Hart child reaches his 18th birthday. At trial, Cynthia Hart was 52.

Before she married, she earned a master’s degree in education and reading. During the marriage, she worked full time in banking until 1993, with her highest salary being $26,000. Thereafter, she worked in educational positions that did not require teacher certification, which she had not obtained. In the three years before trial, Cynthia earned $15,000 in salary plus an annual dividend of $6,000, working as a language enrichment specialist. ¹⁵⁶ In June 2004, as a result of lost funding, Cynthia’s position was terminated.

She unsuccessfully applied for jobs in education and banking. Eventually, she began the process of completing requirements for teaching certification, which she estimated would take two years and yield a starting salary of $34,975.00 plus eventual eligibility for pension benefits. During the marriage, Cynthia inherited money from her mother’s estate. She spent approximately $120,000 on family expenses, including paying private school tuition for the children.

At the time of trial, she had approximately $567,000 of her inheritance remaining. James Hart was 50 at the time of trial. During the marriage, James completed his bachelor’s degree and earned a masters in business administration in the evenings. He simultaneously worked full time during the day for Northrop Grumman.

At trial, James was in his 29th year at Northrup Grumman, earning an annual salary of $112,000. He also earned retirement benefits and a $15,000 annual bonus in 2004. James and Cynthia had a comfortable but not extravagant lifestyle during the marriage. They purchased a vacation condominium in Ocean City.

They also lived in a series of three homes that pertain to this appeal. In 1977, before the marriage, James bought a home on Summit Road. The couple lived there when they married in 1980. In 1981, they purchased a house on Whitney Road.

While in high school, Cynthia had received a personal injury settlement; she used $29,000 of this money to make the down payment on the Whitney Road property. The Harts lived there until they purchased their final marital home on Albacore Drive. Because the Whitney Road home had not been sold before settlement on Albacore Drive, the Harts borrowed $40,000 from Cynthia’s mother and took a home equity loan against the Whitney Road property in order to complete the Albacore ¹⁵⁷ Drive purchase. These two loans were repaid entirely with proceeds of the subsequent sale of the Whitney Road house.

James eventually sold his Summit Road house sometime after the move to Albacore Drive. He claims that he deposited $30,000 in proceeds from that sale into Cynthia’s individual bank account, and that the couple then used $26,000 of those funds to make mortgage payments on Albacore Drive. Cynthia counters that James told her that he sold the Summit Road property for a loss, and denies that any money from that sale was deposited into the marital account or used to make mortgage payments on the Albacore Road property. In the summer of 2000, Cynthia learned that James was having an extramarital affair.

According to Cynthia, James then deceived her into believing that he ended his adulterous relationship. Instead, he continued to live in the marital home and have marital relations with her, at the same time he maintained a sexual relationship with his paramour and made plans for divorce. During this time, Cynthia paid family bills from her inheritance, including all mortgage payments and private school tuition. James filed for divorce on July 25, 2003.

Until October 2003, James deposited his entire paycheck into the marital checking account. He continued to pay some household expenses thereafter. By May 2004, Cynthia had lost her job. James was paying only utility bills that were in his name.

Cynthia paid all other expenses for her, their minor child, and the Albacore Drive home from her inheritance. After a four day trial, the Circuit Court for Anne Arundel County entered a judgment on December 21, 2004. The court ordered the Albacore Drive home to be sold at the end of the use and possession period, and that the net sale proceeds be divided unequally, with two-thirds allocated to Cynthia and one-third to James. The court also awarded Cynthia rehabili ¹⁵⁸ tative and indefinite alimony. 2 James noted this appeal, 3 raising several issues that we consolidate and restate as follows: I. Did the trial court err in awarding Cynthia a two-thirds interest in the net proceeds from the sale of the family home following the use and possession period?

II

Did the trial court err in awarding Cynthia indefinite alimony? We shall vacate the judgment because the trial court erred in dividing the home sale proceeds unequally, possibly in lieu of making a separate monetary award. Although there was evidence that might support an indefinite alimony award, we cannot affirm the decision to make such an award because the trial court failed to make the threshold finding that, even after a period of rehabilitative alimony, Cynthia’s living standard would still be unconscionably lower than James’s. DISCUSSION I. Unequal Division Of S ale Proceeds From Family Home A. Sale Of Family Home Held As Tenants By The Entireties Following Use And Possession Order Under FL sections 8-203 to 8-205, Maryland courts must (1) determine which of a divorcing couple’s property is marital property, (2) value such property, and then (3) determine whether to grant a monetary award “as an adjustment of the equities and rights of the parties[.]” See Kelly v. Kelly, 153 Md.App. 260, 270 , 836 A.2d 695 (2003); FL § 8-202 to 8- ¹⁵⁹ 205.

FL section 8-202(b)(2) provides that, after completing the first step of this analysis, a court may, “as to any property owned by both of the parties, order a ... sale instead of partition and a division of the proceeds.” FL § 8-202(b)(2). That is what the trial court elected to do in this case. With respect to the family home on Albacore Drive, which the parties stipulated was titled as tenants by the entireties and worth $356,000 at trial (without any mortgage), the trial court ordered that, in June, 2006, the Marital Home shall be listed for sale.... The parties legally divide the cost of any repairs.....

Settlement of the property shall not take place before August 15, 2006 unless otherwise agreed upon by the parties. The net proceeds shall be divided with [Cynthia] receiving two-thirds (2/3) of the net proceeds and [James] receiving one-third (1/3) of the net proceeds---remaining after all costs of sale. (Emphasis added.) The 20 month delay in the sale of the marital home reflects that the court simultaneously awarded Cynthia use and possession of the family home “until the sale and settlement of the property[.]” There is no question that the court had authority to do so. When, as in this case, jointly titled marital real property qualifies as a “family home,” 4 the court may award use and possession of that property to the spouse with physical custody of the parties’ minor child, for a period of up to three years after the divorce.

See FL § 8-208(a), § 8-210(a). 5 ¹⁶⁰ The aftermath of such an order is governed by FL section 8-210(c), which provides: When a provision that concerns the family home or family use personal property terminates, the court shall treat the property as marital property if the property qualifies as marital property, and adjust the equities and rights of the parties concerning the property as set out in § 8-205 of this subtitle. (Emphasis added.) FL section 8-205, in turn, authorizes the court to make a monetary award: (a)(1) Subject to the provisions of subsection (b) of this section, after the court determines which property is marital property, and the value of the marital property, 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____ (c) The court may reduce to a judgment any monetary award made under this section, to the extent that any part of the award is due and owing. (Emphasis added.) “[T]he purpose of the monetary award ... is to achieve equity between the spouses where one spouse has a significantly higher percentage of the marital assets titled his name.” Long v. Long, 129 Md.App. 554, 577-78 , 743 A.2d 281 (2000). Granting a monetary award allows a court “to counterbalance any unfairness that may result from the actual distribution of property acquired during the marriage strictly in accordance with its title.” Ward v. Ward, 52 Md.App. 336, 339 , 449 A.2d 443 (1982).

Consequently, when deciding ¹⁶¹ whether to make an award, the court has broad discretion to reach an equitable result. See Freese v. Freese, 89 Md.App. 144, 153 , 597 A.2d 1007 (1991), cert. denied, 325 Md. 396 , 601 A.2d 129 (1992). The exercise of such discretion, however, must be made using correct legal standards. The Marital Property Act, codified at FL § 8-101 et seq., creates the three-step method outlined above for disposing of marital property.

In step three, when deciding whether to make a monetary award (and if so, in what amount and on what terms), courts must comply with FL § 8-205, which requires the court to consider each of twelve enumerated factors, 6 including the value of the family home, as well as the existence of “any award ... with respect to ... the family home[.]” See FL § 8-205(a); FL § 8-205(b)(10); John F. Fader, III & Richard J. Gilbert, Maryland Family Law § 15-5, at 15-19 (3d ed. 2000 & 2004 Cum.Supp.). On appeal, we review the court’s grant of a ¹⁶² monetary award to ensure consideration of the enumerated statutory factors, and for abuse of discretion. See FL § 8-205; Doser v. Doser, 106 Md.App. 329, 351 , 664 A.2d 453 (1995); Randolph v. Randolph, 67 Md.App. 577, 584 , 508 A.2d 996 (1986). James correctly points out that there is no statute or case law explicitly permitting a percentage distribution of proceeds from the sale of a family home following a use and possession period.

He characterizes the court’s two-thirds award of the marital home sale proceeds to Cynthia “as a monetary award.” James posits that allowing the court to award a proportion of the unknown net proceeds from a future sale of the marital home at the end of a use and possession period “totally frustrat[es] the purposes and considerations of the § 8-205(b) factors,” prevents the creation of a debtor-creditor relationship, ignores the potential for changes in market and property conditions during the use and possession period, and effectively amounts to an impermissible award of “a contingent right to receive a marital property award[.]” Cynthia also interprets the court’s two-thirds distribution of sale proceeds as a monetary award. Moreover, she acknowledges the settled Maryland law that “[g]ains on future sales of property are too speculative to consider” in determining a marital award. See Innerbichler v. Innerbichler, 132 Md.App. 207, 239 , 752 A.2d 291 , cert. denied, 361 Md. 232 , 760 A.2d 1107 (2000). Thus, she agrees in principle that a trial court “cannot award a sum certain based upon the speculative value of the marital home at the end of the use and possession period.” Cynthia contends, however, that the trial court acted appropriately in granting her a monetary award equal to two-thirds of the stipulated property value ($356,00 x .66 = $237,333), plus two-thirds of any increase or decrease that may occur during the use and possession period. 7 Because ¹⁶³ the court correctly declined to “speculate as to a specific increase in value during the use and possession period[,]” it “did the only thing it could do which was to provide for a proportional increase or decrease to each party.” We agree with James that the trial court erred in distributing two-thirds of the sale proceeds on the Albacore Drive property to Cynthia.

Our review has been complicated by uncertainty as to whether the trial court intended this order to be a monetary award. As we shall explain, however, no matter which way we characterize the order, we cannot affirm in its current form. B. Sale And Division Of Proceeds Under FL Sections 8—202(b) and 8-210(c)? The most straightforward way to read the court’s order would be to interpret the percentage award as the court’s exercise of authority under FL section 8-202(b), to order sale of the Albacore Drive home, and distribute the proceeds following the use and possession period.

This Court has recognized that “the trial court may, in its discretion, order the sale of the family home ... after the use and possession period expires[.]” Scott v. Scott, 103 Md.App. 500, 524 , 653 A.2d 1017 (1995). The General Assembly’s direction in FL section 8-210(c) to “adjust the equities and rights of the parties concerning the property as set out in § 8-205” (emphasis added) does not mean that, once a use and possession order has been imposed, the court’s lone tool for doing so is a monetary award. Nothing in either section 8-210(c) or section 8-205 obligates the court to grant a monetary award. To the contrary, subsection 8-205(a) states that “the court may ... grant a monetary award,” meaning that “[t]he decision whether to grant a monetary award is generally within the sound discretion of the trial court.” Alston v. Alston, 331 Md. 496, 504 , 629 A.2d 70 (1993).

The sale and division remedy authorized in section 8-202(b) has the potential advantage of making it unnecessary for the ¹⁶⁴ court to project what the net sale proceeds are likely to be at the end of the use and possession period. Simply splitting the net proceeds, whatever they may be, is a most practical way to dispose of such property. In this instance, however, the impediment to construing the court’s award as a simple exercise of such authority under FL sections 8-202(b) and 8-210(c) is that the court did not split the sale proceeds equally. We found no Maryland casé addressing this particular situation, but this Court has stated generally, in another context, that a “trial judge may either grant a monetary award to adjust the equities of the parties ... [under] § 8-205(a), or, in the case of property owned by both of them, order that the property be sold and the proceeds divided equally” under section 8—202(b)(2).

Pleasant v. Pleasant, 97 Md.App. 711, 720 , 632 A.2d 202 (1993)(emphasis added). Although there is no precedent specifically holding that the trial court does not have authority under FL section 8—202(b)(2) to distribute such proceeds unequally, we reach that conclusion by applying established principles governing disposition of marital property. Under Maryland law, real property owned as tenants by the entireties is statutorily classified as marital property. See FL § 8-201(e)(2)(“ ‘Marital property 1 includes any