Kline v. Kline

BLOOM, J. Preface Although Maryland’s Property Disposition in Annulment and Divorce Act (the Act) 1 has been the subject of extensive litigation since it became effective on 1 January 1979, some of its provisions continue to baffle and confuse bench and bar alike. One explanation for the confusion may lie in the fact that the Act gives artificial meanings to the noun “property” when it is modified by the adjective “marital” or its antithesis, “nonmarital.” When a word has different meanings and connotations in various contexts, there may ³⁶ be a tendency to ascribe to it the most familiar meaning and connotation regardless of the context. 2 This case, which comes to us on cross-appeals by both the husband, Charles T. Kline, and the wife, Marlene A. Kline, from a judgment of absolute divorce entered by the Circuit Court for Anne Arundel County, illustrates some of the more popular misconceptions concerning the Act and its application. Neither party objects to the severance of the matrimonial bonds; both, however, find fault with the remaining provisions of the judgment, which concern distribution of property and awards of alimony and counsel fees. Because several of their complaints are valid, we shall reverse various portions of the judgment relating to distribution of property and remand for reconsideration of those issues in light of this opinion.

We shall affirm, however, the grant of an absolute divorce and some other provisions of the judgment as to which there is no dispute. Facts There appears to be little disagreement as to any of the material facts. The parties have known each other for many years. Mr. Kline was a recent widower with three children, two of whom were emancipated, when he and Marlene Amland, a divorcee with an emancipated child of each of her two prior marriages, decided to marry.

Each owned a home but neither wanted to live in the home of the other, so they sold their respective properties and together bought another house which they intended to be their marital home. The new home, at 450 Mary Kay Place, in Linthicum, ³⁷ Maryland, was purchased for $94,150. 3 Mr. Kline contributed $69,000 from the sale of his house; Mrs. Amland contributed either $10,000 or $8,000 from the sale of her house; 4 and there was a purchase money mortgage of $20,750 payable over thirty years. Settlement was conducted on 3 May 1985, at which time the property was conveyed to Charles T. Kline and Marlene A. Amland as joint tenants with rights of survivorship. Three weeks later, on May 25, the parties were married.

Thereafter, in August 1985, they changed the form of their co-ownership of the Linthicum property from joint tenancy to tenancy by the entireties. Several months after the parties married they purchased a business, which they named “B & M Video.” 5 They paid $48,000 for the business, $28,000 of which was contributed by Mr. Kline out of proceeds of insurance on the life of his first wife. The remaining $20,000 was part of an initial advance of $24,000 from Household Finance Corporation III, which took a deed of trust on their home to secure a total loan of $45,000 or so much thereof as the parties actually drew. Sometime later, Mr. Kline borrowed $4,000 from his sister, Lavinia Adler, to purchase more inventory for the business.

The joys of marriage were short-lived. The husband blamed the deterioration of the marriage on the presence, from time to time, of the wife’s daughter, who, according to him, had a serious drug problem; the wife’s mother, who was ill; and the husband’s daughters, who were a source of strife and trouble. Whatever the reason, after just 18 months of marriage the parties separated. The husband alleged the separation was by mutual agreement; the wife ³⁸ alleged that the husband constructively deserted her.

In either event, the parties divided up their personal property and the wife moved out of the home. Thereafter, the husband changed the locks in order, he said, to keep the wife’s daughter from returning. The wife made no effort to return to the house and never asserted a right to do so. The Circuit Court’s Decision On the basis of the evidence presented, the court found that the house had a current market value of $110,000 with a first mortgage balance of $20,000 and with a second lien held by Household Finance in the amount of $44,000, the husband having borrowed an additional $20,000, of which part was spent for joint obligations and part was spent for his sole benefit, including $7,000 for attorneys’ fees.

The business has a current value of $22,000, but against that value are the unpaid $4,000 debt to the husband’s sister and $20,000 of the unpaid $44,000 loan from Household Finance. As a result of a pretrial motion and hearing, a counsel fee of $250, payable to the husband, was assessed against the wife for failure to disclose, during discovery proceedings, information pertaining to her pension. That award was nullified by the trial judge, who, as part of the divorce judgment, awarded the wife a counsel fee of $1,000 while striking out the $250 previously assessed against her. The court also awarded alimony of $25.00 per month for one year.

The husband protests the awards of alimony and counsel fees and the striking out of counsel fees originally awarded to him. The principal problems with the judgment, however, lie in those portions of it which deal with characterization and disposition of property. The court determined that both the home and the business were marital property, the home by virtue of gifts by husband to wife of $69,000 and wife to husband of $8,000 of their respective nonmarital funds. By way of “adjustment of the equities and rights of the parties concerning marital property,” the court ordered that both the house and the business be sold with the proceeds divided as follows: ³⁹ The mortgage balance on the marital home in the amount of approximately $20,000, the equity loan owed to Household Finance in the amount of approximately $44,000, the loan to Levinia [sic] Adler in the amount of $4,000, and the $28,000 owed to the Plaintiff [husband] for his non-marital contribution to B & M Video are to be paid.

The remaining balance is to be divided equally between the parties with the following adjustments: The Plaintiff will receive a debit of $7,000 for the portion of the equity loan which was applied to his attorney fees; the Defendant will receive a credit of $7,000 for the same; the Plaintiff will receive a credit of $6,500 for his Crawford contributions 6 for the maintenance of the marital home from the date of the separation of the parties until the date of the hearing; the defendant will receive a $6,500 debit for same; the Plaintiff will receive a debit of $6,500 for the balance of the equity loan which he retained for his personal use; and, the Defendant will receive a $6,500 credit for same. Errors in the Judgment (and Errors in Assertions of Error) The husband is correct in his contention that the court erred in characterizing the house as marital property, but his belief that he is entitled to recoup his $69,000 initial contribution is erroneous for two reasons, both of which are based upon misconceptions about the Act. The wife is correct in her assertion that the court erred in awarding the husband $28,000 out of the proceeds of sale of the house and business. ⁴⁰ The husband’s complaint that the court erred in granting the wife a monetary award is totally lacking in merit for a variety of reasons, not least of which is the fact that the court made no monetary award in favor of the wife. What the court did, in effect, was to award each party sums of money, to be paid out of the proceeds of sale of their jointly owned property, as an adjustment of specific equitable claims.

Nevertheless, the judgment, in that respect, is worded in such a way — that one party will receive a credit and the other a debit as a result of a particular claim — as to double the amount intended to be awarded on each claim. One of those awards, for “Crawford contributions” is objected to by the wife as being inconsistent with a finding of ouster by the court. We do not believe the court so found; more importantly, we perceive nothing in the record that would support such a finding had it been made. I The court determined that the parties’ home in Linthicum was marital property by virtue of the husband’s gift of $69,000 in nonmarital funds to the wife and the wife’s gift of $8,000 nonmarital funds to the husband when the home was purchased.

That determination was clearly erroneous. “Marital property” within the meaning of the Act is defined in § 8-201(e)(l) as “property, however titled, acquired by 1 or both parties during the marriage.” Property acquired prior to the marriage, therefore, is by definition not marital property. That point is emphasized by § 8-201(e)(2)(i), which very specifically declares that marital property does not include property acquired before the marriage. The parties jointly acquired their property in Linthicum before they were married, taking title as joint tenants with rights of survivorship. The subsequent change in the form of their co-ownership from a joint tenancy to a tenancy by the entireties — from per my et per tout 7 to per tout ⁴¹ et non per my 8 — was not an acquisition of property by either spouse.

They jointly owned the whole property with right of survivorship both before and after the change in the form of their co-tenancy. It is well established that property may be partly marital and partly nonmarital, in accordance with the source of the funds used to acquire it. The Linthicum property, therefore, became partly marital by virtue of mortgage payments made during the marriage because, to the extent that such payments reduced the balance due on the mortgage, property was acquired during the marriage. See Harper v. Harper, 294 Md. 54 , 448 A.2d 916 (1982).

The record in this case discloses that the mortgage, executed less than a month before the marriage, was for $20,750. The court found, on the basis of the husband’s testimony, that the mortgage balance had been reduced to $20,000 at the time of the divorce. Since all mortgage payments were made during the marriage, the Linthicum property was marital to the extent of the $750 marital contribution to its acquisition. When, in accordance with Harper , we apportion the current value of the property between the marital contribution ($750) and the nonmarital contributions (measuring the value of the joint contribution by the value of the property contributed as indicated by the purchase price) it is readily apparent that for purposes of a monetary award (the only real reason under the Act for determining and valuing marital property, § 8-205), the marital property is de minimus.

II We turn now to the husband’s contention that since the Linthicum property is nonmarital (or almost entirely so) he is entitled to a return of his $69,000 nonmarital contribution. This contention is based on two fallacies: (a) that he made a $69,000 nonmarital contribution and (b) that one ⁴² who makes a nonmarital contribution to the acquisition of property is entitled to a return of the amount contributed. (a) The first of those fallacies appears to be based on a misreading of Grant v. Zich, 300 Md. 256 , 477 A.2d 1163 (1984) and Watson v. Watson, 77 Md.App. 622 , 551 A.2d 505 (1989). In Grant , the Court of Appeals held that the presumption of gift that arises from the conveyance of one spouse to another has no applicability to the determination of whether property is marital or nonmarital.

Dorsey v. Dorsey, 302 Md. 312 , 487 A.2d 1181 (1985), recognized the possibility of proving a gift of the marital status of property as well as the property itself. In Watson , however, we explained that a gift of property, whether proved by presumption, by testimony as to expression of intent, or by documents conclusively establishing donative intent, does not. transmute the status of that property, for purposes of the Act, from nonmarital to marital. To effect such transmutation, we pointed out, there must be an express intent to give up, waive, or surrender the nonmarital status as well as to give the property itself. The difficulty with the concept lies, perhaps, in the traditional meaning of the word “property.” “Property” normally connotes corporeal, tangible property, subject to dominion — a thing, whether real estate or chattel, that can be owned (and thus bought, sold, given away, or otherwise transferred), possessed, and used.

The law, of course, also recognizes intangible and incorporeal property, including such personalty as choses in action, patents, and copyrights, and such incorporeal interests or estates in realty as easements, licenses, and profits. But even intangible or incorporeal property traditionally connotes ownership, possession, and use, with all the rights and privileges normally associated therewith. When, for purposes of the Act, however, we designate property as marital or nonmarital, we are using words which have no relationship to traditional concepts of proper ⁴³ ty. Whether property is marital or nonmarital has nothing whatsoever to do with who owns it, possesses it, or uses it.

The very concepts of marital and nonmarital property arise only in the context of a marriage, and they have significance only in the event of and at the time of a judicial dissolution of the marriage relationship. The sole purpose of determining whether property is marital or nonmarital is to enable a divorce court to adjust equities arising out of the marriage relationship by awarding one party or the other a sum of money if a division of property according to ownership would be inequitable. “Marital” and “nonmarital” are adjectives descriptive not of ownership or other rights in property but merely of the time or manner of acquisition by either or both spouses. If instead of “marital” and “nonmarital” we could substitute other adjectives, such as “red” and “green,” the concept would be easier to grasp: a gift by one spouse to the other of a green chattel will effect a change of ownership, not of color; the chattel would still be green, unless the parties, by agreement, changed the color or at least agreed that as between themselves they would deem the chattel to be red. But just as a change of ownership has no effect on the color, a change of color would have no effect on the ownership.

When the parties in this case pooled their money to purchase the Linthicum property, they gave to each other undivided ownership interests in property that was neither red nor green, neither marital nor nonmarital, for prior to their marriage those concepts did not exist. The mutual gifts were of all rights of property, legal and equitable, which each donor had. Unlike the situation in Watson , where the gift was made, during the marriage, of property that by virtue of marriage had acquired a nonmarital status, here there was no nonmarital status to be either retained or given, waived, released, or surrendered at the time of the gift. When they married, three weeks later, the parties jointly owned the property; therefore, they were equal joint nonmarital contributors of the entire property. ⁴⁴ (b) The second fallacy, the mistaken belief that a contribution of nonmarital property somehow entitles the contributor to get back the property or its value, as if the contribution is deemed to create an indebtedness for which the contributor should have a lien, is a total distortion of the Act.

As we pointed out in Watson , when one makes a valid gift of property, whether that property is red or green, marital or nonmarital, the donee acquires a vested interest in the property. The court, when it grants a divorce, cannot return to the grantor spouse the legal interest that he or she had earlier given just because the gift was of nonmarital property; to do so would violate § 8-202(a)(3) of the Act, which expressly prohibits the divorce court from transferring ownership of property, real or personal, from one spouse to the other. Watson, 77 Md.App. at 631, 632 , 551 A.2d 505 . See also Rogers v. Rogers, 80 Md.App. 575, 586 , 565 A.2d 361 (1989); Nisos v. Nisos, 60 Md.App. 368, 380-81 , 483 A.2d 97 (1984).

The fact of the gift, the value of the property given, and the circumstances under which the gift was made are important factors to be considered by the court in determining whether to grant the donor spouse a monetary award to adjust equities between the parties, provided there is sufficient marital property to support such an award. Watson, 77 Md. at 638 n. 5, 551 A.2d 505 . Ill The husband contends that the court erred in determining the value of marital property when the amount of the marital debts exceeded the value of the marital property. Those contentions are partially correct. “Marital debt,” like “marital property” and “nonmarital property,” is a term that seems to invite confusion. “Debt,” like “property,” is a word quite familiar to almost everyone who can read, speak, or understand English.

The most familiar connotations of “marital debt,” however, are (1) a debt incurred by husband and wife jointly ⁴⁵ or (2) a debt incurred by either spouse for any marital purpose. Within the purview of the Act, however, the phrase has an artificial meaning at variance with these familiar connotations. A marital debt is a debt incurred to acquire marital property. Schweizer v. Schweizer, 301 Md. 626, 636 , 484 A.2d 267 (1984).

As with “marital property” or “nonmarital property,” this