Virginia Lawyers Weekly VA Lawyers Weekly
In a divorce action, the court affirmed an equitable distribution that offset the husband’s share by the amount he independently spent on college tuition for the divorcing couple’s adult son. The husband was unable to overcome the marital presumption attaching to the source account.
Background
The parties were married in 1988, had two children, and separated in 2003. Appellee Sarah McGuire maintained custody of the children, who lived with her through their minority. After the separation, Appellant John Hvozdovic had limited visitation with the children.
Hvozdovic’s career was in satellite communications. Prior to the marriage, he used part of his salary to acquire stock in his then-employing company, with a total of 904 shares at the time of the marriage. After the marriage, Hvozdovic continued to participate in his employer’s stock-purchase plan and acquire additional shares. In 1991, he used some of these shares to purchase 500 shares of Qualcomm stock, which ultimately became managed in his Ameriprise SmartTrade account. No subsequent changes were made to the account until Hvozdovic withdrew funds to pay college expenses for the parties’ adult son.
During the marriage and after the separation, Hvozdovic also participated in his subsequent employer’s stock-purchase plan. In 2011, his company split and the stocks were divided. After the company split, Hvozdovic was employed by the new entity and continued for several months to purchase its stock.
In determining equitable distribution of the parties’ assets in the divorce proceeding, the circuit court found that, with respect to the stock assets, marital property and separate property have been comingled into newly acquired property, thereby resulting in the loss of the identity of the contributing properties and transmuted into marital property. Therefore, the circuit court classified the stock as completely marital and awarded each party half of the value. The circuit court also concluded that Hvozdovic’s withdrawal of funds from the Ameriprise account to pay higher-education expenses for the couple’s adult son constituted waste of marital assets. Hvozdovic appealed.
Stocks
Although property acquired during the marriage is presumptively marital property, such property will be considered separately property if it is acquired in exchange for or from the proceeds of sale of separate property. However, the party claiming the property as separate bears the burden of proving that claim.
In classifying Hvozdovic’s stock as marital property, the circuit court did not reject his claim that at least a portion of that stock was purchased with proceeds from the sale of stock he owned prior to the marriage. Rather, the trial court correctly held that, in order to have any portion of the Qualcomm stock deemed separate, Hvozdovic had the burden of establishing how much of the stock was separate by tracing the value of the initial investment separate and apart for any investment of marital funds. Similarly, as to the split stock, Hvozdovic had the burden to show the value of the stock that was acquired during the marriage as opposed to the stock acquired post-separation.
Hvozdovic, citing a lack of recordkeeping over the lengthy time period, was unable to establish the value of the stock at intervals that might allow the trial court to determine a separate property value as distinguished from the presumptively marital whole. Thus, although Hvozdovic may have established that some unknown portion of the purchased stock should be his separate property, he failed to prove the trial court with sufficient evidence to calculate how much. Because he had the burden of proof, the lack of such evidence is fatal to his claim.
Marital Waste
The district court did not err in finding Hvozdovic’s tuition payments for the couple’s adult son to be “waste,” also referred to as the dissipation of marital assets. Once an aggrieved spouse shows that marital funds were either withdrawn or used after the breakdown, the burden rests with the party charged with dissipation to prove that the money was spent for a proper purpose. Under this standard, although the payment of an adult child’s college expenses sometimes does not constitute “waste,” the inquiry is fact-specific and committed to the discretion of the trial court.
In this case, the parties had no legal obligation – by contract or otherwise – to pay for the post-secondary education of their adult children. In fact, the parties’ separation agreement required equal input from both parents regarding education decision. However, Hvozdovic unilaterally decided to use a marital asset to make the tuition payments.
The facts before the circuit court would allow a reasonable factfinder to conclude that, despite some visits, Hvozdovic was largely absent from his children’s lives and that his payment of his son’s tuition was an attempt to improve the relationship. Thus, the payments could be considered to be for Hvozdovic’s own benefit and for a purpose unrelated to the marriage.
Accordingly, in light of the deference owed to the trial court, this court cannot say that the evidence in this case was such that, as a matter of law, Hvozdovic satisfied his burden to establish that his unilateral use of marital fund was for a “proper purpose.”
Affirmed.
Hvozdovic v. McGuire, Record No. 1146-17-4, Feb. 27, 2018. Va. App. (Russell), from Fairfax Cir. Ct. (White). Brian M. Hirsch for Appellant; Lavanya K. Carrithers for Appellee. VLW No. 018-7-044, 22 pp.
