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HOLDEN
v.
HOLDEN
NOVEMBER 16, 1999
Record No. 2614-98-3
ROBERT CHARLES HOLDEN
v.
JENA TAETZ HOLDEN
FROM THE CIRCUIT COURT OF ROANOKE COUNTY
Diane McQ. Strickland, Judge
Present: Chief Judge Fitzpatrick, Judges
Coleman and Bumgardner
Argued at Salem, Virginia
OPINION BY CHIEF JUDGE JOHANNA L. FITZPATRICK
Charles B. Phillips (Phillips & Swanson, on
brief), for appellant.
Frank K. Friedman (John P. Grove; Woods, Rogers
& Hazlegrove, P.L.C., on brief), for appellee.
In this domestic appeal, Robert Charles Holden
(husband) contends the trial court erroneously classified a
parcel of real estate purchased during the marriage. Husband
argues that the property was "hybrid property" from
which he was entitled to receive $17,000 as his separate property
before the net value was divided between the parties. [1] For the following reasons, we
reverse the trial court’s order and remand for the entry of an
order consistent with this opinion.
I.
We view the evidence in the light most
favorable to wife, the prevailing party below. See Barker
v. Barker, 27 Va. App. 519, 528, 500 S.E.2d 240, 244 (1998); Cook
v. Cook, 18 Va. App. 726, 731, 446 S.E.2d 894, 896 (1994). So
viewed, the evidence established that during the marriage the
parties agreed to purchase a parcel of real estate in Bedford
County. Husband sold approximately 300 comic books for $17,000 in
order to raise funds necessary for the purchase of this property.
Husband testified that these comic books were his separate
property acquired prior to the marriage. Additionally, he
presented copies of two checks payable to him for the comic
books, as well as the bank records of the parties’ joint checking
account showing $9,000 deposited February 4, 1992, and $8,000
deposited February 14, 1992.
On April 13, 1992, the parties withdrew
approximately $21,114 from this joint checking account to buy the
Bedford County property. Both parties testified that they
refinanced the marital residence to provide additional funds for
the purchase of the Bedford property and it is uncontested that
at least $13,000 in marital funds were used to fund the $30,000
purchase. [2]
The trial court found that husband’s
contribution from the sale of comic books acquired prior to
marriage was transmuted into marital property. The trial court
stated:
While there has been a showing that $17,000 was
derived from the sale of comic books that may have been acquired
by [husband] prior to the marriage, the Court finds that under
20.107.3(d) (sic) that that property has been commingled by
contributing it into the category of marital property both by
depositing it in an account with joint marital funds, but then
commingling it with other funds that were derived from other
sources and ultimately the property which was jointly titled.
Accordingly, the trial court concluded that
husband had not met his burden to retrace the $17,000 as his
separate property.
II.
A decision regarding equitable distribution
rests within the sound discretion of the trial court and will not
be disturbed unless it is plainly wrong or without evidence to
support it. See McDavid v. McDavid, 19 Va. App.
406, 407-08, 451 S.E.2d 713, 715 (1994) (citing Srinivasan v.
Srinivasan, 10 Va. App. 728, 732, 396 S.E.2d 675, 678
(1990)). "Unless it appears from the record that the trial
judge has not considered or has misapplied one of the statutory
mandates, this Court will not reverse on appeal." Ellington
v. Ellington, 8 Va. App. 48, 56, 378 S.E.2d 626, 630 (1989).
At the time of the equitable distribution
hearing, the parties jointly owned a parcel of real estate with
an agreed value of $30,000. Husband claimed $17,000 of that
$30,000 as his separate, retraceable property.
Pursuant to the provisions of Code
Sect. 20-107.3(A)(3), property may be classified as part
marital and part separate. Under subsection (e), "when
marital property and separate property are commingled into newly
acquired property resulting in the loss of identity of the
contributing properties, the commingled property shall be deemed
transmuted to marital property," unless the contributed
property is retraceable and not a gift. Code
Sect. 20-107.3(A)(3)(e). We have explained the requirements
of tracing under that section:
In order to trace the separate portion of
hybrid property, a party must prove that the claimed
separate portion is identifiably derived from a separate asset.
This process involves two steps: a party must
(1) establish the identity of a portion of hybrid property
and (2) directly trace that portion to a separate asset.
Rahbaran v. Rahbaran, 26 Va. App. 195,
208, 494 S.E.2d 135, 141 (1997) (citing Code
Sects. 20-107.3(A)(3)(d)-(f)). "[T]he party claiming a
separate interest in transmuted property bears the burden of
proving retraceability." Von Raab v. Von Raab, 26 Va.
App. 239, 248, 494 S.E.2d 156, 160 (1997).
Here, it is uncontroverted that husband
deposited $17,000 of the proceeds from the sale of his separate
property, the comic books, in the parties’ joint checking
account. [3] He concedes that these proceeds
were "commingled" with marital funds; the $17,000 was
deposited into the joint account two months before the funds were
paid out for the land purchase. Husband argues that consistent
with the rule in Rahbaran, he sufficiently established
"the identity of a portion of hybrid property" (i.e.,
$17,000 from the sale of his comic books) and "directly
trace[d] that portion to a separate asset." Rahbaran,
26 Va. App. at 207, 494 S.E.2d at 141. We agree and hold that
husband adequately retraced his contribution of discrete,
identifiable funds that were in the account and which were used
to purchase the Bedford County property.
We have previously held that where separate
property is used for a down payment on property that becomes
marital property, the trial court does not abuse its discretion
in making an award that restores the down payment to the
contributing spouse. See, e.g., Rowe v. Rowe,
24 Va. App. 123, 136, 480 S.E.2d 760, 766 (1997) (holding that
husband’s evidence that he had invested $82,000 into a new home
was sufficient to retrace the property claimed as separate by
husband); Pommerenke v. Pommerenke, 7 Va. App. 241,
247-50, 372 S.E.2d 630, 634 (1988) (holding that under the prior
Code Sect. 20-107.3(A)(3) the "court does not abuse its
discretion by making an award that restores the down payment to
the contributing spouse, if the court finds that equity dictates
such a result").
Additionally, husband was not required to have
segregated the $17,000 from all other marital funds in order to
claim a separate interest in that amount. See Rahbaran,
26 Va. App. at 207, 494 S.E.2d at 141 ("[T]racing of the
separate portion of hybrid property does not require the
segregation of the separate portion."). Because husband
commingled separate funds and marital funds in a jointly-owned
bank account, which was then used for the purchase of marital
property, he was only required to trace those separate funds to
the account and to prove that those discrete funds could be
identified as being in the account. See id. at 209,
494 S.E.2d at 141-42 ("[S]eparate property does not become
untraceable merely because it is mixed with marital property in
the same asset. As long as the respective marital and separate
contribution to the new asset can be identified, the court can
compute the ratio and trace both interests.") (emphasis
added) (citing Brett R. Turner, Equitable Distribution of
Property 266 n.591 (1994)).
The trial court’s conclusion that husband
failed to retrace $17,000 in separate property commingled with
other marital funds is not supported by the evidence. To the
contrary, the record established that $17,000 was an identifiable
portion of the value of the hybrid Bedford County property and
husband directly traced that portion to a separate asset (i.e.,
proceeds derived from the sale of the comic books). Husband
introduced into evidence copies of two checks payable to him for
the comic books, as well as the bank records of the parties’
joint checking account showing $9,000 and $8,000 deposited on
February 4, 1992, and February 14, 1992, respectively. While
other deposits and withdrawals occurred within this time period,
it is uncontested that the $17,000 deposited to the account from
husband’s separate property was to be part of the down payment on
the Bedford property. Absent the $17,000 deposited into the joint
account by husband, the parties would have had insufficient funds
to make the withdrawal of $21,114 on April 13, 1992 for the
purchase price of the land. We conclude that the $17,000
contributed to acquire the Bedford property was directly traced
to the sale of husband’s separate property, the comic books,
and should have been allocated to husband. [4]
Accordingly, we reverse the equitable
distribution award and remand for an order consistent with this
opinion.
Reversed and remanded.
FOOTNOTES:
[1] Husband also appealed the trial
court’s award of spousal support. However, he withdrew that
assignment of error and spousal support is no longer a subject of
this appeal.
[2] Husband also presented evidence
that he sold a 1985 truck for $4,000 or $5,000, which was applied
to the purchase price of the real estate. In this appeal,
however, husband does not claim a separate interest in that
amount.
[3] We note that wife never contested husband’s claim that
the comic books sold for $17,000 were his separate property. In
addition to husband’s testimony that the comic books were
acquired prior to the parties’ marriage, James Payette, the
dealer who purchased the collectibles, testified that they were
published in the 1940s and 1950s, which corroborated husband’s
position that the books were separate property. Therefore, the
only question before us is whether husband carried his burden of
retraceability under Code Sect. 20-107.3(A)(3).
[4] Wife argues for the first time on
appeal that husband’s contribution of $17,000 to the down payment
of the Bedford property constituted a gift, which would result in
the loss of identity of the separate property under Code
Sects. 20-107.2(A)(3)(d)-(e). However, no evidence was
presented that husband’s contribution was intended as a gift and
the trial court never addressed this issue.
