Carlos James BURNSIDE, Plaintiff Below, Appellee, v. Jacquelyn Nagle BURNSIDE, Defendant Below, Appellant.
No. 22399.
Supreme Court of Appeals of West Virginia.
Submitted Jan. 11, 1995. Decided March 24, 1995. Dissenting Opinion of Justice Neely March 31, 1995.
460 S.E.2d 264
David J. Sims, Yahn & Sims, Wheeling, for appellant.
CLECKLEY, Justice:
In this divorce proceeding, Jacquelyn Nagle Burnside, the defendant below and appellant herein, appeals a portion of the final order of the Circuit Court of Ohio County, which found the contribution she made to pay off the mortgage on the marital home was part of the marital estate and granted Carlos James Burnside, the plaintiff below and appellee herein, one-half interest therein. Mrs. Burnside argues she paid off the approximately $22,000 balance owed on the mortgage with separate funds she received as inheritance and she did not intend to make a gift to the marital estate. She requests we find Mr. Burnside is entitled to only one-half share of the total equity in the home less her contribution. After reviewing the record, we find the family law master and the circuit court failed to make sufficient findings on this issue. Accordingly, we remand this case.
I.
FACTUAL AND PROCEDURAL BACKGROUND
The facts essentially are undisputed. The parties were married in January, 1971. One child was born during the marriage. In June, 1988, the parties purchased their home in Wheeling for $29,000 and financed the purchase price. Within a year of purchasing the home, Mrs. Burnside inherited approximately $50,000 and placed it in a separate bank account in only her name. The money was not treated as joint property. This arrangement was the source of major disagreements between the parties.
In May, 1990, Mrs. Burnside paid off the $22,480.14 balance on the mortgage with part of the proceeds from her inheritance. The parties separated approximately three months later, and this divorce proceeding was instituted.
On January 22, 1993, the family law master issued his findings of fact and conclusions of law recommending the marital home be found to be joint property and the value of the home be equally divided between the parties.1 The family law master stated: “The fact that the financial responsibilities and obligations of the parties created tensions and arguments does not raise to the level of creating coercion and duress such as to force the wife to use her inheritance to pay off the mortgage.” The family law master, therefore, found the act of Mrs. Burnside‘s transferring her funds to pay off the home “created joint property where none previously existed.”
On September 9, 1993, the Circuit Court of Ohio County entered a final order specifically addressing the other issues litigated by the parties, such as child custody and alimony, and adopting the equitable distribution as calculated by the family law master. Mrs. Burnside appeals the portion of the order involving the equitable distribution of the marital home.
II.
STANDARD OF REVIEW
In reviewing challenges to findings made by a family law master that also were adopted by a circuit court, a three-pronged standard of review is applied. Under these circumstances, a final equitable distribution order is reviewed under an abuse of discretion standard;2 the underlying factual findings are reviewed under a clearly erroneous standard; and questions of law and statutory interpretations are subject to a de novo review. Stephen L.H. v. Sherry L.H., — W.Va. —, — S.E.2d — [1995 WL 87940] (No. 22084 3/6/95). Although factual findings are reviewed under the clearly erroneous standard, mixed questions of law and fact that require the consideration of legal concepts and involve the exercise of judgment about the values underlying legal principles are reviewed de novo. This standard has particular force when a family law master interprets the equitable distribution statute and draws conclusions based on the characterization of statutory legal principles.
In the present case, although the family law master found that coercion and duress did not force Mrs. Burnside to use her inheritance to retire the mortgage on the marital home, the family law master did not reach the issue of whether Mrs. Burnside lacked the intent to make a gift and whether equitable distribution should be altered based on factors stated in
III.
DISCUSSION
This case presents us with the opportunity to review our decisions dealing with the marital gift presumption, the equitable distribution statute, and the procedural steps that a family law master and a circuit court must follow in making a final equitable distribution judgment.
A.
Presumption of Gift to Marital Estate
The initial step in any equitable distribution action is the initial classification by a family law master of all property owned by the parties as marital or separate. As a general rule,
What is designated as nonmarital property, however, still may be presumptively determined to be marital property by the affirmative action of a spouse. This principle of transmutation is based upon the presumption that the owner of the nonmarital property intends to make a gift of that property to the marital estate.3 This presumption may be rebutted by competent evidence offered by the transferring spouse showing lack of intent to make a gift or by circumstances showing fraud, coercion, or duress. When the presumption of gift persuasively is rebutted, a family law master may treat the property as nonmarital and separate. See generally
In the seminal case of Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990), we described equitable distribution as a three-step process. We set forth this procedure in Syllabus Point 1 of Whiting:
“Equitable distribution under
W.Va.Code, 48-2-1, et seq. , is a three-step process. The first step is to classify the parties’ property as marital or nonmarital. The second step is to value the marital assets. The third step is to divide the marital estate between the parties in accordance with the principles contained inW.Va.Code, 48-2-32 [1984] .”
The issue presented in Whiting, however, primarily focused upon the first of these steps, i.e., whether the act of titling separately owned property in the joint names of a husband and wife converts the property into marital property.
In Syllabus Point 4 of Whiting, we resolved any doubt as to the efficacy of transmutation in West Virginia:
“Where, during the course of the marriage, one spouse transfers title to his or her separate property into the joint names of both spouses, a presumption that the transferring spouse intended to make a gift of the property to the marital estate is consistent with the principles underlying our equitable distribution statute.”
We further emphasized that taking joint title to separate property creates a “rebuttable presumption of gift to the marital estate” and this “presumption may be overcome by a
In making this conclusion, we discussed the definitions of marital and separate property as contained in
“(1) Property acquired by a person before marriage; or
“(2) Property acquired by a person during marriage in exchange for separate property which was acquired before the marriage; or
“(3) Property acquired by a person during marriage, but excluded from treatment as marital property by a valid agreement of the parties entered into before or during the marriage; or
“(4) Property acquired by a party during marriage by gift, bequest, devise, descent or distribution; or
“(5) Property acquired by a party during a marriage but after the separation of the parties and before the granting of a divorce, annulment or decree of separate maintenance; and
“(6) Any increase in the value of separate property as defined in subdivisions (1), (2), (3), (4) or (5) of this subsection which is due to inflation or to a change in market value resulting from conditions outside the control of the parties.”5
In light of the definitions of marital and separate property, we concluded the Legislature “express[ed] a marked preference for characterizing the property of the parties as marital property.” 183 W.Va. at 459, 396 S.E.2d at 421.
Second, we found this position to be consistent with the abolishment of the presumption contained in
In sum, we concluded in Whiting that the combination of the way in which the Legislature defined marital and separate property, the abolishment of the presumption in
The very nature of the marital relationship and the nature of jointly owned property by spouses9 convince us that the
Upon a review of the facts in the present case, we agree that Whiting controls. The act of Mrs. Burnside‘s using proceeds from an inheritance she received to retire a mortgage of jointly titled property presented an evidentiary basis for the presumption that the contribution was a gift to the marital estate subject to division for purposes of equitable distribution. We find, however, the family law master did not make the full range of findings contemplated by the Whiting decision. Both the circuit court and the family law master focused on the latter portion of the method of rebuttal and found Mrs. Burnside did not prove she was under “coercion, duress, or deception.” Of course, whether Mrs. Burnside rebutted the presumption is a matter left initially to the discretion of the family law master.12 Applying our deferential standard of review, we do not believe this finding is an abuse of discretion or clearly erroneous. However, the circuit court and the family law master failed to make a specific finding regarding Mrs. Burnside‘s “intent” to make a gift and, pursuant
Although Whiting explicitly provides that the presumption of gift may be rebutted by a “showing that the transferring spouse did not intend to transfer the property to joint ownership,” the facts of Whiting did not require any extended analysis as to the type of evidence that is sufficient for this purpose. We believe the facts of this case compel further elaboration. Having already found the gift presumption is rebuttable only by clear, cogent, and convincing evidence that a gift was not intended, we observe both Whiting and other courts have offered examples of what is not sufficient. The explanation that the joint title was chosen for estate planning purposes is not sufficient to overcome the presumption. Coffey v. Coffey, 119 A.D.2d 620, 501 N.Y.S.2d 74 (N.Y.1986); Brown v. Brown, 352 Pa.Super. 267, 507 A.2d 1223 (1986). In Whiting, we stated that joint titling to “avoid taxes or other adverse consequences of separate ownership” does not deny the transfer, “but only states the reason for making the gift.” 183 W.Va. at 459, 396 S.E.2d at 421. In other words, evidence that a gift is made for the purpose of avoiding taxes or other adverse consequences associated with estate planning does not refute the fact that a gift was made in the first instance.14
Our decision in Charlton v. Charlton, 186 W.Va. 670, 413 S.E.2d 911 (1991), recognized a specific situation that would overcome the presumption that jointly titled property is marital property. In that case, Mrs. Charlton inherited money which she entrusted to her husband to invest for her. Mr. Charlton placed the money, together with money he had inherited, in investment accounts in their joint names. Mr. Charlton managed the accounts. Although some of the income from the accounts was spent for marital purposes, we found the evidence supported Mrs. Charlton‘s belief that the principal investment would remain in the accounts and was not to be used for marital purposes. We cited Whiting for the proposition that “we decline to trace the source of funds in a joint account where that joint account has been utilized as a repository for both marital and nonmarital property.” 186 W.Va. at 676, 413 S.E.2d at 917. Therefore, we concluded in Syllabus Point 5 of Charlton:
“Where a spouse inherits property and entrusts the investment of that property to the other spouse, who is more financially knowledgeable, and the property itself is not used for marital purposes, the fact that the property is titled in the joint names of the spouses will not convert it to marital property.”15
In In re Marriage of Benz, 165 Ill.App.3d 273, 116 Ill.Dec. 336, 518 N.E.2d 1316 (1988), the Illinois court, faced with facts similar to our case, determined no transmutation took place. The wife, Helen Benz, received over $160,000 from the proceeds of the sale of her family‘s farm while she was married to her husband, Curtis. After paying the inheritance taxes and giving her children some money, she placed $100,000 in trust in only her name. These funds were later transferred to a jointly held trust. When the couple divorced, the husband argued the facts showed transmutation of the nonmarital funds to the marital partnership. However, “Helen related that Curtis kept ‘pestering’ her to place the $100,000 in the marital trust. Helen stated she finally agreed to the transfer in order to keep peace in the family, as Curtis had become increasingly verbally abusive.... However, Helen testified it was never her intent to make a gift of the $100,000.” 165 Ill.App.3d at 278, 116 Ill.Dec. at 339, 518 N.E.2d at 1319. The appellate court upheld the lower court‘s finding that the money remained separate property:
“We do not believe the court‘s decision that petitioner had rebutted the presumption of gift was an abuse of discretion. From the time at which she received the money from the sale of her family farm — less those amounts paid out to the children and kept separate for income tax purposes — petitioner had at all times exhibited a clear intent to keep the funds separate. The terms of the trust itself further evidenced petitioner‘s desire, as respondent was to obtain the interest alone from it, and not the corpus. It was only upon respondent‘s insistence at a time when the marriage was admittedly deteriorating and the petitioner‘s son needed money that the $100,000 was transferred.” 165 Ill.App.3d at 280, 116 Ill.Dec. at 340, 518 N.E.2d at 1320.
We believe the essence of the cases cited above is that the presumption of a gift to the marital estate may not be rebutted by evidence that merely reflects the motivation for making the gift or an uncommunicated and subjective state of mind of the transferring spouse16 or that, when viewed alone, can be considered inconsistent with the intent to maintain the property as separate.17 Rather, more substantial evidence is required that clearly is indicative of a lack of donative intent.18 Of course, the best rebuttal evidence would be an instrument of conveyance
It is undisputed that Mrs. Burnside furnished from her separate funds the entire consideration necessary to pay off the mortgage on the jointly owned property. The only issue present is her intent at the time she furnished the money to pay off the mortgage. Upon remand, if Mrs. Burnside can prove by competent evidence that she did not intend to make a gift of her money to her husband by paying off the mortgage, then she has rebutted the presumption. If this is done, the rules regarding separate property prevail as to the amount of money used by her to pay off the mortgage.
In proving the lack of donative intent, the West Virginia Rules of Evidence should be followed,20 particularly the rules governing hearsay and relevancy. Under these rules, to show intent at the time of the transaction in question the parties are entitled to rely on all the attendant facts and circumstances of the transaction.21 Thus, intent may be shown by evidence of any relevant fact and statement of the parties not barred by the hearsay rule. Most statements offered by one spouse against the other will, if relevant, qualify as a party admission under Rule 801(d)(2) of the West Virginia Rules of Evidence. Normally, to be relevant under Rules 401 and 402, except as to admissions, the proof must be of facts antecedent or contemporaneous with the transaction or so immediately afterwards as to be a significant part of the transaction. It is the intention of the spouses at the time of the transfer that is germane and not how the parties feel later once dissolution of the marriage is probable.
“Applicability of Rules.
Administrative, procedural, and evidentiary rules promulgated by the supreme court of appeals shall apply to all proceedings within the scope of these rules, except to the extent that they conflict with these rules or with the provisions of chapters 48 and 48A of the Code of West Virginia.”
B.
Application of Equitable Distribution Statute
After we characterized the jointly titled real property in Whiting as marital property, we did not discuss in depth the occasions when the distribution of marital property may be altered. Instead, we merely stated that we found no serious attempt was made to offer evidence to rebut the presumption the property should be equally divided. Therefore, we concluded each spouse “was entitled to one-half of the proceeds of the sale of such property.” 183 W.Va. at 461, 396 S.E.2d at 423. (Footnote omitted). We now find it necessary to expound upon the circumstances when the distribution of marital property may be altered upon the grounds listed in
Under
“In the absence of a valid agreement, the trial court [or family law master] in a divorce case shall presume that all marital property is to be divided equally between the parties, but may alter this distribution, without regard to fault, based on consideration of certain statutorily enumerated factors, including: (1) monetary contributions to marital property such as employment income, other earnings, and funds which were separate property; (2) non-monetary contributions to marital property, such as homemaker services, child care services, labor performed without compensation, labor performed in the actual maintenance or improvement of tangible marital property, or labor performed in the management or investment of assets which are marital property; (3) the effect of the marriage on the income-earning abilities of the parties, such as contributions by either party to the education or training of the other party, or foregoing by either party of employment or education; or (4) conduct by either party that lessened the value of marital property.
W.Va.Code § 48-2-32(c) (1986) .”26
“In the absence of a valid agreement, the court shall presume that all marital property is to be divided equally between the parties, but may alter this distribution, without regard to any attribution of fault to either party which may be alleged or proved in the course of the action, after a consideration of the following factors, including:
“(1) The extent to which each party has contributed to the acquisition, preservation and maintenance, or increase in value of marital property by monetary contributions, including, but not limited to:
“(A) Employment income and other earnings; and
“(B) Funds which are separate property.
“(2) The extent to which each party has contributed to the acquisition, preservation and maintenance, or increase in value of marital property by nonmonetary contributions, including, but not limited to:
“(A) Homemaker services;
“(B) Child care services;
“(C) Labor performed without compensation, or for less than adequate compensation, in a family business or other business entity in which one or both of the parties has an interest;
“(D) Labor performed in the actual maintenance or improvement of tangible marital property; and
“(E) Labor performed in the management or investment of assets which are marital property.
“(3) The extent to which each party expended his or her efforts during the marriage in a manner which limited or decreased such party‘s income-earning ability or increased the income-earning ability of the other party, including, but not limited to:
“(A) Direct or indirect contributions by either party to the education or training of the other party which has increased the income-earning ability of such other party; and
“(B) Foregoing by either party of employment or other income-earning activity through an understanding of the parties or at the insistence of the other party.
“(4) The extent to which each party, during the marriage, may have conducted himself or
herself so as to dissipate or depreciate the value of the marital property of the parties: Provided, That except for a consideration of the economic consequences of conduct as provided for in this subdivision, fault or marital misconduct shall not be considered by the court in determining the proper distribution of marital property.”
Thus, under
For instance, in the present case, Mrs. Burnside can offer evidence that, although the house is considered marital property under the first step of the process, it should not be equally divided between the parties because she used separate funds to pay off the mortgage.
After a court considers the factors in subsection (c), the court proceeds to subsection (d) where it must “[d]etermine the net value of all marital property” and define and value each parties’ respective interests in the marital property. In cases where there is no valid separation agreement and a court fashions relief based upon the factors in subsection (c), the court may adjust an award under certain circumstances to ensure the parties are treated equitably. These circumstances are set forth in
“In the case of an action wherein there is no agreement between the parties and the relief demanded requires the court to consider such factors as are described in subdivision one, two, three and four, subsection (c) of this section, if a consideration of factors only under said subdivisions one and two would result in an unequal division of marital property, and if an examination of the factors described in said subdivisions three and four produce a finding that a party (A) expended his or her efforts during the marriage in a manner which limited or decreased such party‘s income-earning ability or increased the income-earning ability of the other party, or (B) conducted himself or herself so as to dissipate or depreciate the value of the marital property of the parties, then the court may, in the absence of a fair and just alimony award under the provisions of section fifteen [§ 48-2-15] of this article which adequately takes into account the facts which underlie the factors described in said subdivisions three and four, equitably adjust the definition of the parties’ interest in marital property, increasing the interest in marital property of a party adversely affected by the factors considered under said subdivisions three and four who would otherwise be awarded less than one half of the marital property, to an interest not to exceed one half of the marital property.”
After the court determines each parties’ interest in the marital property, the court should proceed to distribute such property in accordance with the remaining provisions of
(1) Distinguish between marital and separate property;
(2) Consider any evidence under subsection (c) that may warrant an unequal division of the marital property distinguished in step one;
(3) Value all the marital property identified in step one including that which may be subject to unequal division;
(4) Designate the marital property as determined in step one;
(5) Define each spouse‘s interest in accordance with step two;
(6) Value each spouse‘s interest;
(7) Make additional adjustments as are provided in subsection (d)(2).
The above sequence is consistent with Justice Miller‘s pronouncements in Whiting that: (1) distinguish marital property from personal proper-
Thus, even where the evidence is insufficient to rebut the Whiting presumption of a gift, it may be sufficient to rebut the statutory presumption under the equitable distribution statute requiring that marital property be evenly distributed between the parties. For example, evidence that one spouse‘s “contributions” to the marital property were minimal or nonexistent may be a compelling factor supporting a finding that it would be inequitable to distribute the property evenly.
The distribution of the marital property, together with the value of each spouse‘s interest, must be designated in an order. We stated in Syllabus Points 2 and 3 of Somerville:
“2. In any order making a division of marital property, the trial court [or family law master] must set out in detail its findings of fact and conclusions of law, and the reasons for dividing the property in the manner adopted.
W.Va.Code § 48-2-32(f) (1986) .”“3. An order directing a division of marital property in any way other than equally must make specific reference to factors enumerated in § 48-2-32(c), and the facts in the record that support application of those factors.”
Findings of facts are adequate only if they are sufficient to indicate the factual basis for the ultimate conclusion. If an order lacks adequate detail, the case will be remanded for additional specificity. See Pratt v. Pratt, 193 W.Va. 106, 454 S.E.2d 400 (1994).30 In this case, the family law master and the circuit court‘s “findings did not address the parties’ actions in the context of
III.
CONCLUSION
Based on the foregoing, we conclude the family law master and the circuit court failed to make sufficient findings to justify their conclusion that Mrs. Burnside‘s payment of the mortgage on the home in question was marital property within the meaning of our equitable distribution law. Accordingly, this case is remanded to the Circuit Court of Ohio County for proceedings consistent with this opinion.
Remanded with directions.
BROTHERTON, J., did not participate.
FOX, Judge, sitting by temporary assignment.
NEELY, C.J., dissents and reserves the right to file a dissenting opinion.
NEELY, C.J., dissenting:
Double, Double toil and trouble;
Fire burn and cauldron bubble.
WILLIAM SHAKESPEARE, MACBETH act 4, sc. 1.
Once again the majority stirs the cauldron created by Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990). A mere three months before the separation, Mrs. Burnside succumbed to Mr. Burnside‘s pressure and used part of her inheritance to pay off the mortgage on the couple‘s house. The family law master and the circuit court applied the Whiting gift presumption and Mr. Burnside was awarded a half-interest in the jointly titled house. Mrs. Burnside cried foul and foul it is!
Eye of newt, and toe of frog,
Wool of bat, and tongue of dog.
WILLIAM SHAKESPEARE, MACBETH act 4, sc. 1.
Out, damned spot! out, I say!
WILLIAM SHAKESPEARE, MACBETH act 5, sc. 1.
Whiting undermines family security by refusing to recognize that married persons title property jointly to: (1) reassure a spouse of a marital commitment; (2) ease the management of the property; (3) protect property from creditors; and, (4) take advantage of federal estate tax laws. Mrs. Burnside used her inheritance to reassure Mr. Burnside of her commitment to their marriage. Mrs. Burnside should not be penalized for her efforts. An exception was crafted to protect Mrs. Charlton who entrusted the investment of her inheritance to Mr. Charlton. See Charlton v. Charlton, 186 W.Va. 670, 413 S.E.2d 911 (1991). See Whiting, supra, 183 W.Va. at 464-65, 396 S.E.2d at 426-27 (Neely, C.J., dissenting for a discussion of the incentives to title property jointly).
Who would have thought the old man to have
had so much blood in him?
WILLIAM SHAKESPEARE, MACBETH act 5, sc. 1.
I dissent because the tragedy of Whiting continues. The bloodstains are not easily removed. The Mrs. Burnsides, Mrs. Charltons and others going through a divorce should not be required to seek a handcrafted Whiting loophole or exception. We could, of course, write the following sex-neutral syllabus point to accommodate the Charlton and Burnside gloss on Whiting:
Where, during the course of the marriage, one spouse transfers title to his or her separate property into the joint names of both spouses, a presumption that the transferring spouse intended to make a gift of the property to the marital estate is consistent with the principles underlying our equitable distribution statute unless the transfer is made to the phallically challenged spouse by the phallically advantaged spouse.
See, Syl. pt. 4, Whiting, supra.