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holding that a trial court must distinguish between marital property and separate property when distributing property in a divorce
Summary of this case from Fort v. FortOpinion
Docket No. 187577.
Submitted May 14, 1997, at Lansing.
Decided November 21, 1997, at 9:15 A.M.
Allsopp, Kolka Wackerly, P.C. (by William W. Allsopp), for the plaintiff.
Patrick R. Winter, P.C. (by Patrick R. Winter), for the defendant.
Before: NEFF, P.J., and WAHLS and TAYLOR, JJ.
Defendant appeals as of right from a judgment of divorce, claiming that several of the trial court's factual findings were clearly erroneous and that the property division is inequitable because the trial court erroneously included nonmarital assets in the marital estate. Plaintiff cross appeals, claiming that the trial court erred in failing to award her attorney fees. We reverse in part and remand for further proceedings.
The parties met and became romantically involved in 1986 and began cohabiting in 1987. When the parties met, defendant was working as a real estate broker and plaintiff was a bartender. Defendant had an interest in several real estate investments before meeting plaintiff, including a one-sixth ownership interest in the Standish Plaza shopping center resulting from a capital investment made in 1982. When the parties began cohabiting in 1987, defendant purchased a condominium, supplying a $14,000 down payment and financing the remainder of the purchase price. The parties lived together at the condominium, with defendant making all subsequent payments on the mortgage. During the period of cohabitation, two rental properties on Warner and Catherine Streets in Bay City were bought in both parties' names. As with the condominium, defendant alone made the down payment for each rental property. In March 1991, the parties married. During the period of cohabitation and marriage, plaintiff worked intermittently as a real estate salesperson and as a waitress and also performed housekeeping duties for the parties. The marriage did not produce any children.
Plaintiff filed for a divorce in June 1994. The court included as marital property that was later divided the entire $50,000 equity value of the condominium where the parties resided, the entire equity value of the Warner Street rental property, the entire equity value of the Catherine Street rental property, and defendant's interest in the Standish Plaza, which had appreciated $100,000 over the years the parties cohabited and were married. The trial court awarded no alimony and denied plaintiff's request for attorney fees.
Defendant claims that the trial court erred in considering the entire equity value of the condominium and the $100,000 appreciation of the Standish Plaza as part of the marital estate. We agree.
The distribution of property in a divorce is controlled by statute. MCL 552.1 et seq.; MSA 25.81 et seq.; Charlton v Charlton, 397 Mich. 84, 92; 243 N.W.2d 261 (1976). In granting a divorce, the court may divide all property that came "to either party by reason of the marriage. . . ." MCL 552.19; MSA 25.99 (emphasis added). When apportioning marital property, the court must strive for an equitable division of increases in marital assets "that may have occurred between the beginning and the end of the marriage." Bone v Bone, 148 Mich. App. 834, 838; 385 N.W.2d 706 (1986) (emphasis added). Thus, the trial court's first consideration when dividing property in divorce proceedings is the determination of marital and separate assets. Byington v Byington, 224 Mich. App. 103, 114, n 4; 568 N.W.2d 141 (1997). This distinction between marital and separate estates has long been recognized in this state. Charlton, supra at 92-94; Davey v Davey, 106 Mich. App. 579, 583; 308 N.W.2d 468 (1981). Generally, the marital estate is divided between the parties, and each party takes away from the marriage that party's own separate estate with no invasion by the other party. However, a spouse's separate estate can be opened for redistribution when one of two statutorily created exceptions is met. MCL 552.23 and 552.401; MSA 25.103 and 25.136; Charlton, supra at 92-94.
Rather than focusing on the four years the parties had been married, the court said it was equitably considering the parties to have been married for eight years. This was error. Michigan does not recognize common-law marriages. Carnes v Sheldon, 109 Mich. App. 204, 211, 216-217; 311 N.W.2d 747 (1981). Cohabiting with someone is not the same as marrying them. Further, Bone, supra, required the court to look at the period that began with the marriage. A court is not free to expand this period to include any cohabitation that may have occurred before the parties marry.
The first exception to the doctrine of noninvasion of separate estates is found at MCL 552.23; MSA 25.103. Subsection 1 of this statute permits invasion of the separate estates if after division of the marital assets "the estate and effects awarded to either party are insufficient for the suitable support and maintenance of either party. . . ." As interpreted by our courts, this means that invasion is allowed when one party demonstrates additional need. In Charlton, the Court allowed invasion of a separate estate because a division of the marital assets alone would have been insufficient for suitable support in the manner to which the Charltons were accustomed. Charlton, supra at 94. Holding consistently with this, where no showing of need was made, this Court reversed an invasion of separate estates in Davey. The other statutorily granted method for invading a separate estate is available only when the other spouse "contributed to the acquisition, improvement, or accumulation of the property." MCL 552.401; MSA 25.136. When one significantly assists in the acquisition or growth of a spouse's separate asset, the court may consider the contribution as having a distinct value deserving of compensation.
In Grotelueschen v Grotelueschen, 113 Mich. App. 395, 399-400; 318 N.W.2d 227 (1982), this Court held that a separate estate was unavailable for invasion because the other spouse had no involvement with that estate. Accordingly, one spouse's inheritance that had been left alone in a separate bank account could not be redistributed. Subsequently, in Hanaway v Hanaway, 208 Mich. App. 278, 294; 527 N.W.2d 792 (1995), this Court held that the defendant's inherited stock in a family-owned company was available for invasion because the plaintiff's handling of child-rearing and domestic duties had freed the defendant to concentrate on building up that company. The Hanaway Court found that the defendant's stock had "appreciated because of defendant's efforts, facilitated by plaintiff's activities at home." Id. at 294.
We first consider the propriety of the trial court's inclusion of the entire equity value of the condominium as part of the marital estate. As previously indicated, defendant provided a $14,000 down payment for the condominium before the parties married, and equity was built up in the condominium as a result of payments solely made by defendant before the parties married. Further, the condominium may have appreciated after defendant purchased it but before the parties married. The sharing and maintenance of a marital home affords both spouses an interest in any increase in its value (whether by equity payments or appreciation) over the term of a marriage. Such amount is clearly part of the marital estate. However, the down payment, the equity built up before the parties' marriage, and any appreciation that occurred before the parties' marriage should have been considered defendant's separate estate. Thus, we find the trial court erred in considering the entire equity value of the condominium as part of the marital estate. On remand, the trial court may not consider as part of the marital estate the equity value of the condominium immediately before the parties married.
For the same reasons set forth above, we also find the court erred in including the entire equity value of the rental properties in the marital estate. As previously noted, these properties were purchased before the parties married and defendant alone supplied the down payments. The increase in value (whether by equity payments or appreciation) that occurred between the beginning and the end of the marriage, Bone, supra, was part of the marital estate. However, it was error for the court to consider as part of the marital estate the increase in value (by the down payments and equity payments) that occurred before the parties married. Thus, we find the trial court erred in considering the entire equity value of the rental properties as part of the marital estate. On remand, the trial court may not consider as part of the marital estate the down payments and equity payments made before the parties married.
Finally, we consider the propriety of the trial court's inclusion of defendant's appreciated interest in the Standish Plaza as part of the marital estate. The trial court held that defendant's interest in the Standish Plaza had increased $100,000 over the six years before the divorce was granted and considered this amount as part of the marital estate. It was clear error to include any amount that the Standish Plaza may have appreciated before the parties married. Bone, supra. Unlike the situation with the condominium and the rental properties, defendant's minority interest in the Standish Plaza was wholly passive at all times. It cannot be stated, as was done in Hanaway, supra at 294, that the property "appreciated because of defendant's efforts, facilitated by plaintiff's activities at home." Therefore, it was also error to include any amount defendant's interest in the Standish Plaza may have appreciated even after the parties married. On remand, the trial court may not consider as part of the marital estate any such amount as part of the marital estate.
The court's property division in this case inequitably favors plaintiff when defendant's separate estate is deleted from the property the court divided. As noted in Grotelueschen, supra at 402, it does not matter if the division of the entire holdings appears one-sided, what is important is the division of the marital estate. Under the circumstances, we must remand to allow the trial court to render an equitable property division that properly recognizes defendant's separate estate.
We reverse in part and remand for a new property division consistent with this opinion. The court is free to hold additional hearings and to receive further testimony or exhibits if it deems it necessary. After properly recognizing the parties' separate estates and the marital estate, the court may consider whether invasion of defendant's estate is necessary. Before the court may invade defendant's separate estate, it must specifically find that one of the two statutory exceptions exists. In this regard, we note that there was no showing that plaintiff contributed to the acquisition of the condominium or the rental properties or the acquisition, improvement, or accumulation of the Standish Plaza interest in any way. Thus, the only statutory ground that would allow invasion of defendant's separate estate would be if the court found that the award that would otherwise be given to plaintiff would be insufficient for her suitable support and maintenance. The court also may reconsider plaintiff's request for attorney fees after rendering the new property division.
The statement previously made by the trial court, cited by the dissent, along these lines was insufficient to allow us to sustain the sizable invasion that occurred. The cited statement was also made when the court did not specifically recognize that its overall award was greatly invading defendant's separate estate. Thus, it is appropriate to remand this matter for further findings by the trial court.
Reversed in part and remanded for further proceedings consistent with this opinion.
WAHLS, J., concurred.
I respectfully dissent and would affirm the trial court's rulings regarding the property division and attorney fees.
I
The entire thrust of the majority opinion is that the trial court erred in the distribution of property in this divorce action because the distribution included portions of defendant's separate estate either accumulated before the marriage or to which plaintiff made no contribution. Even conceding that the court invaded defendant's separate estate, the separate assets of a party may be distributed where, as here, the marital assets are insufficient for the suitable support and maintenance of either party. MCL 552.23; MSA 25.103. In light of the trial court's findings of fact, which were based on the evidence and the parties' testimony, I find no error in the trial court's property distribution.
The trial court considered the factors established in Sparks v Sparks, 440 Mich. 141, 159-160; 485 N.W.2d 893 (1992), in determining an equitable division of property. Regarding the first factor, the length of the marriage, it held:
[E]quitably speaking here . . . the Court should look at the entire picture and not just the four years that they were married because, in all respects other than having legally tied the knot, the parties were operating as a marriage partnership. . . . [I]t's equitable and appropriate to consider the period prior to the marriage that they were living together and acting as if they were married and conducting themselves in that manner. . . . So, I'm considering this, equitably speaking, as an eight-year marriage. . . .
This finding was not clearly erroneous given the evidence that the parties held themselves out as man and wife during the period of cohabitation, jointly buying rental property, opening joint bank accounts, and filing a joint income tax return in 1990, before their marriage. Heike v Heike, 198 Mich. App. 289, 291; 497 N.W.2d 220 (1993); Nielsen v Nielsen, 179 Mich. App. 698, 699-700; 446 N.W.2d 356 (1989).
With regard to the second factor, the trial court found the contributions of the parties to the marital estate to be equal. The court concluded:
[T]he total contribution, when you add it all up, amounts to equality. . . . [I]n this marriage, both parties contributed a great deal. And both parties actually contributed to the physical assets, although Mr. Reeves contributed more physical assets than Mrs. Reeves did; but she contributed in other ways that created an equality over the eight years.
The third and fourth factors are the age and health of the parties. Sparks, supra at 160. While the trial court did not find age to be a factor affecting property division, it concluded that plaintiff's more precarious health required that additional assets be allocated to her.
The fifth factor, the life status of the parties, led the trial court to make findings that show plaintiff's additional needs, contrary to the assertion of the majority opinion. The trial court opinion holds:
Mr. Reeves really took Mrs. Reeves out of a different style of life and brought him (sic) into a — brought her into his style of life, which was in a different category, in a different life station; and now, she can't just be dropped back into her previous life station and needs to maintain a life station now that she has been used to for the last eight years or similar to that, it may not be exactly the same or it may never rise again to that level, but it is at a different level and needs to be taken into consideration. . . . She needs more of the assets in order to do that.
This is precisely the factor that the majority opinion notes is a justification for the invasion of a separate estate. MCL 552.23; MSA 25.103; Charlton v Charlton, 397 Mich. 84, 94; 243 N.W.2d 261 (1976).
The trial court made only passing reference to the sixth factor, the necessities and circumstances of the parties, but discussed the seventh factor, the earning abilities of the parties, at length, concluding what is obvious from the record: defendant has a much greater ability to earn an income than does plaintiff. Strong emphasis was placed on this factor:
His earning ability is much broader and more extensive and far outweighs hers, and so that's a heavy factor that is weighed by the Court toward compensating her, so that she can deal with her future and be a — appropriated [sic] maintained by her own earning ability in the future, when she's not gonna [sic] have his earning ability to assist her, as she had over the past eight years.
The eighth factor, fault, was discounted by the court as a basis for the property division. When the court discussed the ninth factor, general principles of equity, it briefly referred for a second time to the fact that, before the parties' cohabitation and marriage, plaintiff had a very modest lifestyle that was changed considerably by her relationship with defendant. The court discussed defendant's many and varied business dealings, his business acumen, and his greater potential for long-term financial security. The court also opined that defendant had been less than candid in disclosing the extent of his assets and their value and further stated its view that defendant had taken advantage of plaintiff's lack of sophistication in some of his financial dealings involving her.
II
The record supports the trial court's findings in every particular. Although our review is de novo, we review findings of fact for clear error, and where they are upheld, we determine whether the dispositional rulings were fair and equitable in light of those facts. Sparks, supra at 147, 151-152; Beason v Beason, 435 Mich. 791, 805; 460 N.W.2d 207 (1990). Moreover, because dispositional rulings are discretionary, they should be affirmed unless we are left with the firm conviction that the division is inequitable. Sparks, supra at 152; Kuntze v Kuntze, 351 Mich. 144, 148; 88 N.W.2d 608 (1958); Whittaker v Whittaker, 343 Mich. 267, 272; 72 N.W.2d 207 (1955). After reviewing the record and the arguments of the parties, I am left with no such conviction. Because I conclude that the property division was equitable under all the circumstances, I would affirm it.
III
I would likewise affirm the trial court's denial of plaintiffs request for attorney fees. We review this issue for an abuse of discretion. Hanaway v Hanaway, 208 Mich. App. 278, 298; 527 N.W.2d 792 (1995). Because the trial court did not find that an award was necessary to enable plaintiff to prosecute or defend this action, the denial of plaintiff's request was not an abuse of discretion. Id. With regard to defendant's lack of cooperation in disclosing the extent of his assets, the trial court considered this fact in determining the property division.