Mayhew v. Mayhew
Annotate this CaseJanuary 1996 Term
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No. 23263
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NANCY H. MAYHEW,
Plaintiff Below, Appellant,
v.
ROBERT E. MAYHEW,
Defendant Below, Appellee
_______________________________________________________
Appeal from the Circuit Court of Hampshire County
Honorable John M. Hamilton, Judge
Civil Action No. 93-C-166
REVERSED AND REMANDED WITH DIRECTIONS
_______________________________________________________
Submitted: May 2, 1996
Filed: July 5, 1996
Ward D. Stone, Jr.
Spilman, Thomas & Battle
Morgantown, West Virginia
Attorney for the Appellant
William H. Judy, III
Judy & Judy
Moorefield, West Virginia
Attorney for the Appellee
JUSTICE ALBRIGHT delivered the Opinion of the Court.
JUSTICE WORKMAN dissents and reserves the right to file a dissenting opinion.
JUSTICE RECHT concurs in part and dissents in part.
SYLLABUS BY THE COURT
1. "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; 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." Syllabus
point 1, Burnside v. Burnside, 194 W.Va. 263, 460 S.E.2d 264 (1995).
2. "Questions relating to alimony and to the maintenance and custody of the
children are within the sound discretion of the court and its action with respect to such
matters will not be disturbed on appeal unless it clearly appears that such discretion has been
abused." Syllabus, Nichols v. Nichols, 160 W.Va. 514, 236 S.E.2d 36 (1977).
3. "'"In a suit for divorce, the trial [court] . . . is vested with a wide discretion
in determining the amount of . . . court costs and counsel fees, and the trial [court's] . . .
determination of such matters will not be disturbed upon appeal to this Court unless it clearly
appears that he has abused his discretion." Syllabus point 3, Bond v. Bond, 144 W.Va. 478,
109 S.E.2d 16 (1959).' Syl. Pt. 2, Cummings v. Cummings, 170 W.Va. 712, 296 S.E.2d 542
(1982)." Syllabus point 4, Ball v. Wills, 190 W.Va. 517, 438 S.E.2d 860 (1993).
4. A transmutation occurs when the contributing spouse evidences his intent
to made a gift of the nonmarital property to the marriage by significantly changing the
character of the property to marital.
5. A trial court must address the question of what portion of any appreciation
in value in separate property occurring during the marriage is marital property and of what
portion remains separate property. That portion which is marital property is, like other
marital property, subject to marital distribution.
6. With respect to a business owned or partially owned by either or both of
the parties to a divorce action, the spouses are entitled to share equally in the appreciation
in the value of that business during the marriage arising from the investment of marital
property or the work of either party in the business, absent one or more of the factors
enumerated in W.Va. Code 48-2-32(c).
7. Under equitable distribution, the contributions of time and effort to the
married life of the couple -- at home and in the workplace -- are valued equally regardless
of whether the parties' respective earnings have been equal or not. Equitable distribution
contemplates that parties make their respective contributions to the married life of the parties
in that expectation.
8. The burden is on both parties to the litigation to adduce competent evidence
on the values to be assigned in equitable distribution cases.
9. The burden of persuasion is on the party asserting a right to the property,
that is to say that the burden of persuasion with respect to characterizing the property as
separate property is on the one claiming the property to be separate and the burden of
persuasion with respect to characterizing the property as marital in on the party claiming the
benefit of that result.
10. Sound policy favors the continuation of short-term alimony past the
untimely death of the payor in the absence of evidence that the payor's estate, should the
payor die, is likely to be insufficient to meet other obligations, or other matters appear which
would make such continuation after death inequitable.
11. The right of the payee to receive rehabilitative alimony ceases with payee's
death.
12. Pursuant to W.Va. Code 48-2-13(a)(6)(A), the court in a divorce
proceeding may compel either party to pay attorney's fees and court costs reasonably
necessary to enable the other party to prosecute or defend the action in the trial court.
13. Under W.Va. Code 48-2-13(a)(6)(B), the assertion of unfounded claims or defenses for "vexatious, wanton or oppressive purposes" by a party is made a fact relevant to a party's responsibility for attorney fees and costs.
Albright, Justice:
This is an appeal by Nancy H. Mayhew from a final order entered by the
Circuit Court of Hampshire County in a divorce proceeding. On appeal, the appellant claims
that the circuit court erred in holding that twenty-four shares of Mayhew Chevrolet-Oldsmobile, Inc., titled in the name of her husband, the appellee, Robert E. Mayhew, were
his separate, nonmarital property and that the circuit court also erred in valuing certain other
shares of Mayhew Chevrolet-Oldsmobile, Inc., which were declared to be marital property.
The appellant at another point claims that the trial court erred in failing to award her
permanent alimony and in failing to award her rehabilitative alimony which would extend
beyond her death in the event she died within the period of such rehabilitative alimony. She
additionally claims that the circuit court erred in failing to award her full legal and
accounting fees and that the court erred in deducting certain payments made by her husband
for mortgage payments and car payments during the pendency of the divorce from her
equitable distribution share. Lastly, she claims that the circuit court erred in failing to order
both parties to exchange financial information until the parties' youngest child turned
eighteen years of age.
The appellant, Nancy H. Mayhew, and the appellee, Robert E. Mayhew, were
married on April 28, 1979. Shortly thereafter, they purchased a farm house on a one-acre
tract in Romney, Hampshire County, West Virginia, and they resided there until Robert E.
Mayhew moved out of the marital home in May, 1993.
During all but a brief time during the parties' marriage, Robert E. Mayhew
worked for Mayhew Chevrolet-Oldsmobile, Inc., which previously known as Pancake
Motors, located in Romney, West Virginia. Robert E. Mayhew's father, James Mayhew, was
originally a part owner of the dealership, and later he acquired full ownership.
During the first four years of the parties' marriage, Nancy H. Mayhew worked
at various jobs which paid minimum wage or slightly above minimum wage. The parties'
first child, Elizabeth Anna Mayhew, was born on August 30, 1983, and their second child,
Hillary Leigh Mayhew, was born on April 5, 1986. After the birth of the first child, the
appellant became a full-time mother and homemaker. She continued as a full-time mother
and homemaker during the rest of the parties' marriage.
On January 2, 1985, Robert E. Mayhew's father gave Robert E. Mayhew eight
shares of the one hundred twenty-five outstanding shares of Mayhew Chevrolet-Oldsmobile,
Inc., (or its predecessor Pancake Motors) as a gift. In May, 1988, Robert E. Mayhew
purchased an additional ten shares of Mayhew Chevrolet-Oldsmobile, Inc., for $2,200.00 per
share. At that time, according to the corporate minutes, an additional two shares were given
to Robert E. Mayhew as a gift by his father. The corporate minutes also show that on
January 4, 1989, James Mayhew gave Robert E. Mayhew seven additional shares, valued at
$2,200.00 per share, and on January 3, 1990, he gave Robert E. Mayhew a further seven
shares. After the 1990 transaction, Robert E. Mayhew held thirty-four shares of the one
hundred twenty-five shares of Mayhew Chevrolet-Oldsmobile, Inc., stock, and Robert E.
Mayhew's father, James Mayhew, owned the remaining ninety-one shares.
In February, 1990, after the last gift of stock to Robert E. Mayhew, a major fire
erupted at the Mayhew Chevrolet business location in downtown Romney, West Virginia.
In that fire, the dealership's garage burned to the ground. It appears that following the fire
Robert E. Mayhew and his father were at odds as to the course of action to be taken with
regard to the dealership. Robert E. Mayhew was of the view that a parcel of land outside
town should be purchased and that the dealership should be moved away from the downtown
area. James Mayhew apparently did not agree.
Ultimately, the dealership was moved to the location outside of town, and in
December, 1991, the corporation, Mayhew Chevrolet-Oldsmobile, Inc., purchased James
Mayhew's ninety-one shares of the corporation for $250,000.00. The ninety-one shares
became treasury stock, and at that point Robert E. Mayhew held all thirty-four shares of
outstanding stock. In effect, Robert E. Mayhew became the sole owner and made all
business decisions with regard to the operation of Mayhew Chevrolet.
Late in 1992, Nancy E. Mayhew learned that Robert E. Mayhew was possibly
involved in an intimate relationship with another female. Nancy H. Mayhew confronted
Robert E. Mayhew over this matter, and he did not deny the relationship, but indicated that
he wanted a divorce. Shortly thereafter, he moved out of the marital home.
Divorce proceedings were subsequently instituted, and a temporary order was
entered on October 13, 1993. In the temporary order, Nancy H. Mayhew was awarded legal
custody of the parties' two children, exclusive possession of the marital home, child support
in the amount of $875.00 per month, and alimony in the amount of $500.00 per month.
Robert E. Mayhew was additionally required to pay all marital indebtedness on a monthly
basis.
Pursuant to the temporary order, Robert E. Mayhew paid the mortgage on the
parties' marital home in the amount of $402.01 per month. He also made a car payment in
the amount of $142.17 per month, paid the utilities for the marital home, and paid health-related expenses for the two children and Nancy H. Mayhew.
Prior to actual trial of the issues in the case, the parties stipulated as to the
ownership and value of their assets, except for the ownership and value of the thirty-four
shares of Mayhew Chevrolet-Oldsmobile titled in the name of Robert E. Mayhew. As a
consequence, the only actual equitable distribution issue during trial of the case was the
value of Robert E. Mayhew's thirty-four shares of Mayhew Chevrolet-Oldsmobile, Inc.
During the trial of the case, Robert E. Mayhew took the position that of the
thirty-four shares of Mayhew Chevrolet-Oldsmobile, Inc., stock which he held, twenty-four
shares were his separate property, since those shares of stock had been transferred to him as
gifts by his father, James Mayhew. He conceded that his remaining ten shares of Mayhew
Chevrolet-Oldsmobile, Inc., stock were marital property, since they were purchased during
marriage.
Nancy E. Mayhew took the position that, even though it appeared that the
twenty-four shares which Robert E. Mayhew claimed as separate property had been given
to Robert E. Mayhew by his father, the facts suggested that the gift stock had actually been
consideration for work performed by Robert E. Mayhew for the Chevrolet dealership. The
appellant adduced evidence, and on appeal argues, that the record shows that in 1985 Robert
E. Mayhew's total salary was only $28,748.95, and in 1986 it was $32,792.00. On January
2, 1985, the first eight shares of Mayhew Chevrolet-Oldsmobile, Inc., stock were allegedly
given to Robert E. Mayhew. She further points out that for the first eight months of 1988
Robert E. Mayhew had a salary of $28,000.00 and that his salary for the full year of 1989
was $49,664.00. Seven additional shares of stock were transferred to Robert E. Mayhew on
January 4, 1989, and another seven shares were transferred on January 3, 1990. For the year
1990, Robert E. Mayhew's salary was reduced to $42,000.00.
Evidence was also adduced showing that after Robert E. Mayhew had obtained
complete control of the corporation, a single new stock certificate was issued to him, in his
name alone, for the thirty-four shares of stock in the corporation which he held, the twenty-four shares which he claimed were gift shares, as well as the ten shares which were
purchased during marriage. During trial and on appeal, Nancy H. Mayhew takes the position
that when the gift shares were joined with the purchased shares in the issuance of the single
new stock certificate, there was, in effect, a commingling of gift shares, if they were in truth
a gift, with marital property and that, as a consequence, the gift shares, even if they
originally were intended as gifts, became marital property.
To counter Nancy H. Mayhew's contention that the gift shares were not in truth
gifts, Robert E. Mayhew introduced evidence indicating that at the time of the gifts to him,
his father, James Mayhew, also gave his brother certain other assets of considerable value,
although no stock. Additionally, he adduced corporate minutes which indicated that the
shares were, in fact, gifts. To counter Nancy H. Mayhew's argument that the gifts of stock
were actually transfers of assets made in lieu of salary, Robert E. Mayhew pointed out that
all gifts of stock were made before his salary was, in fact, reduced. He also indicated that
the reduction in his salary which occurred was made after the fire destroyed the corporation's
facility in downtown Romney and that a reduction was required to provide sufficient funds
for rebuilding the dealership. He also showed that James Mayhew, his father, and at the time
the majority owner of the business, also took a reduction in salary for the same reasons.
Relating to the question of the value of the shares of Mayhew Chevrolet-Oldsmobile, Inc., stock, Nancy H. Mayhew called as a witness Don Conley, who testified
that, based on the net equity method, capitalization of earnings method, and cash flow
method, the thirty-four shares of Mayhew Chevrolet-Oldsmobile, Inc., stock held by Robert
E. Mayhew at the end of 1993 were worth $771,800.00. Robert E. Mayhew's expert, Judith
Schubert, using the net equity method, capitalization of earnings method, and sales method,
estimated that the thirty-four shares of stock were worth $458,949.00. Ultimately, the family
law master concluded, and the circuit court agreed, that the value of the thirty-four shares
was $648,586.00, or about $19,076.00 per share. The value thus determined may be
assigned $190,760.00 to the ten shares purchased with marital assets and $457,826.00 to the
twenty-four gift shares at issue below.
During the proceedings, although the parties did not dispute the other property
distribution questions, Nancy E. Mayhew did testify that as of August 25, 1994, her legal and
accounting fees were approximately $15,000.00. Later, she submitted an itemized bill from
her attorney for attorney fees in the amount of $31,585.65 for services through March 16,
1995.
In resolving the issues in the case, the family law master prepared
recommended findings of fact and conclusions of law. In addition to requiring Robert E.
Mayhew to pay child support in the amount of $996.00 per month and medical and other
expenses for the children, the family law master recommended that Nancy H. Mayhew
receive $500.00 per month as rehabilitative alimony for a period of forty-eight months,
beginning on October 1, 1994. The family law master also indicated, contrary to the wishes
of Nancy H. Mayhew, that the rehabilitative alimony end at the death of either of the parties
or upon the remarriage of Nancy H. Mayhew. The family law master also found, in effect,
that twenty-four of the thirty-four shares of Mayhew Chevrolet-Oldsmobile, Inc., were the
separate property of Robert E. Mayhew and awarded him the remaining ten marital shares
of the corporation. The family law master recommended that Nancy H. Mayhew receive
one-half of $174,425.00 for her one-half marital interest in those ten shares. In arriving at
this figure, the family law master deducted from the $190,760.00 value assigned to the ten
marital property shares the sum of $16,335.00, being amounts expended by Robert E.
Mayhew which he had been required to pay for the joint benefit of the parties during the
pendency of the proceedings, over and above the alimony, child support, and suit money
ordered paid to or for the benefit of Nancy H. Mayhew.
The propriety of the family law master's findings and recommendations were
submitted to the trial court. In its final order, the court first found that the value placed on
the Mayhew Chevrolet-Oldsmobile, Inc., stock was supported by the evidence and was not
clearly wrong. In reaching that conclusion, the court detailed the evidence adduced on the
value of the stock, and, in consideration of that evidence, approved and adopted the family
law master's recommendation on the valuation of the stock.
The court also agreed with the family law master's determination that the twenty-four shares of stock were actually gifts. The trial court said:
He [the family law master] reviewed the corporate records and
heard the witnesses, none of whom effectively disputed that the
shares were a bona fide gift by a father to his son of shares of
stock as was the gift by the father to another son of an
automobile and monies at or near the same time, so long as both
sons worked with him in the agency. The Master correctly
found the 24 shares to be a gift and not payment to Defendant
of added compensation over and above his salary for services
performed. Also, the Master correctly refused to apply the
transmutation theory so as to hold the 24 shares as marital
property. The mere issuance of a new stock certificate which
represented all the shares theretofore acquired over a period of
time by a shareholder does not alter the status of the nature of
the acquisition of such shares. In this case the new certificate
was issued on advice of counsel in a restructuring of the
corporate records during a reorganization of the company.
Never did there exist any intent to change the nature of
ownership of the shares, but rather only to consolidate and clean
up the business records. The Master would have had to stretch
the evidence considerably to find support for either the added
compensation theory or that of transmutation. The father may
have recognized and appreciated the work by the son, but they
disagreed on the manner in which the business should be
operated, and the business was not growing and expanding
under the father's method of operation. Defendant quit the
company for a time and upon his return, he obtained more
control in the operation of the business and under his method,
the business again began to grow and prosper. The father
recognized the change and terminated his interest so that
Defendant would have complete control and responsibility.
The Master correctly found from the evidence that the 24
shares and all increases in the value thereof were non-marital
property and were truly the result of a gift by a father to his son.
The court also addressed the question of whether the master properly awarded
Nancy H. Mayhew rehabilitative alimony rather than permanent alimony and whether the
master erred in failing to provide that the rehabilitative alimony would extend beyond the
untimely death of Robert E. Mayhew.
The court found that the record indicated that Nancy H. Mayhew had a four-year Board of Regents degree, was in good health, and, although she had been a homemaker during her marriage, she was fully capable of entering the job market. The court also found that she had elected to train for a career as a court reporter. The court further noted that the evidence suggested that both parties were somewhat at fault in the breakup of the marriage and that Robert E. Mayhew, because of his devotion to his business interests, had been away from home more and more and that he had associated with friends other than his wife. The court concluded that this conduct had created the suspicion on the part of the appellant that he had committed adultery. Although the court found that the evidence was not sufficient to show adultery, the court recognized that the husband's relationship with another female was such as to be a partial cause of the termination of the marriage. On the other hand, the court also found that the evidence showed that Nancy H. Mayhew had, whether intentionally or not, interfered with the parties' children's relationship with their paternal grandparents and that Nancy H. Mayhew, during the pendency of the divorce, had unnecessarily incurred expenses on her home to update it when she believed that it would be conveyed to her and that she had also incurred expenses with a competitor of her husband for the repair of her automobile and for new tires for her automobile. The court also found that the evidence suggested that Nancy H. Mayhew's motivation for revenge was alive and strong. The court concluded:
No doubt the Master recognized this mutual fault and rightly
concluded that each party was well provided for so that neither
was entitled to permanent alimony from the other. The election
by Plaintiff to seek a career as a Court Reporter likely is why
the Master awarded rehabilitative alimony at all. His finding in
this regard is believed to be generous, but under all the
circumstances, will not be disturbed. Upon review of the assets
of each party and the nature thereof, and it appearing the
Defendant is borrowing money to meet his obligations, the
Master was correct in not ordering a lump sum payment of
rehabilitative alimony.
Inasmuch as the court agrees with the Master's finding
that permanent alimony will not be awarded, the question of
such extending beyond the death of Defendant is moot.
In addressing the question of suit money, the court noted that the itemization for attorney fees and charges filed by Nancy H. Mayhew included much which had been incurred for matters which were unnecessary and which should not have been incurred. The court stated:
It is apparent that Plaintiff went out of her way to attempt to gig
Defendant with costs for many items for herself and to salve the
sore she thinks only Defendant caused. When the financial
ability of each of the parties is considered, along with the costs
and expenses of each, it would be the inclination of the Court
that each should pay his or her own attorney fees and costs
without the other being compelled to contribute thereto.
However, the Master thought otherwise, and his findings cannot
be said to be clearly wrong, therefore, are affirmed and adopted.
However, no additional amounts will be awarded either party
for attorney fees or costs.
STANDARD FOR REVIEW
In syllabus point 1 of Burnside v. Burnside, 194 W.Va. 263, 460 S.E.2d 264 (1995), this Court stated:
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; 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.
The Court has also stated, with regard to alimony:
Questions relating to alimony and to the maintenance and
custody of the children are within the sound discretion of the
court and its action with respect to such matters will not be
disturbed on appeal unless it clearly appears that such discretion
has been abused.
Syllabus, Nichols v. Nichols, 160 W.Va. 514, 236 S.E.2d 36 (1977). See also Marilyn H.
v. Roger Lee H., 193 W.Va. 201, 455 S.E.2d 570 (1995); McVay v. McVay, 189 W.Va. 197,
429 S.E.2d 239 (1993); and Martin v. Martin, 187 W.Va. 372, 419 S.E.2d 440 (1991).
Lastly, with regard to court costs and attorney fees, the Court has ruled:
"'"In a suit for divorce, the trial [court] . . . is vested with
a wide discretion in determining the amount of . . . court costs
and counsel fees, and the trial [court's] . . . determination of
such matters will not be disturbed upon appeal to this Court
unless it clearly appears that he has abused his discretion."
Syllabus point 3, Bond v. Bond, 144 W.Va. 478, 109 S.E.2d 16
(1959).' Syl. Pt. 2, Cummings v. Cummings, 170 W.Va. 712,
296 S.E.2d 542 (1982)."
Syl. pt. 4, Ball v. Wills, 190 W.Va. 517, 438 S.E.2d 860 (1993).
VALUATION OF SHARES OF STOCK
Nancy H. Mayhew claims that the circuit court erred in establishing the value
of the ten shares of stock which were determined to be marital property.
An examination of the record shows that the court valued the entire thirty-four
shares of stock which were in the hands of Robert E. Mayhew at the time of this proceeding
at $648,586.00. It appears that the court placed a value on the entire thirty-four shares since
a number of experts were called who valued the shares as a whole. This Court notes that the
value placed on the shares was considerably above the value placed on the shares by Robert
E. Mayhew's expert, Judith Schubert, who found the shares to be worth $458,949.00. The
value, on the other hand, was somewhat lower than the $771,800.00 value placed on the
shares by Nancy H. Mayhew's witness, Don Connelly.
It appears that there was extensive evidence on the value of the shares
presented by expert evaluators of such property, that such expert evaluators used appropriate
methods for valuing the property, and that the family law master resolved the conflict in the
evidence in that regard properly and valued the shares in a manner consistent with the
evidence of value advanced by the evaluators. This Court cannot conclude that the findings
of fact made by the family law master and the circuit court as to the value of the shares were
clearly wrong. Accordingly, under the rule set forth in Burnside v. Burnside, supra, the
circuit court's ruling is affirmed.
GIFT SHARES
As previously indicated, in the present proceeding Nancy H. Mayhew is
claiming that the trial court erred in finding that twenty-four shares of Mayhew Chevrolet-Oldsmobile, Inc., stock titled in the name of Robert E. Mayhew were his separate property
and were not marital property.
In reviewing the evidence relating to the ownership of the twenty-four shares
of Mayhew Chevrolet-Oldsmobile, Inc., stock in issue under this assignment of error, the
Court notes that Robert E. Mayhew adduced evidence showing that those twenty-four shares
were gifts from his father. Nancy E. Mayhew took issue with this and claimed that, although
they outwardly appeared to be gifts, Robert E. Mayhew received a low salary while working
for his father and that the salary was actually reduced shortly after he received his last gift
of shares. Robert E. Mayhew countered this by introducing evidence suggesting that his
brother had received gifts of other property at the same time he received gifts of stock. He
also introduced evidence indicating that his salary was reduced, as was his father's salary at
the same time, due to the fact that the corporation had suffered severe losses from a
devastating fire and needed to restore its financial standing.
West Virginia Code 48-2-1(f) defines separate property as, among other things, property acquired by a party during marriage by gift. Specifically, the relevant portion of the statute provides:
"Separate property" means:
* * *
(4) Property acquired by a party during marriage by gift,
bequest, devise, descent or distribution . . . .
In reviewing the evidence relating to the "gift" shares of stock involved in the
present case, the Court notes that the evidence indisputably shows that the shares were
obtained by Robert E. Mayhew from his father. There was evidence that they were
transferred as a gift and that at the same time a gift was made to Robert E. Mayhew's brother.
Although the evidence relating to Robert E. Mayhew's salary was conflicting and potentially
could have supported a finding that the shares were not in fact gift shares, the family law
master and the circuit court adopted the finding that that evidence did in fact show that they
were intended as gift shares and concluded that the twenty-four shares were gifts to Robert
E. Mayhew. We cannot say that the findings of the family law master and the circuit court
in this regard are clearly wrong.
Nancy E. Mayhew also suggests that the twenty-four shares should be
considered marital property because they were commingled in a single certificate with ten
shares which clearly were purchased during marriage with marital funds and which clearly
were marital property.
The legal argument that such commingled separate shares become marital
property is based upon the theory of "transmutation", addressed by this Court in Miller v.
Miller, 189 W.Va. 126, 428 S.E.2d 547 (1993). In that divorce case, the husband's mother
had deeded her farm to the husband, in his name only, during his marriage, for "love and
affection". The husband and wife had invested marital assets in the construction of
outbuildings and other improvements on the farm and had also invested martial assets in the
improvement of the house constituting the marital domicile, which was located on the farm.
Before this Court, the wife argued that because the improvements to the farm and the house
constituted marital property and were, of necessity, commingled with the farm, the separate
interest of the husband in the farm, acquired by the gift of his mother, had become marital
property by transmutation. In Miller v. Miller, supra, we recognized the theory set forth in
syllabus point 1 of Kuehn v. Kuehn, 55 Ohio App.3d 245, 564 N.E.2d 97 (1988), as
follows: "'This transformation may be effected by an agreement between the parties or by
the affirmative act or acts of the parties.' Westbrook v. Westbrook, 5 Va.App. 446, 364 S.E.2d 523, 528 (1988)." Miller v. Miller, 189 W.Va. at 130, 428 S.E.2d at 551. We also
said in Miller: "'[A] transmutation occurs when the contributing spouse evidences his intent
to made a gift of the nonmarital property to the marriage by significantly changing the
character of the property to marital.' In re Marriage of Nicks, 177 Ill.App.3d 76, 126 Ill.Dec.
442, 444, 531 N.E.2d 1069(l988)." Miller, 189 W.Va. at 130, 428 S.E.2d at 551. However,
the Miller Court refused to find a transmutation, saying: "In the case before us, however,
there was no agreement effected between the parties, nor was there evidence of any intent
by the appellee to change the character of the property. For instance, the appellee did not
transfer title of his separate property in the joint names of both parties." Id.
This Court also addressed transmutation in Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990). In that case, the intent to make a gift of the separate property to the marriage was evidenced by a prior transfer of the separate property to the joint names of the parties. In syllabus point 4 of that case, we held:
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.
In Whiting, the Court recognized that the joint titling of previously separate property gives rise only to a rebuttable presumption of a gift to the marital estate, and the Court outlined factors which would overcome the presumption. Specifically, the Court stated:
The presumption may be overcome by a showing that the
transferring spouse did not intend to transfer the property to
joint ownership or was induced to do so by fraud, coercion,
duress, or deception. See Bonnell v. Bonnell, [117 Wis.2d 241,
344 N.W.2d 123 (1984)]; Trattles v. Trattles, 126 Wis.2d 219,
376 N.W.2d 379 (App. 1985).
183 W.Va. at 459, 396 S.E.2d at 421 (footnote omitted).
In the present case, there is no transfer of title to the joint names of the parties,
and thus the essential predicate of Whiting, the titling of the property in joint names, is not
present.
The extent of any commingling of marital property with separate property is
that ten shares of stock clearly subject to definition as marital property were evidenced on
the same stock certificate evidencing the ownership of twenty-four shares transferred to
Robert E. Mayhew by gift, and the resulting single certificate remained in the sole name of
the legal owner of those shares, Robert E. Mayhew. By introducing evidence that the ten
marital shares were combined with the twenty-four gifts shares in a single certificate solely
because of a corporate reorganization, Robert E. Mayhew adduced evidence which was
sufficient, if believed by the fact finder, to support a conclusion that the reissuance of a
single certificate representing all thirty-four shares was for a separate business purpose and
evidenced no intention to make a marital gift of the separate shares to Nancy H. Mayhew.
In determining that the twenty-four shares retained their character as separate property, it
rather clearly appears that the family law master and the circuit court believed the evidence
and concluded that no intent to make a gift of nonmarital property to the marriage was
established.
After applying the test set forth in Burnside v. Burnside, supra, the Court
cannot conclude that the circuit court or family law master were clearly wrong or that they
otherwise erred in reaching the conclusion that the shares in fact had been gifts to Robert E.
Mayhew or in refusing to declare the twenty-four gift shares marital property because of the
registration of such shares on the same certificate which evidenced the ten shares of marital
property. We, therefore, affirm the ruling below that the twenty-four shares are the separate
property of Robert E. Mayhew.
APPRECIATION AND ITS VALUATION
In reviewing the overall question of the gift shares, the Court does believe that the circuit court and the family law master failed to take all actions required by West Virginia's marital distribution law in dealing with the twenty-four separate property shares. Specifically, the Court notes that W.Va. Code 48-2-1(e) provides that:
"Marital property" means:
* * *
(2) The amount of any increase in value in the separate
property of either of the parties to a marriage, which increase
results from (A) an expenditure of funds which are marital
property, including an expenditure of such funds which reduces
indebtedness against separate property, extinguishes liens, or
otherwise increases the net value of separate property, or (B)
work performed by either or both of the parties during the
marriage.
Correspondingly, W.Va. Code 48-2-1(f) provides:
"Separate property" means:
* * *
(6) Any increase in the value of separate property . . .
which is due to inflation or to a change in market value resulting
from conditions outside the control of the parties.
The record indicates that the twenty-four shares of stock which were given to
Robert E. Mayhew, and which the circuit court properly concluded were his separate
property, appreciated in value during marriage. West Virginia Code 48-2-1(e), cited
above, requires that such appreciation in value as occurred by reason of the investment of
martial assets or the work of the parties is marital property, even though the shares
themselves remain separate property. On the other hand, W.Va. Code 42-2-1(f) provides
that the portion of appreciation due to inflation or to a change in market value resulting from
conditions outside the control of the parties is separate property. This Court believes that
to give full effect to the legislative intent regarding marital distribution, a trial court must
address the question of what portion of any appreciation in value in separate property
occurring during the marriage is marital property and of what portion remains separate
property. That portion which is marital property is, like other marital property, subject to
marital distribution.
In the case before us, the appreciation in value of separate property during the
marriage subject to allocation under the provisions of law just reviewed is appreciation in
the value of a corporate business, one which may be generally classified as both small and
closely-held. It is fundamental to the concept of equitable distribution that, with respect to
a business owned or partially owned by either or both of the parties to a divorce action, the
spouses are entitled to share equally in the appreciation in the value of that business during
the marriage arising from the investment of marital property or the work of either party in
the business, absent one or more of the factors enumerated in W.Va. Code 48-2-32(c).(1)
That entitlement arises because, under equitable distribution, the contributions of time and
effort to the married life of the couple -- at home and in the workplace -- are valued equally,
regardless of whether the parties' respective earnings have been equal. Equitable distribution
contemplates that parties make their respective contributions to the married life of the parties
in that expectation.
In the case before us, Robert E. Mayhew worked in the family business
throughout the married life of the parties. Since 1985, he has owned some part of that
business, later acquired greater interests by gift and by purchase, and in late 1991 acquired
all the outstanding shares. Since then the business has apparently invested a part of its
earnings and assets to pay Mr. Mayhew's father for his former interest in the business.
Against that background, the principles of equitable distribution and the statutory direction
that the appreciation in the value of Mr. Mayhew's separate property holdings in the business
should be allocated between marital property and separate property are clearly applicable.
Such principles appear to be particularly appropriate here, where there is evidence that
Nancy H. Mayhew, the wife, by her efforts at home, enabled the husband to be absent from
the home frequently, attending civic and other meetings and events that were considered
likely to foster the success of the business whose stock is at issue here.
Accordingly, this Court believes that the family law master and the trial court
should properly have conducted an inquiry into, and the parties were obligated to adduce
evidence as to, the allocation of the appreciation in value of the twenty-four shares of
separate property stock of Robert E. Mayhew to determine what portion, if any, of such
appreciation is marital property and what portion remains separate property. Because the
family law master and the trial court did not conduct such an inquiry, we conclude that the
judgment of the circuit court must be reversed, and this case must be remanded for the
appropriate inquiry and action.
We recognize that such an inquiry will not be an easy task. In Miller v. Miller, supra, this Court addressed a part of the problem we are now confronting. In that case, as noted above, the parties to the marriage had clearly invested marital assets in the construction and improvement of the various structures on a farm which was the separate property of the husband. In the trial of the matter, evidence had been adduced as to the value of various improvements to the real estate. However, the wife was unable to introduce competent evidence of the value of improvements to the house located on the farm, the former marital domicile. The evidence was adduced by the wife through an appraiser. The appraiser was unable to segregate the value added to the house by improvements made to it from marital assets, but did give separate values for the house, for the farm, and for improvements paid for from marital assets and made to the remainder of the farm, other than the house. The family law master awarded the wife one half of the value of the improvements the appraiser was able to identify but made no award for improvements to the house. The circuit court refused to disturb that ruling. So did this Court, pointing out that in litigating marital distribution issues, both parties have the burden of presenting competent evidence concerning the value of marital property and concluding:
Based upon the fact that the appellant [wife] was unable
to meet her burden of presenting competent evidence regarding
the value of the improvements made to the house during the
parties' marriage, we find that the circuit court was correct in
denying the appellant one-half of the same.
Miller v. Miller, 189 W.Va. at 130, 428 S.E.2d at 551.
Indeed, we could leave the parties where we found them, as this Court did in
Miller, since neither party here, it appears, addressed the issue as we have drawn it, of
allocating the appreciation in value of the separate property. However, since this Court has
also not considered the issue as drawn here, especially in terms of the allocation of
appreciation in the value of small, closely-held corporations, we think it appropriate that the
matter be remanded to give both parties a fair opportunity to seek an allocation of the
increase in value which occurred after the dates of the various gifts of stock.
We have examined authorities on the subject of equitable distribution and
looked for guidance in the decisions of other courts without success. Therefore, we offer
only the following general comments to suggest at least the outlines of the inquiry to be
conducted:
(1) The appreciation at stake here is not insignificant. The value of the
business, as affirmed herein, has been fixed at $648,586.00. If one assumes that, at the times
given, all twenty-four gift shares had the $2,200.00 per share value recorded for the first such
gift, the appreciation may be calculated at a sum in excess of $400,000.00. We make these
assumptions and calculations to indicate the order of magnitude of the issue being remanded,
not to find the values or in any way inhibit the inquiry below.
(2) It may be helpful to ascertain the book value of the shares as of the date
previously used by the court below to determine the overall value of the business and,
perhaps, to compute book value on other dates. We note that qualified appraisers or
accountants may adduce sound reasons to adjust book value for a variety of reasons, such
as reversing accelerated depreciation or adjusting for other tax considerations, in order to
better reflect the actual net cost of assets and proper amount of liabilities or net book equity.
Any such book value exercises, with or without adjustments that may appear justified under
the evidence, may aid the court in determining what the actual earnings of the whole
business have been for any given period the court deems helpful, what earnings have been
retained in the business or otherwise invested, and how such decisions may have contributed
to the previously found present value of the business.
(3) It may be possible to identify which assets in the business, if any,
appreciated in value above their net book or carrying value and perhaps how any such
appreciation was treated by the experts previously testifying for each party in the formulation
of their previously expressed opinions as to the value of the business. The court may hear
still other opinions as to book value of assets, appreciation, and current value, as the court
may be advised. The court below may thus obtain at least a preliminary indication of
appreciation by reason of inflation or other outside factors.
(4) Perhaps evidence can be developed regarding the performance of this
business relative to others of similar size, character and circumstances which will aid the
court. In this connection, comparisons of typical or average sales, gross margins and
expenses, including the usual level of salaries and benefits of executives of other businesses,
and the degree to which inflation, the particular success of the product line of the business,
or some other factor directly influenced by or beyond the control of the manager of this
business may be helpful in making the required allocation.
(5) We note that segregating the increase in value attributable to the work and
effort of a stockholder may or may not bear any relationship to the value of his or her shares
or the percentage of ownership. An owner may expend virtually all or very little time and
effort in the business. Or the business may reap substantial benefits from the labors of
others, some of whom may have been selected, trained, or directed by the owner and some
of whom may not have been so selected, trained, or directed. The business may prosper or
suffer from a unique or distinctive product line, or from purely fortuitous circumstances.
Moreover, one case may be more difficult to assess than another, because the owner of the
stock being valued holds only a fractional interest in the business and has more, or less,
opportunity to contribute to the overall success of the business than is indicated by
ownership percentages. In such situations, the increase in value attributable to the work and
effort of the share owner may indeed be quite difficult to assess.
(6) None of the factors we have set out here are intended to control or limit
the inquiry below. As the Court indicated in Miller, the burden is on both parties to the
litigation to adduce competent evidence on the values to be assigned in equitable distribution
cases. We recognize that this matter of segregating the increase in value attributable
respectively to marital and separate property is novel for this Court and the tribunal below.
We leave the court below free to rule on issues such as the competency of experts, the
relevancy of expert testimony, and like issues. We think it unlikely that the parties or the
tribunal below will achieve precision; as in appraisal matters generally, substantial justice,
fairly supported by the evidence, is perhaps the best we can expect.
(7) We perceive that the burden of going forward with the evidence is on both parties as to their respective claims, as indicated by Miller, and that the burden of persuasion is on the party asserting a right to the property, that is to say that the burden of persuasion with respect to characterizing the property as separate property is on the one claiming the property to be separate and the burden of persuasion with respect to characterizing the property as marital is on the party claiming the benefit of that result. We are cognizant of the prior holding of this Court that our law shows a preference for characterizing property as marital property. Syllabus point 3, Whiting v. Whiting, supra. However, we do not see that holding as very helpful in this novel area. Indeed, the court below has already characterized the property at issue as separate. We cannot now see a benefit to creating any new presumption, especially a presumption that might be rebutted by adducing only slightly contrary evidence. We leave to another day, or perhaps to legislative initiative, the development of any more specific formulations. At this point, it appears best to rely on the sound and reasoned discretion of the trier of fact.
After making the inquiry here required, the family law master, or the court, if it so elects,(2) should make specific findings on the value of the gift shares when transferred to the husband and on the allocation of the increase in their value thereafter to marital and separate property as the evidence, as weighed and considered by the trier of fact, shall justify, and enter such further order as shall be necessary to effectuate equitable distribution of the marital property thus determined.
OTHER ASSIGNMENTS
Nancy H. Mayhew next challenges the fact that the circuit court awarded her
only rehabilitative alimony, did not provide her with permanent alimony, and did not provide
that the rehabilitative alimony should extend beyond the death of Robert E. Mayhew, in the
event that he should die before the period of rehabilitative alimony expires.
A review of the evidence in this case shows that Nancy H. Mayhew had a
college education, was in good health, and was fully capable of entering the job market.
There was also evidence that she either elected to train for a career as a court reporter or in
some other way pursue a career as a court reporter. In this Court's view, these facts fail to
suggest that the circuit court or family law master were clearly wrong in denying Nancy H.
Mayhew a permanent alimony award. The record also suggests that Nancy H. Mayhew
received a considerable distribution of assets as a result of the orders in this case and may
well receive a greater award after the inquiry regarding the increase in value of the gift stock
in the business herein ordered. The judgment below is affirmed with respect to the denial
of permanent alimony, but the entire issue of alimony must be revisited after the court has
concluded the inquiry regarding the allocation of appreciation in value of the shares of stock.
Nancy E. Mayhew further complains that the period of rehabilitative alimony
was too short and that payment of that rehabilitative alimony should continue for whatever
period it is awarded, whether or not Robert E. Mayhew should sooner die. Essentially, the
Court believes that the period of rehabilitative alimony was within the discretion of the trial
court and that the court did not err in the length of time for which it was ordered.
With respect to extending the rehabilitative alimony beyond the death of Robert E. Mayhew, the court below said only:
Inasmuch as the Court agrees with the Master's finding
that permanent alimony will not be awarded, the question of
such extending beyond the death of Defendant is moot.
It does not appear that the ruling of the court below adequately disposed of the
issue under discussion. It is within the power of the trial court to require that alimony be
paid notwithstanding the death of the payor, and this Court has held that if the court does not
specify that alimony will stop upon the death of the payor, a claim may be had against the
estate of a deceased payor for continued payment of alimony, which claim will be sustained
in certain circumstances. In re Estate of Hereford, 162 W.Va. 447, 250 S.E.2d 45 (1978).
We note that the Legislature has required that, in the case of a separation agreement to be
approved by the court, if the separation agreement does not resolve the question of alimony
after the death of the payor, the court must do so incident to examining and approving the
agreement.(3) It appears that the discretion of the trial court, in cases not involving a
separation agreement, to award or not award alimony past the death of the payor has been
left undisturbed by W.Va. Code 48-2-15 and that the best practice for the trial court in all
circumstances is to address and decide the issue of whether alimony is to cease upon the
death of the payor.
In the case of rehabilitative alimony, we perceive that the policy consideration
underlying the award of rehabilitative alimony -- to enhance the earning capacity and self-sufficiency of the payee -- favors the continuation of alimony not withstanding the death of
the payor. Although alimony will usually be awarded from the income of the payor, the
award of alimony is not foreclosed by the absence or inadequacy of income. It may be
awarded from the payor's assets. W.Va. Code 48-2-15. Thus, it appears that sound policy
favors the continuation of short-term alimony past the untimely death of the payor in the
absence of evidence that the payor's estate, should the payor die, is likely to be insufficient
to meet other obligations, or other matters appear which would make such continuation after
death inequitable.
Similarly, we perceive that the right of the payee to receive rehabilitative
alimony ceases with payee's death. Absent some compelling circumstance for otherwise
providing in the order awarding such alimony, the right to receive rehabilitative alimony
should and would end at the death of the payee, since the issue of enhancing the earning
capacity and self-sufficiency of the payee would be moot in the event of payee's untimely
death. In the rare case where a court wishes to provide otherwise, it would be essential that
the order expressly provide for the enforcement of that right in payee's personal
representative.
As noted, in the present case the trial court offered no adequate reason why the
award of rehabilitative alimony, apparently aimed at assisting Nancy H. Mayhew in re-entering the job market, should not be for the full period awarded, regardless of the untimely
death of Robert E. Mayhew. As noted, this case must be remanded for a reconsideration of
the value of the twenty-four gift shares of stock involved in the case. It will be necessary to
review the entire issue of alimony after the allocation of value issues are resolved. The
continuation of any alimony awarded beyond the death of the payor should be addressed
within the discretion of the court, and the decision and its basis clearly articulated.
Next, Nancy H. Mayhew claims that the circuit court erred in failing to award
her full legal and accounting fees.
The circuit court found that Nancy H. Mayhew "went out of her way to attempt
to gig" Robert E. Mayhew with the costs of many items for herself during the pendency of
the divorce and that the court's inclination would be to rule that each party was to pay his or
her own attorney fees and accounting fees. The court, however, noted that the family law
master had concluded that Robert E. Mayhew should be required to pay Nancy H. Mayhew
$6,500.00 in attorney fees and accounting fees. The court, after examining the record,
concluded that the family law master's finding, which was different from the court's own,
could not be said to be clearly wrong and, therefore, affirmed and adopted that finding.
West Virginia Code 48-2-13(a)(6)(A) provides that "[t]he court [in a divorce
proceeding] may compel either party to pay attorney's fees and court costs reasonably
necessary to enable the other party to prosecute or defend the action in the trial court." Also,
under W.Va. Code 48-2-13(a)(6)(B), the assertion of unfounded claims or defenses for
"vexatious, wanton or oppressive purposes" by a party is made a fact relevant to a party's
responsibility for attorney fees and costs.
It appears that the appellant has been able to prosecute the proceedings thus
far in this case. The family law master found the $6,500.00 attorney and accounting fee
award to be appropriate. The court noted that the appellant had itemized items for attorney
fees and charges that were unnecessary and attempted "to gig the defendant" with costs. In
spite of this, the court acceded to the recommendation of the family law master.
As suggested in syllabus point 4 of Ball v. Wills, supra, the question before this
Court is whether the lower court's ruling constituted an abuse of discretion. Since the
appellant was able to prosecute the action successfully, and since the evidence shows that
the appellant has a substantial income, this Court cannot conclude that the trial court's ruling
constituted an abuse of discretion.
We note that this opinion requires additional proceedings, and, in conjunction
with those proceedings, the court below should ascertain that the parties are financially able
to carry the burden of the additional proceedings and make such orders as will allow both
parties a full and fair hearing, requiring the parties to bear reasonable costs from their own
assets, from the assets of the other party, or from assets to be awarded as a result of the
further proceedings as the court finds fair and just.
Lastly, Nancy E. Mayhew claims that the trial court erred in failing to order
both parties to exchange financial information each year until the parties' youngest child
reaches the age of eighteen.
Under the law, Nancy H. Mayhew may appropriately petition the court from
time to time for an adjustment of child support. In such a proceeding, Robert E. Mayhew
could be legally compelled to reveal financial information relating to his affairs. In view of
this circumstance, the Court cannot conclude that the trial court committed reversible error
by failing to order the annual exchange of information.
Because this Court believes that the trial court should examine the question of
what portion of the gift shares appreciation was attributable to work performed by Robert
E. Mayhew during marriage and what portion was due to inflation or other conditions
outside the control of the parties and that that inquiry may require an adjustment in the
alimony and other factors in the overall settlement of this case, the judgment of the circuit
court is reversed, and this case is remanded for action consistent with the principles set forth
herein.
Reversed and remanded
with directions.
1. 1West Virginia Code 48-2-32(c) states:
(c) 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:
(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.
2. 2West Virginia Code 48-2-25 allows the court either to refer the case to a family law master or to hear it itself.
3. 3The portion of W.Va. Code 48-2-15(f) covering this specifically states:
When alimony is to be paid pursuant to the terms of a separation agreement which does not state whether the payment of alimony is to continue beyond the death of the payor party or is to cease, or when the parties have not entered into a separation agreement and alimony is to be awarded, the court shall specifically state as a part of its order whether such payments of alimony are to be continued beyond the death of the payor party or cease.
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