Deaver, S. v. Lemon, M. ( 2015 )

J-A08002-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
SUSAN T. DEAVER, A/K/A SUSAN IN THE SUPERIOR COURT OF
TAYLOR LEMON, A/K/A SUSAN TAYLOR PENNSYLVANIA
DEAVER-LEMON,
Appellee
v.
MARCUS J. LEMON,
Appellant No. 1244 MDA 2014
Appeal from the Decree Entered July 15, 2014
In the Court of Common Pleas of Lancaster County
Civil Division at No(s): CI-10-08775
BEFORE: SHOGAN, WECHT, and STRASSBURGER,* JJ.
MEMORANDUM BY SHOGAN, J.: FILED JUNE 01, 2015
Marcus J. Lemon (“Husband”) appeals from the final decree entered on
July 15, 2014, in this divorce action. After careful review, we reverse and
remand with instructions.
The relevant facts of this case were set forth by the trial court as
follows:
The parties were married August 30, 1996 in Lancaster
County, Pennsylvania. Susan T. Deaver (“Wife”) is now 44 years
old residing at 121 Windover Turn, Lancaster, PA. Marcus J.
Lemon (“Husband”) is 43 years old residing at 2700 Virginia
Avenue NW, Washington, DC. There were two (2) children born
of this marriage[.]
____________________________________________
*
Retired Senior Judge assigned to the Superior Court.
J-A08002-15
Wife filed a complaint of divorce under Section 330[1](c)
on July 27, 2010. Husband filed an affidavit of consent on
December 22, 2010. There are no defense[s] and no counter-
claims. Penn Glazier, Esq. was appointed Divorce Master on July
18, 2011. Hearings were held December 7, 2011 and March 23,
2012. Briefs were filed on February 15, 2013 and the Divorce
Master’s report was filed on May 30, 2013. Husband filed
exceptions on June 17, 2013. Wife did not file exceptions.
The Divorce Master recommended that a divorce be
granted as both parties consent and the marriage is irretrievably
broken. Pursuant to section 3701[(a)] of the divorce code, the
Divorce Master also recommend[ed] alimony be paid to [W]ife in
the amount of $2,000 per month for a period of 8 years. As
justification for this recommendation, the Divorce Master found
that Wife is a stay-at-home mother of two (2) children, a part-
time artist and works part-time for the Manheim Township
School District. Nevertheless, she was assessed an earning
capacity, by this Court of $30,000 per year. On the other hand,
Husband is employed with McKenna, Long & Aldridge, a law firm
in Washington, DC, and his income is approximately $230,000
per year. Currently, Wife receives $3,200 per month in spousal
and child support. The parties were married for 14 years. Prior to
the children being born, Wife worked full-time and provided
health insurance for the parties. Although Husband completed
law school before the parties married, marital funds were used
to pay down his school loan debt. The most significant findings
made by the Divorce Master were in regards to Husband’s
misconduct. During the marriage, Husband had several
relationships. While buying a new home for his family in
Lancaster, Husband had purchased a BMW, co-signed for an
apartment for his paramour in Washington, DC, bought a dog
with him and furnished the apartment with new furniture and a
plasma TV. In addition, Husband spent over $10,000 in
additional gifts not including trips and dinners. The Divorce
Master noted that marital misconduct is only one factor to
consider; however, he felt the misconduct was so egregious that
i[t] warranted significant weight.
The Divorce Master also found that, although the parties
enjoyed an upper middle class living, they possess very little in
the way of marital assets, and concluded that the total value of
the marital estate of $14,160.58 should be apportioned as
follows:
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Item Value To Wife To Husband
Marital Residence []
Appraised value: $626,000
Less:
Cost of sale (7%): -$43,820
Balance of Mortgages: $629,276.66 $0
Contents of Marital Residence Amicably Divided
Rent Received by Husband for
Lease of jointly owned residence $0 $0
Husband’s 401(k)[] $9,460.58 $9,460.58
Western Reserve Life Insurance
Policy cashed in by Husband $4,700.00 $4,700.00
______________________________________________________________
$14,160.58 $9,460.58 $4,700.00
Given these meager assets, the Divorce Master concluded
that Wife clearly does not possess sufficient property to provide
for her reasonable needs. This fact, coupled with the equally
correct observation that Wife is unable to support herself in
anything remotely resembling the manner in which both
Husband and Wife had become accustomed to during the
marriage, leading him to the conclusion that Alimony was
justified in this case in the amount of $2,000 per month for a
period of eight (8) years.
The Divorce Master also recommended that Husband pay
all of Wife’s counsel fees totaling, $28,368.00 due to the
disparity in their incomes; however, he also pointed to the
vexatious manner in which [H]usband has prosecuted this
divorce as justification for such an award. In addition, the
Divorce Master recommended that Husband be ordered to obtain
and maintain a life insurance policy in the amount of $100,000,
naming [W]ife and children as beneficiaries, and that such policy
shall remain in effect until his youngest child is eighteen (18)
years of age. The Divorce Master recommended that Husband be
required to maintain health [i]nsurance for Wife through COBRA
for a period of not less than three (3) years.
Finally, what appears to be the crux of the issues is Wife’s
Trust Fund which the Divorce Master found to be non-marital
property, as it was established as a “verbal trust” more than 40
years ago which was later memorialized in a written document.
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The Divorce Master also noted that all contributions came solely
from Wife’s parents or inheritance from Wife’s grandparents,
that neither Husband nor Wife ever withdrew funds from the
account(s), and that Wife has no access to the trust and no
ability to withdraw income or principal. The value of the trust, at
the date of Argument Court, was approximately $516,000.
***
The trial court carefully considered the Exceptions raised
by Husband, as well as the factors set forth in 23 Pa. C.S.A.
§3502, and determined that economic justice was achievable in
this case by making a few minor modifications to the
recommendations of the Divorce Master. With regard to
Husband’s Exceptions 1 & 2, the trial court concluded that the
Master erred in finding that Husband, at the date of separation,
was the owner of a life insurance policy with a cash value. Based
upon the arguments of counsel presented in their respective
briefs and in Argument Court, the trial court concluded that
Husband’s Life Insurance Policy was cashed out prior to
separation and used to pay off marital debt. As such, it had no
value for purposes of equitable distribution. Moreover, Wife’s Life
Insurance Policy, which the trial court concluded was marital
property, had a cash value of $5,223.00 at the time of the
Master’s Hearing.
Further, the trial court was persuaded that the Divorce
Master correctly concluded that Wife’s Trust Fund was non-
marital in nature and that she has no present ability to control or
derive income from the asset. Consequently, given the meager
marital assets in this case, the Divorce Master’s
recommendation, that Husband pay Alimony in the amount of
$2,000 per month to Wife for a period of eight (8) years, was
equally justified. Wife clearly does not possess sufficient
property to provide for her reasonable needs, and, given her
current earning capacity assessed by this Court, she is unable to
support herself in anything remotely resembling the manner in
which both Husband and Wife had become accustomed to during
the marriage.
The trial court is equally persuaded that circumstances
dictate that Husband be required to maintain a $100,000 life
insurance policy naming Wife and children as beneficiaries, and
that such policy shall remain in effect until his youngest child is
eighteen (18) years of age. However, this Court also established,
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in an ancillary proceeding, that Wife has an earning capacity of
$30,000.00 per year, and, currently, she is under employed by
choice. Consequently, this Court concluded that she is capable of
obtaining and maintaining health insurance for herself, and,
therefore, the trial court did not require Husband to maintain
COBRA benefits for her at his expense despite the
recommendation of the Divorce Master.
Based upon these findings and conclusions, and given the
fact that Husband has substantial student debt, is shouldering
the majority of the marital debt all while being obligated to pay
Alimony and Child Support, the trial court determined the total
value of the marital estate to be $14,683.58, and that it should
be apportioned as follows:
Item Value To Wife To Husband
Marital Residence []
Appraised value: $626,000
Less:
Cost of sale (7%): -$43,820
Balance of Mortgages: $629,276.66 $0
Contents of Marital Residence Amicably Divided
Rent Received by Husband for
Lease of jointly owned residence $0 $0
Husband’s 401(k)[] $9,460.58 $9,460.58
Western Reserve Life Insurance
Policy owned by Wife $5,223.00 $5,223.00
______________________________________________________________
$14,683.58 $5,223.00 $9,460.58
Finally, for the reasons stated in the Master’s Report, the
Court affirmed the Master’s recommendation that Husband
assume full responsibility for Wife’s attorney fees and costs
incurred during this divorce proceeding.
Trial Court Opinion, 9/18/14, at 3-8. A final divorce decree was entered on
July 15, 2014, and on July 23, 2014, Husband filed a timely appeal.
On appeal, Husband raises the following issues for this Court’s
consideration:
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A. Whether the Court below erred in finding that the accounts in
the individual name of [Wife], in Trust for her mother and
accounts in the joint names of [Wife] and her mother were held
in an oral trust to which [Wife] had no ability to control and
receive either principal or income?
B. Whether the Court below erred in finding that [Wife], as
settlor, could create the Susan Deaver-Lemon Family Trust
without being in possession and control of the funds she
contributed to it?
C. Whether the Court below erred in finding that [Wife] had no
separate property from which income and gain was received
during marriage, which income and gain constituted marital
property?
D. Whether the Court below erred in ordering [Husband] to pay
alimony to [Wife]?
E. Whether the Court below erred in Ordering [Husband] to pay
attorneys[’] fees to [Wife]?
F. Whether the Court below erred in Ordering Appellant to obtain
and maintain a life insurance policy on his life in the face amount
of $100,000 naming [Wife] and their children as beneficiaries?
Husband’s Brief at 7.
As noted by the trial court, the crux of this appeal is its determination
that Wife established an oral trust and that her trust funds were entirely
non-marital property. Because Husband’s first three issues assail the status
of the trust funds as non-marital property and income source, we shall
address those issues concurrently.
“When reviewing an order of equitable distribution, our standard of
review is limited, and we will not disturb the trial court’s decision absent an
abuse of discretion or error of law which is demonstrated by clear and
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convincing evidence.” Gilliland v. Gilliland, 751 A.2d 1169, 1171 (Pa.
Super. 2000) (citation omitted). “The determination of whether an asset is
part of the marital estate is a matter within the sound discretion of the trial
court.” Id. (citation omitted). Additionally, “it is within the province of the
trial court to weigh the evidence and decide credibility and this Court will not
reverse those determinations so long as they are supported by the
evidence.” Childress v. Bogosian, 12 A.3d 448, 455 (Pa. Super. 2011)
(citation omitted). We also note that “a master’s report and
recommendation, although only advisory, is to be given the fullest
consideration, particularly on the question of credibility of witnesses,
because the master has the opportunity to observe and assess the behavior
and demeanor of the parties.” Id. at 455-456 (citation omitted).
The overarching issue in this matter is Husband’s claim that Wife failed
to establish an “oral trust” over which she had no control, and he claims that
Wife had access to the trust funds. Husband’s Brief at 19. Pursuant to 20
Pa.C.S. § 7737, oral trusts created after November 6, 2006, are
unenforceable in this Commonwealth. However, prior to the effective date
of section 7737, oral trusts, also termed parol trusts, were permitted in
Pennsylvania. In re Trbovich’s Estate, 413 A.2d 379, 380 (Pa. 1980)
(citation omitted). In order to establish a parol inter vivos trust of
personalty, the proponent of such a trust has the burden to establish its
existence. Id. (citation omitted). The acts and words of those involved in
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creating the trust must admit to no other interpretation than the creation of
a trust, and the proof must be clear, precise, and unambiguous. Id.
(citations omitted). No part of a parol trust can be left to inference, and the
proof must be clear and specific in all particulars. Id. (citation omitted).
Contrary to Husband’s argument, Wife has maintained that while a
written trust document was created in May 2010, the trust itself was
established forty years earlier, before the effective date of section 7737.
Wife’s Brief at 6. The trial court accepted the Master’s recommendation and
concluded that the testimony from Wife and Wife’s father was credible
concerning the creation of the oral trust. Wife has maintained she had no
access to the funds in the oral trust, and thus it was never her property.
Trial Court Opinion, 9/18/14, at 10-11. After careful review, we are
constrained to disagree.
The record reveals that prior to the marriage, Wife received an
inheritance following the death of her paternal grandmother, and those
funds, combined with gifts from Wife’s parents, totaled approximately
$140,000.00. N.T., 2/24/12, at 111-115. During the marriage, Wife
received another inheritance in the amount of $125,000.00 following the
death of her maternal grandmother. Id. at 115. Wife claims that these
funds were held in the oral trust which was later converted to a written trust
that was memorialized on May 5, 2010. However, Husband claims that the
May 5, 2010 written trust is, in fact, evidence that Wife had access to and
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control over the oral trust funds. This control and access to the trust funds
defeats the trial court’s finding of an oral trust over which Wife had no
control. Husband’s Brief at 20-21. Husbands points out:
By its express terms, Wife placed her property into the trust.
Evidence of deposits into the trust further verify that Wife
deposited her money into the trust. Therefore, the Susan
Deaver-Lemon Trust, by its express terms and coupled with the
evidence of the deposits into the trust, are further proof that the
funds in the Fulton Bank account, Vanguard Group funds and
Fidelity Investments were the funds of Wife and no oral trust
ever existed. Clearly, if the funds in question had been held for
the benefit of Wife and, as the Master and the Court below
determined, she had no ability to obtain or control principal or
income, she could not have contributed the very same money,
as settlor, to her trust.
Husband’s Brief at 23.
We agree with Husband. The language from the written trust lists
Wife as the settlor. Susan Deaver-Lemon Family Trust, 5/5/10, at ¶ 1. The
written trust document reveals that Wife as settlor also funded the trust and
made herself beneficiary. Id. Clearly, if Wife was able to fund the written
trust with monies from the alleged oral trust, it is axiomatic that she had
access and control over those funds. Therefore, we conclude that the trial
court erred and abused its discretion in concluding that an oral trust existed.
The corpus of the alleged oral trust, which is now the corpus of the Susan
Deaver-Lemon Family Trust, is the separate property of Wife.
Having concluded that the trust was Wife’s separate property, we now
address Husband’s claim concerning the income received from those funds.
During the time the parties were married, the trust funds earned interest
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and dividend income and increased in value to approximately $400,000 at
the time the parties separated. N.T., 2/12/14, at 120. Husband argues that
while the money that Wife inherited constitutes Wife’s separate property and
a non-marital asset, the interest earned on those funds during the marriage
was a marital asset. Husband’s Brief at 18. We agree with Husband.
Because income was earned on Wife’s property during the marriage, that
income should have been deemed marital property and subject to equitable
distribution. 23 Pa.C.S. § 3501(a).
In Husband’s remaining issues, he challenges the order directing him
to pay alimony, pay Wife’s attorney’s fees, and maintain life insurance listing
Wife and the parties’ children as beneficiaries. The trial court’s order in
regard to those issues was prefaced on its finding that an oral trust existed
and that Wife had no control over those funds. As discussed above, we have
determined that the trial court erred in that conclusion; therefore, because
Wife had access to those funds and the increase in value of those funds
should have been deemed marital property, the basis for the alimony award,
payment of attorney’s fees, and maintenance of life insurance has changed
substantially.
For these reasons, we are constrained to conclude that the trial court’s
findings were not supported by the evidence, and therefore, we reverse the
trial court’s determination that an oral trust existed. Because the existence
of the oral trust was the basis for the balance of the trial court’s order
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concerning equitable distribution, alimony, attorney’s fees, and life
insurance, we remand those determinations to the trial court for further
consideration in light of our decision. On remand, the trial court shall
determine what income the trust funds accrued during the marriage, and
consider that income as marital property. The court shall then determine
the amounts due as equitable distribution, and the necessity of alimony,
attorney’s fees, and life insurance.
Decree reversed. Case remanded with instructions. Jurisdiction
relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/1/2015
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