Jonathan R. v. Katie R. ( 2016 )

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
Jonathan R.,
Respondent Below, Petitioner FILED
April 29, 2016
vs) No. 15-0400 (Monongalia County 13-D-98) released at 3:00 p.m.
RORY L. PERRY II, CLERK
SUPREME COURT OF APPEALS
Katie R., OF WEST VIRGINIA
Petitioner Below, Respondent
MEMORANDUM DECISION
In this divorce action, petitioner Jonathan R. (“the husband”), by counsel Amber
Urtso Sellaro, appeals the order of the Circuit Court of Monongalia County, dated April
1, 2015, that reversed the May 20, 2014, order of the Family Court of Monongalia
County. The circuit court ruled that a house (but not the lot upon which the house was
built) was marital property and that the value of the house was to be divided equally
between the parties. Respondent Katie R. (“the wife”), by counsel Edmund J. Rollo, filed
a summary response in support of the circuit court’s order, to which husband replied.
This Court has considered the parties’ oral arguments, briefs, and the record on
appeal. Upon consideration of the standard of review, the Court finds no substantial
question of law and no prejudicial error. For these reasons, a memorandum decision
affirming the circuit court’s order is appropriate under Rule 21 of the Rules of Appellate
Procedure.
The husband and the wife began dating in 2005, and lived together for four years
before they were married on September 10, 2011. They separated on December 17,
2012, and were granted a divorce by order of the family court on May 20, 2014. The
family court concluded it was the husband’s “involvement with porn sites on the Internet
[that] caused the break-up of the parties[’] marriage.”
The parties challenged one aspect of the family court’s order: the allocation of the
value of a house (but not the lot upon which the house was built) in the Ashton Estates
development in Monongalia County.
The record suggests that the husband’s parents are wealthy and generous. For
instance, before the parties’ marriage, the husband’s parents paid off the wife’s $60,000
student loan debt. Long before the parties’ 2011 marriage, in 2007, the husband’s mother
bought a house (the “Dayton Street property”) in Morgantown, West Virginia, for
$180,000. By a 2008 deed, the husband’s mother conveyed the Dayton Street property to
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her son in consideration of the sum of $1.00. The husband’s parents never lived in the
house. Between 2007 through July of 2012 (that is, before and after the 2011 wedding),
the husband and the wife resided in the Dayton Street property.
Twelve days after the parties were married, the husband purchased an empty lot in
Ashton Estates for $60,640.31. The lot was deeded in the husband’s name only. The
money to purchase the lot was the husband’s separate, pre-marital property, and was paid
from a joint account owned by the husband and the husband’s mother. The parties agree
that the lot (and only the lot) is the husband’s separate property, as it was acquired
“during marriage in exchange for separate property which was acquired before the
marriage[.]” W.Va. Code § 48-1-237(1) [2001] (defining “separate property”). The
parties’ dispute centers on whether the house that was later built upon the lot is marital
property.
On November 17, 2011, the husband and the wife signed an “Agreement between
Builder and Owner for the Construction of Residential Dwelling” on the husband’s lot in
Ashton Estates. Both the husband and the wife signed the agreement as “Owners.”
Under the contract, both the husband and the wife were liable for any and all construction
costs. Construction of the Ashton Estates house began in early 2012.
Both the husband and the wife were involved in making decisions regarding
construction of the house. However, the wife signed many more of the decision-related
documents than did the husband. Of the fourteen construction documents in the record,
the wife’s was the lone signature on eleven while the husband and wife together signed
three.1 A fifteenth document, the “Ashton Estates Building Design and Landscaping
Committee Application for New Construction” lists both the husband and the wife as the
“homeowners” of the house.
The husband’s parents paid the contractor directly for the construction of the
Ashton Estates house. The payments, totaling $321,500, were made directly to the
builder from the husband’s mother’s separate bank account.
The parties moved from the Dayton Street property into the Ashton Estates house
in July of 2012. The parties resided together until they separated on December 17, 2012,
and the wife later filed for divorce.
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The wife was the lone signatory on five change order sheets; the color selection
sheet; the proposal regarding the retaining wall and various foundation elements; the pre-
build worksheet; the pre-build review; the construction pricing agreement (which wife
signed as an “owner”); and a second pre-building review. Together with his wife, the
husband signed the description of materials; the construction pricing agreement; and one
change order sheet.
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The sole issue disputed by the parties is whether the Ashton Estates house (but not
the underlying lot) is marital property. The family court concluded in its order that the
house was the husband’s separate property, paid for by a “loan” to the parties from the
husband’s parents. The wife appealed and the circuit court reversed, concluding in its
order that the house was a gift by the husband’s parents to the parties after their marriage.
The parties agreed that the value of the lot was the husband’s separate property. Hence,
circuit court found that the value of the Ashton Estates house (minus the value of the lot)
“is marital property and is to be divided equally between the parties.” The husband
appeals the circuit court’s order.
Our standard for reviewing a circuit court order in a family court matter was set
forth in the Syllabus to Carr v. Hancock, 216 W.Va. 474, 475, 607 S.E.2d 803, 804
(2004):
In reviewing a final order entered by a circuit court
judge upon a review of, or upon a refusal to review, a final
order of a family court judge, we review the findings of fact
made by the family court judge under the clearly erroneous
standard, and the application of law to the facts under an
abuse of discretion standard. We review questions of law de
novo.
With this standard in mind, we review the circuit court’s and family courts orders.
West Virginia’s domestic relations laws generally require a court to divide marital
property equally between the parties to a divorce. W.Va. Code, § 48-7-101 [2001].
“Marital property” is defined as including “[a]ll property and earnings acquired by either
spouse during a marriage,” as well as the “amount of any increase in value in the separate
property of either of the parties to a marriage, which increase results from . . . work
performed by either or both of the parties during the marriage.” W.Va. Code, § 48-1­
233(1) and (2) [2001].
The wife asserts, and the circuit court agreed, that the Ashton Estates house was
marital property because it was a gift to the husband and wife by the husband’s parents.
There are three elements to establishing a gift:
It is generally recognized that to have a valid inter
vivos gift three requirements must be met: (1) there must be
an intention on the part of the donor to make a gift; (2) there
must be a delivery or transfer of the subject matter of the gift;
and (3) there must be acceptance of the gift by the donee.
Brewer v. Brewer, 175 W.Va. 750, 751-52, 338 S.E.2d 229, 231 (1985). The party
claiming a gift has the burden of proof. Dickeschied v. Exchange Bank, 28 W.Va. 340,
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360 (1886). However, as a general rule, “the close relationship of parties is . . . an
important factor in weighing the evidence relating to the intent of the party transferring
the property[.]” Sleigh v. Sleigh, 191 W.Va. 326, 330-31, 445 S.E.2d 509, 513-14
(1994). On this point, 38A C.J.S. Gifts § 85 states:
The relationship of the parties is an important factor in
weighing the evidence to determine whether there is a gift
inter vivos. Where the relationship of the parties is such that
the donee has a natural claim on the generosity of the donor,
the courts look with favor on the claim of a gift, and
generally, less evidence is required to support a gift to a close
relative than would be necessary to sustain one to a stranger.
The wife testified that the Ashton Estates house was a wedding gift from the
husband’s parents. The parents said to the wife and the husband that they did not want
the parties to have a mortgage. Further, they gave the parties no wedding gift,2 and the
land for the house was purchased 12 days after the wedding.
The husband claims that his parents loaned, not gifted, the money for the
construction of the house to the parties. However, the wife points out that the husband’s
parents never told the parties the money was a loan. Further, the husband’s parents never
mentioned interest rates or payment terms. There was no documentation to establish the
money was a loan. Additionally, the parties never made a loan payment to the husband’s
parents, and the husband’s parents never demanded a loan payment from the parties.
The husband conceded in his testimony that he had no documents of any kind
suggesting the money was a loan from his parents for the Ashton Estates house. The
husband also conceded that he had made no payments to his parents on that loan.
Still, the husband claimed that the money to build the Ashton Estates house was a
loan. To support his position, the husband testified that his mother gave him a loan for
the previous purchase of the Dayton Street property that, likewise, had no loan
documents and no time frame to pay back the loan on that property. The husband’s
mother testified that she expected no repayment on the new Ashton Estates house until
the Dayton Street property was sold; once the money from the sale was applied and the
remaining debt determined, she said loan papers for the Ashton Estates house would have
been drawn up and the parties placed on a payment schedule.
However, much of the testimony of the husband and his mother conflicted about
the Dayton Street property. For instance, the husband testified that he sold the Dayton
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The husband’s mother testified that the parents’ gift was the wedding, a
reception, and airfare for the parties’ honeymoon. The wife, however, testified that she
and her own mother paid for many of the wedding expenses.
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Street property (after the divorce was filed) and gave his mother all of the estimated
$140,000 proceeds from the sale. Conversely, the husband’s mother testified that her son
had given her only $25,000 of the proceeds to pay back “living expenses” and loans she
had floated him, but that her son kept the remaining $115,000. Similarly, the husband
claimed that the Dayton Street property was purchased mostly with money from the
husband’s personal investment accounts with the remainder loaned by his parents.
Conversely, the husband’s mother testified she paid the entire purchase price alone.
Examining this record, the circuit court found there was no evidence of a
promissory note or deed of trust evidencing a loan. Additionally, the circuit court found
the husband’s parents were wealthy and business savvy, yet could produce no
contemporaneous writing intimating they made the parties a $321,500 loan. The husband
and his mother claimed that the Dayton Street property was to be sold to pay for the
Ashton Estates house, yet it was not placed on the market until after the parties separated.
Once the Dayton Street property was sold, the husband’s mother received only $25,000
as repayment for an unrelated loan and the husband kept the remaining $115,000 (while
claiming he had given all of the money to his mother). We cannot say these findings by
the circuit court are clearly wrong.
As stated previously, there are three elements to proving a gift: intent by the
donor, delivery or transfer, and acceptance by the donee. Brewer v. Brewer, 175 W.Va.
at 751-52, 338 S.E.2d at 231. It is undisputed that the Ashton Estates house was
constructed for the husband and wife, and thereby delivered or transferred into their
possession. It is also undisputed that the husband and wife accepted the newly-
constructed house, moving in as soon as the house was completed and living there until
their separation.
The parties’ positions diverge on the question of whether or not a gift was
intended by the donors, the husband’s parents. The testimony of the parties conflicted on
this question. However,
the intent of [the] donor . . . is not unqualifiedly determined
by the formalities which were carried out by the donor.
Surrounding circumstances, including the conduct of the
parties both prior and subsequent to the transaction in
question, their testimony and the testimony of disinterested
persons, the abilities and contributions of the parties, their
relation to and confidence in each other, and any other factors
which might throw light upon their true intent under the
circumstances of the particular case must be scrutinized[.]
Apt v. Birmingham, 89 F. Supp. 361, 371 (N.D. Iowa 1950). See also Gertler v. Gertler,
303 S.W.3d 131, 134-35 (Ky. Ct. App. 2010) (quoting Sexton v. Sexton, 125 S.W.3d 258,
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269 (Ky. 2004)) (“While the donor’s testimony is ‘highly relevant of the donor’s intent[,
that intent] may not only be expressed in words, actions, or a combination thereof, but
may be inferred from the surrounding facts and circumstances, including the relationship
of the parties[,] as well as the conduct of the parties[.]’”); Foster v. Rose, 238 P.2d 332,
335 (Okla. 1951) (“The facts and circumstances surrounding the parties, their
relationship, and the direct expressions of the [donor] should all be taken into
consideration in determining the intention of the donor.”).
The circuit court (weighing the conduct of the wife, the husband, and the
husband’s parents; the relationship of these individuals; and all of the surrounding
circumstances) concluded that the husband’s parents intended for the Ashton Estates
house to be a gift to the parties, and not a loan. The lack of any writing to suggest it was
a loan, and the lack of any payments or demand for payments, indicated neither the
parents nor the parties believed it was a loan.
After a careful review of the record, we find the circuit court did not abuse its
discretion in setting aside the family court’s order, or in determining that the Ashton
Estates house was a gift to the parties’ marriage, and therefore was marital property
subject to equitable distribution (following an offset for the value of the lot).
For the foregoing reasons, we affirm the circuit court’s April 1, 2015 order.
Affirmed.
ISSUED: April 29, 2016
CONCURRED IN BY:
Chief Justice Menis E. Ketchum
Justice Brent D. Benjamin
Justice Margaret L. Workman
DISSENTING:
Justice Robin Jean Davis, dissenting and writing separately
Justice Allen H. Loughry II
Davis, Justice, dissenting, joined by Loughry, Justice:
The sole issue presented for resolution in the case sub judice involves a
determination as to whether the house in which the parties resided at the time of their
separation is separate property or marital property. In its decision of this case, the
majority of the Court has determined that the subject property is marital. I disagree with
this conclusion because, simply stated, the house that was built upon the Ashton Estates
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lot simply does not satisfy the statutory definition of marital property and has not been
treated as such so as to transmute it into marital property. Because the majority has
reached a contrary result, I dissent.
Determinative of the pivotal issue herein are the statutory definitions of “separate
property” and “marital property.” Pursuant to W. Va. Code § 48-1-237 (2001) (Repl.
Vol. 2015),
“[s]eparate property” means:
(1) Property acquired by a person before marriage;
(2) Property acquired by a person during marriage in
exchange for separate property which was acquired before the
marriage;
(3) Property acquired by a person during marriage, but
excluded from treatment as marital property by a valid
agreement of the parties entered into before or during the
marriage;
(4) Property acquired by a party during marriage by
gift, bequest, devise, descent or distribution;
(5) Property acquired by a party during a marriage but
after the separation of the parties and before ordering an
annulment, divorce or separate maintenance; or
(6) Any increase in the value of separate property as
defined in subdivision (1), (2), (3), (4) or (5) of this section
which is due to inflation or to a change in market value
resulting from conditions outside the control of the parties.
Under the facts of the instant proceeding, it is clear that the lot upon which the Ashton
Estates house was built is separate property because the husband purchased the lot during
the parties’ marriage using his separate property, i.e., a bank account which he jointly
owned with his mother, and the lot was titled in his name only. See W. Va. Code § 48-1­
237(2). See also Syl. pt. 3, Hamstead v. Hamstead, 184 W. Va. 272, 400 S.E.2d 280
(1990) (“When an individual during marriage has property which is separate property
within the meaning of W. Va. Code, 48–2–1(f) [predecessor to W. Va. Code § 48-1­
237(2)], and then exchanges that property for other property which is titled in his name
alone, and which is not comingled with marital property, then that other property
acquired as a result of the exchange is itself separate property.”). The parties do not
dispute the designation of said lot as separate property.
Where the parties differ, however, is with the characterization ascribed to the
house built upon the Ashton Estates lot. The governing statutory provision defines
“martial property” as follows:
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“Marital property” means:
(1) All property and earnings acquired by either spouse
during a marriage, including every valuable right and interest,
corporeal or incorporeal, tangible or intangible, real or
personal, regardless of the form of ownership, whether legal
or beneficial, whether individually held, held in trust by a
third party, or whether held by the parties to the marriage in
some form of co-ownership such as joint tenancy or tenancy
in common, joint tenancy with the right of survivorship, or
any other form of shared ownership recognized in other
jurisdictions without this State, except that marital property
does not include separate property as defined in section 1-238
[§ 48-1-238]; and
(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.
The definition of “marital property” contained in this
section has no application outside of the provisions of this
article, and the common law as to the ownership of the
respective property and earnings of a husband and wife, as
altered by the provisions of article 29 [§§ 48-29-101 et seq.]
of this chapter and other provisions of this code, are not
abrogated by implication or otherwise, except as expressly
provided for by the provisions of this article as such
provisions are applied in actions brought under this article or
for the enforcement of rights under this article.
W. Va. Code § 48-1-233 (2001) (Repl. Vol. 2015). Under this section, any increase in
the value of the separate property at issue herein, i.e., the Ashton Estates lot, that has
resulted from an expenditure of marital funds or work performed by the parties is marital
property. See W. Va. Code § 48-1-233(2). However, the increase in the value of the
Ashton Estates lot arising from the construction of a house thereon is not related to either
the expenditure of marital funds or the parties’ efforts during their marriage; rather, the
home’s construction was financed not by the husband and wife, themselves, but by the
husband’s parents. As such, the increase in the value of the lot resulting from the
construction of the house thereon does not satisfy the statutory definition of marital
property attributable to an increase in the value of a spouse’s separate property as a result
of marital contributions thereto. This is so because no marital funds were expended to
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increase the value of the lot or to fund the construction of the Ashton Estates home on
said lot. See W. Va. Code § 48-1-233(2).
Neither has the character of such separate property been transmuted into marital
property because there is no indication that the husband ever intended the home built
upon his Ashton Estates lot to be a gift to the marital estate. “A transmutation occurs
when the contributing spouse evidences his or her intent to make a gift of the nonmarital
property to the marriage by significantly changing the character of the property to
marital.” Syl. pt. 4, Mayhew v. Mayhew, 197 W. Va. 290, 475 S.E.2d 382 (1996),
overruled on other grounds by Mayhew v. Mayhew, 205 W. Va. 490, 519 S.E.2d 188
(1999). See also Miller v. Miller, 189 W. Va. 126, 130, 428 S.E.2d 547, 551 (1993) (per
curiam) (“Transmutation . . . is the legal process by which nonmarital assets, properties
acquired by gift, bequest, devise or descent, may be converted to marital property. . . .
This transformation may be effected by an agreement between the parties or by the
affirmative act or acts of the parties.” (internal quotations and citations omitted)). “This
gift presumption may be overcome, however, with substantial evidence that clearly
demonstrates the lack of donative intent.” Storrs v. Storrs, 195 W. Va. 21, 23, 463
S.E.2d 853, 855 (1995) (per curiam).
Alternatively, separate property may be changed into marital property when one
spouse gives his/her separate property to the other spouse. Thus,
[i]n order for property that is transferred from one
spouse to the other during marriage to be excluded from the
marital property pool, there must be proof that the property
was intended as an irrevocable gift. In all instances, the
burden of proof is upon the spouse who would claim the gift.
Syl. pt. 2, Loudermilk v. Loudermilk, 183 W. Va. 616, 397 S.E.2d 905 (1990). Accord
Roig v. Roig, 178 W. Va. 781, 785, 364 S.E.2d 794, 798 (1987). Nevertheless, “this
presumption may be rebutted by a showing that there was no intent to transfer to joint
ownership.” Koontz v. Koontz, 183 W. Va. 477, 480, 396 S.E.2d 439, 442 (1990) (per
curiam).
Thus, while separate property can become marital property through transmutation,
such property recharacterization has not occurred in the instant proceeding because there
is no evidence whatsoever that the husband intended the house built upon the Ashton
Estates lot to be a gift to the marriage or that he transferred the house to the wife either
singularly or jointly. At all times relevant herein, the husband remained the sole owner
of record of the Ashton Estates lot, he never gave the house to his wife directly, and he
never retitled the property jointly to include his wife’s name as a record owner.
Moreover, the husband’s mother testified that she did not intend the house to be a
wedding gift to the parties because she and the husband’s father had already given the
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couple substantial wedding gifts including the wedding, a reception, and airfare for their
honeymoon. In short, the spouse claiming that separate property has been converted into
marital property by way of a gift to the marital estate must prove that such a
transformation has occurred. See Syl. pt. 2, Loudermilk, 183 W. Va. 616, 397 S.E.2d
905. Here, though, the wife has not sustained her burden of proof on this issue because
there is no evidence of donative intent on the part of the husband or his mother. See
Storrs, 195 W. Va. at 23, 463 S.E.2d at 855. Therefore, the circuit court erred in finding
that the house built upon the husband’s Ashton Estates lot was marital property. Because
the majority has affirmed the circuit court’s ruling in this regard, I respectfully dissent.
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