Appeal from the Decree of November 23, 1983 in the Court of Common Pleas of Lehigh County, Civil Division, at No. 81-C-2979. Appeal from the Order entered March 23, 1984 in the Court of Common Pleas of York County, Civil Division, at No. 81-S-4525.
Maria C. Mullane, Allentown, for appellant in No. 3430.
Glenn C. Vaughn, York, for appellant in No. 226.
Dianne M. Dickson, Allentown, for appellee in No. 3430.
Raymond R. Smith, York, for appellee in No. 226.
Spaeth,*fn* President Judge, and Cavanaugh, Brosky, Rowley, Wieand,*fn** McEwen, Del Sole, Beck and Tamilia, JJ. Del Sole, Rowley and Brosky, JJ., join the majority opinion by Beck, J. Cavanaugh and McEwen, JJ., join concurring and dissenting opinion by Tamilia, J.
[ 355 Pa. Super. Page 590]
The issues in these appeals are 1) whether under the Divorce Code an increase, during the parties' marriage, in the value of premarital assets constitutes marital property and 2) if the increase in value constitutes marital property, whether the entire increase is marital property or whether
[ 355 Pa. Super. Page 591]
the increase in value should be reduced to reflect the factor of inflation.
We hold that the entire increase, during the parties' marriage, in the value of premarital assets is marital property and that the increase is not reduced to reflect inflation.
The Divorce Code*fn1 defines marital property as "all property acquired by either party during the marriage . . . ." 23 P.S. § 401(e). It excepts from the definition of marital property certain enumerated assets with a proviso that as to those assets the "increase in value during the marriage" is marital property. 23 P.S. § 401(e)(1) & (e)(3).
Both the appellant in Anthony and the appellant in Tompkins argue on appeal that an increase in the value of a spouse's premarital property should not be regarded as marital property unless the appreciation in value is attributable to the joint efforts and/or financial contributions of both spouses and that to the extent an increase is due to economic factors such as inflation, it should be excluded.
Similar facts underlie both appeals. In both appeals, the appellant-spouse seeks to exempt from marital property the increased value of a residence which the spouse bought before the parties' marriage. In Anthony, the appellant-wife purchased a house prior to marrying the appellee-husband. The common pleas court found that the fair market value of the house was $43,500 at the time of the parties' marriage and $65,000 at the time of the parties' separation. The court ruled that the $21,500 increase in the fair market value of the house during the period of the parties' marriage constituted marital property subject to equitable division and distribution upon the parties' divorce. Appellant and appellee were each awarded one-half of the $21,500 increase.*fn2 In Tompkins, the appellant-husband acquired a
[ 355 Pa. Super. Page 592]
house prior to marrying the appellee-wife. The common pleas court found that the fair market value of the house was $36,000 at the time of the parties' marriage and $42,000 at the time of the parties' separation. The court ruled that the $6,000 increase in the fair market value of the house during the period of the parties' marriage constituted marital property subject to equitable division and distribution upon the parties' divorce. Appellant and appellee were each awarded one-half of the $6,000 increase.*fn3
The threshold inquiry is what comprises marital property -- particularly, whether an increase in value, during the parties' marriage, of either spouse's premarital assets constitutes marital property. Pursuant to section 401 of the Divorce Code, marital property includes all property, real or personal, acquired during the parties' marriage by either spouse, whether titled individually or jointly. 23 P.S. § 401(e)-(f). Thus, the time, rather than the method, of property acquisition determines if an item of property constitutes marital property under the Code.
Even the limited marital property exceptions enumerated in subsections 401(e)(1)-(7)*fn4 of the Code reflect the significance
[ 355 Pa. Super. Page 593]
of the time property is acquired in differentiating marital property from non-marital property. For example, subsections 401(e)(1) and 401(e)(3) exclude from marital property any real or personal property received during the parties' marriage either in exchange for premarital property or by gift, bequest, devise or descent. Nevertheless, these subsections specifically classify as marital property any increase in the value of such exchange or given property during the parties' marriage. In other words, if accrued during the period of the parties' marriage, an appreciation in the value of property belonging to either spouse represents, in and of itself, property acquired during the parties' marriage, i.e., marital property. See 23 P.S. § 401(e)(1) and (3).
Because it is the time, rather than the manner, of acquisition that determines whether property constitutes marital property under Pennsylvania's Divorce Code, the spouses' efforts and/or financial contributions are not germane to definition of marital property under the Code.*fn5 See 23 P.S. § 401(e)-(f). The Code's emphasis on "when" -- not "how" -- property is acquired distinguishes Pennsylvania's divorce legislation from the marital dissolution law of other jurisdictions which exempt from marital property any assets
[ 355 Pa. Super. Page 594]
not acquired in joint title or by the united efforts and/or financial contributions of both spouses. See, e.g., Harper v. Harper, 294 Md. 54, 448 A.2d 916 (1982) (comparing and explaining the inception of title, source of funds, and transmutation of property concepts employed in some sister states); Robinson v. Robinson, 569 S.W.2d 178 (Ky.Ct.App.1978); Suter v. Suter, 97 Idaho 461, 546 P.2d 1169 (1976).
In construing Pennsylvania's Divorce Code, we must follow the Pennsylvania legislature's scheme which separates the factors for defining marital property from the factors for distributing marital property. Time of acquisition is the factor that the legislature mandates the courts use in determining whether property is a marital asset. See 23 P.S. § 401(e)-(f). In contrast, a list of ten factors found in subsection 401(d) of the statute are considerations that the legislature mandates courts use in determining distribution of marital property. Those ten factors relate to the personal and economic circumstances of the parties and the parties' contributions in bringing about an increase or decrease in the value of the marital assets. 23 P.S. § 401(d)(1)-(10). In other words, under the statute the court first determines what is marital property based upon the time of acquisition and then determines the equitable distribution of that property taking into account the factors in subsection 401(d).
Subsection 401(d) concerns the fair apportionment of marital property between the parties following a divorce, not the designation of assets as marital or non-marital property. Once the parties' property has been earmarked as either marital or non-marital property according to the time of its acquisition and the subsection 401(e) exceptions, see 23 P.S. § 401(e)-(f), then the court may, in conformity with subsection 401(d) of the Code, equitably divide and distribute the parties' marital property after due regard for all relevant factors among which are those listed in subsection 401(d) such as the "contribution or dissipation of each party in the acquisition, preservation, depreciation or appreciation of the marital property, including the contribution of a party as homemaker." 23 P.S. § 401(d)(7). In Platek v. Platek, 309 Pa. Super. 16,
[ 355 Pa. Super. Page 595454]
A.2d 1059 (1982), we noted that factors such as the parties' efforts or contributions toward procurement, preservation or enhancement of property are appropriately considered for purposes of equitable division and distribution of marital property under subsection 401(d) of the Code.
Given the Pennsylvania Divorce Code's focus on the time, instead of the manner, of property acquisition, section 401 of the Code is properly construed to categorize as marital property any accretion in the value of all of a spouse's premarital property to the extent that the value of the property on the date of the parties' marriage is exceeded by the value of the property at the time of the parties' separation or divorce, whichever applies under subsection 401(e)(4) of the Code. Accord, In re Marriage of Reeser, Colo.App., 635 P.2d 930 (1981) (Section 14-10-113(4), C.R.S. 1973). Construing the Code in another fashion would produce the anomalous result that any increase in the value of property acquired in exchange for premarital property would constitute marital property under 23 P.S. § 401(e)(1), but any increase in the value of premarital property not exchanged for other property would be excluded from marital property. Inasmuch as the legislature is presumed not to have intended an absurd or unreasonable result, we interpret the Code to accord identical treatment to both types of property -- that which has been exchanged and that which has not -- and hence to designate as marital property any increase, during the parties' marriage, in the value of all of a spouse's premarital property. See subsection 1922(1) of the Statutory Construction Act of 1972, 1 Pa C.S. § 1922(1); Fireman's Fund Insurance Co. v. Nationwide Mutual Insurance Co., 317 Pa. Super. 497, 464 A.2d 431 (1983).
This interpretation of the Code does not create an injustice for the party who may have by dint of his physical labor or mental acumen provided the necessary ingredients and conditions for the increased value. In distributing the property, the court is free to take these factors into account
[ 355 Pa. Super. Page 596]
and make a more favorable distribution or even distribute all of the asset to that individual. 23 P.S. § 401(d)(7); Platek.
Such an interpretation of section 401 also comports with the Code's directive to "[e]ffectuate economic justice between parties who are divorced . . . ." 23 P.S. § 102(a)(6). The existence of a premarital asset may discourage or prevent the parties' obtainment of a comparable marital asset and lull the nonowning spouse into a false sense of security. This is especially likely to occur where, as in the appeals sub judice, a residence has been obtained by one spouse prior to the parties' marriage and has been occupied by both spouses after the parties' marriage. Since it was not acquired during the parties' marriage, the residence does not qualify under section 401 as marital property. Yet, the parties' use of the premarital home acts as a disincentive to the parties' acquisition of equivalent marital property and therefore affords the nonowning spouse little opportunity to attain interest in marital property. Non-recognition of the increase, during the period of the parties' marriage, in the value of the residence would unjustly deprive the nonowning spouse of any economic benefit derived from the parties' use of the premarital residence.
For the preceding reasons, the increase, during the parties' marriage, in the value of either spouse's premarital assets is marital property.
Since the increase in the value of premarital assets is marital property, it is necessary to ascertain what constitutes an increase in the value of a spouse's premarital assets. Specifically, we address the appellants' assertion that any appreciation due to inflation should not be regarded as an increase in value subject to equitable division and distribution.
Neither the term "value" nor the expression "increase in value" is explained by section 401 of the Divorce Code. See, e.g., 23 P.S. § 401(e)(1) and 401(e)(3). Hence, the basic
[ 355 Pa. Super. Page 597]
tenets of statutory interpretation must be employed. Where a statute fails to define the language used therein, common words and phrases are construed according to their ordinary and approved usage (plain meaning), and technical words and phrases are construed according to their peculiar and appropriate meaning. Subsection 1903(a) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1903(a); Fireman's Fund Insurance Co.
Value denotes "the power of a commodity to command other commodities in exchange for itself; this power is measured by the proportional quantities in which a commodity exchanges with all other commodities . . . . [P]rice is simply the 'money name' of the value of a commodity." M. Spencer, Contemporary Economics 627 (2d ed. 1974); Black's Law Dictionary 1721 (rev. 4th ed. 1968). Stated alternatively, the fair market (exchange) value of property is "the price a purchaser, willing but not obliged to buy, would pay an owner, willing but not obliged to sell." Cheltenham Federal Savings and Loan Association v. Pocono Sky Enterprises, Inc., 305 Pa. Super. 471, 480, 451 A.2d 744, 748 (1982). Therefore, the value of any property is a function of its relation to other property, i.e., its fair market (exchange) value.
Inflation is not a factor that can be logically eliminated from the determination of a property's fair market value. Inflation represents the "rise in the general price level (or average level of prices) of all goods and services . . . [or equivalently] a reduction in the purchasing power of a unit of money," Spencer, supra, at 149, and as such, comprises a component of the marketplace which necessarily affects the fair market (exchange) value of property. Thus, there is no reason to distinguish between increases in property value due to inflation and increases in property value resulting from other economic conditions in the marketplace. Such a distinction contravenes the legislative intent expressed in the Code and presents nearly insurmountable proof problems.
[ 355 Pa. Super. Page 598]
The purpose of statutory construction is the ascertainment and execution of legislative intention. Subsection 1921(a) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1921(a). In the present case we must determine what the legislature meant by the expression "increase in value" which is not defined in the Code. "When the words of the statute are not explicit, the intention of the General Assembly may be ascertained by considering, among other matters: . . . (4) The object to be attained . . . [and] (6) The consequences of a particular interpretation." Subsection 1921(c) of the Statutory Construction Act of 1972, 1 Pa.C.S. § 1921(c); Lehigh Valley Cooperative Farmers v. Bureau of Employment Security, Department of Labor and Industry, 498 Pa. 521, 447 A.2d 948 (1982); Busy Beaver Building Centers, Inc. v. Tueche, 295 Pa. Super. 504, 442 A.2d 252 (1981).
The Code's clear mandate is the rendering of economic justice for divorced parties. Subsection 102(a)(6) of the Code, 23 P.S. § 102(a)(6). Underlying this directive is the realization that "marriage is, inter alia, an economic partnership whose assets, upon dissolution of the marriage, may be equitably divided and distributed between the parties . . . ." Flynn v. Flynn, 341 Pa. Super. 76, 87, 491 A.2d 156, 162 (1985) (Beck, J., concurring and dissenting). Where the parties' economic partnership has existed in a marketplace influenced by inflation, it is appropriate to have the property reflect inflation's effect upon the partnership assets by including as marital property any increase in the value of each spouse's premarital assets due to inflation during the parties' marriage. Accord, Gregg v. Gregg, 133 Mich.App. 23, 348 N.W.2d 295 (1984).
Classification of property as marital property does not signify, however, that the parties must receive equal portions of that property when the assets of the parties' dissolved economic partnership are divided and distributed between the parties. Platek; 23 P.S. § 401(d); accord, Gregg. Subsection 401(d) of the Code allows the court great flexibility in adjusting property awards to reflect,
[ 355 Pa. Super. Page 599]
among other considerations, the parties' respective sources of income, opportunities for future asset accumulation, and contributions to the acquisition, dissipation, preservation, appreciation, or depreciation of the parties' marital property.*fn6
Otherwise construing the Code to exclude inflation from a calculation of increased property value would produce anomalous results. If inflation were removed from the computation of the appreciated value of a premarital asset, consistency would demand that inflation also be eliminated from the determination of the increased value of all other marital property including that enumerated in subsections 401(e)(1) and 401(e)(3) of the Code which identify as marital property the increase in value, during the parties' marriage, of certain types of non-marital property. But neither subsections 401(e)(1) and 401(e)(3) nor any other provisions of the Code contain restrictive language that defines increased property value to exclude inflation. Because courts are not empowered to inject into a statute qualifying language not legislatively supplied, Worley v. Augustine, 310 Pa. Super. 178, 456 A.2d 558 (1983), we should not superimpose on the Code any language limiting an increase in property value to appreciation from non-inflationary sources.
Additionally, massive and near impossible proof problems would be generated by attempting to eliminate inflation from a calculation of increased value. The number, complexity, diversity, and interrelationship of economic factors in the marketplace make it difficult, if not impossible, to distinguish between property value increases due to inflation and those due to other economic conditions.
The following hypotheticals will illustrate. Assume that prior to the parties' marriage, a spouse bought stock on the New York Stock Exchange and that the stock had a fair market value of $100,000 at the time of the parties' marriage.
[ 355 Pa. Super. Page 600]
Assume further that during the parties' marriage, the spouse's stock was traded several times for other stock and that at the time of valuing the property for dissolution purposes, the spouse's stock portfolio had a fair market value of $200,000. Under these hypothesized circumstances, could inflation's effect on the fair market value of the stock be isolated from other factors influencing the stock's value such as the overall condition of the stock market, the psychology of the individual and institutional investor in relation to the company or companies, and the future earning prospects of the company or companies whose stock was held?
Or assume that prior to the parties' marriage, a spouse bought a house which had a fair market value of $100,000 at the time of the parties' marriage and a fair market value of $200,000 at the time of valuing the property for dissolution purposes. Could inflation's influence on the home's fair market value be segregated from the appreciation in the home's value due to the building of a nearby school or the installation of a municipal water system?
Trying to separate the effect of inflation from the effect of other market factors would unduly complicate and delay the court's assessment of the parties' marital property. Since "good sense and practical utility are always to be considered" in interpreting a statute, Commonwealth v. Coleman, 289 Pa. Super. 221, 227, 433 A.2d 36, 39 (1981); Schaefer v. Hilton, 473 Pa. 237, 373 A.2d 1350 (1977), we conclude that the Code includes inflation as part of the appreciation in property value subject to equitable division and distribution.
Inasmuch as the courts of common pleas in Anthony and Tompkins properly classified as marital property the increase, during the parties' respective marriages, in the value of each spouse's premarital assets and regarded inflation
[ 355 Pa. Super. Page 601]
as an inseparable component of the fair market value of those assets, we affirm the orders being appealed.*fn7
TAMILIA, Judge concurring and dissenting:
These appeals were combined for consideration before the court en banc as they concern the single issue of whether an increase in value, during marriage, of non-marital property is marital property subject to equitable distribution under the Divorce Code of 1980, 23 P.S. § 401(d), as qualified by definitions of "marital property" contained in section 401(e), (1), (3) and (f). Two panels of this Court, on appeals from decisions of trial courts, reached the conclusion that such increases were marital property, but the underlying theories of computing the increase in value were in conflict and could result in confusion among the bench and bar, hence this en banc review.
While the majority has followed the rationale and research of the minority for purposes of resolving the central issue of this case, in finding that increase in value of property acquired prior to divorce is to be considered marital property for purposes of equitable distribution, its failure to explicitly state that the effect of inflationary increase may be considered by the court in making distribution and
[ 355 Pa. Super. Page 602]
refusal to remand on Anthony for consideration of these findings compels this Concurring and Dissenting Opinion.
A brief recital of the facts in each case subject to our consideration will serve to focus our review of applicable law.
In Anthony v. Anthony, appellant/wife purchased a residence prior to her marriage to appellee. The parties were married on October 18, 1974, separated June of 1979, and divorced on November 23, 1983. It was the first marriage for the husband and the second for the wife. The residence remained titled solely in the wife's name throughout the marriage. During their marriage, appellee contributed $5,400 towards a joint fund used for the improvement of the property and made contributions of labor and materials to the property of $3,000. (These amounts are fixed by the master and uncontested.) The fair market value of the real estate at the inception of the marriage was $43,500 and at the date of separation in 1979, $65,000. The lower court, after exceptions to the master's report were filed by both parties, chose not to accept the master's recommendations, ignored the contributions by appellee and determined that the increase in value was the difference in market value ...