Appeal from the Order entered on August 6, 1987, in the Court of Common Pleas of Pike County, Civil Division, at No. 342 Civil 1982.
Lila F. Levy, Milford, for appellant.
Alan Cooper, Hawley, for appellee.
Beck, Kelly and Johnson, JJ.
[ 375 Pa. Super. Page 387]
This appeal presents numerous challenges by appellant husband, Richard Lowry, to the equitable distribution order of the trial court. Among these is a novel question concerning the valuation of husband's pension, a portion of which was earned during the marriage and is marital property. Also challenged are the trial court's exclusion of a portion of the value of the marital home from marital property, the court's division of the appreciation in value of the marital property during marriage, the court's inclusion of certain proceeds of the sale of securities and of a savings and a checking account in marital property and its division of real estate commissions jointly earned by the parties.
The factual background pertinent to all issues except the pension is as follows.*fn1 Richard and Clarissa Lowry were married in 1971. This was husband's third and wife's second marriage. At the commencement of their marriage, the parties lived in wife's home in Long Island, New York. They wished, however, to build their own home. To this end, in 1972, they purchased an undeveloped parcel of land in an area called Hemlock Farms in Pike County, Pennsylvania. At the time of the purchase, the property was held in joint names. The funds to purchase the property, about $7,300, as well as certain funds expended to have initial work done on the construction of the home, about $4,000, were obtained through refinancing wife's Long Island home.
In late 1972, husband experienced difficulties with one of his former wives, who allegedly threatened to "take" husband's Hemlock Farms property. In response to these difficulties, husband transferred his interest in the Hemlock Farms property to wife, stating that he would rather she have it than his former wife. From that time forward, title to the Hemlock Farms property was in wife's name alone.
[ 375 Pa. Super. Page 388]
The balance of the construction work on the Hemlock Farms property was done by the parties themselves and funded through the sale in late 1974 of wife's Long Island home. The proceeds of the sale of wife's home, after payment of the mortgage, a commission and an unrelated loan, were about $27,000. Wife deposited this money into her savings account. When the balance in this account had decreased to about $13,000, wife transferred the remaining money into the parties' joint savings account. Wife testified that she used the entire $27,000 to buy the supplies and materials necessary to construct the Hemlock Farms property.
Wife also testified that the home cost $56,000 to build. Husband testified that it cost only about $38,000. The master found that wife contributed from her funds at least $50,000 of the cost of building the home and that the parties shared in the labor expended on the construction. The parties stipulated that the value of the home as of the date of hearing was $86,000. The trial court recites in its Opinion that the parties also stipulated that of this $86,000, $36,000 represented the increase in value of the home due solely to the parties' joint labor in constructing it.*fn2
Both parties were employed throughout the marriage. Initially, wife was a secretary earning $140-$240 per week. Husband was a union plumber. He testified that he earned $369 per week. Wife stated that he "brought home" only about $260 per week, of which $90 per week was expended on support payments for his children of a prior marriage. In 1976, both parties left their jobs. Husband operated his own construction firm, and both parties began to work
[ 375 Pa. Super. Page 389]
together as real estate agents, pooling their earnings from the real estate business.
At the time of the hearing, wife was 55 years old and husband was 56. Both were in good health and employed. Wife is still a real estate agent working on straight commission. In 1985, she earned $13,133. Husband has returned to his union plumbing job, earning $750 per week, and earns an additional $4,000-$5,000 a year teaching plumbing. This totals approximately $43,000-$44,000 per annum.
The parties separated in 1982. Immediately thereafter, husband filed this action for divorce. A master's hearing was conducted on March 31, 1986. The only issues before the master were certain equitable distribution issues. The parties had stipulated to the remaining distribution issues and to the entry of a divorce. Only the parties testified at the hearing.
On May 26, 1987, the master filed his report. Husband filed timely exceptions which were largely denied by the trial court. The court entered a final order dated August 6, 1987 adopting the master's recommendations in all respects with two exceptions. The court found that the master had undervalued the appreciation in the marital property, as to which the parties stipulated as noted above, and had failed to apply a reduction to the value of husband's pension to reflect the amount of the pension earned during marriage.*fn3 Husband timely appealed.
[ 375 Pa. Super. Page 390]
Our scope of review in equitable distribution matters is limited. We must apply the Divorce Code to the record to determine whether the hearing court abused its discretion. Ganong v. Ganong, 355 Pa. Super. 483, 513 A.2d 1024 (1986). We will find an abuse of discretion only if the hearing court misapplied the law or failed to follow proper legal procedure. Hutnik v. Hutnik, 369 Pa. Super. 263, 535 A.2d 151 (1987); Johnson v. Johnson, 365 Pa. Super. 409, 529 A.2d 1123 (1987).
Husband's first argument centers on the trial court's exclusion of a portion of the value of the marital home from marital property. The trial court adopted the following two recommendations by the master regarding the home:
That a portion of the marital home purchased with funds of Defendant [wife], acquired prior to the marriage, is herewith excluded from Equitable Distribution under Section 401(3)(1) [401(e)(1)] of the Divorce Code. (citations omitted)
That the marital home is excluded from Equitable Distribution under Section 401(e)(3) of the Divorce Code because the land on which the dwelling was constructed was made a gift to Defendant by Plaintiff. The Plaintiff at the time of transfer stated to Defendant "I'd rather you (Defendant) have this property than Claire (Plaintiff's ex-wife)".
Section 401(e)(1) of the Code provides that property acquired in exchange for property acquired prior to the marriage is excluded from marital property except for the increase in value thereof during the marriage. Section 401(e)(3) provides that property acquired by gift is excluded from marital property except for the increase in value thereof during the marriage.
[ 375 Pa. Super. Page 391]
Husband contends that he did not gift the property to wife when he transferred his interest in the property to her in 1972 because he lacked the requisite donative intent. He contends that his purpose was not to exclude the property from marital property, but rather to shield the property from his former spouse.
Husband also attacks the trial court's alternative conclusion that the property is excluded from marital property by virtue of the fact that $50,000 of the value of the property was acquired in exchange for property the wife had acquired prior to the marriage. He argues that to the extent that wife contributed her separate funds to construction of the home, those funds had already become marital property through wife's prior deposit thereof in the parties' joint savings account.
Our review of this issue has been rendered much more difficult than it need be by the unclear state of the record, the inartful argument and questionable representations regarding the facts by the parties, and the lack of a complete trial court opinion. In any event, we have arrived at the following analysis.
We agree with the trial court in its finding of a gift of the Hemlock Farms property by husband to wife in December 1972. At that time, the property's value would appear to be around $14,300, consisting of $7,300 in the price of the lot, $4,000 paid for initial construction work and $3,000 for the initial construction materials. All of this was paid for by wife with her pre-marital funds obtained from the refinance of her Long Island home. She gifted these amounts to the marital estate by investing them in the property, which was then held in joint names. Brown v. Brown, 352 Pa. Super. 267, 507 A.2d 1223 (1986) (property acquired prior to marriage that is transferred into property in joint names during marriage becomes marital property unless contrary intent is shown by clear and convincing evidence). However, when husband conveyed his interest in the property to wife by deed dated December 30, 1972, he
[ 375 Pa. Super. Page 392]
made a gift thereof back to wife, thus excluding the property at its then present value from marital property.
It matters not what husband's motive was in deeding the property to wife. As Justice McDermott opined in his concurring opinion in Semasek v. Semasek, 509 Pa. 282, 502 A.2d 109 (1985):
A gift may be given to anyone. The law is cold in its definition, it does not ask a reason for the giving, only an intention, delivery and acceptance of the thing are required . . . . The question ought not to be what is the subject or the purpose of the gift, ...