Fowler v. Fowler, Record No. 1265-05-2 (VA 3/14/2006)

• Court: Virginia Supreme Court
• Writing for the Court: James W. Benton
• Decision Date: 14 March 2006
• Docket Number: Record No. 1265-05-2.
• Citation: Fowler v. Fowler, Record No. 1265-05-2 (VA 3/14/2006), Record No. 1265-05-2. (Mar 14, 2006)
• Parties: RUBY MORRIS FOWLER v. CLYDE M. FOWLER

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Unpublished Opinion

RUBY MORRIS FOWLER v. CLYDE M. FOWLER

Record No. 1265-05-2.

Court of Appeals of Virginia, Richmond.

March 14, 2006.

Appeal from the Circuit Court of Chesterfield County, Michael C. Allen, Judge.

Robert L. Isaacs (Robert L. Isaacs, P.C., on briefs), for appellant.

Randy B. Rowlett (Gordon, Dodson, Gordon & Rowlett, on brief), for appellee.

Present: Judges Benton, McClanahan and Senior Judge Coleman.

MEMORANDUM OPINION^*

JUDGE JAMES W. BENTON, Jr.

In this appeal from a final decree of divorce, Ruby M. Fowler contends that the trial judge erred in (1) failing to equitably distribute her husband's pension plan and other property, (2) requiring her to pay her husband, Clyde M. Fowler, a lump sum monetary payment, (3) awarding her spousal support in a lump sum, and (4) denying her request for a reservation of the right to receive spousal support in the future.

The parties were married in 1970. The wife ceased working in 1973 because of epilepsy, and she receives monthly social security disability of $533. The husband retired from his employment in 1986 and receives pension benefits of $1,231 monthly. He also receives monthly social security benefits of $1,047. They separated in 2002 after thirty-two years of marriage and were divorced by a final decree three years later. This appeal challenges the trial judge's rulings and provisions in the final decree concerning the distribution of the parties' marital property and spousal support. For the reasons that follow, we reverse these rulings and remand for reconsideration.

Equitable Distribution

"`In reviewing an equitable distribution award on appeal, we have recognized that the trial court's job is a difficult one, and we rely heavily on the discretion of the trial judge in weighing the many considerations and circumstances that are presented in each case.'" Moran v. Moran, 29 Va. App. 408, 417, 512 S.E.2d 834, 838 (1999) (citation omitted). Although the trial judge must exercise sound discretion, we have recognized that the statute requires the judge to make a "determination . . . based upon the equities and the rights and interests of each party in the marital property." Keyser v. Keyser, 7 Va. App. 405, 410, 374 S.E.2d 698, 701 (1988); see also Barker v. Barker, 27 Va. App. 519, 535, 500 S.E.2d 240, 247-48 (1998). If the trial judge fails to do so or if he "use[s] an improper legal standard in exercising [this] discretionary function," then the trial judge necessarily abuses his discretion. Thomas v. Commonwealth, 263 Va. 216, 233, 559 S.E.2d 652, 661 (2002). In other words, "a trial court `by definition abuses its discretion when it makes an error of law.'" Shooltz v. Shooltz, 27 Va. App. 264, 271, 498 S.E.2d 437, 441 (1998) (citation omitted). See also Cooter & Gell v. Hartman Corp., 496 U.S. 384, 405 (1990) (holding that a trial judge "would necessarily abuse [his] discretion if [he] based [his] ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence").

a. Valuation and distribution of a promissory note

The wife contends the trial judge improperly determined the value of a promissory note receivable to be the principal balance owed on the note at the time of the testimony. She argues that the note was not "immediately due and payable" and that the trial judge should have equitably divided between the parties "a share of the income stream." The husband responds that the judge's determination of the value of the note was supported by testimony and by a schedule showing the amount of principal and interest payable on the note through maturity.

A trial judge "valuing marital property for the purpose of making a monetary award must determine from the evidence that value which represents the property's intrinsic worth to the parties upon dissolution of the marriage." Bosserman v. Bosserman, 9 Va. App. 1, 6, 384 S.E.2d 104, 107 (1989). In our review of the trial judge's decision on this issue, we are governed by the following principles:

A trial court has broad discretion to determine the value of assets. "The trial court's valuation cannot be based on mere guesswork. The burden is on the parties to provide the trial court sufficient evidence from which it can value their property." Further, the trial court determines the weight and credibility to afford the evidence presented to it. In sum, "the value of property is an issue of fact, not law."

Hoebelheinrich v. Hoebelheinrich, 43 Va. App. 543, 556-57, 600 S.E.2d 152, 158 (2004) (citations omitted). Simply put, a trial judge may "choose among conflicting assessments of value as long as [the judge's] finding is supported by the evidence." McDavid v. McDavid, 19 Va. App. 406, 413, 451 S.E.2d 713, 718 (1994).

Both the husband and the wife testified that they sold real estate to the wife's niece and the niece's husband and that they "retain[ed] a note against the property." During the husband's testimony, he identified and entered as an exhibit an amortization schedule of the payments on the note. The exhibit shows the initial principal amount in 1995 was $44,170.35, the interest rate is 8%, and the monthly payment is $324.32. The principal balance owed on the note at the time of the hearing was $40,286.13. Payments on the note are made to an account that has been maintained by the wife since the parties' separation.

The wife presented no contrary evidence of value for the judge's consideration. Instead, she argues that, because "no evidence . . . was presented as to the . . . present value," the trial judge should have "equitably divid[ed]" the note and "awarded each party a share of the income stream from the promissory note."

Absent any other evidence as to how to value the note, the trial judge concluded that it should be valued at $40,286.13, the principal balance owed on the note.

Where an asset consists of benefits to be received at some time after the divorce is complete, its present value will be less than the sum total of all future benefits. As any economics student knows, money earns interest, and the value of [a] dollar to be received in the future is therefore less than a dollar to be received today. To accurately value future benefits, the court must make certain that they are discounted to present value.

In computing present value, the court must use a reasonable interest rate.

Brett R. Turner, Equitable Distribution of Property § 7:8, at 655-56 (3d ed. 2005) (footnotes omitted).

Although the wife contends the note's principal balance does not represent the note's present value, she provided no theories at trial or on appeal as to the better way to calculate the note's present value. She makes no argument about a discount rate or other factors.

As part of the equitable distribution scheme, the trial judge awarded this marital property to the wife and offset it by marital property of equal value to the husband. An exhibit in the record indicated the note had a principal balance of $40,286.13 and showed the amount of interest that would be paid on the note in each future installment.¹ Although the trial judge could have awarded each party a percentage of each payment to be made on the note, we hold that the trial judge's valuation was supported by the evidence and that his decision concerning this jointly owned asset was not plainly wrong.

b. The husband's pension

The wife contends the trial judge erred in ruling that the evidence was insufficient to determine the marital share of the husband's pension. The husband responds that the wife offered no evidence as to the value of the marital share of the pension. We hold that the trial judge erred in his ruling.

The statute that authorizes the trial judge to decree as to the property of divorcing parties expressly provides that any "portion of pensions, profit sharing or deferred compensation or retirement plans of whatever nature, acquired by either spouse during the marriage, . . . is presumed to be marital in the absence of satisfactory evidence that it is separate property." Code § 20-107.3(A)(2). In addition, the statute provides that the trial judge may award up to fifty percent of the marital share of any such pension or plan to the non-owning spouse as such benefits are payable. Code § 20-107.3(G)(1). "In the case of any pension, profit-sharing, or deferred compensation plan or retirement benefit, the marital share as defined in subsection G shall be marital property." Code § 20-107.3(A)(3)(b).

The evidence proved that the husband began employment at DuPont in 1944. He was still employed by DuPont when the parties married in 1970. The husband retired from his employment in 1986 while the parties were married and began receiving monthly pension benefits. The parties separated in 2002.

In his letter opinion, the trial judge listed all property that was deemed marital, found that the marital property totaled $130,432.43, and found that the wife had in her possession almost $30,000 more of the marital property than the husband. The listing of the marital property did not include, however, any portion of the husband's pension. The letter opinion further provides that "to approximate an equal division of the parties' marital estate, the [wife] shall pay to the [husband] a net monetary award in the amount of $15,000." Consistent with the letter opinion, the final decree provides "[t]hat to achieve an equal division of the parties' marital estate, the [wife] shall pay to the [husband] a net monetary award in the amount of $15,000." This provision of the final decree, which was to effect the judge's determination that an equal division of the marital property was appropriate in this case, resulted from a valuation and classification of the marital property that did not include consideration of the husband's pension benefits.

The trial judge classified the DuPont pension as "hybrid" property.² In classifying the property as hybrid, the trial judge ruled "there was no...