Gregg v. Gregg

• Decision Date: 18 June 1985
• Docket Number: No. 84-2107,84-2107
• Citation: 10 Fla. L. Weekly 1516,474 So.2d 262
• Parties: 10 Fla. L. Weekly 1516 Marian N. GREGG, Appellant, v. C. Bill GREGG, Appellee.
• Court: Florida District Court of Appeals

Page 262

474 So.2d 262

10 Fla. L. Weekly 1516

Marian N. GREGG, Appellant, v. C. Bill GREGG, Appellee.

No. 84-2107.

District Court of Appeal of Florida Third District.

June 18, 1985.

As Clarified on Denial of Rehearing Sept. 12, 1985.

Edward C. Vining, Jr., Miami, for appellant.

Floyd, Pearson, Richman, Greer, Weil, Zack & Brumbaugh and Ray Pearson and Bertha Claire Lee, Miami, for appellee.

Before NESBITT, BASKIN and JORGENSON, JJ.

NESBITT, Judge.

The wife appeals a final judgment of dissolution of marriage and the order entered on the parties' petitions for rehearing. The husband cross-appeals these same orders as well as an order awarding attorney's fees and costs against him. We affirm in part and reverse in part.

During the marital relationship both parties inherited funds. The wife used $23,734 of money she had inherited to aid in the purchase of certain real property, hereinafter referred to as the farm property. In addition to the wife's contribution, marital assets were needed to acquire the farm property. The farm property, however, is titled in the husband's name alone.

The husband used $20,000 he had inherited to invest in the "Store for Travel," hereinafter referred to as the store. This money was used to start the store and gave the husband fifty-one per cent of the stock and control of the business. Apparently, the store has been operating at a loss since its inception. At some point, $16,000 was loaned to the store by the parties from marital assets and a note was taken back.

In June 1983, the wife filed a petition for dissolution of marriage. After hearing testimony and argument of counsel, the court entered a final judgment of dissolution in April 1984. The judgment, inter alia, awarded the wife $1,700 a month permanent periodic alimony; awarded the wife the husband's interest in the marital home as lump sum alimony; awarded the wife a special equity of $23,734 in the farm property as well as a fifty per cent interest therein after deducting the special equity; ordered the husband to name the wife as irrevocable beneficiary on $125,000 of insurance on his life to secure the payment of alimony to the wife; ordered the husband to pay the wife $37,500 as her share of monies on deposit when the petition for dissolution was filed; and awarded the husband his stock interest in the store. Both parties filed petitions for rehearing. The order on rehearing deleted the provision in the final judgment concerning the payment of $37,500, finding there were no funds on deposit to be divided, and further, gave the husband a special equity of $17,000 in the farm property. Subsequently, the court awarded attorney's fees and costs against the husband.

The wife first contends that the court erred in awarding the husband a special equity in the farm property. We have reviewed the record and found nothing which would support a special equity in favor of the husband. The husband has made no showing that any funds of his, unconnected with the marriage, were used in the acquisition of the farm property. Accordingly, the provision in the order on rehearing awarding the husband a $17,000 special equity in the farm property must be stricken.

Striking this provision leaves the farm property subject to the wife's special equity. Although the property is titled in the husband's name alone, this fact does not prevent the wife from asserting a special equity therein. In the process of sorting out separate property (to be returned to the owner as special equity) from marital property (which may be subject to an equitable distribution between the parties) the trial court must look to the substance, that is, the source of the funds used to acquire the asset, rather than the form in which legal title was taken and held. McClung v. McClung, 427 So.2d 350, 353 (Fla. 5th DCA 1983). ¹

It is now clear in Florida that when the separate property, or funds constituting separate property, of one spouse is combined with marital property, or funds constituting marital property, and both are used to acquire other property, under circumstances where there is no gift from the owner of the separate property to the other spouse, the owner of the separate property is entitled to a special equity in the new property upon dissolution, representing a return of the separate property. McClung, 427 So.2d at 351-52. See Landay v. Landay, 429 So.2d 1197, 1199 (Fla.1983), clarifying Ball v. Ball, 335 So.2d 5 (Fla.1976). In the present case, it is undisputed that the wife combined $23,734 of her separate funds with marital assets to purchase the farm property. Accordingly, the wife is entitled to a special equity in said property. The question remains, however, as to the amount of the special equity.

Generally, there are two theories upon which to calculate a spouse's special equity. The first treats the special equity as a lien interest whereby the spouse obtains the return of the amount or value of the original contribution of separate property. The second treats the special equity as a capital contribution whereby the spouse obtains a percentage of the value of the acquired property equal to the ratio that the separate property contributed was to the original total acquisition cost. See McClung, 427 So.2d at 352. The trial court applied the lien theory in the present case. The supreme court has held that the second theory, or the "percentage-ratio" theory, is the correct one for determining a spouse's special equity in entireties property. Landay. The wife argues that Landay mandates the application of the percentage-ratio theory in the present case. We disagree.

Although we do find that the percentage-ratio theory is the correct one to apply in this case, the Landay decision does not mandate this result. The Landay decision is expressly limited to entireties property. In Landay, the supreme court explained the underpinnings of the formula it adopted as follows:

In Ball, we stated that "record title ... is ... the starting point for a property division." 335 So.2d at 7 (emphasis supplied). We also emphasized that "using record title as the touchstone ... requir[es] some evidentiary showing beyond that for an award other than an equal division." 335 So.2d at 8 (emphasis supplied). We thus start with the fact that in the absence of any claim for special equity on either spouse's part, record title bespeaks an equal division of property. A tenancy by the entireties automatically becomes a tenancy in common upon divorce. § 689.15, Fla.Stat. (1981). Ipso facto, each spouse already has a 50% interest in the property. What a spouse then seeks to do is to carve out from the other spouse's interest in the property his or her special equity, which is, in fact, a vested interest.

429 So.2d at 1199-2000. Thus, the whole basis for the formula adopted in Landay was the fact that the property in which the special equity was claimed was entireties property. In the present case, however, the farm property, in which the wife is entitled to a special equity, is titled in the husband's name alone. Accordingly, the formula in Landay does not apply.

Although the exact formula adopted in Landay does not apply here, the considerations underlying the supreme court's adoption of the percentage-ratio approach over the lien theory are relevant. Following the supreme court's lead, we too find that the percentage-ratio approach is the fairest one. It recognizes that the spouse who furnishes some of the consideration for the property from his or her separate property or funds has, in effect, made a capital investment. Having invested his or her capital in the property, the contributing spouse should be permitted to reap the fruits of such investment, if any. ² See Landay, 429 So.2d at 1199.

In the present case, the record supports the trial court's finding that the wife furnished $23,734 from her separate funds to acquire the farm property and that said contribution was not intended as a gift to the husband. Accordingly, the wife is entitled to a special equity in the farm property equal to the ratio which her contribution of separate funds bears to the entire purchase price of the property. Because the trial court utilized the lien theory to calculate the wife's special equity, we must reverse for a redetermination of the special equity under the percentage-ratio approach adopted herein. On remand, the trial court should determine what percentage of the sale proceeds will constitute the wife's special equity. ³ The remaining equity in the property is, of course, marital property and, as such, is subject to equitable distribution in a manner the trial court deems fair and just under the circumstances of the case. See Canakaris v. Canakaris, 382 So.2d 1197 (Fla.1980); McClung, 427 So.2d at 352-53.

The wife next contends that the trial court erred in not awarding her some interest in the store. In the final judgment, the court awarded the husband "his stock interest in The Store for Travel." The record makes clear that the husband supplied all of the consideration for the stock he acquired in the store from a source unconnected with the marriage. Accordingly, the court correctly awarded all the stock to the husband. See Ball, 335 So.2d at 7.

The wife argues, however, that $16,000 from marital assets was loaned to the business and, therefore, she is entitled to some award. This loan was evidenced by a note taken back from the business. Although this note is not in evidence, we conclude from the husband's testimony that he included the note as an asset on his financial affidavit, that it is payable to him alone. The final judgment makes no disposition of this apparent marital asset. Accordingly, on remand, the trial court should make a specific ruling as to the note's disposition. We express no opinion on whether or not the wife should be granted any interest in the note. The trial court in its sound discretion must determine what would be just and equitable...