McIlwain v. McIlwain

• Decision Date: 16 September 2008
• Docket Number: Record No. 2682-07-2.
• Parties: S. David McILWAIN v. Susan Blair Penick McILWAIN.
• Court: Virginia Court of Appeals

666 S.E.2d 538

52 Va. App. 644

S. David McILWAIN v. Susan Blair Penick McILWAIN.

Record No. 2682-07-2.

Court of Appeals of Virginia, Richmond.

September 16, 2008.

David M. Branch for appellant.

Brian H. Jones (Ann Brakke Campfield; Barnes & Diehl, P.C., on brief), Chesterfield, for appellee.

Present: FELTON, C.J., and ELDER and BEALES, JJ.

BEALES, Judge.

S. David McIlwain (husband) appeals from a final decree granting a divorce to Susan Blair Penick McIlwain (wife). He asks this Court to determine whether the trial court erred in (1) awarding to wife a monetary sum equal to half of the fair market rental value of the marital home as part of the overall equitable distribution of the marital property, (2) finding the receivables from loans to two companies were marital assets and distributing them accordingly, and (3) awarding wife credit for tax payments that she made with marital funds.¹ We find the trial court did not err as to Issues 1 and 2. However, based on this record, we reverse and remand the trial court's award to wife regarding the amount of credit that she received for making tax payments.

I. Rental Value of Marital Home

Husband and wife married in 1988. According to wife, she performed most of the household duties, including cooking, cleaning, and yard work. Husband spent most of his time "on the computer."

Husband generally had no income during the marriage. In 1996 he began to receive an income from a trust, amounting to approximately $8,000 annually. Husband also owned some real estate, but the evidence at trial suggested that these properties did not net any significant rental income. He also owned two businesses during the marriage, but these companies produced little or no income for the couple.

While husband earned little income during the marriage, his irresponsibility with the family's income taxes created significant marital debt. Although he took responsibility for filing their federal and state income tax returns, for several years husband did not enclose a check for the taxes that were owed although wife believed he was paying the taxes. Finally, in 1999, wife discovered the problem. She then began filing her federal income tax return separately because husband "would not finish the '99 taxes" and because husband "wasn't paying any taxes."²

The parties had saved money from the sale of various parcels of real estate to use towards the purchase of a new home. They kept this money in an account at Crestar Bank. They used some of the money to reduce the income tax debt that they owed to the federal government, once wife realized that they had not been paying the taxes. However, at various times prior to December 2000, husband also made large withdrawals from this Crestar account and loaned that money to his two companies, without wife's knowledge or consent. Although their marriage had problems prior to this, when wife discovered the withdrawals, the problems became critical. When wife decided to go on vacation with her family and asked husband to stay at home, he threatened to "leave [her] furniture outside" if she went without him. At that point, she agreed to move out of the home when she returned from the vacation. The parties then separated on August 1, 2001.

Husband remained in the marital home, which was jointly titled, until entry of the final decree in 2007. At the time of their separation, the home was owned outright by the parties, so husband did not have to make mortgage payments on the house. He changed the deadbolt locks on the doors and insisted that wife come to the home only with prior notice to him and only while he was there. Given husband's actions, wife was essentially pushed out of the marital home.

Wife rented a separate residence and later purchased a house using separate funds. The parties agree that wife did not use the marital home after the separation. The trial court found that husband had lived in the home "at virtually no cost since August 1, 2001, while [wife] has had to pay for housing since the separation."

As a result of husband's failure to send a payment with the income tax returns, the parties owed a substantial amount of federal taxes, increased by interest and late payment fees, when they separated. They were still paying taxes owed as far back as 1996. Wife continued to pay off the parties' tax debt after their separation, using her separate income and some marital funds. Husband made one minor payment toward this marital tax debt after the parties separated.

Based on all this evidence, the trial court found wife "was the actual and princip[al] income earner during the marriage, and she bore the burden of [husband's] negative contributions, i.e. his financial contribution to the marriage was to create debt or financial liabilities (negative income)." The court also found, "The [wife] has had to bear a substantially disproportionate financial burden following the separation."

At trial, wife requested that the court credit her with one-half of the fair market rental value³ of the marital home, as part of the overall distribution of the parties' marital property. The trial court included this amount in its overall division of the marital estate, explaining:

[Wife] seeks remedy under Va.Code 20-107.3, not under the accounting statute Va.Code 8.01-31.

The Court took into consideration all of the factors set forth in Va.Code 20-107.3(E)(1-11), including monetary and nonmonetary contributions by each spouse to the marriage in determining the equitable distribution. Specifically, Va.Code 20-107.3(E)(11) calls upon this Court to take into consideration such factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.

[Husband] solely has benefited from exclusive occupation of the marital residence at virtually no cost since August 1, 2001, while [wife] has had to pay for housing since the separation. [Wife] has had to bear a substantially disproportionate financial burden following the separation.

In its overall equitable distribution award, the trial court included in the calculation of wife's portion of that award a figure of $19,725.62 — the sum equal to half of the fair market rental value of the home from August 1, 2001 through March 31, 2007, based on the rental value provided by husband's expert. The trial court clearly stated that it was not using the accounting statute, Code § 8.01-31, to do so, but rather was doing so out of fairness after considering all of the factors in the equitable distribution statute, Code § 20-107.3(E).

On appeal, husband argues that, under the decisions of this Court, a spouse cannot be credited with the fair market rental value of marital property from the date of separation. He contends that such a credit can begin no earlier than the date of the final decree of divorce. Given the relevant statute and case law, the particular facts in this case, and the appropriate standard of review, however, we cannot find that the trial court erred.

The trial court, in reaching its decision, took into account husband's exclusive use of the marital home in the context of a long-pending divorce and equitable distribution under Code § 20-107.3. That code section requires that a trial court consider several factors when determining the equitable division of marital property:

E. The amount of any division or transfer of jointly owned marital property, and the amount of any monetary award, the apportionment of marital debts, and the method of payment shall be determined by the court after consideration of the following factors:

1. The contributions, monetary and nonmonetary, of each party to the well-being of the family;

2. The contributions, monetary and nonmonetary, of each party in the acquisition and care and maintenance of such marital property of the parties;

3. The duration of the marriage;

4. The ages and physical and mental condition of the parties;

5. The circumstances and factors which contributed to the dissolution of the marriage, specifically including any ground for divorce under the provisions of subdivisions (1), (3) or (6) of § 20-91 or § 20-95;

6. How and when specific items of such marital property were acquired;

7. The debts and liabilities of each spouse, the basis for such debts and liabilities, and the property which may serve as security for such debts and liabilities;

8. The liquid or nonliquid character of all marital property;

9. The tax consequences to each party;

10. The use or expenditure of marital property by either of the parties for a nonmarital separate purpose or the dissipation of such funds, when such was done in anticipation of divorce or separation or after the last separation of the parties; and

11. Such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.

Code § 20-107.3. The trial court here explicitly stated that all of these factors were considered in determining the division of the marital property, including a means to provide wife with a remedy for husband's exclusive use of the marital home during the five and a half years that the divorce was pending. When a trial court has considered the statutory factors, this Court will not reverse that court's ruling unless the record indicates that the trial court abused its discretion. Ranney v. Ranney, 45 Va.App. 17, 47, 608 S.E.2d 485, 499-500 (2005).

The evidence in this record is sufficient to support the trial court's findings. Wife was the only person who earned a regular salary during the marriage, and she made most of the nonmonetary contributions to the marriage. Husband, on the other hand, unnecessarily increased the family's debt by refusing to pay the taxes in a timely manner, and he made very few nonmonetary contributions to the marriage. He also loaned huge sums of money to his companies without wife's knowledge, money that the parties had agreed would be...