Rowe v. Rowe

• Decision Date: 04 February 1997
• Docket Number: Nos. 0843-96-2,0845-96-2,s. 0843-96-2
• Citation: 480 S.E.2d 760,24 Va.App. 123
• Parties: Mary Anne ROWE v. Charles S. ROWE. Charles S. ROWE v. Mary Anne ROWE. Record
• Court: Virginia Court of Appeals

Page 760

480 S.E.2d 760

24 Va.App. 123

Mary Anne ROWE v. Charles S. ROWE.

Charles S. ROWE v. Mary Anne ROWE.

Record Nos. 0843-96-2, 0845-96-2.

Court of Appeals of Virginia,

Alexandria.

Feb. 4, 1997.

Donald K. Butler, Richmond (Ann Brakke Campfield; Morano, Colan & Butler, on briefs), for Mary Anne Rowe.

Carl F. Bowmer, Richmond (Christian & Barton, on briefs), for Charles S. Rowe.

Present: MOON, C.J., and FITZPATRICK and ANNUNZIATA, JJ.

MOON, Chief Judge.

Charles S. Rowe ("husband") and Mary Anne Rowe ("wife") each appeal the circuit court's order affirming the commissioner in chancery's equitable distribution and spousal support award. Husband contends (1) the trial court erred by classifying the entire increase in value of husband's newspaper stock as marital property; (2) the $14,000,000 in salary and stocks received by husband as compensation from the paper, which was more than fair compensation for husband's efforts, precludes classification of the stock appreciation as a marital asset; (3) the trial court erred in treating all but $41,000 of the parties' marital residence as marital property; (4) the trial court erred in awarding wife $10,000 per month in spousal support without considering the division of marital property as a factor in making the support award.

We hold that: (1) the trial court erred in classifying the entire increase in the value of husband's stock as marital property because fifty percent or more of the increase was attributable to the efforts of husband's brother and/or passive economic factors; (2) compensation by the paper, whether inadequate or excessive, is but a factor in determining the amount of marital wealth attributable to marital effort; and (3) the trial court erred in treating only $41,000 of the Ingleside Drive home proceeds invested in the parties' marital abode as gifted property. Because the trial court must reconsider classification of the increase in the value of husband's stock and distribution of the $82,000 proceeds of the Ingleside Drive home, the spousal support award must also be reconsidered.

Wife contends in her appeal that: (1) the trial court erred by accepting husband's valuation of his newspaper stock; (2) the trial court erred in failing to order a distribution of husband's retirement benefits consistent with the commissioner's finding that wife was entitled to one-half of the marital share of the retirement benefits; (3) the trial court erred in giving husband credit for post-separation contributions to various marital accounts while not requiring husband to account for post-separation withdrawals from the accounts; and (4) the trial court erred by valuing wife's marital accounts without deduction for her litigation expenses.

We find that: (1) the court did not err in evaluating the newspaper stock; (2) the court properly refused to award wife one-half of husband's retirement benefits and/or be allowed to name an alternate beneficiary; (3) the court erred in classifying all of husband's post-separation contributions as marital but did not err in refusing wife's proffer concerning husband's separate contributions as wife failed to timely offer supplemental evidence; and (4) the trial court correctly deducted wife's litigation expenses in valuing her accounts because she failed to timely present evidence concerning her litigation expenses.

Husband and wife married on May 1, 1970. A no-fault final decree of divorce was entered on December 1, 1993. On March 15, 1996, the circuit court entered its equitable distribution and spousal support decree, confirming the recommendations of the commissioner in chancery.

The vast majority of the parties' assets was generated by virtue of husband's position as a principal stockholder, coeditor, and copublisher of the Free Lance-Star, a family-owned newspaper in Fredericksburg, Virginia. Husband and his brother became coeditors and copublishers of the Free Lance-Star upon their father's death in 1949. They divided the duties of the paper. As coeditor, husband was responsible for the news-editorial side of the paper while husband's brother served as business manager, overseeing all other aspects of the operation, including advertising, production, circulation, distribution, accounting, as well as operation of the paper's radio station. The paper profited substantially under their control and expanded as the Fredericksburg area experienced rapid population growth. The paper's plant, under the supervision of husband's brother, was expanded in 1965, 1980 and in 1990. Husband's expert calculated the paper's stock increased in value from $500 per share in 1970 to $9,500 per share in 1991.

In addition to running the paper, both brothers were heavily involved in outside activities. Husband was involved in state and national level newspaper organizations. He served as president of the Associated Press Managing Editors Association in 1969 and was elected to the Board of Directors of the American Society of Newspaper Editors. He was also elected to the Associated Press Board in 1976 and served as director until 1985. Wife accompanied him to all major board meetings and conventions and was described as "an integral part of the life of the board." As a result of husband's heavy involvement with these and other newspaper organizations, a managing editor was hired in 1975. The managing editor assumed responsibility for the day-to-day news responsibilities at the paper, leaving husband free to devote additional time to his national newspaper activities. No evidence showed that the stock increased in value due to these activities by husband.

During the course of the parties' marriage, husband received $14,000,000 in salary and dividends. These funds were used to support the parties and their children from prior marriages. At the time of their marriage, the parties moved into husband's home on Ingleside Drive. Four years later, they acquired a new home at 501 Hanover Street in Fredericksburg. Husband invested the $82,000 proceeds from the sale of his Ingleside home in the purchase and/or refurbishing of the Hanover residence, which was conveyed to the parties by joint title. In the ensuing years, husband spent an additional $250,000 to $300,000 for improvements and maintenance of the Hanover Street home. Wife oversaw refurbishing and decoration of the home and subsequently oversaw a major addition to the home. At the time of the hearing, the net value of the home was calculated at $512,992. The parties also acquired, with funds from husband's salary and dividends, a home on John's Island, Florida.

Husband left the marital home in November, 1991. Wife subsequently learned that husband had been having an affair during the time leading up to the separation and had engaged in another affair during the course of the marriage. Husband filed for divorce on February 18, 1993, on the ground that the parties had been living separate and apart for more than one year. Over the wife's objection, a decree of divorce was entered on December 1, 1993. Issues of spousal support and equitable distribution were referred to a commissioner in chancery and following extensive discovery, a hearing was conducted by the commissioner in June, 1994. The commissioner's report and recommendation was filed August 14, 1995. The final decree of the trial court was entered on March 15, 1996.

During the interim between the parties' separation and entry of the final decree, husband paid many of wife's expenses directly, but did not pay wife's legal expenses. Consequently, wife paid her litigation expenses with funds withdrawn from her marital accounts. Husband also continued to receive his salary and stock dividends during this time and continued to make deposits, withdrawals and transfers to and from the marital accounts.

The trial court made an equitable distribution award to wife of $4,204,530 and a monthly spousal support award of $10,000.

HUSBAND'S ASSIGNMENTS OF ERROR

Increase in Value of Stock

Husband argued that the trial court erred in classifying the entire increase in the husband's newspaper stock as marital property. He asserted that his brother was more responsible for the increase in value of the stock and that the marital portion should have been considerably reduced in light of the fact that from 1970 to 1991, the value of the stock increased dramatically as a result of passive, external factors.

Code § 20-107.3(A)(3)(a) provides that "[i]n the case of the increase in value of separate property during the marriage, such increase in value shall be marital property only to the extent that marital property or the personal efforts of either party have contributed to such increases...." If husband proved that passive factors, such as the rapid population growth in the Fredericksburg area and low inflation rates accounted for a portion of the increase in the value of his stock, such increase cannot be properly classified as marital property. Similarly, we have concluded that where third parties contribute to the increase in value of separate property, the marital portion is to be reduced proportionately. Decker v. Decker, 17 Va.App. 12, 435 S.E.2d 407 (1993).

Here, husband produced evidence that from 1971 to 1991 the population in the Fredericksburg area increased from 77,425 to 180,500; the circulation of the newspaper grew from 16,490 to 41,161; and gross income increased from $1,175,539 to $14,890,035. Husband's expert, Mr. Lee Dirks, who has participated in sixty-five sales of privately owned newspapers, testified that the most important factor in the increase in the value of the stock was the dramatic increase in the number of households in the Fredericksburg area over a twenty-one year period. Wife's experts also agreed that the dramatic population growth in the market area was one of the most important factors in the increase in the paper's value. In addition, husband's experts testified that slow inflation contributed to...