Schweizer v. Schweizer

• Decision Date: 01 September 1983
• Docket Number: No. 122,122
• Citation: 301 Md. 626,484 A.2d 267
• Parties: Mary E. SCHWEIZER v. Thomas SCHWEIZER. ,
• Court: Maryland Court of Appeals

Page 626

301 Md. 626

484 A.2d 267

Mary E. SCHWEIZER v. Thomas SCHWEIZER.

No. 122, Sept. Term, 1983.

Court of Appeals of Maryland.

Dec. 4, 1984.

Daniel F. Thomas, Baltimore (Thomas & Kalichman, Baltimore, on brief), for appellant.

William W. Cahill, Jr., Baltimore (Richard C. Burch, Michael P. Smith and Weinberg & Green, Baltimore, on brief), for appellee.

Argued before MURPHY, C.J., and SMITH, ELDRIDGE, COLE, DAVIDSON, ^* RODOWSKY and COUCH, JJ.

MURPHY, Chief Judge.

By ch. 794 of the Acts of 1978, now codified as Maryland Code (1984), §§ 8-201 through 8-213 of the Family Law Article, the General Assembly of Maryland enacted the Property Disposition in Annulment and Divorce Law (the Act). ¹ The Act indicates that nonmonetary contributions within a marriage should be recognized in the event that a marriage is dissolved; that a spouse whose activities do not include the production of income may nevertheless have contributed toward the acquisition of property by either or both spouses during the marriage; that when a marriage is dissolved, the property interests of the spouses should be adjusted fairly and equitably, with careful consideration given to both monetary and nonmonetary contributions made by the respective spouses; and that the accomplishment of these objectives necessitates that there be a departure from the inequity inherent in Maryland's old "title" system of dealing with the marital property of divorcing spouses. See Grant v. Zich, 300 Md. 256, 267-268, 477 A.2d 1163 (1984); McAlear v. McAlear, 298 Md. 320, 343, 469 A.2d 1256 (1984); Harper v. Harper, 294 Md. 54, 62-64, 448 A.2d 916 (1982); Deering v. Deering, 292 Md. 115, 117, 437 A.2d 883 (1981); Wimmer v. Wimmer, 287 Md. 663, 667 n. 2, 414 A.2d 1254 (1980); Pitsenberger v. Pitsenberger, 287 Md. 20, 24-25, 410 A.2d 1052, appeal dismissed 449 U.S. 807, 101 S.Ct. 52, 66 L.Ed.2d 10, rehearing denied, 449 U.S. 1028, 101 S.Ct. 601, 66 L.Ed.2d 491 (1980); Bender v. Bender, 282 Md. 525, 534-535 n. 7, 386 A.2d 772 (1978).

The Act "substantially modified the traditional property rights of the husband and wife in a divorce proceeding ...." Deering, supra, 292 Md. at 117, 437 A.2d 883. Although the court in granting a divorce "may not transfer the ownership of personal or real property from 1 party to the other," § 8-202(a)(3), the Act created a statutory scheme whereby the court may grant a monetary adjustment of the equities of the parties concerning marital property, § 8-205(a). A monetary award is reached by a three step process:

(1) [T]he court shall determine which property is marital property .... § 8-203(a).

(2) The court shall determine the value of all marital property. § 8-204.

(3) [Upon compliance with (1) and (2) ], the court may grant a monetary award as an adjustment of the equities and rights of the parties concerning marital property, whether or not alimony is awarded. The court shall determine the amount and the method of payment of a monetary award .... § 8-205(a).

The court is governed in the first step by the statute's broad definition of marital property. Section 8-201(e) declares:

(1) "Marital property" means the property, however titled, acquired by 1 or both parties during the marriage.

(2) "Marital property" does not include property:

(i) acquired before the marriage;

(ii) acquired by inheritance or gift from a third party;

(iii) excluded by valid agreement; or

(iv) directly traceable to any of these sources.

In determining the amount and method of payment of an award, the court is obliged to consider each of ten specified factors. The third factor is "the economic circumstances of each party at the time the award is to be made" and the tenth is "any other factor that the court considers necessary or appropriate to consider in order to arrive at a fair and equitable monetary award." § 8-205(a)(1) through (10).

This "new legislative approach to the concept of marriage," Deering, 292 Md. at 122, 437 A.2d 883, should be liberally construed, Harper, supra, 294 Md. at 61, "to adjust the property interests of spouses fairly and equitably upon the dissolution of their marriage, and to give careful consideration to both monetary and nonmonetary contributions by the spouses to the well-being of the family," Bender, supra, 282 Md. at 534-535 n. 7, 386 A.2d 772. What constitutes "marital property" under § 8-201(e) is clearly "not dependent upon the legalistic concept of title." Harper, supra, 294 Md. at 78, 448 A.2d 916. Nor does a determination of what constitutes marital property depend upon the factors enumerated in § 8-205(a). Those factors come into play only with respect to the amount of the award and the method of its payment. What property is marital property and the value of that property must be determined before that step in the scheme is reached. Harper, supra, 294 Md. at 79-80, 448 A.2d 916. We there concluded with respect to which property is marital property that

under the Maryland Act the appropriate analysis to be applied is the source of funds theory. Under that theory, when property is acquired by an expenditure of both nonmarital and marital property, the property is characterized as part nonmarital and part marital. Thus, a spouse contributing nonmarital property is entitled to an interest in the property in the ratio of the nonmarital investment to the total nonmarital and marital investment in the property. The remaining property is characterized as marital property and its value is subject to equitable distribution. Thus, the spouse who contributed nonmarital funds, and the marital unit that contributed marital funds each receive a proportionate and fair return on their investment. 294 Md. at 80, 448 A.2d 916.

We recognized, however, that in order to apply this theory, "acquired" as it appears in the statutory definition of "marital property," § 8-201(e) must be construed

as the on-going process of making payment for property.... Under this definition, characterization of property as nonmarital or marital depends upon the source of each contribution as payments are made, rather than the time at which legal or equitable title to or possession of the property is obtained. 294 Md. at 80, 448 A.2d 916.

The utilization of this definition of the term "acquired," coupled with the application of the source of funds theory, leads not only to the determination of which property is marital property (the first step) but also to the determination of the value of that property (the second step). In Grant, supra, we reiterated the "principles enunciated in Harper governing the method of calculating nonmarital and marital interests and the value of marital property." 300 Md. at 276 n. 9, 477 A.2d 1163. We said:

Property is nonmarital in the ratio that the nonmarital investment bears to the total nonmarital and marital investment in the property. To the extent that property is nonmarital, its value is not subject to equitable distribution. Property is marital in the ratio that the marital investment bears to the total nonmarital and marital investment in the property. To the extent that the property is marital, its value is subject to equitable distribution. Id.

We illustrated the proper application of these principles with this example:

A husband and wife acquired real property for a purchase price of $40,000. The wife contributed a down payment of $10,000 from property that she acquired prior to marriage. The remaining $30,000 was financed by a mortgage signed by both the husband and the wife. One-quarter of the value of the property is the wife's nonmarital property and three-quarters of the value of the property is marital property.

If, at the time of the dissolution of the marriage, the property has appreciated in value to a fair market value of $60,000 and the mortgage indebtedness has been reduced to $20,000 by the payment of $10,000 of marital funds, the following division would be appropriate. One-quarter of the $60,000 fair market value of the property, or $15,000, would be the wife's nonmarital property, not subject to equitable distribution. From the remaining $45,000, $20,000, representing the unpaid mortgage balance, would be deducted leaving $25,000 as the net value of the marital property subject to equitable distribution. Id. at 276-277, 477 A.2d 1163.

The Act does not set out how debts of the parties are to be treated with respect to a monetary award. Nor have we had occasion in our past decisions to address the question other than incidentally in the example noted in Grant to illustrate the principles enunciated in Harper. The question of the effect on a monetary award of certain outstanding debts is now before us.

The Circuit Court for Baltimore County issued a decree divorcing Mary E. Schweizer a vinculo matrimonii from Thomas Schweizer. The decree contained an order granting a monetary award to the wife. Neither party was satisfied. The wife thought that the amount awarded should have been greater. The husband believed that no monetary award at all should have been granted. Each appealed. The Court of Special Appeals vacated the decree and remanded the case with direction to the trial court to redetermine the amount of the award under guidelines set out in the appellate court's opinion. Schweizer v. Schweizer, 55 Md.App. 373, 381, 462 A.2d 562 (1983). Again, both the husband and wife were dissatisfied. Both of them thought, albeit for different reasons, that the Court of Special Appeals had erred in its directions to the trial court for the redetermination of the amount of the award. Each sought the issuance of a writ of certiorari. We granted both petitions; they presented a common contention--that the method directed by the intermediate appellate court for the computation of the amount of the monetary award was erroneous.

The trial court found that the husband's assets totaled $1,436,882. They consisted of shares of stock, bonds, mortgages, real properties, notes, interests in...