Schweizer v. Schweizer

• Decision Date: 12 July 1983
• Docket Number: No. 1534,1534
• Citation: 462 A.2d 562,55 Md.App. 373
• Parties: Mary E. SCHWEIZER v. Thomas SCHWEIZER.
• Court: Court of Special Appeals of Maryland

Page 373

55 Md.App. 373

462 A.2d 562

Mary E. SCHWEIZER v. Thomas SCHWEIZER.

No. 1534.

Court of Special Appeals of Maryland.

July 12, 1983.

Daniel F. Thomas, Baltimore, with whom were Thomas & Kalichman, Baltimore, on the brief, for appellant.

William W. Cahill, Jr., Baltimore, with whom were Richard C. Burch and Weinberg & Green, Baltimore, on the brief, for appellee.

Argued before LOWE, WEANT and ADKINS, JJ.

WEANT, Judge.

This case requires exploration of another nook in the Marital Property Act (the Act), §§ 3-6A-01 to -07 of the Courts and Judicial Proceedings Article. Both husband and wife have taken an appeal. Principally, the parties are at loggerheads over the monetary award granted the wife by the Circuit Court for Baltimore County. The wife contends the award is inadequate; the husband argues that no award should have been granted.

Thomas Schweizer (husband) and Mary E. Schweizer (wife) were married on 14 March 1963. Both brought children from prior marriages to this union. Although no children were born of this marriage, Thomas adopted and supported Mary's son from her earlier matrimony.

Thomas' substantial wealth was funded by an inheritance from his father and by two trusts of which he was beneficiary. Mary brought little financial wherewithal to the marriage. Notwithstanding their cohabitation of fifteen years, there was discord from the beginning and the parties were granted a divorce a vinculo matrimonii in 1982 after three years of uninterrupted separation. Mary was awarded monthly alimony of $2,000.00. The trial court valued the marital property at $322,182.00 and awarded the wife 25% thereof, or $80,546.00. ¹

The parties' opulent lifestyle was supported, in large measure, by resort to the husband's line of credit at the Equitable Trust Company. Equitable was apparently willing to extend a large line of credit to Thomas because several nonmarital assets secured repayment of the same. Both sides agreed that debt taken on during the marriage, the proceeds of which were often used to fund marital expenditures, must be considered in granting "a monetary award as an adjustment of the equities and rights of the parties concerning marital property." Section 3-6A-05(b). They are divided, however, in which stage of the statutory scheme marital debts should be accounted for.

Section 3-6A-05 envisions a three-step process. First, the court determines which property is marital property. Second, the marital property is valued. Finally, after a weighing of the nine factors enumerated in the statute, the court may grant a monetary award as an adjustment of the parties' equities and rights concerning the marital property. Husband contends that marital debts should be accounted for at the second step, or valuation stage, by subtracting marital liabilities from the marital assets to arrive at the value of the marital property. The wife argues that, in the absence of marital debts which specifically encumber marital assets, outstanding marital debts have nothing to do with the value of marital property and should merely affect the fairness of the way in which assets are divided. Her position asserts that marital debts should be accounted for further downstream at the third step. Specifically, she believes such debts signed only by Mr. Schweizer should be included under the third factor in step three which requires the court to consider "the economic circumstances of each spouse at the time the award is to be made."

This question has not been decided by a Maryland appellate court and decisions from other jurisdictions are of little help. The wife focuses our attention on two Missouri cases, Waitsman v. Waitsman, 599 S.W.2d 42 (Mo.App.1980) and N.J.W. v. W.E.W., 584 S.W.2d 148 (Mo.App.1979). Husband counters these decisions by pointing to cases from South Dakota, Hansen v. Hansen, 302 N.W.2d 801 (S.D.1981), North Dakota, Hoge v. Hoge, 281 N.W.2d 557 (N.D.1979), and Colorado, In re Marriage of Femmer, 39 Colo.App. 277, 568 P.2d 81 (1977), which hold, basically, that courts are really dividing the net worth of marital property and liabilities must be accounted for in computing net worth.

All of these cases are unpersuasive because none of the respective statutes has a separate and distinct requirement that marital property be valued. Generally, the statutes direct the court to divide the marital property in just proportions after considering all relevant factors. Maryland's Act, however, separates out the valuation and division processes.

We start our analysis with this Court's recent decision in Ward v. Ward, 52 Md.App. 336, 449 A.2d 443 (1982). In Ward, the only marital property was the marital residence. This Court recognized that the value of the property could not exceed the parties' equity in the home. The home was found to have a value of $60,000.00 subject to an existing mortgage of $28,000.00. The trial court, in effect, granted a marital award of $40,000.00. We capped any monetary award at $32,000.00 which represented the equity in the home [T]he chancellor's ruling violates the most basic principles governing monetary awards. Since the function of a monetary award is to adjust the parties' equities in the marital property, it is elemental that a court cannot make an award whose amount exceeds the total value of the marital property. Here the court awarded $50,000 (or a net of $40,000) based on marital property worth only $32,000. [ Ward, supra, 52 Md.App. at 343, 449 A.2d 443, emphasis added.]

The purpose of the Marital Property Act as expressed in the Report of the Governor's Commission on Domestic Relations Law at 1 (1982) is to "end the inequity in Maryland's old 'title' system of dealing with the marital property of divorcing spouses." The language of § 3-6A-01(e) makes clear that the characterization of property as marital or nonmarital under § 3-6A-05(a) is not dependent upon the legalistic concept of title. Harper v. Harper, 294 Md. 54, 448 A.2d 916 (1982).

Were we to accept the wife's position, we would be forced to distinguish this case from the situation presented in Ward, supra, solely on the grounds that these marital debts were in husband's name only and because the mortgage or debt impairs the title to nonmarital property. Such an approach would ignore the economic realities of the debt and represent a return to pre-Act times when title was the touchstone. We believe the thrust of the Act would be frustrated and inequitable results would obtain were courts to ignore title when characterizing property as marital or nonmarital only to hold title sacred when considering the acquisition of that property.

In Harper, supra, the Court of Appeals held that the source of funds was of paramount importance in characterizing property as marital or nonmarital. In applying the source of funds theory, the Court of Appeals defined the term "acquired" appearing in § 3-6A-01(e) as "the on-going process of making payment for property." Id. at 294 Md. at 80, 448 A.2d 916. We believe the source of funds is equally important in determining the value of marital property acquired during the marriage. Therefore, if one of the spouses takes on debt during the marriage to purchase marital property, and that debt or a portion thereof is outstanding at the time a monetary award is being considered, then the value of the marital property eligible for equitable distribution must be adjusted downward to reflect the unpaid liability. The value of marital property has not been "acquired," and therefore is immune from distribution, to the extent that the source of funds employed to finance the property is an outstanding debt, irrespective of how the debt is titled or secured.

This approach is necessary to avoid a possible "transmutation" of nonmarital property into marital property serving as a monetary award. The Harper Court recognized that such a result is contrary to Legislative intent:

Indeed, the language of § 3-6A-01(e), which sets forth an exclusive list on nonmarital property, indicates a legislative intent that the value of certain property not be subject to equitable distribution, and that the interests of spouses making nonmonetary contributions be protected without depriving the other spouse of nonmarital property. To permit nonmarital property to be "transmutated" into marital property and, therefore, to be subject to equitable distribution deprives a spouse of nonmarital property and is, therefore, contrary to legislative...