Property Distribution - § 5-2 (F)

(F) Transmutation

2013 --- Layman v. Layman, 62 Va. App. 134
The trial court erred when it determined that Husband’s separate property was comingled with marital property when the parties used marital funds to repay a loan secured by the separate property. The Court of Appeals determined that using separate property to secure a loan, even if the loan is used for marital purposes and repaid using marital funds, does not transmute the separate property that secures the loan into marital property. The discharge of an encumbrance using marital funds generates marital equity only if loan proceeds are used to acquire the encumbered property. In this case, Husband’s separate property was acquired through inheritance and the proceeds of the loan were used to add value to the property and to acquire additional property. While the value added by the loan proceeds is marital property, the separate property used to secure the loan remains separate property.

2011 --- Brock v. Brock, Va. Ct. of Appeals, Unpublished, No. 1353-10-3
The trial court did not err in finding that an IRA account acquired by husband during the marriage was husband’s separate property. Eight years prior to separation, wife endorsed a “Spouse’s Consent to Withdrawal” which allowed husband to liquidate a marital 401-k account. Upon liquidating the account, husband and wife equally divided the funds, and husband placed his portion in the IRA account at issue. Despite wife’s argument that a written agreement, signed by both parties, was required to transmute the proceeds from the marital 401-k account to separate property, the trial court properly held that the oral agreement by the parties to divide the funds, followed by their actual performance of that agreement, was sufficient to transmute the property.

2010 --- Dunfee v. Dunfee, Va. Ct. of Appeals, Unpublished, No. 0870-10-4
Trial court did not err in holding that property owned by husband prior to the marriage was transmuted into wife’s separate property when wife retitled and refinanced the property into her sole name, despite the fact that wife did so without consulting husband and while husband was in the hospital for delirium tremens (severe alcohol withdrawal).

2009 --- Duva v. Duva, 55 Va. App. 286
Trial court erred in holding that husband's separate property was transmuted to marital property due to the commingling of marital funds used to pay the mortgage on that property. Pursuant to Va. Code §20-107.3(A)(3)(d), the marital funds, when used to pay the mortgage on separate property, were commingled with the separate property and were therefore transmuted to separate property. The burden then landed on the wife to trace the contribution of the marital funds to retain the classification of those funds as marital, and to potentially argue that the contribution created hybrid property. By failing to consider (a) that the marital funds used to pay the mortgage on husband's separate property were commingled with that separate property, and were therefore transmuted to separate property, and (b) whether wife was able to retrace the funds used to pay the mortgage back to marital property, the trial court applied the wrong standard for classifying the property.

2003 --- Fowlkes v. Fowlkes, 42 Va. App. 1
Trial court erred in classifying wife’s residence as part marital and part separate property as the result of an addition, which husband paid for in part with separate funds prior to the marriage, but which wasn’t completed until after the marriage. Both parties conceded that wife’s residence, with the exception of the addition, was separate property, and both parties conceded that the addition was paid for with separate, pre-marital funds. Although wife previously agreed that she would re-title the residence in her and husband’s name in exchange for husband’s separate property contributions for the addition, she ultimately refused to do so after the marriage and the completion of the addition. The trial court erred in holding that the building of the addition constituted a commingling of marital property with separate property, as the addition itself was not marital, but separate, because it was purchased with separate funds. Thus, the addition constituted merely the commingling of wife’s separate property with husband’s separate property, leaving no marital property for the court to divide.

2000 --- Asgari v. Asgari, 33 Va. App. 393
Marital home was all marital property where Husband's separate funds were deposited into joint account prior to purchase, and identity of separate funds were lost in countless transactions so they could not be traced.

1998 --- Rahbaran v. Rahbaran, 26 Va. App. 195
If separate property is contributed to marital property, contributed to the acquisition of new property, or re-titled in the names of both parties, and suffers a loss of identity, the commingled separate property is transmuted to marital property.

Even if a party can prove that some part of an asset is separate, if the court cannot determine the separate amount, the unknown amount contributed from the separate source transmutes by commingling and becomes marital property.

1997 --- von Raab v. von Raab, 26 Va. App. 239
Entirety of Husband's separate interest in marital residence was transmuted to marital property during the marriage. Husband used separate equity in home to obtain short-term loan. Later, Husband re-titled house in Husband's and Wife's names in order to obtain permanent financing on the initial loan. As a result, Wife becomes jointly liable on the debt, thereby breaking the chain of re-traceability of Husband's separate equity.

1993 --- Huger v. Huger, 16 Va. App. 785
Where issue is whether separate stock was transmutted to marital, evidence failed to show that the stock received any enhancement in value due to the parties' efforts that was not otherwise fully compensated by the corporation.

1990 --- Stainback v. Stainback, 11 Va. App. 13
The trial court erred in finding that husband’s separate property stock shares were transmuted to marital property based on discussions of the parties regarding potential uses of the stock. Great consideration should be given to the actions, or non-action, of the parties with regard to exercising control over the property in question. Conversely, very little weight should be given to statements made about the nature of property or the uses to which it will be put unless those statements are supported by actions on the part of the speaker indicating his or her intent. To allow general conversation between husband and wife to constitute an “agreement” between parties, without more, is to turn the institution of marriage into an ongoing contract, the terms of which are mandated by each word spoken between spouses.

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