Property Distribution - § 5-2 (F)

(F) Transmutation

2017---Allen v. Allen, Va. Ct. of Appeals, Unpublished, No. 0562-16-4
The trial court did not err classifying as hybrid property the proceeds of the sale of stock in Husband’s company or in its methodology in determining the marital and separate property portions of the sale proceeds. Although the stock at issue was created during the marriage and the initial payment of the sale proceeds were paid to Husband during the marriage, the payment of a substantial portion of the sale proceeds was deferred until after the parties separated. Furthermore, Husband’s receipt of the deferred sale proceeds was conditioned on Husband’s continued employment by the third-party purchaser of the stock and upon his contractual obligation not to compete with the third party. Accordingly, the trial court properly treated the deferred payments of the sale proceeds as form of deferred compensation and properly applied the coverture fraction to determine the marital and separate property portions of the sale proceeds.

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 of Appeals, Unpublished, No. 1353-10-3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.

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