Opinion
Record No. 1793-97-3
JULY 13, 1999
FROM THE CIRCUIT COURT OF BOTETOURT COUNTY George E. Honts, III, Judge
Cheryl Watson Smith (G. Marshall Mundy; Mundy, Rogers Frith, L.L.P., on briefs), for appellant.
Terry N. Grimes (King, Fulghum, Snead, Nixon Grimes, P.C., on brief), for appellee.
Present: Chief Judge Fitzpatrick, Judges Benton, Coleman, Willis, Elder, Bray, Annunziata, Bumgardner, Lemons and Senior Judge Overton
Judge Overton participated in the hearing and decision of this case prior to the effective date of his retirement on January 31, 1999 and thereafter by his designation as a senior judge pursuant to Code § 17.1-401, recodifying Code § 17-116.01:1.
UPON A REHEARING EN BANC
Pursuant to Code § 17.1-413, recodifying Code § 17-116.010, this opinion is not designated for publication.
Enrique Andres Silberblatt and Lori Ann Silberblatt both appealed a June 27, 1997 equitable distribution award. A panel of this Court affirmed the trial court's award. We granted a rehearing en banc to consider three issues raised by the husband. Because the other issues are not raised on this rehearing, the decision of the panel, as stated in its memorandum opinion dated August 11, 1998, is affirmed. Here, we consider the trial court's decision to classify husband's medical practice as marital property, to classify gifts to his wife as separate property, and not to impute income to his wife. We hold that the trial court erred in classifying the property and improperly refused to impute income. Accordingly, we reverse and remand for reconsideration.
It is within the trial court's discretion to fashion equitable distribution decrees. See Srinivasan v. Srinivasan, 10 Va. App. 728, 732, 396 S.E.2d 675, 678 (1990).
Enrique and Lori Silberblatt met in Birmingham, Alabama where the husband was completing a fellowship in hand surgery, and she was working as a nurse pursuing her nursing degree. The couple started dating in February 1985, and he moved to Roanoke to complete his residency training. In September 1987, the husband began plans to open a private medical practice. He opened the practice and began accepting patients in January 1988. The husband formed the practice as a professional corporation and titled it in his name alone. It became successful quickly and earned gross receipts of $438,000 the first year. The largest portion of the receipts was earned before the parties married in November 1988.
Before the marriage, the wife helped the husband establish his practice by sending him sample forms and documents that she acquired from the Alabama practice for which she worked. After the marriage, she worked for one year at the husband's new practice. She received a salary for working as a nurse and office manager. After the first year, she worked part-time but no longer received a salary. The wife testified that the fair value of the services she performed was $15,000 per year for five years, or $75,000. It was the husband's routine to withdraw all retained earnings not necessary for operation of the business at the end of the year. The marital estate received all of the profits distributed from the business.
I. CLASSIFICATION OF MEDICAL PRACTICE
The husband argues that the trial court erred when it classified his medical practice as marital property. He argues that since he acquired the practice before the marriage it was separate property. We agree. Code § 20-107.3(A)(1)(i) provides that "all property, real and personal, acquired by either party before the marriage" is separate property. "Marital property is . . . property acquired by each party during the marriage which is not separate property as defined above." Code § 20-107.3(A)(2). The husband's practice opened in January 1988, and the parties did not marry until November of that year. By statute, the practice is separate property. The trial court erred in classifying the medical practice as marital property and including it in the marital estate.
Under certain circumstances, separate property can become marital property. This occurs when the separate property is commingled with marital property or the non-owning spouse makes contributions that enhance the property's value. See Code § 20-107.3(A)(3)(a); Gottlieb v. Gottlieb, 19 Va. App. 77, 98, 448 S.E.2d 666, 674 (1994); Barnes v. Barnes, 16 Va. App. 98, 104-05, 428 S.E.2d 294, 299 (1993). The non-owning spouse bears the burden of proof. See Code § 20-107.3(A)(3)(a). However, there was no evidence that the wife's contributions were "significant and result[ed] in substantial appreciation of the separate property," and there was no retracing of commingled marital funds. Id. Indeed, the husband's expert, who provided the only evidence of value, testified that the property decreased in value during the marriage. At the end of 1988, it was valued at $192,000 and at the time of divorce, its value was $165,000.
II. CLASSIFICATION OF INTERSPOUSAL GIFTS
Next, we consider whether the trial court erred in classifying interspousal gifts as separate property. The gifts include furs and jewelry, which the husband gave the wife during the course of the marriage. Interspousal gifts do not fall within the scope of Code § 20-107.3(A)(1), which defines separate property, and remain presumptively marital. " '[W]hether the property is separate or marital is determined by the statutory definition and is not determined by legal title.' " Lightburn v. Lightburn, 22 Va. App. 612, 616, 472 S.E.2d 281, 283 (1996) (quoting Garland v. Garland, 12 Va. App. 192, 195, 403 S.E.2d 4, 6 (1991)).
Code § 20-107.3(A)(1) and (2)(iii) governs this issue. Subsection (A)(1) expressly excludes from the definition of separate property gifts from "the other party." Thus, the legislature expressly provided that interspousal gifts be marital property. See Theismann v. Theismann, 22 Va. App. 557, 471 S.E.2d 809, aff'd en banc, 23 Va. App. 697, 479 S.E.2d 534 (1996). We conclude that the trial court erred in classifying the gifts as separate property. Annunziata, J., with whom Fitzpatrick, C.J., Benton, Coleman, Elder, Bray, and Lemons, JJ., join, concurring.
III. IMPUTATION OF INCOME TO WIFE
The trial court's decision to not impute income will be upheld on appeal unless it is "plainly wrong or unsupported by the evidence." Sargent v. Sargent, 20 Va. App. 694, 703, 460 S.E.2d 596, 600 (1995).
Both parents owe a duty of support to their minor children.See Code § 20-61; Kelley v. Kelley, 248 Va. 295, 298, 449 S.E.2d 55, 56 (1994). "A custodial parent has no less responsibility to provide support to a minor child than does the noncustodial parent." Bennett v. Dept. of Social Servs., Div. of Child Support Enforcement, 22 Va. App. 684, 692, 472 S.E.2d 668, 672 (1996). Under prior binding case law, it is clear that parents "cannot contract away their children's rights to support nor can a court be precluded by agreement from exercising its power to decree child support." Kelley, 248 Va. at 295, 449 S.E.2d at 56.
The parties' agreement that wife would remain unemployed outside the home cannot substitute for the trial court's analysis of the factors that must be considered when determining child support and the parties' respective obligations for its payment. See Code § 20-108.1. The trial court's decision on this ground is plainly wrong.
Furthermore, the evidence fails to support the factual finding that income need not be imputed to the wife. The trial court has discretion to impute income to either or both the custodial and noncustodial parent who is voluntarily unemployed, provided that the court may not impute income to the custodial parent except when the child is in school or child care services are available. See Code § 20-108.1(B)(3);Bennett, 22 Va. App. at 691, 472 S.E.2d at 672. Here, the evidence shows that both children are in pre-school two days per week, each child spending a third day in pre-school while the other remains at home. The evidence also shows that wife was prepared to return to school full-time to obtain a law degree and that, but for her failure to timely submit an application for admission, she would be a full-time student upon acceptance. It follows that neither the age of the children nor any other circumstances presented an obstacle to wife's gainful employment.
The court also failed to consider evidence of wife's earning capacity. See Stubblebine v. Stubblebine, 22 Va. App. 703, 708, 473 S.E.2d 72, 74 (1996) (finding that a trial court may consider earning capacity as well as actual earnings in imputing income and fashioning an award of support as long as it applies " 'the circumstances in existence at the time of the award.' " (quoting Payne v. Payne, 5 Va. App. 359, 363, 363 S.E.2d 428, 430 (1987))). The evidence shows that wife was capable of earning $18 per hour as a trained surgical nurse and that she had recent job experience as a nurse and office manager, having worked in husband's office from 1988 to 1996. Wife testified that, while she was not paid actual wages by her husband, the value of her part-time services had she been earning a normal hourly rate for a surgical nurse was $15,000 per year. Furthermore, at the time of the hearing, wife was employed as a nurse several days a month, earning $18 per hour.See Brody v. Brody, 16 Va. App. 647, 651, 432 S.E.2d 20, 22 (1993) ("[A] trial court may impute income based on evidence of recent past earnings.").
Accordingly, we find that the trial court abused its discretion when it declined to impute income to the mother, citing the parties' agreement that wife would be a full-time mother. Not only is the parties' agreement relieving wife of her obligation to provide support to the parties' minor children immaterial, the court's consideration of its terms as binding on its determination of support resulted in its failure to fully consider all the evidence in support of imputation and its failure to impute income as supported by the evidence in this case. See Hiner v. Hadeed, 15 Va. App. 575, 578, 425 S.E.2d 811, 813 (1993) ("In any judicial proceeding to determine child support, the court must consider all relevant evidence concerning the needs of the child and the ability of the parents to provide for those needs.").
For the foregoing reasons, we hold that the medical practice is separate property, the gifts to the wife are marital property, and the trial court erred in refusing to impute income to the wife. Accordingly, we reverse the trial court's decision with respect to the issues raised herein and remand for reconsideration in accordance with this opinion.
Reversed and remanded.
I respectfully dissent from the majority's reversal of the trial court's decision not to impute income. "A trial court has discretion to impute income to [a party] who is voluntarily unemployed." Bennett v. Dep't of Social Serv., Div. of Child Support Enforcement, 22 Va. App. 684, 691, 472 S.E.2d 668, 672 (1996). See Code § 20-108.1(B)(3).
On appeal, the evidence is viewed in the light most favorable to the wife, the prevailing party below. See Cook v. Cook, 18 Va. App. 726, 731, 446 S.E.2d 894, 896 (1994). It established that the children were in pre-school three days per week, and the wife admitted that employment opportunities were available. The trial court refused to impute income finding that "it was the established agreement of the parties that wife would be a full-time mother" and that she was fulfilling that role as she had when the couple was still married.
The decision not to impute income "will be upheld on appeal unless it is plainly wrong or unsupported by the evidence."Bennett, 22 Va. App. at 691-92, 472 S.E.2d at 672. The evidence supports the finding that the parties had an understanding that the wife would raise the children and not work outside the home while they were very young. When first married, the wife had worked in the medical practice, but she was a full-time mother and did not work regularly outside the home once the couple began having children. Given the age of the children and the parties' understanding, I would affirm the trial court's decision not to impute income to the wife.