Dealing with the appreciation in value during the marriage of a marital home owned by one spouse before the marriage has been, perhaps, the most troublesome area of New York’s Equitable Distribution Law. Inconsistencies in decisions abound. The entire area may have been turned on its head in 2010 by the Court of Appeals in Fields v. Fields (see prior blog), 15 N.Y.3d 158, 905 N.Y.S.2d 783.
In its July 12, 2012 decision in Biagiotti v. Biagiotti, the Third Department appears to have handled the issue conservatively, but logically.
The parties were married in September 2002. Their action was commenced in 2010. The husband owned the marital residence before the marriage. Title to the home was not changed during the marriage. It was conceded to be the husband’s separate property.
The wife, however, made a claim to share in the home’s increase in value over the course of the marriage. The Third Department noted that:
Appreciation in value of separate property can become marital property if the appreciation is due to the contributions or efforts of the nontitled spouse.
Although, the parties stipulated that the residence had increased in value by $105,500 between the date of the marriage and the date of commencement of the divorce action, they did not stipulate on what caused that appreciation.
The parties had spent $185,000 of marital funds during the marriage to improve the home. The renovations were paid for with marital funds. The trial evidence showed that defendant was more personally involved in the renovations than plaintiff.
According to an appraisal in the record, however, the improvements only accounted for approximately $11,000 of the increase in value. The appellate court considered the parties’ different levels of involvement, and that most of the appreciation was passive based on market forces rather than related to the improvements. As a result, the Third Department affirmed the award to the wife by Albany County Supreme Court Justice Joseph C. Teresi of 15% of the amount of the property’s appreciation.
Moreover, before the marriage the residence had been encumbered by a mortgage and a home equity line of credit. In 2003, shortly after the marriage, the husband refinanced the mortgage and paid off the existing line of credit by rolling them into a new mortgage. The mortgage payments were thereafter made from a checking account into which both parties deposited their paychecks. The amount of the refinanced mortgage was reduced by $24,028 during the marriage. The Third Departed noted:
If marital assets are used to reduce one party’s separate indebtedness, the other spouse can recoup his or her equitable share of the expended marital funds.
As it was payments from marital funds that reduced the husband’s indebtedness on his separate property, the wife was entitled to recoup $12,014, or half of the reduction of this separate debt.
On the other hand, after so refinancing the mortgage in 2003, the husband also took out a home equity line of credit. The parties agreed that the line of credit had been repeatedly borrowed against and used, according to the husband, to pay for home maintenance and repairs, vehicles, furniture and other living expenses.
As the evidence established that the line of credit was used for marital expenses and the wife’s evidence did not refute this, the appellate court held that Justice Teresi did not abuse his discretion by equally dividing this debt between the parties.
The wife was represented by Jennifer P. Rutkey, Esq., of Gordon, Tepper & Decorsey, LLP, of Glenville, NY. The husband was represented by Daniel D. Cunningham, Esq., of Rhoades, Cunningham & McFadden PLLC, of Latham, NY.