What happens on divorce when during the marriage, the marital residence that had been owned by one spouse prior to the marriage is conveyed during the marriage to the parties jointly? That was the issue addressed by the Appellate Division, Second Department, in its decision this month in Spencer-Forrest v. Forrest.

The parties were married on March 31, 1984. There were no children of the marriage, but children from each of the parties’ prior marriages resided with the parties in the marital residence during the children’s respective minorities. Both parties were employed for the majority of the marriage, and the wife provided care for the husband’s children, who were younger and resided in the marital residence longer than her children.

The husband had purchased the marital residence prior to the marriage, and transferred the property to himself and the wife as joint tenants in 1989. Other than the marital residence, the parties’ assets were held in their respective names. Both parties contributed to the household expenses, although the husband contributed a larger sum to household expenses and maintenance of the marital residence, and the wife ceased financial contributions in 2006 or 2007, after she retired.

In August, 2012, the wife commenced this action for a divorce and ancillary relief. The wife was 68 years old and the husband was 67 years old at the time of trial.

Except for the marital residence, Nassau County Supreme Court Justice Stacy D. Bennett divided the marital property) equally (other than the vehicles and personal items) regardless of the party holding title. As to the residence, Justice Bennett awarded the wife 20% of the appreciation in the value of the marital residence from 1989 (when the husband conveyed the home to the parties jointly) through the date of the commencement of the action, an award amounting to $30,000. The court declined to award the parties credits sought for assets allegedly secreted or wasted by the other party and denied the wife an award of maintenance.

The Second Department modified the marital residence award, while upholding all the other rulings. The appellate court held that by placing the marital residence in both names, the husband changed the character of the property to marital property.

The Court held that Justice Bennett had providently exercised her discretion when awarding the husband a credit for his contribution of separate property toward the creation of the marital asset. However, the Second Department held that the appreciation of the value of the marital residence from the date of marriage in 1984 and the date of transfer in 1989 constituted marital property, given the wife’s contributions to the marital residence, financial and otherwise, during that early marital period.

[Note: The appellate court did not discuss the line of decisions holding that the increase in the value of separate property remains separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the non-titled spouse. The absence of such discussion further obscures the notions of the “extent” of the appreciation due to other than market forces, and the distinctions, if any, between direct and indirect efforts, as well as whether such efforts are by the title-holder (thus rendering the appreciation “active”), or by the non-titled spouse.]

Accordingly, the valuation of the residence at the date of marriage ($105,000) should have been utilized to determine the husband’s separate property contribution. Moreover, although the husband thereafter contributed a larger share of funds towards the maintenance of the residence, in light of the wife’s contributions to the residence, financial and otherwise, an award to her of 50% of the marital portion of the residence was warranted. Accordingly, the Second Department modified the judgment to award the wife $122,500 for her interest in the marital residence, representing 50% of its appreciation in value during the marriage.

Robert A. Ross, of Northport, represented the wife. W. Charles Robinson, of C. Robinson & Associates, LLC, of Manhattan, represented the wife.