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CLASSIFICATION SOURCE OF FUNDS
© 1998 National Legal Research Group, Inc.
VIRGINIA: Hart v. Hart, 27 Va. App. 46, 497 S.E.2d 496 (1998).
Marital and nonmarital components of hybrid property may be apportioned in the same percentages as their respective contributions to the total equity in the property. The value of improvements, not their cost, should be considered when determining contributions.
This case endorses the use of a formula set out in an oft-cited Kentucky case, Brandenburg v. Brandenburg, 617 S.W.2d 871 (Ky. Ct. App. 1981), as one way to determine the marital and separate property interests in an asset acquired with both marital and nonmarital contributions.
The husband purchased a home in New York prior to the marriage for $27,000, financed by a mortgage on the property. He testified that he improved the property before the marriage by installing a pool and adding carpet to the home at a cost of $10,000. During the marriage, the parties sold the home for $259,000, receiving a $40,000 cash down payment and a $219,000 mortgage note payable over 20 years.
The trial court determined that the parties had contributed $17,335 of marital property by way of mortgage payments, while the husband had separately contributed $16,265, consisting of his $2,700 down payment, premarital mortgage payments of $3,565, and the $10,000 cost of the improvements. Based on these figures, the trial court found that 48.4% of the New York mortgage note was the husband's separate property, while 51.6% was marital property.
The Virginia Court of Appeals approved the trial court's basic apportionment methodology, which was based on the formula set out in Brandenburg v. Brandenburg. The court explained that the Brandenburg formula defines the terms "marital contributions," "nonmarital contributions," "total contributions," and "equity," and then apportions the marital and nonmarital components of hybrid property in the same percentages as their respective contributions to the total equity in the property. The nonmarital contribution is compared to the total contribution, and the marital contribution is also compared to the total contributions. These comparisons, reduced to percentages, are multiplied by the equity in the property at the time of distribution to establish the value of the nonmarital and marital properties.
Specifically, the nonmarital contribution divided by the total contribution, multiplied by the equity, yields the value of the nonmarital property. Likewise, the marital contribution divided by the total contribution, multiplied by the equity, yields the value of the marital property.
The Brandenburg formula is an acceptable method of tracing and determining the value of the marital and separate components of hybrid property under the Virginia equitable distribution statute, the court declared. It expressly noted that this holding did not preclude other acceptable apportionment methods.
The court went on to hold, however, that the trial court misapplied the Brandenburg formula to the facts of this case in that it used the cost of the improvements rather than the valuewhich the improvements added to the equity in the home. Brandenburgspecifies that a contribution to property may include the value of improvements, the court emphasized. It remanded for the trial court to redetermine the husband's separate interest based on the value added by the improvements rather than on their cost.
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