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Sanders opinion highlights confused nature of transmutation

The December 21, 2011 Court of Appeals opinion in Sanders v. Sanders, 396 S.C. 410, 722 S.E.2d 15 (Ct. App. 2011), demonstrates the continuing confused jurisprudence regarding transmutation of non marital assets.  It also highlights the problems that result when the trial court is provided insufficient information from the parties to make a complete decision.

Sanders involved a cross appeal of equitable distribution issues stemming from the parties’ divorce. The first issue on appeal was whether Wife’s AG Edwards account was transmuted into marital property.  The Court of Appeals affirmed the family court’s decision that it was.   Wife would typically deposit inherited funds into the parties’ joint checking account, only to transfer these funds into the AG Edwards account a few days later.  The Court of Appeals noted this level of commingling did not make these inherited funds transmuted.

Yet the Court of Appeals still found these funds transmuted because Wife frequently transferred funds back from the AG Edwards account into the joint account to assist in paying marital expenses.  The Court of Appeals held this usage demonstrated Wife’s intent to make these funds marital.  All I see is Wife’s use of these funds demonstrated her intent to be generous with part of her inheritance.  While the doctrine of transmutation serves equity when a spouse incurred benefit during the marriage from treating non marital funds as marital, too often transmutation is used to the detriment of a generous spouse.  Here, Wife was done an injustice.

She was done a further injustice when the Court of Appeals affirmed an equal division of the marital estate.  Too often when our courts transmute marital property, they then reflexively divide it equally.  Transmutation is supposed to be based on the owner-spouse’s intent; I doubt Wife ever expected Husband to end up with half her AG Edwards account.

Husband’s first issue in his cross-appeal regarded the date of valuation for the parties’ retirements.  The value of both parties’ retirements declined during the litigation process due to “passive market depreciation” (an increasingly common fact pattern).  Wife filed an updated financial declaration at trial, listing her lower retirement account value.  Because the reduction in the value of Wife’ retirement was passive, the family court valued her retirement as of the date of trial.  Husband, however, failed to provide the family court an amended financial declaration reflecting his reduced retirement valuation.  The family court valued his retirement as of the date of filing.

Husband argued on appeal that the family court should have valued both retirements as of the date of filing.  The Court of Appeals disagreed, noting that because of the passive loss during the litigation period the proper date of valuation was the date of trial. The Court of Appeals remanded this issue, instructing the family court to value both parties’ retirements as of the date of trial.  Normally, I’d have no issue with the Court of Appeals’ analysis but the family court’s inability to value Husband’s retirement as of the date of trial is due to the Husband’s failure to provide an updated financial declaration.  In two recent appellate decisions, Lewis v. Lewis,  392 S.C. 381, 709 S.E.2d 650, 656, n.11 (2011) and Pittman v. Pittman, 395 S.C. 209, 717 S.E.2d 88 (2011), the courts refused to remand an issue where a party failed to provide the family court necessary evidence because it did not want to give a dilatory party “a second bite at the apple.”  Remand gives Husband this second bite.

Husband also appealed the award of the marital residence to Wife at the $235,000 her expert placed upon it.  Husband’s appraiser testified that the residence was worth $360,000 and Husband testified it was worth $380,000.  On cross-examination, Husband’s appraiser acknowledged a “significant error” that was material to his valuation.  Based on this, the family court found Wife’s valuation more credible and the Court of Appeals affirmed.  Left unaddressed is whether Husband was willing to keep the marital residence at the $380,000 valuation he placed upon it.

The final issue on Husband’s appeal involved the family court’s distribution of personal property.  Evidently Wife provided the family court a schedule of at least 237 items, some of which she claimed were non marital.  Husband appealed the family court’s distribution of items 178 through 237.  Wife testified that some of these items were gifts from her family and others were gifts of jewelry from Husband’s mother.  The family court found the gifts from Husband’s mother were marital property and the gifts from her family were transmuted but still treated some of these items as non marital property.  For reasons the opinion does not make clear some of the property items Husband appealed were item the family court awarded to him. Given the contradictory and often inexplicable nature of this assets schedule, the family court’s treatment of this property, and Husband’s challenge regarding property that was actual awarded to him, the Court of Appeals simply remanded this matter back for further determination.

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