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Court of Appeals mostly affirms family court’s equitable distribution award

On May 21, 2014 the Court of Appeals slightly modified the opinion in this case.

The March 5, 2014 Court of Appeals opinion in Teeter v. Teeter largely affirms the family court’s equitable distribution award (child custody and alimony were resolved before trial by agreement).  The family court determined that properties Husband purchased during the marriage with a down payment from non marital funds were marital property, divided the marital estate 55/45 in Husband’s favor and required Husband to pay Wife $15,000 in attorney’s fees.

Husband’s first issue on appeal was the family court’s exclusion of Wife’s emails that showed post-separation adultery.  Husband claimed he had “stumbled onto” Wife’s password and logged onto her account.  However, Wife denied that she had written down her password and Husband acknowledged installing spyware on Wife’s computer.  The family court found Husband was not credible on this issue and determined that he had used spyware to access these emails.  It therefore excluded these emails as having been obtained in violation of the Electronic Communications Privacy Act, 18 U.S.C.A. § 2515 (2000).  The family court further held that it was not considering either parties’ post-separation adultery in its equitable distribution award.  Because the family court’s credibility determination was within the province of the family court and because any adultery was immaterial to the family court’s equitable distribution award, the Court of Appeals affirmed this exclusion of evidence.

In deciding not to consider post-separation adultery as an equitable distribution factor the family court “determined Husband and Wife grew apart as a consequence of not communicating after the birth of their second child. While Wife’s post-separation contact with her former colleague was not completely irrelevant, the family court determined it did not impact the break-up of the marriage nor deplete the marital assets.” I am unaware of prior case law holding that post-separation adultery is immaterial if “it did not impact the break-up of the marriage nor deplete the marital assets.” The Teeter holding is helpful to litigants defending alimony or property division claims based upon post-separation adultery.

Husband also appealed the family court’s determination that properties he purchased during the marriage, but from non marital funds [the Glenn Street Properties], were marital.  The evidence substantiating his claim was:

Husband purchased 951 Glenn Street in 1998 for approximately $60,000. He testified he used $11,726 in proceeds from the sale of the Indian Creek property as a down payment. HUD statements support that Husband sold the Indian Creek property, received approximately $34,000 in proceeds, and purchased 951 Glenn  Street two weeks later with an $11,726 down payment. Husband financed the remainder of the purchase price with a mortgage on the property, and the record  shows 951 Glenn Street generated enough rent to cover the mortgage payments.

Still the Court of Appeals affirmed the finding that these properties were marital because they had been used to support the marriage:

While the record demonstrates the property generated enough income to cover the mortgage payment, the debt was incurred during the marriage and the rental income from the property was used to benefit both parties. Husband testified excess rental proceeds were used in support of the marriage, and the rental payments were always deposited into Husband’s general checking account.

In affirming the family court’s distribution of the Glenn Street properties, the Court of Appeals accepted that:

Husband was able to establish that nonmarital funds contributed to the initial purchase of 951 Glenn Street. His down payment of $11,726 was sufficiently traceable to the sale of the Indian Creek property. Wife did not dispute Husband’s testimony regarding his use of the Indian Creek funds, and the HUD statements from the closing of the Indian Creek sale and Glenn Street purchase support Husband’s testimony.

Despite finding that “Husband is entitled to recognition of this nonmarital contribution,” the Court of Appeals declined to modify that portion of the equitable distribution award, holding “Husband’s down payment contribution is not significant enough to warrant modification of the family court’s otherwise well-reasoned equitable distribution of 55% of the marital assets to Husband and 45% to Wife.”

Husband also appealed the valuation of the Garner Lane Property.  The property was purchased for $129,900 in 2005.  At trial, which appears to have taken place in 2011, Wife testified to a valuation of $130,000 while Husband testified the value had gone down based on the declining real estate market and valued the property at $108,000.  Neither party obtained an appraisal.  The family court valued the property at $130,000 and the Court of Appeals affirmed, holding that this valuation was within the range of evidence presented at trial.

The Court of Appeals did grant Husband relief on one issue: the date of valuation of his investment business.  As of the date of filing that business had a value of negative $784.56; as of trial it had a value of $74,775.32.  The family court valued this business as of the date of trial. The Court of Appeals modified, agreeing with Husband that this increase in value was not “passive appreciation” but was due to his efforts as an investment advisor.  It further held that Wife had the burden of proving the appreciation was passive [prior case law is unclear on which party has the burden of proof on this issue].  Thus the Court of Appeals held that the date of filing was the proper valuation date for Husband’s business.

On appeal Husband also sought credit for paying one-third of the home mortgage while Wife occupied the home during the litigation period.  The Court of Appeals affirmed the family court’s denial of credit on this issue, finding that Husband “cites no authority to support his argument, rendering anything other than a general fairness argument abandoned on appeal.”

Finally the Court of Appeals affirmed the award of attorney’s fees to Wife and the denial of fees and costs to Husband.  It noted Husband had a greater ability to pay fees, and that Wife prevailed on the contested issues of the Glenn Street Properties and the admissibility of her emails.  The Court of Appeals did not believe Husband’s one beneficial result on appeal–the changed valuation date for his business-was sufficient to modify the family court’s fee determination.

There are two items in the Teeter opinion I am not sure were correctly decided.  I read nothing in the opinion indicating Husband intended the Glenn Street properties to be marital property.  Merely using proceeds of non-marital property for family purposes does not necessarily show an intent to treat the property as marital.

Further, Husband should be entitled to some compensation for allowing Wife’s rent-free use of the marital residence during the litigation period, especially when Wife was not entitled to alimony and Husband was paying one-third of the mortgage.  Husband might have abandoned the issue or failed to cite authority other than general fairness, but the equitable distribution apportionment factors support Husband’s position, making “[t]he contribution of each spouse to the acquisition, preservation, depreciation, or appreciation in value of the marital property….” a factor to be considered in equitable distribution.  S.C. Code § 20-3-620(B)(3).  Often during the litigation period the parties agree to divide responsibility for the home mortgage despite only one party remaining there.  Providing the other party no benefit for agreeing to pay a portion of that mortgage will only discourage future litigants from being so accommodating.

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