Hagood opinion establishes important points on transmutation and alimony

The July 17, 2019 Court of Appeals opinion in Hagood v. Hagood establishes important points on transmutation and alimony. It is one of the rare published opinions to reject a transmutation claim while finding a special equity interest. It is the first published opinion in twenty years to address nonmarital assets as a basis to award alimony.

In Hagood, Husband had inherited substantial real estate prior to the marriage. In the early years of the marriage, the parties lived in a mobile home own by his sister on land he had inherited. Later in the marriage he sold some of this real estate, using the proceeds to purchase land and build the marital home and purchase some vehicles. He also deposited some of these funds into jointly titled CDs and bank accounts. At trial, Wife argued that all of these accounts, the vehicles, and the real property for both marital residences had been transmuted. The family court rejected all of Wife’s transmutation claims.

On appeal, the Court of Appeals affirmed that none of these disputed assets had been transmuted. It held that mere joint titling of CDs and accounts was insufficient to establish an intent to treat the property as marital. It held that, although Wife assisted in the care of the property where the mobile home was located, she did not make any significant contributions to this property, and accordingly the property was not transmuted. It held that her mere use of these vehicles was insufficient to establish transmutation.

However, the Court of Appeals did reverse and remand on one equitable distribution issue: holding that Wife was entitled to a special equity interest in the marital home, as she was significantly involved in the construction as well as the care and maintenance of the home. The Court of Appeal cited S.C. Code § 20-3-630(A)(5) as allowing a spouse to receive a special equity interest in the increase in the value of nonmarital property when the spouse contributes directly or indirectly to the increase.

At trial the family court denied Wife alimony, noting that Husband was in poor health and that both parties had substantially equal income capacities. Further, while the opinion is not explicit on this issue, it appears that Husband has primary physical custody of the parties’ minor child (the opinion simply notes that the parties bifurcated the financial issues and the custody issue, and that Wife does not have custody). Despite this, the Court of Appeals found it was err to deny Wife alimony, holding:

[T]he family court gave insufficient weight to the parties’ standard of living and Husband’s significant nonmarital property. During the marriage, the parties moved from a mobile home to a large new home. Wife and Husband frequently traveled to car shows and purchased numerous collectable cars. Wife received several large cash gifts from Husband. In addition, Husband has over $3 million in nonmarital assets according to his financial declaration. We find Wife should be allowed alimony in some form. Thus, we remand the issue of alimony to the family court to determine the appropriate type and amount of alimony Wife should receive.

As Professor Roy Stuckey notes in his upcoming revision of Marital Litigation in South Carolina:

The case law about transmutation has been both consistent and chaotic. It has been consistent in that the courts agree that the primary question is one of intent: did the owner of the property intend to transmute it into marital property?

The case law about transmutation has been chaotic because courts have struggled to interpret circumstantial evidence of transmutation in a consistent manner. It is impossible to discern consistent lines of reasoning or themes from which one could predict outcomes with any degree of certainty. Even worse, some of the explanations for the outcomes in transformation cases are inconsistent with common sense and human nature.

One method of making transmutation cases less chaotic is finding a special equity interest in lieu of transmutation. Hagood is a welcome example of the appellate courts doing that.

Hagood is also important for establishing that substantial nonmarital assets can be a basis to award alimony. Factor eight in the alimony code–the marital and nonmarital properties of the parties, including those apportioned to him or her in the divorce or separate maintenance action– would seem to authorize this. See S.C. Code § 20-3-130(C)(8). However Hagood is (I believe) the first reported case to reverse a denial of alimony because of one spouse’s substantial nonmarital assets.

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