MALLARD v. MALLARD (2015)

Following the denial of her motion for new trial, as amended, and pursuant to Rule 34(4) of this Court¹ , Alba Horacio Mallard (“Wife”) was granted a discretionary appeal from the final judgment and decree of divorce (“Decree”) dissolving her marriage to Kenneth Russell Mallard (“Husband”). The issue on appeal is whether the superior court erred by awarding Husband a 100% interest in the parties' marital home (the “Property”). For the reasons that follow, we reverse and remand.

This is the second marriage between the parties.² They were first married in February 2010, and divorced in January 2011. Prior to their first marriage, on October 30, 2009, Wife acquired the Property; she was the only grantee in the limited warranty deed and the sole party listed as a mortgagor on the loan for the Property (the “Debt”). The parties' 2011 final divorce judgment and decree made no mention of an award of the Property or an award of any real estate.³ Shortly after this first divorce, the parties resumed their relationship and largely lived together, and in April 2011, Wife executed a quitclaim deed transferring ownership in the Property to herself and to Husband, expressly as joint tenants with right of survivorship. See OCGA § 44–6–190.⁴ The Property was not refinanced to include Husband as a borrower.

The parties remarried on January 1, 2012. In April 2012, Husband paid off, with his separate funds, the Debt in the amount of $268,314. The parties again separated and Wife filed a complaint for divorce on January 15, 2013. In the divorce complaint, Wife asked to be awarded the Property on a temporary basis and 50% of its equity if Husband was to keep the Property. Subsequently in the divorce action, Wife did not object to Husband being awarded the possession of the Property as she had purchased another home, but she asked that the Property be partitioned or that she be awarded 50% of its value. In fact, a consent order issued in which the parties agreed, inter alia, to add a count to the divorce complaint to petition the superior court to partition the Property pursuant to OCGA § 44–6–160,⁵ to the extent that the Property or the equity therein was determined to be premarital property. An appraisal of the fair market value of the Property on September 25, 2013, was $252,000.

Following a hearing, the superior court entered the Decree, which, inter alia, denied Wife's request to partition the Property, i.e., declined to give her any share of it, and awarded the Property entirely to Husband. In so doing, the superior court determined: at the time of the parties' remarriage, there was no equity in the Property; the outstanding balance of the loan on the Property, which Husband paid off from his separate funds, was higher than the fair market value of the Property a year after the payoff, thus, there was no accumulated equity; each party owned a 50% interest in the Property as the result of the Wife's deed to Husband; there was no evidence that Husband intended to make the payment of the Debt a gift to Wife or to the marital unit; and there was no marital investment in the Property. The superior court then applied the “source-of-funds” rule, quoting this Court's opinion in Maddox v. Maddox, 278 Ga. 606, 607(1), 607 S.E.2d 784 (2004), for the proposition that “a spouse contributing non-marital property is entitled to an interest in the property in the ratio of the non-marital investment to the total non-marital and marital investment in the property.”

The evidence supports a finding that initially the Property was considered by the parties to be the separate property of Wife,⁶ but by her own hand, it was made the joint property of Wife and Husband. And, as joint tenants with right of survivorship, each party held an interest in the Property in part and potentially in whole. See Williams v. Studstill, 251 Ga. 466, 306 S.E.2d 633 (1983). Even so, the conveyance was made when the parties were not married, and generally only property and assets acquired by parties during marriage is subject to equitable property division in the divorce proceeding; however, if the non-marital property appreciates in value during the marriage and such appreciation results from the efforts of either or both spouses, the appreciation becomes a marital asset subject to equitable division. Armour v. Holcombe, 288 Ga. 50, 51–52(1), 701 S.E.2d 169 (2010). And, the “source-of-funds” rule utilized by the superior court in this case is a method of equitable division, which as the superior court noted, entitles a spouse contributing non-marital property to an interest in the property in the ratio of the non-marital investment to the total non-marital and marital investment in the property; the remaining property becomes marital property and its value subject to equitable division. Maddox v. Maddox, supra at 607(1), 604 S.E.2d 784.

In this case, there was no evidence of appreciation of the Property in regard to its fair market value during the parties' subsequent marriage; in fact, quite the contrary. Thus, appreciation of the fair market value of the Property fails to provide a basis for application of any method of equitable division, including the “source-of-funds” rule. But, Husband paid off the entire indebtedness on the Property during the parties' second marriage.⁷ So a salient inquiry is the effect of this payment of the Debt, if any.

The superior court made the express finding that Husband's payment of the Debt was not a gift to Wife or to the marital estate; however, Husband's undisputed testimony was that he paid off the Debt in order for him and Wife “to live a debt-free life as a married couple,” and that it was his intent that they would both “have the benefit of those funds.” Thus, there was the manifest intent to make the payment of the Debt a gift to the marital unit. See Miller v. Miller, 288 Ga. 274, 280(2), 705 S.E.2d 839 (2010); Lerch v. Lerch, 278 Ga. 885(1), 608 S.E.2d 223 (2005). Moreover, in circumstances involving conveyances of real property or the payment of certain funds between spouses, there has been the presumption in Georgia law that such a conveyance or payment is a gift and has the status of marital property. Coe v. Coe, 285 Ga. 863, 864–865(1), 684 S.E.2d 598 (2009); Brock v. Brock, 279 Ga. 119, 610 S.E.2d 29 (2005). Consequently, even if the superior court wholly discounted Husband's uncontroverted testimony, which was against Husband's own interest, such a presumption remained. Accordingly, the superior court erred in its finding that Husband's payment of the Debt was not a gift to the marital estate. And, while unquestionably the “source of funds” rule as set forth in Maddox v. Maddox is a method of equitable distribution of marital property, it contemplates and weighs the contribution of separate property brought to the marriage against the entire non-marital and marital investment in the property. Highsmith v. Highsmith, 289 Ga. 841, 843(2), 716 S.E.2d 146 (2011).

The distinction must be made between the Property itself, in which Wife originally had a premarital sole interest and later a premarital joint interest with Husband, and the Debt on the Property, the payment of which became a marital asset by virtue of Husband's gift to the marital unit. In this case, the parties asked the superior court to determine the parties' respective interests in the Property or the equity therein through statutory partitioning in conjunction with the court's equitable division of the parties' marital assets in the divorce proceeding. However, insofar as the superior court sought to statutorily partition the Property in accord with the prior consent order, statutory partitioning pursuant to OCGA § 44–6–160 applies only to tenants in common, not to joint tenants with a right of survivorship.⁸ Wallace v. Wallace, 260 Ga. 400, 396 S.E.2d 208 (1990).

This Court is mindful that the equitable division of marital property is at the discretion of the trier of fact, and such discretion is broad. Zekser v. Zekser, 293 Ga. 366, 367(1), 744 S.E.2d 698 (2013). So too, an equitable division of marital property does not necessarily mean an equal division, but rather a fair one, and in making such determination, the trier of fact should consider all of the relevant circumstances. Id. Consequently, as to any equitable division of the marital asset of the retired Debt on the Property, the superior court was authorized to consider circumstances in this case, which include that Husband made the down payment on the Property, held a joint tenancy of the Property, contributed to the monthly mortgage payments for the Property, and ultimately paid off the entire indebtedness on the Property, which was more than the Property's then fair market value. Nevertheless, the superior court's ultimate award of the Property, and consequently its value, solely to Husband was premised, in whole or in part, upon its unsupported factual finding that the payment of the Debt on the Property was not a gift to the marital unit and upon its misapplication of the expressly cited “source of funds” rule, which, as noted, is a method of equitably distributing marital assets. Consequently, the judgment of the superior court is reversed and the case remanded to that court for proceedings consistent with this opinion.

Judgment reversed and case remanded.

HINES, Presiding Justice.

All the Justices concur.