May 15, 2012

Summers v. Summers | Equitable distribution and Engagement Ring

Summers v. Summers

2012 BCBA 85 Bucks Co. L. Rep

Husband appeals the court’s order regarding division of property subject to equitable distribution pursuant t o 23 Pa.C.S. §§3501 and 3502 alleging inter alia; that the court erroneously included the amount Husband received as a result of a personal injury settlement as marital property; possession of an engagement ring; and awarding Wife alimony.

Domestic relations – Equitable distribution – Increase in value of inherited property – Engagement ring – Personal injury settlement – Tax lien – Alimony – Held, equitable distribution order appropriate.

1. In determining the propriety of an equitable distribution award, the court must consider the distribution scheme as a whole and the award should only be disturbed by the appellate court upon a finding of abuse of discretion.

2. Funds received as a result of a personal injury claim for injuries sustained during the course of the marriage, and received during the course of the marriage are considered to be marital property.

3. The increase in value of nonmarital separate property of the other spouse is marital property and subject to equitable distribution.

4. The Superior Court has suggested that an engagement ring would be the recipient’s separate property and that it would be a pre-marital gift between nonspouses and considered as a nonmarital asset.

5. An IRS tax lien levied on an account deemed to be the separate property of one spouse, even though a joint tax return was filed, should not be considered to be the sole responsibility of the noninterest holding spouse.

6. A limited award of alimony is appropriate to provide a spouse with income until a portion of marital assets can be returned.

Since Husband’s injury occurred during the marriage, and the settlement was received during the marriage, we found that the funds were marital property. 23 Pa.C.S. §3501(a). Based on the timing of Husband’s injury and receipt of settlement, the settlement did not fall into one of the marital property exclusions outlined in 23 Pa.C.S. §3501(a). Section 3501(a)(8) states that “[a]ny payment received as a result of an award or settlement for any cause of action or claim which accrued prior to the marriage or after the date of final separation regardless of when the payment was received” shall not be marital property. Husband’s cause of action accrued during the marriage when he was injured, and so his settlement funds are marital property. Furthermore, property acquired during a marriage is generally presumed to be marital property, especially where, as here, it was held in a joint
account. Husband presented no evidence to overcome the presumption that these funds were marital property. In fact, Husband presented no evidence at all as he did not attend the hearing.


After determining that these funds were marital property, we set about applying the factors of equitable distribution listed in 23 Pa.C.S. §3502(a). Section 3502 instructs the Court to “equitably divide, distribute or assign, in kind or otherwise, the marital property between the parties without regard to marital misconduct in such percentages and in such manner as the court deems just after considering all relevant factors.” After considering factors including the length of the parties’ marriage, the parties’ current states of employment and
potential for employment, additional family support, as well as the liabilities and needs of each party, including costs related to childrearing, we awarded Wife half of the value of the Commerce Bank account. Though Husband received these funds due to his injury affecting his ability to work as he once did, Wife’s primary custody of the couple’s children and Husband’s complete failure to pay child support (N.T., 5/31/11, p. 9), as well as the parties’ other relatively equal circumstances, suggested to this Court that an equal division of the Commerce Bank account was appropriate.

Sometime during the parties’ marriage, Husband received acreage in Colorado as a gift from another family member. N.T., 5/31/11, p. 11. The land was identified during the hearing as consisting of a handful of parcels consisting of 1190 acres. N.T., 5/31/11, pp. 10-11. The acreage was only in Husband’s name. N.T., 5/31/11, p. 11. On the same day that he transferred the $100,000.00 to his father, Husband transferred the parcels to his mother. N.T., 5/31/11, pp. 11-12. While she had not done so before the Master’s Hearing, prior to the de novo hearing, Wife had the acreage appraised, and the appraisal was presented to this Court and entered into evidence as Exhibit P-1. We found the appraisal to be reliable, based on the appraiser’s experience appraising Colorado pastureland and his familiarity with this particular geographic area. Ex. P-1, pp. 2-4. When the land was acquired by gift in 1998, we found that its value was $185.00 per acre. Ex. P-1, p. 4. The value of the acreage increased over time, and we found that in 2005 when it was transferred to Husband’s mother its value was $320.00 an acre. Id. The increase in value between 1998 and 2005 was $135.00 an acre, or $160,650.00 in total. While a spouse is not entitled to the full value of nonmarital, separate property of the other spouse, the increase in value of that property is marital property subject to equitable distribution. 23 Pa.C.S. §3501(a). Based on the evidence presented, we found that the acreage was Husband’s separate property. Though he acquired it during the marriage, it was received as a gift from someone other than Wife. Therefore, the increase in value of that acreage, $160,650.00, is marital property and available for this Court to distribute equitably. We awarded Wife half of the value of this increase, for the same reasons as outlined above during our discussion of the Commerce Bank account as well as the fact that Wife requested half of the value and Husband, by his absence, failed to present any argument against that method of division. The complete circumstances of the parties indicated to this Court that an equal division of the increase in value of the acreage was appropriate.

Diamond Ring

Husband gave Wife an heirloom diamond ring as an engagement ring prior to their marriage. Husband was in possession of this ring at the time of the hearing. N.T., 5/31/11, p. 14. Both parties agreed that the value of the ring was approximately $20,000.00. Id.; Husband’s Prehearing Stmt., p. 3. Based on Wife’s credible testimony, we found the engagement ring to be marital property as a gift between spouses. We awarded Wife half of its value, or $10,000.00 after applying the same factors of equitable distribution previously applied to the Commerce Bank account and the Colorado land. 23 Pa.C.S. §3501(a).

If we committed any error regarding the distribution of the ring, it was in Husband’s favor as a recent decision by the Pennsylvania Superior Court suggests that an engagement ring would be the recipient’s separate property as it would be a pre-marital gift between non-spouses. See, Childress v. Bogosian, 12 A.3d at 461 (upholding the trial court’s determination that the pre-marital gift of the engagement ring was the wife’s separate property). As Wife has not objected to our Order and Decree, we stand by our decision that her engagement ring was marital property and that she was entitled to half of its value.

IRS Tax Lien

Unbeknownst to Wife, Husband opened a Citibank West account sometime during their relationship. This account remained unknown to Wife until she began receiving notices from the IRS that taxes were due on interest earned by the account, as the account was never listed on Husband and Wife’s joint federal tax return. N.T., 5/31/11, p. 15. The IRS placed a tax lien upon the parties for the taxes due on the interest earned by that account. Husband’s prehearing statement asserted that the funds were owned by Husband, were acquired during the marriage and amounted to about $200,000.00. Husband’s Prehearing Stmt., p. 3. Wife, during the hearing with the Master, explained she understood the funds to be Husband’s mother’s money, and so Wife made no claim that these funds were marital property. Master’s Rpt., p. 5. We determined, based on Wife’s assertions to the Master, that the funds were Husband’s separate property, and so we did not enter into an equitable distribution analysis regarding the account itself.

Since the interest earned on the account was never reported to the IRS, and since Husband and Wife filed their taxes jointly and were jointly liable for issues arising from those tax returns, the IRS attempted to secure payment of the lien from both Husband and Wife. The IRS ultimately secured payment of this lien by pulling funds from Wife’s personal account following the parties’ separation, and also intercepted her most recent tax refund check. N.T., 5/31/11, pp. 16-17. As this account was Husband’s separate property, Wife should not be burdened postseparation with the obligation to pay for his mistakes and his decision to hide this account during the marriage. This Court will not force Wife to bear the burden of accounting for Husband’s reporting errors. As the account was neither marital property nor Wife’s separate property, it is Husband’s and not Wife’s sole obligation to pay the IRS tax lien. Therefore, we ordered Husband to reimburse Wife
in full for her payments to the IRS in the amount of $3,748.28.


23 Pa.C.S. §3701 permits the Court to award alimony “as it deems reasonable, to either party only if it finds that alimony is necessary.” 23 Pa.C.S. §3701(a). Subsection (b) lists a number of factors for us to consider if they are relevant to the case at hand. We awarded Wife alimony of $1000.00 per month beginning on April 1, 2011, and extending until such time that Husband paid Wife the amounts we ordered in equitable distribution.

Wife has been the primary caregiver for the couple’s three children since the date of separation. By Husband’s actions, Wife was prevented from accessing assets that were rightfully hers and could have assisted Wife in supporting herself and the children, especially considering the fact that Husband failed to pay any child support. Husband also has a significant number of assets with which to support himself, including all of the acreage in Colorado, his half of the Commerce Bank funds, funds in the Citibank West account, if any, as well as family assistance, as it appears to be available to him. We ordered a limited term of alimony to provide Wife with some assistance until her portion of the assets can be returned to her.

Though she is currently employed, she is also supporting three minor children and a household without any assistance from Husband. A policy of this Commonwealth, when determining issues involving divorce, is to “[e]ffectuate economic justice between parties who are divorced or separated and grant or withhold alimony according to the actual need and ability to pay of the parties and insure a fair and just determination and settlement of their property rights.” 23 Pa.C.S. §3102(a)(6). The alimony we ordered to be paid to Wife is intended to provide her with some monetary assistance until she can recover the assets due to her. This Court considered this to be a fair and equitable award. Though the parties’ are theoretically on equal footing when the broad scheme of factors is considered, in reality, Husband’s possession of Wife’s assets puts him at an advantage. Our alimony award seeks to balance that scale until such time as Husband returns Wife’s assets to Wife.

CONCLUSION For all of the foregoing reasons, we found that the Commerce Bank account, the increase in value of the Colorado acreage and the diamond ring were marital property, and we divided those equally between the parties due to their current circumstances. We found that the tax lien was Husband’s sole obligation, as the account upon which the lien was placed was neither marital property nor Wife’s separate property. As such, we ordered Husband to reimburse Wife for her payment of the tax lien. We also ordered a limited award of alimony to provide Wife with some funds until her portion of the marital assets can be returned to her.