Holman v. Holman
228 S.W.3d 628 (Mo. Ct. App. 2007)

Facts:

  • The parties were married on October 20, 1991, and separated on November 4, 2004. There were no children born of the marriage.
  • The case focused on the division of two items of property fixed up during the marriage – the Farmhouse (which husband owned prior to the marriage) and the Commercial Property (which husband inherited after his father died in 1997).
  • (1) The Farmhouse.
    • Original Value: $54,640
    • Loan for Remodeling: $90,000
    • Market Value at Time of Trial: $185,000
  • (2) The Commercial Property:
    • Original Value: $30,000
    • Loan for Remodeling: $75,000
    • Market Value at Time of Trial: $127,000

History:
The trial court awarded the wife $203,832.67.

  • Apparently the trial court used some variation of simply deducting the original value from the market value after the appreciation.

Issue:
How the increase in the value of separate property during marriage is to be divided when marital assets or labor contributed to the increase.

Holding:
“Source of funds rule.” Trial judgment amended/modified.

Reasoning:

  • Generally, any property acquired by a spouse prior to marriage is that spouse’s separate property upon dissolution of the marriage. However, any increase in the value of separate property can constitute marital property if marital assets or labor contributed to acquiring that increase.
  • “Under the source of funds rule…a spouse contributing nonmarital property is entitled to an interest in the property in the ratio of the nonmarital investment to the total nonmarital and marital investment in the property. The remaining property is characterized as marital and its value is subject to equitable distribution. Thus the spouse who contributed nonmarital funds, and the marital unit that contributed marital funds each receive a proportional and fair return on their investment.”
  • Put into a formula, it looks like this:

Screen Shot 2014-02-23 at 3.10.31 PM

(1) The Farmhouse:

Screen Shot 2014-02-23 at 3.10.45 PM

  • “Accordingly, the ratio of the nonmarital investment by Husband to the total of the nonmarital and marital investment in the property yields $69,886.60 (37.77654% x $185,000.00), and the value of the marital interest in the property is $115,113.38 (62.22345% x $185,000.00).”

(2) The Commercial Property:

  • Screen Shot 2014-02-23 at 3.10.39 PM“Accordingly, the ratio of the nonmarital investment by Husband to the total nonmarital and marital investment in the property yields 28.57142% of the equity, hence the value of Husband’s nonmarital interest in the property is $36,285.70 (28.57142% x $127,000.00). Thus, the value of the marital interest in the property is $90,714.30 (71.42858% x $127,000.00).”
  • Bottom line: H gets nonmarital portion, and then half of the martial portion.

Rule: Any increase in the value of separate property can constitute marital property if marital assets or labor contributed to acquiring that increase.

math-school[ Via David Mills ]