Distribution of a House by the Courts of Pennsylvania

How does Pennsylvania handle the equitable distribution of a house? What happens if only one party’s name is on the deed? What happens when the parties mix non-marital property with marital property?

The case of Lowry v. Lowry (375 Pa.Super. 386) gives a complex analysis of the equitable distribution of a house that was built by the parties. The husband and wife purchased an empty lot. The husband “gave” his wife his interest in the lot to protect it from his former spouse. The Wife refinanced and later sold her first house to raise funds for construction on the new house.

Husband argued that Wife’s contribution of the proceeds of her house should have been included in the marital estate. The trial court had deemed those funds non-marital, and therefore were treated as Wife’s separate property. But the Court disagreed, deciding that by putting Wife’s name alone on the deed, Husband made it Wife’s separate property, “except for the increase in value during marriage.” Therefore a determination of the increase of the value of the property was necessary.

Putting Only One Spouse’s Name on a Deed is a Gift

The Court held:

That the marital home is excluded from Equitable Distribution under Section 401(e)(3) of the Divorce Code because the land on which the dwelling was constructed was made a gift to Defendant by Plaintiff. The Plaintiff at the time of transfer stated to Defendant “I”d rather you (Defendant) have this property than Claire (Plaintiff”s ex-wife)”. Section 401(e)(1) of the Code provides that property acquired in exchange for property acquired prior to the marriage is excluded from marital property except for the increase in value thereof during the marriage. Section 401(e)(3) provides that property acquired by gift is excluded from marital property except for the increase in value thereof during the marriage.

Husband pointed out that Wife had deposited $50,000 from the proceeds of her first house into a joint savings account. On this topic, the Court wrote:

We agree with the trial court in its finding of a gift of the Hemlock Farms property by husband to wife in December 1972. At that time, the property”s value would appear to be around $14,300, consisting of $7,300 in the price of the lot, $4,000 paid for initial construction work and $3,000 for the initial construction materials. All of this was paid for by wife with her pre-marital funds obtained from the refinance of her Long Island home. She gifted these amounts to the marital estate by investing them in the property, which was then held in joint names. Brown v. Brown, 352 Pa.Super. 267, 507 A.2d 1223 (1986) (property acquired prior to marriage that is transferred into property in joint names during marriage becomes marital property unless contrary intent is shown by clear and convincing evidence). However, when husband conveyed his interest in the property to wife by deed dated December 30, 1972, he made a gift thereof back to wife, thus excluding the property at its then present value from marital property.

It matters not what husband’s motive was in deeding the property to wife. As Justice McDermott opined in his concurring opinion in Semasek v. Semasek, 509 Pa. 282, 502 A.2d 109 (1985):┬á “A gift may be given to anyone. The law is cold in its definition, it does not ask a reason for the giving, only an intention, delivery and acceptance of the thing are required…. The question ought not to be what is the subject or the purpose of the gift, but rather whether was it intended as a gift, delivered and accepted.”┬á Id. at 292, 502 A.2d at 113-14. … The fact that husband states that his only intent in deeding the property to wife was to prevent his former spouse from taking the property does not undermine our conclusion. As the Brown court concluded, the fact that there is some financial gain to be had by the gifting spouse as a result of the gift, like a reduction in taxes, does not negate donative intent, but rather positively suggests it. Id. at 272, n. 3, 507 A.2d at 1225 n. 3. This is because the financial goal will only be attained if the gift is effected. The desire to achieve the financial goal is the source of the donative intent that supports a finding of a gift. …

Mixing Separate Funds into a joint Project or Property is a Gift

Wife, however, could not claim that all of the proceeds of the sale of her first house was separate. The Court wrote:

Where a spouse places separate property in joint names, a gift to the entireties is presumed absent clear and convincing evidence to the contrary. See Brown, 352 Pa.Super. at 273, 507 A.2d at 1225… Our conclusion that wife made a gift of this $13,000 to the marital estate when she deposited it in joint names is further buttressed by the fact that the money was thereafter used to make further improvements to the Hemlock Farms property which, although held in wife”s name, was the joint project and marital residence of the parties.

Of the $87,000 market value at the time of the divorce, the Court looked at the following findings of the trial court:

In summary, we can conclude, even from the incomplete and unclear state of the record before us, that wife actually proved only that the Hemlock Farms property was gifted to her during the marriage when it was worth $14,300 and that she thereafter exchanged a total of $14,000 ($27,000 minus $13,000) in pre-marital assets for materials used in improving the property. This totals $28,300 of the value of the home that is non-marital property. The remaining $13,000 of wife”s pre-marital assets that were invested in the Hemlock Farms property were contributed to the marital estate when transferred to joint names.

The Superior Court of Pennsylvania ruled in another case on the issue of a spouse putting the name of the other spouse on a deed after the wedding.  During the divorce, the Husband argued that he should be credited with having owned the property prior to the marriage.  The Court stated,

Husband argues that in considering these factors [referring to the statutory factors regarding equitable distribution], the court must give additional points to the party who owned the property prior to marriage and then transferred the property to tenancy-by-the-entireties during marriage.   The husband supports his argument by reference to Section 401(d)(7) of the Code, set forth in footnote one, which provides in part that one of the factors to be considered in equitable distribution is the contribution of each party to the acquisition of marital property.   In fact, the husband asks us to fashion a principle that would require a court to give overriding consideration to that factor, so that as donor of the real estate to the marriage, he will get extra credit which translates to a greater share of the value of the real estate upon equitable distribution.

We disagree with husband’s contention.   First we note that Section 401(d)(7) does not afford any special consideration to a pre-marital acquisition that later becomes marital property.   As to marital property, Section 401(d)(7) instructs the court to give consideration to the “acquisition, preservation, depreciation or appreciation of marital property.”   The weight to be accorded the acquisition factor depends upon the facts of each case.   The court must consider this factor along with the other relevant 401(d) factors.   We know of no reason nor has appellant proposed any reason why the weight of this factor should be assigned greater value than the other enumerated factors.”  Williams v Williams, 373 Pa.Super. 143, 540 A.2d 563.

In other words, such an action should be considered but is no more important than any other factor in the statutes.