Virginia Equitable Distribution: Marital Waste Illustrated . . . Sort Of

How do Virginia courts address the failure of one spouse to maintain marital property after the final separation?  Can the other spouse get a credit for the loss in value?

Va. Code § 20-107.3 provides the process for the equitable division of the marital estate upon divorce.  First, the circuit court determines the title, ownership and value of all property between the parties.  Second, the court determines which property is marital property (generally all property acquired after the marriage but before the final separation), separate property (generally all property acquired before the marriage or after the final separation), or hybrid property (generally all property acquired with some combination of martial funds and separate funds, like a home acquired before the marriage but continued to be paid off during the marriage).  It is important to remember that whether a property is marital, separate, or hybrid has nothing to do with whose name it’s titled in.  Third, the court may divide, transfer or order the division or transfer of any jointly owned property pursuant to various factors under the Virginia Code (e.g., the contributions of each party to the well-being of the family).  Fourth, the court may grant a monetary award to either spouse based upon the equities, rights and interests of the parties in the marital property and aforementioned factors under Virginia Code § 20-107.3(E).[1]

In Bell v. Bell, (CL10-1312) the Roanoke County Circuit Court was faced with a difficult decision regarding the valuation step.  In that case, the parties married sometime around 1975 and separated sometime in the spring of 1995.  During the marriage, the husband acquired four parcels of real estate in his own name.  Upon separation, the wife moved into one of the parcels that had just been completely remodeled.  Thereafter, however, she allowed the property to go to hell.  Husband’s expert appraiser testified at trial that while the property was worth $150,000, its light fixtures needed to be replaced, its exterior siding was riddled with insects, its back deck was pulled from its steps, its garage door was rotted to the point that it no longer worked, its driveway and roof essentially needed to be replaced, and it otherwise suffered from pervasive wood and water damage.  Altogether, he deemed the property to be the third or fourth worst deteriorated house he had ever seen and that the repairs needed to get it back into good shape would cost $26,000.[2]  Moreover, he testified that the property was worth about $118,000 at the time of the separation in 1995.  The other three properties, however, were all held to be in excellent condition and valued at $700 (0.9 acre parcel) and $475,000 (4.4 acre and 58.7 acre parcels combined), respectfully.  As such, the marital property in this case totaled $625,700 and the amount of monetary necessary to equally divide the value of the marital property would be $312,850 payable by the husband (who individually owned all of the properties) to the wife (who owned none of the properties).  If the husband transferred his interest in the wife’s residence to her, the remaining monetary award would be only $162,850.  Given these facts, how should this court have accounted for the $26,000 in lost value caused by the wife’s negligence?

Va. Code § 20-107.3(E)(10) states that the court shall determine the amount of any monetary award after consideration of, inter alia, the “use or expenditure of marital property by either of the parties for a nonmarital purpose or the dissipation of such funds, when such was done in anticipation of divorce or separation or after the last separation of the parties.”  Subsection (11) further states that the court shall also consider such “other factors as the court deems necessary or appropriate to consider in order to arrive at a fair and equitable monetary award.”  So, in this case, did the aforementioned lost value constitute marital waste under subsection (10) or just another factor to consider under subsection (11)?

Interestingly, the court decided that while it did not constitute marital waste under subsection (10), basically because no marital property was actually used, it nevertheless did constitute permissive waste per longstanding caselaw and statutory law in Virginia.  See, e.g., Chosar Corporation v. Owens, 235 Va. 660 (1988) and Va. Code § 55-211.  Indeed, the court held:

            “Generally, waste is defined as a destruction or a material alteration or destruction of the freehold, or of the improvements forming a material part thereof, by any person rightfully in possession, but who has not the fee title or the full estate.  Chosar Corporation v. Owens, 235 Va. 660, 663 (1988), quoting from Black’s Law Dictionary.  Although marital property as defined by the equitable distribution statute gives Wife an interest in the value of the marital real estate, it does not give her an ownership interest in it.  See, Va. Code § 20-107.3(B), Code of Virginia, 1950 as amended.  The residence Wife lived in for the past seventeen years is titled solely in Husband’s name.  He is its fee simple owner.  At law, Wife had no legal interest in the real estate.  She could have been evicted by husband at any time.  She simply moved in without objection by Husband.  Her claim to the residence was one of possession only.  She has a mere scintilla of interest in the home.  Her relationship to the owner/landlord was personal only.  There was no lease to Wife.  Her interest could not be assigned at law.  She was a tenant at will, rightfully in possession.  Her tenancy was and is tenuous, and at the pleasure of Husband.  Eason v. Rose, 183 Va. 359. 365 (1944).  Such a tenant can be held liable for waste.  Chosar Corporation v. Owens, supra.  See also § 55-211, Code of Virginia (1950), as amended,  that makes any tenant in possession who commits waste liable to any party injured.

             The type of waste being examined in connection with the premises where Wife resides is permissive waste.  It is a form of wasted caused by the failure to take reasonable care of the property.  It is the kind of waste that is a matter of omission only.  In this particular case, it is alleged to be the failure to protect the building and other improvements from the ravages of weather, water, insects and time.  See Minor on Real Property (2nd Ed., Ribble), Vol. 1, section 418.

Perhaps more interestingly, is how the court chose to arrive at an equitable monetary award given this finding of permissive waste.  But for the wife’s waste, her residence would have been worth $176,000 at the time of trial.  Thus, assuming each party would be entitled to half the marital equity in this property, each party would miss out on $13,000.  As such, the court could have just held that either the wife owed her husband his missing $13,000 or that he owed her the monetary award less $13,000.  This is the quick math way to get the result intended.  The court, however, showed all of its steps.  It added back the loss to the marital estate (i.e., it treated the wife’s residence as if it was worth $176,000 and therefore the total marital estate was worth $651,700), determined that the resultant marital equity should be divided equally (i.e., it held that she should receive a monetary award equal to $325,850), that she should be treated as having already received a portion of the monetary award in the amount of $26,000 (i.e., her monetary award was effectively reduced by the amount of waste to $299,850), and that the husband could still transfer his interest in the wife’s residence to her to reduce his monetary award obligation further (i.e., her remaining monetary award would be $149,850).  The result is the same: her monetary award was reduced by $13,000, which equals the husband’s lost equity caused directly by the wife’s permissive waste.

Waste not, want not at trial!

[1] Note that the circuit court identifies, values, and divides martial debts similarly.

[2] Note that these facts are not the most unusual in this case.  The second most unusual fact is that the parties were separated for 17 years before finally divorcing.  The first most unusual fact is that the husband managed to acquire and flip multiple properties to his benefit despite being unable to read or write.