Divorce Proceedings • Equitable Distribution • Marital Assets • Coverture Fraction • Principles of Equity

Dean v. Dean, PICS Case No. 14-0365 (C.P. Berks Jan. 15, 2014) Lash, J. (24 pages).

The court of common pleas denied husband’s exceptions to a divorce master’s recommended equitable distribution where the master’s application of the coverture fraction, which accounted for wife’s contribution of both marital and non-marital funds to the marital residence, was appropriate considering the circumstances and the principles of equity. Affirmance recommended.

The parties were married in 1986. In March 2010, husband filed a complaint seeking a divorce and resolution of ancillary claims. The court of common pleas bifurcated the matter and entered a divorce decree. Thereafter, a special master in divorce held a hearing on ancillary matters.

The master issued a report recommending that marital assets be distributed, with 75 percent of the assets awarded to the defendant wife and 25 percent to the plaintiff husband. In order to accommodate this percentage of distribution, the master awarded the marital residence to wife and recommended that she pay husband $17,366.

Thereafter, the court denied husband’s exceptions. Husband filed an appeal, prompting the court’s opinion. Husband took exception to the divorce master’s application of the coverture fraction to determine the value of the marital residence for purposes of equitable distribution and husband’s interest therein.

The court noted that in making equitable distribution, the master identified two significant assets, the parties’ marital residence and vacation cabin. The cabin was sold and the proceeds distributed equally. The marital residence was purchased in 1995 for $122,000. The current market value for the house, minus expenses incurred upon sale, was $168,330.

The master considered an estate plan the parties entered into in 2002. At the time, wife sought husband’s cooperation in allowing her children to inherit the marital residence. Husband executed a deed conveying his interest in the residence to wife, and the parties executed mutual wills setting forth that if wife died first and the parties were still married at the time, the marital residence was to be sold, with the first $80,000 of proceeds to be distributed to wife’s children.

The master also considered that wife was solely responsible for financing the residence. At the time of purchase, she borrowed $104,000. Moreover, wife withdrew $25,000 from her employment savings plan and used proceeds from the sale of her former residence for a total of $8,637. In addition, she paid off the balance due on the residence with money she received when she retired.

The master found that only a portion of the value of the residence could be deemed marital property because wife used both marital and non-marital funds in paying off the mortgage. The master utilized the “vanishing credit” theory for the proposition that under certain circumstances, a spouse may be entitled to a credit in equitable distribution for the value of non-marital property transmuted to the marital estate.

The court noted that under the unique facts, it agreed with the master’s determination that application of the coverture fraction was appropriate “considering the contextual circumstances and the principles of equity.” At the time of her retirement, wife chose to pay off the remaining debt on the marital residence with funds she would have received in retirement. Thus, wife traded income she would have received in the future for an increase in her present day cash flow by paying off the mortgage, which payment included non-marital funds.