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Raymond H. v. Cammie H.

Supreme Court of Appeals of West Virginia

November 19, 2019

Raymond H. Respondent Below, Petitioner
v.
Cammie H., Petitioner Below, Respondent

          Submitted: November 6, 2019

          Appeal from the Circuit Court of Mercer County The Honorable William J. Sadler, Judge Civil Action No. 15-D-24

          Anthony R. Veneri, Esq. Veneri Law Offices Princeton, West Virginia Counsel for Petitioner

          Debra Kilgore, Esq. Burton & Kilgore, PLLC Princeton, West Virginia Counsel for Respondent

         SYLLABUS

         1. "Where the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review." Syl. Pt. 1, Chrystal R.M. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995).

         2. "When endeavoring to construe the meaning of an ambiguous statute, we must be mindful that [t]he primary object in construing a statute is to ascertain and give effect to the intent of the Legislature." Syl. Pt. 1, Smith v. State Workmen's Comp. Comm'r, 159 W.Va. 108, 219 S.E.2d 361 (1975).

         3. Under West Virginia Code § 43-1-2, where a spouse conveys a security interest in his or her separate real property by deed of trust and fails to give notice of the conveyance to the non-title holding spouse within thirty days of the transaction, then in the event of a subsequent divorce within five years of the conveyance, said separate real property shall be deemed a part of the conveyancer's marital property for purposes of determining equitable distribution or awards of support, and assigned a value equal to its fair market value, net of debt, at the time of the conveyance.

          WORKMAN, JUSTICE.

         In this divorce proceeding we are called upon to determine the standard for valuation of real property, where said property was acquired by the respondent wife prior to the parties' marriage but is included in the marital estate for purposes of equitable distribution by operation of W.Va. Code § 43-1-2(a) - (e). The family court judge initially concluded that the fair market value of the wife's separate property was attributable as a marital asset because during the marriage and within five years prior to divorce, she refinanced existing debt and incurred new debt, executing deeds of trusts secured by the properties, without giving notice to petitioner husband of these transactions prior to or within thirty days thereof. On appeal, the circuit court affirmed, in part, and reversed, in part, concluding that while the wife's separate party was properly included in the marital estate, "[a] deed of trust grants rights to the mortgagee only up to the value of the secured interest, no more," and thus, the value of the real estate conveyed by a deed of trust "is not the total market value of the property but only the value of the security interest."

         On remand, the family court recalculated equitable distribution pursuant to the circuit court's directive, with the result that the three properties subject to equitable distribution were valued at $450, 000.00, the combined value of the notes secured by the deeds of trust, rather than $800, 500.00, the combined fair market value of the properties. The family court's order was affirmed on appeal by the circuit court. It is from this order that the husband now appeals. The wife cross-appeals on the factual issue of whether she gave notice to the husband prior to or within thirty days of the transactions.

         After careful review of the appendix record, the parties' briefs and oral arguments, and the applicable law, we reverse, in part, and affirm, in part, and remand with directions.

         I. Facts and Procedural Background

         Petitioner Raymond H. ("the husband") and Cammie H. ("the wife")[1] were married on June 3, 2006, and separated on January 8, 2015. On January 9, 2015, the wife filed a petition for divorce, and on April 9, 2015, the family court entered a bifurcated divorce order, divorcing the parties but reserving financial issues for future proceedings. The relevant facts underlying the financial issues are as follows. Prior to the marriage, the wife acquired two pieces of real estate: the "Green Valley" property, purchased on September 22, 2003, and the "Shenandoah Estates" property, purchased on August 2, 2004. The Green Valley property was a business property which the wife used for operation of her daycare business, Imagination Station, while the Shenandoah Estates property was a residential property which ultimately became the parties' marital home.[2] The parties agree that both Shenandoah Estates and Green Valley would be classified as the wife's separate property but for the application of the statute at issue in this case, W.Va. Code § 43-1-2(a) to -(e).

         On May 5, 2011, while the parties were married, the wife purchased a third parcel of real estate, the "Lyndale Avenue" property, for $15, 000.00. The property is titled in wife's name only, and she made improvements thereto in order to establish another daycare business, Creation Station, at the location. The parties agree that the Lyndale Avenue property is, and has always been, marital property.

         On June 15, 2012, during the marriage and within five years of the parties' eventual divorce, the wife borrowed $200, 000.00 from MCNB Bank. The funds borrowed were used to refinance the debt then owing on the Shenandoah Estates property and to provide approximately $39, 000.00 to build an in-ground pool thereon. The $200, 000.00 note was secured by a deed of trust which conveyed all of the Shenandoah Estates property to a trustee "IN TRUST FOREVER to secure the payment of the Note which is payable to the order of Lender, the beneficial owner of said Note…." The husband was not a party to the transaction and did not sign the deed of trust, and the family court found as a fact, after hearing all the evidence, that the wife did not notify him of the conveyance prior to or within thirty days thereof. At the time of the parties' separation, the balance owing on the note was $151, 810.38.

         On May 9, 2013, again during the marriage and within five years of the parties' divorce, the wife borrowed $250, 000.00 from MCNB Bank. With this money, wife refinanced the debt then owing on the Green Valley property; refinanced the debt then owing for improvements made on the Lyndale Avenue property; paid off a note secured by other separate property owned by wife, [3] and borrowed additional money to make improvements to the Green Valley property. The $250, 000.00 note was secured by a deed of trust conveying both the Green Valley and Lyndale Avenue properties to the trustee in language identical to that cited in the Shenandoah Estates refinancing transaction. Again, the husband was not a party to the transaction and did not sign the deed of trust, and again, the family court found as a fact that the wife did not notify him of the conveyance prior to or within thirty days thereof. At the time of the parties' separation, the balance owing on the note was $220, 093.00.

         During the course of the parties' divorce proceedings, the family court found as a fact that at the time of execution of the June 15, 2012, deed of trust, the fair market value of the Shenandoah Estates property was $370, 500.00, and that at the time of execution of the May 9, 2013 deed of trust, the fair market value of the Green Valley property was $325, 000.00 and the fair market value of the Lyndale Avenue property was $105, 000.00. The parties do not dispute these valuations.

         In its initial order of June 15, 2017, the family court found as a fact that the wife had not carried her burden of proof to show that she gave notice to petitioner husband of either of the above transactions prior to or within 30 days thereof, as required by W.Va. Code § 43-1-2(b) & (c). The court then held as a matter of law that the transactions were "conveyances" of the Shenandoah and Green Valley properties pursuant to W.Va. Code § 43-1-2(a); and that accordingly, the "value of the real estate conveyed, as determined at the time of the conveyance, shall be deemed a part of the conveyancer's marital property for purposes of determining equitable distribution," W.Va. Code § 43-1-2(d). Finally, the court held that the value of the real estate conveyed was the fair market value of the properties, reasoning that "[t]he wife did not convey only a percentage of each property or its value, but conveyed all of the property in trust as collateral for the loans." (Emphasis in original)

         On appeal, the circuit court reversed solely on one ground:[4] that the family court abused its discretion in determining the value of the real estate conveyed by the deeds of trust. The circuit court concluded that,

The value of interest that conveyed real estate is not the total market value of the property but only the value of the security interest. A deed of trust grants rights to the mortgagee only up to the value of the security interest, no more. Under this statute, only the value of the real estate co ...

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