Domestic Relations – Equitable Distribution – Separate & Marital Properties – Rental Houses – Bank Account

Smallwood v. Smallwood. (Lawyers Weekly No. 011-045-11, 6 pp.) (James E. Lockemy, J.) Appealed from Aiken County Family Court. (Peter R. Nuessle, J.) S.C. App. Click here for the full text of the opinion.

Holding: Even though, during the first five years of the parties’ marriage, the respondent-wife helped to manage the rental properties that the appellant-husband had purchased before the marriage, and even though the husband used some marital funds to support his rental properties, the rental properties remained the husband’s separate property.

We affirm in part and reverse in part the trial court’s equitable distribution order.

The husband maintains that he purchased the rental properties prior to the parties’ marriage and they were never transmuted into marital property. We agree.

The family court found that the wife was a manager of the rental properties and that commingled funds were used to support the rental properties. The family court noted that the parties lived in two of the rental properties during their marriage and that the properties were paid in full during the marriage from rental income, the parties’ jointly titled bank account, and the husband’s earnings during the marriage. The family court also found the insurance bill for one rental property was in the name of both parties.

The husband acknowledges that the wife assisted with the rental properties by painting, cleaning and taking lease applications; however, he contends the rental properties were not transmuted into marital property because he never intended to treat them as marital property.

A spouse claiming transmutation must produce objective evidence showing that, during the marriage, the parties themselves regarded the property as the common property of the marriage.

The wife failed to carry her burden of producing objective evidence showing the husband regarded the rental properties as the common property of the marriage. The husband purchased the rental properties prior to parties’ marriage and testified at trial they were his property and did not belong to the wife. The record contains no evidence that the husband ever placed the rental properties in the wife’s name or transferred the properties to her as a gift.

Although the parties lived in one of the rental properties for several months at the beginning of their marriage, the wife failed to present any evidence that the husband intended to treat that property, or any of the other rental properties, as marital.

Furthermore, we do not agree with the wife’s argument that the assistance she provided to the husband in managing the rental properties was evidence of the parties’ intent to treat the properties as marital. While we recognize the wife’s contributions of time and labor during the parties first five years of marriage, they are insufficient to prove transmutation.

The husband testified that he paid the mortgages on the rental properties with rental income. There is no evidence in the record that marital funds were ever used to pay the mortgages.

The husband also testified property management companies deposited the income from the rental properties into his corporate bank account. The record does not reflect that rental income was ever deposited into the parties’ joint bank accounts.

Furthermore, the husband’s admission that he used funds from the parties’ joint account to support his business is insufficient evidence of intent to treat the rental properties as marital. The husband did not testify as to how much money was used from the account or how the money was used to support the rental properties.

Thus, based on the preponderance of the evidence, we find the husband did not intend to treat the rental properties as marital property and, therefore, they were not transmuted. Accordingly, we reverse the family court’s determination that the rental properties were transmuted into marital property and subject to equitable distribution.

The husband also argues that the family court erred in equitably dividing the proceeds of the parties’ bank account. We disagree.

At trial, the husband acknowledged the money held in the jointly titled account was acquired during the parties’ marriage. He testified that he deposited $60 a month of his salary as well as the proceeds from the sale of a rental property into the account.

Furthermore, the record contains evidence of the parties’ intent to treat the account as marital property. Both parties testified that the account was used to save money for their trip to Hawaii.

The husband also testified he made investments in his and the wife’s names using funds from the account. Accordingly, we affirm the family court’s determination that the account was marital property subject to equitable distribution.

Affirmed in part and reversed in part.