Posted by Nydia Streets of Streets Law in Florida Divorce

When a spouse owns property prior to marriage, that property is usually classified as the spouse’s separate property so long as that spouse has not taken steps which convert the property to a jointly owned-asset. Even if the property remains the spouse’s separate property, the other spouse may be entitled to half of the appreciation in value of the property accumulated during the marriage, especially if the increase was due to active appreciation (meaning the spouse’s labor or efforts). This was an issue in the case Palmer v. Palmer, 5D19-2389 (Fla. 5th DCA April 16, 2021).

At the time of the parties’ marriage, the former husband owned stock in three closely-held corporations. Eight years into their marriage, the former husband quit his job and took a position as Chairman of the Board of Directors for the three closely-held corporations in which he owned stock. As the marriage progressed, the husband took a more active role in the corporation, and the bulk of income he received during the marriage was from this position.

The former wife filed for divorce in 2018 and alleged that the stock had appreciated in value due to the former husband’s active efforts. An expert testified on behalf of the former wife that the stock had increased by $1,240,000.00 due to the former husband’s efforts. The former husband offered very little rebuttal evidence to the former wife’s expert’s testimony, and his financial affidavit valued the stock at a higher rate than even the former wife’s expert. Ultimately, the trial court found the former husband did not meet his burden to rebut the former wife’s evidence as to the appreciation in value, and awarded half of it to her. The former husband disputed that the value of the stock was due to his labor and he appealed.

The appellate court noted that it appeared the former husband was in disagreement with the weight and not the sufficiency of the expert’s testimony. Finding no error in the trial court’s ruling on the appreciation in value, the appellate court held “The trial court, while acknowledging that Former Husband was not involved in the ‘day-to-day management role’ of the company, nevertheless detailed the various ‘leadership efforts’ and ‘marital labor’ that Former Husband did provide to Palmer Timber from 2009 up to Former Wife’s filing for dissolution of marriage in May 2018 that it found to have directly benefited or improved Palmer Timber’s financial condition and, thus, the value of his stock. We find that competent substantial evidence in the record supports the trial court’s findings that the appreciated value in Former Husband’s stock from 2009 to 2018 was due to his marital labor. Under these circumstances, once Former Wife met her burden of showing that the appreciated value in Former Husband’s Palmer Timber stock was due to his marital labor, the burden then shifted to Former Husband to show that some portion of this enhanced value was exempt from equitable distribution.”

Last, turning to the former husband’s argument that the trial court double-credited money to him in equitable distribution, the appellate court agreed with the former husband. The evidence showed that real property was sold after the former wife filed for divorce and the parties split the net proceeds equally between themselves. The former husband put his half in a separate account, and these funds were in that account at the time of trial. As part of equitable distribution, the trial court credited to each spouse their respective half of the sale proceeds of the home, and on top of this, the court credited to the former husband the same funds in his account, resulting in the court double-counting this amount. As this was clear error, the appellate court remanded with instructions to correct this mistake.

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