Courts are often called upon to decide whether assets are marital property subject to division in a divorce or whether assets are separate property. In a recent Michigan Court of Appeals case, Maher v Maher, Wife [“W”] claimed that a Smith Barney investment account titled to both parties was marital property. The account had initially been funded with settlement proceeds from Husband’s [“H”] prior employment discrimination case—filed before the parties’ marriage, but settled during the marriage. W also claimed that the appreciation of that account was marital. The trial court found that the initial investment continued to remain H’s separate property, but the appreciation in the account during the parties’ marriage was distributable as marital property. Both parties appealed. The final result in the COA was that H got to keep not only the initial monies, but also all of the appreciation.
The Initial Funding of the Account:
The COA first discussed prior rulings on the issue of separate property, stating that separate property is an asset that one spouse obtained or earned prior to the marriage and marital property consists of those assets earned or acquired during the marriage. Because H’s settlement resulted from an injury to H, and little in the way of marital funds was used to pursue the lawsuit, the COA held that the trial court’s characterization of those monies (about $113,000) as H’s separate property was not erroneous.
The COA said that W did not prove that the funds were actually commingled with marital funds, but was segregated and kept separate in character from other marital property placed into the account. Citing Korth v Korth, 256 Mich App 286, 292 (2003) and Reeves v Reeves, 226 Mich App at 495-498, the COA added that how assets are titled is not dispositive. The only other funds placed in that account titled in the names of both H and W were the result of defendant’s stock options through his employer. Nevertheless, from the Smith Barney account summary, the stock funds were clearly distinguishable from the settlement funds.
W contended that she should receive half of the monies because she contributed to the acquisition, improvement, or accumulation of the property during the course of the marriage, and the trial court should have allowed her to invade H’s separate property under the statutory exception in MCL 552.401. The trial court rejected this claim, distinguishing this case from Hanaway v Hanaway, 208 Mich App 278 (1995). Additionally, the trial court found no “need” demonstrated by W and rejected her claim of invasion under the statutory exception in MCL 552.23. The COA affirmed.
Next, the COA addressed H’s challenge to the trial court’s ruling that the appreciation on this portion of the Smith Barney account was marital and should be divided equally. The COA reversed the trial court, holding that since the monies were readily identifiable and neither party in any way actively managed the account. Thus the appreciation in the account was not active as W claimed, but was, in fact passive.
The trial court’s ruling on the appreciation was that it was marital property because of “commingling.” The COA rejected the trial court’s assessment, saying that “separate property is ‘commingled’ when it is combined with marital property and loses its original character. Because the monies remained easily traceable, were not combined with other marital assets, and in fact were transferred by H into an individual account with W’s authorization, the COA rejected the trial court’s finding that the funds gained through appreciation were commingled. Thus the trial court on remand was directed to award the appreciation to H as his separate property.
The Classic Cars:
On the other hand, two classic cars that H owned prior to the marriage, a 1967 Chevelle and a 1969 Chevelle, were restored by the parties during the marriage and were thus subject to distribution under MCL 552.401.You may read Maher v Maher here.