Houston We Have A Problem:  Courts are Conflicted on Treatment of Debt Reduction Paid From Marital Funds On a Depreciated Non-Marital Asset

By Eddie Stephens

In Kaaa v. Kaaa, 58 So.3d 867 (Fla. 2010), Florida’s Supreme Court conclusively decided how to determine the impact of the marital appreciation of a non-marital asset when marital funds are used to pay down the indebtedness of non-marital property.

What happens when the non-marital property depreciates during the course of a marriage?

Two opinions were published on this issue last month by the Second and Fourth District Court of Appeals.  The opinions were published 20 days apart and could not be more in conflict.

In Somasca v. Somasca, 40 Fla.L.Weekly D1798 (Fla. 2nd DCA July 31, 2015), the debt on non-marital property was reduced by $23,651.16 using marital funds.  Based on these facts, the Wife contended that she was entitled to an equitable distribution to one half of this reduction. The trial court rejected the Wife’s claim. The trial court reasoned that since there was no appreciation in the value of the non-marital asset during the marriage, the amount of the debt reduction paid from marital funds was moot and not compensable to the Wife.

The Second District reversed the trial Court citing: Ballard v Ballard, 158 So.3d 64 (Fla. 1st DCA 2014) which provides:

“When marital assets are used during the marriage to reduce the mortgage on non-marital property, the increase in equity is a marital asset subject to equitable distribution. The decision in Kaaa did not affect this general rule, and, in fact, it left undisturbed a holding from the lower court based on this general rule. The only question at issue in Kaaa was whether passive appreciation in the value of non-marital property by market forces alone constitutes a marital asset subject to distribution, and the court concluded that it does.”

Twenty days later, the Fourth District Court of Appeals published Weaver v. Weaver, 40 Fla. L. Weekly D1923 (Fla. 4th DCA 2015) where the Wife was denied any reimbursement from mortgage reduction paid from marital funds on a non-marital asset that depreciated in value during the marriage.  In Weaver, the Wife claimed she invested $40,000 from the sale of her non-marital property into the Husband’s non-marital property.  However the evidence demonstrate this money was spent on their wedding, honeymoon, a boat and a motor home.  Nonetheless, it was undisputed the parties pooled their incomes for paying the mortgage on the non-marital property.  Despite this fact, the Fourth concluded because the property decreased in value, there was no enhancement of the value and thus no appreciation due to the expenditure of marital funds and determined it was error for the Court to award the Wife any interest in this non-marital asset, including one half of the mortgage reduction from marital funds.

The Fourth failed to even reference Ballard and the general rule that the Wife would be entitled to one-half the debt reduction.  This decision now conflicts with the First and Second holdings on the same issue.  It will be interesting to see if Mrs. Weaver will pursue the issue further or whether we will have this conflict amongst our districts.  Stay tuned…

Eddie Stephens is a partner at Ward Damon who is Board Certified in Family and Marital Law and has developed a successful family law practice focused on highly disputed divorces.  If you need help with marital or family matters, you may reach Eddie atEStephens@warddamon.com or call 561-842-3000.