In Kaaa v. Kaaa, the Florida Supreme Court changed the way a court determines whether a non-owner spouse is entitled to a share in the non-marital property.
By Cynthia L. Greene, Family Lawyer
One of the leading cases to come out of the Florida Supreme Court in 2011, was Kaaa v. Kaaa, 58 So.3d 867 (Fla. 2011) which completely overruled a statute and changes how a court approaches whether a non-owner spouse is entitled to share in the passive appreciation of non-marital property, by way of equitable distribution.
In Kaaa v. Kaaa, the parties were married in 1980. For the next twenty-seven years, they resided in a home in Riverview, Florida that the husband purchased about six months prior to the marriage. He purchased the home for $36,500 and made a $2,000 down payment. During the marriage, marital funds were used to pay down the mortgage as well as to improve the home by renovating the carport. Although the home was refinanced several times during the marriage, the wife was never given a title interest in the property. At the final dissolution hearing in 2007, the parties stipulated that the current fair market value of the home was $225,000 and that the remaining mortgage balance was $12,871.46. In its final judgment, the trial court found that the marital home was the husband’s non-marital real property, that the mortgage balance had been reduced by $22,279, and that the carport renovation increased the value of the home by $14,400. According to the trial court, the total enhancement value of the home (and the amount subject to equitable distribution) was $36,679. Concluding that the wife was entitled to equitable distribution of only the enhancement value of the marital home, the trial court awarded her an equalizing payment of $18,339.50 and ordered the husband to pay her this amount. The wife appealed, arguing that the value of the passive appreciation of the marital home that accrued during the marriage was subject to equitable distribution. Relying on its decision in Mitchell v. Mitchell, 841 So. 2d 564 (Fla. 2nd DCA 2003), the Second District affirmed the judgment of the trial court and held that the wife was not entitled to equitable distribution of the home’s passive appreciation. However, the District Court also certified direct conflict with the decision of the First District Court of Appeal in Stevens v. Stevens, 651 So. 2d 1306 (Fla. 1st DCA 1995). The Supreme Court resolved the conflict as follows:
1. “In order to resolve the conflict between the cases, this Court must determine whether and under what circumstances the passive appreciation of a marital home that is deemed nonmarital property is subject to equitable distribution under section 61.075(5)(a)(2), Florida Statutes (2007).”
2. “For the reasons expressed below, we conclude that contingent upon certain findings of fact by the trial court, passive appreciation of the marital home that accrues during the marriage is subject to equitable distribution even though the home itself is a nonmarital asset. We quash the Second District’s decision in Kaaa, and approve the First District’s decision in Stevens to the extent that it is consistent with this opinion.”
3. “[The] language [of section 61.075(5)(a)(2), Florida Statutes (2007)] clearly provides that under certain circumstances, the appreciation of a nonmarital asset is indeed a marital asset. We reject [the Husband’s] argument that passive appreciation is not encompassed by the language in this section, and we conclude that the passive appreciation of a nonmarital asset, such as the Kaaa’s marital home, is properly considered a marital asset where marital funds of the efforts of either party contributed to the appreciation. Such findings are to be made by the trial court based on the evidence presented by the parties.”
4. “We agree with the reasoning in Stevens to the extent that it concludes that the payment of the mortgage with marital funds subjected the passive appreciation to equitable distribution.”
5. “However, we emphasize here that it is the passive appreciation in the value of the home that is the marital asset, not the home itself. As the First District Court of Appeal has noted, ‘improvements or expenditures of marital funds to a nonmarital asset does not transform the entire asset into a marital asset; rather, it is only the enhancement in value and appreciation which becomes a marital asset.’ Martin v. Martin, 923 So. 2d 1236, 1238–39 (Fla. 1st DCA 2006) . . . Moreover, we emphasize that the trial court must make a finding of fact that the non-owner spouse made contributions to the nonmarital property during the course of the marriage. While these contributions need not be strictly monetary and may include marital funds or the efforts of either party, they must enhance the value of the property.”
6. “While the trial court and district court correctly concluded that that Kaaas’ marital home is nonmarital real property, the value of the passive appreciation of the property that accrued during the marriage is a marital asset because (1) the value of the home appreciated during the marriage while marital funds were being used to pay the mortgage, and (2) Katherine Kaaa made contributions to the home. Because paying the mortgage is a prerequisite to enjoying the appreciation in value of the marital home, we conclude that principles of equity do not allow an owner spouse to receive the full benefit of the passive appreciation when the nonowner spouse contributed to the property, and marital funds were used to pay the mortgage. Such inequities must be balanced by the trial court making specific factual findings regarding the contributions of the nonowner spouse and the relationship of those contributions to the passive appreciation of the property.”
7. “We now turn to the method that a trial court should employ as it determines whether a nonowner spouse is entitled to a share of the passive appreciation and calculates the proper allocation. We note that the trial court’s task in this regard is an extremely fact-intensive one, and there are certain steps that each court must take. First, the court must determine the overall current fair market value of the home. Second, the court must determine whether there has been a passive appreciation in the home’s value. Third, the court must determine whether the passive appreciation is a marital asset under section 61.075(5)(a)(2). This step must include findings of fact by the trial court that marital funds were used to pay the mortgage and that the nonowner spouse made contributions to the property. Moreover, the trial court must determine to what extent the contributions of the nonowner spouse affected the appreciation of the property. Fourth, the trial court must determine the value of the passive appreciation that accrued during the marriage and is subject to equitable distribution. Fifth, after the court determines the value of the passive appreciation to be equitably distributed, the court’s next step is to determine how the value is allocated.”
8. “Based on the circumstances of this case, we approve the methodology in Stevens, which addresses the disposition of nonmarital real property assets and provides the . . . method for determining how the appreciated value is to be allocated . . .”
9. “Applying this language from Stevens to Kaaa, we note that the home was financed almost entirely by borrowed money that was repaid almost entirely by marital funds. Moreover, there appears to be ample evidence in the record of contributions made by Katherine Kaaa that affected the passive appreciation of the home’s value.”
10. “In sum, when a marital home constitutes nonmarital real property but is encumbered by a mortgage that marital funds service, the value of the passive, market-driven appreciation of the property that accrues during the course of the marriage is a marital asset subject to equitable distribution under section 61.075(5)(a)(2), Florida Statutes (2007).”
Kaaa v. Kaaa, 58 So.3d 867 (Fla. 2011)
For full court opinion, see Kaaa v. Kaaa
Cynthia L. Greene, Esq. is the founder and managing partner of Greene Smith & Associates, P.A. She is the former chairperson of the Family Law Section of the Florida Bar. she is also Board Certified in Marital and Family Law, and is a fellow of the American Academy of Matrimonial Lawyers. For more information, or to contact her, please visit: www.greenesmithlaw.com
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