Mortgage Debt Before Marriage Paid from Marital Funds Consequences
In Stevens v. Stevens, 651 So. 2d 1306 (Fla. 1st DCA 1995), the husband purchased real property and acquired a $ 20,000 mortgage debt before he married.
During the first part of their marriage, the husband and wife lived on the property.
The wife, who never worked outside of the home during the marriage, was never added to the title, and only the husband's income was used to pay the mortgage.
The trial court concluded that the property was the husband's nonmarital asset and did not award the wife any portion of the value of the property's passive appreciation.
The First District reversed the trial court's failure to award the wife a portion of the passive appreciation, stating that "an asset brought by one party to a marriage, which appreciates during the course of the marriage, solely on account of inflation or market conditions, becomes in part a marital asset, if it is encumbered by indebtedness which marital funds service." Id. at 1307.
The court concluded that "the trial court erred in excluding from the equitable distribution plan the entire amount by which the . . . property appreciated in value during the marriage, since marital funds were used to make the mortgage payments and pay the taxes." Id.
The district court rejected the argument that because only the husband's income paid the mortgage, the wife was not entitled to a portion of the value of the passive appreciation.
The court noted that each spouse's funds are to be considered marital funds, and concluded that because marital funds were used to pay the mortgage and other obligations, the court should have awarded the wife a "reasonable proration of the appreciated value." Id. (quoting Sanders v. Sanders, 547 So. 2d 1014, 1016 (Fla. 1st DCA 1989).