Applying Kaaa vs Kaaa for Florida Lawyers

Just about everyone knows the “spreadsheet procedure” which resulted from the Kaaa vs Kaaa decision by Florida’s Supreme Court.

In brief, the passive appreciation is allocated according to the percentage of ownership established at the time of the marriage.  There is a big problem with any “reduction” necessitated by the mortgage being “serviced by marital funds”.  [The original opinion was very detailed in how to apply the decision but it was not implementable.  The revised opinion is much shorter but still confused about “reductions”.]

The “spreadsheet procedure” is a tool that can be used in Step 5 of the 5-Step Kaaa vs Kaaa procedure.

The Supreme Court’s decision is available at : http://www.floridasupremecourt.org/decisions/2011/sc09-967.pdf and an analysis can be found at http://caselaw.findlaw.com/fl-supreme-court/1539758.html#sthash.Ab2WL9CT.dpuf

To a layman, the Florida Supreme Court seemed eager to find a basis for the lower courts to award a portion of the passive appreciation to the non-owner spouse.  Hurley P. Whitaker, esquire, informed me in 2007 that my spouse could not touch my premarital residence.

Quoting the decision:

“61.075 Equitable distribution of marital assets and liabilities.— . . . .

"(5) As used in this section:

“(a) “Marital assets and liabilities” include: . . . .

“2. The enhancement in value and appreciation of nonmarital assets resulting either from the efforts of either party during the marriage or from the contribution to or expenditure thereon of marital funds or other forms of marital assets, or both . . . . (Emphasis added.) 

“This language clearly provides that under certain circumstances, the appreciation of a nonmarital asset is indeed a marital asset. We reject Joseph Kaaa’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 or the efforts of either party contributed to the appreciation. Such findings are to be made by the trial court based on evidence presented by the parties.”

On the bottom of page 7, the opinion states, “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.”

Continuing on to page 8 “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.”

“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.”

Determining an Award of Passive Appreciation

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.  Let's call this TWETCOTNSATAOTP. 

If the trial court does not "find" that the nonowner spouse's contributions affected the appreciation of the property in a positive manner, there is no passive appreciation to be distributed as a marital asset under section 61.075(5)(a)(2).

If the trial court does not determine to what extent the contributions of the nonowner spouse affected the appreciation of the property, the trial court has not completed its task.  

Fourth, the trial court must determine the value of the passive appreciation that accrued during the marriage and is subject to equitable distribution.  In simple cases, this will be directly related to TWETCOTNSATAOTP.   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.

We approve the methodology in Stevens, which addresses the disposition of nonmarital real property assets and provides the following method for determining how the appreciated value is to be allocated:

 

If a separate asset is unencumbered and no marital funds are used to finance its acquisition, improvement, or maintenance, no portion of its value should ordinarily be included in the marital estate, absent improvements effected by marital labor. If an asset is financed entirely by borrowed money which marital funds repay, the entire asset should be included in the marital estate. In general, in the absence of improvements, the portion of the appreciated value of a separate asset which should be treated as a marital asset will be the same as the fraction calculated by dividing the indebtedness with which the asset was encumbered at the time of the marriage by the value of the asset at the time of the marriage. If, for example, one party brings to the marriage an asset in which he or she has an equity of fifty percent, the other half of which is financed by marital funds, half the appreciated value at the time of the petition for dissolution was filed, § 61.075(5)(a) 2, Fla. Stat. (1993), should be included as a marital asset. The value of this marital asset should be reduced, however, by the unpaid indebtedness marital funds were used to service.

Stevens, 651 So. 2d at 1307-08. 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.

Since the Kaaa home was financed mostly by borrowed money which was repaid almost entirely by marital funds, it seems reasonable form Ms. Kaaa to share in the passive appreciation.

What about a home which was 80% owned, only the marital home for 18 months,  TWETCOTNSATAOTP is zero or negative, and paid its way as a rental property?

A Fair and Equitable distribution of assets is a right of all Floridians even for newly Single, Protestant Anglo-Saxon Males.