In the Supreme Court of Georgia



                                         Decided: February 22, 2016


                       S15F1331. FLORY v. FLORY.

      HUNSTEIN, Justice.

      Pursuant to Supreme Court Rule 34 (4), we granted the application for

discretionary appeal filed by Appellant Peter John Flory (“Husband”) seeking

leave to challenge the final judgment and decree effectuating his divorce from

Appellee Lucie Wheeler Flory (“Wife”). Husband contends that the trial court

erroneously awarded Wife certain assets as separate, non-marital property. We

agree that the trial court erred in its division of property, and we therefore

reverse and remand.

      The parties were married in November 1993, and Wife filed her complaint

for divorce in November 2013. During a subsequent bench trial, Husband and

Wife each claimed that certain assets should be classified as separate, non-

marital property. Among other things, Wife sought to recoup the value of

certain stocks, which she owned prior to the marriage, that were liquidated for

the purpose of purchasing a marital residence, while Husband sought credit for
funds advanced by his mother that were used to make improvements on that

residence. The trial court acquiesced to the respective parties’ classification of

the property on the basis that equity dictated such an outcome. Relying on the

maxim that “[h]e who would have equity must do equity and must give effect

to all equitable rights of the other party respecting the subject matter of the

action,” the trial court reasoned that Husband and Wife’s respective claims to

separate property were “on equal footing” and, thus, could all be similarly

granted. The parties agree on appeal that the trial court’s reliance on the above-

quoted maxim was misplaced.

       In order to equitably divide marital property, the trial court must first

classify the disputed property as either marital or non-marital. See Thomas v.

Thomas, 259 Ga. 73, 75 (377 SE2d 666) (1989). “Whether an item of property

can legally constitute a marital asset is a question of law for the court, and

whether a particular item of property actually constitutes a marital asset may be

a question of fact for the trier of fact to determine from the evidence.” Jones-

Shaw v. Shaw, 291 Ga. 252, 252-253 (1) (728 SE2d 646) (2012). “[O]nly the

real and personal property and assets acquired by the parties during marriage is

subject to equitable property division.” Moore v. Moore, 249 Ga. 27, 28 (2)

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(287 SE2d 185) (1982). Property that once may have been separate – such as

gifts, inheritances, or pre-marital property – may be converted into a marital

asset if a spouse takes action manifesting an intent to transform that separate

asset into marital property. See Shaw v. Shaw, 290 Ga. 354 (1) (720 SE2d 614)

(2012) (investment accounts established with inherited funds transformed into

marital property when husband gave wife ownership interest in the accounts);

Coe v. Coe, 285 Ga. 863 (1) (684 SE2d 598) (2009) (residence purchased with

money awarded to husband from personal injury action could be deemed marital

property where it was purchased during the course of the marriage and deeded

in the names of both spouses). A spousal gift of non-marital property to the

marital unit transforms the separate property into marital property and makes it

subject to equitable division. Lerch v. Lerch, 278 Ga. 885 (1) (608 SE2d 223)

(2005).

      On the other hand, assets deemed separate property are not subject to

equitable division, nor is the appreciation of those assets marital property where

that appreciation is solely attributable to market forces; however, any

appreciation of separate property resulting from the efforts of either or both

spouses becomes a marital asset subject to equitable division. See Avera v.

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Avera, 268 Ga. 4 (1) (485 SE2d 731) (1997). Likewise, under the “source of

funds rule,” a spouse contributing non-marital assets towards the acquisition of

property is entitled to an interest in the property in the ratio of the non-marital

investment to the total non-marital and marital investment in the property.

Maddox v. Maddox, 278 Ga. 606 (1) (604 SE2d 784) (2004). The remaining

portion of the property is marital property, subject to equitable division,

allowing the contributing spouse and the marital unit each to receive a

proportionate and fair return on the respective investments. Id.

      The trial court failed to apply any of these well-established legal principles

in apportioning the property between the parties. While the trial court purported

to make legal and factual conclusions regarding the assets in question, it actually

did no such thing, but rather simply concluded, as a matter of “equity,” that each

party was entitled to the property respectively claimed as separate property. The

trial court’s failure here to apply the relevant legal principles is reversible error.

See Horsley v. Horlsey, 268 Ga. 460 (490 SE2d 392) (1997). Accordingly, we

reverse and remand for the application of the appropriate legal principles in the

trial court’s division of property.

      Judgment reversed and case remanded. All the Justices concur.

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