J-A23027-15


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

RENEE L. REGULA                                     IN THE SUPERIOR COURT OF
                                                          PENNSYLVANIA
                            Appellant

                       v.

ANDREW S. REGULA

                            Appellee                    No. 1396 WDA 2014


                     Appeal from the Order August 4, 2014
              In the Court of Common Pleas of Allegheny County
                   Family Court at No(s): FD 08-004511-006


BEFORE: GANTMAN, P.J., LAZARUS, J., and MUSMANNO, J.

MEMORANDUM BY LAZARUS, J.:                          FILED NOVEMBER 25, 2015

       Renee Regula (“Wife”) appeals from the August 4, 2014 order the

Court of Common Pleas of Allegheny County distributing the parties’ marital

property and ordering Andrew S. Regula (“Husband”) to pay Wife alimony

and counsel fees. After our review, we affirm in part and reverse in part.

       The parties were married in 1999 and separated in 2009. Husband,

age 43, and Wife, age 44, are the parents of one minor child, born in 2006.1

Husband is employed in medical equipment sales at Medtronic; he earns in

excess of $250,000 per year.            Wife had worked as a hairstylist earning




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1
  Wife has primary custody of the parties’ child, who attends a charter school
in the city of Pittsburgh.
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approximately $51,000 per year, but reduced her hours when the parties’

child was born. She has not worked since 2011.2

       From the date of separation, Husband enjoyed exclusive occupancy of

the marital home.       His girlfriend moved into the marital home one month

after the parties separated. In September 2011, Husband ceased paying the

mortgage,     real   estate    taxes   and     homeowner’s   insurance   ($2,551.58

monthly). At the time of the hearing before the Special Master, the marital

residence was in foreclosure.          However, the court issued a stay and the

property eventually sold for $427,000.           Wife received net proceeds of the

sale for purposes of paying off a tax lien related to the liquidation of her IRA,

which left her with $164 from the sale.

       The Master recommended a 60/40 distribution in favor of Wife. The

Master found Husband was in possession of, or benefited from, the

following:

       Merit Medical 401(k):                                     $ 98,442
       Marital Home:    Fair Market Rental ($77,700)
                        Dissipation        ($57,975)             $135,675
       Household Goods/Furniture:                                $ 10,000

       TOTAL BENEFIT TO HUSBAND                                  $244,117

       The Master found Wife was in possession of, or benefited from, the

following:

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2
  Wife was assigned an earning capacity of $26,707, which she has not
challenged



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       Pathfinder Federal Credit Union:                          $ 19,450
       American Funds IRA                                        $ 38,599
       House proceeds:                                           $ 10,425

         TOTAL                                                   $ 68,474

              Less liabilities:

       Chase Credit Card:                                        $ 8,806
       2011 Tax lien on IRA proceeds:                            $10,261

         TOTAL                                                  - $19,067

       TOTAL BENEFIT TO WIFE:                                    $49,407

       Thus, the Master determined that the marital estate totaled $293,524,

($244,117+$49,407), that Wife was entitled to 60% of the marital estate, or

$176,114.40,      and,    therefore,    Husband   must    pay   Wife   $126,707.40

($126,707.40+$49,407=$176,114.40).3 The Master noted that Husband

enjoys retirement benefits, medical benefits, car subsidies, and other

perquisites of his employment, and he has significantly greater sources of

income and is in a better position than Wife to acquire future capital assets.

       The Master also noted that both parties are in good health, and that

Wife has primary custody of the parties’ child.          The Master recommended

Husband pay 88% of the child’s tuition and extra-curricular activities costs,


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3
  The Master determined Husband took out $40,000 in loans from the Merit
Medical IRA during the parties’ separation, without Wife’s consent, and, in
January 2010, he liquidated the account. Husband’s 401(k) and Wife’s IRA
were both depleted at the time of the hearing.



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and that he pay Wife $2,000 in alimony each month for two years and

$10,000 in counsel fees. Both parties filed exceptions.

      The trial court, in an order dated August 4, 2014, granted in part and

denied in part the parties’ exceptions, reducing the value of Husband’s Merit

Medical 401(k) from $98,442 to $48,827, reducing the fair rental credit from

$77,000 to $38,500, and ordering Husband to pay $300 each month toward

arrears.   The court also determined that Husband was not responsible for

private school tuition.

      Wife filed this timely appeal, and she raises the following claims for

our review:

              1. The trial court entered an erroneous finding and
                 committed an abuse of discretion in determining that
                 the marital value of Husband’s Merit Medical 401(k) is
                 $48,827, and not $98,442 as recommended by the
                 Master;

              2. The trial court entered an erroneous finding and
                 committed an abuse of discretion in denying Wife’s
                 Cross Exception to the Master’s Report #2, which
                 asserted that $42,250.00, of capital gains realized by
                 Husband from his investment of marital funds derived
                 from Merit Medical 401(k) withdrawals, should have
                 been identified as marital property and therefore
                 included as subject to equitable distribution;

              3. The trial court entered an erroneous finding and
                 committed an abuse of discretion in determining that
                 the fair market value of the rental credit assigned to
                 Husband be set at $38,500, or one-half of $77,700 as
                 had been determined by the Master.

Our standard of review is well settled:




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         A trial court has broad discretion when fashioning an
         award of equitable distribution. Our standard of review
         when assessing the propriety of an order effectuating the
         equitable distribution of marital property is whether the
         trial court abused its discretion by a misapplication of the
         law or failure to follow proper legal procedure. We do not
         lightly find an abuse of discretion, which requires a
         showing of clear and convincing evidence. This Court will
         not find an “abuse of discretion” unless the law has been
         overridden or misapplied or the judgment exercised was
         manifestly unreasonable, or the result of partiality,
         prejudice, bias, or ill will, as shown by the evidence in the
         certified record. In determining the propriety of an
         equitable distribution award, courts must consider the
         distribution scheme as a whole. We measure the
         circumstances of the case against the objective of
         effectuating economic justice between the parties and
         achieving a just determination of their property rights.

Biese v. Biese, 979 A.2d 892, 895 (Pa. Super. 2009); see also Morgante

v. Morgante, 119 A.3d 382 (Pa. Super. 2015). Under section 3502(a) of

the Divorce Code, the court “shall equitably divide, distribute or assign, in

kind or otherwise, the marital property between the parties without regard

to marital misconduct in such percentages and in such manner as the court

deems just after considering all relevant factors.” 23 Pa.C.S.A. § 3502(a).

Moreover, it is within the province of the trial court to weigh the evidence

and determine credibility; this Court will not reverse those determinations so

long as they are supported by the evidence.       Childress v. Bogosian, 12

A.3d 448, 455–56 (Pa. Super. 2011) (internal citations omitted).         We are

also aware that a master’s report and recommendation, although only

advisory, is to be given the fullest consideration, particularly on the question




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of credibility of witnesses, because the master has the opportunity to

observe and assess the behavior and demeanor of the parties. Id.

       In her first claim, Wife argues that the court erred in concluding that

the marital value of Husband’s 401(k) is $48,827, and not $98,442 as

determined by the Master. The trial court determined that Husband testified

that, prior to separation, he withdrew $30,000 from the Merit Medical 401(k)

for home repairs in order to prepare the home for sale. He also testified that

he liquidated the account and was taxed $19,615 on the withdrawal. 4 Wife

offered no evidence to contradict this testimony.      The court, therefore,

accepted Husband’s unrebutted testimony and determined that Husband’s

401(k) was properly valued at $48,827 ($98,442 less the marital loan of

$30,000 and less the federal income tax liability of $19,615).

       In determining the value of marital property, the court must rely on

the evidence submitted by both parties, and it is free to accept all, part, or

none of the testimony as to the true and correct value of property. Smith

v. Smith, 653 A.2d 1259, 1265-66 (Pa. Super. 1995); Aletto v. Aletto,

537 A.2d 1383 (Pa. Super. 1988). Further, “[w]here the evidence offered by

one party is uncontradicted, the court may adopt this value although the

resulting valuation would have been different if more accurate and complete


____________________________________________


4
  See 23 Pa.C.S.A. § 3502(a)(10.1)(federal, state and local tax ramifications
associated with each asset to be divided, distributed or assigned, is a
relevant consideration in equitable distribution determination).



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evidence had been presented.” Holland v. Holland, 588 A.2d 58, 60 (Pa.

Super. 1991); see also Anzalone v. Anzalone, 835 A.2d 773, 784 (Pa.

Super. 2003). In the instant case, the trial court did not abuse its discretion

in accepting Husband’s unrefuted testimony with respect to the Merit Medical

401(k).

       Next, Wife argues that the trial court erred or abused its discretion in

failing to include as marital property $42,250 in capital gain realized from

the investment of funds Husband withdrew, post-separation, from his Merit

Medical 401(k) account.         Husband testified that he liquidated his 401(k)

account and received $44,365.89; he invested $35,955 and made a profit of

$42,250, which he included on his tax return as capital gain.          The capital

gain was not included in the marital assets subject to distribution.

       Wife contends, “[c]learly, the capital gain was directly generated as a

result of investments made with marital funds[.]” Appellant’s Brief, at 17.

She argues that this gain is “property acquired in exchange for marital

assets” and is marital property under 23 Pa.C.S.A. § 3501(a)(4),5 and,

therefore, should have been subject to equitable distribution. Her argument,

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5
  (a) General rule.--As used in this chapter, “marital property” means all
property acquired by either party during the marriage and the increase in
value of any nonmarital property acquired pursuant to paragraphs (1) and
(3) as measured and determined under subsection (a.1). However, marital
property does not include: . . . (4) Property acquired after final separation
until the date of divorce, except for property acquired in exchange for
marital assets. 23 Pa.C.S.A. § 3501(a)(4) (emphasis added).



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however, has as its premise the fact that the profit was made from the use

of marital funds. This is not what the court, or the Master, determined. The

Master’s report states:    “[I]n 2010, Husband earned $177,423/yr. plus

capital gains of $42,250 from non-marital stock options.”     Master’s Report

and Recommendation, 12/17/13 at 3 n.5 (emphasis added).        The trial court

agreed with the Master’s report and recommendation, stating that these

capital gains were “were from non-marital stock options and thus not marital

property.”   Trial Court Opinion, 11/3/14, at 5-6.   The fact that the court

went on to state that “[p]ost-separation gains from investments on his

marital portion of the 401(k) do not constitute property acquired in

exchange for marital assets[]” does not, as Wife argues, constitute a

manifest error of law. Though not artfully stated, the court’s use of the term

“marital portion” clearly referred to the non-marital stock options. We find

no error or abuse of discretion. Childress, supra; Biese, supra.

      Finally, Wife argues that the court erred and abused its discretion in

decreasing the fair rental value of the marital home from $77,000 to

$38,500. We agree.

      The spouse who is out of possession must be compensated for his or

her rights and interests in the marital property. Schmidt v. Krug, 624 A.2d

183 (Pa. Super. 1993);     Trembach v. Trembach, 615 A.2d 33, 37 (Pa.

Super. 1992); Hutnik v. Hutnik, 535 A.2d 151, 154 (Pa. Super. 1987).

Here, the parties purchased the marital home in January 2009; Wife and the

parties’ child moved out the following month. Husband’s girlfriend moved in

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with him shortly after Wife left, and she remained in the house with him until

the house sold in June 2013. Wife made claims for fair rental value, as well

as for dissipation of the asset.

      The Master determined that the net proceeds realized from the sale of

the house “were negatively impacted by the penalties, interest and costs

associated with Husband’s failure to pay the expenses of the house during

his residence therein and the mortgage foreclosure expenses.”        Master’s

Report, supra, at 3.    Wife’s expert real estate appraiser, Matt Stepanovich,

opined that the fair rental value of the property (5 bedrooms/3.5

bathrooms) was $3,700 per month.        The Master determined Stepanovich

was credible. Thus, since Wife was out of possession for 21 months after

Husband ceased paying the mortgage, the benefit to Husband was $77,700

($3,700 x 21 = $77,700).           Based on the 60/40 split, the Master

recommended Wife be awarded $46,620.

      In his exceptions, Husband argued that Wife was not entitled to any

rental credit since she vacated the new house after only 36 days, leaving

him with all the obligations. However, the Master calculated the fair rental

value for the 21 months that Husband did not meet those obligations.

Master’s Report, supra at 5.

      The trial court states that the Master “gave Wife credit of $77,700, or

100%, of the fair market rental value[.]” Trial Court Opinion, supra at 6. It

then went on to explain the four-step procedure for determining whether the




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dispossessed party is entitled to a credit for the fair rental value of jointly

held marital property against a party in possession:

         1. dispossessed party is entitled to credit, provided there are
            no equitable defenses;

         2. rental credit is based upon and limited by extent of parties’
            interest in the property (generally ½);

         3. fair rental value is limited to the time party is dispossessed
            and other party is in actual or constructive possession;

         4. party in possession is entitled to credit for payments made
            to maintain the property

Trembach v. Trembach, 615 A.2d 33, 37 (Pa. Super. 1992).

      After our review, we remand for a recalculation. Although we agree

with the trial court’s statement that Wife was not entitled to 100% of the fair

rental value, the Master awarded Wife 60% of that value ($46,620), as the

fair rental value of $77,700 was included as an asset in the marital estate.

Further, when the trial court reduced the value by half, to $38,850, it did

not, as far as we can tell from the court’s August 4, 2014 order and its

opinion, effectuate a one-half credit to Wife.       If that value was simply

plugged into the prior $77,700 value, then Wife is not receiving the credit

she is due. The general rule is that the dispossessed party is entitled to a

credit for the fair rental value of jointly held marital property against a party

in possession of that property, provided that there are no equitable defenses

to the credit. Trembach, supra.      The proper methodology for granting the

dispossessed spouse a credit for rental value is to deduct Wife’s share of the

rental value, here, $38,850, from Husband’s ultimate distribution of the

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marital estate.     See Butler v. Butler, 621 A.2d     659 (Pa. Super. 1993),

aff'd in part, rev'd in part on other grounds, 663 A.2d 148 (Pa. 1995). See

also 23 Pa.C.S.A. § 3502(a)(7).

         Further, that value represents foregone revenue; it is not a marital

asset. Including it in the marital estate artificially inflates the value of the

marital estate and awards Husband 40% of that value. Here, Husband was

in exclusive possession and did not financially maintain the residence for

those 21 months on which the value was based. Therefore, not only is

Husband not entitled to a portion of that value (which occurred here), he is

not entitled to any deductions in Wife’s credit because he did not financially

maintain the former marital residence for those 21 months. Cf. Ressler v.

Ressler, 644 A.2d 753, (Pa. Super. 1994) (awarding wife $5,600 as fair

rental value for time wife was out of possession, without deductions for

payments husband made on loan secured by marital residence, was not

abuse of discretion where payments were not on original mortgage, but on

home equity loan taken out to enable husband to purchase new vehicle).

         Further, contrary to the court’s statement that Wife was “awarded

$47,957 for dissipation,” Trial Court Opinion, supra at 7, that amount as

well was included in marital assets prior to the 60/40 equitable distribution

split.

         For these reasons, the order is affirmed in part, reversed in part, and

remanded for recalculation. The court of common pleas is directed to carry




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out what limited proceedings it deems necessary to settle the issues of fair

rental value and dissipation and to enter an appropriate order.

      Affirmed in part; reversed in part and remanded.            Jurisdiction

relinquished.



Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 11/25/2015




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