Equitable Distribution

MARITAL EQUITY OF PREMARITAL HOME IS SPOUSE’S EQUITY AT THE TIME OF THE MARRIAGE; NOT THE PURCHASE PRICE

In the family law, equitable distribution case of Mundy vs. Mundy, PICS Case No. 16-1484 (Pa. Super. Nov 16, 2016) the Honorable Mary Jane Bowes, writing behalf of the Pennsylvania Superior Court, ruled that the trial court erred when calculating the marital equity in a home which was originally a non-marital asset in using the purchase price of the home rather from the purchasing spouse’s equity at the time of marriage as a baseline for calculating marital equity. The Order of the trial court was vacated in part and affirmed in part.

Wife Amy Mundy appealed from the order of the trial court providing for the equitable distribution of the marital estate following the grant of divorce from husband Todd Mundy. Approximately 20 months prior to the parties’ marriage husband purchased a home. The deed was placed in husband’s name, although a refinancing added wife’s name to the mortgage obligation. During the parties’ cohabitation, husband paid the mortgage and contributed to expenses while wife paid the utilities and most of the other household expenses.

Following the parties’ separation, wife continued to reside in the house and by agreement the parties became solely responsible for the mortgage and all other household expenses. However when wife failed to make several mortgage and utility payments, significantly impacting husband’s credit score and his ability to obtain another mortgage.

During the marriage wife attended nursing school, with her tuition paid her by current employer. Nonetheless, during her studies wife obtain two student loans she claimed were used to pay household expenses. Husband cosigned one loan, which was no longer outstanding, with a second loan in collection that was solely in wife’s name. As part of the equitable distribution of the marital estate, the trial court ruled that the marital equity portion of the house purchase by husband which was originally a non-marital asset was the difference between the purchased price and the last valuation of the property, which neither party objected to. The trial court further ruled that the wife would solely be responsible for her outstanding student loan obligations. Wife appealed, arguing that the trial court had erred in calculating the marital equity from the purchase price of the house. Wife also challenged the total assignment of her student loan debt.

The court ruled that the proper calculation of the marital equity would have been to start husband’s equity at the time of the marriage, although court rejected wife’s calculation of husband’s starting equity based on his mortgage payments, in favor of a calculation that account for the reevaluation of the house. The court did affirm the trial court’s decision to deny wife a credit for her mortgage payments. However the court rejected wife’s argument that the trial court erred in ordering her to have sole responsibility for the student loans she acquired during the marriage. The court found, that although wife asserted that the loans were used to pay for household expenses while she was in school, as she could not work full time, wife failed to provide evidence to document how the loans were used, and noted that wife did not testify that she used the loans exclusively for household purposes.

Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 39, PLW 1176 (December 13, 2016).

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