## Facts

- In 1950, before marriage, the husband purchased a lot under an installment land contract requiring monthly payments.
- The parties married in 1951; legal title to the lot remained solely in the husband’s name throughout.
- About sixteen years into the marriage, the parties constructed a residence on the lot.
- The wife claimed sale proceeds from an earlier home (paid for by her mother) helped finance construction; the husband claimed he alone funded the construction.
- Neither party introduced evidence showing the sources and amounts of funds used to pay for the land, build the residence, or make improvements.
- In the divorce action, the trial court classified the lot and residence as marital property, ordered a sale, and divided proceeds equally; the intermediate appellate court affirmed.

## Issues

1. Whether real property acquired under an installment contract and paid partly before and partly during marriage is marital property, and if so to what extent.
2. Whether a residence constructed during marriage on that property is marital property, and if so to what extent.
3. What findings are required to classify, value, and make an equitable monetary award concerning property with mixed marital and nonmarital contributions.

## Decision

- The Court of Appeals of Maryland held that Maryland follows the “source of funds” approach, not an “inception of title” rule, when classifying marital property.
- The lot could not be treated as entirely marital property because at least part of its acquisition was paid before the marriage.
- The residence and other permanent improvements could be marital property to the extent they were acquired through marital funds or efforts, but the record lacked evidence to allocate shares.
- The court rejected the blanket marital classification and equal division of sale proceeds.
- The case was remanded for the trial court to:
  - Determine the source and amounts of funds/efforts contributing to acquisition of the lot and construction/improvement of the residence;
  - Classify the property as part marital and part nonmarital in proportion to those contributions;
  - Value the marital portion; and
  - Enter an equitable monetary award consistent with statutory factors.

## Legal Principles

- “Marital property” includes property acquired during marriage, regardless of title, but excludes property acquired before marriage and property directly traceable to excluded sources.
- Under the source-of-funds theory, an asset acquired over time with both marital and nonmarital contributions is classified proportionally as part marital and part nonmarital based on each contributing source.
- For installment acquisitions, each payment may acquire an incremental interest; marital status depends on whether payments were made with marital or nonmarital funds.
- Permanent improvements (such as a residence built during marriage) are classified by tracing the funds and efforts used to create them, and may result in mixed marital/nonmarital interests.
- The court’s role is to (1) identify marital property, (2) value it, and (3) adjust the parties’ equities through a monetary award rather than re-titling property.
- When classification depends on tracing, the trial court must make specific factual findings on sources, amounts, and resulting proportional interests.

## Conclusion

The court adopted a proportional source-of-funds method for classifying property acquired with mixed premarital and marital contributions and remanded for tracing, valuation, and entry of an equitable monetary award rather than an automatic equal division of sale proceeds.


Harper v. Harper, 448 A.2d 916 (Md. 1982)