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COURT OF APPEALS OF VIRGINIA


Present:  Judges Coleman, Bumgardner and Lemons
Argued at Salem, Virginia


DIANE L. MORAN
   OPINION BY
v. Record No. 2543-97-3 JUDGE SAM W. COLEMAN III
            MARCH 30, 1999
CURTIS E. MORAN, JR.


FROM THE CIRCUIT COURT OF THE CITY OF MARTINSVILLE
Martin F. Clark, Jr., Judge

  Stacey W. Moreau (Williams, Morrison, Light and Moreau, on briefs), for appellant.

  Gregory P. Cochran (Caskie & Frost, P.C., on brief), for appellee.



Diane Moran, wife, and Curtis Moran, husband, appeal the equitable distribution of their marital assets.  Wife contends the trial court erroneously classified her separately owned rental house, known as the "Berkshire house," as hybrid property, and unfairly distributed the marital portion of husband's defined contribution pension plan.  On cross-appeal, husband contends the trial court erred in refusing to award him the passive income earned on his separate share of the defined contribution pension plan, and in assigning him the total debt remaining on a loan secured by the pension plan.  We hold that the trial court did not err in classifying the Berkshire home as hybrid property and did not err in assigning husband the debt secured by the pension plan.  However, we hold that the court erred by failing to classify as separate property the passive income earned in the husband's pre-marital contributions to the pension plan.  Accordingly, we reverse and remand for reclassification, valuation and distribution of the pension plan.  
I.  BERKSHIRE HOUSE
In 1983, when the parties married, wife owned the Berkshire house that she had purchased in 1978 for $27,900.  According to husband's estimate, at the date of marriage, wife owed between $24,000 to $25,000 on the deed of trust, giving her $2,900 to $3,900 equity in the Berkshire house.  The Berkshire house was their marital home from 1983 to 1990, at which time they purchased another home and leased the Berkshire property.  When the parties separated, the fair market value of the Berkshire home was $58,500.  The parties still owed $18,533 on the original deed of trust and $11,079 on a home equity loan, resulting in net equity of $28,888.  During the marriage, the parties spent $30,000 of marital funds renovating the Berkshire property and used marital funds to make the monthly payments on the deed of trust.
Property that is acquired by either party before the marriage is separate property, Code

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