The Third Department, in a full-fledged opinion by Justice Stein, over a dissent, determined that real property purchased prior to marriage cannot be transformed into marital property by contributions made by the non-titled spouse, although the appreciation in value of the property attributable to the efforts of the non-titled spouse could be the subject of equitable distribution (there was a failure of proof on that issue here), and funds paid toward the mortgage by the non-titled spouse could be recouped:
“‘[W]hether a particular asset is marital or separate property is a question of law'” … . Marital property is defined as “all property acquired by either or both spouses during the marriage” (Domestic Relations Law § 236 [B]  [c] [emphasis added]), while “property acquired before marriage” is separate property (Domestic Relations Law § 236 [B]  [d]  [emphasis added]). Here, the husband purchased the marital residence in January 1994 2½ years prior to the parties’ marriage paying $130,000 of his own funds and borrowing an additional $100,000 from his father, secured by a note and mortgage. Although the wife contributed $30,000 of her separate funds to the initial purchase of the residence, she did not attend the closing and the husband took title to the property in his name alone. The record reflects that the wife thereafter paid the mortgage for more than two years prior to the marriage, as well as after the parties were married through 2003, when a satisfaction of mortgage was issued, notwithstanding a principal balance remaining of approximately $52,000. Supreme Court determined that the wife’s contributions transformed the residence from the husband’s separate property into marital property, which was subject to equitable distribution. …[W]e disagree. * * *
…[W]hile Supreme Court’s finding that the wife made certain substantial contributions of money and effort toward the acquisition and maintenance of the marital residence is amply supported by the record, the effect of such contributions by the wife particularly those she made before the marriage is not to transform the husband’s premarital, separate property into marital property … . * * *
We note, however, that separate property contributions by a nontitled spouse could result in an appreciation of the value of the titled spouse’s separate property during the marriage, which appreciation would be subject to equitable distribution … . Here, inasmuch as the wife failed to prove the value of the residence at the time the parties were married, the amount of the property’s appreciation during the marriage and, hence, the wife’s equitable share thereof cannot be ascertained …, and no award may be made on this basis … .
We agree, however, with the wife’s alternative argument that she is entitled to recoup her equitable share of marital funds paid toward the mortgage. It is well settled that, in determining the “equitable distribution of marital property, a court has the authority to effectively recoup marital funds applied to the reduction of one party’s separate indebtedness” … . Here, the wife testified that she paid the mortgage on the marital residence from the date of the marriage until a satisfaction of mortgage was issued. Although it is not evident from the record what funds were used to make these payments, it can be presumed that marital funds were used (see Carr v Carr, 291 AD2d 672, 676 ). Thus, the wife is entitled to an equitable share of the marital funds that were used to pay the husband’s separate indebtedness the mortgage during the marriage… . Ceravolo v DeSantis, 2015 NY Slip OP 00266, 3rd Dept 1-8-15