October 2011 Archives

Parties Agreement on Insurance Coverage Deemed Terminable

October 12, 2011 by The McKellar Law Firm, PLLC

In the case of Davis v. Davis, No. E2010-00958-COA-R3-CV (Tenn. Ct. App. Aug. 30, 2011), the Wife appealed the trial court's classification of Husband's agreement to carry Wife's insurance as alimony in futuro. The original agreement was as follows: Wife was given a paid position on the board of Husband's company, CBM, which allowed her to be on the company's health insurance plan. Wife was then to reimburse CBM for all costs they incurred from her coverage. Husband eventually sold CBM to his son, who continued Wife's position and coverage. Then in 2005, CBM ended its group coverage for all employees and ceased paying Wife as a board member. Wife sued CBM and Husband. The Chancery Court for McMinn County held that the CBM payments were alimony in futuro, deemed Husband liable for CBM's lack of coverage and required him to cover Wife going forward. Husband appealed.

Interestingly, both parties disagreed with the trial court's classification of the insurance provision as alimony. Wife argued the payments could not be modified (and therefore cannot be alimony in futuro, which is modifiable) and did not cease upon death or remarriage. Husband argued that the agreement was a good-faith compromise allowing Wife to obtain insurance in return for her services as a board member.

The Court of Appeals noted that the original agreement stated that neither party would owe the other any spousal support. Also, the trial court, under T.C.A. §36-5-121(k) may require either party to pay health insurance costs for any appropriate length of time. However, this was an agreement of the parties, which the Appeals Court stated was terminable by Wife at any time or by Husband upon the extinguishing of his interest in the company, which he retained the right to do. Accordingly, the Appeals Court agreed with Husband that this was a good faith concession to allow Wife to easily obtain coverage, and therefore is properly classified as property division. Therefore, when Husband sold his interest in CBM, his obligation to carry Wife's insurance ended and Husband should not be held liable for prior unmade payments or future payments related to Wife's health insurance. The Court also ruled that the Wife could not recover payments from CBM either, because this was not an employment contract but an agreement between Husband and Wife. The Court further stated that neither the Husband nor CBM would be tasked with providing coverage for Wife indefinitely. The option for Wife to be covered by insurance in this manner was just that - an option, which the parties' agreement allowed to terminate at any time. Therefore the decision of the trial court was reversed and costs taxed to the Wife.

Service, Notice Required for Contempt of Tennessee Orders of Protection

October 10, 2011 by The McKellar Law Firm, PLLC

The case of Brooks v. Brooks, No. E2010-02614-COA-R3-CV, (Tenn. Ct. App. Sept. 9, 2011) shows that respondents to Orders of Protection in Tennessee must be given notice and served properly in order to be held in contempt.

In the spring of 2007, Wife filed her first Petition for an Order of Protection (hereinafter "OP"), alleging an assault by Husband, and an ex parte order was issued. After a hearing, an OP was put into place requiring no contact and payment of $400 per month by Husband to the parties' mortgage. Three weeks later, Wife filed a show cause, alleging Husband was in contempt for approaching her. Then Wife filed a second OP Petition in August 2007, prior to the show cause hearing. At that hearing, Husband was found in contempt of the first OP and given a sentence that was held in abeyance but required his compliance with the second August OP which included the mortgage payment provision.
Wife then filed a second show cause alleging Husband contacted her again. Prior to that hearing, Wife filed a third show cause alleging failure to pay the mortgage payment. After a hearing in April 2008, the trial court found Husband violated the August OP by attempted communication with Wife and ordered him to serve 20 days in jail. A new OP (the third, at this point) was entered in April 2008 which did not include the mortgage provision. Another hearing was held regarding the third show cause filed by Wife, alleging nonpayment of the mortgage payment, and the court entered an order in May 2008 that Husband would continue paying the $400 per month.

Two years later, Wife filed a fourth show cause, again over the mortgage payment. A hearing (now in 2010) resulted in a holding that because the April 2008 OP failed to include a provision regarding the mortgage, the court did not have the requisite jurisdiction to enter the May 2008 order requiring him to pay the mortgage. Accordingly, the show cause was dismissed.

The Court of Appeals explained that the May 2008 order seems to be an agreement announced by the parties and not the result of a hearing and court ruling. The problem with this is Husband was not present that day in court and had not been served with process. Accordingly, Husband cannot be held in contempt for disobeying an order that he never received notice of, or was present at a hearing for (because of no notice) and apparently did not agree to in open court. Importantly, the Appeals Court also noted that Husband's payments after this order could not be used to presume he had knowledge of the order and was only making the payment to avoid contempt. Further, the April 2008 OP did not contain the mortgage provision. Therefore, the trial court was correct in dismissing the Wife's fourth show cause.

Post-Divorce Alimony Modification In Tennessee

October 6, 2011 by The McKellar Law Firm, PLLC

The case of Bordes v. Bordes, No. M2010-02036-COA-R3-CV (Tenn. Ct. App. Sept. 30, 2011), illustrates the standard for modifying alimony post-divorce in Tennessee based upon the obligor's ability to pay.

The parties divorced in June of 1999, with Wife have primary custody of the children and Husband paying alimony in futuro of $1,700 per month until the child support for the oldest child stopped, at which point he would pay $2,300 until the child support for the youngest child ended and then $2,000 thereafter. In 2008, Husband filed a petition to decrease his alimony, citing health problems that kept him from working as he had in the past. He had switched businesses and was only making $800 per month from employment and $1100 from his retirement.

The trial court (Williamson County) held that the "economic downturn in the economy" was a substantial and material change in addition to his previously un-contemplated health issues. However, the Court also held that the Husband's decision to sell his business and invest in another, lower-paying ($800 per month) business should not result in the Wife being penalized. Therefore, Husband's petition was denied and Wife was awarded $750 in attorney's fees. Husband appealed.

The Appeals Court stated that "substantial" means a significant effect on either the payor's ability or the payee's need. The evidence in this case showed a dramatic drop in Husband's income, which equaled a substantial change in his ability to pay. The Court went on to explain that "material" means a change having occurred after the initial alimony order and one not contemplated at the time the settlement was entered. Here, the Husband's decrease in income and health problems met this standard.

The Court of Appeals, having affirmed (albeit for different reasons) that a substantial and material change existed, moved on to determining whether the trial court erred in denying Husband's modification. This issue is controlled by T.C.A. §36-5-121(i). The most important factors are the need of the receiving spouse and the ability of the payor spouse, considered equally. Here, the trial court determined Husband's earning capacity to be between $75,000 and $100,000 per year. The Appellate Court agreed with the lower of that range of $75,000. The Appeals Court also found that Wife's need was actually $950 per month less than Husband's alimony payment, based upon her filed affidavit of expenses and income. Therefore, the trial court's denial of Husband's modification was in error. The Appeals Court also found error in the award of attorneys fees, reversing that as well. Accordingly, the Appeals Court instructed the trial court to enter an order setting Husband's alimony at $1050.00 per month.