August 2012 Archives

Courts Moving Toward Making Spouses Refi More Often Per T.C.A. 36-4-121(c)(4)

August 24, 2012 by The McKellar Law Firm, PLLC

In Dobbs v. Dobbs, No. M2011-01523-COA-R3-CV (Tenn. Ct. App. Aug. 7, 2012), Tennessee divorce attorneys learn the manner in which courts select the primary residential parent, determine when a spouse should refinance the marital residence, and evaluate the value of a marital residence.

The Facts: Husband and Wife had one minor child at the time of their divorce. Husband was employed with the family business as truck driver and Wife was employed as a radiation therapist. The court appointed Wife the primary residential parent and conferred upon her the $235,000 marital residence upon awarding her a divorce due to Husband's inappropriate marital conduct; however, Wife "was to be responsible and hold harmless Husband on the debt encumbering the property" (both a first mortgage and $233,792 line of credit for a second mortgage). She was not required to refinance, or otherwise remove Husband's name from liability.

The Issues: (1) which parent should be designated the primary residential parent; (2) whether the court should compel Wife to refinance the residence in her name alone; and (3) whether the marital residence was properly valued.

The Holdings: First, in alleging that he should be designated primary residential parent, Father asserted that the trial court improperly considered his failure to restrain the minor child in a car seat while the child rode in his automobile, instead placing the child in the front seat of an airbag-equipped automobile; he stated that the parenting plan statute, T. C A. § 36-6-404, makes no reference to such a factor. Further, Husband alleged that Wife intentionally interfered with the time Husband was to spend with the minor child. The appellate court emphasized the importance of seeking the child's best interests and mentioned the "broad discretion" given to trial courts; it applied the factors listed in the parenting plan statute and explained that the trial court was permitted "to consider other factors deemed relevant," including Wife's intrusion into Husband's time with child and Husband's disobedience of child restraint laws. The appellate court affirmed that Wife should be primary residential parent since she met more statutory factors than Husband. The court's reference to Father's failure to comply with child restraint laws was within the court's discretion to consider factors deemed relevant by the court and was not a reason to overturn the decision. See T. C A. § 36-6-404(b)(16).

Second, Husband alleged that the marital property (a 6.03-acre tract of land and a house) was worth at least $50,000 more than the trial court's valuation, having testified at trial that he reviewed the Comptroller's records. The appellate court also looked to evidence a certified real estate appraiser's assessment, reached by conducting an inspection, considering neighborhood property values, and formulating an opinion that the land's highest value could be attained by regarding it as two separate parcels. The value placed on the property by the trial court was based on the appraiser, whose valuation was in close proximity to the date of the division of property, and was within the range of evidence presented by the parties. Therefore, evidence does not preponderate against the trial court's valuation, which is upheld.

Third, Husband alleged that the court should order the property to be refinanced in Wife's name only. The appellate court noted that courts have a variety of methods by which to allocate marital debt and ownership of assets, including: "hold harmless" provisions, joint ownership lasting until sale or finance, and refinancing the property in one person's name. The court explained that when determining the proper division of marital property, courts must evaluate "the relative ability of each party for future acquisitions of capital assets," pursuant to Tenn. Code Ann. Section 36-4-121(c)(4); Therefore, the appellate court expressed concern that failing to make any provision for Husband's release from the debt would be contrary to T.C.A. § 36-4-121(c)(4). Accordingly, this issue was remanded for the trial court to determine a reasonable time for Wife to secure Husband's release from indebtedness and to amend the final decree accordingly.

When To Impute Income for Child Support; Preference for Rehabilitative Alimony in Tennessee Highlighted

August 12, 2012 by The McKellar Law Firm, PLLC

In the case of Velez v. Velez, No. M2011-0949-COA-R3-CV (Tenn. Ct. App. July 31, 2012), Tennessee divorce attorneys learn the manner in which appellate courts evaluate the adequacy of a parenting plan set by the trial court; that imputed income for an unemployed parent with a high school education and little work experience should be based upon minimum wage; and that Tennessee courts have a preference for rehabilitative alimony.

Facts: A divorce was filed after 12 ½ years of marriage. The parties had two minor children, with Mother requesting to be the primary residential parent (PRP). While Mother had been employed at minimum wage, she primarily stayed at home raising the children, and had a high school diploma. Father had been active duty US Navy, but suffered post-traumatic stress and was discharged. Father became employed as a civilian with relatively high pay.

At the hearing, Father confessed to adultery and testified he earned $70,000 per year base salary with the opportunity for bonuses. Mother alleged she had been the children's primary caregiver as well as offering testimony from relatives regarding Father's parenting ability and the parties' interactions with one another. Mother testified she had enrolled in college for occupational therapy, which would be expensive and would take 6-7 years to complete. The trial court granted Mother a divorce based on Father's inappropriate marital conduct. While Father had earned several bonuses, the court determined these were speculative and calculated his income at $7,433 per month; however, the trial court noted Mother was entitled to "immediate" information regarding Father's future bonuses. The trial court imputed a $1,642.00 per month ($8.00 per hour) income to Mother, in spite of her being unemployed. The trial court then provided Mother with lump sum alimony ($25,000), but denied her the greater amount of rehabilitative alimony she requested for school, and named her PRP.
The appeal addressed three issues: (1) whether the parenting plan was in the best interests of the children under Tenn. Code Ann. 36-6-106; (2) whether the court properly calculated child support and correctly imputed income to Mother; and (3) whether the alimony was appropriate in accordance with Tenn. Code Ann. 36-5-121.

First, the appellate court decided that the parenting plan was in the best interests of the children, holding that "trial courts have broad discretion to fashion parenting plans that best suit the unique circumstances of each case" and that the appellate courts are not to "tweak" such plans unless they appear to be entirely unreasonable because trial courts are in the position to determine credibility.

Second, the appellate court found that trial courts are granted "broad discretion" to assess child support in accordance with the Child Support Guidelines and that Father's bonuses were "too speculative for inclusion as income." However, the appellate court reversed the trial court's decision regarding Mother's imputed income, stating that it should be based upon the federal minimum wage ($7.25 per hour) and that after Mother is employed, the Child Support Guidelines warrant a child support award for resulting work-related daycare expenses.

Third, the court ruled on Mother's request for rehabilitative alimony. While trial courts have discretion in deciding the appropriate type of alimony, the appellate court noted a "strong preference for short-term spousal support", particularly rehabilitative alimony. The appellate court stated that one spouse's ability to pay and the other spouse's need are the most essential considerations in determining alimony awards and listed the factors provided in Tenn. Code Ann. §36-5-121, including: relative education and training of each party; length of the marriage; separate assets of each party; marital property allocations; relative earning capacity of each party; standard of living to which the parties are accustomed; age, mental condition, and physical condition of each party; relative fault of the parties; and tangible and intangible contributions of each party to the marriage. Here, Father's income was (minimum) $70,000 per year; however, since Mother had contributed to the marriage by staying home with the children, she had little work experience (earning minimum wage) and a high school education that would provide her with income of only $15,080 per year. Since Mother was "significantly" economically disadvantaged in comparison to Father, the appellate court held that the trial court did not appropriately apply the statutory factors and that Mother was entitled to rehabilitative alimony "either in addition to or instead of" the lump sum alimony originally granted. Accordingly, this issue was remanded to the trial court to determine the appropriate amount of rehabilitative alimony for Wife.

Understanding Equitable Division of Marital Property and Debt; When Alimony in Futuro is Appropriate

August 10, 2012 by The McKellar Law Firm, PLLC

In Pollan v. Pollan, No. M2011-01896-COA-R3-CV, (Tenn. Ct. App. July 3, 2012) Tennessee divorce attorneys learn the manner in which courts equitably divide marital debt and learn factors that the courts consider when awarding future alimony.

The facts of the case are as follows: Wife was a 56 year-old homemaker with a high school education but assisted her Husband with beginning his successful company. Wife suffered from degenerative disk disease, but Husband was in good health. Due to Husband's inappropriate marital conduct, a divorce was granted to Wife after a twenty-five year marriage. The parties subsequently agreed in a Stock Settlement Agreement that Wife would receive full-time employment at Husband's company for eight years, with a $50,000 annual salary and full benefits. Further, Wife would not be responsible for any taxes or debt of Husband's company and in return, Husband could keep all of the stock in the company; however, upon the sale of the Company, Wife was entitled to a set percentage of proceeds between a certain range (which decreased the further the sale occurred from the date of divorce). At trial, the court divided debts and assets; Husband obtained 49% of the marital assets and Wife obtained 51% of the marital assets. Until Wife turned 65 years old, she was to receive alimony in futuro of $5,000 per month; after age 65, and until Wife's remarriage or death, Wife received $2,000 per month. The trial court did not state that Husband would be responsible for Wife's health insurance benefits in the event that she lost them through the company.
The appellate court decided three issues: (1) whether allocation of marital debts to wife were proper; (2) whether wife's alimony award was properly calculated; and (3) whether Husband should be required to pay Wife's medical insurance upon the conclusion of Husband's eight-year agreement with his employer.

First, the appellate court provided that equitable distribution of property applies to both marital debts and assets. It stated that "equitable division" does not necessarily mean "equal division" per Tenn. Code Ann. § 36-4-121. The appellate court further noted that Tennessee courts should apply the following factors when equitably dividing marital debt: "(1) the debt's purpose; (2) which party acquired the debt; (3) which party benefited from acquiring the debt; and (4) which party is best able to repay the debt." Accordingly, the appellate court determined that Wife had benefited in the past and would benefit in the future from the company and credit cards and was in a position to pay the debt. Second, the appellate court held that alimony in futuro was proper (in spite of a legislative preference for short-term alimony) due to Wife's need for long-term support, the impossibility of economic rehabilitation (largely due to her age and lack of work experience and education), and Wife's accustomed high standard of living. However, the court held that Wife provided insufficient proof that Husband dispersed assets and therefore was not entitled to additional lump sum alimony. While "dissipation of assets is a factor to be considered in the division of the marital property", it "requires a showing of intentional, purposeful, and wasteful conduct"--a burden of persuasion which Wife failed to meet. Third, the appellate court found that Husband owed Wife no additional health insurance benefits due to her alimony in futuro, her eight-year employment agreement (with included health insurance), and the fact that she would soon be eligible for Social Security and Medicare benefits.

Modification of Alimony Requires Provable, Unanticipated Change of Circumstances

August 8, 2012 by The McKellar Law Firm, PLLC

The case of Hand v. Hand, No. M2010-02404-COA-R3-CV (Tenn. Ct. App. July 31, 2012) discusses modification of alimony post-divorce. This case shows Tennessee divorce attorneys that proving inability to pay by the obligor spouse and reduced need of the recipient spouse can sometimes be very difficult.

Facts: The parties divorced in 1990 with Husband keeping his business and paying Wife $13,000 from the marital estate. The parties then remarried prior to dividing any of the assets per the divorce. They remained married the second time for 14 years. The trial court ordered that the provisions of the first divorce decree were to be followed along with the following new obligations: a joint bank account with $75,000 was divided equally; Husband was ordered to pay $1,200 per month in alimony to Wife until her death, remarriage, or future order of the court; Husband was required to pay for Wife's medical insurance for 18 months; Husband was required to carry a life insurance policy for the term of the alimony; the marital home was awarded to Wife and each party was required to pay ½ the mortgage each month, with Husband's ½ obligation to continue to be paid to Wife even if Wife sold the house.

In 2009, Husband filed to have his alimony lowered or terminated based upon an "unforeseeable material and substantial change of circumstances" involving his ability to pay (lower income), Wife moving in with her boyfriend, and Wife's conveyance of the marital residence to her son as a gift. Wife filed to increase the alimony due to her worsened physical ailments, increased medication costs and lack of insurance. After a hearing, the trial court found: Husband's testimony about his lowered income was not credible, as he was a sole proprietor and self-employed; that Wife was a credible witness; that Husband had not proved Wife lived with her boyfriend; that Wife still needed alimony as previously ordered, denying Husband's request; finally, the court determined the Wife's transfer of the home to her son was a "sale" under the decree and Husband had to continue paying; finally, the court denied Wife's request for an alimony increase.

The Appeals Court found that Husband's business records did not support his testimony and that the trial court correctly concluded he had not experienced a decrease in income nor had an inability pay. Regarding Wife's alleged live-in boyfriend, T.C.A. §36-5-121(f)(2)(B) creates a rebuttable presumption that if an alimony recipient lives with a third party, that third party is contributing to the recipient's support, reducing their need for alimony or that the third party is receiving support from the alimony recipient, and therefore the need has gone away. Here, court found the Wife was not cohabitating with her paramour and therefore no reduction was proper based upon this argument.
Husband next claimed that even without a paramour, Wife's need for alimony had decreased due to her reduced debt burden (such as the home mortgage, conveyed to her son). However, Wife testified that she conveyed the property in order to avoid foreclosure while she was unemployed. Further, she stated she currently still pays $400 in rent each month, only $100 less than her half of the mortgage obligation. Wife also indicated that she pays utilities, phone, groceries, credit cards, vehicle maintenance and gas and $1,200 per month on prescription medication due to her diabetes and lack of insurance, causing her to borrow money from friends and family. Husband failed to show and evidence to contradict this testimony. Accordingly, Husband's petition for downward modification was denied.

Husband next argued that Wife's conveyance of the marital residence relieved him of his obligation to pay one-half of the mortgage each month ($500). The judgment of divorce stated that if Wife desired to sell or not live in the residence, Husband shall continue to pay the $500 until half of the amount owed on the mortgage is paid back to the Wife, determined as of the date that Wife vacates. Further, Wife did receive consideration for the sale: she retained a life estate while the son would pay her half of the mortgage debt each month. Therefore, Husband's obligation to pay $500 per month until half the debt is paid back to Wife continues and this request was properly denied by the trial court.

Classification and Valuation of Assets Pivotal in Tennessee Divorces

August 6, 2012 by The McKellar Law Firm, PLLC

In the case of Lane v. Lane, No. E2011-02293-COA-R3-CV (Tenn. Ct. App. July 26, 2012), Tennessee divorce attorneys learn that as a dual property state, assets must be identified as marital or separate before they are divided by a trial court. This case also points out the two methods of valuing a pension: present cash value and deferred valuation.

Facts: Husband and Wife married in 2006 and both had existing property and children from previous marriages. Shortly after marriage, Husband was injured at his place of employment and was not able to work for several months. During this time, he received worker's compensation benefits along with settlement proceeds. The couple also received a settlement from a products liability claim. The couple maintained separate checking accounts but shared household expenses including half the mortgage payment on property owned by Wife previous to the marriage. In 2008, the parties refinanced this property and consolidated several debt obligations, adding $70,000.00 to the debt owed, increasing the mortgage payment. In 2009, the parties attempted another refinance which increased the debt owed slightly but reduced mortgage payment. Later in 2009, Husband filed for divorce on the ground of irreconcilable differences and inappropriate marital conduct. The trial court determined the Husband spent the majority of the equity from the refinance and $20,000.00 from the product liability settlement to pay off separate/personal debt without Wife's consent. Therefore, the Court awarded Husband his pension (approx. $43,000) but gave Wife $27,520.97 to equalize the division of assets.

Issues: Whether the court erred in classifying the proceeds of the products liability settlement as marital property; whether the court erred in dividing the marital portion of the pension using the present cash value method.

Analysis: Tennessee is a "dual property" state, meaning the court must identify all property and assets possessed by the parties as either separate or marital before dividing the marital estate under Tenn. Code Ann. § 36-4-121. The products liability settlement proceeds here were properly classified as marital property because it was awarded during the marriage and the check was made payable to both parties. The trial court determined the check represented the amount sought by both parties. Further, the award did not specifically include recovery for lost wages and therefore pursuant to Tenn. Code Ann. § 36-4-121(b)(1)(C), it was properly classified as marital property.
With regards to Husband's unvested pension, the parties agreed it was marital property which was subject to division; however, Husband took issue with how the Court divided the pension. In Tennessee, trial courts may choose the valuation method by consideration of all relevant factors and circumstances and must "reflect essential fairness in light of the facts of the case." Id. at 832. (citing Kendrick v. Kendrick, 902 S.W.2d 918, 929 (Tenn. Ct. App. 1994)).

Husband argued a deferred valuation method was appropriate, in which the court would determine a formula for dividing monthly benefits at the time of the decree, but would delay the actual distribution until the benefits become payable. Wife argued that the present cash value method, which places a present value on a retirement benefit as of the date of the final decree, should be used. Here, present cash value method was the logical way to reach an equitable division of the marital estate because Wife needed an immediate substantial judgment to offset her debt obligations given the continued refinancing of real property and the consolidation of debts, which benefited Husband. Further, Husband's dissipation of the product liability settlement contributed to the Court's use of the present cash value method.

Parents Must Prove Unanticipated Material Change to Modify Parenting Plan

August 2, 2012 by The McKellar Law Firm, PLLC

In the case of Armbrister v. Armbrister, No. E2012-00018-COA-R3-CV, (Tenn. Ct. App. July 27, 2012), Tennessee divorce attorneys learn that a significant or material unanticipated change of circumstances must be proven before the best interest of the child analysis can be applied in parenting plan modification cases.

History: In 2009, the parties were granted a divorce and a Permanent Parenting Plan ("PPP") was entered. Mother was awarded primary parent status and was given 280 days with Father having 85 days. Father paid child support in the amount of $2,014.00 per month. In February 2011, Father filed Motion to Modify the PPP alleging a material change in circumstances which included his remarriage and work schedule change. Mother was unwilling to allow modification and in her Response stated no material change of circumstances existed. In October 2011, the trial court heard testimony from interested parties and increased the number of days for the Father to 143 and decreased the award of child support accordingly.

Issue: Whether the trial court erred in finding that a material change of circumstances had occurred which justified a modification of the prior PPP?

Analysis: There is a two step process to determine whether a modification of a current PPP is warranted. First, the court must determine whether a material change in circumstances has occurred after the initial custody determination. Even though there are no "rules" to determine this, there are several relevant considerations: (1) whether a change has occurred after the entry of the order sought to be modified; (2) whether a change was not known or reasonably anticipated when the order was entered; and (3) whether a change is one that affects the child's well-being in a meaningful way. Second, after finding that a material change in circumstances has occurred, the trial court must determine whether modification of custody is in the child's best interests using the factors enumerated in T. C. A. §36-6-106. The party seeking a change to the PPP must prove a material change of circumstances before a trial court can continue on with the best interests analysis.

Here, Father's move and remarriage are the only two significant factors that had changed since the divorce. His move was not a significant (Greeneville to Johnson City, a distance of 30 miles) and furthermore, the move was anticipated at the time of the divorce according the trial court records. Father's work schedule did not change significantly either, only allowing him more Fridays off. Nothing about the work schedule or move changed in a meaningful enough way to merit a material change in circumstances. Father's remarriage was not found to be a material change in circumstances either. Father's new spouse was able to establish a relationship with the children under the preexisting PPP and no proof was offered to establish that she had changed their environment in any significant way. The Tennessee Court of Appeals concluded the Father failed to show a significant or material unanticipated change of circumstances which affected the children's well-being in any meaningful way. The Court reversed and remanded to the trial court, meaning the parties would return to the original PPP.