January 2013 Archives

Careful! Exaggerating Expenses for Alimony Purposes Can Backfire

January 25, 2013 by The McKellar Law Firm, PLLC

In the case of Willocks v. Willocks, No. E-2012-00378-COA-R3-CV (Tenn. Ct. App. January 10, 2013), Tennessee divorce attorneys are shown some potential ramifications of dissipating the marital estate and filing false expense affidavits, as well as an example of when property can be classified as separate (and therefore not subject to equitable distribution) even when acquired during the marriage.

Facts: The parties married in 1994, and Husband brought substantial separate inherited assets to the marriage. Wife worked for about 6 years, earning about $30,000 per year. Husband filed for divorce in 2008 after a separation that began in 2007. Husband began paying Wife $2,000 of temporary spousal support in July 2009. The trial court awarded Wife retroactive alimony of $12,000 upon her motion showing $700 of monthly income and $4,400 in monthly expenses. At trial, Wife amended these numbers, claiming $2,600 in expenses and $934.00 in income per month. After the trial, the court entered a Memorandum Opinion, finding that Wife's affidavits were untruthful and she had "secretly and fraudulently" spirited away $100,000 of marital assets. The court awarded Wife marital assets of $383,848 (including the $100,000)and Husband was given $257,206 of marital property and separate property worth $685,100, including an AIG annuity. The court also awarded Wife $900 per month of alimony in futuro, to continue until one party's death or Wife's remarriage or cohabitation.
Issues: Wife argues that the alimony award was improperly low and Husband argues the amount was too high. Secondly, Wife argues that the annuity should have been deemed marital property.

Analysis: Regarding the award of alimony, the trial court must look to the factors found at T.C.A. §36-5-121(I)(1-12). The two most important factors are the disadvantaged spouse's need and the payor's ability to pay. The parties' income in 2006 was over $500,000, which came from Husband's inherited interest in his family's business and estate. When the trial occurred, those assets were not producing income, as the estate had been closed and the business hadn't paid a dividend in three years. The trial court made an important finding that these assets could not maintain the previous standard of living. The court also found Wife's affidavit of expenses was not accurate and noted that she admitted that they were false. As to fault, the court found that Wife's "extreme jealousy" contributed to the end of the marriage. In light of these findings and Wife's dissipation of marital assets, the Appellate Court found that the $900 per month alimony award was appropriate and proper.

Secondly, Wife argues the annuity should be classified as marital property. The Court looked to T.C.A. §36-4-121 which defines separate property as "property acquired in exchange for property acquired before the marriage or income from and appreciation of property owned by a spouse before marriage except when characterized as marital property." Husband bought the annuity during the marriage with separate funds. Husband testified that the purchase came from separate funds acquired prior to the marriage and Wife did not contribute to the purchase. Further, Wife's argument that the property was transmuted from separate to marital fails because no evidence in the record shows that she substantially contributed to preservation or appreciation of the annuity. Accordingly, the Appellate Court upheld the classification of the annuity as Husband's separate property.

Alimony In Futuro Appropriate in Tennessee Divorce When Employment Rehabilitation Not Possible

January 18, 2013 by The McKellar Law Firm, PLLC

In the case of The Tennessee Court of Appeals matter styled Dodd v. Dodd, No. E-2012-00378-COA-R3-RV (January 9, 2012), Tennessee divorce attorneys are given an example of when alimony in futuro is appropriate.

Facts: The parties married in 2002 and Husband filed for divorce in 2011. During the marriage, Husband opened and operated several businesses. After a trial, the court awarded Wife $3,156.00 per month in alimony in futuro. Husband appealed, arguing that there was no finding as to whether Wife could be rehabilitated, no evidence as to the parties' standard of living, no evidence that Husband had an ability to pay, and that the court misapplied the alimony factors found in T.C.A. §36-5-121(i).

Analysis: Trial courts have "broad discretion" to determine alimony in divorce cases, but the two most important factors are the payor's ability to pay and the payee's need. In the case of alimony in futuro, this type is only appropriate when rehabilitation of the payee spouse is not feasible. In this case, Wife was 56 years old at the time of divorce and was earning $400 net per month after taxes and insurance as a teaching assistant and had a high school education.

Accordingly, the trial court found that she was the economically disadvantaged spouse and that "nothing was shown that there's any training we could give to her over the next six years before she's at least eligible for social security that's going to make a hill of beans difference....I'm finding she's not trainable." Further, the trial court also found that there was no credible proof that Husband's expenses negated his ability to pay as he failed to file an Affidavit of Income and Expenses. The Appellate Court, on review, stated there was substantial evidence in the record to support Wife's inability to be rehabilitated or meet the standard of living enjoyed while married. Wife's only other work experience consisted of retail and restaurants, and her Affidavit showed a need of $3,375.00 per month. The proof regarding Husband's income included net income of one business of $105,328.76 over a two-month period, and that Husband owned and operated a convenience store and a restaurant. Husband failed to produce any tax returns or reliable profit and loss statements. Therefore, the trial court committed no error in it's alimony determination and the Appellate Court affirmed the decision.

How Waiver of Violations of Local Rules Can Affect Divorce; Standards for Pro Se Litigants

January 15, 2013 by The McKellar Law Firm, PLLC

In Hall v. Hall, No. E2012-00394-COA-R3-CV (Tenn. Ct. App. Dec. 21, 2012), Tennessee divorce attorneys learn: (1) that courts may enter a divorce decree even if the parties fail to attend mediation; (2) that pro se litigants are not held to a lower standard; (3) the manner in which courts assess whether a 401(k) constitutes separate or marital property; and (4) how appellate courts evaluate remedies for violations of local rules of practice.

The facts: The parties were married for five years, having married less than a year after Husband's prior wife passed away. Throughout the course of the marriage, the parties did not make improvements on the home Husband owned, and the home did not appreciate in value. Husband (age 60) worked as a chemical technician earning $67,000 per year. Wife, on the other hand, received $973.00/month in social security disability benefits and received Medicare. Wife enjoyed the freedom of spending her entire benefit amount freely as the mortgage and every household bill was timely paid from Husband's earnings. Nevertheless, Wife accumulated $16,000 in credit card debt. Wife independently owned a home in the Philippines, did not have a retirement plan or pension, and sought in the divorce to acquire the home that Husband had owned prior to the marriage.

When Husband's former wife died, Husband participated in a tax sale, buying a few vacant lots with her life insurance benefits. He also bought a quadraplex rental unit which was foreclosed upon, and Husband was still paying off the $24,000 deficiency judgment at the time of trial. Husband's 401(k) value had actually decreased during the marriage.

At trial, Wife represented herself pro se. She cancelled two scheduled mediations, and did not file a Motion to Compel to access her right to discovery from Husband. The trial court held that the marital residence was separate property belonging to Husband due to Wife's not making a substantial contribution to its appreciation (the residence had not appreciated whatsoever); Wife's home in the Philippines was her separate property; Husband's vacant lots were his separate property; Husband was entitled to his 401(k) account; since the credit card debts were Wife's separate property, Wife was responsible for paying them herself; Husband was responsible for court costs; and Husband did not owe Wife any alimony due to his "lack of ability to pay."

Citing Tenn. R. Civ. P. 59, Wife moved for a new trial due to "mistake, inadvertence, surprise or excusable neglect" and because the parties did not attend mediation as required by T.C.A. § 36-4-131, a requirement not expressly waived by the Court. Wife's motion was denied since neither Husband nor Wife referenced the lack of mediation (thus serving as the equivalent of a waiver) at trial, and since Wife neglected to complete a Motion to Compel (which served as the equivalent of a waiver of discovery).

Issues: On appeal, the court considered the following issues: (1) whether the parties' failure to engage in mediation warrants a new trial; (2) whether Wife is entitled to a new trial because interrogatories and requests for production for documents were not answered; (3) whether Wife is entitled to a new trial or different distribution of the estate based upon the Trial Court allegedly erring in its allocation of Husband's 401(k); and (4) whether Wife is entitled to a new trial or different distribution of the estate on the basis that the Trial Court allegedly did not comply with its local rules of practice.

Analysis: First, Tenn. Code Ann. § 36-4-131(a)-(b) (2010) provides that the court is permitted to "waive or extend mediation" in certain situations, including: mediation is unaffordable; there is a marital dissolution agreement or agreed order in place; a settlement conference occurred instead (with a special master or the court presiding); if impasse is the "substantial[ly] likel[y]" result; or for other reasons that the court decides are adequate. The court of appeals upheld the trial court's ruling here since mediation is clearly not required in order for a divorce to be final.

Second, the court of appeals emphasized that Wife acting as a pro se litigant is not a valid excuse for her failure to properly file a Motion for Discovery: "Pro se litigants are not excused from complying with the same substantive and procedural requirements that other represented parties must adhere to." Whitaker v. Whirlpool Corp., 32 S.W.3d 222, 227 (Tenn. Ct. App. 2000). Third, the court of appeals stated that the pre-marriage value of a 401(k) account constitutes separate property rather than marital property and any appreciation would be grounds for the property to become a marital asset. The court then upheld the trial court's decision regarding the decreasing value of the 401(k). Fourth, Wife complained that since the parties did not file financial statements, they violated local Rule 10.01(c) of the local rules of practice. Since Rule 10.01(c) provides that either continuance, entry of default judgment, dismissal, or "other appropriate sanctions in the Court's discretion" are the remedies for a lack of filing statements, the court of appeals upheld the trial court's decision that this was waived when not objected to at trial by either party.

Best Interests Review and Finding Required in Tennessee Divorce and Custody Cases

January 4, 2013 by The McKellar Law Firm, PLLC

In the case of Hardin v. Hardin, No. W2012-00273-COA-R3-CV, filed December 27, 2012, Tennessee divorce attorneys learn that a trial court's ruling can be vacated if a specific best interest finding is not properly noted in the record.

Facts: The parties divorced in 2009. In 2011, Father filed a Petition to Modify the Parenting Plan, Petition for Temporary Restraining Order ("TRO") and Petition for Contempt, alleging that he had been the primary caretaker for the child 75% of the time, and therefore the parties had not been following the Plan. He also alleged Mother had several paramours, that Mother had exposed the child to cigarette smoke and Mother had moved in with a third party due to financial constraints, and that this new residence was not appropriate. A TRO was entered, giving Father primary parenting responsibility and allowing Mother two days per week of co-parenting. Mother then also filed requesting to change the parenting plan and alleged Father was in contempt for failure to pay child support. After a trial, the court named Father the primary residential parent ("PRP"), stated a material change of circumstances existed and awarded Mother standard visitation. Mother appealed.

Issues: Mother argues that the trial court committed error in failing to consider the factors found in T.C.A. §36-6-106 and therefore also failed to correctly use a best interests standard. Father requested his attorneys fees.

Analysis: When courts modify an existing parenting plan or custody order, they must go through two steps. First, a material change of circumstances must be found under T.C.A. 36-6-101, and if so, whether a modification is in the child's best interests (T.C.A. §36-6-106) pursuant to the factors found in T.C.A. 36-6-404. These factors include: character and physical and emotional fitness of each parent, continuity, history of who was primary caretaker and emotional bond, among others.

Mother argues the trial court failed to make a best interests finding. The Appeals Court agreed. Accordingly, the trial court's order was vacated and remanded for entry of an order complying with Rule 52.01 of the Tennessee Rules of Civil Procedure (which requires the trial court to make specific findings of facts and conclusions of law). Moreover, the Appeals Courts notes this is not a "mere technicality" but instead gives the basis upon which the court reached the decision, which speeds up the appellate process. The trial court erred in failing to making a best interests finding and failing to apparently consider any of the statutory factors. Any evidence of the court doing so was omitted from the record. Father's attorney fee request was denied due to Mother's claims having been found meritorious.