Husband Denied Proceeds From Property Sold in Violation of Injunction

February 21, 2013
By The McKellar Law Firm, PLLC on February 21, 2013 11:07 AM |

In the recent case entitled Jolley v. Jolley, No. M2011-02550-COA-R3-CV (Tenn. Ct. App. Jan. 31, 2013), Tennessee Divorce Attorneys learn that due to the unclean hands doctrine, a spouse is not entitled to proceeds of property sold in a partition action in violation of the automatic statutory injunction. This injunction, found at T.C.A. §36-4-106, is put into place automatically upon the filing of a contested divorce in Tennessee, and prohibits both spouses from the selling, transferring, assigning, encumbering, concealing or in any way dissipating or disposing of marital property without prior court approval.

The facts: The parties married on November 21, 1981, and separated after twenty-eight years. The couple owned a piece of property in DeKalb County, Tennessee jointly with another person. In August 2010, Husband filed a quitclaim deed for his one-half interest in the property to his sister and brother-in-law. In November 2010, the joint owner filed a partition suit which named Husband and Wife as owners.
Wife filed a Petition in the divorce action requesting proceeds from the sale of the property. Wife alleged that Husband "sold and/or transferred approximately 33.91 acres located in DeKalb County Tennessee without Wife's approval which is a direct violation of Tennessee Code Annotated § 36-4-106." Wife also alleged criminal contempt.
Through a judicial settlement conference, the parties reached an agreement in the divorce proceeding and the trial court entered a hand-written Consent Decree resolving issues of their personal and real property, dismissing any Orders of Protections and all motions/petitions for contempt; there was no specific mention of the DeKalb County property or the proceeds from the sale.

A hearing was held on the partition action in April 2011, an the Order was entered in May 2011, dismissing Husband from the action due to his stating he had no interest in the property in his Answer. The property was sold by public auction within 120 days. After the sale, the parties were to have another hearing to "determine the parties respective shares and interest and how the proceeds will be distributed."
In May 2011, Wife's attorney filed a proposed final decree in the divorce case, but Husband objected, alleging "Wife appeared at a hearing conducted in the litigation and asserted a right in and to the real property or the sale's proceeds to be generated from the partition sale of the property." On May 27, 2011, the final decree of divorce proposed by the Wife was entered by the Chancellor.
In September 2011, the divorce court held a hearing on the Husbands motion to set aside the final decree of divorce pursuant to Tennessee Rules of Civil Procedure 60.02. That was denied, the court having found that the Husband deliberately violated Tennessee Code Annotated § 36-4-106 and came before the court with unclean hands. Therefore, he was not entitled to relief from the original judgment. The proceeds from the partition property were found to be Wife's separate property, not marital. Husband committed a contemptible charge by transferring his interest in the property based upon statute and lost his right to claim an interest in the property. The Court found that he had not petitioned the Court with clean hands, and waived any interest he would have had.

In the Appeal, Husband then argued that the trial court erred when they entered the Wife's proposed divorce decree without holding a hearing on his objection. Following Local Rule of Chancery Practice 14.01(c), no hearing was required for the proposed decree, just allowance for an objection to be filed or the filing of a competing proposed final decree. Tennessee Court of Appeals found no error in the trial court's entry of the Wife's proposed divorce decree.

The Husband then challenged the trial court's decision to deny his motion to set aside the Wife's final divorce decree and awarding the DeKalb County property partition proceeds to the Wife in infringement of the consent decree and final divorce decree. The property was not mentioned overtly in the consent decree or the final divorce decree. The Husband believed that the property was marital property and should be transferred to him. "The trial court declined to award Husband any proceeds related to the DeKalb County property because Husband took a diametrically opposed position in the partition action and he had unclean hands by his misconduct and actions and should be estopped after the fact to obtain an interest in the property subject to the partition suit in DeKalb County." The Tennessee Court of Appeals agreed with the trial court.

The doctrine of unclean hands is based on the belief that "he who seeks equity must do equity and that he who has done inequity cannot have equity." In re Estate of Boote, 265 S.W.3d 402, 417 (Tenn. Ct. App. 2007). The doctrine "enables a court to prevent a party from profiting from her own misconduct." Emmit v. Emmit, 174 S.W.3d 248, 253 (Tenn. Ct. App. 2005). Because of Husband's actions in quit-claiming the property in violation of Tenn. Code Ann. § 36-4-106(d), the trial court did not err in using the unclean hands doctrine to deny the Husband any interest in the property and awarding any proceeds from the partition suit to the Wife.