Recently in Divorce & Division of Property Category


Misrepresentation May Lead to New Trial in Tennessee Divorces

In the case titled Stamps v. Stamps, Jr., No. M2012-02512-COA-R3-CV Slip Copy, 2013 WL 6795411 (Tenn. Ct. App. Dec. 19, 2013) Tennessee divorce attorneys learn whether the application of Local Rule of Practice 6.02 for the Twenty-First Judicial District gives a trial court discretion to deny a Motion to Alter or Amend and/or for a New Trial in relation to a mediated agreement where facts may have been distorted by a party without a hearing on the matter, without discussing the evidence filed to support said motion in its denial, and without discussing its basis for the denial of said motion.

Facts

Husband and Wife were married for 26 years and had two minor children at the time of filing for Divorce. Wife filed a Complaint for Divorce and the parties attended mediation which resulted in the parties entering into a Marital Dissolution Agreement ("MDA").

The parties amassed several pieces of commercial and residential properties during the marriage, one of which was the subject of this appeal. This was a rental property that was awarded to Wife in the MDA.

After the MDA and Final Decree were entered with the court, Wife filed a Motion to Alter or Amend and/or for a New Trial. In her motion Wife averred that Husband had misrepresented the condition and status of the rental property in question. She alleged that Husband did not disclose that the property was in "significant disrepair" and "not rentable or inhabitable." Further, she stated that Husband represented in his deposition that the property was worth $215,000.00 which was supported by an appraisal, and was bringing in $1,600.00 per month in rent. She stated that the tenant had vacated the property due to its poor condition. She supported her motion with her own affidavit, an affidavit of the former tenant, Husband's deposition, letters between counsel, the property appraisal, the MDA and Final Decree. The record did not show that an Answer was filed by Husband.

The trial court did not set the matter for hearing. Instead it denied Wife's motion citing Rule 6.02 of the Local Rules of Practice for the Twenty-First Judicial District and entered an order denying Wife's motion. Rule 6.02 states as follows:

Motions for new trial, motions for judgment n.o.v. and motions to alter or amend will not be set for hearing exception upon direction of the Judge. Such motions should be accompanied by any citation of authorities and written argument which the moving party wishes the Judge to consider. No such motion will be sustained by he Judge without affording the adverse parties an opportunity either to file responsive briefs and written argument or to be heard in oral argument.

Wife appealed the court's decision averring the court erred in denying her motion without a hearing, in not giving the court's basis for the denial, and in not applying contract principles in its consideration of her motion.

Analysis and Conclusion

Tenn. R. Civ. P. 59.04 allows a motion to alter or amend a judgment in order for a trial court to fix errors as to the law or facts that it failed to consider in certain matters. Chadwell v. Knox Cnty., 980 S.W.2d 378, 383 (Tenn. Ct. App. 1998). According to Vaccarella v. Vaccarella, 49 S.W.3d 307, 312 (Tenn. Ct. App. 2001), these motions "may be granted (1) when the controlling law changes before a judgment becomes final, (2) when previously unavailable evidence becomes available, or (3) when, for sui generis reasons, a judgment should be amended to correct a clear error of law or to prevent injustice." Decisions based on Tenn. R. Civ. P. 59.04 are reviewed under an abuse of discretion standard. Ferguson v. Brown, 291 S.W.3d 381, 386 (quoting McCracken v. Brentwood United Methodist Church, 958 S.W.2d 792, 795 (Tenn. Ct. App. 1997)). A trial court is deemed to have abused its discretion when it "causes an injustice by applying an incorrect legal standard, reaching an illogical decision, or by resolving the case 'on a clearly erroneous assessment of the evidence.'" Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 524 (Tenn. 2010). When reviewing these cases the appellate court "should begin with the presumption that the decision is correct and should review the evidence in the light most favorable to the decision." Henderson v. SAIA, Inc., 318 S.W.3d 328, 335 (Tenn. 2010) (quoting Overstreet v. Shoney's, Inc., 4 S.W.3d 694, 709 (Tenn. Ct. App. 1999)). The appellate court may not substitute its own judgment for the trial court's under the standard. Henry v. Goins, 104 S.W.3d 475, 479 (Tenn. 2003).

Until approved by a court, a mediated agreement is contractual in nature. Ledbetter v. Ledbetter, 163 S.W.3d 681, 685 (Tenn. 2005). Whether a mediated agreement is enforceable is a question of law. Id. At 683. Proof of misrepresentation of facts that were used for the basis of entering into a mediated agreement can be grounds for vacating or amending the agreement. Coleman v. Coleman, E2011-00974-COA-R30CV, 2012 WL 1622240. at *5 (Tenn. Ct. App. May 8, 2012).

In the appellate court's review of the trial court's record it found the trial court to cite its basis for denying Wife's motion as follows:

"The Court now having carefully considered the Plaintiff's motion, respectfully denies the motion pursuant to Rule 6.02 of the Local Rules of Civil court for the 21st Judicial District. IT IS SO ORDERED."

It also reviewed the documents that Wife filed in support of her Motion and found that if the facts asserted by Wife were true, that a misrepresentation of the rental property may have occurred. It further averred that this could justify a new trial or amendment to the MDA and/or Final Decree.

According to Eldrige v. Eldrige, 42 S.W.3d 82,88 (Tenn. 2001) "[a]n abuse of discretion can be found only when the trial court's ruling falls outside the spectrum of rulings that might reasonably result from an application of the correct legal standards to the evidence found in the record." In the case at bar, the trial court did not discuss the grounds for Wife's motion or the evidence she provided to support it in its denial. Therefore, the appellate court could not review the trial court's discretion in denying the motion.

For these reasons, the appellate court vacated the order that denied Wife's Motion to Alter or Amend and/or New Trial and remanded the case back to the trial court to enter an order that discussed the evidence that Wife filed in support thereof and ordered the trial court to discuss its basis for its denial.


Award of Lien Against Spouse Incurred to Preserve Marital Estate Upheld in Tennessee Divorce

December 4, 2013 by The McKellar Law Firm, PLLC


In the case titled Jackson v. Cash, No. M2012-01338-COA-R3-CV Slip Copy, 2013 WL 5762354 (Tenn. Ct. App. Oct. 22, 2013) Knoxville family law attorneys learn when it is appropriate for liens to be granted in regards to a party's interest in a marital estate and what constitutes an equitable division in regards to debt accrued in maintaining a marital estate during the course of a divorce spanning over two years.

Facts
Husband and Wife married in 1998. Wife rarely worked outside of the home and Husband worked as an engineer until he changed careers and became a general contractor. The couple bought a home in Williamson County with the intention of improving the property and marketing it as a wedding venue. However, this never came to fruition, and Wife filed for divorce in October 2009. During most of the divorce process, Husband and Wife continued living together.

In May 2010 an agreed order was entered allowing Wife to borrow money to pay the mortgage, insurance, and make repairs to preserve the marital home. The order required Husband to make some of the repairs since he was a contractor. However, Husband never made them. Wife petitioned the court to allow her to hire others to do the work. The court acquiesced, and in its order advised that they would make "an equitable adjustment to compensate Wife" at a later time.

Again in September 2010, the court allowed Wife to borrow money to keep the marital home out of foreclosure. The court noted in its order that Wife would be credited for this amount in regards to her interest in the marital estate at the final hearing.

The trial for the divorce began in April 2011 and spanned ten days. During trial, Husband was ordered by the court to leave the marital residence, and Wife was granted the ability to lease the home. Prior to the final hearing, a Mr. Tucker that had done work on the estate and loaned Wife money for maintenance of the estate filed a motion to intervene alleging he was owed $240,000 for services provided and monies loaned. In his petition, he requested a lien on the marital home that would be subordinate to the existing mortgages. The court granted his petition.

The trial court found that Mr. Tucker loaned Wife $240,128 in cash, services, supplies, and payments. It awarded him a judgment against Wife for the full amount, and granted a lien on Wife's interest in the marital estate. Further, it was found that Husband never agreed to pay Mr. Tucker, and, in fact, Husband had specifically stated that he would not agree to be liable for the work Mr. Tucker did. However, because the work was done to improve/preserve the marital home for which Husband had a financial interest, the trial court found Husband to be liable to Mr. Tucker for $75,889.59 and granted a lien on Husband's interest in the marital estate. In addition to Mr. Tucker's liens, Wife was awarded a lien against Husband's interest in the marital home for her expenses maintaining it during the divorce in the amount of $100,714.69.

In June 2012, the trial court amended its memorandum and order to state that the judgment in favor of Mr. Tucker against Husband was against both Husband and Wife, jointly and severally. It also noted that the judgment against wife in favor of Mr. Tucker in the amount of $240,128.19 included the judgment against Husband. Husband appealed the decision.

Analysis and Conclusion

Husband raised the following issues on appeal: the trial court erred in awarding a judgment against him in favor or Mr. Tucker; and the trial court erred in awarding a judgment against him in favor of Wife in regard to expenses she spent on the marital estate. As there was no transcript or statement of evidence in the record for the appellate review, the facts of the case were extracted entirely from the trial court's Memorandum and Order.

In regards to the lien awarded to Mr. Tucker, the appellate court looked to Tenn. Code Ann. § 36-4-121(c) to ensure the trial court applied the correct legal standards, weighed the correct legal factors, applied the correct logic and reason, and whether the division of the marital estate, assets, and debt was equitable. Owens v. Owens, 241 S.W.3d 478, 490 (Tenn. Ct. App. 2007).

When determining if marital debt has been equitably divided, the court must consider the following factors:
• The debt's purpose
• Which party incurred the debt
• Which party(ies) benefitted from the incurred debt
• Which party is best able to repay the debt

Alford v. Alford, 120 S.W.3d 810,814 (Tenn. 2003) (citing Mondelli v. Howard, 780 S.W.2d 769, 773 (Tenn. Ct. App. 1989)). Per case law, marital debt is defined as "all debts incurred by either or both spouses during the course of the marriage up to the date of the final divorce hearing." Id. at 813.

Here, the trial court found Wife incurred a debt of $240,128.19 to maintain and preserve the marital estate. Despite Husband's objections, these expenditures were approved by the trial court prior to the debt being incurred. Of the total amount of debt incurred, the trial court specifically found that $75,889.55 was used to keep the marital estate out of foreclosure, maintain homeowner's insurance, and to do maintenance. For this reason, it was found that this portion of the debt was for Husband's benefit as well. The appellate court found no evidence to dispute the trial court's findings; therefore, the trial court's ruling on Mr. Tucker's lien against Husband's interest in the marital property was affirmed for $75,889.55.

In regards to the trial court's judgment in favor of Wife for a lien against Husband's interest in the marital estate in the amount of $100,714.69, Husband argued that it was inequitable to make him liable to Wife for the full amount. He further averred that if he was liable at all, it should only be for one-half of the total debt.

Because there was no transcript or statement of evidence provided, the appellate court was unable to reweigh the equities in the matter. Manufacturers Consolidation Serv., Inc. v Rodell, 42 S.W.3d at 865. The appellate court was left with no other choice but to assume the trial court's findings were supported by the evidence and affirmed its ruling.


Appreciation Due to Market Factors Not Enough to Justify Distribution of Value to Spouse in Tennessee Divorce

August 13, 2013 by The McKellar Law Firm, PLLC

In the case of Huddleston v. Huddleston, No. M2012-00851-COA-3-CV (Tenn. Ct. App July 30, 2013), a case out of Putnam County Chancery Court, Knoxville divorce attorneys learn that an increase in value of separate property during a marriage, if due to market factors only, will not justify dividing that increase between the spouses upon a divorce.

Facts: The parties married in 1996, and each brought property into the marriage. The Husband owned a farm and the Wife a house in Cookeville. Wife moved to the farm until they separated in 2010. During the marriage, the couple bought a vacant lot adjacent to the Cookeville house. Husband then quitclaimed his interest in that property to Wife, and Wife conveyed the property to her sons but retained a life estate. Wife then gave that up and the sons sold the property and the proceeds were used to purchase a life insurance policy on the Wife. In a trial in 2012, the court bisected the farm property, giving each spouse half. Wife's life insurance property was awarded solely to her. Husband appealed the classification of the increase of the value of the farm as marital property, the award of half the property to the Wife and the classification of life insurance as separate property.

Analysis:

The Farm Property: The trial court decided that this property was marital and not separate because Wife contributed to its appreciation during the marriage. T.C.A. §36-4-121 defines marital property as that which is acquired during the marriage and includes income or increase in value of separate property if the spouse substantially contributed to its preservation and appreciation. Substantial contribution can include a spouse who is a homemaker, wage earner, parent, financial manager and other factors. Separate property is defined as that owned by either spouse prior to the marriage or income/appreciation earned after the marriage from separate property, gifts, bequests, or inheritance. Here, this Farm property was acquired in 4 parcels, three prior to the marriage and one after. An appraiser concluded that the increase in value during the marriage was approximately $330,000. Here, the trial court found that the Wife maintained the home, did laundry, cleaned, cooked, gardened, landscaped, painted and decorated, helped with farm chores, maintained fencing and helped harvest crops. However, the Appellate Court concluded that these efforts did not contribute to the increase in the value of the property. Because the court failed to make a finding as to why it held that Wife did substantially contribute to the appreciation. Prior case law emphasizes that when property increases due to market factors, and not efforts of either spouse, that increase in value is not marital property. Accordingly, the trial court's award is reversed as what was given to the Wife.

Life Insurance: Husband argues that the life insurance policy was marital because even though purchased with proceeds from separate property, the policy itself was acquired during the marriage and was comingled and/or transmuted into a marital universal policy worth over $250,000. The trial court found that Husband had signed over his interest via deed of the property to Wife. Husband offered no proof or evidence to support his contention. Accordingly, the proceeds from the sale of separate property to buy the separate life insurance policy was correctly determined to be Wife's separate property, and the trial court was affirmed on this issue.


Rare Tennessee Case Where Primary Parent Designation is Split Between Siblings

In the case titled Maupin v. Maupin, No. E2011-01968-COA-R3-CV, 2013 WL 1803602 (Tenn. Ct. App. Apr. 29, 2013) Knoxville divorce attorneys learn in what instances the primary parent designation ("PRP") can be split between parents and siblings, whether foreclosure liability is appropriate for the spouse who was not awarded the property, and when retroactive child support is appropriate.

Facts:Husband and Wife were married in 1993 and had three (3) children who were minors at the time of the divorce. For the first five (5) years of the marriage, Husband was unemployed and helped his parents on their farm; Wife worked at a hospital and sold jewelry on the side for extra income. Wife admitted to an affair in2007 and agreed to end it to save the marriage. Husband gave up farming to spend more time with Wife, and both attended marriage counseling sessions. However, Wife continued her affair Wife filed for divorce in 2008.

After considering testimony of two psychological experts and a guardian ad litem regarding the breakdown of Father's relationship with the daughter and Mother's relationship with the couple's two sons, the trial court designated Mother the PRP for the daughter and Father the PRP for the two sons. However, the court did stipulate that there be a co-parenting schedule to facilitate shared time together for the siblings on "weekends, holidays, and other vacation periods." Mother was ordered to pay $594 per month in child support based on the court determined income of $4,902 per month for Wife and $2,360 per month for Father. Two permanent parenting plans ("PPP") (one for the daughter and one for the sons) were entered with the court that were almost identical. Both allowed the PRP 247 parenting days with the other parent receiving 118 parenting days. Both plans included a supplemental provision requiring the family to enroll in counseling.

When determining assets, trial court's typically review a schedule of assets and liabilities submitted by both parties; however, Husband never submitted this information to the court in this case. Despite lacking this information, the court awarded Husband 20% of Mother's retirement fund and made the parties equally responsible for any joint credit card balances and a timeshare that was foreclosed on. Husband was awarded the marital residence valued at $175,000 with a mortgage balance of $223,834. The court ordered Husband "solely responsible for paying the indebtedness owed with regard to the [marital residence], holding [Wife] harmless from any liability in connection therewith"; however, in its ruling the court stipulated "the parties shall be equally responsible for paying any deficiency balance due" in the event of a foreclosure.

Husband filed a motion requesting retroactive child support to the date of separation which the court granted. Wife filed a motion for contempt alleging she had received no parenting time with her sons. The court scheduled an evidentiary hearing to determine if Husband was in contempt for failure to follow the "PPP." After hearing testimony from Husband and Wife, the court determined Husband had encouraged the two sons to go with Wife for visitation, but the children did not want to go. Therefore, it was reasoned that Husband was not in contempt of the court ordered PPP. Wife appealed the trial court's decision.

Analysis and Conclusion: On appeal the court had to determine the following:

• Whether the trial court erred in ordering Wife the PRP for one minor child and ordering Husband PRP of the other two children
• Whether the trial court erred in awarding Husband the marital home with the condition he assume the mortgage while stipulating Wife would be held responsible for on-half of the debt should the home be foreclosed
• Whether the court erred in awarding Husband retroactive child support to April 2009

On the issue of PRP, Wife argued that Husband refused to encourage the two sons for which he was PRP to have a relationship with her. She averred that Husband was turning the children against her. Husband argued that Wife brought the situation on herself by having an affair. In looking at the best interests of the children and applying that standard, the appellate court determined the trial court did not err in its discretion appointing Husband the PRP of the boys considering their animosity toward Wife. However, it did modify the parenting plan to require "appropriate, professional counseling" and remanded the case back to the trial court to have a hearing to appoint a therapist to develop a counseling program and therapy sessions with the parents. Both parents and all three children were ordered to attend the counseling.

On the issue of retroactive child support, Wife averred that she contributed to providing for the children during the separation period and trial for the divorce; yet, she was not seeing her sons. Husband pointed out that the guidelines for child support state a child support award is effective as of the date of separation unless there is a reason to deviate. The appellate court agreed with Husband's argument and found no reason to deviate from the guidelines. The trial court's decision was affirmed on this issue.

In determining Wife's final argument that the trial court erred in holding her responsible for one-half of the mortgage of the martial home in the event of foreclosure while awarding Husband said home, the appellate court found the trial court's opinion to be ambiguous. Father argued the divorce left him in financial ruin; Mother argued the trial court's opinion was inconsistent as it awarded Husband the home and the mortgage, but allowed that debt to come back on her in the event of a foreclosure. From the record the appellate court found that Husband had hidden assets during the divorce trial, finding he had approximately $200,000 in martial assets of which some were gambled away. The appellate court reversed the trial court's decision, stating Wife should be held harmless from any foreclosure debt on the marital home.


The Importance of Preserving the Record for Appeal (and the Importance of Having a Divorce Attorney)

April 28, 2013 by The McKellar Law Firm, PLLC

In Higgins v. Higgins, No. E2012-01376-COA-R3-CV (Tenn. Ct. App. April 16, 2013), Tennessee divorce attorneys learn the importance of preserving the record for appeal; if there is no record, the Court of Appeals must presume that the trial court's findings and conclusions are correct. Also, Tennessee family lawyers also learn that a party's decision to represent himself or herself pro se are not an excuse for failing to preserve the record.

The facts of the case are as follows: In 2010, Wife and Husband separated after twenty years of marriage; Wife subsequently filed for divorce. Husband was provided with an additional thirty (30) days before trial to acquire a new attorney after his former attorney withdrew from the case; however, he declined to do so, instead choosing to represent himself pro se. The parties then attended trial to address remaining issues of property division. At trial, it was clear to the trial court that the parties had similar health, financial resources, earning capacity, and ages. Also, the trial court noted that the marriage was long-term, and that the parties did not have any separate property. Accordingly, the trial court fairly equally divided the parties' property ($34,000 to Husband and $38,000 to Wife) and expressed its opinions in a memorandum opinion.

Testimony revealed that Wife's $50,000 gift and a prior sale of a residence that was in the name of both Husband and Wife was the source of funds by which the parties acquired their marital residence. The court granted this residence to Wife "subject to the first mortgage as well as two-thirds of the home equity line of credit (HELOC)," and determined that it was a marital asset. Husband was responsible for the remaining one-third of the HELOC. After trial, Wife filed a motion requesting that the court amend the memorandum opinion to elaborate on other matters; the court made amendments and entered a divorce decree and final judgment at a second hearing, which Husband declined to attend. Husband then filed a motion to amend, alleging that the court's initial memorandum opinion differed from the final decree. The trial court only made a few amendments to the final judgment. As such, Husband filed this appeal, claiming that the court improperly classified the marital residence as separate property and that the division of the marital property was inequitable because the trial court failed to account for his "substantial" debt. He also alleged that the trial court wrongfully awarded alimony to Wife.

On appeal, the Court of Appeals addressed the following issues: (1) "Did the trial court err in its classification of the parties' property and did the court err in failing to equitably divide the marital estate?" and (2) "Did the trial court err in amending the final order to include an award of alimony?"

Regarding the classification and division of property, the Court of Appeals found that the trial court properly classified the home as a marital asset and that the trial court averred that Husband did not provide evidence of his alleged debts; since Husband presented no record, the Court had no basis on which to challenge the trial court's position. Finally, the Court found that neither the trial court's memorandum opinion nor amendment reflect any alimony award; the amount was purely an attempt to allocate the mortgage debt between Husband and Wife.

The most important aspect of this case is that the Court of Appeals noted that Husband entirely failed to provide a record of trial, and that his self-representation was not an excuse for his failure to do so. The Court warned that appellants are responsible for "prepar[ing] a record which conveys a fair, accurate, and complete account of what transpired in the trial court with respect to the issues which form the basis of the appeal." If they fail to do so, then the appellate court is required to "assume that the record, had it been preserved, would have contained sufficient evidence to support the trial court's findings."


Husband Denied Proceeds From Property Sold in Violation of Injunction

February 21, 2013 by The McKellar Law Firm, PLLC

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.
house_for_sale.jpg
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.


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.


When Transitional Alimony, Attorney Fees, and Moving Expenses are Proper After A Short Marriage

November 21, 2012 by The McKellar Law Firm, PLLC

In Gorbet v. Gorbet, No. W2011-01879-COA-R3-CV (Tenn. Ct. App. Oct. 11, 2012), Tennessee divorce attorneys learn that the Tennessee Court of Appeals finds transitional alimony, attorney fees and moving expenses proper after a short marriage where one spouse relocated and sacrificed former employment. The Court of Appeals also sheds light on how to determine whether property is marital or separate.

The facts are as follows: Husband owned a construction company building custom homes. He had a daughter from a prior marriage who visited every other weekend. Wife, a quality management analyst in Little Rock, AR, lived with her daughter from a prior marriage. Wife and her daughter moved to Jackson, TN and Wife stopped working following the marriage. Only Husband attended the closing of the parties' new Jackson, TN home several weeks prior to the marriage, and only Husband's name was on the deed. After the marriage, Husband moved out of the parties' new home in February 2011--before Wife could sell her home in Arkansas. Husband filed for divorce, and both parties contested ownership of the home and alimony. After a hearing, the trial court "grant[ed] Wife's petition for exclusive use of the... home." Wife also was to receive temporary alimony in the amount of $2,055 per month.

At trial, Husband stated that Wife's only contribution to Husband's company, which "purchased lots on a speculative basis", was interacting with potential clients at a home show and signing twenty checks. The parties used the business account (personal account) rather than a joint bank account to pay for monthly living expenses during their short marriage. Husband asserted that the parties' new home constituted separate property as the mortgage and title were in his name and he bought it prior to marriage; however, in order to have $2,000 of stonework completed, Wife gave away her car to the workmen, and the parties intended the home to be the "marital home." The parties disputed whether some of the business properties were separate or marital. Husband estimated that he had a $625,000 net worth, including $60,000 to $70,000 per year in income, a $162,000 annuity from his first divorce settlement, and two vehicles. Husband also confessed to engaging in an extramarital affair .

Wife testified she quit her job to assist Husband with his construction business "by running errands, signing checks, and helping Husband with a week-long home show." Wife spent her entire $20,000 savings account during the short marriage to contribute to marital expenses and "pay her own bills" (including the mortgage on her unsold home in Arkansas). She alleged that Husband never permitted her to access either of the bank accounts in his name. Wife claimed that the parties' home constituted marital property, that she did not need to have her name on the title, and that Husband said she was not required to be present at the closing. She referred to obtaining $2,000 of brick and stone services by trading her car. Wife also alleged that another lot constituted marital property since the parties (through the business bank account) made a $16,000 down payment with a loan obtained during the marriage since they anticipated establishing another residence there. Wife sought temporary spousal support. She had received a salary of more than $32,000 per year after working at the Arkansas hospital for ten years. Since the hospital was on a "hiring freeze", Wife was unable to reacquire her former job following the parties' separation; the hospital informed her that she would not reacquire seniority, even in the event that jobs became available. Wife was interested in obtaining a certification or master's degree to improve her likelihood of employment in the speech pathology and audiology field, in which she had already earned a bachelor's degree. In order to find a job in Arkansas, Wife felt that it was necessary to relocate from Tennessee to Arkansas. Wife only earned $500 per month in child support paid by her former husband; she alleged that Husband was responsible for "cutting off her phone" and thus impeded her job search. Wife also alleged that Husband was largely responsible for her high attorney fees because he was dishonest during discovery regarding his infidelity, neglected to maintain the marital residence, and did not pay temporary spousal support as ordered.

The trial court considered the Jackson, TN marital residence, the other lot, and Husband's whole-life insurance policy as marital assets and equitably divided them between the parties. It also provided Wife with two-year transitional alimony of $1700/month the first year and $750/month the following year, $8,000 in attorney fees as alimony in solido, and $2,500 in relocation costs.

The Tennessee Court of Appeals decided the following issues: (1) the award of transitional alimony to Wife; (2) the classification of the marital home, the other lot, and Husband's whole life-insurance policy as marital property; (3) [the award of attorney fees to Wife as alimony in solido; (4) the award to Wife of $2500 in moving expenses.

First, the court indicated that "when the court finds that rehabilitation is not necessary, but the economically disadvantaged spouse needs assistance to adjust to the economic consequences of a divorce", transitional alimony is proper (Tenn. Code Ann. § 36-5-121(g)) and upheld the award of transitional alimony to Wife, referring to her sacrifice in leaving Arkansas and her former employment there.

Second, the court upheld the classification of the aforementioned property as marital assets. It described that "marital property" is "all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing..." and that it "must be divided equitably... without regard to fault on the part of either party" (Tenn. Code Ann. § 36-4-121). The court further stated that under the transmutation or commingling doctrine, "separate property can become part of the marital estate due to the parties' treatment of the separate property." Eldridge v. Eldridge, 137 S.W.3d 1, 13 (Tenn. Ct. App. 2002). The marital residence that both parties agreed to purchase, the lot on which both parties expended marital funds, and the whole-life insurance policy that Husband changed from a pre-existing term life insurance policy using marital funds all constituted marital assets.

Third, the court affirmed the alimony in solido attorney fees to Wife due to Husband's inappropriate discovery behaviors (lying about an affair under oath), Wife's minimal income, and the importance of Wife being restored to her former standard of living. Fourth, the court upheld the award of $2,500 in moving costs to Wife since the parties had received estimates for this amount and because Husband testified during trial that he should reimburse Wife for such costs.


Drowning in Debt: Equitable Division and the Nondischargeability of Domestic Support Obligations in Bankruptcy

October 16, 2012 by The McKellar Law Firm, PLLC


In Yattoni-Prestwood v. Prestwood, No. E2011-01967-COA-R3-CV (Tenn. Ct. App. Aug. 29, 2012), Tennessee divorce attorneys learn the manner in which courts address equitable division for divorcing parties with no assets and lots of debt in light of the fact that domestic support obligations are not dischargeable in personal bankruptcy.

The facts of the case are as follows: Husband (earning $30,000 per year at the time of marriage) and Wife (earning $7,000 to $15,000 per year at the time marriage) were divorced less than one year after being married. A bank sued the parties on a promissory note on their real property, and the court combined the divorce and bank cases. Husband then filed for (and obtained) a Chapter 7 bankruptcy that discharged all of his debts. The bank proceeded against Wife for the deficiency following foreclosure on the parties' property, and she settled for a $15,000 entry of judgment (even though she was simply a co-signor and never owned the property).

At trial, the court discovered that Husband had placed the leftover loan money into his personal checking account and paid a portion to a previous girlfriend. When Husband promised that he was capable of repaying the loan and alleged that new loan requirements and his ownership of multiple properties made co-signature necessary, Wife had co-signed the note. Prior to marriage, Wife had enjoyed many assets from the settlement of a prior divorce (including two properties) and did not have much debt. Husband had multiple vehicles and a home, but he also owed mortgage payments on several rental properties.

During their brief marriage, Wife paid over $90,000 in expenses for Husband's vehicles, property, and the engagement ring he purchased for her. Wife also refinanced a property to obtain a $99,000 line of credit. Husband testified that he was primarily responsible for paying the bills. Husband said he had been reluctant to marry until achieving financial stability and pre-warned Wife that he was "borderline bankrupt" prior to marrying her; Wife denied this. The testimony conflicts as to whether Wife was indifferent to Husband's financial state and at any point asserted that she had enough assets. By trial, Wife was unemployed and $1,200 yearly real estate licensure fee was out of her budget; her sole income was from her two rental properties. Post-separation, Husband only earned $10,000-$12,000 per year appraising properties; he felt as though they had acquired the debt together and said he never promised to repay Wife any amount other than $4,000 for a credit card bill.

The court granted both parties a divorce and held them each responsible for their own liabilities. The case was then reopened on one issue: "whether Husband's discharge in bankruptcy 'trumped' the trial court's ability to assign him debt in the divorce." The court heard evidence from Wife's expert bankruptcy attorney regarding the nondischargeability of divorce-related debts and "domestic support obligations" but nevertheless affirmed its prior decision. The trial court also denied Wife's request for attorney's fees, in a departure from a prior ruling.

The appellate court addressed the issue of "whether the trial court erred in assigning one hundred percent of the marital debt to Wife." The court found that it would be "impossible" to restore either Husband or Wife to their pre-marriage financial state, as courts typically strive to do for short-term marriages. The court defined "marital debts" as "all debts incurred by either or both spouses during the course of the marriage up to the date of the final divorce hearing." The court asserted that courts can equitably divide marital debts by considering the Alford factors: (1) the debt's purpose; (2) which party incurred the debt; (3) which party benefitted from the debt; and (4) which party is best able to repay the debt.

The court found that the loan was not a marital debt since Husband applied for and obtained it prior to the marriage (rather than during the marriage); Husband placed the remainder of the loan in his personal Bank account and used the loan to pay off debt that was his alone. Since Wife settled for $15,000 with the bank after Husband discharged the loan in his Chapter 7 bankruptcy, the court ruled that Husband should pay Wife $15,000 of alimony in solido under Tenn. Code Ann. § 36-5-121.

On Appeal, the Appellate Court ruled that $89,000 of Wife's $99,000 line of credit that she obtained when she refinanced one of her properties was acquired during the marriage and thus constituted a marital debt . Therefore, a total of $108,700 - $89,000 of the equity line of credit plus $19,700 in credit card debt - was subject to equitable distribution between the parties, which the Court determined should be fifty-fifty.

Therefore, Husband was ordered to pay $54,350 in alimony in solido to the Wife, because he was found to have an ability to pay in light of the fact that Wife is solely liable to the creditors due to Husband's bankruptcy and his greater earning capacity.
The appellate court asserted that certain debts were not dischargeable in bankruptcy (per 11 U.S.C. § 523 (a)), including "domestic support obligations"--citing a case from Ohio, the court stated: "a requirement in a divorce decree to hold harmless or indemnify a spouse for joint obligations incurred during a marriage creates a 'new' [nondischargeable] debt, running solely between the former spouses." The court therefore modified the judgment and allocated the marital debt evenly between the parties, finding that "in the present case, equitable means equal"; the court held that alimony in solido from Husband to Wife to compensate for his share of the marital debt (in spite of Husband's debt discharge via bankruptcy) was proper. The appellate court also granted Wife her attorney's fees for both trial and appeal.


Older Parties Divorcing After a Long Marriage: Division of Marital Estate and Determinations of Periodic Alimony

October 12, 2012 by The McKellar Law Firm, PLLC

In Rodgers v. Rodgers, No. E-2011-02190-COA-R3-CV (Tenn. Ct. App. July 9, 2012), the Tennessee Court of Appeals sheds light for Tennessee divorce attorneys on the manner in which it divides the marital estate and awards periodic alimony for a marriage of long duration in which the parties are at or nearing retirement.

The facts are as follows: Both parties were aged in their mid-to-late 60s. After more than forty years of marriage, Wife accused Husband of irreconcilable differences and inappropriate marital conduct and divorced Husband. Husband, in turn, accused Wife of inappropriate marital conduct. Wife, a registered nurse, had worked part-time throughout her career while taking care of their sons (now adults), and presently her $3350.55/month expenses exceeded her $2407.69/month income--she had received no financial assistance from Husband during the separation although prior to his retirement he was making $100,000/year using his two degrees. Husband qualified for Social Security Disability beginning in 2005. As a means of supplementing his income, Husband owned a side car sales business in which Wife was not greatly involved (and which Husband failed to report on joint income tax returns). Selling cars and a line of credit were the means by which Husband accumulated $89,011 in funds in the parties' joint account at one point in 2006; however, Husband alleged that he no longer sold cars often.

In the final divorce decree, the trial court granted Wife a divorce and periodic alimony and also divided the marital estate. The court determined that a family heirloom ring that Wife wore was to be passed to the parties' adult sons upon their engagement or marriage. It also determined that Husband's sister's flat screen TV, freezer, and refrigerator that she had shipped to TN in anticipation of a move were "gifts" that were abandoned to the marital estate. The court evaluated the expert testimony pertaining to the valuation of the lake house and marital residence, ultimately deciding that the lake house was worth $243,000 and the marital residence was worth $248,750. Six of the parties' automobiles were to be sold to satisfy the HELOC (Husband would pay any remaining disparity since he used the HELOC as an income source).

As for alimony, the court (citing T.C.A. § 36-5-121 and common law) emphasized "need" and "ability to pay" as its primary considerations. The court found that Husband's sale of automobiles generated a substantial profit and noted that Husband would make more than twice the amount in Social Security benefits as Wife when she became of age to qualify. While the parties are at an age nearing retirement (thus, "their traditional earning capacity is not relevant"), Husband's car business is likely be ongoing post-retirement. The parties were in similar physical and mental conditions and Husband was at fault for the divorce. Based on all of the information, the court awarded Wife $1,000/month in periodic alimony, required Husband to pay the premium on both his and his Wife's life insurance policy, and enabled Wife to change beneficiaries. $5500 of Wife's attorney fees were also to be covered by Husband.

The appellate court decided the following issues on Husband's behalf: "(1) Whether the trial court erred in its classification of the marital estate; (2) whether the division of the marital estate was in error; (3) whether the trial court erred in awarding Wife periodic alimony; and (4) whether the trial court erred in awarding Wife's attorney's fees."
First, the appellate court discussed the difference between "separate" and "marital" property-- according to T.C.A. § 36-4-121(b)(2)(D), "separate property" includes "property acquired by a spouse at any time by gift, bequest, devise or descent" and can become marital property "under theories of commingling or transmutation" that reveals an "intention that it become marital property." As for marital property, there is a "presumption" that "property acquired during the marriage" qualifies. The court affirmed the trial court's decision that the heirloom ring and abandoned property of Husband's sister constituted marital property. Second, the court affirmed that the 53% (Wife) and 47% (Husband) division of marital property was equitable since relative fault should not be taken into account in dividing marital property (T.C.A. § 36-4-121(a)(1)) and "equitable" does not necessarily mean "equal." The court referenced T.C.A. § 36-4-121(c) factors. The appellate court, explaining its affirmation of the trial court, noted the older age of the parties, the high standard of living to which the parties had become accustomed, and the length of the marriage.

Third, the court decided the issue of periodic alimony; maintaining the "broad discretion" of the trial court and the "factually-driven" nature of alimony determinations, the court explained that the objective of alimony in futuro (based on factors such as earning capacity, past education, length of marriage, age and health of each party, standard of living the parties enjoyed, contributions of each party to the separate and marital property, and relative fault- see T.C.A. § 36-5-121(i)) is to "provide support on a long-term basis until the death or remarriage of the recipient." T.C.A. § 36-5-121(f)(1). Finding that Husband was at fault, the parties enjoyed a high standard of living, Husband earned more income, and the marriage lasted over four decades, the appellate court affirmed the trial court's award of alimony to Wife. Fourth, the court considered the issue of attorney's fees. The appellate court said that it was reasonable under the statute to require the spouse with adequate income to pay the legal expenses of the other spouse who does not have enough income and thus affirmed Wife's award of attorney's fees.

Finally, the appellate court addressed Wife's two disputed issues: "(1) whether the trial court erred in declining to award her the vehicles she requested and (2) whether the trial court erred in requiring Wife to pay part of what Wife describes as Husband's debt out of her share of marital property." First, the court said that the trial court was justified in requiring Wife to use her portion of marital property (in this case, the vehicles) to assist with paying some of Husband's debts since the HELOC benefit (and resulting "debt incurred during the marriage") "benefitted the marriage." Second, the court asserted that Wife is not entitled to attorney fees pertaining to any appellate issue on which she did not prevail.



Classifying Separate vs. Marital Real Property; Determining When Transmutation has Occurred

October 4, 2012 by The McKellar Law Firm, PLLC


In Sandford v. Sandford McKee, No. M2010-00562-COA-R3-CV (Tenn. Ct. App. Sept. 27, 2012), Tennessee divorce attorneys learn how courts decide which real property is classified as marital versus separate and how courts determine whether transmutation has occurred.

The facts: The parties obtained a divorce after eight years of marriage. The court adopted a parenting plan, provided Wife with transitional alimony, and equitably divided the property. At trial, it was established that Husband had bought (and had invested even more money in repairing) a 63-acre farm and house in Franklin, TN prior to the marriage. Also prior to the marriage, Husband had obtained a mortgage on the house and 10 acres of the farm ($1,050,000 fair market value) and kept the other 53 acres ($684,300 fair market value) separate. Situated on the 53 acres of land was a barn that Husband "convert[ed] into a guesthouse"; while Wife's father had contributed about a week of his time for framing the house and inspecting a lumber list, Husband had completed most of the work on his own prior to the marriage. Wife alleged that she had sanded, painted, decorated, furnished, designed, found assistants, and ordered wood for the new guesthouse. Husband obtained a $1,404,000 mortgage on the 10 acres and house in 2006; Husband obtained a $150,000 home equity loan in 2007, with security being the entire 63 acres (both Deeds of Trust were signed by both Husband and Wife).

At the conclusion of trial, the court held that the Franklin home on the 10 acres belonged to Husband as his separate property (however, any appreciation that occurred due to Wife's involvement during the marriage constituted marital property). Since the appreciation was equal to the mortgage indebtedness ($350,000), the court gave Husband this property to own and pay off. The trial court further held that the other 53 acres of the property belonged to Husband as "separate property as Wife made no substantial contribution to the appreciation of the value in that property." However, Wife alleged that transmutation occurred on both properties because she co-signed the 2006 and 2007 loan Deeds of Trust, enabling Husband to obtain a much higher loan than he otherwise could have and making her "an essential party."

The appellate court addressed whether the trial court's categorization of marital and separate real property was correct. Citing to Tenn. Code Ann. § 36-4-121, the court defined "marital property" as: "... all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing..." and "income from, and any increase in value during the marriage of, property determined to be separate property... if each party substantially contributed to its preservation and appreciation." The court defined "separate property" as: "all real and personal property owned by a spouse before marriage."

The appellate court further noted that "contributions [to separate property that convert it to marital property] may be either 'direct' or 'indirect'" but (1) "the contributions must be 'real and significant'" and (2) "there must be some link between the spouses' contributions and the appreciation in the value of the separate property."
In this particular case, the appellate court reaffirmed the trial court in ruling that the 53 acres should belong to Husband since it constituted "separate property." In support of this decision, the court first noted that Husband's evidence suggested depreciation of the 53 acres and that Wife never attempted to prove appreciation of the 53 acres. Secondly, the court asserted that Wife never actually showed that her personal "contributions [led to] any appreciation in value of the 53 acres," but that Wife simply claimed that she provided such contributions.

In response to Wife's transmutation argument, the appellate court again affirmed the trial court's ruling since Wife failed to meet her burden. Transmutation, which can be proved if "separate property [is put] in the names of both spouses" or if spouses "take title in joint tenancy," "occurs when separate property is treated in such a way as to give evidence of an intention that it become marital property." The court looks to "conduct between the parties" in determining whether transmutation has occurred. Here, Husband's actions never revealed that Husband "intended the house and 10 acres or the 53-acre parcel to become marital property." Wife only signed two Deeds of Trust "to protect the bank's interest in the property"; she never paid on either loan and never "signed either note [or] assumed liability for them." The appellate court also mentioned that the trial court required only Husband to pay debts related to both properties.


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.


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.


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.


Marital vs. Separate Property in Tennessee Divorce Context

August 2, 2011 by The McKellar Law Firm, PLLC

Malone v. Malone, No. E2010-01455-COA-R3-CV, 2011 WL 3066384 (Tenn. Ct. App. July 26, 2011) has further defined what constitutes marital and separate property in Tennessee divorce cases.

James Malone ("Husband") and Susan Malone ("Wife") married in 1990. In 2005, Husband filed for divorce. At the time of the marriage, wife received $13,975 in disability income and $11,712 in Social Security disability benefits. She also had a 401(K) worth $96,914. Husband received $5,130/month in pension benefits, had $847,106 in deferred compensation, a stock deferral plan of $390,000, a 401(k) plan of $232,000, and a flexible compensation plan of $205,000, all accumulated during the marriage. Husband also had over 20,000 shares of stock. During the entire marriage Husband and Wife lived separately due to Husband's profession.

The total marital estate was valued at $7,323,910 at the time of trial. Husband argued Wife should only receive 20% of the estate since wife did nothing to contribute to the appreciation of the majority of the property because of their separate living arrangements. Therefore, she should not receive an equal division of the property, but an equitable one. The trial court disagreed, ruling that it would be more equitable to split the estate 60-40, with Husband receiving $4,320,030 and Wife $2,968,989. Wife and Husband both appealed.
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Tenn. Code Ann. § 36-4-121(a)(1) controls distribution of marital property. Courts are required to look at all relevant factors, including the factors listed in subsection (c) to determine how to be distribute and divide marital property. Tenn. Code Ann. § 36-4-121(b) also classifies property as either separate or marital. Any property owned by a spouse before marriage is considered separate and is therefore not subject to division. Marital property, on the other hand, is property gained by either or both spouses during marriage and up to the time of divorce. If a piece of property is a pension, stock option, retirement, or other fringe benefit right related to employment, then the court determines the value of that benefit that accrued during the marriage even if it was originally separate property. Any other property that was originally separate will not be considered marital property even if there was any increase in income or appreciation during marriage.

While Husband argued that Wife's TVA disability pension should be marital property, the Tennessee Court of Appeals held it was separate property. Tenn. Code Ann. § 36-4-121 states that social security disability actions and other similar actions for wages lost during the marriage are marital property, but here Wife received the pension before she married, and there was no action for any wages lost while married. Therefore, her pension was still separate property.

The appellate court also allowed Husband's expenditures on his attorney and expert fees to be counted as part of the marital estate. Lastly, Wife was allowed 40% of the 20,000 stock. Even though the option price was lower than the market price, the appellate court held Wife had the right to share in any future gains from any employment benefit that accrued during the marriage.