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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.


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. ยง36-4-121 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.

Inequitable Property Division in Divorce Remedied by Motion to Alter/Amend

In the case titled Haggard v. Haggard, No. W2012-003600-COA-R3-CV, 2013 WL 2304186 (Tenn. Ct. App. May 28, 2013) Knoxville divorce attorneys learn what constitutes an equitable division of property in a divorce and when a Motion to Alter or Amend is appropriate post-judgment.

Facts: Husband and Wife were married for nine (9) years with no children. Wife filed for divorce in 2010; Husband responded with a counter-complaint. Wife entered a proposed division of marital property as an exhibit with the trial court requesting it award her a lump sum (or in monthly payments) for her marital share of the assets that she proposed be given to Husband.

The trial court took Wife's proposal under advisement. However, in its Final Decree it awarded marital assets valued at $119,847.49 (including three parcels of property) to Husband while only awarding assets valued at $16,598.01 to Wife with no mention of a monetary award for her marital share of the assets given to Husband.

Wife filed a Motion to Alter the Final Decree arguing that although she had not specifically asked for any of the property awarded to Husband she did not intend to forfeit her claim in said property. She also pointed out the proposed division of the marital property she entered with the court as an exhibit. As a remedy, Wife asked the court to award her unencumbered marital assets. Husband filed a response arguing that the division of property was equitable and no "mistake" was made in the final decree. He averred that under the Rules of Civil Procedure there were no grounds to alter or amend the final decree. The trial court stated that it misunderstood Wife's intention at trial regarding the marital assets and found the division to be inequitable. Therefore, it awarded wife a parcel of property valued at $47,000 with no debt. Husband appealed.

Analysis: On appeal the appellate court had to determine whether the trial court abused its discretion when awarding Wife additional real property, without additional proof presented, based on the trial court's misunderstanding of Wife's intention at trial in regards to marital assets.

Husband argued that the division of the marital property was equitable when factoring in the award of alimony ($450 for 24 months) and attorney's fees (approximately $5,000) awarded to Wife. Husband also pointed out that Wife had no debt. The appellate court did the math which showed Wife's total share of the marital assets as $36,297.51 once the alimony and attorney's fees were added. The court conceded that an "equitable" division of marital property does not have to balance mathematically; however, it stated that the division of assets in this case was "plainly inequitable."

Husband also argued that the trial court abused its discretion in allowing Wife's Motion to Alter or Amend. He averred that in the motion Wife spoke of her "intention" regarding the marital property which was new evidence after the final order was entered in the case. The appellate court pointed out that Husband never asked for an evidentiary hearing from the trial court on the matter.

The appellate court quoted Tennessee case law stating a Motion to Alter or Amend allows a trial court to amend a judgment to correct an error or prevent injustice to a party. Its purpose is to allow trial courts, when it has overlooked or failed to consider important matters, to fix its errors to prevent unnecessary appeals.

Conclusion: The appellate court found that the initial division of marital property was inequitable and the trial court did not abuse its discretion in allowing Wife's motion to amend. The trial court's opinion was affirmed with costs of the appeal taxed to Husband.