Reduction of Value for Cost of Sale Reversed in Chattanooga Divorce: Gaither v. Gaither

Facts: The parties divorced after 28 years of marriage.

At trial, the parties disputed the value of the marital residence. The trial court ordered the marital residence to be appraised and for Wife to have the opportunity to purchase Husband’s interest in the home at the appraised value.

The court-ordered appraisal established the fair market value of the home to be $475,000.

After the trial court deducted the debt associated with the marital residence, the equity value was found to be $403,735.

The trial court then deducted 20% for the cost of sale if the parties had sold the house, thereby finding the net equity to be $323,020. Husband was awarded $150,000 for his portion of that equity.

Husband appealed the trial court’s decision to deduct 20% of the value of the marital residence to reflect the cost of selling the home.

On Appeal: The Court of Appeals reversed the trial court.

Husband argued the trial court erred in deducting 20% for the cost of selling the home because there was no proof of such expense presented at trial.

Wife countered the trial court properly considered this cost in the event Wife was unable to purchase Husband’s interest.

It was undisputed on appeal, however, that (1) Wife had been approved for a loan to purchase Husband’s interest, (2) the house was not listed for sale, and (3) no proof was presented to support an expense of sale totaling 20%. According to Wife, she wanted to retain the home as her sole property. She expressed no desire to sell the home.

After reviewing the record, the Court reasoned:

We agree with Husband that the trial court erred in deducting twenty percent for the costs associated with a possible sale of the home inasmuch as Wife made clear that she did not intend to sell it. The parties had not listed the home for sale, and there was a dearth of evidence regarding any potential costs that might be associated with selling the home. Wife testified that she wished to keep and occupy the residence. The trial court granted her request, awarding the home to her and awarding Husband a share of the “net” equity. In the absence of ordering the home to be sold, however, the trial court had insufficient basis to reduce the equity value by the cost of selling the home. Such a calculation resulted in an inequitable windfall to Wife regarding the equity value of this asset awarded solely to her.

After finding the trial court’s overall distribution of the marital estate exclusive of the marital residence to have awarded 52% to Wife and 48% to Husband, the Court of Appeals modified Husband’s allocation of equity in the marital residence from $150,000 to $188,000 in order to retain the trial court’s 52%-48% division.

Concurring Opinion: Judge Susano wrote a concurring opinion to add:

I write separately to express my view that it is sometimes appropriate to take into account the cost of selling an asset even though there is no present intent to sell. Since the proof in this case does not support the trial court’s “20%” decision, I agree that this particular part of the trial court’s judgment is not correct.

K.O.’s Comment: Judge Susano’s opinion that “it is sometimes appropriate to take into account the cost of selling an asset even though there is no present intent to sell” appears to conflict with other cases from the Court of Appeals. For example, in Watson v. Watson (Western Section, Aug. 9, 2005), the Court held:

This Court has previously held that transfer costs and fees are not proper deductions when the record contains no evidence that a party intends to sell an asset; unless the trial court contemplates the sale of property as part of the division of the marital estate, the value of the property should be based on its present value without deducting costs that might be incurred if the property were sold.

Divorce litigators take note.

Gaither v. Gaither (Tennessee Court of Appeals, Eastern Section, October 13, 2014).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce, Matrimonial and Family Law Attorney.

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K.O. Herston is a family-law attorney in Knoxville, Tennessee whose practice is devoted exclusively to family law, including divorce, child custody, child support, alimony, prenuptial agreements, and other aspects of family law.

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