Facts: This is the second appeal in this case.
In the first appeal, the Court of Appeals reversed the trial court’s classification of certain business interests as Wife’s separate property, instead finding the increase in value of those interests to be marital property. The case was remanded to the trial court to reconsider the division of property now that the marital appreciation of Wife’s business interests is included in the marital estate.
When Wife’s business interests were excluded from the marital estate, the trial court divided the property 51% to Wife and 49% to Husband.
On remand, Wife’s business interests were valued at $4.6 million. The business interests were gifts to Wife from her father. Husband was found to have made no contribution to acquiring Wife’s business interests. For an explanation of why the marital appreciation of Wife’s business interests is marital property, see the first appeal.
After reconsidering the division, the trial court described Husband as a “reckless” manager of the parties’ finances who lived as if the “well” of money from Wife’s family “would never run dry.”
The trial court kept the same division as before except it ordered Wife to pay Husband an additional $600,000. This resulted in an overall division of approximately 84% to Wife and 16% to Husband.
On Appeal: The Court of Appeals reversed the trial court.
Tennessee law requires that marital property be divided equitably based on the factors in Tennessee Code Annotated § 36-4-121(c) without regard to fault by either party. The law requires an equitable division of marital property, not an equal division. Tennessee courts have wide discretion in dividing marital property.
The Court concluded an 84/16 division is an abuse of discretion in this marriage of long duration:
The [trial] court focused a great deal on the relative financial contributions of the parties in dividing the marital estate. We believe that the [trial] court, in dividing the appreciation of the business entities this Court instructed be included in the marital estate, lost sight of the forest for the trees. This was a long-term marriage, in which Husband exercised a great deal of the financial decision-making. If Husband, like Wife, benefited from Wife’s family’s largesse, that does not serve to undermine all of the otherwise relevant statutory factors such as the economic circumstances of Husband and Wife when the division of the estate becomes effective and the duration of the marriage. We also note that if Husband had been successful rather than unsuccessful financially, there is little question that the fruits of his success would be fair game for equitable division. As long as it does not rise to the level of dissipation, spouses share the results not just in successful financial decisions but also in the unsuccessful ones.
We are very much disinclined to tinker with a lower court’s decisions regarding the division of a marital estate. However, the 84/16 division of the marital estate in this case is extreme and inequitable resulting in an injustice to Husband. The factual basis for the [trial] court’s division of the marital estate is not properly supported by evidence in the record. Further, the [trial] court did not properly identify and apply the most appropriate legal principles applicable to the equitable division of the marital estate. We vacate the [trial] court’s division of the marital estate, and remand for a new division that will award 65% of the entire marital estate to Wife and 35% to Husband. To emphasize, it does not matter how the court below divides a particular marital asset because ultimately it is the overall division of the entire marital estate that must be equitable, a fact seemingly lost in this drawn-out case.
The trial court’s judgment was reversed and the case remanded to effect a 65/35 division of the marital property.
K.O.’s Comment: Tennessee courts have blessed grossly unequal divisions of marital property because of the relative contributions of the parties.
For example, in Phelps, an 88/12 division was affirmed in a long marriage where one party’s contribution was found to have far exceeded the other’s. For another, consider Brown, where an 80/20 split of the marital appreciation of Husband’s separate business was affirmed in a long marriage where Wife made no contribution to the business.
Why is a similar result here an “extreme” outcome? Instead of an explanation, the Court offers mere conclusions between potshots at the trial court.
It would help family-law attorneys and trial-court judges alike to know how or why this trial court’s decision to give more weight to relative contribution and less weight to other factors constitutes reversible error under a highly deferential standard of review.