Facts: Husband worked for his father’s railroad construction business since he was a teenager and, aside from a few short periods, he worked for his father throughout this 29 -year marriage.
In the summer of 2005, Husband left the business after disagreeing with his father. Early the next year, Husband’s father asked him to return to the business.
According to Wife, Husband said he would demand an ownership interest in either the business or the business’s real estate before he would return.
Within days, Husband returned. One month later, Husband’s father purchased real estate for the business and titled the property is in his name along with Husband’s name as joint tenants with right of survivorship, giving Husband a one-half interest in the property.
Roughly eight years later, Wife filed for divorce. She named Husband’s father as a defendant so the court could address the jointly-titled property.
After a lengthy trial, the trial court found that while Husband owned no interest in his father’s business, he was a one-half owner of the business’s real property and buildings. Husband failed to carry his burden of showing that his interest in the properties was a gift that would render it separate property. The court found that Husband acquired his interest in the property in consideration for his agreement to return to his father’s business.
The trial court also found that the claims of Husband and his father as to their inability to find documents regarding his father’s business were “absolutely ridiculous,” and that both had engaged in “extreme discovery abuses.” The trial court further commented that their lack of organization regarding the business was “truly baffling to the Court.”
On Appeal: The Court of Appeals affirmed the trial court.
Husband argued that his ownership interests in the business property was a gift from his father and should be classified as his separate property rather than marital property.
Tennessee recognizes both marital property and separate property. Marital property must be divided between the divorcing parties. Separate property is not part of the marital estate and is not subject to division. Before dividing a marital estate, the trial court must first classify the assets owned by the parties as either separate or marital property.
Marital property includes all real or personal property acquired by either spouse during the marriage.
Separate property includes property acquired by a spouse at any time by gift. The party asserting the gift must prove (1) an intention by the donor to make a present gift, and (2) delivery of the gift by which the donor surrendered complete control of it. Any doubts must be resolved against the gift.
The classification of property is separate or marital does not depend on how it is titled. Instead, it is a question of fact to be determined under the circumstances.
The Court agreed that Husband failed to prove his interest was separate property:
We have no written employment agreement reflecting the terms of Husband’s reemployment. During the relevant time frame, however, there were discussions and letters exchanged regarding Husband purchasing [his father’s business] and the property where it would operate . . . . However, Wife testified that she and Husband discussed the situation just a couple of days before Husband returned to work, and at that time, Husband intended to demand an ownership interest either in the company or in the property before he would agree to return for [his father’s business], as they believed that an ownership interest would diminish the chances of [Husband’s father] firing Husband again and impacting their ability to pay for [their children’s] private school. [Husband’s father] invited Husband to return to [the business], and Husband did return within days. When the first parcel was acquired approximately one month later, Husband’s name was added to the deed, and it was added to each subsequent deed. . . . [W]hen [Husband’s father] was asked at trial whether he considered it a gift when he added Husband’s name to the deed, he responded, “I don’t think of it as a gift. I don’t think of it is anything.”
The trial court implicitly rejected the testimony of [Husband’s father] and Husband with respect to this issue by concluding that Husband did, in fact, acquire his ownership interest in the [business] property in consideration for his agreement to return to work at [his father’s business] in the same timeframe. The trial court explicitly found that “[n]either Husband nor [his father] had a good description or explanation of how it was agreed that Father would return to working for [his father’s business].” The court ultimately concluded that Husband failed to present sufficient evidence to overcome the presumption that his interest was marital property.
Because the evidence does not preponderate against this finding, the trial court’s judgment was affirmed.
K.O.’s Comment: Wife incurred over $649,000 in attorney’s fees, while Husband’s totaled $331,000. Wife testified that she borrowed $550,000 from her brother to pay for her attorney’s fees. The trial court ordered Husband to pay $200,000 of Wife’s attorney’s fees. Wife also sought to recover her attorney’s fees on appeal.
The Court agreed with the trial court’s observation that the staggering amount of attorney’s fees in this litigation “is one of the saddest issues involved in this case.” When denying Wife’s request for fees on appeal, the Court explained:
Litigants should be forewarned that they are ultimately responsible for the payment of their attorney’s fees. Although the court may award the prevailing party in a divorce case some or all of their attorney’s fees, that result is never certain. Accordingly, it behooves every litigant to be acutely aware of the costs of litigation and to actively participate in deciding what issues are worth litigating.
Both litigants and lawyers must be mindful of the economics of litigation and the risk involved.