Classification of Increased Stock Value Disputed in Brentwood, Tennessee Divorce: Spergl v. Spergl

FactsHusband and Wife divorced after 11 years of marriage.

Before the marriage, Husband received from his father 1200 shares of Class A UPS stock and 8400 shares of Class B stock. When the parties married, each share was worth $73. At the time of divorce, the price per share was $132.76.

Tennessee separate propertyThrough a dividend reinvestment program, the dividends from the Class A shares were used to purchase additional shares of Class A stock. During the marriage, an additional 531 shares of Class A stock was purchased this way.

The dividends from the Class B shares were used to support the parties’ lifestyle.

The trial court found that Wife made a substantial indirect contribution as a wage earner, homemaker, and parent to the preservation of the Class A shares. Without Wife’s income and contribution as a homemaker and parent to Husband’s children (her stepchildren), Husband would have had to use the dividends from the Class A shares to support the parties’ lifestyle just as he did with the dividends from the Class B shares. Thus, the 531 shares of Class A stock acquired during the marriage through the dividend reinvestment program were classified as marital property and equally divided.

The trial court found that the shares acquired before the marriage — and their increase in value during the marriage — were Husband’s separate property.

Wife appealed.

On AppealThe Court of Appeals affirmed the trial court.

Marital property includes income from, and any increase in the value during the marriage of, property determined to be separate property if each party substantially contributed to its preservation and appreciation. This contribution may include the indirect contribution of a spouse as homemaker, wage earner, or parent.

Separate property includes all property owned by a spouse before the marriage and the income the separate property generates during the marriage unless each party substantially contributed to its preservation and appreciation.

An increase in the value of separate property during the marriage is not considered marital property unless both parties substantially contributed to the appreciation in the value of the property. These contributions must be real and significant, and there must be some causal link between the spouse’s contributions and the appreciation in the value of the separate property. A spouse’s contributions need not be monetarily comparable to the increase in the separate property’s value, nor must they relate directly to the separate property at issue.

Wife argued the increase in the value of the UPS shares during the marriage is marital property as her income substantially contributed to the preservation and appreciation of the shares because, without her income, Husband would’ve been forced to sell them to pay for his “lavish living expenses.”

Husband argued the increase in share price had nothing to do with any contribution by Wife; instead, the increase in price was driven by the market.

The Court held that Wife failed to prove a causal connection between her contributions and the increase in the value of Husband’s premarital shares of UPS:

The shares of UPS stock are Husband’s separate property [because he owned them before the marriage. Tennessee law] allows that marital property includes the increase in value of property determined to be separate property if the non-owning spouse contributed to both the preservation and appreciation of the separate property. Accordingly, for the appreciation in the shares’ value to become marital property, Wife needed to show that she substantially contributed to the stocks’ preservation and appreciation. The record before us fails to support such a conclusion.

Husband testified that the increase in the stock shares’ value is “absolutely . . . market driven.” Wife did not offer proof to the contrary, and on appeal cites only to evidence that marital funds helped to preserve the stock by permitting Husband to pay taxes on the dividends without cashing out the stock. Wife has not cited to evidence establishing a nexus between the use of her income to pay the tax liabilities and the appreciation in value of UPS stock.

* * * * *

In the absence of competent proof that Wife’s activities contributed to the appreciation in value, we conclude that the evidence does not preponderate against the trial court’s determination that the appreciation in value of the stock was Husband’s separate property.

The trial court’s judgment was affirmed.

Spergl v. Spergl (Tennessee Court of Appeals, Middle Section, May 16, 2019).

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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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