Classification of Marital Residence as Separate Property Reversed in Memphis, Tennessee Divorce: Lewis v. Lewis

August 17, 2020 K.O. Herston 1 Comments

FactsBefore Husband and Wife married, Wife purchased a home, made the down payment with her separate funds, placed the title in her name, and lived there. Within a year, Husband moved in with her.

Eight months later, they married. Throughout the marriage, Wife paid the mortgage with her earnings.

After 10 years of marriage, they divorced.

The issue was the classification of Wife’s premarital home.

Tennessee marital propertyWife testified she never intended for the property to be a marital asset. She also said Husband told her she should pay the bills because it was her house. While conceding that Husband performed some maintenance on the property, she insisted she did most of the upkeep. She paid for property expenses and improvements out of her separate bank account, which was funded with her earnings.

Husband testified that Wife intended for him to be a co-owner, but she left him off the title and the mortgage because of his credit. He admitted he did not contribute as much as she did, but claimed he gave her half of everything he earned. Husband testified his contributions took the form of physical labor and insisted he did most of the upkeep.

The trial court found Wife’s testimony was more credible than Husband’s and concluded the home was Wife’s separate property.

Husband appealed.

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

The classification of property as separate or marital is a question of fact to be determined considering all relevant circumstances. Tennessee courts must consider both the legal and equitable interests of the parties in deciding whether property is separate or marital.

Separate, premarital property can become marital property through the doctrine of transmutation. Factors that Tennessee courts must consider include:

  • using the property is a marital residence,
  • the ongoing maintenance of the property by both parties,
  • placing the title to the property in joint ownership, and
  • using the credit of the nonowner spouse to improve the property.

These four factors are nonexclusive, however. Tennessee courts have also found transmutation based on the use of marital funds to improve the property or pay down the mortgage. A spouse’s earnings are marital property, regardless of whether they are deposited into a joint or separate bank account.

The increase in value during the marriage of a separate asset can be classified as marital property if the nonowner spouse substantially contributed to the asset’s preservation and appreciation.

While not challenging the trial court’s credibility assessment, the Court found that Wife’s testimony proved facts that preponderate against the finding that the property did not transmute from separate to marital during the marriage:

[T]he transmutation analysis is focused on how the parties treated the property and not their relative efforts. Here, it is undisputed that the parties used the property throughout the marriage as their marital residence. Also persuasive is the use of marital funds for improving property or paying off an encumbrance. Admittedly, while Wife assumed more responsibility for the property then Husband, in addition to performing her role as the primary wage earner, it is undisputed that Wife used marital funds, her earnings during the marriage, to pay the mortgage, property taxes, and expenses to maintain the property.

The Court found the evidence preponderates against the trial court’s findings that the property did not transmute to marital property. The case was remanded to the trial court to reconsider the equitable division of marital property, given this change in classification.

K.O.’s Comment: If there is a convincing case for finding that the evidence preponderates against the trial court’s conclusion, I didn’t find it in this opinion. The Court’s reversal is based on the fact that (1) the property was a marital residence, and (2) Wife used her marital earnings to pay the mortgage, taxes, and insurance on the property.

Consider these appellate opinions:

  • While the property was a marital residence, Treadwell v. Lamb explains that a property should not be classified as marital property simply because the parties lived in it.
  • In Bates v. Bates, the Court found that the maintenance of separate accounts where the husband paid the mortgage from his account and did not add the wife to the deed proved there was no intent to transmute the home from the husband’s separate property to marital property.

This case could have gone either way at the trial court level. The trial court’s judgment is supposed to enjoy a presumption of correctness and be given great weight on appeal. The Court should have left this one alone.

Lewis v. Lewis (Tennessee Court of Appeals, Western Section, August 11, 2020).

Classification of Marital Residence as Separate Property Reversed in Memphis, Tennessee Divorce: Lewis v. Lewis was last modified: August 16th, 2020 by K.O. Herston

1 people reacted on this

  1. KO I had this exact situation while working as a divorce financial analyst for the wife several years ago. Wife had purchased the condo and lived in it for a few years prior to getting married and putting him on the deed. The husband insisted 1/2 of the current value of the condo was his property since marital income paid the upkeep, mortgage, taxes and insurance during the marriage. I did an analysis showing the appreciation value of the condo from the time it was purchased until he was put on the deed and used this calculation as the cost basis. I subtracted the cost basis amount from the appreciation/ depreciation value during the marriage (this was during part of the housing crash) to get the marital value. Then divided the marital value by 2 to get the husband’s portion. This calculation was accepted by both parties. This didn’t address the main question raised above, but did resolve in getting an agreeable value on the Condo

    Sharon Jennings, CDFA

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