Facts: Husband and Wife divorced after 30 years of marriage.

Throughout the marriage, Husband owned with his father a company that grew to be successful, with over 80 employees and grossing approximately $10 million a year. Wife was a homemaker and stay-at-home parent.

The trial court valued the marital estate at $3.3 million and divided it 60% to Wife and 40% to Husband because there was no income-producing property available to award Wife like there was with Husband and his interest in the company.

The proof showed that Husband and his father regularly took what they designated as “shareholder loans” from the company above and beyond their regular salaries. They used company credit cards for both personal and business expenses. Husband’s personal expenses would be paid by the company and recorded as a “loan” to Husband. There was no loan document, no collateral, and no interest owed or paid.

Before the complaint for divorce was filed, Husband owed $592,000 in shareholder loans. Shortly before trial, his loan balance was $1.78 million.

While some of the credit card charges benefited Wife, such as the mortgage payment, the parties’ attorney’s fees, etc., many charges did not, such as payments for Husband’s Porsche, living expenses for their adult children, and money spent to further an affair.

In valuing Husband’s interest in the company, the trial court refused to offset the entire balance of the shareholder loan, finding that 25% of the loan represented the “dissipation of the parties’ marital assets” by Husband. The trial court found that Husband dissipated the marital estate by his “extravagant spending” which was “detrimental to [Wife] by reducing the value of her equitable interest in the parties’ share of the business.”

Husband appealed.

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

A party’s dissipation of marital or separate property is one of many factors a trial court must consider in making an equitable division of the marital estate. Whether dissipation has occurred is often determined by the facts and the party’s credibility.

The timing of the expenditures is crucial. It’s unlikely that expenditures that were typical or commonplace during the marriage will constitute dissipation, especially when the other spouse acquiesced in them.

The Court found that Husband failed to preserve the parties’ interest in the company:

Husband seems to suggest that because the parties typically spent extravagantly during the marriage, he could continue to spend as he desired during the divorce. We respectfully disagree.

*     *     *     *     *

[T]he the trial court acknowledged that it was impossible to calculate the exact total of Husband’s wasteful and unnecessary expenditures. Even if we were to conclude that some portion of the expenditures would not neatly fit the definition of dissipation, the trial court was still authorized to consider Husband’s extreme spending and record-high shareholder loan balance as a failure to preserve [the interest in the company] as a marital asset.

*     *     *     *     *

At the outset of the divorce proceeding, Husband was admonished to limit his spending on the parties’ grown children and what the trial court deemed wasteful expenditures. Instead, Husband increased his shareholder loan balance by over $1 million in the course of two years. He was driving a new Porsche and renting an expensive apartment while at the same time claiming an inability to pay for Wife’s attorney’s fees or repairs to the marital home. He vehemently opposed providing spending money to Wife while at the same time providing tens of thousands of dollars to the parties’ two grown children and charging it as shareholder loans. This reduced the marital property available for equitable distribution. During Husband’s testimony at trial, the trial judge asked Husband directly if he was borrowing shareholder loans from [the company] and using the money to pay his grown children’s expenses. Husband replied, “Yes. As I explained, Your Honor, they’re my kids. I’ve done everything I could for them.” The trial judge then responded, “First obligation is to your spouse.” The trial judge observed that Husband was “using that debt to minimize the value of [the] company.”

Finding that the trial court properly considered Husband’s depreciation of marital assets, the Court affirmed the trial court’s judgment.

K.O.’s Comment: (1) Husband took extreme, unreasonable, and unrealistic positions, e.g., valuing his interest in the business as a negative number, insisting that Wife was only a candidate for transitional or rehabilitative alimony, etc. While it’s normal for advocates to argue for a favorable position within the range of reasonableness, repeatedly going outside that range is often counterproductive because it diminishes the advocate’s credibility.

(2) Wife requested attorney’s fees on appeal but cited no statutory or contractual authority for that relief, instead appealing “to the discretion of” the Court of Appeals. That won’t suffice. Tennessee Code Annotated § 36-5-103(c) provides the statutory authority for Wife’s request because this appeal also involved the trial court’s ruling on alimony, but she never cited it. Because of this unforced error, Wife’s request was denied. Readers should learn from this.

(3) This opinion is 39 pages long. Thirty. Nine. Pages. (This is my cry for help.)

Kholghi v. Aliabadi (Tennessee Court of Appeals, Middle Section, September 18, 2020).