Classification of Separate Property Reversed in Knoxville, Tennessee Divorce: Dover v. Dover

December 21, 2020 K.O. Herston 0 Comments

Facts: Husband and Wife divorced after 10 years of marriage.

Throughout the marriage, Husband worked as an anesthesiologist, sometimes earning over $900,000 a year, while Wife was a homemaker and stay-at-home parent. Husband deposited his income into the parties’ joint bank account, where it was used to pay household expenses.

Before the marriage, Husband bought the marital residence, a North Carolina cabin, and a one-half interest in another North Carolina property on Church Street.

During the marriage, the parties extensively renovated the marital residence with funds from their joint bank account. They paid off the mortgage three years after the marriage.

They also substantially renovated to the North Carolina cabin with marital funds.

Five months after the marriage, Husband used marital funds to buy the remaining one-half interest in the Church Street property. The parties used significant marital funds to renovate and improve that property, too.

Husband testified he never intended for the real estate to be marital, that all three properties are titled only in his name, and that Wife’s credit was not used to finance or renovate the properties.

The trial court found that none of the properties had transmuted from Husband’s separate property into marital property. However, Wife was awarded funds equal to one-half of the cost of renovating the marital residence and the North Carolina cabin.

The trial court specifically found that the marital funds used to improve Husband’s premarital properties “were earned by Husband with Wife making no monetary contribution, but contributions in the form of helping to pick out fabrics and other design elements of the renovation and remodeling. No proof of any substantial contribution by Wife to the increase in value was presented.

Both appealed.

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

Tennessee law distinguishes between separate property and marital property. In a divorce, only marital property is subject to division between the parties. Thus, Tennessee courts must classify property as separate or marital before they can equitably divide the property between the parties.

Separate property is generally all property owned by a spouse before the marriage.

Marital property is generally all property acquired by either spouse during the marriage. It also can include an increase in the value of separate property during the marriage if each party substantially contributed to its preservation and appreciation.

Separate property can also become marital property by commingling if it is inextricably mingled with marital property or with the separate property of the other spouse. If the separate property continues to be segregated or can be traced into its product, commingling does not occur.

Separate property can also become marital property through transmutation, which occurs when separate property is treated in a way that shows an intention that it become marital property. Dealing with property in such a way creates a rebuttable presumption of a gift to the marital estate. The presumption can be rebutted by evidence of circumstances or communications clearly showing an intent that the property remains separate.

Transmutation often occurs when a spouse buys real estate before the marriage and the parties then use the property as the marital residence and undertake significant improvements to the property during the marriage.

Tennessee courts often consider these factors when determining whether a home owned by a spouse before the marriage became marital property through transmutation:

  • using the property as a marital residence;
  • the ongoing maintenance and management 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.

The Court found the evidence showed the marital residence had transmuted into marital property:

First, it is undisputed that the parties used the [marital] residence as their family home. Second, both parties contributed to the ongoing management and maintenance of the property, both during the marriage and during the period of separation before trial. It is undisputed that when the parties resided together, Husband worked long hours and Wife cared for the home as well as the parties’ children. The record demonstrates that Wife paid bills for the home out of the parties’ joint bank account, helped plan renovations on the home, planted flowers, etc. . . . The record clearly reflects that Wife contributed greatly to the ongoing management and maintenance of the [marital] residence.

The third transmutation factor, whether the home is titled jointly, obviously militates against a finding of transmutation in this case because the [marital] residence is titled in Husband’s name only. However, it is well-established that record ownership of an asset does not always control its classification. Moreover, the fourth factor strongly favors a finding of transmutation in light of the proof that the parties did substantial renovations on the [marital] residence with marital funds. Wife was heavily involved in the improvement process and often wrote checks out of the parties’ joint bank account to pay for the improvements. . . . Although both the trial court and Husband make much of the fact that Wife’s credit was never used to fund the improvements, this is inapposite in light of the fact that no party’s credit was needed because the renovations were paid for outright with marital funds.

The Court applied the same analysis to the North Carolina cabin:

Again, both Husband and the trial court rely heavily on the fact that the cabin was not titled in Wife’s name, as well as the fact that Wife’s credit was not used to improve the property. Like the [marital] residence, however, no party’s credit was used to improve the property because the parties were able to pay for all improvements up front. . . .

The trial court again gives undue weight to the fact that Wife did not financially contribute to the parties’ estate during the marriage . . . . However, the record does not support this finding in light of the fact that the improvements were paid for with marital funds.

The classification of the Church Street property was reversed for the same reasons.

After ruling that all three properties are marital property, the Court remanded the case to the trial court to reconsider its equitable division of marital property. It concludes with this note to the trial court:

One final note is in order regarding equitable division of the parties’ marital estate on remand. In its amended findings of fact and conclusions of law addressing division of the parties’ property, the trial court repeatedly states that Wife made no financial contributions to the family, and at several points notes that the money in the parties’ joint checking account was money earned by Husband, through his employment, with no contribution from Wife. . . . The trial court’s conclusions addressing the division of property ascribed more weight to Husband’s role as wage earner than to Wife’s role as homemaker. Wife, however, has been the sole caregiver to the parties’ children [for several years]. Contrary to the findings of the trial court and Husband’s contentions on appeal, Wife’s contribution to the family has been both meaningful and substantial.

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[F]ailure to consider Husband’s and Wife’s contributions equally would be a serious error of law in light of the longstanding policy recognizing the equal dignity and importance of the contributions to the family of the homemaker and the breadwinner. It is our sincere hope that the trial court will remedy this error in dividing the marital estate on remand so as to avoid future appeals.

Dover v. Dover (Tennessee Court of Appeals, Eastern Section, December 8, 2020).

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Classification of Separate Property Reversed in Knoxville, Tennessee Divorce: Dover v. Dover was last modified: December 20th, 2020 by K.O. Herston

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