Facts: Husband’s parents gave him a piece of real estate in 1994 that remained titled only in his name since then.

When the parties married in November 1996, they were building the marital residence on the piece of real estate Husband received from his parents. They moved into the marital residence after construction concluded in January 1998 and lived there until they separated in July 2016.

Wife testified both parties contributed financially to constructing the marital residence. For example, she bought the house plans before the marriage. She also testified she and Husband performed substantial work themselves to complete the home, including installing and finishing the drywall, painting, staining doors, and performing some stonework. Husband acknowledged Wife painted “a little bit” and helped him stain some doors. But he claimed the home was built primarily by his father and various contractors.

Wife worked throughout the marriage and contributed her income to the household. Husband worked until 2004 when he left a teaching position to pursue a business venture with his father.

The mortgage on the marital residence was in both parties’ names as was a later-acquired home equity line of credit (“HELOC”) that the parties secured using the equity in the home. Funds withdrawn from the HELOC were used by both parties for household purposes and for constructing a metal building associated with Husband’s business venture.

The trial court ruled the marital residence had become marital property under the doctrines of transmutation and commingling.

Husband appealed. He argued the trial court erred in determining the marital residence had been converted from his separate property to marital property.

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

In Tennessee, separate property can become marital property through commingling or transmutation.

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

Transmutation occurs when separate property is treated in a way that shows evidence of an intention that it become marital property.

Four common factors used to figure out whether real property has been transmuted from separate property to marital property are:

• using the property as a marital residence;
• ongoing maintenance and management of the property by both parties;
• jointly titling the property; and
• using the credit of the nonowner spouse to improve the property.

The reasoning for the doctrines of commingling and transmutation is that dealing with property in these ways creates a rebuttable presumption of a gift to the marital estate. The presumption can be rebutted by evidence of circumstances or communications clearly indicating an intent that the property remains separate.

The Court found no error in the trial court’s classification of the marital residence as marital property:

Wife demonstrated that she was involved in the design and construction of the marital residence and that she contributed financially and by investing sweat equity in the home both before and during the parties’ marriage…. Wife testified that the mortgage and other expenses necessary to maintain the home during the marriage were paid utilizing marital funds, and the proof established that Wife had been the primary breadwinner in the family since 2004. Both parties maintained and managed the property during the marriage, and as the trial court found, the evidence demonstrated that the home had fallen into a state of disrepair after Wife left.

Husband contends that the trial court erred by failing to consider whether he had adequately rebutted the presumption of a gift to the marital estate. Husband points to his testimony and Wife’s acknowledgment that he had refused to place Wife’s name on the property’s title…. In this matter, we agree with the trial court’s determination that there was insufficient evidence or proof offered that Husband ever intended to keep the properties separate and apart from Wife. Although Husband refused to place Wife’s name on the real property’s title, the proof established that Wife and he were both involved in the design and construction of the home, that they lived there for 18 years together, that they both oversaw the home’s maintenance, and that the mortgage and other expenses were paid from marital funds. We therefore conclude that the trial court did not err in its determination that the marital residence was a marital asset.

The Court affirmed the trial court’s classification of the marital residence as marital property.

Source: Hill v. Hill (Tennessee Court of Appeals, Eastern Section, May 26, 2023).

If you found this helpful, please share it using the buttons below.