Facts: Husband and Wife, the parents of two children, divorced after 11 years of marriage. All issues were resolved at mediation except the property issues surrounding two properties Husband owned before the marriage: the Baywood Drive property and the Boatdock Road property.

The parties found, purchased, and lived in the Baywood Drive property before their marriage. The property was titled only in Husband’s name because Wife was unemployed and had student loan debt that made it difficult for her to obtain financing.

Husband claimed that Wife never made a mortgage payment, paid the taxes, or used any of her money toward the home. It was undisputed, however, that the mortgage was paid with marital funds throughout the marriage.

After purchasing the Baywood Drive property, the parties began renovating and expanding it. Wife testified that she contributed $20,000 to the cost of the renovations from the sale of a house she inherited during the marriage. Wife also contributed another $20,000 she was awarded as damages from a lawsuit. Wife also contributed “sweat equity” through physical labor, caulking, painting, and supervision of the remodeling and design work. Wife was employed outside the home throughout the marriage except for a period when she was a stay-at-home parent.

Also before the marriage, Husband and a business partner bought a 50% interest in the Boatdock Road property. Wife claimed Husband used $25,000 of marital funds to pay his business partner for taxes and maintenance on the property. Husband disputed these claims.

The trial court ruled that Wife made substantial contributions to the Baywood Drive property, which the trial court found had transmuted into marital property. The trial court ordered the property be sold when the youngest child graduates high school and that the equity be divided equally at that time. The trial court also found that the Boatdock Road property was Husband’s separate property. Still, Wife was entitled to be reimbursed for one-half of the marital funds Husband spent to maintain the property, i.e., a judgment of $12,000.

Husband appealed.

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

Generally, marital property is all real and personal property acquired by either spouse during the marriage and owned by either spouse when the complaint for divorce is filed. Separate property is all real and personal property owned by either spouse before the marriage, including any property a spouse inherited before or during the marriage.

Separate property may become marital property through commingling or transmutation. Commingling occurs if the separate property is inextricably mingled with marital property or with the other spouse’s separate property. Transmutation happens when separate property is used in a manner as to give evidence that it become marital property. A rebuttable presumption that one spouse has given a gift to the marital estate arises when that spouse takes affirmative steps to change the separateness of the property owned before the marriage. When separate property is transmuted into marital property, it is divisible at divorce.

Four of the most common factors Tennessee courts use to determine whether real property has been transmuted from separate property to marital property are:

• the use of 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.

Title alone is not dispositive of the intent of the parties in the use of the property. An asset separately owned by one spouse will be classified as marital property if the parties themselves treated it as marital property. Transmutation often occurs when a spouse purchases real property before the marriage and the parties then use the property as the marital residence and undertake significant improvements to the property during the marriage.

The Court found no error in the trial court’s analysis:

In the present case, the Baywood Drive property was used as the family residence throughout the marriage. Wife made significant contributions to the maintenance and improvements to the property. The term “substantial contribution” is defined to include, but is not limited to, “the direct or indirect contribution of a spouse as homemaker, wage earner, parent, or family financial manager, together with such other factors as the court having jurisdiction thereof may determine.” In the matter before us, Wife provided physical labor in the remodeling of the home. She contributed funds from her separate property of approximately $93,819 for renovations, maintenance, and improvements to the home. Additionally, Wife contributed to the improvements and maintenance of the property by paying off credit card debt that arose out of the property renovations and family expenses. Furthermore, Wife maintained the home and cared for the children. Tennessee law does not discount the contributions made by the homemakers to property. The state’s policy is to recognize the equal dignity and importance of the contributions to the family of the homemaker and the breadwinner.

The parties treated the Baywood Drive property as marital property and maintained it with marital funds. Even though the property was titled separately, the preponderance of the evidence is that Husband intended for the Baywood Drive property to be marital property.

Further, the evidence establishes that approximately $25,000 of marital funds were used for payment of property taxes, upkeep, and maintenance to the Boatdock Road property. Thus, the trial court’s award of $12,000 to Wife for her contributions and improvements to this property must be affirmed.

K.O.’s Comment: I believe Husband’s appeal had a very low chance of success on these facts.

Source: Parker v. Parker (Tennessee Court of Appeals, Eastern Section, January 9, 2024).

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