Facts: Husband and Wife divorced after just two and half years of marriage. They had no children together. The only issue was the classification and division of their property.

Before the marriage, Husband bought a home in Indiana. During the marriage, Husband sold the Indiana home and began buying the five properties at issue.

The first property he bought during the marriage was known as the Switchboard property, and was titled in both parties’ names. Husband testified that the joint title occurred because his real estate agent told him that properties must be titled in both parties’ names when the purchaser is married. Both parties were on the mortgage.

The four other properties were all titled only to Husband, and the mortgages were only in Husband’s name.

Husband testified that all five properties were purchased using his separate funds, namely the proceeds from selling his premarital property in Indiana. Four of the properties were rented to various tenants, and Husband maintained separate bank accounts to accept rent payments and pay for repairs.

Wife argued the Switchboard property had been transmuted into marital property because Husband had titled it in both of their names. She also argued that she substantially contributed to the increase in value of all five properties during the marriage.

The trial court found that all five properties were Husband’s separate property and that there was no commingling or transmutation. It also found that the increases in the values of the properties were Husband’s separate property. As for the Switchboard property, the trial court found:

The presumption that titling the property in both names was transmutation is overcome by the fact that the funds used to purchase the property came from the sale of [Husband’s] premarital property, he was the only party on the promissory note, and he ceased to title the property in both names upon discovering he was not required to by law. The intentional act of holding funds from the sale of his house to use in the purchase, then separating the bank accounts for the purposes of the rental property show [Husband] had an original intention that the Switchboard property was not marital property, and not a gift, but rather an investment property funded by his separate property and income.

Thus, the trial court concluded that Husband had successfully rebutted the presumption that the Switchboard property had been transmuted into marital property.

Wife appealed, arguing that the Switchboard property had been transmuted into marital property because Husband titled it in both of their names.

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

In a Tennessee divorce, courts must classify the parties’ property as either marital or separate. Marital property is subject to equitable division, while separate property is not included in the marital estate and cannot be divided.

Marital property includes all property acquired by either spouse during the marriage.

Separate property includes all property owned by either spouse before the marriage and any property acquired in exchange for property owned by either spouse before the marriage. Separate property’s income or increase in value is considered marital if each party substantially contributed to the property’s preservation and appreciation. Although contributions may be direct or indirect, they must be “real and significant,” and there must be some link between the contributions and the appreciation of the property’s value.

Assets acquired during the marriage are presumed to be marital property. The spouse asserting that an asset acquired during the marriage is separate has the burden of proving this by a preponderance of the evidence.

Joint ownership of a marital residence, even one that was a spouse’s separate property before the marriage, gives rise to a presumption that the property is marital, not separate. The presumption created by joint ownership is not always controlling and can be overcome by evidence of contrary conduct by the parties and the way the parties themselves treated the property.

The four most common factors Tennessee courts consider when determining whether separate property has been transmuted into 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.

The Court found no error in the trial court’s conclusion about the Switchboard property:

Of these four factors, only the third factor relating to Husband titling the property jointly weighs in favor of a finding of transmutation. However, as the trial court found, Husband’s “contrary conduct” and “the manner in which the parties” treated the property weigh against a finding of transmutation. Further, the classification of property does not depend on the state of its record title but on the conduct of the parties. The parties’ conduct showed that Husband only titled the Switchboard property jointly because of the false belief that he was required to do so. The parties’ subsequent conduct supports the [trial] court’s conclusion that Husband did not intend for the property to be marital.

Wife argues that the [trial] court “operated under an assumption that the mortgage associated with the Switchboard property was solely” held in Husband’s name, an assertion the record supports. According to Wife, “[t]his fact, coupled with the fact that [the Switchboard property] is titled in both parties’ names, proves of the parties’ intent that this was and would remain marital property.” Although we agree with Wife’s assertion that the [trial] court erred in its analysis regarding which property’s mortgage she was listed on, we do not believe this error alone necessitates reversal. It is the parties’ conduct which evidences an intent of transmutation. As with Husband titling the property jointly, Husband ceased listing Wife on the subsequently acquired properties’ mortgages after this initial property purchase. Wife had the burden of establishing transmutation, and she failed to carry this burden at trial and on appeal.

Wife also argued the trial court erred in classifying the marital appreciation of Husband’s separate property as separate property. The Court disagreed:

Wife argues that the evidence presented at the trial preponderates against the [trial] court’s finding that her contributions were minimal. In particular, Wife points to her testimony, several photos, and a summary of the expenses that she claims she paid. Wife directs us to her testimony that she recalled working on several of the properties. She testified, however, that she did not keep any log or journal of the work she completed and that she did not contribute financially to the purchase of these properties. Wife’s proffered evidence is insufficient to overturn the [trial] court’s factual findings regarding her contributions.

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Regarding Wife’s testimony, the [trial] court stated she “had a difficult time” remembering what she did on the properties. We infer from this that the [trial] court did not find Wife to be credible regarding her work on the property and did not credit her testimony. We require clear and convincing evidence to overturn factual determinations based upon credibility determinations. This deference extends both to express credibility determinations and any implied in the [trial] court’s holdings. Wife has failed to point to evidence meeting the standard.

The Court affirmed the trial court’s determination that the increase in the value of the properties was Husband’s separate property and that the five properties were Husband’s separate property.

K.O.’s Comment: Proving that a spouse substantially contributed to the increased value of their spouse’s separate property can be challenging. The trial court focused on Wife’s inability to “quantify the value of her labor,” and the Court approved this analysis:

Here, Wife contends that she labored in the rental properties and in the marital residence, and therefore she is entitled to the increase in value of the properties. [Wife] was not able to quantify the value of her labor. Her financial contribution claims, which she also could not quantify, were de minimis. Therefore, the increase in the value of the marital residence, along with the increase in the value of the four rental properties, will not be treated as marital property because [Wife] did not substantially contribute to the preservation and appreciation of the properties.

Family-law attorneys should take note.

Source: Perkins v. Sloane (Tennessee Court of Appeals, Middle Section, April 14, 2025).

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