Brandon v. Brandon ( 1999 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
FILED
April 29, 1999
Cecil Crowson, Jr.
LEROY BRANDON, ) Appellate Court Clerk
)
Plaintiff/Appellee, )
) Appeal No.
) 01-A-01-9805-CV-00235
VS. )
) Rutherford Circuit
) No. 36550
ADRIENNE VIVIAN BRANDON, )
)
Defendant/Appellant. )
APPEALED FROM THE CIRCUIT COURT OF RUTHERFORD COUNTY
AT MURFREESBORO, TENNESSEE
THE HONORABLE ROBERT E. CORLEW, CHANCELLOR
JERRY SCOTT
JOHN KEA
110 City Center Building
100 West Vine Street
Murfreesboro, Tennessee 37133-1216
Attorneys for Plaintiff/Appellee
KATHRYN G. BRINTON
43 Music Square West
Nashville, Tennessee 37203
JON S. JABLONSKI
2400 Crestmoor Road, Suite 321
Nashville, Tennessee 37215
Attorneys for Defendant/Appellant
AFFIRMED IN PART; REVERSED IN PART;
MODIFIED IN PART; AND REMANDED
BEN H. CANTRELL,
PRESIDING JUDGE, M.S.
CONCUR:
KOCH, J.
CAIN, J.
OPINION
In this divorce case, the trial court divided the marital assets of the
parties, ordered a cash payment from the wife to the husband to equalize the division,
and ordered an equal division of certain unvested assets of the wife if and when they
mature. We affirm the division of property, but reverse the equalization payment, and
we reverse in part and modify in part the division of unvested assets.
I. Divorce and Property Division
LeRoy Brandon filed a complaint for divorce on April 24, 1996, after
sixteen years of marriage to Adrienne Vivian Holmes Brandon. Both parties worked
at well-paying jobs during the marriage, and they had accumulated a considerable
amount of property, which included real estate, stocks, retirement accounts, furniture,
jewelry, vehicles, farming equipment and livestock.
The parties stipulated to grounds during a hearing on September 24,
1997. The trial court issued a final decree granting the divorce to both parties on
January 12, 1998. The court awarded the parties their respective bank accounts,
pensions, and 401(k) accounts. The husband was awarded the marital home (which
was built on land he had jointly owned with his brother), his pickup truck, farming
equipment, land and livestock. The wife was awarded a residence she had
purchased, using $19,000 she had borrowed from her 401(k) as a down payment, and
her Lexus.
The court placed a valuation on each item of property that was thus
divided, and ordered the wife to pay the husband $17,379.30 in order to achieve an
exactly equal division. The court also ordered that a $15,000 bonus and stock options
from the wife’s employer, neither of which had yet vested, be equally divided between
the parties, if and when they vest.
-2-
On appeal, the wife faults the valuation upon which the chancellor based
the equalization payment, contending that he failed to take into account the tax
consequences flowing from the division of property. She argues that if the tax
consequences had been correctly factored in, and if the trial court had not made
several erroneous decisions regarding division and debt repayment, the equalization
payment necessary to achieve an exactly equal division between the parties would be
a payment from the husband to the wife of $31,070.49. She also contends that her
unvested assets should not be considered marital property, and thus that it was error
to divide them.
II. Earnings and Assets
At the outset, we must note this is an unusual case in that the parties
had to a great extent separated their financial affairs well before separation and
divorce. They both had good jobs and made their own financial decisions without
consulting with each other. They both held substantial assets in their individual
names. No alimony was asked for, and no minor children were involved.
The Brandons had one joint household checking account, but they also
maintained separate checking accounts from which they each deposited into the joint
account whatever money was needed to meet the monthly household expenses.
They did not file joint income tax returns after 1986, but filed separately, because the
wife was not comfortable with the way the husband handled the finances for a farming
operation he was involved in with his brothers and parents.
During the entire course of the marriage, Adrienne Brandon worked for
United Cities Gas Company. She was a corporate officer and executive at the time
the parties separated. In 1996 she earned salary income in excess of $75,000.
LeRoy Brandon worked first for the Travelers Insurance Company, but in 1991 he
-3-
began working for the CNA Insurance Company. His 1996 earnings from his job were
in excess of $46,000.
After the parties separated, but before the final decree of divorce, United
Cities Gas Company merged with Atmos Energy Company. As part of the merger,
Ms. Brandon received a buy-out of her United Cities supplementary executive
retirement program in the amount of $189,200. After taxes, she netted $107,601 on
the buy-out. Out of that money, she paid debts (including the $19,000 borrowed from
her 401(k)), made improvements to her mother’s house, and invested $50,000 in a
financial services company that she had started in anticipation of a possible
downsizing by Atmos. Her 401(k) was worth over $66,000, her United Cities pension
was worth over $37,000, and her Atmos energy stocks and vested stock options were
worth about $14,700.
Mr. Brandon had a 401(k) account at CNA worth over $41,000, a CNA
pension valued at over $19,000, and a Traveler’s Insurance Company pension valued
at almost $29,000. The farming equipment he owned was worth over $20,000, and
his livestock was likewise worth over $20,000. Three pieces of separate property he
owned with his brothers appreciated in value during the course of his marriage. His
share of that appreciation amounted to over $14,000. The equity in the marital
residence, which was awarded to him, was found to have a value of $52,855.
Though the property mentioned above (with the exception of the marital
home) was titled individually, all of it meets the definition of marital property found in
Tenn. Code Ann. § 36-4-121, because it was acquired during the course of the
marriage. Thus the court would have been authorized to divest and reinvest title to
that property, and to order it sold, with the proceeds divided between the parties, if
that were necessary to achieve an equitable division. Tenn. Code Ann. § 36-4-
121(a)(2).
-4-
However the trial court correctly found that no such divestment or sale
was necessary. The parties had each provided well for their own needs, and they
were each awarded property that they had accumulated by their own efforts.
III. An Equitable Division
Tenn. Code Ann. § 36-4-121(c) sets out the following factors for the
court to consider in dividing marital property:
(1) The duration of the marriage;
(2) The age, physical and mental health, vocational
skills, employability, earning capacity, estate, financial
liabilities and financial needs of each of the parties;
(3) The tangible or intangible contribution by one (1)
party to the education, training or increased earning power of
the other party;
(4) The relative ability of each party for future
acquisitions of capital assets and income;
(5) The contribution of each party to the acquisition,
preservation, appreciation or dissipation of the marital or
separate property, including the contribution of a party to the
marriage as homemaker, wage earner or parent, with the
contribution of a party as homemaker or wage earner to be
given the same weight if each party has fulfilled its role;
(6) The value of the separate property of each party;
(7) The estate of each party at the time of the
marriage;
(8) The economic circumstances of each party at the
time the division of property is to become effective;
(9) The tax consequences to each party; and
(10) Such other factors as are necessary to consider
the equities between the parties.
An equitable division of marital property does not necessarily mean an
equal division. Ellis v. Ellis, 748 S.W.2d 424, 427 (Tenn. 1988). The chancellor
awarded each of the parties property worth in excess of $200,000. Considering the
first eight factors listed above, it appears to this court that this division of property is
equitable. Though the chancellor did a most careful and conscientious job in valuing
the property, it also appears to us that no equalization payment should be required.
It is true that Ms. Brandon thus receives a somewhat larger share than
her husband, but this is in line with the relative contribution the parties made to the
-5-
acquisition of the marital property. As we indicated above, both parties were relatively
free to save and to spend as they saw fit, without interference by the other. It appears
from the record that the wife made a somewhat greater contribution to the expenses
of the marital household than did the husband, while the husband chose to invest a
major portion of his income on a farming operation that lost money every year from
1991 to 1996.
After this division, both parties retain considerable earning power and
assets, but Ms. Brandon’s financial needs are perhaps greater than Mr. Brandon’s.
Her new business will require additional capital investment to succeed. Also she has
a large mortgage, but very little equity in her new home, while Mr. Brandon is receiving
all the equity in the marital home, to which both parties made substantial contributions.
Most of the remaining issues raised by the appellant become moot with
the decision to eliminate the equalization payment, for they involve property of
relatively small value and are only relevant within the context of an attempt to achieve
a perfectly equal distribution. We would like to state in passing, however, that
contrary to the appellant’s contentions, it appears to us that the chancellor properly
took tax considerations into account. We also believe that each party should be
responsible for their own debts. Thus, the trial court was correct in ordering the wife
to repay the $5,500 she borrowed against the marital home on the home equity line
of credit. The husband must likewise repay the money he borrowed against his
401(k), and hold the wife harmless for that debt.
IV. The Unvested Assets
As part of the merger agreement between United Cities Gas and Atmos
Energy Corp, the CEOs of both organizations agreed that certain employees of United
Cities would be entitled to bonuses if they remained employed at Atmos for six
months. Ms. Brandon was notified that she would receive a $15,000 bonus if she was
-6-
still an employee of Atmos Energy on December 31, 1998. She would also be entitled
to stock options if she retained her employment.
The husband argued that both the bonus and the stock options should
be considered marital property, subject to division. The trial court agreed, and
ordered that the $15,000 bonus be divided equally between the parties when it was
received. The court also entered a Qualified Domestic Relations Order to divide the
unvested stock options equally.
The wife argued on appeal that those unvested assets were not marital
property, and thus were not subject to division. In the alternative, she argued that the
trial court erred in dividing the $15,000 before income taxes, ultimately leaving her a
lesser share than the husband.
Both parties cite the case of Cohen v. Cohen, 937 S.W.2d 823 (Tenn.
1996). In that case, the Supreme Court determined that unvested retirement
accounts should be classified as marital property subject to division. The husband
argues that the logic the Supreme Court applied in Cohen should also be applied to
the unvested bonus and stock options at issue here. The wife argues that the holding
in Cohen was limited to retirement accounts only.
Tenn. Code Ann. § 36-4-121(b)(1)(B) includes in the definition of marital
property “the value of vested pension, retirement or other fringe benefit rights accrued
during the period of the marriage,” but says nothing about unvested rights. The
Cohen court found Tenn. Code Ann. § 36-4-121(b)(1)(B) to be ambiguous on the
question of whether unvested retirement benefits should also be considered marital
property subject to division, and searched other parts of the statute to determine the
legislative intention.
-7-
The Court noted the highly inclusive nature of the language defining
marital property at Tenn. Code Ann. § 36-4-121()(1)(A): “‘Marital property’ means all
real and personal property, both tangible and intangible, acquired by either or both
spouses during the course of the marriage up to the date of the final divorce hearing
. . . .” The Court also observed that unvested pensions were not one of the varieties
of property enumerated in the statutory definition of separate property. Tenn. Code
Ann. § 36-4-121(b)(2). Finally, the court found that the legislature intended that
homemakers undergoing divorce not be deprived of the opportunity to share in
property that, although not fully vested, is in many cases the most valuable asset
accumulated during the course of the marriage. See Kendrick v. Kendrick, 902
S.W.2d 918 (Tenn. App. 1994).
Though Ms. Brandon’s bonus was unvested at the time of the final
hearing, it was scheduled to vest soon afterwards (in fact, she did receive the bonus).
The amount to be paid was never in question, but only whether Ms. Brandon would
work at Atmos long enough to be entitled to it. There is no doubt that Ms. Brandon
had done most of the work necessary to acquire the bonus during the course of the
marriage. Though it is not a retirement account, we believe the bonus should be
considered marital property, and we also believe that it would be equitable to divide
it between the parties. However, it would be most equitable to divide it after taxes are
paid. We therefore direct the chancellor to subtract from the $15,000 the taxes Ms.
Brandon will be liable for at her marginal tax rate, and order the payment of one half
the remainder to Mr. Brandon.
The stock options require a different treatment. By their terms they are
not transferrable. They were scheduled to vest serially as Ms. Brandon continued to
work at Atmos, so the rights to some of them were not scheduled to vest until long
after the marriage ended. There was no certainty as to what they would be worth
when they vested, or whether they would be worth anything, for that depended on the
stock price. Finally, even if they vested and were worth something, Ms. Brandon
-8-
could not realize their value until she sold the optioned stock, and the decision to sell
would be complicated by the requirement of sharing the proceeds. We do not believe
unvested property that is so contingent and so speculative should be considered
marital property. But even if we did consider the stock options to be marital property,
we do not think it would be equitable to award Mr. Brandon a share in them. We
therefore vacate the qualified domestic relations order regarding the options.
V.
The decree of the trial court is affirmed in part, reversed in part, and
modified in part. Remand this cause to the Circuit Court of Rutherford County for
further proceedings consistent with this opinion. Tax the costs on appeal equally
between appellant and appellee.
_________________________________
BEN H. CANTRELL,
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
_____________________________
WILLIAM C. KOCH, JR., JUDGE
_____________________________
WILLIAM B. CAIN, JUDGE