Troy Steven Potter v. Christa Gilman Potter ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
May 14, 2013 Session
TROY STEVEN POTTER v. CHRISTA GILMAN POTTER
Appeal from the Circuit Court for Hamilton County
No. 11D1609 Jacqueline S. Bolton, Judge
No. E2012-02390-COA-R3-CV-FILED-AUGUST 19, 2013
This case focuses on the proper classification and distribution of the parties’ assets incident
to a divorce. Troy Steven Potter (“Husband”) filed a divorce complaint against Christa
Gilman Potter (“Wife”) on August 17, 2011. The parties proceeded to trial in August 2012
on the issues of alimony and classification and division of property. The court awarded
transitional alimony to Wife and divided the parties’ assets and debts. Husband appeals the
trial court’s classification and division of property. We affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
Affirmed; Case Remanded
T HOMAS R. F RIERSON , II, J., delivered the opinion of the Court, in which C HARLES D.
S USANO, J R., P.J., and J OHN W. M CC LARTY, J., joined.
William H. Horton, Chattanooga, Tennessee, for the appellant, Troy Steven Potter.
Phillip C. Lawrence, Chattanooga, Tennessee, for the appellee, Christa Gilman Potter.
OPINION
I. Factual and Procedural Background
Husband and Wife were married on September 30, 2001. At the time of the marriage,
Husband, who is a home builder, was in the process of building a sizeable home at 515
Gentlemen’s Ridge in Hamilton County. Although the parties had no children born of their
marriage, each was a parent of two minor children from a prior marriage. Husband, Wife,
and their four children moved into the Gentlemen’s Ridge home when the parties married,
while the home was being completed. Wife was not employed outside the home at that time.
She served as a stay-at-home mother for the parties’ children. Husband and Wife enjoyed
a lavish lifestyle over the years, taking numerous expensive vacations and sending all four
children to private schools.
On April 16, 2003, the Gentlemen’s Ridge home was sold for $1,425,000. The net
proceeds from the sale of that home were used to purchase a home at 1321 Brow Estates in
Hamilton County. The Brow Estates home was purchased for $598,000. An additional
$129,000 was invested in remodeling the home. It is undisputed that the funds for the
purchase and remodeling of the Brow Estates home came from the sale of the Gentlemen’s
Ridge home, which Husband owned prior to the marriage. Wife did, however, contribute to
the marital estate $50,000 from the sale of a home she owned prior to the marriage. A
portion of those funds was used to decorate the Brow Estates home. The Brow Estates
improved real property was titled in the names of both Husband and Wife.
In approximately 2006, Wife obtained employment outside the home, which she
testified displeased Husband. During that year, Wife earned $8,913. Her income increased
in subsequent years as follows:
2007 - $17,037
2008 - $21,415
2009 - $30,850
2010 - $31,153
In 2011, Wife was laid off from her employment due to lack of funding; consequently, her
earnings for that year were only $12,795. At the time of trial, Wife was receiving
unemployment compensation benefits and had not been able to locate another job.
Husband earned income not only from his employment as a builder, but also from
participation in his family’s business, which owned and managed apartment buildings as well
as other real properties. Husband’s income, although subject to some fluctuation, was
significantly higher than Wife’s, to wit:
2007 - $ 74,703
2008 - $122,475
2009 - $ 62,726
2010 - $165,890
2011 - $143,000
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The parties separated in September 2009 when Husband left the Brow Estates home.
Wife and her two children remained in that home, with Husband paying all related expenses,
including insurance, taxes, and utilities. Husband subsequently initiated the instant divorce
action on August 17, 2011. Wife filed a motion seeking temporary spousal support and
assistance with her legal fees. The trial court ordered Husband to continue paying the home-
related expenses and to pay Wife an additional $750 per month as temporary alimony.
Husband was also ordered to pay Wife’s attorney $3,000 toward her legal expenses. The
Brow Estates home was placed on the market for $599,000. By the time of trial, the listing
price had been reduced to $549,000. The parties, however, had received no offers to
purchase.
Following a bench trial, the trial court declared the parties to be divorced pursuant to
Tennessee Code Annotated § 36-4-129 (2010). The trial court found the following items to
be assets of the marital estate and divided them as shown:
Brow Estates home $500,000 value of equity split equally between parties
2006 Ford 250 $20,000 value of equity awarded to Husband
2009 Suburban $9,000 value of equity awarded to Husband
Furniture unknown value awarded to Wife
Guns $500 value awarded to Husband
2006 BMW $5,891 value of equity awarded to Wife
Gateway accounts $6,800 value awarded to Husband
TVA account $500 value awarded to Wife
The trial court also awarded Wife transitional alimony of $3,500 per month for three
years, plus the cost of her health insurance. This award of transitional alimony was ordered
to commence when the Brow Estates home was sold, when Wife vacated the home, or if her
interest in the home was acquired by husband. Further, Wife was ordered to pay the debt she
incurred post-separation, in the total amount of approximately $30,000. The court also
ordered that Husband could purchase Wife’s equity interest in the home for $250,000.
Husband timely appealed the trial court’s ruling.
II. Issues Presented
Husband presents the following issues for our review:
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1. Whether the trial court erred in finding that the Brow Estates home, which was
purchased with premarital funds, was transmuted to marital property.
2. Whether the trial court erred in its division of marital property.
III. Standard of Review
In a case involving the proper classification and distribution of assets incident to a
divorce, our Supreme Court has elucidated the applicable standard of review as follows:
This Court gives great weight to the decisions of the trial court in dividing
marital assets and “we are disinclined to disturb the trial court’s decision
unless the distribution lacks proper evidentiary support or results in some error
of law or misapplication of statutory requirements and procedures.” Herrera
v. Herrera, 944 S.W.2d 379, 389 (Tenn. Ct. App. 1996). As such, when
dealing with the trial court’s findings of fact, we review the record de novo
with a presumption of correctness, and we must honor those findings unless
there is evidence which preponderates to the contrary. Tenn R. App. P. 13(d);
Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).
Because trial courts are in a far better position than this Court to observe the
demeanor of the witnesses, the weight, faith, and credit to be given witnesses’
testimony lies in the first instance with the trial court. Roberts v. Roberts, 827
S.W.2d 788, 795 (Tenn. Ct. App. 1991). Consequently, where issues of
credibility and weight of testimony are involved, this Court will accord
considerable deference to the trial court’s factual findings. In re M.L.P., 228
S.W.3d 139, 143 (Tenn. Ct. App. 2007) (citing Seals v. England/Corsair
Upholstery Mfg. Co., 984 S.W.2d 912, 915 (Tenn. 1999)). The trial court’s
conclusions of law, however, are accorded no presumption of correctness.
Langschmidt v. Langschmidt, 81 S.W.3d 741, 744-45 (Tenn. 2002).
Keyt v. Keyt, 244 S.W.3d 321, 327 (Tenn. 2007). Questions relating to the classification of
assets as marital or separate are questions of fact. Bilyeu v. Bilyeu, 196 S.W.3d 131, 135
(Tenn. Ct. App. 2005).
Further, as this Court has previously held:
Because Tennessee is a “dual property” state, a trial court must identify all of
the assets possessed by the divorcing parties as either separate property or
marital property before equitably dividing the marital estate. Separate
property is not subject to division. In contrast, Tenn. Code Ann. §36-4-121(c)
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outlines the relevant factors that a court must consider when equitably dividing
the marital property without regard to fault on the part of either party. An
equitable division of marital property is not necessarily an equal division, and
§36-4-121(a)(1) only requires an equitable division.
McHugh v. McHugh, No. E2009-01391-COA-R3-CV, 2010 WL 1526140 at *3-4 (Tenn. Ct.
App. Apr. 16, 2010) (internal citations omitted). See also Manis v. Manis, 49 S.W.3d 295,
306 (Tenn. Ct. App. 2001) (holding that appellate courts reviewing a distribution of marital
property “ordinarily defer to the trial judge’s decision unless it is inconsistent with the factors
in Tenn. Code Ann. § 36-4-121(c) or is not supported by a preponderance of the evidence.”).
IV. Classification of Property
Husband posits that the trial court erred in classifying the Brow Estates home as
marital property. He argues that, even though the home was purchased during the marriage,
the funds used for the purchase came entirely from proceeds of the sale of his premarital
property. Wife asserts that the trial court’s classification was correct as the home was titled
in both parties’ names and treated as marital property. We agree with Wife.
It is well settled that assets acquired during a marriage are presumed to be marital
property, and a party desirous of disputing this classification has the burden of proving by
a preponderance of the evidence that the asset is separate property. See Owens v. Owens, 241
S.W.3d 478, 486 (Tenn. Ct. App. 2007). Therefore, an analysis of the proper classification
of this asset must begin with the presumption that it is marital property as it was purchased
during the parties’ marriage. This presumption can be rebutted, however, by evidence of
circumstances or communications clearly indicating an intent that the property remain
separate. See Batson v. Batson, 769 S.W.2d 849, 858 (Tenn. Ct. App. 1989). As this Court
has previously explained, the types of evidence sufficient to rebut the presumption are found
in Tennessee Code Annotated § 36-4-121(b)(2)(B)-(F) (Supp. 2012):
(B) Property acquired in exchange for property acquired before the marriage;
(C) Income from and appreciation of property owned by a spouse before
marriage except when characterized as marital property under subdivision
(b)(1);
(D) Property acquired by a spouse at any time by gift, bequest, devise or
descent;
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(E) Pain and suffering awards, victim of crime compensation awards, future
medical expenses, and future lost wages; and
(F) Property acquired by a spouse after an order of legal separation where the
court has made a final disposition of property.
Fox v. Fox, No. M2004-02616-COA-R3-CV, 2006 WL 2535407 at *4 (Tenn. Ct. App. Sept.
1, 2006) (referencing the statutory definition of “separate property” found in Tennessee Code
Annotated § 36-4-121(b)(2)(B)-(F)).
Husband asserts that the home should be classified as his separate property as
“property acquired in exchange for property acquired before the marriage” because it was
purchased with proceeds from the sale of property he owned prior to the marriage. Husband
relies on the case of Barnett v. Barnett, No. 01A01-9706-CV-00244, 1998 WL 122717(Tenn. Ct. App. Mar. 20, 1998), in support of this position. In Barnett, the parties were both
“savvy business people” who had been married before, and the wife maintained a significant
separate estate at the time of the parties’ marriage. Id. at *9. The proof showed that the
parties agreed before and during the marriage to segregate their assets. Id. The wife
purchased a home and a condominium in Florida during the marriage with her separate funds,
and both were titled solely in her name. Id. This Court found both assets to be the wife’s
separate property as they were property “acquired in exchange for property acquired before
marriage.” Id.
Husband argues that this case presents the same factual scenario because he purchased
the home at issue with funds from premarital property and paid for renovations on the home
with funds from premarital property. Barnett is factually distinguishable, however, because
the parties herein did not evince a definite intent to segregate their assets. Further, the most
significant factual distinction between Barnett and the case at bar is that Husband allowed
title to the improved real property to be placed in both parties’ names.
As the trial court found, Husband is a businessman whose profession involves
building homes and dealing in real estate matters. Husband admitted that he had closed
numerous real estate transactions in his career, both on his own behalf and for the benefit of
his family business. Husband acknowledged that the Brow Estates home was titled in the
names of both Husband and Wife. He asserts, however, that he did not ask for the deed to
be prepared in this fashion. Husband claimed that when he questioned the attorney who
prepared the deed about this alleged error, the attorney told him that the deed had to be in the
names of both parties because they were married. Husband contends that it was never his
intention to make a gift to the marital estate by titling this property jointly. Husband
nonetheless accepted the deed and executed the consideration statement.
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Separate property can be transmuted into marital property when it is titled in the
names of both spouses or where property is purchased with separate funds but title is taken
in joint tenancy. See Batson v. Batson, 769 S.W.2d 849, 858 (Tenn. Ct. App. 1989). As the
Supreme Court explained:
[S]eparate property may become part of the marital estate if its owner treats it
as if it were marital property. Professor Clark describes the doctrine of
transmutation as follows:
[Transmutation] occurs when separate property is treated in such
a way as to give evidence of an intention that it become marital
property. One method of causing transmutation is to purchase
property with separate funds but to take title in joint tenancy.
This may also be done by placing separate property in the names
of both spouses. The rationale underlying both these doctrines
is that dealing with property in these ways creates a rebuttable
presumption of a gift to the marital estate. This presumption is
based also upon the provision in many marital property statutes
that property acquired during the marriage is presumed marital.
Batson,769 S.W.2d at 858 (quoting 2 H. Clark, The Law of Domestic Relations in the United
States § 16.2, at 185 (1987)). The fact that it is possible to trace the source of the funds back
to separate property is thus irrelevant for the purposes of rebutting the presumption of a gift
to the marital estate created by transmutation. Langschmidt v. Langschmidt, 81 S.W.3d 741,
747 (Tenn. 2002).
As this Court has previously explained:
[A] marital residence acquired by the parties during the marriage and owned
by the parties jointly should be classified as marital property. Even a marital
residence that was separate property prior to the marriage or that was
purchased using separate property should generally be classified as marital
property if the parties owned it jointly because joint ownership gives rise to a
rebuttable presumption that the property is marital, rather than separate,
property.
However, as relevant as record ownership may be to the classification of an
asset, it is not always controlling. In the final analysis, whether a particular
asset is marital or separate depends on the conduct of the parties, not the
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record title of the asset. An asset separately owned by one spouse will be
classified as marital property if the parties themselves treated it as marital
property.
Four of the most common factors courts use to determine whether real property
has been transmuted from separate property to marital property are: (1) the use
of the property as a marital residence; (2) the ongoing maintenance and
management of the property by both parties; (3) placing the title to the property
in joint ownership; and (4) using the credit of the non-owner spouse to
improve the property. Accordingly, our court has classified separately owned
real property as marital property when the parties agreed that it should be
owned jointly even though the title was never changed, or when the spouse
owning the separate property conceded that he or she intended that the separate
property would be converted to marital property.
Fox, 2006 WL 2535407 at *5 (internal citations omitted).
Applying the factors enumerated in Fox to the present case, it is clear that the trial
court did not err in classifying the Brow Estates home as marital property. The proof
established that the parties used the home as a marital residence, and both parties managed
and maintained it. See Id. In addition, the title to the property was placed in the names of
both parties. Therefore, based on their conduct, the parties treated the home as a marital
asset.
Husband argues that the parties’ intentions were to keep their assets separate. He
testified that the parties maintained separate bank accounts, but he also admitted that they had
a joint account for a few years. Wife proved that she deposited money into the joint account.
Wife also testified that she received $50,000 from the sale of a home she owned prior to the
marriage, which funds were made a part of the marital estate and utilized for the benefit of
the family.
Wife further testified that she was present at the closing on the Brow Estates home
and did not hear the attorney tell Husband that the home had to be titled jointly because the
parties were married. Wife also stated that Husband never mentioned anything to her about
the deed being incorrect. Wife established that the parties maintained a joint bank account
at the time the home was purchased and that she deposited money into this account. Husband
spent such funds as he saw fit. Wife testified that they did not segregate all of their assets
and that this was never their intent. Husband, while stating that his intent was to keep his
premarital property separate, did not testify that the parties discussed and agreed to do so.
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Husband also relies on the case of Feather v. Feather, No. 01A01-9704-CH-00183,
1998 WL 151393 at *9 (Tenn. Ct. App. Apr. 3, 1998), in support of his argument that the
home should be classified as his separate property. In Feather, however, the parties
discussed and agreed that the wife’s contribution of separate property to the marital estate
would remain her separate property regardless of how the property was titled, and the
husband admitted at trial that this was their agreement. Id. In the present case, there was no
such agreement shown . As stated above, a party who wishes to rebut the presumption of a
gift to the marital estate must present clear evidence of circumstances or communications
indicating an intent that the property remain separate. The record in this case does not
contain proof of clear circumstances or communications indicating such intent. The trial
court’s classification of the home as marital property is supported by a preponderance of the
evidence.
V. Equitable Division of Marital Property
Husband contends that, even if the equity in the Brow Estates home was marital
property, the trial court erred in its division of the marital estate. Specifically, Husband
asserts that the trial court should not have divided the equity in the home equally because his
separate property funded its purchase and renovation. The equity in this improved real
property was the most significant asset in the marital estate.
As this Court has explained:
The trial court’s goal in every divorce case is to divide the parties’ marital
estate in a just and equitable manner. The division of the estate is not rendered
inequitable simply because it is not mathematically equal, or because each
party did not receive a share of every item of marital property. In the final
analysis, the justness of a particular division of the marital property and
allocation of marital debt depends on its final results.
Payne v. Payne, No. E2006-02467-COA-R3-CV, 2007 WL 2668588 at *4 (Tenn. Ct. App.
Sep. 12, 2007) (internal citations omitted). The trial court is to consider the following
statutory factors in making an equitable distribution:
(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;
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(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)(A) The contribution of each party to the acquisition, preservation,
appreciation, depreciation 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;
(B) For purposes of this subdivision (c)(5), dissipation of assets means
wasteful expenditures which reduce the marital property available for equitable
distributions and which are made for a purpose contrary to the marriage either
before or after a complaint for divorce or legal separation has been filed.
(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, costs associated with the reasonably
foreseeable sale of the asset, and other reasonably foreseeable expenses
associated with the asset;
(10) The amount of social security benefits available to each spouse; and
(11) Such other factors as are necessary to consider the equities between the
parties.
Tenn. Code Ann. § 36-4-121(c) (Supp. 2012).
This case involves a ten-year marriage. At the time of trial, Wife was forty-one years
of age, while Husband was fifty-one. There was no proof regarding any physical ailments
experienced by Husband. Wife testified that she suffered from migraines and high blood
pressure, requiring medication for the treatment of these conditions. She also took an anti-
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depressant and a sleep aid. The evidence supports a determination that neither party had any
physical problems that would affect his or her employability.
Husband’s earning capacity was substantially greater than Wife’s. Husband was a
successful home builder, and he also earned income managing apartments for his family’s
business. Wife’s employment had been as a receptionist or an administrative assistant. Wife
testified that she had been unable to find employment at the time of trial due to her lack of
vocational skills. She wished to attend school to improve her skill set and employment
opportunities. Both parties testified that they had financial needs, but with Wife’s lack of
income, her needs were greater than Husband’s. Husband’s earning capacity also provided
him a greater ability to acquire assets and earn future income.
Both parties contributed to the marital estate as wage earners and parents, with Wife
also making a substantial contribution as a homemaker for several years. Husband
contributed substantially more separate property to the marital estate than did Wife. As
reviewed above, Husband’s separate property funded the purchase and renovation of the
marital residence in an amount exceeding $700,000, whereas Wife contributed separate
property of approximately $50,000.
Husband had a greater separate estate at the time of the marriage and also had
appreciable separate property at the time of the divorce, as he held an ownership interest in
his family’s business valued at $18,000,000. He testified, however, that this interest was
burdened with debt of almost equal value. Apart from this asset, Husband had separate
accounts worth approximately $11,000, and Wife had a separate account worth
approximately $57,000. Wife also had a significant amount of debt, which she had incurred
during the parties’ separation by reason of living expenses and medical bills. The proof is
absent regarding the other statutory factors.
Our Supreme Court has explained the proper appellate review of this issue:
We give great weight to the trial court’s division of marital property and “ ‘are
disinclined to disturb the trial court’s decision unless the distribution lacks
proper evidentiary support or results in some error of law or misapplication of
statutory requirements and procedures.’ ” Keyt v. Keyt, 244 S.W.3d 321, 327
(Tenn. 2007) (quoting Herrera v. Herrera, 944 S.W.2d 379, 389 (Tenn. Ct.
App. 1996)).
Tennessee Code Annotated section 36-4-121(c) provides that in making an
equitable division of marital property, the trial court shall consider all relevant
factors. Because trial courts have broad discretion in dividing the marital
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estate, the division of marital property is not a mechanical process. Flannary,
121 S.W.3d at 650. Rather, the trial court should weigh the most relevant
factors in light of the facts of each case. Tate v. Tate, 138 S.W.3d 872, 875
(Tenn. Ct. App. 2003).
Larsen-Ball v. Ball, 301 S.W.3d 228, 234 (Tenn. 2010).
In this case, the trial court determined that an equitable distribution was a near-equal
distribution. We cannot find that this distribution “lacks proper evidentiary support or results
in some error of law or misapplication of statutory requirements and procedures.” See id.
The parties were married for ten years, and both contributed to the marital estate in a
substantial manner. Although it is true that Husband contributed a greater amount of separate
property, he also had a significantly greater earning capacity and ability to replace assets than
Wife. Wife was a homemaker for many years and her lack of vocational skills and work
experience will likely mean that she will never be able to earn an income commensurate with
Husband’s or enjoy a lifestyle similar to that which Husband enjoys. Wife was also ordered
to pay all of the debts that she incurred during the parties’ separation. Therefore, considering
all of the relevant factors, we conclude that the trial court did not abuse its discretion in
making its division of the parties’ marital property.
VI. Conclusion
The judgment of the trial court is affirmed. Costs on appeal are taxed to the appellant,
Troy Steven Potter. This case is remanded to the trial court, pursuant to applicable law, for
enforcement of the trial court’s judgment and collection of costs assessed below.
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THOMAS R. FRIERSON, II, JUDGE
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