### IN THE S UP REME COURT OF TENNESS EE AT NAS HVILLE June 6, 200 7 S es sio n

TI MOTH Y WADE KE YT v. NANCI S UZANNE KEYT

Appeal by p erm ission from the Court of Appeals, Midd le Sect ion

No. 02-174 Ve rnon Neal, Chancellor

No. M2005- 00447-SC-R11- CV - F iled Dece m ber 19, 2007

G AR Y R. W ADE , J., dissenting.

Beca use it is my v ie w th a t th e r e w a s e v id e n c e to s u p p o r t th e c o n c lu s io n th a t H u s b a nd, by virtue of his long-ter m employment with the company, substantially contributed to the pre serva tion and appre ciation of his sepa rate ly owned stock, I w ould hold that any incre ase in va lue during the

course of the mar

riage should qualify as marital pr operty. I w ould also hol d t h at the cha ncellor’ s assessment of the appre ciation amount was likew ise supported by the evidenc e. On these important points, the chanc ellor, who saw and hear d the witnesses firsthand, should be aff orded de ference under our limit ed scope of re view. The Court of Appea ls, which upheld the ruling of the cha ncellor as to these spe cific issues, should have been a ffirme d in that rega rd.

As indicated in the major ity opinion, “‘[m]arital property’ includes . . . any inc rea se in value du ri ng the marria ge of

, p ro pe rt y d e te rm ine d to be se pa rate pr op e rt y .

. . if

e a c h p art y s ub sta nti a lly contributed to its preser vation and appr ecia tion . . . .” Tenn. Code Ann. § 36- 4-121(b) (1)( B) (2005). “[S] ubstantial contribu t i on” may include, but is not lim ited to, “the dire ct or indirec t contribution of a spouse as homemaker
, wag e ea rner , pare nt or family

financ ial manag er . . . .” Tenn. Code Ann. § 36-4-121( b)(1) (D) ( 2005) (e mphasis added)

.
Our statute, ther efo re , re quires the substantial contr ibution to t he pre servation and
appre ciation of sepa

rate proper

ty of both the husband a

nd the wife befor e an incre ase in the va lue of sepa rate ly owned pr operty

may be conside red a s a part of t he marital estate. That a homemaker
may contribute indirec tly

to appre ciation, as provided by section 36-4- 121(b)( 1)(D) , is a leg islative
p o l i c y d e s i g n e d

t o a s s u r e t h a ts p o u s e s , a f t e r a d i v o r c e , a r e n o t e c o n o m i c a l l y d i s a d v a n t a g e d b y a decision to contribute to a ma rriag e by rea ring children a

nd manag ing the complex affai rs o f t he household, rathe r than de voting their labors to an outs ide-the- home j ob. See Te nn. Code Ann. § 36- 5- 12 1 ( 20 05 ); se e g e ne ra lly Cy nth ia Starn e s, Di vo rc e a nd the Di sp la c e d H ome make r: A D isc ours e on Play ing w ith Dolls, P artne rship Buyouts and Dissociation Under No-F ault, 60 U. Chi. L

. Rev. 67-2-

(1993). Eve n when one spouse has ma d e l au d able contributions as a homemake r, howe ver, the statute “doe s not permit the conclusion that any incre ase in value during marriag e constitutes marital
proper ty .” Ha rr i son v. Harr ison, 912 S.W .2d 124, 127 (Tenn. 1995) (empha sis omit ted). F or the purposes of se ction 36-4-121( b)(1) (B ), the c ontributions of a husband and w ife must satisfy two

re qu ir e me nts : th e y mus t be “r e a l and sig nif ic a nt, ” B ro wn v. B ro wn , 913 S.W. 2d 16 3, 16 7 ( Te nn . Ct

. Ap p. 19 94 ), a nd

the re mus t be “ so me lin k be tw e e n the sp ou se s’ c on tr ibutio ns ” a nd the inc re a se in

v a lu e d u r in g th e ma

r r ia g e

. M c F a r la

n d v

. M c F a r la

n d
, N o

. M 2 0 0 5

- 0 1 2 6 0

- CO A

- R3

- CV
, 2 0 0 7 WL 2254576, *6 (Tenn. Ct. App. Aug

. 6, 2007); see also L ang schmidt v. L ang schmidt, 81 S.W .3d 741, 746 (Tenn. 2002)

.

Her e, Wife “subs t an tially contributed” as a mother , the ca retaker of the re sidence , and the
manag er of the household financ es. Husband did not contest that Wife’s labors as a h omemaker

e na ble d h im t o f

oc us his e ff

or t and a tte nti on mor e fu lly

on his wo rk , r a the r t

ha n e xpe nd ingthat ti me on ch i l d car e and house hold manag ement. The question then bec ame whe ther Husba nd’s contribut io n s w e r e s ig n if ic a n t a n d
, if s o , w h e th e r

th e r e w a s a

li n k b e tw e e n h is e f

f o rts a n d the
p r e s e r v a t i o n o r a

p p r e c i a t i o n i n v a l u e

. T h e r e i s a n e xu s t o t h e i n c r e a s e i n v a l u e i n t h e s t oc k o nly when Husba

nd’s ef forts also mee t the require ments of sec tion 36-4-121(b)( 1)(B ).

Despite his stat u s as a sha reholde r and a

long- term employ ee of

the company , Husband, duri ngthe c ours e of

the tr ia l, d ow np lay e d th e imp or tanc e of his job re sp on sib ili tie s in the bu sin e ss, which he de scribed a s a mid-level mana g ement position. He claimed that his perfor mance did not add to either

the pre servation of or g rowth in value of the company

as re quired by

s t at u t e. More
sp e c if ic a lly , h e a sse rt e d th a t th e ri se in v a lue of the sto c k h e ha d re c e ive d b y g if t w a s d ue so le ly to the “ re mov a l of

the re str ic tio ns ” a g a ins t his sal e or tr a ns fe r an d b or e no re la tio ns hip to h is e ff or ts i n the business during his y ear s of employ ment. I n fairne ss to the majority opinion’s conclusion that his contributions were insubstantial, ther e wa s testimony indicating that, on occa sion, Husband was irresponsible in his use of a lcohol. I n those circ umstances, it is perha ps a natura l infere nce that any dr ink ingpr ob le m ma

y have had an adv ers e ef fe c t on Hu sb a nd ’s wo rk

a nd the re by lim ite d h is

c on tr ibutio ns to t

he bu sin e ss. Som e e vid e nc e su g g e ste d th a t H us ba nd ha d c on su me d a lc oh ol w hil e i nt h e p h y s i ca l cu s t o dy

o f t h e m i n o r c h i l d
, wh i ch v i o l at edt h e o rd er go v ern i n g v i s i t at i o n

. Al t h o u gh Husband de nied the cla im and contende d that he had “ never ” bee n intox icated, othe r testimony
cont radicted that asser

tion. For e x ample, L arr

y Bur kes, a w itness on behalf of Wife, stated that Husband smelled of

alcohol whe n he re turned the c hild to Wife’s residenc e. Also, the c hild reca lled that o no n e o c c a s io n H u s b a n d h a d s me ll e d o f a lc o h o l w h il e c h a r g e d

w it h h is c a r e

. A b a n k e r, testify ing on be half of Wife, acknowle dg ed that he had seen Husba nd intox icated in the pa

rking lot of a re sta ur a nt. F ina lly , Ca

ro l G oo lsb y , a

pa re nti ngc oo rd inator

fo r P utn a m Co un ty , te sti fi e d to another occa sion, claiming she had see n Husband in an intoxi cate d state outside a r estaura nt in 2003. All of the testimony , howeve r, wa s relate d to the primary residential pa

rent issue. The entirety

of the e vid e nc e wa s f

a vo ra ble to Wi fe on

that po int . T he un a

pp e a le d p a rt of the jud g me nt r e fl e c ts that. Notwithstanding the nature of this testimony
, I did not infer that any of these inc idents aff ecte d the
qu a lity of Hu sb a nd ’s se rv ic e to t

he c omp a ny

or the imp or

tanc e of his po sit ion

in i ts m a na g e me nt. Neither did the chanc ellor.-3-

The c hance llor conclude d that Husband ha d been f ar too modest in assessinghi s l ev el of participation in the preser vation and appr ec i at i o n o f the c ompany ’s stock value . The proof in the

rec ord established that dur i n g t h e approximately twenty -four

y ear s of his employ

ment until the
company was sold, Husband pe rfor med a wide rang e of ta sks for the c ompany , beg inning at an entry level position and then taking on incre asing responsibilities a s time pa ssed, some routine and other s

more c losely

related to the m anag ement and g rowth of the business. Although Husba nd contende d that he did not make policy or org anizational de cisions f or the company and claimed that absent the
cooper ation and assistanc e of o t h er s , he could not choose the servic e route s, neg otiate new acquisitions, make purc hase de cisions, or collect the ac counts rec eivable, he did acknowle dg e that he ha d a ro le in tho se pr oc e sse s. F ur the r, a n ind e pe nd e nt w itn e ss c on fi rm e d th a t H us ba nd wa s, in fac t, regularly

out of town on an ove rnig ht basis for business purpose s. I ndeed, th e record establishes that he, as a long -term e mploy ee, ha d a hand in the ma nag ement of the company ’s day -today aff airs. The Key

t family owned a lmost seventy -eig ht perc ent of the stock at the time of the sale

. There is lit tle indication in this rec ord of wha t responsibiliti es his fathe r had. The re is no proof that
any o t h er m ember of the fa mily participated in the day -to-day manag ement. The circ umstances

s u g g e s t t h a t H u s b a

n d e n j o ye d a p o s i t i o n o f t r

u s t , b o t h f

r o m t h e p e r s p e c t i v e o f t h e e x t e n d e d K e yt family and that o f the other

share holders. F or example, he wa s the desig nated r epre sentative of Service Tran s p o rt i n t h e sale to STACAS Holdi ng s, hardly the role of

a mid-leve l employ ee. A s

s h ar eh o l d er re p re s en t at i v e, h e pa rt i ci p at ed as a si gn at o ry i n a co mp l ex t ra n s ac t i o n i n v o l v i n g a business with a neg otiated v al u e of $18,000,000. While Husband wor ked for the company , he exercised hiring power s, oversa w key instances of expansion, a nd solved problems at the c ompany ’s

va ri ou s te rm ina ls fr om his po sit ion a t the ho me of fi c e . In my

a sse ssm e nt, Hu sb a nd

wa s si g nif

ic a ntl y

mor e inv olv e d in the op e ratio n a nd e xpans ion

of the bu sin e ss t

ha n th e hu sb a nd

in S he rr ill v. She rr ill
, 83 1 S. W.2 d 2 93 , 2 94 (T e nn . Ct . App . 1 99 2) , w ho pe rf or me d po or ly in h is j ob , o r H a rr iso n, wh os e one-ha lf interest in r eal proper ty , to w hich he made no contribution, incre ased in va lue beca use an interstate wa s built. Harrison, 912 S.W.2d at 125.

I n th is in s ta

n c e , th e c h a n c e ll o r a c c r e d it e d th e te s ti mo n y o f Wi f e , w h o h a d th e b urden of
pr ov ingthe su

bs tanti a l c on tr ibutio n b y each par ty be fo re a ny

inc re a se in v a lue of

the se pa rate proper ty could be c onsidered a s a par t of the mar ital estate. See Cutsinger v. Cutsinger , 917 S.W .2d 238, 241 (Tenn. Ct. App. 1995). At trial, the testimony of Husband was aff orded le ss cre dibilit y

on this point . The c hance llor had an a dequate evidentiar y basis to de termine that Husba nd contributed

su bs tanti a lly

to the pr e se rv a tio n an d a

pp re c ia tio n o f t

he sto c k – bo th b y vir tue of his po sit ion

of tr us t and the leng th and nature of his e mploy ment. This link to the pre servation and appre ciation of the stock was not seve red, a ccor d i n g t o the deter minations reac hed by

the cha ncellor, by

any fac tors outside of the business. I n summary , Ido not believe the e vidence preponde rate d ag ainst the finding s of the cha

ncellor a s confirme d by the the Court of App ea l s

. W h et her H usband’s contribution was su b s t an t i al, as found by the cha ncellor, is a f

actua l issue, which is subject to a limit ed scope of re view. Te nn. R. App. P. 13(d).

As to the issue of eva luation o f t h e s t o ck, Te nnessee Code Annotated se ction 67-8-107( a) (2006) r equire s that valuations for g ift tax purposes must ref lect a g ift’s “full and tr

ue value at the tim e of the makin g of the g if

t.” As Mc Na

bb te sti fi e d, ho we ve r, the a mou nt c la ime d o n g if

t ta x for ms-4-

may not alway s ref

lect the f igur e that would be r eac hed using another method of valuat i on. A varie ty of methods ar e used to evaluate corpor ate stock. See Bla singa me v. Am. Mater ials, I nc., 654 S.W .2d 659, 665-67 (Tenn. 1983). Thus, while the g ift tax valuation is evidenc e of stock va lue at the tim e of

the tr a ns fe r, it i s not so lely de te rm inativ e . In r e sp on se to t he re qu e st f

or a dmi ssi on s, Husband stated his belief that “the information contained in the Te nnessee State Gift Tax Returns of his fathe r, Widn e y C. K e y t . . . is c or

re c t [and ] [t]ha t Wid

ne y C. K e y t w ou ld t e sti fy

to t he fa c ts as they are set forth in the attached c opies of his Tenne ssee St ate Gift Tax R eturns.” H usband’s opinion as to the corr ectne ss of the information in the forms, including the statements of g ift value,

and the st ip ul ati on of

Widn e y Ke y t’ s te sti mony

are imp or

tant f a c ts i n e vid e nc e . N e ith e r o f t he se

a dmi ssi on s, ho we ve r, fo re c los e d oth e r te sti mony re le va nt to the of the a c tua l va lue of the sto c ks –
a f a c tt h a ti s d i s t i n g u i s h a

b l e f r o m H u s b a n d ’ s b e l i e f

s o r e v e n W i dn e y

K e y t ’ s t e s t i m o n y

. In

c on se qu e nc e , Hus ba

nd wa s not pr e c lud e d by

the a dmi ssi on s f

ro m pr e se nti ngoth e r t e sti mony a s to the va lue of

the sto c ks

.

Ne ve rt he le ss, the c ha

nc e llo r’ s u se of

the g if t ta x a pp ra isa l a s th e be g inn ingpo int wa s n ot, in
my view, er roneous. That the collec tive decision of the sha reholde rs to sell, thereby

removing the other re strictions on Husband’s stock, trig g ered s o m e of the increa se is not incompatible with the evaluation of the chanc ellor and should not sever the link be tween Husband’s eff orts as a shar eholder and employ ee w ith the increa sed value of his holdings. F urther, our statute is designe d to classify “any incre ase during the marria g e” as a pa rt of the mar ital estate, so long as substantial contributions

ar e m a d e b y e a c h p a rt y.

Marke t outcomes are inhere ntly the re sult of many fac tors. Our statute does not re quire trial courts to tackle ever

y detail. Fur

ther, it does not re quire a n y d i s count i n the amount of the
appre ciation that qualifies a s marital prope rty depend i n g o n the re lative ef fec t of those var ious fac tors. I t only

require s active c ontribution by eac h spouse to wh at ev er appre ciation in value

occur red. The discre t i o n aff

orded the chanc ellor as to the distribution of the marital e state is the ultimate me ans of enabling a fair and equitable division. The chanc ellor’s awa rd of 37.5% to Wife, as opposed to a la

rg er pe rce ntag e, re flec ts an appropriate e x erc ise of that discre tion in the allocation of the mar ital estate.

Summ ary

I n my opinion, the evidence does not preponde rate ag ains t t h e chanc ellor’s findingthat Hu sb and su bs tanti a lly

c on tr ibute d to the “ pr e se rv a tio n a n d a p p r e c i a t i o n ” o f t h e K e y t f a m i ly bu sin e ss. Moreove r, Wife substantially contributed in her

capa city as a home m ak er and primar y car eg iver, there by aff

ording Husband the opportunity , during their marr iag e of se vera l y ear s, to conce ntrate on his role in the company

. Fur ther, the chanc ellor was require d to exercise discre tion in determining the extent of the incre ase in the va lue of the stock dur ing the course of the mar riag e. His dec ision
to u se the g if

t ta x re tur n a pp ra isa l, a

mon g oth e r a

va ilable r e so ur c e s, in m a kin g that a sse ssm e nt i s

re a so na ble un de r the se c ir c ums tanc e s, a nd the e vid e nc e in the re c or d do e s no t p repon de rate otherwise. N o other testimony provided is so persua sive as to lead me to conclusions differ ent from-5-

tho se re a c he d b y

the c ha nc e llo r. Th e a ff

ir manc e by the Court of Ap pe a ls on the se imp or tant p oin ts

wa s, in m y

vie w, e nti re ly

a pp ro pr ia te . I

mus t, t he re fo re , r e sp e c tf

ull y dis se nt.

___________________________________ GA RY R. WA DE , JUST I CE