IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

November 24, 2014 Session

CATHY C. PHIPPS V. WILLIAM PHIPPS

Appeal from the Chancery Court for Claiborne County

No. 17660 Hon. Robert M. Estep, Judge

1

No. E2014-00922-COA-R3-CV - Filed January 27, 2015

In this post-divorce appeal, the husband seeks reversal of the trial court’s classification of a

certificate of deposit as marital property and the grant of alimony. We affirm the decision

of the trial court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which D. MICHAEL SWINEY

and THOMAS R. FRIERSON, II., JJ., joined.

David H. Dunaway and Rick A. Owens, Lafollette, Tennessee, for the appellant, William

Phipps.

Lee Dan Stone, III, Tazewell, Tennessee, for the appellee, Cathy Phipps.

OPINION

I. BACKGROUND

William Phipps(“Husband”) and Cathy Phipps(“Wife”) were married in March 1973.

Two children were born of the marriage, while a third child was adopted. All three children

have since attained the age of majority. In January 2012, Wife sought a divorce after nearly

39 years of marriage. Husband responded by filing a counter-complaint for divorce.

Sitting by interchange.

1
Prior to Husband and Wife’s (collectively “the Parties”) lengthy marriage, Husband

served in the Vietnam War. Husband was in college when he finally met Wife, who worked

in the nursing profession. Following their marriage, Wife eventually became a stay-at-home

mother. Husband retained various jobs and at one point, operated his own coal mining

business, with Wife serving as an administrative assistant. Wife returned to nursing after

Husband suffered a heart attack and sold the business. By the time Wife sought a divorce,

neither of the Parties were employed. The Parties relied on Husband’s disability benefits

from the Social Security Administration and Veterans Affairs (“VA”) and their significant

monetary assets that they had amassed during their lengthy marriage. Husband had also

recently received a lump sum award from VA for retroactive benefits a few months before

Wife filed her complaint. The benefits, in the amount of approximately $125,399, were

awarded as a result of Husband’s exposure to Agent Orange during the Vietnam War. The

award letter reflects that a portion of the retroactive benefits was attributable to Husband’s

marriage status. The benefits were automatically deposited into their joint checking account;

however, Husband, along with Wife, later purchased a certificate of deposit in the amount

of $110,000.

During the pendency of the hearing on the complaint, the court awarded Wife spousal

support at the rate of $2,500 a month. Prior to the hearing, the Parties stipulated that

statutory grounds existed to support the request for divorce. As pertinent to this appeal,

Wife, who was 61 years old at the time of the hearing, testified that she and Husband

separated in January 2012. However, she acknowledged that she remained on the property

in a garage apartment until March 2012. She stated that she was unable to move until she

received spousal support. She explained that shortly before their separation, Husband

withdrew approximately $9,000 from their savings account and $4,000 from their checking

account, leaving her with approximately $1,000 and no income.

Wife acknowledged that she also withdrew money from the certificate of deposit that

they opened after receiving Husband’s lump sum benefits from VA. She asserted that she

eventually returned the money. She recalled that the retroactive benefits were initially

deposited into their joint checking account but that she and Husband later purchased a

certificate of deposit. She asserted that Husband decided to purchase a joint certificate of

deposit because he believed that she “was a big part in him getting this VA settlement.” She

stated that he never claimed that the money did not belong to her but that he considered it

joint property.

Wife testified that Husband failed to forward her mail to her once she left the

residence. She asserted that as a result, she missed the deadline for renewing her nursing

license. She stated that she had practiced nursing for approximately 38 years. She

acknowledged that at times, she was not employed as a nurse but was responsible for raising

-2-
the children and maintaining the home. She returned to nursing in 1993, when Husband had

a heart attack.

Wife testified that she suffered from mitral valve prolapse and was required to take

medication for her condition. She related that her doctor also found two masses in her right

breast and one mass in her left breast. She explained that she underwent breast augmentation

surgery in 1980 and that the doctor could not perform a biopsy until the implants were

removed. She asserted that she had also been diagnosed with a malignant melanoma and

would have to receive continuous treatments for the remainder of her life. She stated that she

did not intend to return to the nursing profession or any other profession because of her

various health issues.

Wife testified that while she and Husband were married, he drew approximately

$8,000 per month from various sources for their living expenses. She related that he drew

VA benefits and Social Security benefits and that he also drew $1,500 per month from an

annuity. She asserted that her temporary alimony was sufficient to maintain her frugal

standard of living, with the exception of her additional medical bills.

As pertinent to this appeal, Husband testified that he was in the Air Force for

approximately three years and eight months. He related that upon his discharge, he worked

at various places and obtained an engineering degree. He stated that he eventually started

his own business, Black Mountain Mining and Burnside Excavating, but that he sold

everything approximately three years later when he had a heart attack. He established several

retirement and savings accounts throughout the marriage to supplement his income once he

retired. He claimed that he suffered from various health issues and that he would probably

never work again.

Husband testified that his retroactive VA benefits were automatically deposited into

their joint checking account. He purchased a certificate of deposit with Wife because he

wanted her to receive the benefits when he died. He explained that he thought he was dying

on more than one occasion when his health drastically deteriorated in 2011. He

acknowledged that the way in which they purchased the certificate of deposit allowed Wife

equal access to the money.

Husband conceded that Wife worked throughout the marriage and also stayed home

with the children at times. He admitted that Wife returned to work when he suffered from

a heart attack and that she assisted him in obtaining his VA benefits. He claimed that his

relationship with Wife had been strained for several years. He acknowledged that a family

conflict involving his grandchild was partly to blame for their deteriorating relationship.

-3-
Husband testified that his monthly income totaled $6,936. He stated that he recouped

approximately $4,156 in VA benefits per month and $1,780 in Social Security benefits per

month. He acknowledged that he also withdrew approximately $1,000 per month from

another account. He claimed that he no longer depended upon the $1,000 from the separate

account because he had been required to remit that money as temporary alimony pending the

divorce hearing. He asserted that he also remitted approximately $1,300 per year for

homeowner’s insurance and $1,500 per year for property taxes. He stated that he was also

responsible for remitting payment for Wife’s medical insurance. He conceded that he was

still able to support himself even after remitting payment for these extra expenses.

Following the presentation of the above evidence, the trial court granted the request

for divorce. As pertinent to this appeal, the court classified the certificate of deposit opened

with Husband’s retroactive VA benefits as marital property as a result of transmutation. The

court then divided the marital assets, awarded Wife alimony at the rate of $1,500 per month

until she reached the age of 65, and ordered Husband to remit payment for Wife’s health

insurance until she was eligible for Medicare at the age of 65. This timely appeal followed.

II. ISSUES

We restate the issues raised on appeal by Husband as follows:

A. Whether the trial court erred in classifying the certificate of deposit as

marital property.

B. Whether the trial court erred in awarding alimony to Wife.

Wife raises an issue on appeal for our consideration that we restate as follows:

C. Whether the trial court erred in setting the rate and duration of the alimony

award.

III. STANDARD OF REVIEW

The factual findings of the trial court are accorded a presumption of correctness, and

we will not overturn those factual findings unless the evidence preponderates against them.

See Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). A trial

court’s conclusions of law are subject to a de novo review with no presumption of

correctness. S. Constructors, Inc. v. Loudon Cnty. Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.

2001).

-4-
The trial court’s classification and division of property is reviewed de novo with a

presumption that the trial court’s factual findings are correct. See Watters v. Watters, 959

S.W.2d 585, 588 (Tenn. Ct. App. 1997). An appellate court may alter the trial court’s

division of property only if the trial court misapplies the law or if the evidence preponderates

against the trial court’s factual findings. See Wade v. Wade, 897 S.W.2d 702, 715 (Tenn. Ct.

App. 1994). We must give great weight to the trial court’s decisions 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.’” 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)).

Likewise, trial courts have broad discretion in awarding spousal support. Bratton v.

Bratton, 136 S.W.3d 595, 605 (Tenn. 2004). “Accordingly, ‘[a]ppellate courts are generally

disinclined to second-guess a trial judge’s spousal support decision unless it is not supported

by the evidence or is contrary to the public policies reflected in the applicable statutes.”’

Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001) (quoting Kinard v. Kinard, 986 S.W.2d

220, 234 (Tenn. Ct. App. 1998)). The role of an appellate court in reviewing an award of

spousal support is to determine whether the trial court applied the correct legal standard and

reached a decision that is not clearly unreasonable. Id. at 733. Thus, an appellate court must

review a trial court’s decision regarding alimony using the deferential abuse of discretion

standard. See Bratton, 136 S.W.3d at 605. If a discretionary decision is within a range of

acceptable alternatives, we will not substitute our judgment for that of the trial court simply

because we may have chosen a different alternative. White v. Vanderbilt Univ., 21 S.W.3d

215, 223 (Tenn. Ct. App. 1999).

IV. DISCUSSION

A.

Husband argues that his retroactive VA benefits were not subject to division by the

trial court because his benefits were never transmuted into marital property. He explains that

he purchased a certificate of deposit with the VA funds solely to ensure that the funds would

transfer to Wife in the event of his death. He notes that he did not transfer the amount that

was attributable to Wife, namely $15,399, because he sought to separate his benefits from

Wife’s portion. Wife responds that Husband failed to present evidence indicating an intent

that the property should remain separate when the property was used to purchase a joint

certificate of deposit that allowed her equal access.

Because Tennessee is a “dual property” state, a trial court must identify all of the

assets possessed by the divorcing parties as either separate or marital property before

-5-
dividing the marital estate. See generally Tenn. Code Ann. § 36-4-121(a)(1); see Snodgrass

v. Snodgrass, 295 S.W.3d 240, 246 (Tenn. 2009). The classification of property as either

marital or separate property is a question of fact for the trial court. Mitts v. Mitts, 39 S.W.3d

142, 144-45 (Tenn. Ct. App. 2000).

Separate property is not part of the marital estate and is therefore not subject to

division. See Cutsinger v. Cutsinger, 917 S.W.2d 238, 241 (Tenn. Ct. App. 1995). Separate

property is defined as,

(A) All real and personal property owned by a spouse before marriage,

including, but not limited to, assets held in individual retirement accounts

(IRAs) asthat term is defined in the Internal Revenue Code of 1986 as amended;

(B) Property acquired in exchange for property acquired before marriage

except when characterized as marital property under subdivision (b)(1);

(C) Income from and appreciation of property owned by a spouse before

marriage except when characterized as marital property undersubdivision (b)(1);

(D) Property acquired by a spouse at any time by gift, bequest, devise or descent;

(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.

Tenn. Code Ann. § 36-4-121(b)(2). In contrast, “marital property includes all property

owned as of the date of the filing of the complaint for divorce or acquired up to the date of

the final divorce hearing.” Larsen-Ball v. Ball, 301 S.W.3d 228, 233 (Tenn. 2010);see Tenn.

Code Ann. § 36-4-121(b)(1). Marital property also

includes income from, and any increase in value during the marriage of,

property determined to be separate property in accordance with subdivision

(b)(2) if each party substantially contributed to its preservation and

appreciation, and the value of vested and unvested pension, vested and

unvested stock option rights, retirement or other fringe benefit rights relating

to employment that accrued during the period of the marriage.

-6-
Tenn. Code Ann. § 36-4-121(b)(1)(B). “[S]eparate property can become part of the marital

estate due to the parties’ treatment of the separate property.” Eldridge v. Eldridge, 137

S.W.3d 1, 13 (Tenn. Ct. App. 2002). “The doctrines of transmutation and commingling

provide an avenue where separate property can become marital property.” Id.

This court has stated that

[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. The presumption can be rebutted by evidence of

circumstances or communications clearly indicating an intent that the property

remain separate.

Batson v. Batson, 769 S.W.2d 849, 858 (Tenn. Ct. App. 1988) (internal citations and

quotations omitted).

While the retroactive VA benefits were awarded for Husband’s service prior to the

marriage, Husband used the fundsto purchase a joint certificate of deposit with Wife, thereby

creating a rebuttable presumption that the certificate of deposit was marital property.

Husband argues that he only intended for the funds to transfer to Wife upon his death.

However, the certificate of deposit allowed Wife equal access to the money throughout

Husband’s lifetime and required both signatures for either party to access the money. Cf.

Burns v. Burns, No. 01-A-01-9705-CH-00218, 1997 WL 691533, at *4-5 (Tenn. Ct. App.

Nov. 7, 1997) (holding that a certificate of deposit was the husband’s separate property when

the husband evidenced an intent to only relinquish control of the certificate upon his death).

Husband simply submitted no evidence to establish that he ever intended to keep the

retroactive VA benefits as his separate property during the marriage. On the contrary,

Husband’s intent to keep the benefits as his separate property surfaced only after the demise

of the marriage. See Gorbet v. Gorbet, No. W2011-01879-COA-R3, 2012 WL 4847090, at

*11 (Tenn. Ct. App. Oct. 11, 2012) (holding that property purchased in anticipation of the

marriage and later used as the marital residence was marital property). Accordingly, the

evidence supports the determination of the trial court that the certificate of deposit purchased

with the VA benefits was marital property.

-7-
B. & C.

Husband argues that the trial court erred in awarding Wife alimony when she is fully

capable of supporting herself with her nursing degree and the significant monetary assets she

received as a result of the divorce. He claims that he, unlike Wife, is unable to work as a

result of his permanent and total disabilities. Wife responds that the court erred in setting the

rate and duration of her alimony. She requests alimony at the rate of $3,000 per month until

she reaches the age of 66, the age at which she will be eligible to draw full benefits from the

Social Security Administration.

“Alimony” is defined, in pertinent part, by Black’s Law Dictionary, 9th ed., as

[a] court-ordered allowance that one spouse pays to the other spouse for

maintenance and support . . . after they are divorced. Alimony is distinct from

a property settlement.

Tennessee recognizes four different types of alimony: rehabilitative alimony, transitional

alimony, alimony in futuro, and alimony in solido. Each type addresses a specific need. The

trial court in this case awarded transitional alimony. Transitional alimony may be awarded

to assist the disadvantaged spouse in adjusting to the economic consequences of the divorce.

Tenn. Code Ann. § 36-5-121(g)(l).

In determining whether to award alimony, the court must first consider whether the

spouse seeking alimony is economically disadvantaged. Perry, 114 S.W.3d at 467. “Once

the trial court has found a party to be economically disadvantaged relative to his or her

spouse, it must determine the nature, amount, length of term, and manner of payment of the

award.” Id. at 467. In setting the type, duration, and amount of support, courts are guided

by the following list of factors:

(1) The relative earning capacity, obligations, needs, and financial resources

of each party, including income from pension, profit sharing or retirement

plans and all other sources;

(2) The relative education and training of each party, the ability and

opportunity of each party to secure such education and training, and the

necessity of a party to secure further education and training to improve such

party’s earnings capacity to a reasonable level;

(3) The duration of the marriage;

-8-
(4) The age and mental condition of each party;

(5) The physical condition of each party, including, but not limited to, physical

disability or incapacity due to a chronic debilitating disease;

(6) The extent to which it would be undesirable for a party to seek employment

outside the home, because such party will be custodian of a minor child of the

marriage;

(7) The separate assets of each party, both real and personal, tangible and intangible;

(8) The provisions made with regard to the marital property, as defined in §

36-4-121;

(9) The standard of living of the parties established during the marriage;

(10) The extent to which each party has made such tangible and intangible

contributions to the marriage as monetary and homemaker contributions, and

tangible and intangible contributions by a party to the education, training or

increased earning power of the other party;

(11) The relative fault of the parties, in cases where the court, in its discretion,

deems it appropriate to do so; and

(12) Such other factors, including the tax consequences to each party, as are

necessary to consider the equities between the parties.

Tenn. Code Ann. § 36-5-121(i).

In addition to the factors found in Tennessee Code Annotated section 36-5-121(i), the

two most relevant factors in determining the amount of alimony awarded are the

economically disadvantaged spouse’s need and the obligor spouse’s ability to pay.

Robertson, 76 S.W.3d at 342. When considering these two factors, the primary consideration

is the disadvantaged spouse’s need. Watters v. Watters, 22 S.W.3d 817, 821 (Tenn. Ct. App.

1999). Courts must also take into consideration the different roles a spouse may have in a

marriage when considering an award of alimony. Tenn. Code Ann. § 36-5-121(c). “There

are no hard and fast rules for spousal support decisions, and such determinations require a

‘careful balancing’ of the relevant factors.” Miller v. Miller, No. M2002-02731-COA-R3-

CV, 2003 WL 22938950, at *3 (Tenn. Ct. App. Dec. 10, 2003) (citing Anderton v. Anderton,

988 S.W.2d 675, 682-83 (Tenn. Ct. App. 1998)).

-9-
A number of the support factors weigh in favor of affirming the alimony awarded to

Wife. Wife was clearly educated, but she needed additional education to update her nursing

license. Unlike Husband, she lacked funds from sources other than her division of the

marital property to sustain her. Tenn. Code Ann. § 36-5-121(i)(1), (2). The marriage was

of a long duration, namely 39 years. Tenn. Code Ann. § 36-5-121(i)(3). Wife also made

substantial contributions to the marriage as a homemaker and as Husband’s caretaker

throughout the marriage. Tenn. Code Ann. § 36-5-121(i)(10). The remaining factors appear

equally weighted or inapplicable. Indeed, the Parties were both nearing retirement age and

suffered from numerous physical ailments. However, the record reflects that Wife was

economically disadvantaged as compared to Husband and in need of support. Wife testified

that she was unable to support herself without assistance from Husband and that she was

even unable to leave the residence until she was awarded spousal support. Despite his

disability, Husband had additional sources of income, thereby providing him with the ability

to support Wife. Accordingly, we conclude that the trial court did not abuse its discretion

in awarding transitional alimony to Wife. This conclusion does not end our inquiry because

Wife requests an increase in the rate and duration of her award.

While Wife is economically disadvantaged as compared to Husband, she, like

Husband, received a significant portion of the marital estate. Husband was also tasked with

remitting payment for Wife’s medical insurance until she is eligible for Medicare at the age

of 65. Unlike Husband, Wife is likely capable of seeking some form of employment if

necessary to sustain her before she is eligible for full benefits from the Social Security

Administration. With these considerations in mind, we further conclude that the trial court

did not abuse its discretion in awarding $1,500 to Wife until she reached the age of 65.

V. CONCLUSION

The judgment of the trial court is affirmed, and the case is remanded for such further

proceedings as may be necessary. Costs of the appeal are taxed one-half to the appellant,

William Phipps and one-half to the appellee, Cathy Phipps.

______________________________________

JOHN W. McCLARTY, JUDGE

-10-