### FILED June18, 1999 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

ANGELA M AE ARP, ) C/A NO. 03A01-9808-CV-00273 ) Plaintiff- Appellee, ) POLK CIRCU IT ) v. ) HON. LAWRENCE PUCKETT, ) JUDGE RICHARD LEE ARP, ) ) AFFIRMED AS MODIFIED Defend ant-App ellant. ) AND REMANDED

ROBERT S. THOMPSON, L OGAN, THOMPS ON, MILL ER, BI LBO, THOMPS ON & FISHER, P.C., Cleveland, for Plaintiff-Appell ee. B. PRIN CE M ILLER , JR., Clevela nd, for D efendan t-Appellan t.

O P I N I

O N Franks, J.

In this divor

ce action, t

he husband was dissati sfied with the classific ation of propert y, the di vision of marit

al property , and the custody arrangem ent ordered by the Trial Jud ge, and ha s appealed numero us issues to th is Court. The parties were m arried on January 6, 1990, an d two children w ere born to the ma rriage.

The trial of t

he divorce was heard on March 13, 1998,and the wife testified that when she was eightee n she met the husband and the y immediatel

y start ed dating. They dated for six years before marri age, and lived together for four of those years. Duri

ng that time,the wife took care of t he house and did cooking, a nd worked2

at Goody’s Family

Clothing Store as

assistant manager. She also hel ped the husband with his busines ses, by cl eaning Peoples Bank and picki ng up money or washing the bays at the

car wash. The Trial Court, i

n resolving the

issues, not

ed that the marr

iage was an eight year

marriage, and found bot h in good health and t

o have the abili

ty and vocationa l skills necessa ry to maintain a b usiness. Th e Court fo und that ne ither party contributed to the educ ation, training o r increased e arning po wer of th e other, but b oth parties worked in t

he businesses, contributi ng to one another’s e

nhanced financial state. The Court

found the husband to be the mot ivator behind t

he businesses, and further that

the wife made signifi

cant contribut

ions, both as a homemaker a nd business part

ner, toward acquis ition, pr eservation and appr

eciation of mari

tal and separa te prop erties.

The husband presents eight issues for review, as follows: 1. The Court erred in the determinati on of separate proper ty. The evidence does not suppor t the Court’s fi

nding that the pa

rties had been in a partnershi

p for six year

s prior to t

heir marriage. 2. The Court erred in it s valuation and di

vision of Professi

onal Janitoria l Supply Corporat

ion. 3. The Court erred in finding that there was a $108,000.00 cash asset which is a separate asset of the parties. 4. The Court erred in fai ling to find t

hat the tax l

iabilit ies for the real estate, com mercial and business p roperties, is a liab ility that should have been addressed in the division of the assets and liabilit ies. 5. The Court erred in ass essing Mr. Arp with one-hal f of the elective ortho dontic proc edure that M rs. Arp incu rred imme diately before trial

and for credit ca

rd debt which she incur red after an order

for Tempo rary Mainten ance and Support. 6. The Court erred in the division of t

he marital est

ate. 7. Appellant respect fully submi

ts to the Court

of Appeals that the division of t

he property a

ttempted by t

he trial cour

t cannot be complied with because of the cr

oss-collat

eralizati on agreement that t

he parties executed to the Peopl

e’s bank of Fannin County , Georgia.3 8. The Court erred in pla cing the care,custody and cont rol of the parties’ t wo minor children with t heir mother, Angela

Mae Arp. Our standard of review in this case is de novo upon the record of the Trial Court, accomp anied by a presumption o f correctness of the Trial C ourt’s findings, unless the eviden ce preponderates oth erwise. T.R.A.P. R ule 13(d).

First, the husb and insists the Court erred in the determ ination of se parate prop erty. At the time of the marr iage, the husband owned an i nterest i n several pieces of propert

y. Under T.C.A. §36-4- 121(2)(A), all of these propert

ies would be considered separate pro perty, because they were own ed before marriage . The Court found some of these propert ies to be separa

te property , some to be both separ ate and marital proper

ty, and some t

o be marital prope

rty. Accor

dingly, the issue thus become s whethe r the proper ty owned b efore ma rriage beca me marital p roperty due to transmutation, commingling, or increase in val

ue due to substant

ial contri bution by t

he spouse. Two of the husband’s several parcels consist of land in Turtl etown, Tenness ee. The T rial Court aw arded part o f this prope rty to the husban d as separa te property, and the rest t

o the husband as marit

al property . At trial , the wife did not dispute that all of the Turtletown property was separate prop erty, and the Trial Court was in error in dividing a portion of this property as part of the marital estate. Thus, the award as marital

property t

o the husband of 11.92 acres in Turtletown, va

lued at $30,000.00, must be excluded from the marit al estate and a

warded to the husband as sepa rate p rope rty.

The Ca mpbell pro perty consists of 2.2 acres of unimpro ved prop erty which the husb and purchased f or $45,000.00 bef ore the marriage. The T rial Court assigned a value t

o this propert

y at the t ime of trial

of $265,000.00, and awarded onefifth of the prope

rty to t he husband as separate

property,

and four-fifths

of the4

property t

o the husband as marit

al property . The evidence at t rial reveal

ed that the parties had d one nothin g to this prop erty, but it had incre ased in valu e due to its location and ext

ension of public ut

ilities. Accordingly , there is no basis to cla ssify this as marital property , since the wife made no contribution to the properties’ increase in value. The incr

ease in value was not due t o any contri

butions by ei

ther the husband or wife, but was due to t he location and t

he economy. This i s similar t o the situat

ion in Harrison v. Harrison , 912 S.W .2d 124 (T enn. 1995 ), where the husband ’s separate property increa sed substan tially in value due to the constru ction of an interstate high way. The Trial Court valued t he Cherokee Hills house at $120,000.00, and awarded half of it t

o the husband as separat e property,

and half of it t

o the husband as marital proper

ty. The husband s tates in hi s brief that this was pre-owned proper ty, but does not set fort

h any reason why t

he property was wrongl y classi fied as parti al marital property. The evidence d oes not preponde rate against the Trial Court’s finding that fi

fty percent

of the value of thi s property is marital , because the par ties did live in this house for a period of time, and wife made contributions to its increase in value as a homemaker, a nd as a partner i

n the business. This is both dir ect and indirect substantial

contributions to the propert ies’ increase in value. The evi dence does n ot prep ondera te again st the Tr ial Cou rt’s deter minatio n. T.R.A .P. Rule 13(d).

Husband was operating all of his car washes before mar riage, being 68 Car Wa sh, Tri-State C ar Wash , and Ap palachian C ar Wash . It appears tha t he only owned half of the 68 Car W ash at the tim e of the m arriage, and he purch ased his partner’s i

nterest aft

er the marriage.The Trial Court tr eated these busi

nesses as

mar ital p rope rty.

In these pre-owned proper ties, t he proceeds and debts have be en intermingle d with tho se of mar ital property, and th e husban d treated the p roperty in5

such as way as to evi

nce a transmutat

ion into marit

al property . The financial transactions involving the se parties and t hese businesses ar

e not clearly

delineated,but the record indi

cates that t

he debts on the proper

ties were consoli

dated with other properties i

n 1992, after the

marriage, so t

hat only one pay

ment was made. The refinancing produced new debt which was used to renovate t he Hillcrest

Motel, which is undisputed marital property. Later, the husband used these properties as crosscollateral for the Ocoee Chevron, Car Wash, and I nn. Wife d id the bo okkee ping fo r the car wash es and o ther bu sinesse s. Husband testified that he is now doing al l of the bookkeeping for the businesses , and that it i s a difficult

job which takes a great deal of time. Both hus band and wife had access to all o f the busine ss accoun ts, and they took money out o f these acc ounts whenever they needed i t. Husband stated that while he and t he wife were married, “everythi ng we did was -- we was together, I mean, husband and wife. I mean,I never done anythin g withou t talking to her about it. Bu t she did thing s without talk ing to me. But we never made any ventur es in anythi

ng unless we talked about it and prayed about it.” The husband’s actions e stablish a pa rtnership t

ype of arrangement between the husband and wife, i n all of their

business ventur

es. The proceeds and debts of these busi

nesses were extensi

vely int ermingled with mari

tal proceeds and debts, blurr

ing any dist

inction between t

he properties.Accordingly,the evidence does not pre ponde rate aga inst the T rial Cou rt’s classi fication

.

Next, husband argues t

hat the Trial

Court erred in i

ts evaluation and division of the Profes sional Janitor ial Supply Co rporation. W e conclud e the Cou rt did not err in i

ts evaluation and division of t he Corporation, t

hough it erred i

n ordering the release of a CD securing t he debts of the Corporat ion. The value assi

gned by the Trial Court to the respective interest in the C orporation is supported by the ev idence. In6

this distribution th e Trial Co urt ordered :

Husband shall have sixt y days t o secure the rel

ease of the Certi

ficate of Deposit and the proceeds from the sale of the

jeep . . . or shall pay Angela Mae Arp the sum of $11,432.60. We find no e rror in the award of the C ertificate of Deposit to the w ife, but the Court did err in ord ering that the C D be relea sed. Since th e wife is res ponsible fo r one-half of the debt att

ributable t

o a one-third st

ock interest

in the Corporation, this CD which

secure d the de bt and w as awa rded to the wif e, shou ld rema in as sec urity for th is debt. We accor

dingl y vac ate t

hat po rti on of t he Tri al Cou

rt’ s Order

that directs t hat t he CD be released. Next, it is asserted that

the Court erred i

n finding there was $108, 000.00 cash assets, which w as a separate asset of the pa rties. We agree that the Trial Co urt’s finding was in error . On October 1, 1997, the date of the deposit

ion of the loan officer of People’s Bank of Fannin County , Georgia, it was established t

hat the husband had on that d ay a total o f $108 ,173.26 in his pe rsonal a nd bus iness ac counts with th e bank

. The husband testifi

ed the account refl

ected the operat

ing revenues of the bus iness, and that on a ny given date the y varied d ramatic ally, depen ding on incom e and e xpens es. On the date of tria

l, February

13, 1998, the account

s had a balance of $68,645. 64. The Trial Court proper

ly dist ributed thes e accounts as marit al property , but erred i

n the evaluation . Marital pro perty must be “ valued as o f a date as n ear as reaso nably possible to t

he final divorce

hearing date. ” T.C.A.§ 36-4-121(b)( 1)(A). The value on the date of the di

vorce hearing should have been the value uti lized by t he Court, and that amount must be substituted i n the Court’s judgment

for “cash on hand”. Next, it is

argued that the Court

erred in fail

ing to find that

the tax liabili ties for the

real estat

e commercial and busines s properties is a liabi lity that should have been addressed in the divis ion of the assets and liabil ities. The evidence established the amount of business tax liabili ties in the State of Georgia, and business7

taxes in the St

ate of Tennessee. Apparent ly, t hese assessments were i ntroduced at trial,but are not in t

he record before us. Accordingly,we cannot determine what ta x

amou nt is attrib utable to each o f the pa rties.

“Marital debt shoul

d be allocated as

are marital

assets, and should be considered when making an equit able division of property. ” Herrera v. Herrera , 944 S.W.2d 379, 390 (Tenn. App. 1996). In this case, the tax debt was incur

red by virt

ue of property ownership, and while both pa rties might

argue that taxe s are not beneficial, both parties did bene fit from the property own ership. The parties were awarded substantia

l assets i n the property

division, t

hough the husband was awarded the greater share. Since the husband was awarded most of the marit al property , he shou ld be resp onsi ble f or m ost o f the tax a ttribu table to th at pr ope rty. A ccor ding ly, we hold that the equ itable way to d istribute the tax lia bility is to require eac h party to pay the d ebt on the

prop ert y whi ch he or sh e rec eived in t

he di str ibut ion, whic h we cannot determine wit

hout the tax ass essments. Accordingl y, upon remand, t

he Trial Cou rt is d irect ed to dete rmin e the alloc ation of ta x liab ility to each part y.

Next, husband seeks rel ief from an assessment

of one-half of an elect

ive orthodon tic procedu re that the w ife incurred immedia tely before trial, and for credit card debt sh e incurred a fter the Ord er of Tem porary Ma intenance a nd Supp ort.

The Trial Court found the de bt for the ort

hodontic procedure t

o be a marital debt, which, with the e xception of the deb ts on the real property, the Court

assesse d the m arital deb ts almos t equally b etwee n the pa rties.

On April 25, 1997, the Trial Court entered a n Order granting wife temporary cust

ody of the two chil

dren, and orderi

ng the husband to pay

$200.00 per week as temporary ch ild support, as well as pro viding that h usband “ further ma intain payme nt on t he oth er billsand indebtedness incl uding , but

not l imit ed to, the home and utilit ies.” After t

his time, t

he wife had orthodontic surgery on her

jaw, and she8

testified the surgery

was for health reas ons. The husband and wife had discus sed the wife having the su rgery five years earlier, but had put it off due to the w ife’s pregnancy, and t

heir lack of ins

urance coverage. The w ife also incurre d credit c ard deb ts after th e Orde r went i nto eff ect. She testified that part of th e debt wa s due to tran sfers of ea rlier debts to ca rds with lower interest

rates, and par

t was due to new purchases. She testified she needed the cards because husband was no longe r providing her wit

h any money, ot

her than the stated child su pport.

Husband argues that si

nce the wife created this debt, she should pay for it. How ever, de bt, like pr operty, is c onside red ma rital if acq uired d uring th e marria ge. See Herrera , p.389; Mondelli v. Howard , 780 S .W.2d 769, 77 3 (Ten n. App . 1989)

. The evidence does not preponder ate against t

he Trial Court’s

division of t

he indebte dness. Next, the husband ins ists the Court erred in the over

all divis ion of the marital est

ate. As we have noted, t he Trial Court made inc orrect clas sifications of separate proper

ty and the mari

tal propert

y, and adopted a

n incorrect val

ue of cash on hand and failed to i

nclude the tax ass essment as lia bilities. However, after considering t

he Trial Court’s

findings and the fac

tors for equit

able distr ibution set

out in T.C.A. §36-4-121(c), the division made by the Trial Court, after our modifications, remains a fair and e

quitable divi sion of the marit al estate. As trial court s are given wide discretion in the divis ion of marital property,

their divi sion is enti

tled to great weigh t on app eal, and we af firm the proper ty division , as mod ified. See Watters v. Watters , 959 S.W.2d 58 5, 590 (Tenn. A pp. 1997).

The husband argues that t he division of t

he marital prope

rty order ed by the Trial Court

cannot be effected becaus e of the cross-col laterizat ion agreement that the parties

executed at the Peopl

e’s Bank of Fannin County,Georgia. While the9

cross-coll aterizati

on agreement complicat es the property

division, i

t does not render the divisi on inoperable.

The People’s Bank of Fannin County , Georgia, loaned the husband 100% of the construction c osts of the Ocoee Convenience St ore, Car Wash, and Motel project. The pr

oject was built

and had been operating for about a year at

the time of trial. The remaining loan bal ance on the project was $1,550,000.00, at

the time of trial, and the O coee prop erty was value d at $1,750 ,000.00. T he Oco ee property is collateral for the loan, but

so is all t

he other real pr

operty owned by e

ither the husband or husband and wife together . In the dist ribution, the Trial Court awarded the wife property that is co llateral for the O coee proje ct.

The Pres ident of the Bank testif ied that the hu sband’s tota l obligation to the Bank under this c ross-collateral a greemen t and unde r prior loans is a pproxim ately $2,400,000.00. The hus band’s past busi

ness successes and hi s personal invol vement in the venture,

were the factors i

n the Bank’s decision to loan the husband t his amount of money for the Ocoee proj ect, accordi ng to the Bank’s presi

dent. The preside

nt stated the Bank would not release any

of the collat

eral that s ecures the loan, and further that

he would consider a tr

ansfer from the husband t o the wife as a suffici

ent transfer to t

rigger a due on sal

e clause, though t

he transfer of a r

esidence, as oppos ed to commercial proper

ty, gener ally would not

trigger such ac

tion. He test

ified that t

he Bank could waive the due on sale clause, but he would have to analyze t

he situation at the time of the Court ’s transfer of property a s to whether or not t here was sufficient collatera l to cove r the loan

.

Any possible ra

mifications t

hat may flow from the pr operty divi sion cannot be a basis for denying the wife her equitable share in the marital estate. These contractual r

elationshi

ps do not prevent t

he Court from awarding inte rest in proper

ties in a divorce case,

and the transfer

of the properti

es to the wife does not

impair the1 0

Bank’s collater

al interest. However, as the Trial Court ordered,the husband will be required to hold the w ife harmless for any possible losses a s a result of the husband ’s indebtedness t

o the Bank. Finally , we conclude that t he Court properly

placed the minor chi

ldren with th eir moth er, whic h was in the T rial Judg e’s discr etion. Suttles v. Suttles , 748 S.W.2d 427, 429 (Tenn. 1988). The evidence preponderat es strongly

in favor of placemen t of the childr en with the mother, as b eing in their b est interest.

In sum, the Trial

Court’s dist

ribution of prope

rty will be modified, as indicated. Also, a tax li ability will be assess ed to each party upon remand, depending upon the tax lia

bility attribut able to the proper

ty that each party was awarded, and the order of th e Trial Co urt to release th e CD f rom the sa le of the N issan truck, as security to the loan for Pr

ofessional Jani

torial Ser vice, will be

vacated. The judg ment of th e Trial Co urt is affirme d, as mod ified, and the costs assessed o ne-half to e ach party on a ppeal.

__________________________ Herschel P. Franks, J.

CONCUR:

___________________________ Houston M. Godd ard, P.J.

___________________________ H. David Cate, Sp.J.