Court Opinion

ID: 1066550
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:23:46.829202+00
Date Added: 2024-06-11T12:11:07.987435
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                                  AT JACKSON
                                            May 21, 2003 Session

             KATHLEEN ANNE EARLEY v. ROBERT KEITH EARLEY

                   A Direct Appeal from the Circuit Court for Shelby County
               No. CT-003076-00     The Honorable John R. McCarroll, Jr., Judge

                        No. W2002-01354-COA-R3-CV - Filed August 26, 2003

       In this divorce case, the final decree granting wife a divorce made a division of marital
property but failed to include as part of the marital estate several expenditures made by the husband.
Wife asserts that such expenditures constitute a dissipation of assets by the husband and should have
been included as part of the marital property. Wife appeals. We affirm.

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

W. F RANK C RAWFORD, P.J., W.S., delivered the opinion of the court, in which A LAN E. H IGHERS , J. and H OLLY M. K IRBY,
J., joined.

David E. Caywood, Laurie W. Hall, Memphis, For Appellant, Kathleen Anne Earley Earley

Michael L. Robb, Dawn Davis Carson, Susan T. Hunt, Memphis, For Appellee, Robert Keith Earley

                                                       OPINION

       Appellant Kathleen Anne Earley (“Wife”) and appellee Robert Keith Earley (“Husband”)
were married in Elmont Long Island, New York on September 29, 1973. The parties separated on
May 7, 2000.1 Throughout most of the marriage, Husband served as the sole financial provider, and
Wife acted as the primary caregiver and homemaker.

       Husband was hired as Vice President of Distribution for Williams-Sonoma Corporation
(“Williams-Sonoma”) in June 1983. In July 1984, Husband was transferred from Williams-
Sonoma’s offices in California to the corporation’s distribution center in Memphis, Tennessee.
Husband was eventually promoted to the position of Senior Vice President of Distribution.

         1
            The parties have two daughters together. Both daughters were eighteen years of age or older at the time the
trial court’s Final Decree of Divorce was entered.
       In addition to his annual salary as Senior Vice President of Distribution, Husband was also
awarded a ten percent interest in the Hewson-Memphis Partnership in the early 1990’s. The
Hewson-Memphis Partnership was a partnership that owned the land and building where Williams-
Sonoma’s Shelby County distribution center was located. Husband maintains that the interest he
received in this partnership was a “gift,” and not an element of his annual compensation from
Williams-Sonoma.

        Shortly after his arrival in Memphis, Husband entered into a business agreement with Bill
Norris to form Professional Transportation Services, Inc. (“Pro Trans”).2 Husband testified that he
was a silent partner in Pro Trans, and as such was entitled to a fifty percent share of the corporation
profits. According to Husband, Pro Trans generated very little profit in its early years of inception.
However, as the business continued to grow, Husband testified that the corporation’s profit margin
increased to between $90,000.00 and $200,000.00 per year. Husband testified that Wife knew about
Pro Trans, and further insists that his family benefitted financially from his interests in the
corporation.

        As an executive employee of Williams-Sonoma, Husband was required to sign a Yearly
Officer’s Statement and truthfully answer several questions, including inquiries regarding outside
business interests. Husband admits that he was required to reveal his interests and involvement in
Pro Trans; however, despite this knowledge, he consciously chose not to reveal this information in
violation of Williams-Sonoma policy.3

        In February 1993, Husband began an extramarital affair with his Williams-Sonoma co-
worker, Bobbye Payne (“Ms. Payne”). Husband admitted to purchasing jewelry, trips, various
household goods, and a residence for Ms. Payne with marital funds during his marriage to Wife.
Husband further admitted to paying several of Ms. Payne’s debts or bills with marital funds. He
calculated the total “agreed dissipation” amount at $440,233.97.4 At the time of trial, Husband and
Ms. Payne were still involved.

         Husband resigned from Williams-Sonoma in January 1997. In early 1999, Williams-Sonoma
filed a complaint against Husband and Ms. Payne in the United States District Court for the Western

         2
             Pro Tra ns was created as a freight forwarding corporatio n. W illiams-So nom a was a Pro Tra ns client.

         3
           Husband co ntends that he did not reveal his involvem ent in Pro T rans because he considered P ro Trans a
“stock investment” rather than a business interest, on the basis that he had no responsibility for the day-to-day operations
of the corporation.

         4
         At trial, an Agreed Dissipation list was entered as an exhibit. This list represents the total amount by which
Husband dissip ated the parties’ marital assets thro ugh gifts and payments to M s. Payne.

                                                            -2-
District of Tennessee, alleging corporate theft.5 Williams-Sonoma’s First Amended Complaint,
entered as a trial exhibit in this matter, alleged eight causes of action against Husband, to wit: (1)
conversion; (2) money had and received; (3) fraud; (4) conspiracy to defraud; (5) unjust enrichment;
(6) breach of fiduciary duty; (7) fraud, in connection with the Settlement Agreement and General
Release of July 5, 1997; and (8) rescission of contract.6 Williams-Sonoma later filed an amendment
to its First Amended Complaint, alleging a ninth cause of action against Husband for unjust
enrichment and breach of fiduciary duty. Pursuant to this ninth cause of action, relating to
Husband’s interest and involvement in Pro Trans, Williams-Sonoma alleged:

                          As a direct and proximate result of Earley’s breach of his
                  fiduciary duty as herein alleged, Earley has received substantial
                  benefits which constitute secret profits and which have a value of at
                  least $2,000,000.00 in the form of distributions and benefits paid or
                  provided to him by ProTrans. Earley is fully liable to Williams-
                  Sonoma for all such secret profits that he obtained in violation of his
                  fiduciary duties. The exact amount of Earley’s secret profits will be
                  proven at the time of trial.7

       Husband retained the Memphis law firm of Armstrong Allen to represent him in the
Williams-Sonoma suit. On December 10, 1999, Husband and Williams-Sonoma entered into a
Mutual Release and Settlement Agreement in the above cited action. The Settlement Agreement
provided:

                          Not later than twenty (20) days following the full execution
                  and delivery of this Release by the parties hereto, Earley shall cause
                  the sum of $4 million Dollars ($4,000,000) (the “Settlement
                  Amount”) to be wire transferred in immediately available funds to the
                  account of Williams-Sonoma in accordance with the wire transfer
                  instructions provided by Williams-Sonoma. Additionally, Earley will

         5
           Williams-Sonoma specifically contended that Husband and Ms. Payne “dive rted W illiams-So nom a corporate
funds for their own p ersonal use and benefit.” According to W illiams-Sonoma’s First Amended Co mplaint, Husband
opened an unauthorized corporate account at a Memp his bank. Husband placed the account in the name of “W illiams-
Sonoma, Inc. Emplo yee Fund.” The account was referenced to Husband’s own social security number, and he received
all acco unt statem ents at his p rivate residence. W illiams-So nom a alleged that H usband funded the account with
Williams-Sonoma money, and further asserted that Husband “wrote checks, drawn on the unauthorized account, to cash,
to himself and to defendant Payne, and to other persons and entities, as payment for his and defendant Payne’s respective
perso nal exp enses a nd for their resp ective p erson al benefit.”

         6
           Ms. Payne was included as a defendant only as to W illiams-Sonoma’s actions for conversion, money had and
received, fraud, conspiracy to defraud , and unjust enrichment.

         7
          In her testimony before the trial court, W ife admitted that she knew about Pro T rans, but denied any
knowledge that Husband’s participation in this corporation was a violation of Williams-Sonoma policy. Wife further
denied any knowledge regarding the unauthorized and illegal “Employee Fund” established by Husband.

                                                          -3-
                  donate his 10% interest in the Memphis Hewson partnership to a
                  qualified charity of Williams-Sonoma’s choice....

This agreement further specified that the $4,000,000.00 paid by Husband represented a “return of
compensation” as to Williams-Sonoma’s ninth cause of action for breach of fiduciary duty.

        The Settlement Agreement between Husband and Williams-Sonoma included the signatures
of Wife, and the parties’ children. With regard to her knowledge of the litigation and settlement
agreement details, Wife admitted that she and Husband discussed the lawsuit during its pendency,
and further conceded that, at the suggestion of Husband’s attorney, she spoke with attorney Brook
Lathram (“Mr. Lathram”) on one occasion regarding the Williams-Sonoma lawsuit.8 Wife noted,
however, that she did not speak with Husband about the Settlement Agreement prior to signing it,
and further asserted that she was never advised of the possibility that this agreement could be used
against her interests in a future divorce proceeding. Wife acknowledged that she did not read the
Settlement Agreement prior to affixing her signature.

      When questioned as to whether he explained the terms and consequences of the Settlement
Agreement to Wife prior to giving final approval to the agreement, Husband testified:

                  Q: And did you talk to her about the settlement when that issue came
                  up?

                  A: Yes. We went to mediation in Dallas. Dallas, Texas was the site
                  that Williams-Sonoma insisted that we meet in. And when we –
                  when we arrived at a mediation number or an agreement number, I
                  called Kathy and explained to her what the number was, how much
                  Williams-Sonoma stock we would have to sell in order to meet that
                  number and also explained the – that we – what assets we would have
                  left.

                  ******************************************************

                  Q: Did she agree with [the Settlement Agreement]?

                  A: Yes, she did.

                  Q: Did you tell her about also the charitable gift of the partnership?

                  A: Yes, I did.

         8
            Wife testified that she only met with Mr. Lathram once , and stated that she did not speak with him at any time
after the S ettlement Agreement was reached or prior to her signing o f said agreem ent.

                                                           -4-
                    Q: Did she know all the terms about the settlement?

                    A: Yes.

                    ******************************************************

                    Q: Did you make a specific point of calling her before you
                    consummated the mediated settlement?

                    A: Yes, I did. I wanted her to understand about the settlement and to
                    – to get her approval basically.

In addition to these assertions, Husband further maintained that Wife was aware that he was using
marital funds to pay his attorney’s fees in the Williams-Sonoma litigation.

        On June 12, 2000, Wife filed a Complaint for Absolute Divorce and Injunctive Relief in the
Circuit Court of Shelby County, Tennessee. Wife sought a divorce on the grounds of irreconcilable
differences and, in the alternative, inappropriate marital conduct and adultery.9 Pursuant to her
Complaint, Wife asked the court for a fair and equitable distribution of the parties’ marital assets,
such distribution taking into consideration Husband’s alleged dissipation of marital property.10

         9
            In her C omp laint, W ife also so ught alim ony pendente lite and alimony in futuro. On September 12, 2000,
W ife filed a M otion Pendente Lite for alimony, child support, and attorney’s fees. On March 12, 2003, after the trial
court entered its Final Decree of Divo rce and W ife filed a N otice o f App eal of the court’s order, this Court entered an
Order stating that it did not have jurisdiction to hear the appeal as the trial court’s decree was not a final order. In
support of our finding, this C ourt no ted that there wa s nothing in the record to show that the trial court adjudica ted W ife’s
claim fo r alimony. As a re sult, this Court dism issed W ife’s app eal.

         W ife filed a Petition for Rehearing with this Court on March 24, 2003. The petition, unopposed by appellee,
acknowledged that Wife asked for alimony in her original complaint. However, despite her initial pleading, Wife cited
to an exc hange betw een the trial court and a ppe llant, documented in the trial transcript, where “it was stipulated
Appellant was no t seeking any rehabilitative or pe riodic alimo ny.” On this basis, W ife asked this Court to “remand the
issue of the alimony claim back to the Trial Court so that an appropriate Order might be entered in the Trial Court
adjudicating the claim for alimony based upon the stipulation of the p arties.”

           Soon thereafter, this Co urt entered an Ord er giving W ife thirty days in which to supplement her petition with
a trial court order adjudicating her claim fo r alimony. W ife supp lemented her petition in compliance with this Court’s
Order on April 8, 2003. Attached to her petition was a Consent Order Amending Final Decree of Absolute Divorce, filed
in the trial court, stating that the court’s M ay 2, 2003 decree “sho uld be amended to add that Plaintiff was not awarded
any alimony by the trial court.” The following day, this Court entered an Order vacating its March 12, 2 003 Ord er in
its entirety.

          10
             The dissipation argument asserted in Wife’s Complaint is premised on appellant’s allegation that Husband
“gave, conveyed and otherwise transferred substantial property and funds [to Payne] which far exceeded a quarter o f a
million dollars, which funds were, in fact, marital property and/or property o f anothe r,” thereby constituting a dissipation
of the parties’ marital assets.

                                                               -5-
        Husband filed a Motion to Stay Divorce Proceedings in the trial court on February 23, 2001.
As the basis for his motion, Husband asserted that he was at that time a target of a federal criminal
investigation. In support of this motion, Husband filed the Affidavit of Kemper B. Durand, his
attorney in the criminal matter. Mr. Durand averred that he advised Husband not to answer any
questions posed in the course of a civil proceeding that “could be the subject of the criminal
investigation or subsequent charges.”

        On June 8, 2001, Husband filed an Answer and Counter-Complaint. In his Answer, Husband
admitted Wife’s alleged grounds for divorce, and further acknowledged his extramarital relationship
with Ms. Payne. Husband moreover admitted “transferring some property” to Ms. Payne, but did
not admit to the monetary value of the property transferred. Husband thereby asked the court to
grant a divorce on the grounds of irreconcilable differences. In the event that the parties could not
reach a marital dissolution agreement, Husband asked that he be allowed to proceed with his
Counter-Complaint which sought a divorce on the grounds alternatively, of inappropriate marital
conduct.

       A non-jury trial was held from February 25, 2002 through February 26, 2002.11 Prior to trial,
Wife filed an Affidavit of Income, Expenses, Assets, and Liabilities and a Memorandum.12
Husband, in turn, also filed a Rule 14(D) Memorandum. A Final Decree of Absolute Divorce was
entered in the trial court on May 2, 2002. In its Order, the court declared the parties divorced
pursuant to T.C.A. § 36-4-129, and, regarding division of marital property, stated:

                          The marital property shall be valued as set out below, and the
                  Court finds the total value of the marital estate is Three Million Seven
                  Hundred Thirty-Eight Thousand Eight Hundred Fifty-Four Dollars
                  and Sixteen Cents ($3,738,854.16). The marital property shall be
                  divided equally, but wife shall receive an additional Five Hundred
                  Thirty-Three Thousand One Hundred Forty-Five Dollars and
                  Seventy-Four Cents ($533,145.74) because of Husband’s dissipation
                  of marital assets in that amount. In summary, Wife shall receive Two
                  Million One Hundred Thirty-Five Thousand Nine Hundred Ninety-
                  Nine Dollars and Ninety-Five Cents ($2,135,999.95) of the marital
                  property more specifically set out below and Husband shall receive
                  One Million Six Hundred Two Thousand Eight Hundred Fifty-Four
                  Dollars and Twenty-One Cents ($1,602,854.21) of the marital
                  property as described below.

        11
           Husband moved for a continuance on the ground that he would be prej udice d by th e pending criminal
proceedings but the trial court denied.

        12
            These docum ents are required by Rules of Practice and Procedure 14 (c) and 14 (d), Circuit Court for the
Thirtieth Judicial D istrict at Memphis.

                                                        -6-
              ******************************************************

                      The Court finds that Wife did not dissipate any marital assets
              and the Court further finds no further dissipation of marital assets by
              Husband other than the Five Hundred Thirty-Three Thousand One
              Hundred Forty-Five and Seventy-Four Cents ($533,145.74) referred
              to herein above.

        Although the court did not specifically detail in its Final Decree how it arrived at the
dissipation total of $533,145.74, the trial judge’s commented from the bench:

                      All right. I think that the dissipation numbers that I gave you
              as far as the issues with Mrs. Payne – or Ms. Payne – are the correct
              numbers. And those numbers being the 440,233.97 that’s on Exhibit
              27 [Agreed Dissipation List].

                       The Court further finds that 85,298 dollars and 48 cents worth
               of jewelry was purchased for Ms. Payne, and I think I’ve gone
               through the recitation of how I came up with that number, but I’ll do
               it again just so we have everything right in the record.

               ******************************************************

                       Further, I think that there is an additional dissipation of 7,613
               dollars and 28 cents. I went through Exhibit 11 previously, and I told
               you how I arrived at that number, and going through the various
               items, broke down exactly how I came up with the number, but the
               number is 7,613.28.

The court further noted:

                       The real issue for me is whether or not then to add the
               $207,277.50 in attorney fees that were paid in connection with the
               civil suit to the dissipation. And I find that the civil – preparation for
               defense of and settlement of the civil suit was something Ms. Earley
               knew about all along.

                       It is certainly not a commendable course of action that gave
               rise to the civil case, but I don’t think that it amounts to legal
               dissipation, so I’m not going to include the $207,277.50 in the
               dissipation figure. Therefore, the figure I come up with for the
               amount that was dissipated is 533,145 dollars and 74 cents
               [$533,145.74].

                                                  -7-
The record reflects that the court did not factor Husband’s ten percent interest in Hewson-Memphis
Partnership, the $4,000,000.00 payment to Williams-Sonoma pursuant to the Settlement Agreement,
and the above noted attorney fees into the dissipation total.13

         Wife appeals, presenting the following issue for review, as stated in appellant’s brief:

                  Did the trial court err in holding that the Four Million Dollar
                  ($4,000,000.00) return of compensation to Williams-Sonoma, the
                  donation of Mr. Earley’s ten percent (10%) interest in Hewson-
                  Memphis Partnership to charity valued at Two Million, One Hundred
                  Eighty Seven Thousand ($2,187,000.00), and the attorney’s fees spent
                  by Mr. Early in his defense of the Williams-Sonoma lawsuit totaling
                  Two Hundred Thirty-Three Thousand, Eight Hundred Nineteen
                  Dollars and Fourteen Cents ($233,819.14) were not a dissipation of
                  marital assets?

       Since this case was tried by the court sitting without a jury, we review the case de novo upon
the record with a presumption of correctness of the findings of fact by the trial court. Unless the
evidence preponderates against the findings, we must affirm, absent error of law. See Tenn. R. App.
P. 13(d).

        Although there is a presumption that marital property is owned equally, there is no
presumption that marital property should be divided equally. Bookout v. Bookout, 954 S.W.2d 730,
31 (Tenn. Ct. App. 1997). Thus, an equitable division of the marital property need not be an equal
division of the property. Id. A trial court is afforded wide discretion when dividing the marital
property, and its distribution will be given “great weight” on appeal. Ford v. Ford, 952 S.W.2d 824,
25 (Tenn. Ct. App. 1997). Guidelines for the equitable division of marital property are set forth in
T.C.A. § 36-4-121 (c) (Supp. 2002). Among the factors to be considered by the court in making an
equitable division of marital property is 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.” See T.C.A. § 36-4-121(c)(5) (Supp. 2002) (emphasis added).

       This Court set forth the standard for determining whether a party to a divorce action is guilty
of dissipating marital assets in Ward v. Ward, No. W2001-01078-COA-R3-CV, 2002 WL
31845229, at *3 (Tenn. Ct. App. Dec. 19, 2002). We quote at length from the Ward decision:

         13
            Exhibit 11 includes a “Dissipation of Marital Assets” list compiled by Wife with regard to her allegations
of dissipation against Husband. Included in this list is the $4,000,000.00 wire transfer from Husband to W illiams-
Sonoma, Husband’s ten p ercen t interest in the Hewson-Memp his Partnership valued by Wife at $2,187,000 .00, and
various fees advanced by Husband to Armstrong Allen for payment of legal services rendered in the Williams-Sonoma
litigation.

                                                         -8-
                          The court notes dissipation is not defined in [T.C.A. § 36-4-
                  12(c)]. In such circumstances, courts must look to the plain language
                  of the statute and apply the ordinary meaning of the words. Cohen
                  v. Cohen, 937 S.W.2d 823, 827 (Tenn. Ct. App. 1996). “Dissipate”
                  is defined “[t]o destroy or waste, as to expend funds foolishly.”
                  Black’s Law Dictionary 473 (6th ed.1990). This Court finds
                  instructive an article by Lee R. Russ examining how courts around
                  the country have dealt with the difficult task of making the fine-line
                  distinction between dissipation and discretionary spending. See Lee
                  R. Russ, Annotation, Spouse’s Dissipation of Marital Assets Prior
                  to Divorce as a Factor in Divorce Court’s Determination of
                  Property Division, 41 A.L.R. 4th 416 (1985). Trial courts must
                  distinguish between what marital expenditures are wasteful and
                  self-serving and those which may be ill-advised but not so far
                  removed from “normal” expenditures occurring previously within the
                  marital relationship to render them destructive.

                          In determining whether dissipation occurred, we find trial
                  courts should consider the following: (1) whether the evidence
                  presented at trial supports the alleged purpose of the various
                  expenditures, and if so, (2) whether the alleged purpose equates to
                  dissipation under the circumstances. Id. at 420-421. The first prong
                  is an objective test. To satisfy this test, the dissipating spouse can
                  bring forward evidence, such as receipts, vouchers, claims, or other
                  similar evidence that independently support the purpose as alleged.
                  The second prong requires the court to make an equitable
                  determination based upon a number of factors. Those factors include:
                  (1) the typicality of the expenditure to this marriage; (2) the
                  benefactor of the expenditure, namely, whether it primarily benefitted
                  the marriage or primarily benefitted the sole dissipating spouse; (3)
                  the proximity of the expenditure to the breakdown of the marital
                  relationship; (4) the amount of the expenditure. Id. at 421.

Ward v. Ward, No. W2001-01078-COA-R3-CV, 2002 WL 31845229, at *3 (Tenn. Ct. App. Dec.
19, 2002).

        Specifically, Wife contends that the trial court erred in finding that the following did not
constitute a dissipation of marital assets: (1) the $4,000,000.00 payment and charitable gift of the
Hewson-Memphis partnership made by Husband pursuant to the Williams-Sonoma settlement
agreement; and (2) the $233.819.1414 in attorney’s fees incurred and paid by Husband for
representation in the Williams-Sonoma civil lawsuit.

       14
            The trial court calculated Husband’s attorney’s fees at $207,277.50.

                                                         -9-
        Applying the standard set forth in Ward, we first consider whether the $4,000,000.00
payment and charitable gift made by Husband pursuant to the settlement agreement amounted to a
dissipation of marital assets, thereby entitling Wife to an additional award of marital property. The
parties do not dispute that Husband’s $4,000,000.00 payment and charitable gift were relinquished
for the purpose of satisfying the conditions of the settlement agreement. Therefore, we proceed to
the second prong of the Ward analysis, and consider whether Husband’s payment and gift constituted
a dissipation of marital assets in light of the four factors introduced by the Ward court.

         Under the first factor, we find that Husband’s payment and charitable gift were not
expenditures typical to the parties’ marriage. Although Husband was the subject of a separate but
related criminal investigation at the time of the trial in this matter, there is no evidence that payment
of civil or criminal penalties, settlement agreements, or lawsuits was typical to the marriage.

       With regard to the second factor, Wife contends that the expenditures made by Husband in
accordance with the settlement agreement were made solely for Husband’s benefit. In reaching this
conclusion, Wife notes that she was never a party to the Williams-Sonoma lawsuit and further
suggests that she did not benefit “from the acts complained of by Williams-Sonoma against
[Husband] and Ms. Payne in the Complaint for Damages alleging rescission of contract, conversion,
money had and received, fraud, conspiracy to defraud, unjust enrichment, and breach of fiduciary
duty.”

        We disagree with Wife’s assertion that she did not benefit from Husband’s payment and gift
under the settlement agreement. Recognizing that Wife was not a party to the lawsuit, nor was she
directly or indirectly involved with the underlying wrongful conduct, the evidence is nonetheless
undisputed that Wife knew of Husband’s involvement in Pro Trans and further received significant
financial benefits as a result of Husband’s business venture and his lucrative employment with
Williams-Sonoma. According to his business arrangement with Bill Norris, Husband received a fifty
percent share of Pro Trans’s annual profits. Husband testified that the profit total varied, but
acknowledged that his annual share totaled more than $200,000.00 on at least one occasion.15
Moreover, there is no evidence in the record, aside from payments and gifts made in accordance with
the settlement agreement, that Husband’s involvement in Pro Trans resulted in financial loss to his
family.

        Husband offered unrefuted testimony that his family benefitted financially from his
involvement in Pro Trans. Husband testified that Pro Trans allowed his family to maintain a
privileged lifestyle, as profits from the business funded racquet club memberships, cars for the
parties’ children, and provided extra family income. Additionally, because Wife was not employed

        15
             When questioned about his annual profit share in Pro Trans, Husband testified:

                            [I]n our early years – som e of the e arly years, we did n’t have but a little
                   profit. But as we grew, the profits went from anywhere – my share, from [$]90,000
                   to up ove r [$]200,000 in our better years.

                                                           -10-
outside of the home, Husband’s compensation from Williams-Sonoma and his profit share from Pro
Trans provided the only income for the parties’ family.

        Having found that Wife directly benefitted from the business venture that led to the breach
of fiduciary duty claim upon which the settlement agreement was based, we also find that Wife
benefitted from and consented to the expenditures made pursuant to the settlement agreement.
Finalized on December 10, 1999, the Williams-Sonoma settlement agreement provided that the
entire $4,000,000.00 payment be allocated to the corporation’s ninth cause of action for Unjust
Enrichment and Breach of Fiduciary Duty, stemming from Husband’s involvement in Pro Trans.
As such, no part of the $4,000,000.00 was assigned to any of the corporation’s other eight claims
against Husband. Husband asserts that Wife benefitted from the settlement agreement expenditures
as said expenditures helped to preserve the parties’ estate.16 We are inclined to agree.

       Entered as an exhibit at trial, Williams-Sonoma’s First Amended Complaint sought punitive
and exemplary damages as to five of the eight causes of action levied against Husband. The
corporation’s First Amended Complaint also sought compensatory damages on each of the eight
claims in excess of $500,000.00. In its amendment to this First Amended Complaint, Williams-
Sonoma added claims for compensatory, punitive, and exemplary damages based on Husband’s
breach of fiduciary duty, resulting from his involvement with Pro Trans.

        Considering the corporation’s multiple claims for damages, both compensatory and punitive,
we find that it is entirely possible that the Williams-Sonoma litigation, had it proceeded to trial,
could have depleted the parties’ estate by more than the amount settled upon by the parties.
Moreover, Husband and Wife’s willingness to settle appears to indicate an acknowledgment that a
trial of the Williams-Sonoma suit could have proven even more costly to the Earley family.
Furthermore, we note that the parties satisfied the $4,000,000.00 payment required by the settlement
agreement in its entirety by “paying back” Williams-Sonoma stock options. As such, the parties
acted in full compliance with the settlement agreement without further depleting marital funds or
being forced to sell the marital home or any other substantial marital assets. For these reasons, we
are persuaded that the expenditures made in accordance with the settlement agreement provided
insurance against further depletion of the parties’ estate, thereby constituting a benefit to the
marriage, and not just Husband as the “dissipating” spouse.

        Finally, with regard to the second Ward factor, we note that Wife affixed her signature to the
settlement agreement, thereby authorizing and consenting to the expenditures made in accordance
thereto. The fact that Wife was required to sign the settlement agreement indicates to this Court that
Wife had a significant interest in the resolution of the Williams-Sonoma suit. Therefore, we are
unable to conclude that the expenditures made pursuant to the settlement agreement, especially in
light of Wife’s signature authorizing and consenting to such expenditures, were not made for the
primary purpose of benefitting the parties’ marriage.

         16
             W ife’s reply b rief recognizes that settlement of the controversy with Williams-Sonoma prevented greater
liability and loss of marital assets.

                                                        -11-
         The third factor in Ward requires a court to consider the proximity of the expenditures to the
breakdown of the marital relationship. It is undisputed that Husband began an extramarital affair
with Ms. Payne in 1993. Husband’s on-again-off-again relationship with Ms. Payne continued
through December 10, 1999, the date of the settlement agreement, and was still intact at the time
of trial in this matter. From the record, it is apparent that Wife was aware of Husband’s marital
indiscretions years prior to the settlement agreement.

         The record indicates that Husband and Wife were still living together at the time of the
settlement agreement and expenditures. Wife testified that the parties were attempting to reconcile
at the time of settlement.17 Husband acknowledged that the parties were attempting to reconcile at
the time of the settlement, and added that they attended church and counseling sessions together in
an effort to mend their marital relationship.

        Wife offered conflicting testimony as to whether she had entertained thoughts of divorce
prior to meeting with her attorney, Mr. Lathram. Wife conceded, however, that she never discussed
or considered discussing the possibility of divorce in her meeting with Mr. Lathram. Wife did not
file her Complaint for divorce until June 12, 2000, approximately six months after the Williams-
Sonoma lawsuit was settled, and several years after first learning of Husband’s affair.

       17
            On cross examination, Husband’s counsel questioned Wife as to the steps taken b y the parties to reconcile:

                           Q: All right. All right, Ms. Earley. And you and your husband were
                  actually in counseling for probably a year or two before the Williams-Sonoma
                  lawsuit, were you not?

                           A: Yes.

                            Q: And during that counseling, your husband acknowledged that he had
                  an affair with Bo bbye Payne; correct?

                           A: Yes.

                          Q: And you and your husband attempted through counseling and other
                  means to try to w ork o ut your relationship; co rrect?

                           A: Yes.

                           Q: And once again, that continued through the Williams-Sonoma lawsuit,
                  as you all were together during that law suit up to the time it wa s settled; correct?

                           A: Yes.

                           Q: A nd then you stayed together for som e time after that?

                           A: Yes.

                                                          -12-
        While it is apparent that the parties’ marital relationship began to break down the moment
Husband began his affair with Ms. Payne, we are unable to make a finding of dissipation based on
this factor in light of the particular facts of this case. We find no evidence that the expenditures
mandated by the settlement agreement were motivated by or related to the breakdown of the parties’
marriage. We are further convinced that Husband’s involvement in Pro Trans was premised solely
on Husband’s concern for his own financial stability, and that of his family. While we do not find
that dissipation requires an intent to dissipate, we are unwilling to find that the expenditures made
by Husband in an effort to preserve the greater part of the marital estate while attempting to save the
marriage constitutes dissipation of marital assets. Concerning the third Ward factor, we note
Husband’s reliance on the decision of the Illinois Supreme Court in In Re Marriage of O’Neill, 563
N.E.2d 494 (Ill. 1990), where the Court construed the Illinois statute dealing with distribution of
marital property requiring that, among other things, dissipation of assets by each party is a factor to
be considered in distributing marital property. This statute is similar to the Tennessee statute dealing
with the same subject. In O’Neill, the Court stated:

                        We therefore hold that the term “dissipation,” as used in
                section 503 (d)(1) of the Illinois Marriage and Dissolution of
                Marriage Act, refers to the “use of marital property for the sole
                benefit of one of the spouses for a purpose unrelated to the marriage
                at a time that the marriage is undergoing an irreconcilable
                breakdown.”

Id. at 498-99 (citations omitted).

        Husband asserts that the evidence in the record preponderates against a finding that the
parties’ marriage was undergoing an irreconcilable breakdown, citing to evidence that the parties
were still living together at the time of the settlement agreement expenditures, were participating in
marriage counseling, and even attended church together. While we find that the evidence relied upon
by Husband strongly suggests that the parties were putting forth every effort to reconcile at the time
of the settlement agreement expenditures, we are unwilling to adopt the definition set forth by the
Illinois Supreme Court requiring a finding of an irreconcilable breakdown. Ward sets forth no
requirement of irreconcilability, and we find no case law in Tennessee explicitly providing for such
requirement.

        The final Ward factor requires a reviewing court to consider the total amount of the
expenditure(s) in determining whether said expenditure(s) constituted a dissipation of marital assets.
It is undisputed that Husband made a $4,000,000.00 payment to Williams-Sonoma in accordance
with the settlement agreement. Although the parties offered conflicting testimony as to the purported
value of the Hewson-Memphis Partnership, it is apparent from the record that the partnership
represented a substantial financial worth to the parties. However, in recognizing the substantial
value of the parties’ marital estate, and considering the fact that the payments made by Husband to
Williams-Sonoma represented less than fifty percent of the parties’ total estate, we find that the

                                                 -13-
payments, under the circumstances of this particular case, were not so as to require or suggest a
finding of dissipation.

         In weighing the Ward factors, as they apply to the facts in this case, we find that the
$4,000,000.00 expenditure and charitable gift made by Husband pursuant to the settlement
agreement do not constitute a dissipation of marital assets. We premise our decision specifically
upon our findings with regard to the second, third, and fourth factors set forth in Ward. Having
found that Wife directly benefitted from the expenditures, and that said expenditures were not related
to or the product of the breakdown of the parties’ marital relationship, we are unable to conclude that
these expenditures were a dissipation of marital assets.

       The final issue presented for review before this Court is the question of whether the
attorney’s fees incurred and paid by Husband in exchange for services rendered in the Williams-
Sonoma civil lawsuit constitute a dissipation of marital assets. In his ruling from the bench denying
Wife’s claim for inclusion of the Williams-Sonoma attorney’s fees in the dissipation total, the trial
judge stated:

                       The real issue for me is whether or not then to add the
               $207,277.50 in attorney fees that were paid in connection with the
               civil suit to the dissipation. And I find that the civil – preparation for
               defense of and settlement of the civil suit was something Ms. Earley
               knew about all along.

                       It is certainly not a commendable course of action that gave
               rise to the civil case, but I don’t think that it amounts to legal
               dissipation, so I’m not going to include the $207,277.50 in the
               dissipation figure. Therefore, the figure I come up with for the
               amount that was dissipated is [$533,145.74].

        Wife asserts that the trial court erred in refusing to include Husband’s attorney’s fees in the
dissipation total. In presenting this argument, Wife relies heavily on a footnote contained in the case
of Pennington v. Pennington, No. W2000-00568-COA-R3-CV, 2001 WL 277993 (Tenn. Ct. App.
Mar. 14, 2001). In Pennington, a divorce case involving child support and marital property issues,
Mr. Pennington was a former doctor who had been arrested and convicted several times for drug-
related offenses, including possession of cocaine and illegally writing prescriptions for controlled
substances. Id. at *1. Mrs. Pennington filed for and was awarded an absolute divorce on the
grounds of inappropriate marital conduct and adultery. Id. at *1-2. In dividing the parties’ marital
property, the court considered evidence of the husband’s dissipation of marital assets. Id. at *2. The
appellate court included the following footnote with regard to the trial court’s findings as to
dissipation:

                       The trial court cited the following as examples of Mr.
               Pennington’s dissipation of assets: (1) $3,200 in attorney’s fees for
               one of the women with whom Mr. Pennington was having an affair,

                                                 -14-
                 and (2) thousands of dollars in attorney’s fees for Mr. Pennington’s
                 various legal infractions.

Id. at *2 n.6.

The appellate court made no other reference and engaged in no further analysis of Mr. Pennington’s
alleged dissipation.

         Based on our reading of Pennington, and in consideration of the factors set forth in Ward,
we find that the attorney’s fees incurred by Husband, under the specific facts of this case, do not
constitute a dissipation of marital assets. Addressing first Wife’s assertion that Pennington requires
a finding of dissipation, we note that the issue of dissipation was not before or considered by the
Pennington court. Further, the appellate court did not provide a sufficient factual background with
regard to the legal charges for which Mr. Pennington incurred “thousands of dollars in attorney’s
fees,” thereby preventing us from accurately comparing and/or analogizing Pennington with this
particular case. Finally, we note that the legal infractions referred to in Pennington appear to be
strictly criminal in nature. In contrast, the nine counts listed in Williams-Sonoma’s complaint, and
specifically the corporation’s action for breach of fiduciary duty, were initiated as part of a civil
lawsuit. We are unwilling to interpret or apply Pennington as a blanket rule that attorney’s fees
incurred in a civil lawsuit, by and as a result of the legal indiscretions of a single party to the marital
relationship, necessarily constitute a dissipation of marital assets.

        Applying the factors set forth in Ward, we reiterate our finding that the attorney’s fees
incurred by Husband do not constitute a dissipation of marital property. With regard to factor two,
whether the expenditure “primarily benefitted the marriage or primarily benefitted the sole
dissipating spouse,” we note that the attorney’s fees at issue in this case were incurred solely for
Husband’s defense in the Williams-Sonoma lawsuit. Although the fees were incurred for Husband’s
defense, Wife also benefitted from this expenditure when considering that the parties, both Husband
and Wife, were able to reach a settlement agreement in a lawsuit that could have resulted in a
substantially greater financial loss to the parties’ estate. We reiterate that Husband’s involvement
in Pro Trans was premised on a desire to increase the financial resources of his family. As for the
expenditures made and fees incurred as a result of the settlement agreement and lawsuit, we find that
all such expenditures and fees were paid for the purpose of preserving the marital estate. Moreover,
we find that Wife admitted that she knew Husband had retained counsel to represent him in the
Williams-Sonoma litigation, and authorized and consented to the terms of the settlement agreement
by affixing her signature. Because Husband was the sole financial provider for the family, it is
unlikely that Wife was unaware that marital funds were being used to secure representation in the
Williams-Sonoma lawsuit.

        The evidence in the record does not preponderate against the trial court’s finding that the
attorney’s fees paid by Husband in connection with the Williams-Sonoma lawsuit and the settlement
thereof do not constitute a dissipation of marital property.

                                                   -15-
       The decree of the trial court is affirmed and the case is remanded for such further proceedings
as necessary. Costs of this appeal are assessed against Kathleen Anne Earley and her sureties.

                                               __________________________________________
                                               W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.

                                                -16-