Court Opinion

ID: 1055202
Source: CourtListenerOpinion
Date Created: 2013-10-08 20:55:40.056111+00
Date Added: 2024-06-11T12:39:43.729226
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                                 AT NASHVILLE
                                          September 9, 2004 Session

          DEBORAH LYNN (KATZ) SMITH v. STEVEN WHITE SMITH

                            Appeal from the Circuit Court for Sumner County
                                  No. 23862-C     C. L. Rogers, Judge

                       No. M2003-02242-COA-R3-CV Filed September 20, 2004

Wife appeals the trial court’s distribution of marital property as inequitable in view of her
contribution to the acquisition of the only significant asset, the marital home. The trial court clearly
recognized that without Wife’s contribution from her separate property, the parties would have been
unable to buy the house. We modify the trial court’s award of the equity in the house and affirm as
modified.

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

PATRICIA J. COTTRELL, J., delivered the opinion of the court, in which WILLIAM C. KOCH , JR., P.J.,
M.S., and FRANK G. CLEMENT , JR., J., joined.

Michael W. Edwards, Russell E. Edwards, Hendersonville, Tennessee, for the appellant, Deborah
Lynn (Katz) Smith.

Roger A. Sindle, Hendersonville, Tennessee, for the appellee, Steven White Smith.

                                                       OPINION

        The sole issue in this appeal is the trial court’s distribution of the parties’ property upon their
divorce. More specifically, the wife appeals the trial court’s decision regarding only one asset, the
marital home, which was the primary asset.1

         1
           Of course, courts are required to equitably divide the entire marital estate, and the distribution of the rest of
the marital property generally affects the equity of the distribution of any one asset. Nonetheless, the parties have assured
this court that the other assets are minimal compared to the house at issue. At trial, both agreed that the only significant
asset of either party was his or her interest in the marital home. Additionally, neither party has asserted that distribution
of other marital property was inequitable. Therefore, we will review the trial court’s division of the equity in and debts
on the marital home as though it were the entire marital estate.
        The parties, Deborah Smith (Wife) and Steven Smith (Husband) were married March 28,
1999. This marriage took place two months after Wife’s divorce from her prior husband. As part
of that earlier divorce, Wife was awarded $68,758 as equity in that couple’s marital home and a
$100,000 cash award to be paid in forty-eight (48) monthly installments of $2,536.26.

       In June of 1999, Husband and Wife agreed to purchase the house at issue from Husband’s
parents using Wife’s money from the property distribution in her prior divorce. They bought the
house for $200,000, giving the sellers $68,508 as a down payment and agreeing to pay $2,500 per
month to pay off the remainder interest-free. Both the down payment and the monthly payments
were to come from Wife’s separate assets. The house was deeded to both parties jointly.

        The monthly payments were made for forty-seven months, totaling $117,5002 as of the date
of the hearing. During the marriage, the parties borrowed money from Bank of America which was
secured by a second mortgage on the house. The balance owing on the second mortgage as of the
hearing was $42,757.77. Wife agreed that $30,000 of the loan was her debt solely since it was used
to help Wife’s mother pay off bankruptcy debt. The parties also had a third mortgage on the house
that secured a line of credit that had a balance of $50,284.61.

        The divorce was initiated by a complaint filed on February 19, 2003. The hearing was held
July 9, 2003, and the final order was entered July 18, 2003 and was amended, after motion, on
August 1, 2003.

        The trial court valued the house at $239,000, which was within the range testified to by the
parties. The court deducted the outstanding mortgages. Out of the remaining equity, the court
awarded Wife $68,000 as reimbursement for the down payment she made and then divided the rest
equally. The court awarded the house to Wife, subject to the mortgages, and ordered her to pay
Husband his half of the equity. On appeal, Wife argues she should also have been awarded out of
the equity the $117,500 of her money that was paid in monthly payments on the house.

        The trial court held that Wife’s separate property used for the down payment had transmuted
into marital property because, after seeking legal advice, she still agreed to title the property to both
parties. The court also stated the parties agreed that transmutation had occurred. However, the trial
court held that the monthly payments were all made from Wife’s separate property and did not
transmute into marital property because Wife had no intent to gift Husband with those payments.
“She simply was paying on the house that he had an interest in.” Of course, if that money remained
Wife’s separate property, it was not subject to distribution as part of the marital property. Tenn.
Code Ann. § 36-4-121(a)(1).

         2
          The trial court calculated the total payments made at approximately $90,000; W ife uses the $117,500 figure
and specifically requests that she be awarded that amount as reimbursement. Because neither the trial court’s resolution
nor ours depends on the amount actually paid, there is no need to reconcile this apparent discrepancy.

                                                          -2-
        On appeal, as well as in closing argument at trial, Wife does not assert that either the down
payment or the monthly payments remained her separate property. Instead, she admits that both
should be classified as marital property in accordance with Batson v. Batson, 769 S.W.2d 849 (Tenn.
Ct. App. 1988). However, she argues that the trial court’s division of the equity in the house was
inequitable because she made all the payments out of her separate property.

        Once the court identifies the marital property, it is to divide or distribute it in “proportions
as the court deems just.” Tenn. Code Ann. § 36-4-121(a)(1). That distribution “is not achieved by
a mechanical application of the statutory factors, but rather by considering and weighing the most
relevant factors in light of the unique facts of the case.” Batson, 769 S.W.2d at 859. Equity does
not require an equal distribution. Word v. Word, 937 S.W.2d 931, 933 (Tenn. Ct. App. 1996).
Among the factors to be considered are those listed in Tenn. Code Ann. § 36-4-121(c), including the
duration of the marriage, the estate of each party at the time of the marriage, the contributions of each
spouse to the acquisition, preservation, appreciation, or dissipation of marital property, and “such
other factors as are necessary to consider the equities between the parties.”

        Based on these factors, our courts have established the principle that in marriages of short
duration, “it is appropriate to divide the property in a way that, as nearly as possible, places the
parties in the same position they would have been in had the marriage never taken place.” Batson,
769 S.W.2d at 859. In such marriages, each spouse’s contribution to the accumulation of assets is
an important factor.

       The trial court herein made a number of factual findings relevant to the issue before us,
including that it was a marriage of three to four years; that Wife made the down payment on the
house from her separate funds; and that the parties had no other sources of funds or means. Further,

        Based on what I understand their incomes were and holdings at the time, it would
        have been absolutely impossible to have that down payment from any other source.
        The wife from her own separate funds has paid each and every mortgage payment,
        approximately $90,000, since June of 1999.

        Based on what the Court was shown as far as income of the parties, there’s absolutely
        no way in the world these parties could have paid $2,500 a month without the wife’s
        separate funds being used to pay it.

        At the time of the marriage I’m shown the husband had some cash and vehicles,
        certainly nowhere near the amount of assets the wife had based on her recent divorce
        and awards that she received in that divorce. The husband was made able to allow
        to even quit a job that he hated and look for other employment because the wife had
        the ability to get him in the house and make the house payment and he looked around
        for something else he enjoyed because of her concessions.

                                                  -3-
         From the testimony it’s clear to me that the husband had some funds coming into the
         marriage and some vehicles I’m not familiar with. . . . But they were sold for
         substantial monies, but rather than using this to pay on the balance due on the house,
         the money appeared to be used mostly for vehicles for the husband’s use. No real
         contribution other than a $7,500 fence and some split equity.

         . . . it is a special circumstance that the wife, totally the wife, made available this
         house for these individuals to live in during their brief marriage. It wouldn’t have
         happened without it.

         The evidence does not preponderate against the trial court’s findings of fact. Applying those
facts to the factors that must be considered in making an equitable division of property, we conclude
that Wife’s share of the equity remaining in the house should be increased to more closely reflect her
contribution to the house, the only significant marital asset.3 Both Husband and Wife contributed
to other marital expenses, but, as the trial court found, Wife used her separate funds, acquired before
the marriage, to provide the couple a home they could not otherwise have afforded.

         Using the trial court’s methodology, we calculate the net marital property subject to division,
i.e., the equity in the house, as follows:

                            $239,000.00 -               Value of house
                            $ 79,534.004 -              outstanding indebtedness (excluding
                                                        $30,000 debt assumed totally by Wife)
                            ___________
                            $159,466.00                 Net equity

         3
          As the trial court’s findings make clear, that court clearly considered W ife’s contribution of her separate
property to the acquisition of the house the only basis on which the couple could have bought it and kept it. The court
found this factor important in considering the equitable division of the equity in the house. Nonetheless, although the
court awarded W ife reimbursement of the amount of her down payment from the equity in the house, and although the
court determined the total monthly payments had remained W ife’s separate property, it did not award her that amount
from the equity, and, apparently, there were no other assets of sufficient value from which such funds could have been
awarded.

         4
           The figure used by the trial court, $75,543, is not an accurate total of the individual amounts of indebtedness
found by the court to exist: $16,492 to Husband’s parents; $42,757.77on second mortgage; $50,284.61on third mortgage;
minus $30,000 of debt assigned solely to W ife. The correct total is $79,534.38. W ife did not point out this anomaly,
but used figures in her tabulation that total $77,034.38. She used as the balance due the sellers $13,992, rather than the
$16,492 used by the trial court, a $2500 difference perhaps explained by one payment, but refers to an exhibit that
appears to put the amount due at $16,492. Neither party has challenged the total indebtedness figure used by the court,
but the error is apparent from the first order. Assuming it was due to a simple error in mathematics, we will use the trial
court’s findings as to the individual balances, but use the correct total of those balances.

                                                           -4-
         We do not agree with Wife that she should have been awarded an amount to reimburse her
for the total payments she made. That total, as calculated by Wife, together with the down payment,
would exceed the equity in the house. The courts can only distribute assets that exist. Besides, the
task before the court is to make an equitable division of the marital property, not to repay either
spouse exactly for amounts they may have contributed.

       While we have concluded that Wife’s provision of the money that allowed the parties to buy
and keep the house entitles her to a greater proportion of the remaining equity, we also conclude that
Husband made some contribution to the house and to its value.5 Under all the circumstances in this
case, we conclude that Wife is entitled to 85% of the net equity, or $135,546, and Husband is entitled
to 15% of the net equity, or $23,920.

       The trial court’s order is modified to reflect this distribution and is affirmed as modified.
Costs on appeal are to be divided equally between the parties.6

                                                                  ___________________________________
                                                                  PATRICIA J. COTTRELL, JUDGE

         5
             W e also note the loan from Husband’s parents was interest free.

         6
           Husband asked for an award of attorney’s fees for this appeal on the basis it was frivolous. Having granted
W ife relief, we cannot find her appeal was frivolous, and deny Husband’s request.

                                                           -5-