Court Opinion

ID: 1068927
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:31:57.845364+00
Date Added: 2024-06-11T15:31:57.214181
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                               AT KNOXVILLE
                                         August 22, 2002 Session

             KIMBERLY G. LEWIS (HARMON) v. TIMOTHY E. LEWIS

                          Appeal from the Circuit Court for Johnson County
                              No. 1862    G. Richard Johnson, Judge

                                       FILED DECEMBER 10, 2002

                                       No. E2002-00209-COA-R3-CV

        In this divorce case, Timothy E. Lewis (“Husband”) appeals the Trial Court’s decision,
arguing that it erred in classifying certain assets as marital rather than his separate property. Husband
asserts that “the failure of the Trial Court to properly characterize separate property versus marital
property [resulted in] an inequitable division of the parties’ assets.” We find that several of the
assets classified by the Trial Court as marital property should have been classified as Husband’s
separate property. We also find that a portion of the Husband’s credit card debt, which was incurred
during the marriage, should be assigned to Kimberly G. Harmon (“Wife”).1 We affirm the Trial
Court’s judgment in all other respects.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed in Part and
                           Modified in Part; Cause Remanded

HOUSTON M. GODDARD , P.J., delivered the opinion of the court, in which HERSCHEL P. FRANKS and
D. MICHAEL SWINEY, JJ., joined.

David W. Blankenship, Kingsport, for the Appellant, Timothy E. Lewis

Jeffrey P. Miles, Johnson City, for the Appellee, Kimberly G. Harmon

                                                    OPINION

        The parties were married on November 6, 1992. One child was born to their marriage on
September 9, 1997. Wife filed this action for divorce on May 3, 1999. On December 14, 1999 the
Trial Court granted each party a divorce from the other and reserved the issues of child custody and
support and division of marital property. On February 23, 2000, the Court entered a final order
setting child custody, support and visitation. A trial was conducted on May 8 and 9, 2001 on the

         1
         At the time o f the divo rce, W ife’s name was K imberly G. Lewis. She has since remarried and her name is now
Kimberly G. Harm on.
issues of classification and division of the parties’ property and debts, and the Trial Court entered
a final order and memorandum opinion resolving these issues on June 12, 2001.

       Husband appeals, raising the following issues as quoted from his brief:

               1. Did the Trial Court err in its characterization of property as
               between the divorcing parties and thus err in the distribution of the
               property to the respective parties?

               2. Did the Court abuse its discretion in ruling on issues of distribution
               of marital property, characterization of property and in distribution of
               marital debt?

       These issues cause us to focus on the provisions of T.C.A. 36-4-121, which provide in
relevant part as follows:

               (a)(1) In all actions for divorce or legal separation, the court having
               jurisdiction thereof may, upon request of either party, and prior to any
               determination as to whether it is appropriate to order the support and
               maintenance of one (1) party by the other, equitably divide, distribute
               or assign the marital property between the parties without regard to
               marital fault in proportions as the court deems just.
                                *              *               *
                (b) For purposes of this chapter:

               (1)(A) "Marital property" means all real and personal property, both
               tangible and intangible, acquired by either or both spouses during the
               course of the marriage up to the date of the final divorce hearing and
               owned by either or both spouses as of the date of filing of a complaint
               for divorce, except in the case of fraudulent conveyance in
               anticipation of filing, and including any property to which a right was
               acquired up to the date of the final divorce hearing, and valued as of
               a date as near as reasonably possible to the final divorce hearing date.
               . . .All marital property shall be valued as of a date as near as possible
               to the date of entry of the order finally dividing the marital property.

               (B) "Marital property" 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.

                                                  -2-
                               *             *                  *
                (2) "Separate property" means:

                (A) All real and personal property owned by a spouse before
                marriage, including, but not limited to, assets held in individual
                retirement accounts (IRAs) as that term is defined in the Internal
                Revenue Code of 1986, as amended;
                                *               *                *
                (C) Income from and appreciation of property owned by a spouse
                before marriage except when characterized as marital property under
                subdivision (b)(1);
                                *               *                *
                (c) In making equitable division of marital property, the court shall
                consider all relevant factors including:
                (1) The duration of the marriage;
                (2) The age, physical and mental health, vocational skills,
                employability, earning capacity, estate, financial liabilities and
                financial needs of each of the parties;
                (3) The tangible or intangible contribution by one (1) party to the
                education, training or increased earning power of the other party;
                (4) The relative ability of each party for future acquisitions of capital
                assets and income;
                (5) 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;
                (6) The value of the separate property of each party;
                (7) The estate of each party at the time of the marriage;
                (8) The economic circumstances of each party at the time the division
                of property is to become effective;
                (9) The tax consequences to each party, costs associated with the
                reasonably foreseeable sale of the asset, and other reasonably
                foreseeable expenses associated with the asset;
                (10) The amount of social security benefits available to each spouse;
                and
                (11) Such other factors as are necessary to consider the equities
                between the parties.

        In order to divide the property of divorcing parties in accordance with this statute, the trial
court is required to first classify the parties’ property as either separate or marital, and then it must
divide the marital property in an equitable manner. Dividing a marital estate “is not a mechanical

                                                  -3-
process but rather is guided by considering the factors in Tenn. Code Ann. § 36-4-121(c).” Kinard
v. Kinard, 986 S.W.2d 220 (Tenn. Ct. App. 1998). As this Court noted in Kinard,

               Trial judges have wide latitude in fashioning an equitable division of
               marital property, see Fisher v. Fisher, 648 S.W.2d 244, 246
               (Tenn.1983); Brown v. Brown, 913 S.W.2d at 168, and appellate
               courts accord great weight to a trial judge's division of marital
               property.     See Wilson v. Moore, 929 S.W.2d 367, 372
               (Tenn.Ct.App.1996); Edwards v. Edwards, 501 S.W.2d 283, 288
               (Tenn.Ct.App.1973). Thus, we will ordinarily defer to the trial
               judge's decision unless it is inconsistent with the factors in Tenn.Code
               Ann. § 36-4-121(c) or is not supported by a preponderance of the
               evidence. See Brown v. Brown, 913 S.W.2d at 168; Mahaffey v.
               Mahaffey, 775 S.W.2d 618, 622 (Tenn.Ct.App.1989); Hardin v.
               Hardin, 689 S.W.2d 152, 154 (Tenn.Ct.App.1983).

Kinard, 986 S.W.2d 220 at 230-31.

        The Husband argues on appeal that the Trial Court incorrectly classified certain assets as
marital instead of as his separate property. He asserts this argument regarding a certain parcel of real
estate referred to in the record as the Lewis-Oliver property. The Lewis-Oliver property consists of
approximately 15 acres purchased before the marriage by Husband and his partners, a Mr. and Mrs.
Oliver. The Trial Court found as follows regarding the Lewis-Oliver property:

               The [Husband] owns a one-half (½) interest, and the Olivers own a
               one-half (½) interest. The [Husband] and the Olivers developed the
               tract into a residential subdivision and improved it with division into
               lots, leveling of lots, paving of roads, guttering the roads, etc. . .The
               [Husband] and his partners sold, or have for sale, all lots in the tract,
               except two (2) lots. The [Husband] took Lot No. 10 in his name (after
               marriage) and his partners chose a lot. The [Wife and Husband]
               intended to build their dream home on Lot 10. [They] had floor plans
               and elevations drawn for their “dream house design” to be built on
               Lot 10.
                        Lot 10 is marital property. The [Husband] took title to Lot 10
               during the marriage. The Court finds that improvements to the lots
               were made during the marriage. Although the [Husband] and his
               partners purchased the tract before the parties’ marriage, the [Wife]
               made substantial contributions, including that of homemaker, parent,
               and wage earner. The [Wife] made further contributions by
               increasing the earning power of the [Husband] by paying the vast
               majority of all living and household expenses of the parties and their
               child.

                                                  -4-
The evidence does not preponderate against the Trial Court’s conclusion that Lot 10 of the Lewis-
Oliver property is marital property. This conclusion is supported by the Court’s finding that
Husband took title to Lot 10 during the marriage, and that the parties intended to build a new marital
residence on the property. The Court placed a value of $15,000.00 on Lot 10, awarded it to the
Husband, and ordered him to pay Wife $7,500.00 for her interest in the lot.

         The Trial Court did not classify the other lots of the Lewis-Oliver property. We find that the
other lots are Husband’s separate property. We also find that the record fully supports the Court’s
conclusion that Wife made substantial and material contributions to the preservation and
appreciation of the Lewis-Oliver property during the marriage. The Trial Court awarded the other
lots to the Husband. The Court did not place a specific value on the other lots of the Lewis-Oliver
property. The evidence presented to the Court supports a finding that the value of his interest in the
property is $30,000.00.

       The next piece of property at issue is a rental property referred to as the Shady Street
property. The Court found as follows regarding the Shady Street property:

               This property was owned by the [Husband] pre-marriage to [Wife].
               The property apparently consists of four (4) small rental offices on the
               top floor and a small apartment on the bottom floor. The [Wife]
               insists she has a marital interest in the property because she helped
               the [Husband] with the remodeling: tiled floors, mopped, swept,
               cleaned litter and debris, and helped tear down an old building on the
               property.
                               *               *              *
               In addition to the [Wife’s] work on this property as aforesaid, she
               made a contribution as a wage-earner, parent, homemaker, and
               payment of most of the parties’ and their child’s living and household
               expenses. This is marital property. The value of this property on the
               date of the parties’ divorce was about $40,000.00. The marital value
               is $40,000.00. This property is awarded to the [Husband].

In light of the Court’s finding that he owned it before the marriage, we agree with Husband that it
should have classified the Shady Street property as his separate property. The record supports a
finding that its appreciation in value during the marriage was marital property. In any event, as noted
above, the Court awarded the entire value of the property to the Husband, and we do not find it erred
in this disposition.

        Husband owns a business called Lewis Construction Company (“LCC”). He argues on
appeal that the Court should have classified all the assets of LCC as his separate property. These
assets include a real estate parcel of approximately five acres, a large metal building with high-top
garage doors for large vehicles, a single wide mobile home, a small wooden storage building, and
various pieces of construction equipment.

                                                 -5-
        At trial, the parties stipulated that the pre-marriage value of the land was $12,000.00, that the
value of the land and the improvements made after the marriage is $39,488.00, and that the value
of the mobile home is $6,000.00. They also stipulated that the mobile home was marital property.
The Trial Court found as follows:

                [Wife] insists that a portion of the [Husband’s] business is marital
                property. It appears that marital funds were used to purchase the
                mobile home located on the property. . .[Wife] testified that she did
                some of the businesses’ book-work; drove the [Husband] to job sites
                at night and shined the lights of the vehicle so the [Husband] could
                move equipment; and she recalled one instance when she drove a
                dump-truck for ten (10) hours a day for four (4) days. The [Husband]
                admitted that the [Wife] “. . .contributed some. . .” to the business by
                helping with the book-work, “occasionally” operating a dump-truck
                and “sometimes” driving the [Husband] to job site so he could drive
                equipment back to the business property.
                        The [Wife] made a substantial contribution to the business by
                her work as aforesaid, in addition to her contribution as a homemaker,
                parent, wage-earner, and payment of practically all of the parties’ and
                their child’s household and living expenses. The Court finds that
                Lewis Construction Company is a marital asset.

        Because Husband owned the real estate on which LCC operated prior to the marriage, we
agree with his argument that the Court should have classified the premarital value of the land as his
separate property. The parties stipulated that this value was $12,000.00. Although the fact that the
Wife made substantial contributions to the preservation and appreciation of LCC means that the
appreciation in LCC’s value during the marriage is marital property under T.C.A. 36-4-121(b)(1)(B),
it does not serve to convert Husband’s separate property into marital property.

        The Court found that the value of the construction equipment purchased during the marriage
was $100,100.00. Because this equipment was “acquired by either or both spouses during the course
of the marriage,” T.C.A. 36-4-121(b)(1)(A), the Court correctly classified it as marital property. The
Trial Court found and held that the net value of LCC’s assets was $145,488.00. The Court awarded
the assets of LCC to Husband and found that Wife’s marital interest in the business was $13,000.00,
which he ordered Husband to pay to Wife within sixty days. We find no error in the Court’s
disposition of LCC’s assets.

       At the time of the divorce, Husband had a credit card debt of approximately $106,000.00.
The Trial Court found that Husband should be solely responsible for its payment, and he argues that
the Court should have split the debt equally between the parties. The Court found as follows
regarding Husband’s credit card debt:

                                                  -6-
                This debt has been incurred by the [Husband] for about everything he
                has purchased in his business, as well as personal expenditures that
                did not benefit the [Wife]. The [Husband] used his credit cards for
                the parties’ honeymoon, to take the family out to eat, to pay his child
                support, to make the $23,000 down-payment on the parties’ home, to
                purchase and improve realty (Lewis/Green property and [Shady
                Street] office/apartment building), to make purchases for Lewis
                Construction, including large purchases for equipment, and the cost
                of improving the realty, to “live on” while the parties were separated,
                as well as other personal purchases. Very little or none of this debt
                was incurred on behalf of the [Wife] or the parties’ child.

        Courts must divide the parties’ marital debts in an equitable fashion. Kinard, 986 S.W.2d
220 (Tenn. Ct. App. 1998). Marital debts are “those debts incurred during the marriage for the joint
benefit of the parties. . .or those directly traceable to the acquisition of marital property.” Mondelli
v. Howard, 780 S.W.2d 769 (Tenn. Ct. App. 1989)(internal citation omitted). In equitably
distributing the marital debts, courts should consider (1) which party incurred the debt, (2) the
purpose of the debt, (3) which party benefitted from incurring the debt, and (4) which party is better
able to repay the debt. Mondelli, 780 S.W.2d at 773; Smith v. Smith, an unreported opinion of this
Court filed in Nashville on August 28, 2002. Courts should also consider the factors found at T.C.A.
36-4-121(c) in making this determination. Kinard, 986 S.W.2d 220.

        Husband testified that his credit card debt before the marriage was approximately $3,230.00.
The remainder of the credit card debt was incurred during the marriage, and the evidence shows that
most of it is traceable to the acquisition of marital property. In light of the Trial Court’s finding that
$23,000.00 of this debt was used to make a down payment on the marital residence, and that a
portion of it was incurred in spending “for the parties’ honeymoon, [and] to take the family out to
eat,” which finding is supported by the record, we find that the evidence preponderates against the
Court’s finding that “very little or none of this debt was incurred on behalf of the [Wife] or the
parties’ child.”

        This Court has noted on prior occasions that “[m]arital debts should, where possible, follow
their associated assets,” King v. King, 986 S.W.2d 216 (Tenn. Ct. App. 1998), and that “[m]arital
debts need not be divided in precisely the same manner as the marital assets, although they
frequently follow their related assets,” Kinard, 986 S.W.2d at 233. It is apparent from a review of
the evidence presented that the majority of the credit card debt was incurred for the purchase of
construction equipment for Husband’s business use. It therefore follows that the Husband, who was
awarded the assets of his construction business, should be responsible for the majority of the debt.
We find, however, that under the facts of this case, equity requires that the Wife be responsible for
a portion of the marital debt.

       The Trial Court awarded the marital residence to the Wife. We find that she should be
responsible for half of the down payment on the marital residence, an amount of $11,500.00. The

                                                   -7-
Trial Court also awarded Wife $13,000.00 as her interest in LCC, which amounts to 8.9 percent of
the total value of LCC as determined by the Court. Although there is no requirement that marital
debts and assets be allocated to the parties in directly proportional amounts, see Mondelli v. Howard,
780 S.W.2d 769 (Tenn. Ct. App. 1989), under the specific circumstances of this case, we find it
equitable for the Wife to be responsible for a similar proportion of the marital debt, an amount of
$8,123.00.2

      The Trial Court found as follows regarding certain personal loans from the Wife to the
Husband:

                  During the course of the marriage, the [Husband] “constantly” asked
                  the [Wife] for a personal “loan” or a “loan” for his business. The
                  [Wife] loaned the money to the [Husband] by check, credit card, and
                  “cash” ten (10) to fifteen (15) times, according to the [Husband’s]
                  testimony.
                          Exhibit 1 indicates that the [Wife] “loaned” the [Husband]
                  $11,650.00 from her personal credit card, plus loans evidenced by
                  checks totaling $520.00. . .and the sum of the cash loans is unknown.
                  The [Husband] testified that on September 17, 1992 (before the
                  parties’ marriage) he borrowed $15,862.50, at nine percent (9%)
                  interest per annum, from the [Wife] and on which he made one
                  principal and interest payment. . .leaving a balance of $15,000.00.
                  The [Husband] further testified that the [Wife] never demanded the
                  payment of this balance during their marriage and that she forgave
                  him the debt. The [Wife] denies forgiveness of this debt.
                          The Court finds that the [Wife] loaned the [Husband]
                  $11,650.00 during the marriage for the [Husband’s] business or
                  personal use. The [Wife] did not share in the use of these funds. The
                  [Husband] shall pay the [Wife] $11,650.00 within sixty (60) days of
                  the entry of this Memorandum Opinion and Final Decree. . .
                          The Court finds that the $15,000.00 debt is a personal
                  obligation of the [Husband] to the [Wife], as the same was incurred
                  pre-marriage and was used by the [Husband] for him personally, or
                  his business. The [Wife] did not share in the use of these funds. The
                  loan was in the nature of a demand repayment and the [Wife] made
                  the demand per her Rule 9 Statement. . .Pursuant to the [Husband’s]
                  testimony, the principal sum due is $15,000.00, with a simple nine
                  percent (9%) per annum interest from January 1, 1993 to June 1,
                  2001, which equals $10,125.00 in interest. The [Husband] shall pay

         2
          W e arrive at this figure based on the following calculation: $102,770 (marital debt on Husband’s credit card)
less $11,500 (one-half down payment on marital residence) equals $91,270, multiplied by 8.9%, yields an amount of
$8,123.03.

                                                          -8-
               the [Wife] the balance of this loan, the sum of $25,125.00, within
               sixty (60) days of the entry of this decree.

        On appeal, the Husband argues that the personal loan from Wife made before the marriage
“was a gift consummated during the marriage and there should be no repayment obligation.” The
question of whether the Wife “forgave” the loan or treated it as a gift is factually-driven, and on this
issue, as with most factual issues in this case, the parties’ testimony differs sharply. The Trial Court
made a specific finding that the Husband “has poor credibility.” Regarding the “loans” made during
the course of the marriage, we believe the Trial Court approached this issue in the context of
attempting to make an equitable division of the property, not in regard to the legal enforceability of
a loan made between spouses during a marriage. We find no error in the Court’s judgment and
disposition regarding the loans from Wife to Husband.

        The Husband takes issue with the following findings and ruling by the Trial Court regarding
certain medical expenses incurred during the marriage:

                The [Wife] insists that about $8,000.00 in uninsured debt was
                incurred by the parties during the [Wife’s] complicated and bed-
                ridden pregnancy and delivery of twin sons (one died). The [Wife]
                further insists that the [Husband] has never “paid a penny” on these
                debts and there was about a $2,600.00 balance due on these debts as
                of the date of the divorce. The [Husband] shall pay $2,600.00 to the
                [Wife] as his share of child-related medical expenses within sixty
                (60) days of the entry of this decree.

These findings and the Court’s judgment in this regard are supported by the record and we find
Husband’s argument that they are erroneous to be without merit.

        The Wife is employed as a medical technician, and she worked full-time in that capacity
throughout the marriage. The Court found her gross monthly income to be $3,784.00. The Husband,
as above noted, operates a construction and trucking business, in addition his involvement in real
estate speculation. The Court found that “the [Husband’s] true income is difficult to calculate.” The
Court further found as follows in this regard:

                The [Husband] is playing a numbers game with the Court. On these
                two Local Rule 9 Statements, the [Husband] swears that he is making
                monthly credit card payments that grossly exceed the income he
                reports on these sworn statements.
                        The Court finds that the [Husband’s] true gross monthly
                income is at least equal to the [Wife’s] monthly gross income of
                $3,784.00. . . . .and when depreciation on the [Husband’s] equipment
                and buildings are excluded, the [Husband’s] monthly net income is
                more than the [Wife’s] monthly net income.

                                                  -9-
At the time of divorce, which ended a seven-year marriage, the Husband was 43 years old and the
Wife was 34 years old, and both parties were in good physical and mental health.

       Regarding each spouse’s contribution to the family and household during the marriage, the
Trial Court found as follows:

               During the parties’ marriage (before separation), the [Husband]
               admits that the [Wife] paid, from her income, practically all of the
               household and living expenses, i.e., food, clothing, day-care, ninety
               percent (90%) of the utilities, health insurance, her monthly vehicle
               payment, etc. Furthermore, the [Husband] admitted that the [Wife]
               cleaned the parties’ residence but, the [Husband] testified, the [Wife]
               “did a substandard job,” kept clean clothes for the family, did the
               grocery and other shopping chores, prepared the meals, performed all
               of the work in the yard of the parties’ home, performed substantially
               all of the child-rearing, performed substantially all of the household
               chores, and was the family’s “financial manager.”

Taking into consideration all of the relevant statutory factors as discussed above, including the value
of each party’s separate property, we find that with the adjustments made as described in this
opinion, the Trial Court’s distribution of the marital debts and assets is an equitable one. Including
the adjustments to the distribution of marital debt, and the reclassification of the assets as discussed
above, the Wife’s portion of the net marital estate will be $129,873.30 or 62.6%. The Husband’s
portion of the net marital estate will be $77,591.00, or 37.4%. Our review of the record and the
relevant statutory authorities persuades us that this is an equitable result under the particular facts
of this case.

         In accordance with our determination that Wife should be responsible for a total of
$19,623.00 of the Husband’s credit card debt, on remand the Court should direct that this amount
is to be offset against the amount owed by Husband to Wife under the terms of the Court’s judgment.

         For the foregoing reasons the judgment of the Trial Court is affirmed in part and modified
in part and the cause remanded for proceedings not inconsistent with this opinion and for collection
of costs below. Costs of appeal are adjudged against the Wife, Kimberly G. Harmon.

                                               _________________________________________
                                               HOUSTON M. GODDARD, PRESIDING JUDGE

                                                 -10-