Cutsinger v. Cutsinger

• Decision Date: 04 October 1995
• Parties: Laura Patricia CUTSINGER, Plaintiff/Appellee. v. Charles Edward CUTSINGER, Defendant/Appellant.
• Court: Tennessee Court of Appeals

Page 238

917 S.W.2d 238

Laura Patricia CUTSINGER, Plaintiff/Appellee. v. Charles Edward CUTSINGER, Defendant/Appellant.

Court of Appeals of Tennessee,

Western Section, at Nashville.

Oct. 4, 1995.

Application for Permission to Appeal

Denied by Supreme Court

Jan. 29, 1996.

Appeal from Circuit Court, Robertson County; Robert W. Wedemeyer, Judge.

W.A. Moody, Nashville, for Defendant/Appellant.

Fred C. Dance, Dance, Dance & Lane, Nashville, for Plaintiff/Appellee.

FARMER, Judge.

In this divorce case, Charles Edward Cutsinger (Husband) has appealed the trial court's judgment which awarded Laura Patricia Cutsinger (Wife) a thirty percent (30%) interest as a seller in the contract of sale of Husband's chiropractic practice. Husband also has appealed the trial court's ruling which ordered Husband to indemnify Wife for any judgment that might arise as a result of an indebtedness for a pleasure boat purchased during the marriage.

The parties were married on May 3, 1985. Prior to the marriage, Husband had practiced chiropractic medicine in Iowa for ten years. In 1983, Husband moved to Tennessee and started a chiropractic practice as a sole proprietorship. Approximately three days after the parties were married in 1985, Wife, a licensed practical nurse, began working at the practice. Wife worked in Husband's practice throughout the marriage, and Husband paid Wife a salary.

In August of 1990, Husband became seriously ill due to a systemic carcinoma. His illness forced him to leave his practice until September of 1991. During this time, Wife helped keep the practice running by doing the bookkeeping and obtaining other chiropractors to treat patients.

On July 26, 1992, the parties separated. On April 20, 1993, Husband sold his chiropractic practice to Terry D. Totty (Mr. Totty) pursuant to a sale of assets agreement (sales agreement). The total purchase price was $130,000. Among other provisions, the sales agreement contained a "Covenant Not To Compete" as well as a "Consultation Fee" for Husband's future services. The total purchase price of $130,000 was apportioned as follows:

                        Equipment                  62,000
                        Trade Name & Good Will     13,000
                        Covenant Not To Compete    13,000
                        Accounts Receivable        18,000
                        Consultation Fee           24,000
                                                 --------
                        TOTAL:                   $130,000
                

On June 10, 1993, Wife filed a complaint seeking a divorce upon the grounds of cruel and inhuman treatment and irreconcilable differences. Husband answered, denying Wife's allegations, and filed a countersuit alleging abandonment and inappropriate marital conduct. At trial, the parties stipulated that the trial court should grant a divorce to both parties. The parties presented two issues for the trial court's consideration: (1) the equitable division of the Husband's chiropractic practice; and (2) the distribution of a potential debt arising from the forfeiture of a pleasure boat that had been purchased by the parties during their marriage.

At trial, Wife testified that she had contributed her services to Husband's chiropractic practice throughout the marriage. Wife further contended that she had helped maintain the practice when Husband's illness forced him to quit working for approximately a year. Wife argued that her various contributions to the practice entitled her to an interest in the purchase price.

As additional evidence of her interest in Husband's practice, Wife presented a list of equipment, which she alleged had been bought for the practice during the parties' marriage. She argued that the equipment was marital property and was therefore subject to equitable division pursuant to T.C.A. § 36-4-121. Wife's testimony showed that the value of the equipment in question comprised 48.73% of the total value of the equipment present in Husband's practice at the time that the practice was sold.

Wife also asserted that she should be held harmless for any future deficiency judgment that might arise due to the parties' forfeiture of a $120,000 pleasure boat. It was undisputed that the boat had been purchased during the marriage. Due to Husband's illness, the parties had been unable to pay the necessary installments on the boat. Consequently, a creditor had repossessed the boat. At the time of trial, the repossessor of the boat had not taken any action for a deficiency.

The trial court granted a divorce to the parties pursuant to T.C.A. § 36-4-129 ¹ and awarded Wife a 30% interest in the purchase price of Husband's practice. The court found that the purchase price of the chiropractic practice was $104,000. In arriving at the $104,000 figure, the court excluded the amounts paid by Mr. Totty for "Trade Name and Good Will" and the "Covenant Not To Compete" from the total purchase price of $130,000. Thus, the trial court found that the value of Wife's interest in the purchase price of Husband's practice was $31,200 ($104,000 (purchase price of Husband's practice) X 30% (percentage of Wife's interest in Husband's practice) = $31,200). The trial court also ordered that Husband indemnify Wife for any deficiency judgment that might arise as a result of the forfeiture of the boat purchased during the parties' marriage.

Husband presents the following issues for review:

1. Did the trial court err in awarding the plaintiff a 30 percent interest in the sale price of the defendant's chiropractic practice, holding it to be marital property?

2. Did the trial court err in decreeing that the defendant indemnify the plaintiff for any deficiency judgment against them for the purchase and repossession of a pleasure boat?

3. Did the trial court err in awarding the plaintiff a 30% interest in the $24,000 consultation fee paid by the purchaser of the chiropractic practice to the defendant?

In regard to Husband's first issue, the trial court found that the chiropractic practice was the separate property of Husband because he had owned the practice prior to the marriage. Assets owned by a spouse prior to marriage are to be considered the separate property of that spouse. T.C.A. § 36-4-121(b)(2)(A).

However, the trial court also found that Wife was entitled to a share of the purchase price because she had performed services during Husband's illness that were essential to preserving Husband's practice. The court reasoned that, without Wife's services, the value of the practice would have been substantially less at the time of sale. Additionally, the trial court found that the equipment from Husband's practice, which Wife had specified as having been purchased during the course of the parties' marriage, qualified as marital property under T.C.A. § 36-4-121(b)(1)(A). Consequently, the trial court held that Wife was entitled to 30% of the purchase price of the practice, excluding the monetary amounts in the sales agreement attributable to "Trade Name and Good Will" and the "Covenant Not To Compete."

Husband argues that the trial court erred in assessing Wife's interest in the purchase price because Wife failed to show that the practice had appreciated during the parties' marriage. He argues that the burden was on Wife to prove the value of the practice prior to the marriage. Husband further argues that since no evidence was presented as to the value of the practice prior to their marriage, Wife did not meet her burden in proving that the value of Husband's practice had appreciated during the marriage. Without proof of an appreciation in the value of the practice, Husband contends that there is no evidence in the record to support the trial court's award.

We agree with Husband and hold that the trial court erred in assessing Wife's equitable interest in the value of the assets of Husband's practice. The determination of what property is jointly owned and the value of a party's interest in that property is a question of fact. Hardin v. Hardin, 689 S.W.2d 152, 153 (Tenn.App.1983). Our review of the lower court's decision is de novo with a presumption of the correctness unless the evidence preponderates otherwise. T.R.A.P. 13(d); Farrar v. Farrar, 553 S.W.2d 741, 743 (Tenn.1977); Kelly v. Kelly, 679 S.W.2d 458, 460 (Tenn.App.1984).

The evidence offered at trial was sufficient to show that Wife did make a valuable contribution to Husband's practice throughout the entire course of the parties' marriage and, most especially, during his illness. Moreover, T.C.A. § 36-4-121(a)(1) gives the trial court great latitude in equitably dividing marital property between divorcing parties. However, as a threshold matter, property must first qualify as marital property under T.C.A. § 36-4-121(b)(1)(A) or T.C.A. § 36-4-121(b)(1)(B) before it can be subject to the court's powers of equitable division under T.C.A. § 36-4-121(a)(1). If the nonowner spouse cannot prove that a piece of property is marital property, the trial court has no authority to make an equitable division of the property. T.C.A. § 36-4-121(a)(1). T.C.A. § 36-4-121(b)(1)(B) defines "marital property" inter alia to include "income from, and any increase in value during the marriage, of property determined to be separate property ... if each party substantially contributed to its preservation and appreciation." T.C.A. § 36-4-121(b)(1)(B). Thus, if a nonowner spouse can show that he contributed to the preservation and appreciation of a piece of separate property, the trial court may grant the nonowner spouse an equitable share of the increase in value of that property. T.C.A. § 36-4-121.

In order to prove such an increase in the value of separate property, a nonowner spouse must present evidence that proves the value of the separate asset prior to the marriage. See Bryson v. Bryson, App. No. 88-94-II, 1988 WL 87685 at ---3 (Tenn.App. Aug. 26, 1988). If there is no proof of the value of a separate asset before the parties' marriage, the trial court has no legitimate basis to determine that an asset has appreciated. Id....