Mondelli v. Howard

• Decision Date: 29 September 1989
• Parties: Michael F. MONDELLI, Administrator Ad Litem of the Estate of Lee Ann Stringer Howard, Plaintiff/Appellee, v. Robert Eugene HOWARD, Defendant/Appellant.
• Court: Tennessee Court of Appeals

Page 769

780 S.W.2d 769

Michael F. MONDELLI, Administrator Ad Litem of the Estate of Lee Ann Stringer Howard, Plaintiff/Appellee, v. Robert Eugene HOWARD, Defendant/Appellant.

Court of Appeals of Tennessee Middle Section, at Nashville.

Sept. 29, 1989.

Published Pursuant to Tenn.Ct.App.R. 11.

W.C. Keaton, Keaton, Turner & Spitzer, Hohenwald, for defendant/appellant.

Michael F. Mondelli, Nashville, for plaintiff/appellee.

OPINION

KOCH, Judge.

This appeal concerns the manner in which the Chancery Court for Wayne County divided the marital estate of a couple who had been married for approximately six years. The husband insists that the division was not equitable because the trial court did not divide the parties' debts according to the same percentages it used to divide their assets. While we disagree with the husband's premise that the marital debts must be divided in exact proportion to the marital assets, we have determined that the division of the marital estate should be modified because of other errors in the classification and division of the property and in light of the wife's death while this appeal was pending. ¹

I.

Lee Ann Stringer Howard met Robert Eugene Howard in late 1977 or early 1978 when she showed one of her real estate clients a house listed by one of Mr. Howard's clients. They began living together in August, 1978 even though Mr. Howard was still married at the time. They were married in October, 1981 after Mr. Howard and his first wife were divorced.

Several years before their marriage, the parties left the real estate business and went to work for one of Mr. Howard's friends selling toy gliders at shopping malls and fairs around the country. Following a dispute with their supplier, they started their own toy glider business, Howard Manufacturing Company, in 1981.

Both parties played an active role in Howard Manufacturing's business. They travelled together throughout the United States from Canada to Mexico for six or seven months every year, staying little more than two weeks at any one location. When they were not on the road, Mrs. Howard took care of their itinerary and bookings, and Mr. Howard saw to it that they had an adequate supply of toy airplanes. At its peak, Howard Manufacturing sold gliders to seven or eight other travelling teams, and the Howards earned between $60,000 and $70,000 a year.

However, all was not well with the Howards. The extensive travel was taking its toll on Mrs. Howard, and she became increasingly unhappy with Mr. Howard because she thought he spent too much time hunting and fishing. The parties separated briefly in 1984 or 1985 but reunited when Mr. Howard promised that they would settle down and look for another livelihood that did not require them to travel as much.

In September, 1986, the Howards bought a convenience market in Clifton. Mr. Howard did not favor buying the market because he viewed it as a bad investment and because he thought the glider business was doing well. Nonetheless, he went along with Mrs. Howard because she insisted that she did not want to travel anymore. Although Mrs. Howard was primarily responsible for managing the business, both parties worked at the market. They borrowed money not only to purchase the market but also to improve the property and to operate the business. Their finances were very tight because most the market's revenues were needed for operating expenses and to repay their sizeable business loans.

The demands of operating the market caused the Howards to cut back on their glider business. However, in the fall of 1987, their precarious financial situation prompted Mrs. Howard to suggest that Mr. Howard should return to selling gliders to earn additional money. Mr. Howard did not go back on the road because he thought he could make as much money trapping raccoons. Unfortunately, the bottom dropped out of the raccoon pelt market, and Mr. Howard earned very little. The failure of Mr. Howard's trapping enterprise, coupled with the amount of time he spent hunting, finally prompted Mrs. Howard to leave Mr. Howard in December, 1987. When she left, she took $2,400 from the store's cash register.

Mr. Howard tried to operate the market without Mrs. Howard but with little success. He fell behind on paying the bills and finally was forced to borrow $35,000 from his great aunts and had to sell a boat to obtain money to operate the market and to pay some of the parties' other debts. Mrs. Howard resumed management of the market in March, 1988 and found that the business was in shambles. She sold some of her assets, including a silver collection, to obtain operating funds for the business. She also removed part of the market's merchandise and installed pool tables and video games in an attempt to increase the store's income.

Mrs. Howard took up with another man soon after she left Mr. Howard, and she filed for divorce in March, 1988. Mr. Howard counter-claimed for divorce shortly thereafter, and the trial court heard the proof in May, 1988. While the parties blamed each other for the break up of their marriage and disagreed about how their marital estate should be divided, they were in substantial agreement concerning the value of their marital assets and the amount of their debts.

The trial court granted Mrs. Howard the divorce because Mr. Howard "could have put more effort into [the marriage]." After stating its intent to divide the marital estate "just almost even," the trial court awarded the market to Mrs. Howard because she had been "the moving factor ... in getting [the businesses] where they are." However, allocating the parties' sizeable debt presented a more difficult task for the court because it was faced with two conflicting considerations. On one hand, it did not wish to "hurt" Mrs. Howard by giving her the market and its existing debts--which would have forced her to "go head over heels in debt." On the other hand, it was reluctant to require Mr. Howard to assume the market's debts "if he's not going to have anything to do with it any more."

After a lengthy discussion with the parties' counsel, the trial court divided the marital estate in the following manner:

Husband Wife

II.

Mr. Howard does not take issue with the trial court's division of the marital assets. However, he insists that the trial court has required him to be responsible for a disproportionate share of the parties' marital debts. We have determined that the distribution of the marital estate is inequitable, not because the trial did not divide the debts in direct proportion to the assets, but because of other classification and allocation errors.

A.

Trial courts have broad discretion in dividing the marital estate in a divorce case. Fisher v. Fisher, 648 S.W.2d 244, 246 (Tenn.1983). Accordingly, their decisions are entitled to great weight on appeal, Edwards v. Edwards, 501 S.W.2d 283, 288 (Tenn.Ct.App.1973), and are presumed to be correct unless the evidence preponderates otherwise. Hardin v. Hardin, 689 S.W.2d 152, 154 (Tenn.Ct.App.1983).

Appellate courts are generally disinclined to disturb a trial court's distribution of marital property unless it lacks proper evidentiary support or results from an error of law or a misapplication of statutory requirements and procedures. However, Tenn.R.App.P. 13(d) requires us to review each record de novo, and, if outcome-affecting errors are found, Tenn.R.App.P. 36(a) requires us to grant the relief to which the parties are entitled.

B.

Tenn.Code Ann. Sec. 36-4-121 (Supp.1988), Tennessee's statute governing the distribution of marital property, is oriented toward the division of marital assets. It does not deal specifically with marital debts since Tenn.Code Ann. Sec. 36-4-121(b)(1) is not broad enough to include marital debts within its definition of marital property. However, it is difficult to conceive how the courts can equitably divide a marital estate without at least taking the parties debts into consideration. See Newberry v. Newberry, 493 S.W.2d 99, 102 (Tenn.Ct.App.1973).

Most courts now go beyond merely considering the parties' assets when dividing the marital property and follow the rule that adjudicating the parties' property interests necessarily involves distributing the parties' debts as well. Cadwell v. Cadwell, 126 Ariz. 460, 616 P.2d 920, 922 (Ct.App.1980); Beede v. Beede, 186 Conn. 191, 440 A.2d 283, 286 (1982); In re Marriage of Simmons, 101 Ill.App.3d 645, 57 Ill.Dec. 352, 354, 428 N.E.2d 1032, 1034 (1981); In re Marriage of Johnson, 299 N.W.2d 466, 467 (Iowa 1980); McInnis v. McInnis, 62 Or.App. 524, 661 P.2d 942, 943-44 (1983).

In dual property jurisdictions like Tennessee, the courts also distinguish between marital and separate debts and divide only the marital debts. See B. Goldberg, Valuation of Marital Assets Sec. 15.311, at 390 (Supp.1989); 2 H. Clark, The Law of Domestic Relations in the United States Sec. 16.4, at 198 (2d ed.1987). Marital debts are those debts incurred during the marriage for the joint benefit of the parties, Geer v. Geer, 84 N.C.App. 471, 353 S.E.2d 427, 429 (1987), or those directly traceable to the acquisition of marital property. Schweizer v. Schweizer, 301 Md. 626, 484 A.2d 267, 272 (1984). Courts do not generally attempt to divide speculative, unsubstantiated debts or contingent liabilities. Novick v. Novick, 366 N.W.2d 330, 332 (Minn.Ct.App.1985); Wallahan v. Wallahan, 284 N.W.2d 21, 26 (S.D.1979).

Courts should apportion marital debts equitably in much the same way that they divide marital assets. Whitley v. Whitley, 757 P.2d 849, 850 (Okla.Ct.App.1988); B. Goldberg, Valuation of Divorce Assets Sec. 15.311, at 510 (1984). When practicable, the debts should follow the assets they purchased. In re Marriage of Guntren, 141 Ill.App.3d 1, 95 Ill.Dec. 392, 395-96, 489 N.E.2d 1120, 1123-24 (1986); Janik v. Janik, 634 S.W.2d 323, 325 (Tex.Ct.App.1982).

Courts should consider the following factors when they divide marital...