Smith v. Smith

• Decision Date: 28 August 2002
• Citation: 93 S.W.3d 871
• Parties: Eileen Ann SMITH v. Robert Maxwell SMITH.
• Court: Tennessee Court of Appeals

93 S.W.3d 871

Eileen Ann SMITH v. Robert Maxwell SMITH.

Court of Appeals of Tennessee, Middle Section, at Nashville.

August 28, 2002.

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

COPYRIGHT MATERIAL OMITTED

Mike W. Hinkley, Nashville, Tennessee, for the appellant, Robert Maxwell Smith.

Joanie L. Abernathy, Franklin, Tennessee, for the appellee, Eileen Ann Smith.

DAVID R. FARMER, J., delivered the opinion of the court, in which W. FRANK CRAWFORD, P.J., W.S., and HOLLY K. LILLARD, J., joined.

OPINION

This is a divorce case. Acting upon the stipulation of the parties, the trial declared the parties divorced. The court determined that the appreciation of Husband's premarital Individual Retirement Accounts (IRAs) was marital property. The court also ruled that a bond account that Husband received from his mother and later titled jointly between the parties remained Husband's separate property. Finally, the court addressed marital debt and alimony. Both parties raise issues regarding the trial court's disposition of the case. We affirm in part, reverse in part, and remand the case to the trial court.

Robert Maxwell Smith and Eileen Ann Smith married in August 1986. Dr. Smith was fifty-one and Ms. Smith was thirtyeight at the time of the marriage. Prior to the marriage, Ms. Smith worked as a nurse earning $26,000 a year. Dr. Smith, a physician, earned as much as $500,000 a year. This was the second marriage for each party. Each party had two children from their previous marriages. The union of Dr. and Ms. Smith produced no children.

Shortly after the parties married, Ms. Smith left her position as a nurse. Thereafter, in addition to performing various homemaking tasks, Ms. Smith established and operated a nonprofit animal shelter. At the height of its operation, the animal shelter housed about 125 cats and employed four to six workers. The shelter cost the couple about $50,000 to $60,000 each year.

Dr. Smith had a profitable medical practice during the marriage. Dr. Smith functioned as the parties' financial manager and paid all of the couple's bills. In addition to caring for his own children, Dr. Smith took financial responsibility for Ms. Smith's two children.

Dr. Smith had six retirement accounts before the marriage. Of these six accounts, only two were partially funded during the marriage. There were no contributions made to four of the accounts during the marriage. These four accounts are the Emigrant Keough, the Vanguard Group IRA, the Astoria Federal IRA, and the Chase Traditional IRA. At the date of the parties' marriage, these accounts had a total value of $177,500. By the end of 1999, the total of the accounts had risen to $385,000.

The other two retirement accounts are the Merrill Lynch IRA Rollover and the Smith Barney IRA Rollover. These accounts contain fixed income bonds with stated interest rates. At the time of the parties' marriage, these two accounts totaled $650,000. During the couple's marriage, Dr. Smith deposited marital funds into these accounts. The total marital contribution was approximately $253,500. By December 31, 1999, the total of the two accounts had risen to $2,276,673.

Dr. Smith also acquired a $500,000 Paine Webber bond portfolio from his mother. Dr. Smith subsequently added Ms. Smith's name to the account. This portfolio generated approximately $25,000 each year in interest. Each party had check writing privileges on the account. Ms. Smith, however, did not withdraw money from this account during the marriage.

The trial court declared the parties divorced pursuant to section 36-4-129(b) of the Tennessee Code. First, the court distributed the parties' real property. The court then examined the six retirement accounts that Dr. Smith established prior to the parties' marriage. The court classified the appreciation of the six retirement accounts that took place during the marriage as marital property. The court classified Dr. Smith's premarital contributions to these accounts as his separate property.

The court classified the Paine Webber bond portfolio account as Dr. Smith's separate property. In making its determination, the court found that Dr. Smith successfully rebutted the presumption that he made a gift to the marital estate by titling the account in both spouse's names. Regarding the couple's marital liabilities, the court determined that each party would pay one-half of the $38,285 debt.

Next, the court ruled that Ms. Smith was entitled to alimony. After dividing the couple's personal property, the court awarded Ms. Smith $1,000 as alimony in solido in order to "more equitably distribute the value of the personal property." The court also awarded Ms. Smith rehabilitative alimony. In making its award, the court recognized that Ms. Smith would be eligible to withdraw funds from her retirement accounts at the age of 59 and onehalf years. Therefore, the court awarded Ms. Smith $1,000 per month until she reached such age.

Finally, the court awarded Dr. Smith $2,500 in attorney's fees. This award represented sanctions against Ms. Smith for her "violations of previous court orders in failing to provide discovery information to [Dr. Smith]."

Both parties appeal the decision of the trial court. Dr. Smith's issues, as stated in his brief, are as follows:

I. Whether the amendment to Tenn. Code Arm. Section 36-4-121(d) classifies the increase in value of retirement accounts accrued during the course of the marriage as marital property only where the increase in value is related to the spouse's employment.

II. Alternatively, whether the trial court's equal division of marital property is equitable where the parties were married for only thirteen years and where sixty-two percent (62%) of the marital estate is comprised of the passive appreciation of the Husband's retirement accounts which he owned prior to marriage.

III. Whether the trial court abused its discretion in failing to require the wife to refund $50,000 to the husband which he paid to her, at her insistence, as reimbursement for her only financial contribution of separate funds to the marriage.

IV. Whether the trial court abused its discretion in awarding alimony in the absence of financial need, and where the wife has the present capacity for financial independence.

V. Whether the trial court abused its discretion in its division of marital debt.

Ms. Smith presents two issues for our review. These are as follows:

I. Whether the trial court erred in classifying the Paine Webber bond fund as Husband's separate property.

II. Whether the trial court erred in awarding Wife only $1,000 a month in rehabilitative alimony.

To the extent these issues involve questions of fact, our review of the trial court's ruling is de novo with a presumption of correctness. Tenn. R.App. P. 13(d); e.g., Berryb ill v. Rhodes, 21S.W.3d 188, 190 (Tenn.2000). We may not reverse the trial court's factual findings unless they are contrary to the preponderance of the evidence. Id. With respect to the court's legal conclusions, our review is de novo with no presumption of correctness. Bowden v. Ward, 27 S.W.3d 913, 916 (Tenn. 2000). Further, we give great weight to the factual findings of the trial court which rest on determinations of witness credibility. Randolph v. Randolph, 937 S.W.2d 815, 819 (Tenn.1996). Accordingly, absent clear and convincing evidence to the contrary, we will not re-evaluate a trial judge's assessment of witness credibility. Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 783 (Tenn.1999).

Classification and Distribution of the Parties' Property

Dr. Smith's first issue concerns the trial court's classification of the retirement accounts that he established prior to marriage. The court classified the appreciation of the accounts that took place during the marriage as marital property and awarded Ms. Smith 45% of this appreciation. Dr. Smith contends that any appreciation of the accounts resulting from his premarital contributions should not have been classified as marital property. Rather, Dr. Smith argues that the court should only have classified any marital funds that were contributed to the accounts and their corresponding appreciation as marital property.

Before we address Dr. Smith's concerns regarding the court's classification of the parties' property, it is helpful to review some well-established principles of our divorce jurisprudence. In an action for divorce, Tennessee, as a "dual property" state, draws a distinction between separate and marital property. Batson v. Batson, 769 S.W.2d 849, 856 (Tenn.Ct.App.1988). Because the Tennessee statutes only allow for the division of marital property upon the dissolution of a marriage, it is of primary importance for the trial court to classify property as separate or marital. Tenn.Code Ann. § 36-4-121(a)(2001); Brock v. Brock, 941 S.W.2d 896, 900 (Tenn. Ct.App.1996). Therefore, because separate property is not subject to division in an action for divorce, the trial court must initially determine the nature of the parties' property. Watters v. Watters, 959 S.W.2d 585, 588 (Tenn.Ct.App.1997); Brock, 941 S.W.2d at 900.

The General Assembly defines "separate property" as:

(A) All real and personal property owned by a spouse before marriage;

(B) Property acquired in exchange for property acquired before the marriage;

(C) Income from and appreciation of property owned by a spouse before marriage except when characterized as marital property under subdivision (b)(1);

(D) Property acquired by a spouse at any time by gift, bequest, devise or descent;

(E) Pain and suffering awards, victim of crime compensation awards, future medical expenses, and future lost wages; and

(F) Property acquired by a spouse after an order of legal separation where the court has made a final disposition of property.

Tenn.Code Ann. § 36-4-121(b)(2) (2001). Further, the Tennessee legislature provides the following definitions for "marital property" in a divorce action:

(A) ...