Snodgrass v. Snodgrass

• Decision Date: 09 October 2009
• Docket Number: No. E2007-00576-SC-R11-CV.,E2007-00576-SC-R11-CV.
• Citation: 295 S.W.3d 240
• Parties: Iris Kay SNODGRASS v. Robert H. SNODGRASS.
• Court: Tennessee Supreme Court

295 S.W.3d 240

Iris Kay SNODGRASS v. Robert H. SNODGRASS.

No. E2007-00576-SC-R11-CV.

Supreme Court of Tennessee, at Knoxville.

May 5, 2009 Session.

October 9, 2009.

Robert H. Green and Catherine E. Shuck, Knoxville, Tennessee, for the appellant, Robert H. Snodgrass.

Craig L. Garrett, Maryville, Tennessee, for the appellee, Iris Kay Snodgrass.

OPINION

CORNELIA A. CLARK, J., delivered the opinion of the court, in which JANICE M. HOLDER, C.J., WILLIAM C. KOCH, JR., and SHARON G. LEE, JJ., joined.

We granted permission to appeal in this divorce case to address whether a spouse's 401(k) account is a "retirement or other fringe benefit right[] relating to employment" under Tennessee Code Annotated section 36-4-121(b)(1)(B) such that any increase in the account's value that accrues during the marriage is marital property. We hold as follows: (1) the parties' 401(k) accounts are "retirement or other fringe benefit rights relating to employment"; (2) the entire net amount by which the parties' 401(k) accounts increased in value during the period of the parties' marriage is marital property; (3) the premarital balances in the parties' 401(k) accounts remain their separate property; (4) Husband did not transmute his entire 401(k) account to marital property when he made a single withdrawal for marital purposes; and (5) the trial court correctly divided the parties' defined benefit pensions by reference to the monthly income each spouse was receiving rather than by reference to the present cash value of each spouse's pension. The judgment of the Court of Appeals is affirmed in part and reversed in part.

Factual and Procedural Background

Robert H. Snodgrass ("Husband") and Iris Kay Snodgrass ("Wife") were married in July 1982. Wife filed for divorce in February 2005. No children were born of the marriage.

At the time they wed, Husband and Wife were each employed by Alcoa¹ ("Employer"). Each had participated in the employer-provided Alcoa Savings Plan for Salaried Employees ("the 401(k) Plan")² prior to their marriage; accordingly, each spouse had a separate 401(k) account at the time they married. At the time of their marriage, Husband's balance in his 401(k) account was approximately $54,000; Wife's balance in her 401(k) account was approximately $17,000.

Husband and Wife both continued to contribute to their 401(k) accounts during the marriage, and Employer also continued to make contributions. From time to time each party made changes in the investment vehicles used. Also during the marriage, Husband made a single withdrawal of $180,000 from his 401(k) account and used that money toward the purchase of the couple's marital residence. At the time the parties' divorce was granted, the balance in Husband's 401(k) account was approximately $2,301,000; the balance in Wife's account was approximately $691,000.

The parties resolved most of their issues through mediation, and the trial court granted their divorce by order entered April 10, 2006. As acknowledged in the trial court's order, the parties reserved for a hearing the division of their 401(k) accounts and the division of their defined benefit pensions payable by Employer. The parties stipulated that, with respect to the marital property portions of their 401(k) accounts and pensions, "an equitable division is an equal division." They disagreed, however, on what portions of the accounts and pensions were marital property.

Prior to or contemporaneously with the hearing, Wife's counsel filed a motion in limine to exclude expert testimony with regard to valuing the growth attributable to the premarital balances in the 401(k) accounts.³ Wife's counsel argued that "the increase in that retirement benefit during the marriage is all marital property subject to an equitable division." Accordingly, counsel asserted, no expert testimony was necessary or relevant with respect to determining how much of each account's appreciation was attributable to the premarital balances. Wife also objected to any expert testimony with respect to assigning a present cash value to each of the parties' pensions.

Over Husband's opposition to the motion and his counsel's argument that expert testimony was necessary to resolve the issues regarding the 401(k) accounts and the pensions, the trial court found that "the 401(k)s are retirement benefits" and granted Wife's motion in limine. The hearing proceeded with brief testimony by Husband and Wife.

Wife testified that Husband retired from Employer in 1994 and she retired from Employer in 1997. She and Husband were both drawing their pensions at the time of the hearing. Wife explained that they made a joint decision on Husband's retirement that he would "opt into" the surviving spouse benefit available in conjunction with his pension.

Wife testified that she and Husband funded their 401(k) accounts with wages withheld from their paychecks; Employer also contributed to each of their accounts. She made no withdrawals from her account during the marriage; Husband withdrew $180,000 from his 401(k) account in 1999 when they bought a house.⁴

Husband testified that he worked for Employer from 1962 until his retirement. He worked as a mechanical engineer and Wife worked as a secretary. He explained that he used the $180,000 he withdrew from his 401(k) account to assist in the purchase of a marital home. Husband conceded that the home purchased in part with these funds became marital property. In conjunction with their divorce, Husband paid Wife for her one-half interest in the house. He made no other withdrawals from his 401(k) account.

Husband explained that his contributions to his 401(k) account stopped when he retired. He also testified that he "followed" [the changes in value of] the couple's 401(k) accounts and occasionally made transfers between funds within his account.

On cross-examination, Husband acknowledged that he and Wife would discuss their 401(k) accounts and try to decide how best to invest their monies based on the performance of Employer's stock. He testified that this occurred one to three times a year. According to Husband, Wife would also make transfers after these conversations "if she chose to do so."

After the hearing,⁵ the trial court entered an order in which it awarded each party his or her premarital balance in his or her 401(k) account as the party's separate property. The trial court found the entire amount of growth in each account which accrued during the marriage to be marital property and divided it equally. With respect to the parties' pensions, the trial court determined that the marital portion of Husband's monthly benefit was $2,754.18 ("Husband's marital pension payment"). The trial court also determined that the marital portion of Wife's monthly benefit was $1,121.22 ("Wife's marital pension payment"). The trial court awarded Wife 50% of Husband's marital pension payment and awarded Husband 50% of Wife's marital pension payment. This division resulted in the trial court ordering Husband to pay Wife a sum certain every month in order to equalize the marital portion of the pension benefits.

Husband appealed. The Court of Appeals held that the trial court erred in ruling that all of the marital growth in the parties' 401(k) accounts was "retirement benefits" and therefore marital property. Snodgrass v. Snodgrass, No. E2007-00576-COA-R3-CV, 2008 WL 836392, at *8 (Tenn.Ct.App. Mar.31, 2008). The Court of Appeals determined that Husband's withdrawal of $180,000 from his 401(k) account rendered the entire account marital property, however, under the doctrines of commingling and transmutation. Id. at *6, *8. As to Wife's 401(k) account, the Court of Appeals remanded for a determination of what amount in the account was attributable to the appreciation of the premarital balance, which amount (together with the premarital balance) would be deemed Wife's separate property "if [the appreciation on the premarital balance] can be segregated from the marital contributions and their gains." Id. at *8. The Court of Appeals affirmed the trial court's decision with respect to the parties' pensions. Id.

Husband applied for permission to appeal to this Court, which we granted in order to address whether the parties' 401(k) accounts are "retirement or other fringe benefit rights relating to employment" such that the net growth of the accounts that accrued during the marriage is marital property under Tennessee Code Annotated section 36-4-121(b)(1)(B) (2005). We also address whether the courts below erred in dividing the parties' defined benefit pension plans on the basis of the monthly payments each spouse was receiving instead of on the basis of the pensions' present cash values.

STANDARD OF REVIEW

The classification of particular property as either separate or marital is a question of fact to be determined in light of all relevant circumstances. See Langford v. Langford, 220 Tenn. 600, 421 S.W.2d 632, 634 (1967); Cutsinger v. Cutsinger, 917 S.W.2d 238, 241 (Tenn.Ct.App. 1995). This Court gives great weight to a trial court's decisions regarding the division of marital assets, and we will not disturb the trial court's ruling unless the distribution lacks proper evidentiary support, misapplies statutory requirements or procedures, or results in some error of law. Keyt v. Keyt, 244 S.W.3d 321, 327 (Tenn.2007). As to the trial court's findings of fact, "we review the record de novo with a presumption of correctness, and we must honor those findings unless there is evidence which preponderates to the contrary." Id. However, we accord no presumption of correctness to the trial court's conclusions of law. Id.

ANALYSIS

The primary issue in this case is how to characterize 401(k) accounts that were established prior to the parties' marriage but to which contributions were made during the marriage.⁶ Husband and Wife concede that contributions to their 401(k) accounts made by each of them and Employer during the...