For Property to Transmute, Substantial Contribution Must Relate Directly to the Asset

Spergl v. Spergl, No. M2018-00934-COA-R3-CV (Tenn. Ct. App. May 16, 2019)

or Property to Transmute, the Spouse’s “Substantial Contribution” Must Relate Directly to the Asset in Question

The husband and wife in this Williamson County, Tennessee, case were married in 2004 and had no children.  In September 2015, the wife filed for divorce, arguing irreconcilable differences and inappropriate marital conduct.  After an initial answer, the husband admitted inappropriate conduct, and also filed a counterclaim alleging inappropriate marital conduct by the wife.

In 2018, the trial was held before Judge Joseph A. Woodruff.  The parties stipulated to entry of divorce, and agreed to the disposition of most assets.  However, the court was called upon to rule on shares of UPS stock.  The husband had received the stock from his father before the marriage, and acquired more after the marriage.  The stock had also appreciated in value, and the husband had used the dividend reinvestment program to buy more shares from dividends.  Some of the dividends were used to pay down a line of credit to purchase real estate, buy automobiles, and other family purposes.  The husband also used some of the line of credit to purchase drugs and alcohol.

The lower court found that the wife had made substantial indirect contributions as a wage earner and homemaker.  Therefore, it found that some of the stock was marital property.  It also held that shares purchased during the marriage from the dividend reinvestment program were marital property.  However, the court held that the bulk of the shares were the husband’s separate property.  The wife then appealed to the Tennessee Court of Appeals.

The appeals court began by noting that dividends received were marital property.  Accordingly, it agreed that shares purchased during the marriage with dividends were marital property.  However, since some of the dividends were used to support the family, those shares were not to be divided.

The court next turned to the increase in value.  The wife argued that she contributed to the increase by working for a family business without salary.  But the appeals court cited Langschmidt v. Langschmidt, 81 S.W.3d 741 (Tenn. 2002) for the proposition that there must be some definite link between the spouse’s efforts and the property in question.  Here, the wife’s efforts were not directly connected, and most of the appreciation was market driven.  For these reasons, the court held that these shares were the husband’s separate property.

This post is part of a series, Appreciation of Separate Property: The Forensic Accountant’s Full Employment Act.