Divorce Court Lacks Jurisdiction to Determine Property Interest of LLC which is Not Party to Case
Tennessee case summary on property division and business valuation in divorce.
Thomas John Pitera v. Samantha Pitera
The husband and wife in this Blount County, Tennessee, were married in 1998 when the husband was in the Marine Corps and the wife was employed on base. Starting in 2005, the husband was employed as a contractor with the U.S. Army in Iraq, and in 2007, he formed an LLC which engaged in trucking in Iraq, until the contract was terminated in 2015. The parties separated in 2015, and the husband filed for divorce later that year. A trial was held in 2016, and the final judgment was entered in 2018. The wife was granted alimony in solido of over $7 million, to be paid over a period of 10 years. To secure payment, the wife was granted a lien on real property, including property owned by LLC’s owned by the husband.
Because of the termination of the LLC’s contract with the government, the LLC had a contingent claim against the government, potentially worth $32 million. The court ordered that the first $6.6 million recovered under that claim would be awarded to the wife. The husband brought an appeal to the Tennessee Court of Appeals.
The husband first argued that the lower court had erred in designating one of the LLC’s as marital property. However, the appeals court looked deeper and concluded that the real issue was whether the trial court had jurisdiction to adjudicate ownership of property owned by the LLC, even though the LLC was not a party to the case. The appeals court agreed and held that the trial court had no jurisdiction to adjudicate ownership of property owned by the LLC. Accordingly, it vacated that portion of the lower court’s order.
The appeals court next turned to the contingent claim against the government. Once again, the Court of Appeals held that the lower court had acted improperly. Since the LLC was not a party to the case, the trial court erred in adjudicating ownership of this claim, since it was property of the LLC.
The husband also argued that the lower court had erred in setting the valuation of the company. The husband argued that a financial statement relied upon by the court was outdated and not certified by a CPA.
However, the appeals court found that the financial statement had been properly admitted, and that the lower court had considered facts that had taken place after the date of the statement. The appeals court essentially looked at the husband’s arguments as going to the weight of the evidence, and held that such decisions are properly made by the trial court.
The appeals court did, however, find it necessary to remand the case. Since the contingent claim had been treated separately, it was never taken into account in determining the value of the company. Therefore, on remand, the lower court would need to reevaluate the value of the business.
After addressing some other issues in the case, the Court of Appeals remanded the case for further proceedings. The wife requested attorney fees on appeal, but this request was denied.
No. E2019-01136-COA-R3-CV (Tenn. Ct. App. Nov. 10, 2020).
See original opinion for exact language. Legal citations omitted.
To learn more, see Property Division in Tennessee Divorce.
To learn more, see Business Valuation in Tennessee Divorce.
