Business Property, Even if Gift to Wife, Transmuted to Marital Property

Tennessee case summary on property division classification and transmutation in divorce.

Wanda Sue Binkley v. Allen Dale Binkley

Business Property, Even if Gift to Wife, Transmuted to Marital Property

The husband and wife in this Montgomery County, Tennessee, case were married in 1986.  The wife filed for divorce in 2017, and the case went to trial before Judge Ted A. Crozier late that year.  After a post-trial motion, the wife appealed to the Tennessee Court of Appeals.  She argued that the lower court had erred in classifying commercial property as marital.

There were two adjoining parcels that were conveyed to the wife by her mother in 2002.  According to the wife, only one of the parcels was purchased.  The other one, she alleged, was given as a gift.  After receiving the property, the wife operated her cosmetology business there.  The husband argued that the purchase price, $25,000, was for both parcels, and that neither of them was a gift.  He also alleged that marital assets were used for the upkeep of the properties.

The appeals court began its review of the case by noting that one of the parcels was conveyed by warranty deed, with a purchase price of $25,000 listed.  The alleged gift was, however, conveyed by quit claim deed, and stated that the consideration was $0.

The husband pointed out that there was a mortgage secured by both properties for the purchase money.  However, the appeals court held that this factor alone did not support the claim that the property was marital.

The appeals court held that the different treatment of the two parcels made clear that one of them was a gift.

This did not end the case, however, since the appeals court next turned to the issue of transmutation.  The husband argued that comingled funds had been used over the years to maintain the property and pay taxes.  The wife testified that business income from her business was used, but the appeals court pointed out that she failed to produce records showing this.  Therefore, the appeals court agreed with the lower court that the property was marital, on the grounds of transmutation.

For these reasons, the Court of Appeals affirmed the lower court’s ruling and taxed the costs of appeal against the wife.

No. M2018-02251-COA-R3-CV (Tenn. Ct. App. Oct. 22,  2020).

See original opinion for exact language.  Legal citations omitted.

To learn more, see Transmutation in Tennessee Property Division Divorce Law.