Transmutation: When Separate Property Becomes Marital Property in Tennessee
Tennessee law case summary on transmutation and property division law in Tennessee divorce and family law from the Tennessee Court of Appeals.
Transmutation: When separate property becomes marital property
CHAS ALAN SANDFORD v. KRISTINE ELAINE SANDFORD MCKEE – Tennessee property division law
In this case, the wife argued that based on the rule of transmutation, the property in question went from being separate property to marital property during the course of the marriage.
The husband, Chas Sandford, and the wife, Kristine Sandford Mckee were married for eight years and had four children together. In 1997, two years prior to the marriage, the husband purchased 63 acres of real property with a house. The land was split into two parcels. One parcel was 53 acres in size, with an old barn on it. The other property was ten acres and contained the house. Shortly before marrying, in 1999, the husband took out a mortgage on the house and ten acres and had both parcels appraised. The ten acres and the house were appraised at $1,050,000 and the 53 acres at $684,300.
The 53 acres and the barn
The husband started renovations to convert the barn to a guesthouse before the couple married. The husband testified that this was his full time work. He also testified that the wife’s father, a builder by profession, assisted him with the building over a one week period. The wife testified that she also helped with the design of the guesthouse and with some of the physical work. She also testified to working on another barn on the 53 acres.
In December 2006, the husband received a mortgage for the 10 acres and the house in the amount of $1,404,000. In June 2007 he obtained a home equity loan in the amount of $150,000. On both loans, the husband and wife signed the Deeds of Trust as “borrowers”.
The trial court ruled that the house and the ten acres was the husband’s separate property, but to the extent that there was appreciation on that land, the appreciation was marital property according to Tenn. Code Ann. § 36-4-121(b)(1)(B) because of the wife’s contribution to its upkeep and improvements. The trial court also ruled that the remaining 53 acres and the barn was the husband’s separate property entirely and that the wife had no ownership or claims to that parcel since she made no substantial contribution to its appreciation. In addition, while the market value of the home and ten acres was $1,400,000, the mortgage was the same amount and the husband is fully responsible for the entire mortgage. While there was $350,000 in equity, which is marital property, he was also responsible for the $350,000 mortgage debt, so the court gave him the ten acres and the house. The wife appealed, claiming both parcels transmuted into marital property during the marriage.
The wife argued on appeal that both properties transmuted into marital property. By signing the deeds of trust on the mortgage and the home loan, she became “an essential party” to the loan, and that the husband benefitted an additional $800,000 in loans as a result of her signature. While the husband benefitted from her signature, she became a partner equally responsible for the debt. The result was that the property transmuted from separate to marital.
The court held that transmutation occurs when separate property is treated in such a way as to prove that the intention is to turn it into marital property. Transmutation occurs by placing separate property or property bought with separate funds in the names of both spouses. In another case, cited by the wife, a woman signed the loan used to refinance a home her husband had bought prior to that marriage. In that case, however, the wife also helped pay back the loans, which the wife did not do in this case. The wife’s signatures alone did not, according to the appellate court, transfer rights in the property but were rather a standard procedure required by banks for obtaining a loan.
The appeals court held that there was no evidence showing the husband had intent to transfer the property. In his testimony he made it clear that he did not intend to convert the property or the guesthouse into marital property. The court held that the wife brought no evidence that showed intention to convert the 53 acres or the ten acres into marital property and upheld the decision of the lower court.
No. M2010-00562-COA-R3-CV (Tenn. Ct. App. Sep. 27, 2012).
See original opinion for exact language. Legal citations omitted.
To learn more, see Transmutation in Tennessee Property Division Divorce Law and Tennessee Property Division Divorce Laws & Factors | Answers to FAQs. Memphis divorce attorney, Miles Mason, Sr., practices family law exclusively and is founder of the Miles Mason Family Law Group, PLC. Buy The Tennessee Divorce Client’s Handbook: What Every Divorcing Spouse Needs to Know, available on Amazon and Kindle. To schedule your confidential consultation, call us today at (901) 683-1850.
