No Penalty Against TN Wife For Allowing Marital Property Foreclosure

Tennessee law case summary on dissipation in divorce and family law from the Court of Appeals

Jeffery Charles Hayes v. Melissa Marie Hayes – Tennessee divorce dissipation of marital assets.

The husband and wife were married for about six years with no children.  The husband initially worked as a superintendent for his brother’s construction company, and the wife worked as a real estate agent.  During the marriage, the husband left his job and began building houses.  The parties owned a number of houses during the marriage, some of which went into foreclosure.  The trial court concluded that the house in which they were living, which the wife had purchased with the proceeds of an earlier divorce settlement, was the wife’s separate property.  During the marriage, however, wife had executed a quit-claim deed transferring the property to the couple jointly.

During the marriage, the husband had received money for his business from the wife’s father.  At trial, the husband testified that this money had been a gift.  The father, on the other hand, testified that he had viewed it as a loan.  The trial court concluded that the money had been a loan.

Their properties included a number of rental properties.  The husband testified that, at the time of the divorce filing, none of the mortgage payments on those properties were more than 30 days behind.  The wife obtained a restraining order allowing her to collect the rents and not allowing husband to interfere.  During the course of the divorce, the properties went into foreclosure.

At trial, the husband contended that the decision to allow the properties to go into foreclosure amounted to dissipation.  The trial court, however, believed that the wife had made a reasoned business decision to do so.  The husband appealed to the Tennessee Court of Appeals.

The Court of Appeals first affirmed the trial court’s finding that the money from the wife’s father had been a loan.  While there was some evidence to the contrary, the Court of Appeals noted that this was a factual finding of the trial court that  was entitled to deference.

On the issue of dissipation, the Court of Appeals first noted that the husband bore the burden of proof.  And the Court of Appeals was able to point to evidence that the properties had been problematic.  One witness who was familiar with the properties had testified that she would have also allowed them to be foreclosed.  The real estate market was also very unstable at that point.  The Court of Appeals emphasized that the issue of dissipation cannot be decided in hindsight.  In addition, there was no evidence that the wife’s spending habits had changed from those during the marriage.  Since there was evidence supporting the trial court’s finding of no dissipation, the Court of Appeals affirmed.

The Court of Appeals did reverse on the issue of whether the marital residence was marital property.  The trial court had held that the house was the wife’s separate property, but the Court of Appeals reversed.  The Court of Appeals first noted that because the property was jointly held, there is a presumption that it is marital.  Even though this fact was not dispositive, the court noted that the property had become marital property for other reasons.  Many expenses were paid from a joint account.  Even if the husband’s contributions to this account had been minimal, the resulting funds became marital property by virtue of being deposited into the joint account.  For those reasons, the Court of Appeals held that the evidence preponderated against the trial court’s finding and reversed.

No. W2010-02015-COA-R3-CV (Tenn.Ct. App. Oct. 18, 2012).

See original opinion for exact language.  Legal citations omitted.

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