TN Home Held Marital Property Even Though Bought with Husband’s Assets
Tennessee law case summary on transmutation in divorce and family law from the Court of Appeals.
Troy Steven Potter v. Christa Gilman Potter – Tennessee divorce and transmutation law
The husband and wife were married in 2001. Each had children from prior marriages, but no children were born of the marriage. The husband was a home builder, and was in the process of building a large home in Hamilton County, Tennessee. They moved to that home upon their marriage, and the wife was a stay-at-home mother for the children, all of whom attended private schools.
They sold that house in 2003 for $1.4 million, and they purchased a new home. The purchase price of the new home was $598,000, and they spent an additional $129,000 in remodeling. In 2006, the wife obtained a job outside the home, and her earnings increased to about $30,000 per year until she was laid off from her job in 2011. The husband’s income as a builder ranged from $62,000 to $165,000 during the last years of the marriage. The parties separated in 2009, and the husband filed for divorce in 2011. The home was placed on the market, but had not sold at the time of trial. Its listing price had been reduced to $549,000 by that time.
The trial court divided the parties’ property. In particular, it valued the home at $500,000 in equity, and split this equally between the parties. The husband objected, and argued that this should have been his personal property. But the trial court had agreed with the wife that this asset had been transmuted into marital property. Dissatisfied with this outcome, the husband appealed to the Tennessee Court of Appeals.
The husband acknowledged that the home had been purchased during the marriage. But he argued that the funds used to purchase it came entirely from the sale of the prior home, which had been his own premarital property.
The Court of Appeals first noted that there is a presumption that property is marital property, especially when it was purchased during the marriage. In order to overcome this presumption, a party must show evidence showing a clear intent to keep it separate. The husband cited a prior case where similar property was held to be separate, but the Court of Appeals pointed out that in the prior case, there had been a definite intent to segregate assets, which was not present in this case. Also, it noted that in the earlier case, both parties were savvy business people. In this case, the husband was a professional home builder who had closed numerous real estate transactions. And he had allowed the property to be titled in both of their names, which the Court saw as strong evidence that the property was to be treated as joint property.
In this case, the evidence showed that the property had been transmuted into marital property by the actions of the parties during the marriage. The owners had treated it as joint property and used it as the marital residence. For these reasons, the Court of Appeals agreed with the wife and the trial court and affirmed the finding that the house was marital property.
The Court of Appeals also examined the division of the marital property and concluded that it had been done properly by the trial court. Therefore, it affirmed the trial court and taxed the costs of appeal against the husband.
No. E2012-02390-COA-R3-CV (Tenn. Ct. App. Aug. 19, 2013).
See original opinion for exact language. Legal citations omitted.
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