Court Lacks Authority to Transfer Property Owned by LLC

Tennessee case summary on property division in divorce.

TN divorce court doesn’t have authority to award property owned by LLC, but can award the LLC’s interest.

Louise Ann Sexton v. Michael Bryant Sexton

The wife in this Knox County, Tennessee, case filed for divorce in 2018.  The filing of the case put into effect the automatic statutory injunction under a Tennessee statute, and both parties signed a document acknowledging that injunction.

The husband was the owner of real estate, all of which were purchased during the marriage.  At some point, the title to those properties was transferred to an LLC, at least part of which was owned by the husband.   The husband claimed that the LLC was owned by his father, but offered no evidence of that alleged ownership.  The trial court found that the husband organized and maintained the LLC, and used personal funds to renovate and repair the properties and pay taxes.

The trial court awarded those properties to the wife, and ordered the husband or an authorized representative of the LLC to execute a quit-claim deed to the wife.

The husband appealed to the Tennessee Court of Appeals.

The husband argued that the properties owned by the LLC were not marital property.  The appeals court pointed out that trial courts have a great deal of discretion when it comes to allocation of property.  The appeals court agreed with the lower court that the husband was 100% owner of the LLC.  It noted that the lower court acted properly in not accrediting husband’s testimony that his father actually owned it.  Therefore, it affirmed this finding.

The husband fared better, however, when he argued that the trial court erred in ordering him to convey the property on behalf of the LLC.   He argued that the LLC was not a party to the case, and that the trial court over-stepped its authority.

The appeals court agreed, but the husband’s victory was pyrrhic.  It remanded the case and noted that the lower court should instead award the wife the entirely of the interest in the LLC, rather than the property owned by the LLC. 

After addressing some other issues, the Court of Appeals remanded the case to the trial court.

No. E2023-00136-COA-R3-CV (Tenn. Ct. App. Jan. 26, 2024).

See original opinion for exact language.  Legal citations omitted.

To learn more, see Property Division in Tennessee Divorce and view our video Is Tennessee a 50 50 divorce state?