Gift of Real Estate Partnership Was Marital Property When Gifted During Marriage 

Tennessee case summary on property division, classification, and valuation in divorce.

Carolyn Diane Long v. Steven Lawrence Long

The wife filed for divorce in Cumberland County, Tennessee, in 2014.  The trial court divided the parties’ property and there was a first appeal to the Tennessee Court of Appeals, which remanded the case to Judge Larry Michael Warner with instructions to make sufficient factual findings and conclusions to permit review.  Specifically, the dispute involved the classification of the wife’s partnership interest in an entity known as Pioneer Properties and its value.

The husband and wife were originally married in 1984.  They were divorced but remarried in 1987.  The wife’s family had been involved in real estate, and in 1993, her mother and stepfather created and funded the partnership.  The partners were the wife and her siblings.  The husband and wife never contributed funds to the partnership.  When distributions were paid out, the wife deposited them into a joint account.

In 1988, the parties also acquired a property.  They were contemplating divorce at the time, and the wife intended to live there.  The husband quitclaimed his interest to the wife, but they later reconciled and lived together at the house for several years.  They later moved and rented out that property.

Before the first appeal, the trial court awarded the wife the entire interest in the partnership, which the wife valued at over $300,000.  The trial court, however, viewed it as marital property.  The husband argued that it had a higher value, and to offset the value, the court awarded the husband other properties.

In the first appeal, the Court of Appeals noted that there is a presumption that the partnership was marital, since it was acquired during the marriage.  This presumption, however, can be rebutted, with the wife having the burden of proof.  The wife had testified that the interest was a gift, and intended to be separate.  The lower court, however, made no findings on this critical issue, resulting in the remand.

After a hearing, both parties prepared an order, and the trial court adopted the husband’s proposed order.  That order recited that both parties had proferred proposed findings, which the court had reviewed, and that the final order reflected the court’s independent judgment.

The trial court ultimately awarded the wife’s interest solely to her, with the husband receive other property solely.  The wife then appealed to the Tennessee Court of Appeals.  She argued that the trial court erred in adopting verbatim the husband’s findings of fact, without making its own independent judgment.  The appeals court cited a 2014 case which makes clear that the “record must not create doubt that the decision represents the trial court’s own deliberations and decision.”

The appeals court agreed with the wife that the findings were lacking.  In particular, it pointed out that the trial court announced its decision before the proposed findings were prepared.  It also agreed that the issue was properly before the appeals court.  However, it also acknowledged that neither party wanted the case remanded, and it was best to decide the appeal based upon the record that was available.

The key issue in deciding the fate of the partnership was whether it had constituted a gift to the wife.  Here, the court zeroed in on the fact that distributions were paid into a joint account, indicating that at least the distributions, which totaled over $70,000 were gifts to the marriage, as opposed to gifts to just the wife.  It found that this evidence supported a conclusion that the partnership itself was a marital asset.  Especially since the wife had the burden of proof, the Court of Appeals affirmed the lower court’s ruling as to the status of the partnership.

The appeals court also reviewed the overall distribution of the marital estate and concluded that they were equitable, even though not mathematically equal.

For these reasons, the Court of Appeals affirmed the lower court’s judgment in its entirety.

The opinion of the Court of Appeals was penned by Judge Thomas R. Frierson, II, and Judges D. Michael Swiney and John W. McClarty joined.

No.E2020–01350-COA-R3-CV (Tenn. Ct. App. Sep. 27,  2021).

See original opinion for exact language.  Legal citations omitted.

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