Wife Takes the Cake Baking Business in Divorce

Tennessee case summary on property classification in divorce.

John Anthony Gentry v. Katerine Wise Gentry

The husband and wife in this Sumner County, Tennessee, case were married in 2009 and had no children.  The wife had owned a cake-baking business since before the marriage.  The husband had worked as an accountant but had lost his job shortly before the marriage.  He was hired by the wife’s business.  During the marriage, the wife submitted a patent application and amended the patent to add the husband as a co-inventor.  The patent application was ultimately denied during the divorce litigation.

The wife filed for divorce in 2013.  During an attempt at reconciliation, the wife signed a stock certificate transferring part of the business to the husband.  However, she never gave the certificate to him and kept it stored in a storage unit that was inaccessible to him.  She ultimately destroyed the certificate.  The husband continued to work for the wife’s business during this time, until she fired him in December 2014.

Prior to trial, the husband filed various contempt motions, all of which were denied.  The final hearing was held in 2016.  The cake business and patent application were deemed the wife’s separate property.  With respect to the business, the trial court noted that it had been started prior to the marriage, the wife was always listed as the sole owner, and there was no evidence of implied partnership.  The court held that the gift of stock was never completed because the certificate was never delivered.  The court also rejected the husband’s claim that he had contributed to an increase in value, noting that he had introduced no evidence of the alleged increase in value.  The husband then appealed to the Tennessee Court of Appeals.

The appeals court first considered a number of pre-trial issues raised by the husband, such as his claim that the trial judge, Joe Thompson, should have recused himself.  After addressing these issues, the appeals court turned to the classification of the business, and first looked at whether there had been a gift of the shares of stock.

The appeals court agreed that the gift had never been completed, because the signed stock certificate was never delivered.  Under Tennessee law, for a gift to be made, the donor must deliver the gift in a manner to surrender all dominion and control.  The court reviewed the testimony and agreed with the lower court that the wife had never made delivery.  It noted that while she had signed the front of the certificate at a marital counseling session, she had never signed the back, and the certificate had never been in the husband’s hands.

The husband next argued that the business should have been marital property under the doctrine of comingling.  For that doctrine to apply, the property must be inextricably mingled with marital property.  The court reviewed the testimony on this point and agreed that there had been no comingling in the case.

The patent application had been classified as joint property.  But since it had been rejected, the court valued it at zero and awarded it to the wife.  The husband argued that this was error.  He believed that the rejection should be appealed.  However, the court agreed that there was no evidence that the appeal would be successful, and agreed with the lower court’s valuation.

After addressing some other issues raised by the husband, the Court of Appeals affirmed in part, reversed in part, and remanded the case.

No. M2016-01765-COA-R3-CV (Tenn. Ct. App. Dec. 28, 2017).

See original opinion for exact language.  Legal citations omitted.

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