Determining equitable distribution as part of ending a marriage represents many challenges. In a recent Tennessee case, a formerly married couple returned to court on a divorce appeal. Quite simply, the dispute involved dividing the farm.
Before getting into the specifics of Anderson v. Anderson, it’s critical to understand the differences between separate property and marital property. After all, the distinction matters when it comes to equitably determining how assets are divided.
As you might surmise, marital property is subject to distribution; separate property is not. Although T.C.A. § 36-4-121 explains what constitutes marital property, that doesn’t mean there are always clear cut lines.
Therefore, it is not so uncommon for one party to disagree with the court’s differentiation between the two. A husband or wife might file a divorce appeal if the court decided something they felt was separate property should be equitably distributed.
Likewise, one of the parties may feel just the opposite. If they were denied assets they considered as acquired during the marriage, they could decide to ask the Court of Appeals to look at the case. The latter is what prompted Marilyn Kay Anderson to file an appeal after she and James Cephas Anderson divorced.
Dividing the Farm: Separate or Marital Property
According to the case history, the Andersons met in 1988. James lived in Robertson County and operated a farm. He and his brother jointly owned a 103-acre tract of land. In 1990, James expanded his farming operation with the purchase of a 197-acre tract.
During this time period, Marilyn lived in Nashville and stayed at the farm on weekends. The couple didn’t marry until 1995. They then moved into a trailer on the larger land tract. James added his wife to his credit line and checking account. However, he didn’t add Marilyn’s name to the deed for either property.
Marilyn worked, and both parties deposited their income into the joint checking account. They used the money to pay all of their personal and business expenses, including mortgage payments on the larger tract of land.
In 2002, the Andersons purchased another tract of land, and it was placed in both names. They ultimately built their marital home on the 197-area tract. They financed the home with loans secured on the property that they jointly owned.
When the parties separated in 2015, the State of Tennessee initiated an eminent domain action to condemn part of the property they owned together. They used part of the money they received from the State to pay off their mortgage. The rest was deposited into the joint checking account.
Ultimately, Marilyn decided to split up the money in the joint account. She opened up a new account in her name alone after taking half of the funds.
James’ mother died during that same year. His late mother’s will granted James the option of purchasing the J.B. Anderson Family Farm for $150K. James withdrew money from the joint checking account and took out a loan in his name. The deed to this farm was in James’ name alone.
A few months after the transaction occurred, Marilyn filed for divorce, and James filed a counter-complaint. Fast forward to 2017 and the State of Tennessee remitted additional monies associated with the condemnation of the property taken over by eminent domain. The court equally divided the proceeds and deemed the division as “each part[y]s’ separate property.”
Divorce Appeal – Wife Contended Other Tracts Were Marital Property
During the divorce proceedings after the divorce appeal, Marilyn contended that the original tracts of land held by James in his name alone also constituted marital property. She cited the doctrine of transmutation in making her assertions. Alternatively, Marilyn claimed that the increase in the value of the land represented marital property because of her contributions.
Additionally, Marilyn felt she was due equitable distribution of the J.B. Family Farm asset. After all, James used funds from their joint account to purchase it while the couple was still married.
As far as Janes was concerned, only the marital residence was marital property and subject to equitable distribution. He contended that everything else was his separate property.
The trial court agreed that some of the tracts represented the husband’s separate property. When it came down to equitable distribution, the court found that as a result, James’ separate property was worth substantially more than that assessed to Marilyn. Therefore, in deciding equitable distribution, the wife was allocated a larger portion of the marital estate. More specifically, she received 59%.
Nevertheless, Marilyn disagreed with the court’s determination and filed an appeal. The Court of Appeals disagreed with portions of the lower court ruling. It returned the case back to the lower courts. It felt that the parties “intended for some portion of the land to transmute into marital property” and not just the marital residence itself.
The Court of Appeals further decided it would be necessary to determine the value of the entire tract so it could be equitably distributed. The reclassification as marital property could then change the existing distribution award.
There’s no doubt that determining what constitutes separate property versus marital property can be confusing. At Martin Heller Potempa & Sheppard, PLLC, we can help you through the process. Contact us to schedule an appointment.