Cathy C. Phipps v. William Phipps

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
November 24, 2014 Session

CATHY C. PHIPPS V. WILLIAM PHIPPS
Appeal from the Chancery Court for Claiborne County
No. 17660 Hon. Robert M. Estep, Judge 1

No. E2014-00922-COA-R3-CV - Filed January 27, 2015

In this post-divorce appeal, the husband seeks reversal of the trial court’s classification of a
certificate of deposit as marital property and the grant of alimony. We affirm the decision
of the trial court.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded

J OHN W. M CC LARTY, J., delivered the opinion of the Court, in which D. M ICHAEL S WINEY
and T HOMAS R. F RIERSON, II., JJ., joined.

David H. Dunaway and Rick A. Owens, Lafollette, Tennessee, for the appellant, William
Phipps.

Lee Dan Stone, III, Tazewell, Tennessee, for the appellee, Cathy Phipps.

OPINION

I. BACKGROUND

William Phipps (“Husband”) and Cathy Phipps (“Wife”) were married in March 1973.
Two children were born of the marriage, while a third child was adopted. All three children
have since attained the age of majority. In January 2012, Wife sought a divorce after nearly
39 years of marriage. Husband responded by filing a counter-complaint for divorce.

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 Prior to Husband and Wife’s (collectively “the Parties”) lengthy marriage, Husband
served in the Vietnam War. Husband was in college when he finally met Wife, who worked
in the nursing profession. Following their marriage, Wife eventually became a stay-at-home
mother. Husband retained various jobs and at one point, operated his own coal mining
business, with Wife serving as an administrative assistant. Wife returned to nursing after
Husband suffered a heart attack and sold the business. By the time Wife sought a divorce,
neither of the Parties were employed. The Parties relied on Husband’s disability benefits
from the Social Security Administration and Veterans Affairs (“VA”) and their significant
monetary assets that they had amassed during their lengthy marriage. Husband had also
recently received a lump sum award from VA for retroactive benefits a few months before
Wife filed her complaint. The benefits, in the amount of approximately $125,399, were
awarded as a result of Husband’s exposure to Agent Orange during the Vietnam War. The
award letter reflects that a portion of the retroactive benefits was attributable to Husband’s
marriage status. The benefits were automatically deposited into their joint checking account;
however, Husband, along with Wife, later purchased a certificate of deposit in the amount
of $110,000.

During the pendency of the hearing on the complaint, the court awarded Wife spousal
support at the rate of $2,500 a month. Prior to the hearing, the Parties stipulated that
statutory grounds existed to support the request for divorce. As pertinent to this appeal,
Wife, who was 61 years old at the time of the hearing, testified that she and Husband
separated in January 2012. However, she acknowledged that she remained on the property
in a garage apartment until March 2012. She stated that she was unable to move until she
received spousal support. She explained that shortly before their separation, Husband
withdrew approximately $9,000 from their savings account and $4,000 from their checking
account, leaving her with approximately $1,000 and no income.

Wife acknowledged that she also withdrew money from the certificate of deposit that
they opened after receiving Husband’s lump sum benefits from VA. She asserted that she
eventually returned the money. She recalled that the retroactive benefits were initially
deposited into their joint checking account but that she and Husband later purchased a
certificate of deposit. She asserted that Husband decided to purchase a joint certificate of
deposit because he believed that she “was a big part in him getting this VA settlement.” She
stated that he never claimed that the money did not belong to her but that he considered it
joint property.

Wife testified that Husband failed to forward her mail to her once she left the
residence. She asserted that as a result, she missed the deadline for renewing her nursing
license. She stated that she had practiced nursing for approximately 38 years. She
acknowledged that at times, she was not employed as a nurse but was responsible for raising

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the children and maintaining the home. She returned to nursing in 1993, when Husband had
a heart attack.

Wife testified that she suffered from mitral valve prolapse and was required to take
medication for her condition. She related that her doctor also found two masses in her right
breast and one mass in her left breast. She explained that she underwent breast augmentation
surgery in 1980 and that the doctor could not perform a biopsy until the implants were
removed. She asserted that she had also been diagnosed with a malignant melanoma and
would have to receive continuous treatments for the remainder of her life. She stated that she
did not intend to return to the nursing profession or any other profession because of her
various health issues.

Wife testified that while she and Husband were married, he drew approximately
$8,000 per month from various sources for their living expenses. She related that he drew
VA benefits and Social Security benefits and that he also drew $1,500 per month from an
annuity. She asserted that her temporary alimony was sufficient to maintain her frugal
standard of living, with the exception of her additional medical bills.

As pertinent to this appeal, Husband testified that he was in the Air Force for
approximately three years and eight months. He related that upon his discharge, he worked
at various places and obtained an engineering degree. He stated that he eventually started
his own business, Black Mountain Mining and Burnside Excavating, but that he sold
everything approximately three years later when he had a heart attack. He established several
retirement and savings accounts throughout the marriage to supplement his income once he
retired. He claimed that he suffered from various health issues and that he would probably
never work again.

Husband testified that his retroactive VA benefits were automatically deposited into
their joint checking account. He purchased a certificate of deposit with Wife because he
wanted her to receive the benefits when he died. He explained that he thought he was dying
on more than one occasion when his health drastically deteriorated in 2011. He
acknowledged that the way in which they purchased the certificate of deposit allowed Wife
equal access to the money.

Husband conceded that Wife worked throughout the marriage and also stayed home
with the children at times. He admitted that Wife returned to work when he suffered from
a heart attack and that she assisted him in obtaining his VA benefits. He claimed that his
relationship with Wife had been strained for several years. He acknowledged that a family
conflict involving his grandchild was partly to blame for their deteriorating relationship.

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 Husband testified that his monthly income totaled $6,936. He stated that he recouped
approximately $4,156 in VA benefits per month and $1,780 in Social Security benefits per
month. He acknowledged that he also withdrew approximately $1,000 per month from
another account. He claimed that he no longer depended upon the $1,000 from the separate
account because he had been required to remit that money as temporary alimony pending the
divorce hearing. He asserted that he also remitted approximately $1,300 per year for
homeowner’s insurance and $1,500 per year for property taxes. He stated that he was also
responsible for remitting payment for Wife’s medical insurance. He conceded that he was
still able to support himself even after remitting payment for these extra expenses.

Following the presentation of the above evidence, the trial court granted the request
for divorce. As pertinent to this appeal, the court classified the certificate of deposit opened
with Husband’s retroactive VA benefits as marital property as a result of transmutation. The
court then divided the marital assets, awarded Wife alimony at the rate of $1,500 per month
until she reached the age of 65, and ordered Husband to remit payment for Wife’s health
insurance until she was eligible for Medicare at the age of 65. This timely appeal followed.

II. ISSUES

We restate the issues raised on appeal by Husband as follows:

A. Whether the trial court erred in classifying the certificate of deposit as
marital property.

B. Whether the trial court erred in awarding alimony to Wife.

Wife raises an issue on appeal for our consideration that we restate as follows:

C. Whether the trial court erred in setting the rate and duration of the alimony
award.

III. STANDARD OF REVIEW

The factual findings of the trial court are accorded a presumption of correctness, and
we will not overturn those factual findings unless the evidence preponderates against them.
See Tenn. R. App. P. 13(d); Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001). A trial
court’s conclusions of law are subject to a de novo review with no presumption of
correctness. S. Constructors, Inc. v. Loudon Cnty. Bd. of Educ., 58 S.W.3d 706, 710 (Tenn.
2001).

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 The trial court’s classification and division of property is reviewed de novo with a
presumption that the trial court’s factual findings are correct. See Watters v. Watters, 959
S.W.2d 585, 588 (Tenn. Ct. App. 1997). An appellate court may alter the trial court’s
division of property only if the trial court misapplies the law or if the evidence preponderates
against the trial court’s factual findings. See Wade v. Wade, 897 S.W.2d 702, 715 (Tenn. Ct.
App. 1994). We must give great weight to the trial court’s decisions in dividing marital
assets, and “‘we are disinclined to disturb the trial court’s decision unless the distribution
lacks proper evidentiary support or results in some error of law or misapplication of statutory
requirements and procedures.’” Keyt v. Keyt, 244 S.W.3d 321, 327 (Tenn. 2007) (quoting
Herrera v. Herrera, 944 S.W.2d 379, 389 (Tenn. Ct. App. 1996)).

Likewise, trial courts have broad discretion in awarding spousal support. Bratton v.
Bratton, 136 S.W.3d 595, 605 (Tenn. 2004). “Accordingly, ‘[a]ppellate courts are generally
disinclined to second-guess a trial judge’s spousal support decision unless it is not supported
by the evidence or is contrary to the public policies reflected in the applicable statutes.”’
Bogan v. Bogan, 60 S.W.3d 721, 727 (Tenn. 2001) (quoting Kinard v. Kinard, 986 S.W.2d
220, 234 (Tenn. Ct. App. 1998)). The role of an appellate court in reviewing an award of
spousal support is to determine whether the trial court applied the correct legal standard and
reached a decision that is not clearly unreasonable. Id. at 733. Thus, an appellate court must
review a trial court’s decision regarding alimony using the deferential abuse of discretion
standard. See Bratton, 136 S.W.3d at 605. If a discretionary decision is within a range of
acceptable alternatives, we will not substitute our judgment for that of the trial court simply
because we may have chosen a different alternative. White v. Vanderbilt Univ., 21 S.W.3d
215, 223 (Tenn. Ct. App. 1999).

IV. DISCUSSION

A.

Husband argues that his retroactive VA benefits were not subject to division by the
trial court because his benefits were never transmuted into marital property. He explains that
he purchased a certificate of deposit with the VA funds solely to ensure that the funds would
transfer to Wife in the event of his death. He notes that he did not transfer the amount that
was attributable to Wife, namely $15,399, because he sought to separate his benefits from
Wife’s portion. Wife responds that Husband failed to present evidence indicating an intent
that the property should remain separate when the property was used to purchase a joint
certificate of deposit that allowed her equal access.

Because Tennessee is a “dual property” state, a trial court must identify all of the
assets possessed by the divorcing parties as either separate or marital property before

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dividing the marital estate. See generally Tenn. Code Ann. § 36-4-121(a)(1); see Snodgrass
v. Snodgrass, 295 S.W.3d 240, 246 (Tenn. 2009). The classification of property as either
marital or separate property is a question of fact for the trial court. Mitts v. Mitts, 39 S.W.3d
142, 144-45 (Tenn. Ct. App. 2000).

Separate property is not part of the marital estate and is therefore not subject to
division. See Cutsinger v. Cutsinger, 917 S.W.2d 238, 241 (Tenn. Ct. App. 1995). Separate
property is defined as,

(A) All real and personal property owned by a spouse before marriage,
including, but not limited to, assets held in individual retirement accounts
(IRAs) as that term is defined in the Internal Revenue Code of 1986 as amended;

(B) Property acquired in exchange for property acquired before marriage
except when characterized as marital property under subdivision (b)(1);

(C) Income from and appreciation of property owned by a spouse before
marriage except when characterized as marital property under subdivision (b)(1);

(D) Property acquired by a spouse at any time by gift, bequest, devise or descent;

(E) Pain and suffering awards, victim of crime compensation awards, future
medical expenses, and future lost wages; and

(F) Property acquired by a spouse after an order of legal separation where the
court has made a final disposition of property.

Tenn. Code Ann. § 36-4-121(b)(2). In contrast, “marital property includes all property
owned as of the date of the filing of the complaint for divorce or acquired up to the date of
the final divorce hearing.” Larsen-Ball v. Ball, 301 S.W.3d 228, 233 (Tenn. 2010); see Tenn.
Code Ann. § 36-4-121(b)(1). Marital property also

includes income from, and any increase in value during the marriage of,
property determined to be separate property in accordance with subdivision
(b)(2) if each party substantially contributed to its preservation and
appreciation, and the value of vested and unvested pension, vested and
unvested stock option rights, retirement or other fringe benefit rights relating
to employment that accrued during the period of the marriage.

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Tenn. Code Ann. § 36-4-121(b)(1)(B). “[S]eparate property can become part of the marital
estate due to the parties’ treatment of the separate property.” Eldridge v. Eldridge, 137
S.W.3d 1, 13 (Tenn. Ct. App. 2002). “The doctrines of transmutation and commingling
provide an avenue where separate property can become marital property.” Id.

This court has stated that

[transmutation] occurs when separate property is treated in such a way as to
give evidence of an intention that it become marital property. One method of
causing transmutation is to purchase property with separate funds but to take
title in joint tenancy. This may also be done by placing separate property in
the names of both spouses. The rationale underlying both these doctrines is
that dealing with property in these ways creates a rebuttable presumption of a
gift to the marital estate. This presumption is based also upon the provision
in many marital property statutes that property acquired during the marriage
is presumed marital. The presumption can be rebutted by evidence of
circumstances or communications clearly indicating an intent that the property
remain separate.

Batson v. Batson, 769 S.W.2d 849, 858 (Tenn. Ct. App. 1988) (internal citations and
quotations omitted).

While the retroactive VA benefits were awarded for Husband’s service prior to the
marriage, Husband used the funds to purchase a joint certificate of deposit with Wife, thereby
creating a rebuttable presumption that the certificate of deposit was marital property.
Husband argues that he only intended for the funds to transfer to Wife upon his death.
However, the certificate of deposit allowed Wife equal access to the money throughout
Husband’s lifetime and required both signatures for either party to access the money. Cf.
Burns v. Burns, No. 01-A-01-9705-CH-00218, 1997 WL 691533, at *4-5 (Tenn. Ct. App.
Nov. 7, 1997) (holding that a certificate of deposit was the husband’s separate property when
the husband evidenced an intent to only relinquish control of the certificate upon his death).
Husband simply submitted no evidence to establish that he ever intended to keep the
retroactive VA benefits as his separate property during the marriage. On the contrary,
Husband’s intent to keep the benefits as his separate property surfaced only after the demise
of the marriage. See Gorbet v. Gorbet, No. W2011-01879-COA-R3, 2012 WL 4847090, at
*11 (Tenn. Ct. App. Oct. 11, 2012) (holding that property purchased in anticipation of the
marriage and later used as the marital residence was marital property). Accordingly, the
evidence supports the determination of the trial court that the certificate of deposit purchased
with the VA benefits was marital property.

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 B. & C.

Husband argues that the trial court erred in awarding Wife alimony when she is fully
capable of supporting herself with her nursing degree and the significant monetary assets she
received as a result of the divorce. He claims that he, unlike Wife, is unable to work as a
result of his permanent and total disabilities. Wife responds that the court erred in setting the
rate and duration of her alimony. She requests alimony at the rate of $3,000 per month until
she reaches the age of 66, the age at which she will be eligible to draw full benefits from the
Social Security Administration.

“Alimony” is defined, in pertinent part, by Black’s Law Dictionary, 9th ed., as

[a] court-ordered allowance that one spouse pays to the other spouse for
maintenance and support . . . after they are divorced. Alimony is distinct from
a property settlement.

Tennessee recognizes four different types of alimony: rehabilitative alimony, transitional
alimony, alimony in futuro, and alimony in solido. Each type addresses a specific need. The
trial court in this case awarded transitional alimony. Transitional alimony may be awarded
to assist the disadvantaged spouse in adjusting to the economic consequences of the divorce.
Tenn. Code Ann. § 36-5-121(g)(l).

In determining whether to award alimony, the court must first consider whether the
spouse seeking alimony is economically disadvantaged. Perry, 114 S.W.3d at 467. “Once
the trial court has found a party to be economically disadvantaged relative to his or her
spouse, it must determine the nature, amount, length of term, and manner of payment of the
award.” Id. at 467. In setting the type, duration, and amount of support, courts are guided
by the following list of factors:

(1) The relative earning capacity, obligations, needs, and financial resources
of each party, including income from pension, profit sharing or retirement
plans and all other sources;

(2) The relative education and training of each party, the ability and
opportunity of each party to secure such education and training, and the
necessity of a party to secure further education and training to improve such
party’s earnings capacity to a reasonable level;

(3) The duration of the marriage;

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 (4) The age and mental condition of each party;

(5) The physical condition of each party, including, but not limited to, physical
disability or incapacity due to a chronic debilitating disease;

(6) The extent to which it would be undesirable for a party to seek employment
outside the home, because such party will be custodian of a minor child of the
marriage;

(7) The separate assets of each party, both real and personal, tangible and intangible;

(8) The provisions made with regard to the marital property, as defined in §
36-4-121;

(9) The standard of living of the parties established during the marriage;

(10) The extent to which each party has made such tangible and intangible
contributions to the marriage as monetary and homemaker contributions, and
tangible and intangible contributions by a party to the education, training or
increased earning power of the other party;

(11) The relative fault of the parties, in cases where the court, in its discretion,
deems it appropriate to do so; and

(12) Such other factors, including the tax consequences to each party, as are
necessary to consider the equities between the parties.

Tenn. Code Ann. § 36-5-121(i).

In addition to the factors found in Tennessee Code Annotated section 36-5-121(i), the
two most relevant factors in determining the amount of alimony awarded are the
economically disadvantaged spouse’s need and the obligor spouse’s ability to pay.
Robertson, 76 S.W.3d at 342. When considering these two factors, the primary consideration
is the disadvantaged spouse’s need. Watters v. Watters, 22 S.W.3d 817, 821 (Tenn. Ct. App.
1999). Courts must also take into consideration the different roles a spouse may have in a
marriage when considering an award of alimony. Tenn. Code Ann. § 36-5-121(c). “There
are no hard and fast rules for spousal support decisions, and such determinations require a
‘careful balancing’ of the relevant factors.” Miller v. Miller, No. M2002-02731-COA-R3-
CV, 2003 WL 22938950, at *3 (Tenn. Ct. App. Dec. 10, 2003) (citing Anderton v. Anderton,
988 S.W.2d 675, 682-83 (Tenn. Ct. App. 1998)).

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 A number of the support factors weigh in favor of affirming the alimony awarded to
Wife. Wife was clearly educated, but she needed additional education to update her nursing
license. Unlike Husband, she lacked funds from sources other than her division of the
marital property to sustain her. Tenn. Code Ann. § 36-5-121(i)(1), (2). The marriage was
of a long duration, namely 39 years. Tenn. Code Ann. § 36-5-121(i)(3). Wife also made
substantial contributions to the marriage as a homemaker and as Husband’s caretaker
throughout the marriage. Tenn. Code Ann. § 36-5-121(i)(10). The remaining factors appear
equally weighted or inapplicable. Indeed, the Parties were both nearing retirement age and
suffered from numerous physical ailments. However, the record reflects that Wife was
economically disadvantaged as compared to Husband and in need of support. Wife testified
that she was unable to support herself without assistance from Husband and that she was
even unable to leave the residence until she was awarded spousal support. Despite his
disability, Husband had additional sources of income, thereby providing him with the ability
to support Wife. Accordingly, we conclude that the trial court did not abuse its discretion
in awarding transitional alimony to Wife. This conclusion does not end our inquiry because
Wife requests an increase in the rate and duration of her award.

While Wife is economically disadvantaged as compared to Husband, she, like
Husband, received a significant portion of the marital estate. Husband was also tasked with
remitting payment for Wife’s medical insurance until she is eligible for Medicare at the age
of 65. Unlike Husband, Wife is likely capable of seeking some form of employment if
necessary to sustain her before she is eligible for full benefits from the Social Security
Administration. With these considerations in mind, we further conclude that the trial court
did not abuse its discretion in awarding $1,500 to Wife until she reached the age of 65.

V. CONCLUSION

The judgment of the trial court is affirmed, and the case is remanded for such further
proceedings as may be necessary. Costs of the appeal are taxed one-half to the appellant,
William Phipps and one-half to the appellee, Cathy Phipps.

______________________________________
JOHN W. McCLARTY, JUDGE

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