Flannary v. Flannary

IN THE SUPREME COURT OF TENNESSEE

AT KNOXVILLE

September 4, 2003 Session

CARROL PRESTON FLANNARY v. JOYCE ANN FLANNARY

Appeal by Permission from the Court of Appeals

Circuit Court for Hawkins County

No. 10161 Ben K. Wexler, Judge

No. E2002-00869-SC-R11-CV - Filed December 16, 2003

We granted permission to appeal to determine whether the trial court erred in dividing as marital

property funds that were missing at the time the divorce complaint was filed. We hold that the

missing funds are not marital property that can be divided between the parties. However, we also

conclude that the trial court may properly consider Husband’s careless handling of those funds in

distributing property that does constitute marital property. Therefore, we affirm the judgment of the

Court of Appeals as modified, and we remand the case to the trial court for reconsideration of its

property division and alimony award.

Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed as

Modified; Case Remanded

JANICE M. HOLDER, J., delivered the opinion of the court, in which FRANK F. DROWOTA , III, C.J.,

and E. RILEY ANDERSON, ADOLPHO A. BIRCH, JR., and WILLIAM M. BARKER, JJ., joined.

Timothy R. Wilkerson and John D. Parker, Kingsport, Tennessee, for the appellant-defendant, Joyce

Ann Flannary.

James H. Beeler, Kingsport, Tennessee, for the appellee-plaintiff, Carrol Preston Flannary.

OPINION

Factual and Procedural Background

The appellee, Carrol Preston Flannary (“Husband”), and the appellant, Joyce Ann Flannary

(“Wife”), were granted an absolute divorce on October 22, 2001. A hearing was held on February

1, 2002, to determine issues that were reserved pending further orders of the trial court. One of the

issues addressed at this hearing was the disposition of funds totaling $48,000 that had been

withdrawn from a savings account by Husband.

Husband testified that he began drawing money out of the account in September of 1999 in

response to the Y2K scare. He withdrew $8,000 to $10,000 at a time in hundred-dollar bills and

placed the funds in his bedroom drawer. He testified that he planned to re-deposit the money in

January of 2000. However, when he went to do so he discovered that the money was gone. Husband

admitted that keeping the money in the drawer was “stupid” and that he never thought of putting the

money in a safe deposit box. Husband alleges that Wife is responsible for taking the money, but

Wife has denied this allegation throughout the proceedings. Wife contends that she did not know

that Husband had withdrawn the money until he accused her of taking it.

In its memorandum opinion, the trial court found that the evidence presented was insufficient

to determine what happened to the money but stated that Husband was “in full control of this money

after it left the bank until it got in that drawer.” The court found that only Husband knew that the

money was in the house and that it was his decision to put it in his bedroom drawer. The court stated

that “[t]here are a lot of other safer places to put [the money]. To put it in a fruit jar and buried [sic]

it in the back yard would have been better than putting it in that drawer, because a lot of things could

have happened to it . . . .” The court concluded that the money was marital property and had to be

“divided like any other marital property.” Consequently, in its order dated March 12, 2002, the trial

court awarded Wife a judgment against Husband in the amount of $24,000, which represented one-

half of the missing funds. In deciding to award Wife only “a little bit of alimony,” the trial court

considered that “[s]he’s getting a pretty good whack of money out of his retirement,” which included

the $24,000 judgment.

A majority of the Court of Appeals vacated the portion of the trial court’s order that awarded

Wife a judgment with respect to the missing $48,000. The majority relied on Brock v. Brock, 941

S.W.2d 896 (Tenn. Ct. App. 1996), and concluded that “[s]ince the money disappeared prior to the

divorce, the Trial Court erred in dividing property which was ‘not there’ as neither Husband nor

Wife was able to show that the other had taken the money.” The majority affirmed the remainder

of the trial court’s judgment.

Judge Charles D. Susano, Jr. filed a separate opinion in which he concurred in part and

dissented in part. Judge Susano disagreed with the majority to the extent it held that the trial court

erred in awarding Wife the $24,000 judgment. He interpreted the trial court’s memorandum opinion

to mean that Husband’s “careless handling of these funds was the efficient cause of their

disappearance,” and he characterized Husband’s handling of the money as “dissipation” for purposes

of Tennessee Code Annotated section 36-4-121(c)(5). We granted review.

Analysis

I. Classification as Marital Property

In divorce cases, a trial court has the authority, upon the request of either party, to equitably

divide the marital estate between the parties. Tenn. Code Ann. § 36-4-121(a)(1) (2001); see also

Manis v. Manis, 49 S.W.3d 295, 306 (Tenn. Ct. App. 2001). Trial courts have broad discretion in

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fashioning an equitable division of the marital estate. See Tenn. Code Ann. § 36-4-121(c) (2001);

Manis, 49 S.W.3d at 306. Because of the court’s broad discretion, its division of assets is not a

mechanical process. Manis, 49 S.W.3d at 306.

Tennessee is a “dual property” state. Smith v. Smith, 93 S.W.3d 871, 875 (Tenn. Ct. App.

2002). Accordingly, the division of a marital estate must start with the classification of the parties’

property. Brown v. Brown, 913 S.W.2d 163, 166 (Tenn. Ct. App. 1994). Property is classified as

either marital or separate property. Id. Only marital property is equitably divided as part of the

marital estate. Tenn. Code Ann. § 36-4-121(a)(1) (2001); Brock v. Brock, 941 S.W.2d 896, 900

(Tenn. Ct. App. 1996). “Marital property” is defined by statute to mean “all real and personal

property, both tangible and intangible, acquired by either or both spouses during the course of the

marriage up to the date of the final divorce hearing and owned by either or both spouses as of the

date of filing of a complaint for divorce.” Tenn. Code Ann. § 36-4-121(b)(1)(A) (2001) (emphasis

added).

Under the definition found at Tennessee Code Annotated section 36-4-121(b)(1)(A), the

missing funds are not “marital property” that is subject to division. It is undisputed that the money

was missing before Husband filed for divorce, and both parties testified that the money was not in

their possession. Furthermore, the trial court concluded that anything could have happened to the

money and stated that “neither one of [the parties] knows what happened to it.” Thus, it appears

from the record that the property was not owned by either of the parties as of the date the complaint

for divorce was filed. Accordingly, this property does not fit within the definition of “marital

property” and should not have been divided as part of the marital estate. Id.; see also Brock, 941

S.W.2d at 900 (stating that “property once owned by a spouse, either as separate property or marital

property, but not owned by either spouse at the time of divorce, is not subject to classification and

division or distribution when the divorce is pronounced”). This conclusion, however, does not end

our analysis as to the effect of Husband’s handling of the funds.

II. Equitable Division of Marital Property and Award of Alimony

A trial court’s division of marital property must be guided by Tennessee Code Annotated

section 36-4-121(c).1 This statute provides that in making an equitable division of marital property

1

In making equitable division of marital property, the court shall consider all relevant

factors including:

(1) The duration of the marriage;

(2) The age, physical and m ental health, vocational skills,

employability, earning capacity, estate, financial liabilities and

financial needs of eac h of the parties;

(3) The tangible or intangible contribution by one (1) party to the

education, training o r increa sed earning pow er of the other p arty;

(4) The relative ability of each pa rty for future acqu isitions of

capital assets and income;

(continued...)

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a trial court must consider all relevant factors. Although we hold that the funds themselves are not

marital property that can be divided between the parties, the trial court may properly consider

Husband’s careless handling of those funds in distributing property that does constitute marital

property.

Tennessee Code Annotated section 36-4-121(c)(5) requires a court to consider “[t]he

contribution of each party to the acquisition, preservation, appreciation, depreciation or dissipation

of the marital or separate property.” Under Tennessee Code Annotated section 36-4-121(c)(11), a

court must consider “[s]uch other factors as are necessary to consider the equities between the

parties.” These provisions require the trial court to consider the actions of the parties throughout the

course of the marriage. See Storey v. Storey, 835 S.W.2d 593, 598 (Tenn. Ct. App. 1992) (looking

at Husband’s excessive spending during the parties’ separation in considering the factors listed in

Tennessee Code Annotated section 36-4-121(c)(5)).

The trial court specifically found that Husband “was in full control of [the] money after it left

the bank until it got in [the] drawer” and that “[h]e was the last person in control of [the funds].”

The court also found that putting the money in a fruit jar and burying it in the backyard “would have

been better than putting it in that drawer, because a lot of things could have happened to it.” These

findings suggest that it was Husband’s careless handling of the funds that caused their disappearance

and that the trial court regarded Husband’s conduct as relevant in considering the equities between

the parties. Husband’s careless handling of the funds could be characterized as a failure to preserve

a marital asset under Tennessee Code Annotated section 36-4-121(c)(5). See Black’s Law

Dictionary 1184-85 (6th ed. 1990) (defining “preservation” as “[k]eeping safe from harm; avoiding

injury, destruction, or decay; maintenance . . . not the creation, but the saving of that which already

exists, and implies the continuance of what previously existed”); see also Barker v. Barker, 992

1

(...continued)

(5) The contribution of each party to the acquisition,

preservation, appreciation, depreciation or dissipation of the

marital or separate property, including the contribution of a party

to the marriage as homemaker, wage earner or parent, with the

contribution of a party as homemaker or wage earner to be given

the same weight if each party has fulfilled its role;

(6) T he value of the se parate pro perty o f each p arty;

(7) The estate of each party at the time of the marriage;

(8) The economic circumstances of each party at the time the

division of property is to become effective;

(9) The tax consequences to each party, costs associated with the

reasona bly foreseeable sale of the asset, and other rea sonably

foreseeable expenses associated with the asset;

(10) The amount of social security benefits available to each

spouse; and

(11) Such other factors as are necessary to consider the equities

between the parties.

Tenn. Cod e Ann. § 36-4-121(c) (200 1).

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S.W.2d 136, 138 (Ark. Ct. App. 1999) (explaining that the trial court’s division of the proceeds from

the sale of the marital home was based on the Husband’s failure to preserve marital assets by wasting

the parties’ savings). In the alternative, since Husband’s careless handling of the funds affected the

equities between the parties, such handling could be regarded as a necessary factor in considering

those equities. See Tenn. Code Ann. § 36-4-121(c)(11) (2001).

In this case, a remand to the trial court is appropriate to allow the trial court to consider the

relevance of Husband’s conduct with regard to the missing funds. On remand, the trial court may

reconsider its equitable division of the marital property in light of our reclassification of the missing

funds. See Langschmidt v. Langschmidt, 81 S.W.3d 741, 750 (Tenn. 2002); Smith, 93 S.W.3d at

880-81. Our reclassification of the funds may also require the trial court to reconsider its award of

alimony. See Tenn. Code Ann. § 36-4-121(a)(1) (2001) (providing that a trial court may award

alimony only after the court has equitably divided the parties’ marital property). Since the trial court

considered Wife’s $24,000 award in awarding Wife only “a little bit of alimony,” on remand, the

court also may reconsider its alimony award. See Langschmidt, 81 S.W.3d at 750; Smith, 93 S.W.3d

at 881.

Conclusion

We hold that the trial court erred in classifying the missing funds as marital property and in

awarding Wife a judgment in the amount of one-half of the missing funds. However, we further

conclude that Husband’s careless handling of those funds may be considered in distributing property

that does constitute marital property. Accordingly, the judgment of the Court of Appeals is affirmed

as modified, and the case is remanded to the trial court for proceedings consistent with this opinion.

Costs of this appeal are taxed to the appellee, Carrol Flannary, and his surety, for which execution

may issue if necessary.

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JANICE M. HOLDER, JUSTICE

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