                 IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                    June 4, 2013 Session

   LILLIE FRANCHIE HUDDLESTON v. ROBERT LEE HUDDLESTON

                  Appeal from the Chancery Court for Putnam County
                     No. 2010203    Ronald Thurman, Chancellor


                  No. M2012-00851-COA-R3-CV - Filed July 30, 2013


In this divorce action, Husband appeals the trial court’s classification of property, specifically
the appreciation in value of farm property he owned in his own name prior to the marriage
as marital property and of a life insurance policy owned by Wife as her separate property.
Finding that the court erred in its classification of the increase in value of the farm property,
we reverse the judgment in part and remand for further proceedings.

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

R ICHARD H. D INKINS, J., delivered the opinion of the court, in which P ATRICIA J. C OTTRELL,
P. J., M. S., and A NDY D. B ENNETT, J., joined.

William A. Cameron, Cookeville, Tennessee, for the appellant, Robert Lee Huddleston.

Scott L. Lytal, Crossville, Tennessee, for the appellee, Lellie Franchie Huddleston.

                                           OPINION

        Robert Lee Huddleston (“Husband”) and Lellie Franchie Huddleston (“Wife”) were
married in 1969; it was the second marriage for both. Each brought some real property into
the marriage–Husband a farm in Putnam County and Wife a house in Cookeville. Husband
had acquired the farm in pieces over a number of years; the last piece was deeded to him by
his father in 1972. Wife moved to the farm when the parties married and she resided there
until they separated in 2010. During the marriage they bought a vacant lot next to the house
in Cookeville; while they were married, Husband quitclaimed his interest in the house and
the lot to Wife, who subsequently conveyed the house and lot to her sons while retaining a
life estate. Wife later relinquished her life estate and the sons sold the property, using the
proceeds to purchase a life insurance policy covering Wife.
       Wife filed a complaint for divorce on June 2, 2010 on the grounds of irreconcilable
differences and inappropriate marital conduct. Husband filed a timely answer and counter-
complaint for divorce, asserting irreconcilable differences, inappropriate marital conduct and
cruel and inhuman treatment as grounds. Mediation was not successful and the case
proceeded to trial on February 22, 2012.

       The court entered its Final Decree on March 19, granting Husband an absolute
divorce, classifying the parties’ property and dividing the marital property. With respect to
the farm property, which fronted on Lancaster Road and was bisected by Dow Huddleston
Road, the court awarded Wife the portion of the property located on the east side of Dow
Huddleston Road and awarded Husband the property on the west side of the road. The court
also determined that a life insurance policy covering Wife was her separate property.

       Husband appeals the classification of the increase in value of the farm as marital
property and the award of a portion of it to Wife, and the classification of the life insurance
policy as Wife’s separate property.

                                        DISCUSSION

I. T HE F ARM P ROPERTY

        The division of the parties’ marital estate begins with the classification of the property
as separate or marital. Miller v. Miller, 81 S.W.3d 771, 775 (Tenn. Ct. App. 2001). This is
because Tennessee is a “dual property” state, referring to the distinction between “marital
property” and a spouse’s “separate property,” see Smith v. Smith, 93 S.W.3d 871, 875-76
(Tenn. Ct. App. 2002); thus, a spouse’s separate property cannot be included in the marital
estate. Property classification is a question of fact. Mitts v. Mitts, 39 S.W.3d 142, 144-45
(Tenn. Ct. App. 2000). Thus, we review the trial court’s classification using the familiar
standard of review in Tenn. R. App. P. 13(d).

        The trial court held that “the appreciation of the value of the farm located at 998
Lancaster Road in Putnam County is marital property because Lellie Franchie Huddleston
contributed to the appreciation during the marriage.” Husband argues that the facts do not
show that Wife made a substantial and significant contribution to the increase in value and
that the increase in value was due to “appreciation from inflation and increase in value [that]
every other piece of property in rural Putnam County, Tennessee, experienced.”

       The definitions of marital and separate property, as pertinent to the issues in this
appeal, are set out at Tenn. Code Ann. § 36-4-121, as follows:



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       (b)(1)(A) “Marital property” means 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, . . .
               (B) “Marital property” 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, . . .
               ***
               (D) As used in this subsection (b), “substantial contribution” may
       include, but not be limited to, the direct or indirect contribution of a spouse as
       homemaker, wage earner, parent or family financial manager, together with
       such other factors as the court having jurisdiction thereof may determine.

Tenn. Code Ann. § 36-4-121(b)(1)(A), (B) and (D).

       (2) “Separate property” means:
       (A) All real and personal property owned by a spouse before marriage, . . .
        ***
       (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; . . .

Tenn. Code Ann. § 36-4-121(b)(2)(A), (C) and (D).

        The farm property was composed of four parcels, all of which were deeded to
Husband; Husband acquired three of the lots prior to the marriage and the fourth was deeded
to him by his father during the marriage. David Roberson, a real estate appraiser in Putnam
County, testified as an expert witness. Mr. Roberson testified that the value in December
1969 of the three tracts was $42,500.00 and the value of the same tracts as of January 10,
2012, one month prior to the trial, was $300,000.00; Mr. Roberson testified that the value of
the tract Husband received after the marriage was $74,000.00 as of January 10, 2012. He
concluded that the increase in value of the four tracts over the period of the marriage was
$331,500.00.1 The issue presented is whether the court erred in concluding that Wife made
a substantial contribution to the increase in value of Husband’s separate property and,



       1
           Husband does not contest Mr. Roberson’s opinions of value.

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pursuant to that determination, awarding Wife the tract acquired by Husband in 1972 as its
division of the marital property.2

       The court in McFarland v. McFarland, No. M2005-01260-COA-R3-CV, 2007 WL
2254576 (Tenn. Ct. App. Aug. 6, 2007), a case analogous to that at bar, considered whether
the evidence supported the trial court’s determination that the wife’s efforts did not
substantially contribute to the increase in value of the husband’s separate property. The wife
argued that the trial court had misapplied Tenn. Code Ann. § 36-4-121(b)(1)(B) when it
concluded that her activities did not constitute substantial contributions to the increase in
value.3 On review, this court stated that the standard to be employed in applying Tenn. Code
Ann. § 36-4-121(b)(1)(B) is the following:

        Increases in the value of separate property during a marriage will not be
        considered to be marital property unless the parties “substantially contributed”
        to the appreciation in the value of the property. Tenn. Code Ann. § 36-4-
        121(b)(1)(B). While these contributions may be either “direct” or “indirect,”
        Tenn. Code Ann. § 36-4-121(b)(1)(D), they must satisfy two requirements.
        First, the contributions must be “real and significant.” Second, there must be
        some link between the spouses' contributions and the appreciation in the value
        of the separate property.

        When separate property increases in value with no contribution from either
        spouse, that increase remains the separate property of the spouse who owns the
        property, no matter how great the other spouse's contribution to the marriage
        may have been. Thus, when a spouse is asserting that his or her indirect
        contributions resulted in the appreciation of the other spouse's property, the
        pivotal inquiry is whether there was an appreciation in the value of the separate
        property due to the efforts of the spouse who owned it which were aided or
        facilitated in some way by the indirect contributions of the other spouse.



        2
           While there is no issue that the three lots which Husband owned prior to the marriage were his
separate property, he contends that the lot he acquired after the marriage from his father was also his separate
property, because it was acquired “‘by gift, bequest, devise or descent’ from the old family farm.” While
the deed does show that Husband acquired title to the property from his father, there is no indication from
the deed or testimony that Husband acquired this property under circumstances which would make it his
separate property pursuant to Tenn. Code Ann. § 36-4-121(b)(2)(D); consequently, the lot acquired in 1972
is marital property.
        3
          Testimony at trial was that the farm property increased in value from $500,000 in 1990 to
$1,100,000 by 2004 and that the increase in value was driven by real estate market forces.

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McFarland, 2007 WL 2254576 at *6-7 (internal citations omitted).

       In the present case the court determined that Wife “contributed to the appreciation [of
the farm property] during the marriage.” The basis of the court’s holding was the following
testimony of Wife:4

        [S]he worked a few years during the marriage but always maintained the
        marital home and performed the duties of homemaker such as laundry, ironing,
        cleaning, cooking meals, gardening, canning and freezing food from the
        garden, raking leaves, planting flowers, painting rooms, making curtains, and
        helped with farm chores such as driving the tractor, maintaining fencing, and
        cutting and stripping tobacco.5

While the testimony supports a finding that Wife made contributions to the marriage as a
homemaker, the evidence does not support a determination that her efforts contributed to the
increase in the value of the property. The court made no determination as to the cause of the
increase in value and there is no proof that the appreciation in value as testified to by Mr.
Roberson was due to the efforts of either Husband or Wife. Consequently, the court erred
in determining that the increase in value of three lots Husband owned prior to the marriage
was marital property and we reverse that portion of the final order.6




        4
          The was no transcript of the trial, rather Husband and Wife filed Statements of the Evidence in
accord with Tenn. R. App. P. 24; the trial court entered an order approving Wife’s Statement.
        5
          Husband’s only testimony relative to Wife’s contribution was that she “did very little canning or
freezing of vegetables from the garden and very little meal making.”
        6

        Tennessee courts have consistently indicated that where “the appreciation is due solely to
        market factors and not to efforts of either spouse, the increase in value will not be
        considered marital property.” Because the appreciation in the value of the Robin Roost farm
        resulted from the increased value of land for purposes of residential development and did
        not result from the efforts of either Mr. McFarland or Ms. McFarland, there is no basis upon
        which to find that Ms. McFarland substantially contributed to both the preservation and
        appreciation of the property.

McFarland, 2007 WL 2254576 at *7 (internal citations omitted). We have reviewed both of Mr. Roberson’s
appraisals of the three lots and see nothing in the appraisal as of January 1, 2012 that would support a finding
that the increase in value from the retrospective appraisal as of December 1, 1969 was due to any efforts by
either Husband or Wife.

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II. L IFE I NSURANCE P OLICY

       The trial court rejected Husband’s contention that a life insurance policy covering
Wife, which was purchased with the proceeds of sale of the Cookeville home, was marital
property and held that “the proceeds from the sale of the real estate previously owned by
[Wife] is her separate property because [Husband] conveyed any marital interest he might
have had in that real estate to [Wife] by deed.” Husband argues that the record shows that
the insurance policy is marital property because “it was acquired during the marriage from
marital property . . . and was comingled or transmuted into a marital universal life insurance
policy worth over $52,000.00.”

       The Statement of the Evidence recites the trial court’s oral ruling relative to the life
insurance policy as follows:

       The Chancellor found that the wife’s real estate on Louisiana Avenue had been
       her separate property at the time of the marriage and then the parties bought
       adjoining real estate during the marriage which was marital property. Then the
       husband by deed conveyed his interest in both adjoining pieces of real estate
       to the wife and therefore both pieces of real estate became the separate
       property of the wife. The life insurance policy purchased from the sale of this
       real estate and her separate savings was thereafter the wife’s separate property.

The ruling is consistent with Wife’s testimony and two deeds which were introduced into
evidence, one dated April 7, 1986 from Husband and Wife to Wife and the other dated April
30, 1990, from Wife and Husband to Wife’s sons from her first marriage.7

       Husband does not cite any evidence to support his contention that the policy is marital
property and we have found none. To the contrary, the record supports the court’s
determination that Husband conveyed his interest in the Cookeville property to Wife in 1986
and then conveyed any remaining marital interest to her sons in 1990; consequently, he had
no interest in the proceeds from the ultimate sale of the property, which produced the funds
which purchased the policy. The court properly held that the policy is Wife’s separate
property.




       7
           Wife retained a life estate in this deed.

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                                    CONCLUSION

        For the foregoing reasons the judgment of the trial court is affirmed in part and
reversed in part. The case is remanded for the court to divide the lot acquired by Husband
after the marriage in accordance with Tenn. Code Ann. § 36-4-121(c).




                                                 _________________________________
                                                 RICHARD H. DINKINS, JUDGE




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