                IN THE COURT OF APPEALS OF TENNESSEE
                             AT JACKSON
                                  June 21, 2016 Session

     ROBERT HAROLD DOUGLAS v. SUSAN MERCEDES DOUGLAS

                 Appeal from the Chancery Court for Benton County
                   No. 2847    Carma Dennis McGee, Chancellor
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                 No. W2015-02044-COA-R3-CV – Filed August 8, 2016
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In this divorce proceeding, Husband appeals from the trial court’s classification of an account
as Wife’s separate property. On appeal, Husband asserts that the account is marital property
based on the doctrine of transmutation. Discerning no error, we affirm.

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

J. STEVEN STAFFORD, P.J.,W.S., delivered the opinion of the court, in which W. NEAL
MCBRAYER, and KENNY ARMSTRONG, JJ., joined.

Andrea D. Sipes and Lowe Finney, Jackson, Tennessee, for the appellant, Robert Harold
Douglas.

George Robert Whitfield III, Paris, Tennessee, for the appellee, Susan Mercedes Douglas.

                                         OPINION

                                       BACKGROUND

       Robert Harold Douglas (“Husband”) filed a complaint for divorce against Susan
Mercedes Douglas (“Wife”) on July 9, 2013. The parties married in 1995 and separated
sometime during the summer of 2013. The parties had one child, who reached majority while
the divorce was pending. Although this divorce involved multiple issues, the sole issue on
appeal concerns the classification of a Wells Fargo account (“the Account”) that contained
funds that Wife inherited from her late father. At the time of trial, the Account had an
approximate value of $2.4 million. The parties do not dispute that the Account was funded
solely by monies inherited by Wife after her father’s death in 2010.
        The trial court conducted a trial on July 9 and 10, 2015. Due to the limited scope of
this appeal, we only recite the parties’ testimony that is related to the Account. Except where
otherwise indicated, the facts concerning the Account are relatively undisputed. Wife
testified that the Account contained only funds that she inherited from her late father’s estate.
Her financial advisor, Mr. Doug Golden, testified that he met with Wife at the time she
opened the Account in September 2010. Husband was not involved in the creation of the
Account. After weighing her options for setting up the Account, Wife decided to establish the
Account as a joint account with a right of survivorship in both her and Husband’s names.
Wife testified that she decided to create the joint account with right of survivorship so that, in
the case of her death, the Account would avoid being subject to probate. In addition, she
stated that the inheritance tax consequences were less with a joint account with a right of
survivorship. Wife testified that, when she set up the Account, she was “still in the middle”
of the four-year-long probate process for her father’s estate, and she did not “want anything
like that to happen.”

         Approximately four to six months after establishing the Account, Wife began
withdrawing $5,000.00 per month from the Account and has continued to do so. She testified
that she used the money to “support family, buy big ticket items like the Mercedes, the red
350 truck, the living quarters horse trailer, build the barn, buy some more adjacent property. .
. . It was thirty-something acres.” She testified that Husband never deposited or withdrew any
funds from the Account. Additionally, Husband did not participate in the management of the
Account. Wife stated that she met with Mr. Golden often, sometimes as often as weekly.

        The parties held the Account jointly until sometime during the summer of 2012. At
this time, Wife contacted Wells Fargo to remove Husband from the Account. Wife testified
that she did this again for tax purposes. However, she also conceded that shortly prior to
taking this action, she and husband had been experiencing marital difficulties. Wife testified
that the reason she wanted to change the names on the Account was to avoid certain taxes
and make it easier for her daughter to have access to the funds in case Wife died. When Wife
asked Husband for his opinion on the transfer, she stated that he did not care and told her to
do “whatever [she] wanted.” Wife obtained the transfer letter from Wells Fargo to begin the
process for removing Husband from the Account. She testified that she signed the document
upon receiving it, and “then I put it in his bowl where his keys are.”

        Several weeks passed, according to Wife, and Husband had not signed the letter. She
stated that she asked Husband again to sign the document. She testified that she found it on
the counter several days later signed, but Wife recognized that the parties’ daughter had
signed Husband’s name. Wife stated that the parties’ daughter often signed documents on
behalf of Husband. The parties’ daughter, however, testified that Wife asked her to sign
Husband’s name. Husband also testified that he did not give the daughter permission to sign
his name. Husband testified that he had no knowledge that he had been removed from the
Account until the parties separated in 2013.
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       The trial court entered an order declaring the parties divorced on July 27, 2015. At this
time, all other issues were reserved pending further rulings from the trial court. On August
15, 2015, the trial court issued a written ruling finding that the Account was Wife’s separate
property. The trial court found that Wife did not intend to gift the funds to the marital estate
and that no evidence existed linking Husband’s contributions and any appreciation in value
of the Account. Husband timely appealed.

                                                         ISSUE1

      Husband presents one issue for review: whether the trial court erred by classifying
the Account as separate property that had not been transmuted?

                                              STANDARD OF REVIEW

       The trial court’s findings regarding questions of fact are presumed correct unless the
evidence preponderates otherwise. Tenn. R. App. P. 13(d). The classification of particular
property as marital or separate is a question of fact to be determined in light of all the
relevant circumstances. See Snodgass v. Snodgrass, 295 S.W.3d 240, 245 (Tenn. 2009).
However, questions of law are reviewed de novo with no presumption of correctness. Union
Carbide Corp v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).

                                                     DISCUSSION

        Husband challenges the trial court’s determination that the Account never transmuted
into marital property and remained Wife’s separate property. Husband asserts that Wife
intended for the money to be a gift to “help her family.” Additionally, Husband claims that
the transfer of the money into an Account only in Wife’s name was procured through fraud,
and thus, was ineffective to render it separate property again.




        1
          As an initial matter, we note that both parties failed to present this Court with a record that had been
culled down to only relevant materials pursuant to their obligations in Tennessee Rule of Appellate Procedure
24. The technical record appears to contain a litany of documents unrelated to the Account at issue, such as
restraining orders, motions for pendente lite support, various other motions, parenting class certificates, and
documents regarding the parenting plan. The parties also included sixty exhibits totaling well over 1,000 pages
in the record on appeal, approximately fifteen pages of which have any relevance to this appeal.
         This practice does not promote the speedy resolution of cases and may be a ground for dismissal of the
appeal. In the interest of judicial economy, this Court exercises its discretion to consider the merits of this
appeal despite the foregoing deficiencies. Tenn. R. App. P. 2. However, we caution litigants to consider the
implications of their decisions when creating the record on appeal, as we may not be so forgiving in the
future.
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        The trial court, however, stated that it could not find that transmutation of the Account
had occurred. The trial court specifically found that Wife’s intent by titling the Account in
both parties’ names was for estate planning purposes and to avoid certain estate taxes. The
trial court also found that Husband had no involvement with the management of the Account
and neither deposited nor withdrew any funds. In addition, the trial court found that Wife
used the money occasionally to help the family, but did not intend to make a gift of the funds
in the account. The trial court concluded:

              The funds were separate property inherited by Wife during the
              marriage. She had no intent to gift the funds to the marital
              estate. For a time period, the funds were held in an account
              which was jointly in the name of Husband and Wife as joint
              [tenants] with right of survivorship. There is no evidence of a
              link between the Husband’s contributions and the appreciation
              in the value of the separate property. Therefore, this remains
              Wife’s separate property.

        Tennessee law distinguishes between separate property and marital property in divorce
proceedings. Smith v. Smith, 93 S.W.3d 871, 875–76 (Tenn. Ct. App. 2002). The trial court
is charged only with providing an equitable division of the parties’ marital property. Tenn.
Code Ann. § 36-1-121(a)(1)–(2). Accordingly, the trial court must first classify the parties’
property as marital or separate. Cutsinger v. Cutsinger, 917 S.W.2d 238, 241 (Tenn. Ct. App.
1995). Typically, property that is acquired during the marriage is deemed marital property.
Tenn. Code Ann. § 36-4-121(b)(1)(A). On the other hand, “separate property” encompasses,
inter alia, “[p]roperty acquired by a spouse at any time by gift, bequest, devise or descent[.]”
Tenn. Code Ann. § 36-4-121(b)(2)(D).

       Separate property can become marital property subject to division, however, through
the doctrine of transmutation. When the parties treat separate property in a way that manifests
an intent that the property become marital property, transmutation occurs. Woodward v.
Woodward, 240 S.W.3d 825, 829 (Tenn. 2007). As explained by the Tennessee Supreme
Court:

              [Transmutation] occurs when separate property is treated in such
              a way as to give evidence of an intention that it become marital
              property . . . . The rational underlying th[is] doctrine[] is that
              dealing with property in these ways creates a rebuttable
              presumption of a gift to the marital estate. This presumption is
              based upon the provision in many marital property statutes that
              property acquired during the marriage is presumed to be marital.
              The presumption can be rebutted by evidence of circumstances

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               or communications clearly indicating an intent that the property
               remain separate.

Langschmidt v. Langschmidt, 81 S.W.3d 741 (Tenn. 2002) (citing Homer H. Clark, The Law
of Domestic Relations in the United States, § 16.2 at 185 (2d ed. 1987)). The party claiming
that the separate property has been transmuted into marital property carries the burden of
demonstrating that transmutation has occurred. Nesbitt v. Nesbitt, No. M2006-02645-COA-
R3-CV, 2009 WL 112538 (Tenn. Ct. App. Jan. 14, 2009) (citing Keyt v. Keyt, 244 S.W.3d
321, 328 n.7 (Tenn. 2007)). Thus, the party must prove that transmutation has occurred to
cause the property to fit within the definition of marital property. Id. (citing Kinard v.
Kinard, 986 S.W.2d 220, 232 (Tenn. Ct. App. 1998)). Determining whether separate property
has been transmuted is a fact-intensive analysis dependent on the particular circumstances of
a case. Telfer v. Telfer, No. M2012-00691-COA-R3-CV, 2013 WL 3379370, at *7 (Tenn.
Ct. App. June 28, 2013), perm. app. denied (Tenn. Oct. 16, 2013) (citing Snodgrass, 295
S.W.3d 240, 245 (Tenn. 2009)).

       Transmutation can be proven, inter alia, by evidence that property has been titled in
the names of both spouses. Smith v. Smith, 93 S.W.3d 871, 878 (Tenn. Ct. App. 2002). Such
property may begin as separate property but be subsequently placed in the names of both
spouses. Id. “The rationale underlying [this doctrine] is that dealing with property in [this]
way[] creates a rebuttable presumption of a gift to the marital estate.” Id. The presumption,
however, may be rebutted based upon evidence clearly indicating an intent that the property
remain the spouse’s separate property. Id.

       In Smith v. Smith, 93 S.W.3d 871 (Tenn. Ct. App. 2002), this Court analyzed a
similar factual situation. In that case, the wife argued that the trial court erred in classifying
an investment account as the husband’s separate property. Id. at 879. She claimed that the
account became marital property through the doctrine of transmutation. The husband had
obtained the account from his mother and, during the parties’ marriage, titled the account in
both parties’ names. Husband testified that he added his wife’s name to the account “in order
for her to have immediate access to cash the event of his death.” Husband’s accountant
corroborated this testimony, stating that Husband only added the wife’s name as part of his
estate planning. Neither party deposited funds into the account, and although the wife had
check-writing privileges, she neither wrote a check from the account nor withdrew any funds.

        This Court held that the evidence did not preponderate against the trial court’s
conclusion that the account was the husband’s separate property. Id. at 879. We recognized
that a presumption was created that the husband gifted the account to the marital estate when
he titled it jointly, but ultimately concluded that the husband had rebutted the presumption by
explaining that he only added wife’s name for estate planning purposes. Additionally, we
noted that other circumstances supported this conclusion, such as the fact that the wife never

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deposited nor withdrew funds from the account. The trial court’s finding that the account was
the husband’s separate property was therefore affirmed. Id. at 880.

        The case-at-bar is analogous to the Smith case. As in Smith, Wife had the Account at
issue titled jointly in both parties’ names during the marriage. The joint titling of the Account
raises a presumption that Wife intended for the property to be a gift to the marital estate. Id.;
see also Wright Miller v. Miller, 984 S.W.2d 936, 941 (Tenn. Ct. App. 1998) (providing that
a presumption of transmutation arises when a party uses separate funds to purchase property
but jointly titles the property). In the instant case, however, like in Smith, Wife testified that
her intent was not to gift the Account to the marital estate. Instead, she testified that her
intent in jointly titling the Account was for estate planning purposes, such as avoiding certain
tax consequences. Wife specifically stated that she wanted the Account to avoid the probate
process, and she believed that titling the Account jointly with a right of survivorship would
accomplish this goal. Like the accountant in Smith, Mr. Golden similarly corroborated
Wife’s testimony that she was concerned with different estate planning scenarios for the
Account. In addition, the parties do not dispute that Husband’s had no involvement with the
Account other than being listed on it. Husband never participated in any management of the
funds and did not utilize the funds for any reason. Equally important, Wife’s occasional use
of funds from the Account for her family is insufficient to demonstrate that she intended for
the Account to be a gift to the marital estate. Snodgrass, 295 S.W.3d at 257 (citing Avery v.
Avery, No. M2000-00889-COA-R3-CV, 2001 WL 775604, at *9 n.12 (Tenn. Ct. App. July
11, 2001) (“We think it would be bad policy for a court to hold that a party risks all of his or
her separate property by spending some of it for the benefit of his or her family.”).
Accordingly, we conclude that Wife has rebutted the presumption that she intended for the
funds in the Account to become marital property.

         Husband also contends that Wife’s removal of Husband from the Account “does not
render the money once again separate property because it was effectuated by fraudulent
means without the knowledge of Husband.” Husband argues that he was fraudulently
removed from the Account because his daughter signed the letter and not him. He also
alleges that it was fraudulent because Wife had the parties’ daughter sign in an effort to avoid
Husband’s interest in the property once the parties separated. The trial court concluded that
the Account was never transmuted into marital property and, therefore, at all times pertinent
the Account was Wife’s separate property. Wife’s intent in jointly titling the Account, as
found by the trial court, was not to gift the Account to the marital estate, but instead to avoid
certain estate planning pitfalls. Any subsequent removal of Husband’s name from the
Account will not render the Account marital property, as it was never marital property in the
first instance. Thus, Wife’s actions merely converted the form of property that was already
separate into a different form of separate property. Wilson v. Moore, 929 S.W.2d 367, 374
(Tenn. Ct. App. 1996) (concluding that “property acquired in exchange for separate property
. . . remains separate property”) (citing see also Tenn. Code Ann. § 36-4-121(b)(2)(B), (C)).

                                              -6-
The result in this case would be the same even if Husband’s name was still listed on the
Account. Respectfully, Husband’s argument to this point is unavailing.

      Based on the foregoing, we affirm the trial court’s ruling finding that the Account was
Wife’s separate property.

                                            CONCLUSION

        The judgment of the Chancery Court of Benton County is affirmed. This cause is
remanded to the trial court for all further proceedings as are necessary and are consistent with
this Opinion. Costs of this appeal are taxed to Appellant Robert Harold Douglas, and his
surety.

                                                   _________________________________
                                                   J. STEVEN STAFFORD, JUDGE




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