Harrison v. Harrison

                                       December 18, 1995
                                       FOR PUBLICATION

              IN THE SUPREME COURT OF TENNESSEE

                           AT NASHVILLE




NORMA SUE HARRISON,              (
                                 (
     Plaintiff-Appellee,         (
                                 (
                                 (
                                 (   Rutherford Circuit
                                 (
v.                               (   Hon. Robert E. Corlew, III
                                 (   Chancellor
                                 (
                                 (   No. 01S01-9412-CV-00l53
JAMES NESBITT HARRISON,          (
                                 (
     Defendant-Appellant.        (




For Plaintiff-Appellee:                For Defendant-Appellant:

Roger W. Hudson                        William Kennerly Burger
Murfreesboro                           Murfreesboro




                           O P I N I O N
COURT OF APPEALS REVERSED;
REMANDED TO TRIAL COURT.                     REID, J.
          This divorce case presents for review the judgment

of the Court of Appeals, affirming the trial court, that a

one-half undivided interest in a tract of real property is

marital property within the meaning of Tenn. Code Ann. § 36-

4-121(b)(1)(B) (1991).   This Court finds that the interest is

the husband's separate property, not marital property, thus

requiring that the Court of Appeals' decision be reversed.



           The parties were married in 1957.   Both parties

reside in Rutherford County, where the subject property is

located.   The husband, James Nesbitt Harrison, is a long-time

employee of South Central Bell Telephone Company.    His

beginning wage was approximately $2,650 per year; his maximum

annual compensation was $3l,000.    The record shows that the

wife, Norma Sue Harrison, was employed outside of the home

from 1957 until the birth of the parties first child in 1962

and from l977 until the time of the divorce.   The parties

lived in Memphis during the first 16 years of their marriage,

then, in 1973, they returned to Rutherford County.




                              -2-
             The husband and wife experienced serious marital

trouble beginning in 1973.     The wife lived separately for

approximately one year during 1980 and 1981.       They reared two

children, who now are non-dependent adults.



             On January 19, 1993, the circuit court of

Rutherford County entered an order granting the parties an

absolute divorce on the mutual allegations of irreconcilable

differences.1     The only issue on appeal is whether a one-half

undivided interest in certain land is marital property or the

separate property of the husband.



             In 1947, ten years prior to the parties' marriage,

the husband's grandparents deeded a tract of land containing

l25 acres to the husband's parents for their lives and, upon

the death of the survivor, to the husband and his brother

equally.     The property in question, a 45 1/2-acre tract, is a

portion of the original l25-acre farm.        One lot included in

the 45 l/2-acre tract is leased to Exxon, another lot is

leased to Waffle House, and the remaining portion is

undeveloped.



             In 1968, Interstate Highway I-24 was constructed



     1
         Tenn. Code Ann. § 36-4-129 (1991).




                                -3-
across the 125-acre farm.    Part of the farm was acquired by

eminent domain. A note in the principal amount of $9,600

dated September 18, 1961, was paid in full immediately prior

to the condemnation award.   The trial court did not make a

finding regarding the purpose of this loan which was retired.

The construction of the interstate greatly increased the

value of the farm.   For example, the value of the 45 l/2-acre

tract increased from $7,000 at the time of the parties'

marriage to $1,361,750 at the time of their divorce.   The

parties acknowledge and the record shows conclusively that

the sole cause of the increase in value was the construction

of I-24.



           Prior to the construction of the highway, the farm

was used to pasture cattle owned by the husband and his

parents.   Prior to his death, the husband's father farmed and

worked at a grocery store on a part-time basis.   His mother

was employed as a lab technician until she became disabled in

1961.   She lived with the parties during the four year term

of disability, after which she lived at Maryville College

where she was employed as a housemother.



           Although no records of the cattle business were

presented at trial, the testimony shows that the proceeds

from the sale of cattle was used primarily for the upkeep of




                               -4-
the farm and to pay the indebtedness.   The parties with their

children returned to Rutherford County from Memphis on many

weekends for the purpose of helping the husband's parents

tend the cattle, repair fences, and perform other duties

connected with the farm.   The husband's father died in 1966,

prior to the construction of I-24.   His mother died in 1987,

subsequent to the construction of I-24 and prior to the

divorce.



           After the construction of I-24 and prior to the

divorce, portions of the original farm were sold or leased.

Sales included:   Days Inn - $l35,000; Shoney's - $87,500;

Shoney's Inn - $l50,000; Southgate Ventures - $850,338.    The

Waffle House lot was leased for $450 per month and the Exxon

lot for $825 per month.    Prior to the death of the husband's

mother, proceeds from the sale of the property were divided

by agreement between the husband, his mother, and his

brother.   Subsequent to the mother's death and prior to the

divorce, the proceeds were divided equally between the

husband and his brother.



           With proceeds received from sales and leases of

portions of the property, the husband purchased a farm

containing l54 acres, title to which was taken by the husband

and wife as tenants by the entirety.    This tract, identified




                               -5-
in the record as the parties' "home place," was their

residence prior to the divorce.    The husband did not contest

that the home place was marital property.   In the division of

assets found to be marital property, the following

allocations were made:



          Wife:   cash and certificates of deposit -

$215,930.31; common stock - $26,474; proceeds from the sale

of I-24 property to Southgate Ventures - $l43,517; wife's IRA

- $5,643; cemetery lots; automobile; one-half of the

husband's South Central Bell retirement benefits valued at

$12,500; and one-half of the husband's one-half interest in

the 45 1/2-acre portion of the original farm, which one-

fourth interest was valued by the court at $340,437.50; other

miscellaneous personalty; and attorneys' fees of $7,500.



          Husband:   cash - $4,550; proceeds from sale of I-

24 property to Southgate Ventures - $95,000; l54-acre home

place valued by the court at $248,l44; husband's IRA -

$5,258; automobile and trucks; livestock, farm equipment and

supplies, valued by the court at $49,365; one-half of

husband's retirement valued at $l2,500; one-half of the one-

half interest in the 45 1/2-acre tract valued by the court at

$340,437.50; and other miscellaneous personalty.




                             -6-
          As stated previously, the only item contested on

appeal is a one-half undivided interest in the 45 1/2-acre

tract, which undivided interest is valued at $680,875.   The

issue is determined by application of the following

provisions of Tenn. Code Ann. § 36-4-121:



          (b)(1)(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 and
          the value of vested pension, retirement
          or other fringe benefit rights accrued
          during the period of the marriage.

                (C) As used in this subsection,
          "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.

                . . .

              (2) "Separate property" means:

                 (A) All real and personal
          property owned by a spouse before
          marriage;

                 (B) Property acquired in exchange
          for property acquired before the
          marriage;

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




                             -7-
                   (D) Property acquired by a spouse
            at any time by gift, bequest, devise or
            descent.



            The trial court found the 45 1/2-acre portion of

the original farm to be marital property.   The trial court

based its finding that the wife had substantially contributed

to the property's preservation and appreciation on the proof

that the wife had helped the husband and his parents with the

care of the cattle and that payments on an indebtedness

secured by a deed of trust on the farm had been made from

funds owned by the husband and wife.



            The Court of Appeals disagreed with the trial

court's decision that those circumstances were sufficient to

convert the husband's estate in the property into marital

property.   The Court of Appeals found, however, that the

amount whereby the 45 1/2-acre tract had increased in value

during the marriage of the parties was marital property, and

determined that amount to be $677,375 ($680,875 less $3,500).



            This Court finds that application of the statute

to the facts of this case requires the conclusion that the

husband's interest in the 45 1/2-acre tract of land is his

separate property rather than marital property.




                              -8-
            Both the trial court and Court of Appeals

correctly found that the husband's interest in the property

originally was separate property of the husband.    The estate

in the property acquired by the husband and the date on which

that estate was acquired are significant in making that

determination.   The estate acquired was a vested remainder

subject to life estates in the husband's parents.   See In re

Walker, 

, 769 (Tenn. 1993).   There was no

further conveyance to the husband.   Pursuant to that

conveyance, the husband's parents owned joint life estates in

the property until the father's death, after which the mother

owned a life estate in the property until her death.     Upon

the death of the husband's mother, the husband became the

owner in fee of a one-half undivided interest in the tract in

question.   See Ogle v. Ogle, 

, 669-70 (Tenn.

1994); 21 Tenn. Juris., Remainders, Reversions and Executory

Interests, § 24 (1985).   Consequently, the property was owned

by the husband before marriage, within the meaning of

subsection 36-4-121(b)(2)(A),2 and was, therefore, his

separate property.



            The trial court found that the wife substantially


     2
      Though not determinative of the essential issue
presented in the case, the husband apparently received his
interest in the property from his grandfather as a gift,
within the meaning of subsection 36-4-121(b)(2)(D).




                              -9-
contributed to the preservation and appreciation of the

husband's separate property within the meaning of subsections

(b)(l)(B) and (C), thereby converting his estate into marital

property.   The Court of Appeals found that the record does

not support the trial court's conclusion that the wife's

activities were sufficient to convert separate property into

marital property.   Implicit in the Court of Appeals' decision

is the conclusion that the wife's activities did not

substantially contribute to the preservation and appreciation

in value of the property.   That finding by the Court of

Appeals is consistent with the acknowledgement by both

parties that the sole cause of the appreciation in value was

the construction of I-24.   There is no finding by either

court that payments on the note secured by a deed of trust on

the farm was for the purpose of "preserving" the husband's

estate in the farm.3



            The Court of Appeals correctly found that the

husband's estate in the property increased in value during



     3
      Pretermitted is any discussion of the further
circumstance that the wife's activities occurred while the
farm was subject to the exclusive use and control of the
husband's parents as life tenants. "A life tenant of land is
a quasi trustee for the remainderman. He cannot, therefore,
be allowed to so deal with the property as to defeat that
remainder." Morrow v. Person, 

, 381, 

 (1953); see also Holley v. Marks, 

, 862
(Tenn. 1976).




                              -10-
the marriage, but that court failed to apply the statutory

conditions which must be met before the increase that

occurred during marriage becomes marital property.

Subsection (b)(l)(B) provides that the increase in value

during marriage is marital property "if each party

substantially contributed to its preservation and

appreciation."



          Even though the Court of Appeals found that the

wife did not substantially contribute to the preservation and

appreciation of the property, it, nevertheless, found that

the value whereby the farm increased as the result of the

construction of I-24 was marital property.    The statute does

not permit the conclusion that any increase in value during

marriage constitutes marital property.    The increase in value

constitutes marital property only when the spouse has

substantially contributed to its preservation and

appreciation.    In Ellis v. Ellis, 

 (Tenn.

1988), the issue was whether the value of marital property

was limited to the cost of the husband's contribution or

extended to the entire amount whereby the property had

increased during marriage.    In explanation, the Court stated:



               The only condition imposed in the
          statute for treating any increase in
          value during the marriage as marital




                              -11-
            property is the provision, "if each
            party substantially contributed to its
            preservation and appreciation." This
            condition was amply supported in the
            evidence. As above mentioned, the Court
            of Appeals in its own findings found
            that the husband had contributed $5,544
            on improvements to the big house
            property. This clearly proved that the
            husband had "substantially contributed
            to its preservation and appreciation,"
            as found by the trial judge. This
            evidence satisfied the condition thus
            required but it did not limit the
            husband's right to share in the full
            appreciation of the property during the
            marriage to the amount which he alone
            had thus contributed to its maintenance
            and repair. Having established that the
            condition had been complied with, the
            husband was entitled to share fully in
            the whole appreciation and value of the
            big house property during the marriage.



Id. at 427.   Application of the rule stated in Ellis to the

facts of this case would require the conclusion that if the

evidence proved that the wife had contributed substantially

to the preservation and appreciation in value, the entire

amount of the increase in value would be marital property;

but, since the evidence does not show that the wife

substantially contributed to the preservation or appreciation

of the property, the increase in its value is not marital

property.



            The conclusion is that the one-half undivided

interest in the 45 1/2-acre tract of land is the husband's




                              -12-
own separate property, not marital property.



          The decision of the Court of Appeals is reversed,

and the case is remanded to the trial court.



          Costs of appeal are taxed against the wife.




                         ________________________________
                         Reid, J.


Concur:

Anderson, C.J., Drowota, Birch,
    and White, JJ.




                            -13-