Jennifer Kate Watts v. Scottie Lee Watts ( 2017 )

07/11/2017
IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
April 26, 2017 Session
JENNIFER KATE WATTS v. SCOTTIE LEE WATTS
Appeal from the Chancery Court for Shelby County
No. CH-14-0083 Walter L. Evans, Chancellor
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No. W2016-01189-COA-R3-CV
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In this divorce case, the parties owned three businesses that comprised a large portion of
their marital estate. Prior to trial, they entered into a written agreement providing that
they would retain a business valuation expert to analyze two of the three businesses and
that they would accept the expert’s findings as conclusive evidence of their value at trial.
At the outset of trial, Wife requested a continuance to allow the expert more time to
complete the valuations. Despite having ordered Wife to sign a document retaining the
expert five days earlier, the trial court denied the continuance and ordered the parties to
proceed with trial. As a result, Wife did not present any evidence of either business’s
value at trial. On appeal, we affirm the trial court’s award of a divorce to Wife.
However, we conclude that the trial court abused its discretion in denying Wife’s request
for a continuance and that the trial court’s findings of fact and conclusions of law are
insufficient to enable a meaningful appellate review of its property division. We also
conclude that the trial court’s rulings with regard to the Ferjo art collection, the two rings
gifted to Wife during the marriage, and the children’s private school tuition expenses are
not supported by the evidence in the record. As such, we affirm the trial court’s
permanent parenting plan except that we vacate that portion of the plan concerning the
children’s private school tuition expenses. On remand, the trial court should make
findings of fact and conclusions of law as to whether an upward deviation in child
support is appropriate in this case in light of the parties’ stated willingness to share the
children’s private school tuition expenses equally. We affirm the trial court’s award of
the original Ferjo painting to Wife as her separate property. We hold that the Ferjo
reproductions should be classified as marital property and the two rings gifted from
Husband to Wife during the marriage should be classified as Wife’s separate property on
remand. We vacate the remainder of the trial court’s property division and remand to the
trial court for an equitable division of martial property consistent with this opinion.
Finally, we vacate the trial court’s rulings on spousal support and attorney’s fees and
direct the trial court to reconsider those issues on remand following its equitable
distribution of marital property.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
in part, Vacated in part, and Remanded
ARNOLD B. GOLDIN, J., delivered the opinion of the Court, in which BRANDON O.
GIBSON and KENNY ARMSTRONG, JJ., joined.
Annie B. Davis and Lisa J. Gill, Memphis, Tennessee, for the appellant, Jennifer Kate
Watts.
Nick Rice, Memphis, Tennessee, for the appellee, Scottie Lee Watts.
OPINION
BACKGROUND AND PROCEDURAL HISTORY
On January 16, 2014, Jennifer Kate Watts (“Wife”) filed a complaint for divorce
from Scottie Lee Watts (“Husband”) in the Shelby County Chancery Court. The parties
had been married for 20 years and had two minor children together–a daughter (born in
October 2006) and a son (born in January 2009). Wife worked as a certified public
accountant during the marriage; Husband was self-employed and managed the daily
operations of three small businesses–Homesmart Services (“Homesmart”), Watts
Overstock Outlet, Inc. (“Overstock Outlet”), and Watts Investment and Asset
Management LLC (“Watts Investment”).1 Before trial, the parties agreed that Wife was
entitled to a divorce based on Husband’s adultery and that Wife should be designated
primary residential parent of the children. As such, their disputes centered on the details
of the residential parenting schedule, the division of marital property, child support, and
spousal support. Trial was scheduled to begin on October 19, 2015.
On May 8, 2015, the parties filed a stipulation agreement with the trial court
concerning Homesmart and Overstock Outlet. The stipulation agreement provided that
the parties would retain Mark Orndorff of Southard Financial, LLC to perform valuations
of those two companies and would stipulate to the values he placed on them without
objection. It provided that the parties would cooperate fully with Mr. Orndorff and pay
him using funds from their home equity line of credit. Notably, it also provided that Mr.
Orndorff would be “allowed to retain the services of other experts if he finds it necessary
to do so.”
1
Homesmart is a contracting company that provides renovation and repair services to residential and
commercial properties. Overstock Outlet is a retail business that buys and sells salvaged merchandise
online and at a store in Memphis. Watts Investment is a holding company through which the parties
owned and managed rental properties.
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Before he would begin, Mr. Orndorff required the signatures of both parties on an
engagement letter outlining the terms of their agreement with him. Mr. Orndorff sent an
initial engagement letter to the parties on May 22, 2015. In pertinent part, Mr. Orndorff’s
initial engagement letter stated, “[I]f it becomes necessary to engage other professionals
(such as a forensic accountant), Southard Financial will engage qualified professionals of
our choice to provide such services.” Wife signed the initial engagement letter, but
Husband did not. On July 1, 2015, Husband’s attorney sent a letter to Mr. Orndorff
advising him to modify the above-quoted language in his engagement letter to state, “If
the parties agree that it is necessary to hire a forensic accountant, then upon said
agreement, Southard Financial shall select and retain said forensic accountant.” On July
23, 2015, Mr. Orndorff sent a revised engagement letter to the parties that adopted
verbatim the language proposed by Husband’s attorney. Husband signed the revised
engagement letter, but Wife did not.
On August 28, 2015, Wife filed a motion urging the trial court to enforce the
stipulation agreement as written by ordering that Mr. Orndorff be allowed to retain a
forensic accountant. Wife claimed that a forensic accountant was needed to ascertain the
actual values of Homesmart and Overstock Outlet because the financial records of the
companies were not accurate. She claimed that Husband was trying to prevent Mr.
Orndorff from retaining a forensic accountant in contravention of the parties’ stipulation.
In response, Husband argued that Wife was preventing Mr. Orndorff from beginning the
work and determining whether a forensic accountant would be necessary by refusing to
sign the revised engagement letter.
The trial court conducted a hearing on Wife’s motion on September 4, 2015. The
trial court indicated during the hearing that it would order Wife to sign Mr. Orndorff’s
revised engagement letter. Nevertheless, it did not enter a written order directing her to
do so until October 14, 2015. The order stated that if Mr. Orndorff believed a forensic
accountant to be necessary after beginning the work and the parties could not agree on
whether he should be allowed to retain one, then the trial court would make a final
determination on the issue on the motion of either party. Wife signed the revised
engagement letter on October 14, 2015, but Mr. Orndorff did not complete valuations of
Homesmart and Overstock Outlet before trial began five days later.
At the outset of the trial proceedings on October 19, 2015, Wife’s attorney
requested a continuance to allow Mr. Orndorff more time to complete his valuations of
Homesmart and Overstock Outlet. Husband’s attorney opposed the request, arguing that
Wife’s delay in signing Mr. Orndorff’s revised engagement letter was the only reason the
valuations had not already been completed. Despite having entered an order directing
Wife to sign the revised engagement letter just five days earlier, the trial court denied
Wife’s request for a continuance and ordered the parties to proceed with trial.
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In accordance with Local Rule 14(d) of the Shelby County Chancery Court, the
parties submitted affidavits listing all of their assets and debts at trial. The Rule 14(d)
affidavits submitted by the parties reflected that the net value of their marital estate was
between $1,676,924 (according to Wife) and $2,136,926 (according to Husband). While
the parties valued several assets differently, the primary reason for the difference in their
total valuations was that Husband’s Rule 14(d) affidavit included values of $30,721 for
Homesmart and $155,114 for Overstock Outlet while Wife’s Rule 14(d) affidavit did not
list a value for either company. Husband testified that he calculated the values listed in
his Rule 14(d) affidavit for those two companies based on the assets and liabilities listed
in their respective balance sheets. Wife testified that she did not believe the balance
sheets accurately reflected the values of the companies because Husband had routinely
used company accounts and credit cards to pay personal expenses during the marriage.
Husband acknowledged using company funds for some personal expenses but insisted
that he properly reported those expenses as personal income.
On December 15, 2015, the trial court entered a permanent parenting plan and
final decree of divorce. The trial court granted a divorce to Wife based on Husband’s
adultery and designated Wife the primary residential parent of the children with Husband
having parenting time 145 days per year. It also divided the assets and debts of the
parties. In doing so, however, it did not classify or assign specific values to each piece of
property. Instead, it stated that it “used as a basis for allocating the property division the
chart that was attached to Wife’s Local Rule 14(d) Affidavit.” The trial court awarded
Homesmart and Overstock Outlet to Husband and awarded Watts Investment to Wife.
The trial court declined to make awards of spousal support or attorney’s fees to either
party.
On January 15, 2016–31 days after the trial court entered its permanent parenting
plan and final decree of divorce–Wife filed a motion to set aside the orders pursuant to
Tennessee Rule of Civil Procedure 60.02. Wife asserted in the motion that the trial court
had adopted Husband’s proposed orders without her knowledge or consent at a time
when Husband’s attorney knew that Wife would be unable to review them or appear in
court. Following a hearing, the trial court directed Wife to submit a written list of the
changes that she felt should be made to its December 15, 2015 orders.
While Wife’s first Rule 60.02 motion was pending, however, on April 21, 2016,
Wife filed a second Rule 60.02 motion to set aside the trial court’s orders. In the motion,
Wife claimed that Husband had transferred $42,600 from a joint investment account into
his personal checking account just prior to trial without Wife’s knowledge or consent.
She asserted that Husband had prevented her from viewing activity in the investment
account prior to trial and had wrongfully attributed its decreased value to a decline in the
stock market. She argued that the transfer of funds affected the trial court’s property
division and urged the trial court to re-evaluate its property division in light of Husband’s
conduct. In his response, Husband admitted transferring the funds prior to trial but
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argued that the transfer did not affect the trial court’s property division because he only
used the funds to pay marital expenses. He also argued that the trial court should not
revisit the matter because Wife knew about the decreased balance before trial and failed
to exercise ordinary diligence in investigating it.
On May 4, 2016, the trial court entered an amended permanent parenting plan and
an amended final decree of divorce. The amended orders included slight changes and
additional details but did not alter the trial court’s original orders in a meaningful way.
The amended orders did not address Wife’s claims related to Husband’s transfer of funds
from the joint investment account. Wife filed a timely notice of appeal from the trial
court’s amended orders, but this Court determined that the amended orders were not final
because they did not address Wife’s second Rule 60.02 motion. Following a limited
hearing, the trial court entered an order on October 10, 2016 directing Husband to pay an
additional $21,300 to Wife for her one-half share of the transferred funds. This appeal
followed.
ISSUES
Wife raises the following issues on appeal, as we have restated them from her
appellate brief:
1. Whether the trial court erred in declining to enforce the parties’
stipulation agreement.
2. Whether the trial court erred in failing to assign values to Homesmart
and Overstock Outlet prior to making a property division.
3. Whether the trial court failed to make sufficient findings of fact and
conclusions of law with regard to the Ferjo art collection and the two
rings gifted to Wife by Husband during marriage.
4. Whether the trial court failed to make sufficient findings of fact and
conclusions of law with regard to Husband’s parenting time and the
children’s private school tuition expenses.2
Husband raises the following additional issues, restated:
2
In her brief, Wife also submits that the trial court failed to make sufficient findings of fact or
conclusions of law with regard to Husband’s dissipation of marital assets. The substance of her argument
on that issue is not clear from her appellate brief or the record and was not addressed at oral argument.
We therefore decline to discuss it in our analysis.
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1. Whether the trial court erred in ordering Husband to reimburse Wife for
her one-half share of the funds that he transferred from the parties’ joint
investment account prior to trial.
2. Whether the trial court acted within its discretion when it denied Wife’s
request for a continuance of the trial.
3. Whether Husband is entitled to attorney’s fees and expenses on appeal.
STANDARD OF REVIEW
This case was tried by the trial court without a jury. We therefore review the trial
court’s findings of fact de novo with a presumption of correctness unless the
preponderance of the evidence is otherwise. Tenn. R. App. P. 13(d); Armbrister v.
Armbrister, 414 S.W.3d 685, 692 (Tenn. 2013). If the trial court fails to explain the
factual basis for a decision, we may conduct a de novo review of the record to determine
where the preponderance of the evidence lies, or we may remand the case with
instructions to make the requisite findings of fact and conclusions of law and enter
judgment accordingly. Lovelace v. Copley, 418 S.W.3d 1, 36 (Tenn. 2013). We review
the trial court’s resolution of questions of law de novo with no presumption of
correctness. Armbrister, 414 S.W.3d at 692.
Many of the decisions that a trial judge must make in a divorce case are
discretionary. See, e.g., Armbrister, 414 S.W.3d at 693 (“[D]etermining the details of
parenting plans is peculiarly within the broad discretion of the trial judge.”); Gonsewski
v. Gonsewski, 350 S.W.3d 99, 105 (Tenn. 2011) (“[T]rial courts should be accorded wide
discretion in determining matters of spousal support.”); Owens v. Owens, 241 S.W.3d
478, 490 (Tenn. 2007) (“Trial courts have broad discretion in fashioning an equitable
division of marital property.”). On appeal, we review those discretionary decisions using
the abuse of discretion standard of review. Lee Med., Inc. v. Beecher, 312 S.W.3d 515,
524 (Tenn. 2010). The abuse of discretion standard of review envisions a less rigorous
review of the trial court’s decision and a decreased likelihood of reversal on appeal. Id.
It reflects our awareness that the decision being reviewed involved a choice among
several acceptable alternatives. Id. The trial court’s decision will therefore be upheld
under the abuse of discretion standard “so long as reasonable minds can disagree as to the
propriety of the decision made.” Eldridge v. Eldridge, 42 S.W.3d 82, 85 (Tenn. 2001).
Nevertheless, a discretionary decision must still take the applicable law and the relevant
facts into account. Konvalinka v. Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d
358 (Tenn. 2008). A court abuses its discretion when it causes an injustice to the party
challenging the decision by applying an incorrect legal standard, reaching an illogical or
unreasonable decision, or basing its decision on a clearly erroneous assessment of the
evidence. Lee Med., Inc., 312 S.W.3d at 524. On appeal, we therefore review a trial
court’s discretionary decision to determine (1) whether the factual basis for the decision
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is properly supported by the record, (2) whether the trial court identified and applied the
appropriate legal principles applicable to the decision, and (3) whether the trial court’s
ultimate decision fell within the range of acceptable alternatives. Id.
DISCUSSION
The dissolution of a marriage requires the court to “engage in the orderly
disentanglement of the parties’ personal and financial affairs.” Anderton v. Anderton,
988 S.W.2d 675, 679 (Tenn. Ct. App. 1998). Because many of the issues that must
addressed during that process are interrelated, the court and the parties should pay close
attention to the order in which the court addresses and decides various issues in a divorce
case. Id. Generally, the court’s first task is to determine whether one or both parties have
demonstrated that they are entitled to a divorce based on one of the grounds listed in
Tennessee Code Annotated section 36-4-101. Id. After the court determines that one or
both of the parties have proven grounds for a divorce, the court should resolve custody
and visitation issues if the parties have minor children together. Id. Once those status
issues have been resolved, the court should turn its attention to the property interests of
the parties. Id. Finally, the court should consider child support and spousal support
issues. Id. “Child support decisions should precede decisions about spousal support
because a spouse’s ability to pay spousal support may be directly and significantly
influenced by the amount of child support he or she has been ordered to pay.” Id. We
will address the issues raised by the parties in the order set forth above.
Residential Parenting Schedule
On appeal, Wife contends that the trial court failed to make sufficient findings of
fact and conclusions of law with regard to Husband’s parenting time. In every divorce
case involving a minor child, the trial court’s final order must approve and incorporate a
permanent parenting plan that allocates parenting responsibilities between the parties and
sets forth a residential parenting schedule. Tenn. Code Ann. § 36-6-404(a). To that end,
the General Assembly has declared that the “standard by which the court determines and
allocates the parties’ parental responsibilities” after a divorce is the “best interests of the
child.” Tenn. Code Ann. § 36-6-401(a). In taking the best interests of the child into
account, the court should strive to craft a custody arrangement that allows both parents to
“enjoy the maximum participation possible in the life of the child” consistent with other
factors and circumstances. Tenn. Code Ann. § 36-6-106(a) (listing 15 factors a court
should consider in fashioning a parenting arrangement). Nevertheless, because parenting
arrangements require careful consideration of numerous factors, the details of a parenting
plan are “particularly within the broad discretion of the trial judge,” and it is “not the
function of the appellate courts to tweak a residential parenting schedule in hopes of
achieving a more reasonable result than the trial court.” Kelly v. Kelly, 445 S.W.3d 685,
692 (Tenn. 2013). We therefore review a trial court’s decisions regarding the details of a
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parenting schedule under an abuse of discretion standard to determine whether they take
the applicable law and relevant facts into account. Id.
At trial, the trial judge stated that he considered the relevant statutory factors and
directed the parties to draft a parenting plan that allowed Husband approximately 145
days per year of parenting time. The parties drafted a residential schedule in compliance
with the trial court’s directions, and it was included in the trial court’s final order.
Although Wife states in her brief that the trial court failed to make sufficient findings of
fact and conclusions of law regarding Husband’s parenting time, she does not specify
how the trial court’s decision was erroneous. In any event, we conclude that the record
supports the trial court’s decision. At trial, both parents submitted proposed parenting
plans to the trial court. The residential parenting schedule in Wife’s parenting plan
provided that the children were to spend 233 days per year with Wife and 132 days with
Husband. The residential parenting schedule included in Husband’s parenting plan
provided that the children would spend 206 days per year with Wife and 159 days with
Husband. While it appears as though the trial court merely split the difference between
the two when it directed the parties to draft a parenting plan that allowed Husband
approximately 145 days of parenting time per year, we find no basis for disturbing its
ruling. Nothing in the record raises serious concerns about the parenting ability of either
parent. Both parents have strong relationships with the children and love the children
dearly. Likewise, both parents have suitable homes; both are able to take the children to
school and to their extracurricular activities; and both are able to provide the children
with food, clothing, medical care, and other necessities. Moreover, it appears that the
trial court’s parenting schedule is somewhat similar to the informal schedule that the
parties followed while the divorce was pending. Wife testified at trial that Husband had
been spending 10 or 11 days per month with the children. Under the trial court’s
parenting schedule, Husband will spend approximately 12 days per month with the
children. In light of the foregoing, we affirm the residential parenting schedule included
in the trial court’s amended permanent parenting plan.
Division of Marital Property
The parties raise a number of arguments related to the trial court’s division of
marital property. Dividing a marital estate necessarily begins with the identification of
the divorcing parties’ property interests. Owens, 241 S.W.3d at 485. Tennessee is a dual
property state, meaning that our domestic relations statutes make a distinction between
“marital property” and “separate property.” See Tenn. Code Ann. § 36-4-121; see also
Snodgrass v. Snodgrass, 295 S.W.3d 240, 246 (Tenn. 2009). As a general rule, assets
acquired by either spouse during the marriage are presumed to be marital property. Tenn.
Code Ann. § 36-4-121(b)(1)(A). Similarly, assets acquired by either spouse before the
marriage are presumed to be separate property. Tenn. Code Ann. § 36-4-121(b)(2)(A).
Assets acquired by either spouse by gift, bequest, devise, or descent are also considered
separate property. Tenn. Code Ann. § 36-4-121(b)(2)(D). Notably, separate property is
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not part of the marital estate and is therefore not subject to division. Snodgrass, 295
S.W.3d at 246. As such, it is important that the trial court begin its property division by
classifying all the parties’ property as marital or separate so that a proper division can be
accomplished. Id. After the trial court has classified the divorcing parties’ property as
either marital or separate, it must assign a value to each piece of property subject to
division. Owens, 241 S.W.3d at 486. Each party bears the burden of presenting
competent valuation evidence. Kinard v. Kinard, 986 S.W.2d 220, 231 (Tenn. Ct. App.
1998). If the valuation evidence presented by the parties is conflicting, the court may
assign a value that is within the range of values represented by all of the relevant
valuation evidence. Id. Decisions regarding the classification and value of the parties’
property are questions of fact, and they will not be second-guessed on appeal unless they
are not supported by a preponderance of the evidence. Owens, 241 S.W.3d at 485-86.
Once the trial court has classified and valued the marital property, its goal is to
divide the property in an essentially equitable manner without regard to the marital fault
of either party. Tenn. Code Ann. § 36-4-121(a)(1). In doing so, the court should
consider the factors set forth in Tennessee Code Annotated section 36-4-121(c) to the
extent that they are relevant. Owens, 241 S.W.3d at 486. Trial courts have wide latitude
in fashioning an equitable division of marital property, and appellate courts will
ordinarily defer to the trial court’s division of the marital estate unless it is inconsistent
with those statutory factors or is not supported by a preponderance of the evidence. Id.
As it relates to the division of marital property, the primary issue in this case is
whether the trial court erred in declining to enforce the parties’ stipulation agreement to
accept Mr. Orndorff’s valuations of Homesmart and Overstock Outlet. The written
agreement, titled “Stipulation,” was signed by the attorneys for both parties and filed in
the Chancery Court clerk’s office on May 8, 2015. As we explained above, Mr. Orndorff
required both parties to sign an engagement letter setting forth the terms of their
agreement with him before he would begin work on the valuations. The parties spent
several months wrangling over the language that should be used in the engagement letter
before signing it. Ultimately, following a hearing on September 4, 2015, the trial court
ordered Wife to sign an engagement letter that Mr. Orndorff had revised at the direction
of Husband’s attorney and that effectively modified the terms agreed to by the parties in
their stipulation of May 8, 2015. The written order directing the Wife to sign the revised
letter was not entered by the trial court until October 14, 2015. Following entry of that
order, Wife signed the letter on the same date. As a result of the delays, Mr. Orndorff
was unable to complete the valuations before the scheduled trial date on October 19,
2015. At the outset of the trial proceedings, Wife requested a continuance to allow Mr.
Orndorff additional time to complete the valuations. Husband objected to a continuance
of the trial, and the trial court declined to grant Wife’s request. The trial court did not
elaborate on the factual basis of its decision in its final order. On appeal, Wife argues
that the trial court erred in declining to enforce the May 8, 2015 stipulation as agreed to
by the parties and in directing that the trial proceed without Mr. Orndorff’s valuations.
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Tennessee public policy favors allowing divorcing parties to resolve their disputes
by agreement. Long v. McAllister-Long, 221 S.W.3d 1, 8 (Tenn. Ct. App. 2006). As a
result, many divorcing parties resolve disputed issues by entering into a marital
dissolution agreement. Id. To the extent that the obligations in a marital dissolution
agreement retain their contractual character, they are binding on the parties like all other
contracts once they are approved by the court. Id. at 8-9. Similarly, divorcing parties
stipulate to facts that fall within the range of possibly true facts or to valid legal
strategies. See Hyneman v. Hyneman, 152 S.W.3d 549, 555 (Tenn. Ct. App. 2003). A
stipulation is “an agreement between counsel regarding business before the court which is
entered into mutually and voluntarily by the parties.” Overstreet v. Shoney’s, Inc., 4
S.W.3d 694, 701 (Tenn. Ct. App. 1999). While narrower in scope than a marital
dissolution agreement, a valid stipulation is binding on the parties and will be “rigidly
enforced” by the courts like any other agreement. See Mast Adver. & Publ’g, Inc. v.
Moyers, 865 S.W.2d 900, 902 (Tenn. 1993). In determining whether a stipulation is
valid, courts should consider (1) whether the parties had competent representation of
counsel, (2) whether extensive and detailed negotiations occurred, (3) whether the parties
agreed to the stipulation in open court, and (4) whether the parties acknowledge their
understanding the terms and that the terms are fair and equitable when questioned by the
judge. Hyneman, 152 S.W.3d at 555.
Here, the foregoing factors weigh in favor of the stipulation agreement’s
enforcement as written. Both parties were represented by counsel when they entered into
the agreement. The parties entered into the agreement at mediation. The terms of the
agreement are detailed and carefully constructed. The agreement was reduced to writing
and signed by the attorneys for both parties. Finally, the agreement was filed with the
trial court and appears in the record in the case. While the record on appeal does not
reflect that the trial judge posed questions to the litigants about the terms of the
agreement, neither party has argued that they did not understand its terms or that its terms
are unfair. As such, we conclude that the stipulation agreement was valid and
enforceable, and the trial court erred in modifying it.
Of course, given the circumstances, the fact that the stipulation agreement was
valid and enforceable does not necessarily mean the trial court erred in declining to
enforce it. The agreement was not simply a stipulation to the values of Homesmart and
Overstock Outlet. Rather, it was an agreement to a specific method of ascertaining their
values. It required the parties to retain and cooperate with Mr. Orndorff so that he could
begin the work. It also required Mr. Orndorff’s cooperation to complete the work in a
timely manner. Clearly, the trial court was not required to delay the trial indefinitely if
either of the parties or Mr. Orndorff failed to act diligently in their efforts.
Trial courts have broad discretion over the course and conduct of the proceedings
before them. See Bell v. Todd, 206 S.W.3d 86, 93 (Tenn. Ct. App. 2005). That discretion
extends to decisions to grant or deny a request for a continuance. Sanjines v. Ortwein &
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Assocs., P.C., 984 S.W.2d 907, 909 (Tenn. 2005). Accordingly, this Court will not
reverse a trial court’s decision on a motion for a continuance unless the record, reviewed
as a whole, shows a clear abuse of discretion or that a prejudicial error has been
committed. Nagarajan v. Terry, 151 S.W.3d 166, 172 (Tenn. Ct. App. 2003). The
decision to grant or deny a request for a continuance is fact specific and must be viewed
in the context of all of the circumstances existing when the motion is filed. Howell v.
Ryerkerk, 372 S.W.3d 576, 580 (Tenn. Ct. App. 2013) (citing Nagarajan, 151 S.W.3d at
172). The party seeking the continuance has the burden of demonstrating that the
circumstances justify the continuance. Osagie v. Peakload Temp. Servs., 91 S.W.3d 326,
329 (Tenn. Ct. App. 2002). To meet that burden, the moving party must supply some
“strong excuse” for postponing the trial date. Howell, 372 S.W.3d at 580 (citing Barber
& McMurry, Inc. v. Top-Flite Dev. Corp. Inc., 720 S.W.2d 469, 471 (Tenn. Ct. App.
1986)). Factors relevant to the trial court’s decision include: “(1) the length of time the
proceeding has been pending, (2) the reason for the continuance, (3) the diligence of the
party seeking the continuance, and (4) the prejudice to the requesting party if the
continuance is not granted.” Nagarajan, 151 S.W.3d at 172 (footnotes omitted).
Application of the foregoing factors here indicates that the trial court should have
granted Wife’s request for a continuance. First, Wife requested a continuance from the
first trial setting in this case, and the record does not reflect that there had previously
been any significant delays in the litigation. Thus, it does not appear that postponing the
trial while Mr. Orndorff completed the valuations would have been unduly burdensome
to the parties or to the court. Second, Wife had a valid reason for requesting the
continuance. The stipulation agreement provided a method for conclusively establishing
the values of two of the parties’ largest marital assets. Moreover, as the trial court was
well-aware, the proper values of those particular assets had been vigorously disputed
throughout the litigation. Third, despite Husband’s assertions to the contrary, the record
does not reflect that Mr. Orndorff’s failure to complete the valuations prior to trial
primarily resulted from a lack of diligence on Wife’s part. Mr. Orndorff’s initial
engagement letter was consistent with the parties’ stipulation agreement in that it allowed
him to retain other experts if he found it necessary to do so. Wife signed that initial
engagement letter, but Husband did not. Instead, Husband’s attorney directed Mr.
Orndorff to send a revised engagement letter that was inconsistent with the stipulation
agreement in that it required an additional agreement by the parties before Mr. Orndorff
could retain other experts. Although Wife did not sign the revised engagement letter
until the trial court entered a written order directing her to do so, she did sign it on the
same day that order was entered. By refusing to sign the engagement letters, both parties
contributed to the delay in retaining Mr. Orndorff. Wife, however, had a valid reason for
refusing to sign the revised engagement letter because its terms were plainly inconsistent
with the parties’ stipulation agreement. Husband’s refusal to sign the initial engagement
letter was nothing more than a unilateral attempt to modify the terms of the stipulation
agreement. The fact that Husband was successful in that effort does not, in our view,
absolve him from shouldering the majority of the blame for the parties’ delay in retaining
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Mr. Orndorff. Finally, the trial court’s denial of Wife’s request for a continuance was
prejudicial to Wife. The stipulation agreement relieved the parties of their individual
burdens to present evidence concerning the values of Homesmart and Overstock Outlet.
The trial court expressed an intention to enforce the stipulation agreement, albeit with
modified terms, by entering its October 14, 2015 order that directed Wife to sign the
revised engagement letter. Nevertheless, the trial court declined to enforce the stipulation
agreement just five days later when it denied Wife’s request for a continuance. Although
Husband presented valuation evidence based on the balance sheets of the companies at
trial, Wife did not have the opportunity to prepare evidence in support of her assertion
that the balance sheets were not accurate.
Having reviewed the record and applied the appropriate legal principles, we
conclude that the trial court’s decision was unreasonable and caused an injustice to Wife.
There is little factual support for the trial court’s decision in the record, and the record
does not reflect that the trial court identified and applied the legal principles applicable to
the decision. We therefore conclude that the trial court abused its discretion when it
denied Wife’s request for a continuance.
In any event, our ability to review the trial court’s property division is frustrated
by its failure to clearly classify the property as marital or separate prior to making a
property division. While trial courts have wide latitude in fashioning an equitable
division of marital property, this Court cannot determine whether the trial court’s division
of marital property was equitable if the trial court has not properly identified the marital
property. See, e.g., Myers v. Myers, No. M2007-01435-COA-R3-CV, 2009 WL 152522,
at *3 (Tenn. Ct. App. Jan. 21, 2009); Melton v. Melton, No. M2001-00128-COA-R3-CV,
2002 WL 256801, at *3 (Tenn. Ct. App. Feb. 22, 2002). Here, the trial court simply
divided all of the assets and debts owned by the parties in a section of its final order titled
“Property Division.” While dividing all of the property owned by two divorcing parties
would be permissible if neither party had any separate property, the evidence presented in
this case demonstrates that some of the property at issue was separate. Indeed, the trial
court noted that several items of personal property were acquired by gift to one spouse or
the other. Nevertheless, it still divided those items as though they were marital property.
Pursuant to Tennessee Court of Appeals Rule 7, the appellate briefs submitted by both
parties contain tables listing their assets and debts with the classification and value of
each as found by the trial court. Inexplicably, the Rule 7 tables of both parties indicate
that the trial court classified numerous assets as the separate property of one party or the
other. In fact, the parties actually appear to be in agreement concerning what specific
assets the trial court classified as separate. However, their interpretations of the trial
court’s final order have no basis in the record. For example, the parties owned two Tag
Heuer watches at the time of the divorce. The trial court’s final order states, “The man’s
Tag Heuer watch, valued at $1,500 is awarded to Husband, and Wife’s similar jewelry
item is awarded to Wife.” Based on that statement alone, the Rule 7 tables of both parties
somehow reflect that the trial court classified the women’s Tag Heuer watch as Wife’s
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separate property and the men’s Tag Heuer watch as marital property awarded to
Husband. We fail to see how such a conclusion can be gleaned from the record.
Further complicating matters, the trial court’s final order does not contain findings
concerning the values assigned to Homesmart or Overstock Outlet–two of the parties’
largest marital assets. Rather than assign values to each specific asset, the trial court
stated in the “Property Division” section of its final order that it “used as a basis for
allocating the property division the chart that was attached to Wife’s Local Rule 14(d)
Affidavit.” As such, it appears that the trial court intended to adopt the values listed in
Wife’s Rule 14(d) affidavit for each asset. As we stated previously, however, Wife’s
Rule 14(d) affidavit did not list any values for Homesmart and Overstock Outlet due to
the absence of an appraisal by Mr. Orndorff. Husband urges this Court to review the trial
court’s property division using the valuation evidence that he presented at trial for the
companies because it was the only evidence presented on the issue. Under different
circumstances, we might accept such an invitation to soldier on and review the trial
court’s property division on the record and the proof presented at trial. This Court has
previously explained that the trial court’s failure to assign values to all items of property
“does not prohibit the parties from providing this Court with the value they contend ought
to be assigned and a citation to the record to support such an assertion.” Kirby v. Kirby,
No. M2015-01408-COA-R3-CV, 2016 WL 4045035, at *7 (Tenn. Ct. App. July 25,
2016). Such an effort is not appropriate in this case, however, given our determination
that the trial court should have enforced the parties’ stipulation agreement and allowed
Mr. Orndorff to complete valuations of the companies in accordance with the terms of the
written and filed stipulation agreement.
In light of the foregoing, we vacate the trial court’s property division and remand
this case for an equitable division of martial property. On remand, the trial court should
enforce the terms of the stipulation agreement as written and allow Mr. Orndorff a
reasonable time to ascertain the values of Homesmart and Overstock Outlet as of a date
as near as reasonably possible to the final divorce hearing date. The trial court should
make findings classifying the parties’ property as marital or separate consistent with this
opinion. The trial court should also make findings concerning the value of the property
to be divided. The trial court should then divide only that property classified as marital in
an equitable manner.
Remaining Issues
Wife challenges the sufficiency of the trial court’s findings of fact and conclusions
of law in several other respects. For example, Wife contends that the trial court failed to
explain why it awarded Husband a piece of artwork that was a gift to her during the
marriage. At the time of the divorce, the parties owned a collection of artwork by an
artist referred to in their filings as “Ferjo.” Wife testified that the Ferjo collection
consisted of three reproductions of Ferjo paintings that she purchased with marital funds
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and one original Ferjo painting that Husband gave her as a Christmas gift. Wife’s Rule
14(d) affidavit listed the reproductions as marital property valued at $5,000 and the
original painting as Wife’s separate property valued at $6,000. Husband did not present
any testimony related to the Ferjo collection at trial and listed the entire Ferjo collection
as marital property valued at $11,000 in his Rule 14(d) affidavit. In its final order, the
trial court found, “The Ferjo artwork collection, purchased by Wife, which was a gift to
Husband with a value of approximately $5,000.00 is awarded to Husband.” Next, the
trial court found, “The other Ferjo original, which was a Christmas gift to Wife from
Husband, with an approximate value of $6,000.00, is awarded to Wife, as her separate
property.” In her brief, Wife contends that the trial court erroneously awarded Husband
“one of Wife’s Ferjo artwork collection pieces gifted to her during the marriage by
Husband.” Additionally, Wife’s Rule 7 table indicates that the trial court found the
“Ferjo original painting” to be Husband’s separate property. As such, the basis of Wife’s
objection is not abundantly clear. To the extent that Wife contends that the trial court
erroneously awarded the Ferjo original to Husband, her argument appears to be based on
a misreading of the trial court’s final order. However, to the extent Wife contends that
the trial court erroneously found the Ferjo reproductions to be a gift to Husband, the
record supports her argument. Neither party presented evidence that the Ferjo
reproductions were a gift to Husband. Wife testified that she purchased the Ferjo
reproductions with marital funds, and both parties listed the Ferjo reproductions as
marital property in their Rule 14(d) affidavits. As such, we affirm the trial court’s award
of the original Ferjo painting to Wife as her separate property but conclude that the Ferjo
reproductions should be classified as marital property on remand.
Next, Wife contends that the trial court failed to explain why it awarded Husband
one of two rings that were gifts to her during the marriage. At trial, Wife testified that
both rings were given to her by Husband, but she stopped wearing them and put them
into a safe after the parties separated. She explained that, sometime thereafter, Husband
took the rings out of the safe and used them to propose to her again. Wife testified that
she declined Husband’s proposal but never intended to relinquish the rings. Wife
claimed that she had asked Husband to return the rings to her multiple times since, but he
refused to do so. Wife’s Rule 14(d) affidavit listed an anniversary and solitaire ring
valued at $8,000 as her separate property but stated that they were in Husband’s
possession. In his appellate brief, Husband cites his testimony that the rings were made
from rings belonging to his mother and grandmother and that Wife told him she did not
want them after she learned of his affair as support for the trial court’s decision. We
note, however, that the cited testimony was presented during a pendente lite hearing
before a divorce referee and was not relevant to the issues then before the court.
Husband did not address the rings in his testimony at trial. In its final order, the trial
court found:
Husband has two (2) women’s rings in his possession, one being an
anniversary ring and a solitaire ring received by Wife as a wedding gift. It
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is disputed whether or not those rings were returned by Wife to Husband
after having been received as a gift. Husband shall select which of those
rings he will receive, and the other ring is awarded to Wife.
The evidence presented to the trial court does not support its finding that Wife may have
returned the rings to Husband. The only evidence elicited at trial demonstrated that the
two rings were a gift from Husband to Wife, that Wife placed the rings in a safe when the
parties separated, and that Husband removed the rings from the safe to re-propose to
Wife. Although she rejected Husband’s overture, Wife never expressed intent to
relinquish her property interest in the rings, which were gifted to her as her separate
property. As such, the two rings should be classified as Wife’s separate property on
remand.
Wife also contends that the trial court failed to make sufficient findings with
regard to its ruling on the children’s private school tuition expenses. The proposed
parenting plans submitted by both parties at trial provided that the children would remain
in private school as long as they maintained a “C” or better overall average and that the
parties would be equally responsible for the cost of the children’s private school tuition.
Additionally, Husband testified that he would be willing to pay one-half of the children’s
private school tuition as long as they maintained a “C” average or better. However, the
trial court’s final order and permanent parenting plan both provide that if the parties do
not agree to be responsible for one-half of the children’s private school tuition, then the
party who insists on the children remaining in private school is to be responsible for
paying that expense from whatever resources they may receive. On appeal, Wife
contends that the trial court should have ordered Husband to be responsible for one-half
of the children’s private school tuition and that Husband’s income is sufficient to support
such an expense. Husband, on the other hand, contends that he cannot afford to make the
payments. In our view, the trial court erred in failing to make findings that explain its
decision not to enter an order consistent with the parties’ professed willingness to share
the children’s private school tuition expenses. Trial courts may order an upward
deviation in child support for educational expenses such as private school tuition. Tenn.
Comp. R. & Regs. 1240-02-04-.07 (2)(d)(1)(i). On remand, the trial court should make
findings of fact and conclusions of law that address whether such an upward deviation is
appropriate in this case.
Finally, Husband advances several arguments related to the trial court’s decision
to award Wife one-half of the $42,600 that he transferred from the parties’ joint
investment account into his personal checking account just prior to trial. First, he
contends that the doctrine of res judicata should have barred the trial court from
considering the matter. Res judicata bars a second action between the same parties or
their privies on the same claim with respect to all issues that were, or could have been,
litigated in the first lawsuit. Jackson v. Smith, 387 S.W.3d 486, 491 (Tenn. 2012). Here,
Wife did not pursue the matter by filing a new lawsuit; she did so by filing a motion
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pursuant to Tennessee Rule of Civil Procedure 60.02. That rule permits the court to
relieve a party from a final judgment, order, or proceeding for the following reasons:
(1) mistake, inadvertence, surprise or excusable neglect; (2) fraud (whether
heretofore denominated intrinsic or extrinsic), misrepresentation, or other
misconduct of an adverse party; (3) the judgment is void; (4) the judgment
has been satisfied, released or discharged, or a prior judgment upon which
it is based has been reversed or otherwise vacated, or it is no longer
equitable that a judgment should have prospective application; or (5) any
other reason justifying relief from the operation of the judgment.
Tenn. R. Civ. P. 60.02. Husband’s res judicata argument is therefore without merit.
Second, Husband contends that the trial court erred in ruling that Wife was entitled to
one-half of the funds because he used the money to pay marital expenses and the
expenditures therefore were not dissipation. Husband’s argument is flawed, however,
because Wife did not argue, nor did the trial court rule, that the expenditures equated to
dissipation.3 As such, it was not relevant whether Husband used the funds to pay marital
expenses. Wife simply argued that Husband’s withdrawal of the funds prior to trial
affected the trial court’s property division, and the trial court agreed. We find no basis
for disturbing the trial court’s decision. The trial court may therefore consider Husband’s
transfer of the funds in making its equitable division of marital property on remand.
Attorney’s Fees on Appeal
Both parties seek an award of attorney’s fees incurred on appeal.4 The decision to
award attorney’s fees incurred on appeal lies solely within the discretion of the appellate
court. Andrews v. Andrews, 344 S.W.3d 321, 340 (Tenn. Ct. App. 2010). We have
considered the parties’ requests and respectfully decline to award attorney’s fees incurred
on appeal to either party.
CONCLUSION
In sum, we affirm the trial court’s award of a divorce to Wife. We also affirm the
trial court’s permanent parenting plan except that we vacate that portion of the permanent
parenting plan concerning the children’s private school tuition expenses. On remand, the
3
During the trial court’s limited hearing on this issue, Husband’s attorney acknowledged that Wife was
not arguing the expenditures equated to dissipation. At one point, he stated, “Dissipation hasn’t even
been alleged by opposing counsel, much less did they produce any information in regards to dissipation.”
Later, he stated, “Now, if they even alleged dissipation, we would have a potential problem. They didn’t
even try to prove dissipation[.]”
4
Although not presented as a stand-alone issue, Wife’s appellate brief states in closing, “Finally, this
Honorable Court should award Appellant her attorney’s fees with respect to this appeal.”
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trial court should make findings of fact and conclusions of law as to whether an upward
deviation of child support is appropriate in this case in light of the parties’ stated
willingness to share the children’s private school tuition expenses equally. We affirm the
trial court’s award of the original Ferjo painting to Wife as her separate property. We
vacate the remainder of the trial court’s property division, however, and remand this case
for an equitable division of martial property consistent with this opinion. On remand, the
trial court should enforce the parties’ stipulation agreement as written and allow Mr.
Orndorff a reasonable time to ascertain the values of Homesmart and Overstock Outlet as
of a date as near as reasonably possible to the final divorce hearing date. The trial court
should make findings classifying the assets and debts of the parties as marital or separate
property consistent with this opinion. The trial court should also make findings
concerning the value of the property to be divided. The trial court should then divide
only that property classified as marital in an equitable manner. On remand, the Ferjo
reproductions should be classified as marital property, and the two rings gifted from
Husband to Wife during the marriage should be classified as Wife’s separate property.
Finally, we vacate the trial court’s rulings on spousal support and attorney’s fees and
direct the trial court to reconsider those issues on remand following its equitable
distribution of marital property. The requests of both parties for an award of attorney’s
fees on appeal are denied. Costs of this appeal are taxed one-half to the appellant,
Jennifer Kate Watts, and her surety, and one-half to the appellee, Scottie Lee Watts, for
which execution may issue.
_________________________________
ARNOLD B. GOLDIN, JUDGE
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