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Heaton v. Heaton

Court of Appeals of Tennessee, Knoxville

August 29, 2014


Session Date June 18, 2014

Appeal from the Chancery Court for Hamilton County No. 12-0412 Jeffrey M. Atherton, Chancellor

Jennifer K. Peck, Chattanooga, Tennessee, for the appellant, Jason Barrett Heaton.

Jeffrey A. Miller, Cleveland, Tennessee, for the appellee, Carolyn M. Heaton.

Thomas R. Frierson, II, J., delivered the opinion of the Court, in which D. Michael Swiney, J., joined.



I. Factual and Procedural Background

Carolyn M. Heaton ("Wife") and Jason Barrett Heaton ("Husband") were married on October 21, 2006, in Alabama. One child, Ava, was born of the marriage, and she was three years old at the time of trial. Prior to their marriage, the parties entered into a written prenuptial agreement, which recites, inter alia, that the parties desired for all separate property obtained by them during the marriage to remain separate. The agreement also provides that the only property to be considered jointly owned would be that property specifically designated as such. At the time of the marriage, Wife was the settlor and beneficiary of a substantial irrevocable trust.

The prenuptial agreement, in relevant part, contains a provision entitled "Co-Owned Property, " which states:

6.1 Definition. The parties acknowledge that they are each free to acquire property during the marriage either in their own name or in joint names. Any property acquired during the marriage shall conclusively be deemed the Separate Property of the party in whose name such title is held unless such property is expressly acquired and held in the name of both parties as evidenced in a writing clearly expressing an intent that the property covered by the writing is to be so held ("Co-Owned Property") or as to which the deed or document evidencing title is in the name of both parties and creates, expressly or as a matter of law, a tenancy in both parties with the right of survivorship.

(Emphasis in original.) The prenuptial agreement also provides that, upon divorce, Co-Owned Property will be "divided into equal shares by the parties in further settlement of the respective marital rights" and that if one party desires to retain the Co-Owned Property, he or she can purchase the other party's interest at fair market value. The prenuptial agreement further provides that home furnishings purchased after the marriage and wedding gifts will be jointly owned and will be divided equally if the marriage is dissolved.

In June 2009, the parties purchased certain improved real property, with the deed reflecting that title was being acquired by both parties as husband and wife. A few months after purchasing the property, the parties tore down the existing structure and began building their "dream home." Husband acted as the general contractor for construction of the home. Although he was not a licensed contractor, he was able to proceed in this capacity and obtain all the necessary building permits because he was listed as an owner of the property. See generally Tenn. Code Ann. §§ 62-6-103 and -120 (Supp. 2013). Construction took approximately two years. During construction, Husband was paid $600 per week by Wife, which he utilized to pay his bills and contribute to expenses of the household. Wife did not issue Husband an IRS Form 1099 for these payments.

Wife filed a complaint for divorce against Husband on May 30, 2012. Wife asserted that the parties' prenuptial agreement controlled all financial issues relative to their divorce. Husband answered, admitting that a valid prenuptial agreement existed and asserting that this agreement should control. On March 8, 2013, Wife amended her complaint to add a claim seeking reformation of the deed to the marital residence, and averring that Husband's name was erroneously included as grantee. Wife stated that she contributed all of the funds to purchase the real property and build the home, and she alleged that it was the parties' intent that this real property constitute Wife's separate property. The trial court entered an order allowing Wife to amend her complaint. Husband responded by filing an amended answer, presenting the defense of estoppel by deed.

The parties reached an agreement as to the terms of a permanent parenting plan, which provided in part that each parent would have equal time with the child. A trial was conducted on May 31, 2013, regarding financial issues, including property division, child support, and attorney's fees. At trial, Wife testified that the inclusion of Husband's name on the deed to the real property was a mistake. In support, she asserted that her intent was to be the sole owner of the property because it was purchased entirely with her separate funds. Wife claimed that she instructed the realtor to have the deed drafted to name her as the only grantee. This would support the fact that she was also the sole applicant on the attendant mortgage. As Wife explained, although she objected to Husband's name on the deed at closing, she was told by the closing agent that because the parties were married, Husband's name was required by state law to appear on the deed. According to Wife, she relied upon this advice to her detriment and did not learn that no such requirement existed until the divorce proceedings were underway. Wife admitted that she knew upon leaving the closing that Husband's name appeared on the deed, due to no fraud on Husband's part. Wife also admitted that she had never attempted to correct the deed prior to the divorce proceedings.

Wife further explained that Husband had never paid any monies toward the purchase, construction, or maintenance of this real property. As she related, the parties kept all of their finances separate during the marriage. As such, Wife paid Husband $102, 000 for his services as contractor in the construction of the home. Wife admitted that Husband sought and acquired the necessary permits for building the home as a co-owner of the property. She also related that the parties intended the construction to serve as their dream house while launching Husband's career as a contractor.

William Weathers, the realtor who drafted the sales contract concerning the subject real property, testified that the agreement listed only Wife as the buyer, per the parties' instructions. Mr. Weathers further explained that the sales contract specifically provided for the deed to be prepared in Wife's name only. As Mr. Weathers was present at the closing, he related that Wife was upset when the deed was presented initially containing both parties' names. He testified that Wife adamantly insisted that the deed be in her sole name. According to Mr. Weathers, Husband remained calm and questioned whether his presence was even necessary at the closing. Despite Wife's objections, the closing proceeded with Wife signing the necessary documents. Mr. Weathers confirmed that the title agent told Wife that Husband's name was required on the deed.

Sandra Clayborne, a mortgage loan originator for Regions Bank, testified that Wife applied for the loan regarding the subject real property in her sole name and that the loan application was approved. Ms. Clayborne related that Wife informed her that the real property was to be Wife's separate property. Ms. Clayborne suggested that because the mortgage company did not require that Husband's name be included on the deed, the inclusion of his name could have been a mistake.

According to Husband's testimony, the parties intended to purchase the property together, build their dream house thereon, and reside together into their retirement years. Husband admitted that he did not contribute any money toward the purchase of the land or the construction of the home and that he and Wife kept their finances separate. He also admitted that Wife paid him an allowance while he was working on the home so that he could pay his bills and contribute to household expenses. Although Husband maintained that this allowance was not intended to compensate him for his services as contractor, he opined that his work as general contractor was worth significantly more than the $600 per week allowance he received during construction. Husband related that he was present at the closing and did not understand the exchange between Wife and the title agent. As Husband explained, he used his status as co-owner of the home to save the parties money during construction because he was able to procure special discounts from vendors and obtain the necessary permits. Husband's parents both testified that Wife always referred to the house as "their" home, thereby suggesting joint ownership.

Husband further testified that his average income at the time of trial was approximately $2, 000 per month. According to Husband, he was currently performing irrigation work and landscaping as well as outdoor construction and remodeling. As a high school graduate, Husband had also taken college courses but lacked about nineteen hours in earning a degree from U.T. Chattanooga.

Wife indicated that her income was derived exclusively from her trust. Despite holding two college degrees, Wife contended that she had been unable to secure gainful employment. She claimed that her trust provided income of $1, 700 per month compared to her expenses in excess of $9, 300 per month. She did admit listing an income of $19, 000 per month on the mortgage loan application when she purchased the real property, but she explained that this was only her income for that one particular month. Wife claimed that Husband earned $50, 000 to $60, 000 per year when they married but that he was often paid in cash.

At trial, the parties presented a combined asset list, which listed the marital residence as having a value of $1, 144, 000. The outstanding mortgage indebtedness was shown to have a balance of $388, 000. Husband therefore asserted that there existed $756, 000 in equity value in the improved real property. Wife, however, sought to show that she had "borrowed" money from her trust to finance the construction of the home. She still owed a balance on these "loans" in excess of $960, 000, such that according to Wife there existed no equity in the property. Wife presented the proof deposition of her accountant, Vincent James, to support and corroborate her claim regarding the loans relative to her trust.

At the conclusion of the trial, the court entered an order finding that the credibility of both parties had been successfully attacked. The court did, however, find the testimony of Mr. Weathers to be credible. The court likewise found Ms. Clayborne's testimony to be credible as to the real estate transaction.

As one of the primary issues, the trial court determined the parties' prenuptial agreement to be enforceable. The court concluded, however, that Husband's position that the marital residence should be treated as Co-Owned Property pursuant to paragraph 6.1 of the prenuptial agreement was inconsistent with other provisions of the agreement. Wife had substantial trust assets, which were the exclusive source for buying the land and building the home. The court further found that Husband invested no money in the house and was paid for his services as contractor. In relevant part, the trial court explained:

The Court further finds that the inclusion of the Defendant on the deed was clearly and convincingly shown to be both unexpected by both parties and not desired by either party. The Court finds that declaring the residence at 6557 Fair Harbor Trail to be co-owned property would be inconsistent with the intent and conduct of the parties, not compelled by the pre-marital agreement, and would result in an unequivocally inequitable windfall to the Defendant. The Court finds that the Plaintiff should be awarded the Fair Harbor property and should be responsible for any encumbrance for same.

The court divided the remainder of the assets and liabilities pursuant to the parties' agreed-upon list, finding this distribution to be fair and equitable. Rather than awarding Husband the cash value of the items of personal property awarded to him, the court ordered that Husband take possession of those items.

With regard to child support, the trial court determined that Husband was capable of earning $30, 000 per year while Wife's actual income was established at $33, 360 per year. Child support was then calculated based upon these income figures, utilizing the child support worksheet. The court ordered that each party pay his or her own attorney's fees. Husband timely appealed.

II. Issues Presented

Husband presents the following issues for our review, which we have restated slightly:

1. Whether the trial court erred by failing to award Husband one-half of the equity value in the jointly titled real property pursuant to the terms of the prenuptial agreement.
2. Whether the trial court erred by requiring Husband to take possession of one-half of the actual household furnishings rather than awarding him half of the value of those furnishings.
3. Whether the trial court erred by failing to apply properly the child support guidelines when calculating Wife's income and failing to award retroactive child support.
4. Whether the trial court erred by failing to award Husband his attorney's fees.

III. Standard of Review

Our standard of review is de novo with a presumption of correctness as to the trial court's findings of fact unless the preponderance of the evidence is otherwise. Tenn. R. App. P. 13(d); McCarty v. McCarty, 863 S.W.2d 716, 719 (Tenn. Ct. App. 1992). No presumption of correctness attaches to the trial court's legal conclusions. Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). The findings of the trial court involving the credibility of witnesses are entitled to great weight on appeal. Sisk v. Valley Forge Ins. Co., 640 S.W.2d 844, 849 (Tenn. Ct. App. 1982).

We review issues of contract interpretation de novo. See Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 659 (Tenn. 2013). As this Court has previously explained:

In resolving a dispute concerning contract interpretation, our task is to ascertain the intention of the parties based upon the usual, natural, and ordinary meaning of the contract language. Planters Gin Co. v. Fed. Compress & Warehouse Co., Inc., 78 S.W.3d 885, 889-90 (Tenn. 2002) (citing Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999)). A determination of the intention of the parties "is generally treated as a question of law because the words of the contract are definite and undisputed, and in deciding the legal effect of the words, there is no genuine factual issue left for a jury to decide." Planters Gin Co., 78 S.W.3d at 890 (citing 5 Joseph M. Perillo, Corbin on Contracts, § 24.30 (rev. ed. 1998); Doe v. HCA Health Servs. of Tenn., Inc., 46 S.W.3d 191, 196 (Tenn. 2001)). The central tenet of contract construction is that the intent of the contracting parties at the time of executing the agreement should govern. Planters Gin Co., 78 S.W.3d at 890. The parties' intent is presumed to be that specifically expressed in the body of the contract. "In other words, the object to be attained in construing a contract is to ascertain the meaning and intent of the parties as expressed in the language used and to give effect to such intent if it does not conflict with any rule of law, good morals, or public policy." Id. (quoting 17 Am.Jur.2d, Contracts, § 245).

Kafozi v. Windward Cove, LLC, 184 S.W.3d 693, 698 (Tenn. Ct. App. 2005). "Courts must look at the plain meaning of the words in a contract to determine the parties' intent. If the contractual language is clear and unambiguous, the literal meaning controls . . . ." Allmand v. Pavletic, 292 S.W.3d 618, 630 (Tenn. 2009) (internal citation omitted).

IV. Real Property

A. No Reformation of Deed

Husband asserts that the trial court erred by failing to award him one-half of the equity in the parties' jointly owned real property pursuant to the terms of the prenuptial agreement. Husband contends that because the deed to the property reflected the names of both parties as grantees, the real property is Co-Owned Property subject to equal division upon divorce. Wife claims that the trial court properly reformed the deed due to a mistake. She therefore contends that the real property was properly determined by the trial court as constituting her separate property and therefore not subject to division.

With regard to the reformation of a deed, this Court has previously stated:

Reformation is an equitable doctrine by which courts may correct a mistake in a writing "so that it fully and accurately reflects the agreement of the parties." 22 Tenn. Jur. Rescission, Cancellation and Reformation § 46 (1999). In order to reform a writing on the basis of mistake, there must have been either a mutual mistake or a unilateral mistake induced by fraud. Williams v. Botts, 3 S.W.3d 508, 509 (Tenn. Ct. App. 1999), perm. app. denied October 4, 1999. "A 'mistake' is an act which would have been done, or an omission which would not have occurred, but from ignorance, forgetfulness, inadvertence, mental incompetence, surprise, misplaced confidence, or imposition. . . ." Id. at 509-10. Reformation is ...

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