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Watts v. Watts

Court of Appeals of Tennessee, Jackson

July 11, 2017


          Session April 26, 2017

         Appeal from the Chancery Court for Shelby County No. CH-14-0083 Walter L. Evans, Chancellor

         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

          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.

          Arnold B. Goldin, J., delivered the opinion of the Court, in which Brandon O. Gibson and Kenny Armstrong, JJ., joined.



         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."

         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.

         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 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 ...

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