TODD MICHAEL PERKINS v. ELIZABETH MUNDY (PERKINS) SLOANE

TODD MICHAEL PERKINS V. ELIZABETH MUNDY (PERKINS) SLOANE

Tennessee divorce case. Trial court found the “Vance report” and testimony to be credible and adopted my finding that showed Husband had kept his bank accounts separate, including one he maintained to manage funds from rental properties Wife claimed were marital due to transmutation. The appellate court concluded the trial court did not err when it classified five real properties as the Husband’s separate property.

In the Court of Appeals of TN at Nashville
Appeal from the Circuit Court for Sumner County
Judge Joe Thompson
No. M2024-00756-COA-R3-CV
Filed April 14, 2025

Todd Perkins (“Husband”) and Elizabeth Sloane (“Wife”) were married in December 2018 and had been married for just over two and a half years when Husband filed for divorce in July 2021. They had no children together. The bulk of the property to be classified consisted of five properties that had been purchased during the marriage. The trial court was, therefore, left to determine whether these five pieces of real property were part of the marital estate. The evidence at the hearing consisted primarily of testimony regarding these properties.

Husband testified that, before the parties’ marriage, he owned a house in Indiana that he subsequently sold to help pay for his education. After graduating from a nurse anesthesiologist program in Tennessee, Husband returned to Indiana and purchased a second property there known as Baldham with funds from the sale of the previous Indiana home. Husband sold Baldham in October 2019 and began purchasing the five properties at issue.

Husband purchased the first property in October 2019, known as Switchboard, using funds from the sale of Baldham that was titled in both parties’ names after he was told erroneously by his real estate agent that properties needed to be titled in both parties’ names when purchasers of property are married. Both parties were also listed on this property’s mortgage. Husband testified that he purchased four more rental properties using his separate funds and that those titles and mortgages were solely in his name which became an important distinction at trial on the classification of Switchboard. The classification of these five properties is the primary issue in the appeal.

Husband testified that he rented four of the properties (collectively “the rental properties”) to various tenants, and he continued to live in the fifth. Husband was questioned extensively regarding the separate bank account he maintained to accept rent payments from and pay for repairs for the rental properties. Husband also testified that he sometimes would use money from other bank accounts to pay for various expenses for the houses when rent was insufficient to do so.

In addition, Husband presented deposition testimony and the Vance report from forensic accountant, Robert Vance, whom he hired to analyze Husband’s bank records. The Vance report showed that Husband had kept his accounts separate, including an account Husband maintained to manage funds from the four rental properties Although not detailed in the appellate opinion, the Vance report clearly demonstrated the source of funds used for each property purchase including earnest money and cash at closing, copies of settlement sheets and a summary of several months of the rental bank accounts showing the sources and uses of all funds for the month.

The trial court undertook a separate analysis regarding the classification of the Switchboard property, finding that Husband had titled this property in both parties’ names and that this created a presumption that Husband had gifted the property to the marital estate. However, the trial court found that Husband had rebutted this presumption through his actions during the marriage, concluding that “the Court specifically finds that neither transmutation nor commingling occurred with respect to any of the five pieces of real property, thus each remains Mr. Perkins[’s] separate property.”

The trial court next determined whether Wife should be awarded a portion of the increase in value of the properties because of her testimony that she contributed to their upkeep. However, the trial court found that Wife could not adequately recall the work she did or quantify her work on the houses and that any financial contributions she made were de minimis. Therefore, the trial court found that the increases in the values of the properties were Husband’s separate property.

The appellate court dealt with several issues on appeal but this article focuses on the Classification of Property. Wife asserted that the trial court erred in classifying the five real properties as Husband’s separate property.

A. Whether Husband used separate property to purchase the properties.
Husband successfully rebutted the presumption that the properties were marital by proving that the properties were all purchased “in exchange for property acquired before the marriage.” See Tenn. Code Ann. § 36-4-121(b)(4)(B). Husband submitted the Vance report to rebut this presumption which presented an analysis of Husband’s financial accounts and the transactions through which he purchased the properties. This report and Vance’s deposition testimony established that all the funds used to purchase the five properties could be traced back to the sale of the Baldham property in Indiana. The Vance report concluded with the opinion that “Mr. Perkins has sufficiently maintained segregated, separate bank accounts in his sole name only that funded all four rental houses and the marital residence[,] and these five properties and the related bank accounts do not appear to have been comingled and transmuted.”

Wife’s argument that Husband periodically paid for expenses for the properties with marital funds was unpersuasive. In circumstances where a spouse has used marital funds to improve separate property for significant amounts of time or used a significant amount of marital funds for improvements to separate property, the appellate Court has found that the separate property was transmuted into marital property. Husband’s testimony that he “sometimes” used marital funds for repairs to the various properties, during an approximately two-and-a-half-year marriage, did not establish that he used a significant amount of marital funds that would substantiate a finding of transmutation. [Numerous case cites follow this section.] The evidence, therefore, did not preponderate against the trial court’s finding that the properties were Husband’s separate property and that no commingling or transmutation occurred.

B. Whether the Switchboard property transmuted into marital property.
The trial court concluded that the presumption that titling the property in both names was transmutation was overcome by the fact that the funds used to purchase the property came from the sale of Husband’s pre-marital property, he was the only party on the promissory note, and he ceased to title property in both names upon discovering he was not required to by law. The intentional act of holding funds from the sale of his house to use in the purchase, then separating the bank accounts for the purposes of the rental property show Mr. Perkins had an original intention that the Switchboard property was not marital property, and not a gift, but rather an investment property funded by his separate property and income.

The appellate Court has outlined the four most common factors to be considered when determining whether separate property has been transmuted into marital property: “(1) the use of the property as a marital residence; (2) the ongoing maintenance and management of the property by both parties; (3) placing the title to the property in joint ownership; and (4) using the credit of the non-owner spouse to improve the property.” Fox, 2006 WL 2535407, at *5. Of these four factors, only the third factor relating to Husband titling the property jointly weighs in favor of a finding of transmutation. However, as the trial court found, Husband’s “contrary conduct” and “the manner in which the parties” treated the property weigh against a finding of transmutation. Further, “the classification of property does not depend on the state of its record title but on the conduct of the parties.” Altman v. Altman, 181 S.W.3d 676, 680-81 (Tenn. Ct. App. 2005). The parties’ conduct showed that Husband only titled the Switchboard property jointly because of the false belief that he was required to do so. The parties’ subsequent conduct supports the trial court’s conclusion that Husband did not intend for the property to be marital.

C. Whether the appreciation in the value of the rental properties was marital property. Wife’s remaining arguments regarding the classification of the properties concern the definition of marital property found in Tenn. Code Ann. § 36-4-121(b)(2)(B)(i), which defines as marital property “income from, and any increase in the value during the marriage of, property determined to be separate property in accordance with subdivision (b)(4) if each party substantially contributed to its preservation and appreciation.”

The trial court concluded that Wife offered evidence of expenditures of only $461 per month over a 30 month period for goods and services which benefited both parties. In her deposition, Wife had a difficult time, with the exception of the Switchboard property, remembering what tasks she performed to contribute to the appreciation of the property, what goods she purchased for the property, or how much time she spent performing services at the property. Most importantly, she was unable to place a value on any of these goods and services. Conversely, Husband paid all of the mortgage payments and testified that he also contributed to household expenses and furnishings in an amount at least equal to, if not greater than, that of Wife. The evidence in the case was clear that not only did Husband intend for the property to remain his separate property, but contrary to her testimony at trial, Wife also acted during the marriage as if the properties were his separate property.

For the appreciation in the value of the five properties, or the rental incomes from the four rental properties, to be considered marital, Wife must have contributed to both the preservation and appreciation of the properties. Langschmidt v. Langschmidt, 81 S.W.3d 741, 746 (Tenn. 2002). Although contributions may be direct or indirect, they must be “‘real and significant,’” and there must be some link between the contributions and the appreciation of the property’s value. Keyt v. Keyt, 244 S.W.3d 321, 329 (Tenn. 2007) (quoting McFarland v. McFarland, No. M2005-01260-COA-R3-CV, 2007 WL 2254576, at *6 (Tenn. Ct. App. Aug. 6, 2007)). Whether a spouse made a substantial contribution to the preservation and appreciation of the subject property presents a question of fact. Id.

The trial court specifically found Husband and his expert (Vance) to be credible witnesses. Regarding Wife’s testimony, the court stated she “had a difficult time” remembering what she did on the properties. The appellate court inferred from this that the trial court did not find Wife to be credible regarding her work on the property and did not credit her testimony. The appellate court affirmed the trial court’s determination that any increase in the value of the properties was properly treated as Husband’s separate property and also affirmed the trial court’s determination that the five properties were Husband’s separate property.