The case involves a divorce between Louis Ernest Cunningham and Cheryl Lynne Cheatham Cunningham after seven years of marriage, with the trial court granting the divorce on grounds of inappropriate marital conduct. The court awarded the wife rehabilitative alimony, alimony in solido, child support for their minor daughter, established an educational trust fund, and mandated that the husband maintain life insurance while obligated to pay child support. The husband appealed against all rulings, including the constitutionality of the child support guidelines, while the wife contested the lack of an award for her litigation expenses. The appellate court affirmed some aspects of the trial court's judgment, reversed others, and remanded the case.
The couple married on October 20, 1990, and separated on July 15, 1995, with the final divorce decree issued on January 20, 1999. They share joint custody of their daughter, Avery, who primarily resides with the mother. Dr. Cunningham, a cardiologist with significant income, had gross earnings of approximately $82,000 per month, while Ms. Cunningham, a former medical equipment salesperson and business administrator, did not intend to return to work, choosing instead to care for Avery. The husband brought separate assets into the marriage, including real estate, while the wife had no separate resources. The trial court awarded the wife the marital home, furnishings, a vehicle, half of the couple's bank accounts, and half of certain insurance policies.
Ms. Cunningham was awarded her profit sharing in the Mid-South Heart Center as well as half of Dr. Cunningham’s profit sharing. She is responsible for debts owed to Union Planters, Visa, and a Memphis law firm. Dr. Cunningham received the remaining marital assets, including the Heart Center and its goodwill, and is accountable for the remaining marital debts. The court established a visitation schedule for Dr. Cunningham, including every weekend, specific holidays, and six weeks in the summer. Financial obligations imposed on Dr. Cunningham include $450,000.00 in alimony in solido, $6,000.00 monthly rehabilitative alimony for seven years, $6,200.00 monthly child support, and $4,486.00 monthly into a college trust fund for their child, Avery. Furthermore, he must maintain a $900,000.00 life insurance policy while child support obligations exist.
Dr. Cunningham filed a motion for a new trial on September 1, 1999, challenging the child support determination on constitutional grounds, which was subsequently denied. He is appealing the trial court’s decision, raising several issues including the valuation of the Heart Center at $1,300,000.00, the award of alimony, property division, the amount of child support, and the requirement to maintain life insurance. Additionally, Ms. Cunningham questions the denial of her litigation expenses. The valuation of the Heart Center, a factual determination, was supported by competing expert testimonies, with the court ultimately finding its value at $1,300,000.00.
Ms. Cunningham acknowledged that the medical practice's correct valuation is $1,059,947.00, contrary to the $1,300,000.00 listed in her financial statement. The court awarded the Mid South Heart Center, Inc. to Dr. Cunningham, noting that the goodwill associated with the practice is not a marital asset. Goodwill, being tied to the reputation of the practice, lacks a separate property interest and cannot be sold or pledged. The court referenced Smith v. Smith, establishing that professional goodwill should not factor into the equitable distribution of marital assets. The court found the trial judge's valuation of $1,300,000.00 to be unsupported by evidence, as Ms. Cunningham's expert valued the practice at $1,059,947.00, including $417,083.00 attributed to goodwill, while Dr. Cunningham's expert valued it at $546,710.00, excluding goodwill. The court reversed and remanded the issue, instructing the trial court to assign a value between $546,710.00 and $624,864.00 based on the evidence presented.
Regarding alimony, the court noted that its appropriateness depends on the specific facts of each case and must consider statutory factors from section 36-5-101(d) of the Tennessee Code. This statute emphasizes rehabilitative support for economically disadvantaged spouses but allows for long-term support if rehabilitation is not feasible. The court must evaluate various factors, including the parties' earning capacities, financial resources, education, duration of marriage, and mental condition, to determine the nature and amount of support.
Key factors considered in determining alimony and marital property distribution include the physical condition of each party, the desirability for a party to seek employment while caring for a minor child, separate assets, marital property provisions, standard of living during the marriage, contributions to the marriage, relative fault of the parties, and tax consequences. The trial court emphasized that while all factors under section 36-5-101(d)(1) are significant, need and ability to pay are paramount in setting alimony awards.
In this case, the trial court divided marital assets and liabilities, awarding the appellant $1,290,033.05 (78.5%) and the appellee $352,641.34 (21.5%), totaling $1,642,674.39. Ms. Cunningham was awarded $450,000 in alimony. However, due to an incorrect valuation of Dr. Cunningham’s medical practice, the court reversed the alimony award and remanded for re-evaluation.
The trial court's equitable division of marital property does not require equal distribution but must adhere to the factors in section 36-4-121(c), allowing discretion in adjusting interests in jointly owned property. The fairness of property division is assessed by final outcomes, and the duration of marriage influences distribution. In shorter marriages, contributions to marital assets are particularly relevant. The trial court's reliance on an incorrect valuation of the Mid-South Heart Center necessitates a reevaluation of property distribution.
The court determined that the Cunninghams' marriage lasted just under five years before their separation in July 1995. It found it necessary to reverse the trial court's division of marital property and remanded for a reassessment based on the newly assessed value of Dr. Cunningham's medical practice. For rehabilitative alimony, it is essential to establish that the recipient spouse can be economically rehabilitated, considering the standard of living during the marriage. A court only addresses rehabilitation if the recipient is economically disadvantaged compared to the other spouse. If such disadvantage is found, the court must evaluate the nature, amount, duration, and payment method of alimony, which can be modified upon substantial changes in circumstances. The burden lies with the recipient to prove unsuccessful rehabilitation efforts. The trial court recognized Ms. Cunningham's potential for rehabilitation and her economic disadvantage relative to Dr. Cunningham. However, since the court previously identified an error in valuing Dr. Cunningham's practice, it reversed the alimony award for reevaluation based on the corrected valuation.
Regarding child support, Dr. Cunningham contested the trial court's decision requiring him to pay $6,200 monthly due to increased visitation and its refusal to allow a downward deviation from the guidelines. While the trial court's factual findings are presumed correct, its discretion is guided by child support guidelines. These guidelines provide a rebuttable presumption of the correct support amount but allow for deviations if the situation warrants it. For a deviation to be justified, the court must document specific reasons that demonstrate the deviation serves the child's best interest, is unjust or inappropriate, or maintains equity between the parties.
Rule 1240-2-4-.04(2) and (4) outlines circumstances under which downward deviation from child support guidelines is permitted, specifically: 1) when the Department of Human Services (DHS) has taken custody of the child due to neglect, dependency, or abuse; 2) when the child spends more visitation time with the obligor than the guidelines assume; and 3) in cases of extreme economic hardship for the obligor, such as when they have other children with extraordinary needs. The guidelines also allow for downward deviation if the obligee has stopped caring for the child or incurs lower childcare expenses than anticipated.
The court can authorize a downward deviation if the child's overnight time is shared more equally between parents, making it necessary to evaluate each case individually. If the child is not staying overnight with the obligor during the standard visitation periods, additional support may be added to cover the obligee's costs. The court may also consider downward deviation if the obligor consistently provides more care than the guidelines account for, with the primary focus being the best interest of the child.
Additionally, the court must consider all net income of the obligor, setting child support based on a percentage of income up to $10,000 per month. If the obligor's income exceeds this amount, downward deviation may be granted if it is shown that applying the guideline percentage to the excess is unreasonable given the child's best interest and the parents' circumstances.
In this case, the trial court calculated Dr. Cunningham's child support obligation based on his net income of $610,605, resulting in an annual support amount of $128,227.00 (or $10,686.00 monthly), with $6,200.00 going directly to Ms. Cunningham and $4,486.00 allocated to a college trust fund. Dr. Cunningham contends that the child support should have been calculated based on a net income cap of $10,000, arguing that the trial court's determination is incorrect.
Dr. Cunningham seeks a reduction in child support obligations, arguing that his above-average visitation with his daughter warrants a downward deviation from the guideline amount. The court emphasizes that child support determinations prioritize the child’s best interests, not those of the parents. It finds no abuse of discretion by the trial court in not basing child support on a monthly net income of $10,000, noting that the child has been accustomed to a high standard of living and that the guidelines aim to minimize the economic impact of parental separation on the child.
The court acknowledges Dr. Cunningham's capacity to pay the established support amount and affirms the trial court's discretion to set payments based on income exceeding $10,000. The guidelines allow for a downward deviation when a non-custodial parent exercises more visitation than the standard 80 days annually. In this case, Dr. Cunningham has been granted 160 days of visitation, leading to the presumption that he is exercising this time. Consequently, the court reverses the trial court’s child support determination and remands for a downward deviation reflecting his increased visitation.
Additionally, the guidelines permit the establishment of an educational trust fund when the obligor’s income exceeds $10,000. The trial court ordered Dr. Cunningham to allocate $4,486.00 of his $10,686.00 monthly support into such a fund. He argues this requirement is unconstitutional under equal protection provisions. During the trial, Dr. Cunningham affirmed his commitment to support his daughter and to meet court requirements, including providing life insurance.
The document outlines several key decisions made by the trial court regarding child support, life insurance, and litigation expenses in a divorce case. Dr. Cunningham expressed a desire to support his child, Avery, through a trust fund funded by child support payments, which the court subsequently established. The court also found that Dr. Cunningham waived his constitutional argument regarding child support guidelines, opting not to address it on appeal.
Tennessee Code § 36-5-101(g) allows courts to direct parties to maintain life insurance for the benefit of the other spouse and children. Citing *Young v. Young*, the court upheld the trial court's decision to require Dr. Cunningham to maintain a $900,000 life insurance policy to secure child support payments. However, this decision is contingent upon the trial court's later re-evaluation of child support due to Dr. Cunningham's increased visitation rights.
Regarding litigation expenses, the court noted that trial courts have discretion to award funds to cover legal costs in divorce cases, particularly for economically disadvantaged spouses. Despite Ms. Cunningham's request for attorney's fees, the court affirmed the trial court's decision not to award them, as she was deemed to have sufficient resources from the division of marital property and alimony.
In conclusion, the court affirmed some trial court decisions while reversing others, remanding the case for the valuation of specific assets, recalibration of alimony and child support based on new findings, and determining the appropriate amount of life insurance Dr. Cunningham must maintain. The costs of the appeal were to be borne equally by both parties.
