IN THE COURT OF APPEALS OF TENNESSEE FILED AT KNOXVILLE May 27, 1999
Cecil Crowson, Jr. Appellate C ourt Clerk FRANK VERNON SOUTHERS, ) C/A NO. 03A01-9802-CV-00001 ) Plaintiff-Appellant,) ) ) ) ) APPEAL AS OF RIGHT FROM THE v. ) SULLIVAN COUNTY LAW COURT ) ) ) ) PATSY LORETTA SOUTHERS, ) ) HONORABLE R. JERRY BECK, Defendant-Appellee. ) JUDGE
For Appellant For Appellee
JOHN S. BINGHAM DAVID S. HAYNES Hawkins, Moody, Bingham, Bristol, Tennessee Miller, P.C. Kingsport, Tennessee
O P I N IO N
AFFIRMED AND REMANDED Susano, J.
1 This is a post-divorce case. The trial court set aside
that portion of the parties’ judgment of divorce dealing with the
issue of periodic alimony. It then entered a new decree again
establishing Frank Vernon Southers’ (“Husband”) periodic alimony
obligation at $2,000 per month, but decreeing new terms as to
when his obligation would terminate. In a subsequent order, the
trial court decreed that Husband should reimburse Patsy Loretta
Southers (“Wife”) the sum of $6,255.44 for medical insurance
premiums previously paid by her. The second order further
directs that Husband pay Wife’s premiums in futuro until May 12,
1998.1 Husband appeals from these orders, raising four issues
for our consideration:
1. Does a confidential relationship exist between married parties after they have separated and while they are engaged in divorce proceedings?
2. Did the trial court abuse its discretion in setting aside a divorce judgment on the ground of constructive fraud where the party in whose favor the relief was granted had not filed a motion pursuant to Rule 60.02, Tenn.R.Civ.P.?
3. Did the trial court err in permitting Wife to introduce a doctor’s medical record which recounts a conversation prior to the parties’ divorce between Husband and his physician regarding Husband’s desire “to apply for social security disability”?
4. Did the trial court, in reimposing an alimony obligation on Husband, fail to properly consider the relevant factors found at T.C.A. § 36-5-101(d)(1)(A)-(L)?
1 In doing so, the trial court, without saying so, actually set aside or modified a provision of the divorce judgment of May 12, 1995, which provides that Husband pay Wife’s medical insurance premiums “for three years or until retirement or death.” (Emphasis added).
2 I.
The parties’ divorce judgment, entered May 12, 1995,
dissolved a marriage of over 38 years. Wife was then 57 years
old and Husband was 61. The parties did not have minor children.
The divorce judgment was entered pursuant to the
parties’ oral agreement on economic issues and their stipulation
that Wife was entitled to a divorce on the ground of
inappropriate marital conduct. Both parties were represented by
counsel. The divorce judgment specifies, in some detail, each
asset of the marital estate, its value, and the party to whom it
was awarded. Wife received marital assets valued at $520,969,
and Husband was awarded marital assets with a total value of
$296,477.61. As a part of the division of the marital estate,
and included in the figures previously stated, each of the
parties received “50% short term retirement” and “50% long term
retirement.” Under the heading of “Alimony,” the judgment
provides as follows:
Husband’s income is $6,233/mo. after taxes. Husband will pay Wife $2000.00 per month until his retirement or death. Husband will pay for Wive’s [sic] health care insurance for three years or until retirement or death, under COBRA. First payment due May 4, 1995 and 4th of each month thereafter until after the 4th of the month of Husband’s retirement. Husband will apply each 18 months for Wive’s [sic] COBRA rights.
(Emphasis added).
3 Husband was a State Farm Insurance agent. He
terminated his employment with State Farm effective December 31,
1995, having elected to retire because of a disability associated
with a heart condition. As a result of his disability
retirement, Husband receives a monthly Social Security check of
$985 and a monthly disability check of $5,200. His retirement
triggered State Farm’s five year payout for the assets of his
agency -- referred to in the divorce judgment as “short term
retirement.” Effective as of Husband’s retirement, both he and
Wife started receiving a monthly check of $1,239.07 -- payments
that will terminate in 60 months. At the conclusion of this
period, State Farm will commence its “long term retirement”
payments, which are also being equally split between the parties
pursuant to the terms of their divorce judgment. The “long term
retirement” payments continue until Husband’s death.
Husband refused to pay alimony after December, 1995.
He made his last medical insurance premium payment for Wife in
January, 1996. His position was, and still is, that his
obligation to pay periodic alimony and Wife’s medical insurance
premiums terminated upon his retirement and, according to him,
his disability constitutes retirement as contemplated by the
divorce judgment.
On February 19, 1996 -- some nine months after the
divorce judgment was entered -- Wife filed a pleading entitled
“Petition to Enhance Alimony as to Duration and Amount.” The
petition alleges that “[i]t was contemplated that retirement
would reduce the husband’s income, therefore, his ability to pay
4 alimony.” Instead, so the petition correctly alleges, Husband’s
disability retirement increased his income. According to the
petition,
[t]he retirement of the husband without disability was contemplated and it was thought that this would reduce his ability to pay. This was contemplated, and provided for, in the judgment of May, 1995. The work stoppage due to disability, enhancing the husband’s ability to pay, was not contemplated.
Following a bench trial on Wife’s petition, the trial court found
that Husband had failed to disclose to Wife that he was seriously
considering disability retirement prior to the time that the
parties finally negotiated the settlement of the economic issues
in their divorce; that a confidential relationship existed
between the parties during their negotiations and up to the time
of their divorce; that this confidential relationship gave rise
to Husband’s fiduciary duty to disclose this contemplated-
retirement information to Wife; and that Husband’s failure to do
so was a violation of his fiduciary duty to his then-spouse.
Accordingly, the trial court set aside the alimony/medical
insurance portions of the divorce judgment on the basis of
“constructive fraud,” and, in two separate decrees, ordered as
follows:
That [Husband’s] alimony obligation shall be fixed in the amount of Two Thousand Dollars ($2,000.00) per month and the same shall be due and payable from and after February, 1996. [Husband’s] alimony obligation shall terminate when [Husband’s] disability pay from the State Farm plan with CIGNA ceases or at his death whichever first occurs.
5 * * *
[Husband] is ORDERED to pay to [Wife], in addition to the sums heretofore ordered and adjudged in the prior Order, the sum of $6,255.44, which is reimbursement for medical insurance premiums at $399.44 per month for 1996 and $232.70 per month for 1997, calculated as $6,255.44 through August, 1997. After August, 1997 the amount shall continue to be $232.70 per month through 1997, and thereafter, beginning in January, 1998, such amount that will purchase the same coverage that was purchased for $399.44 per month in 1996. The premiums shall be due and payable from [Husband] to [Wife] for her medical insurance premium reimbursement until May 12, 1998.
II.
In finding a confidential relationship between the
parties, the trial court relied, at least in part, on the
decision of this court in the case of Howell v. Davis, 306 S.W.2d
9 (Tenn.App. 1957). In Howell, this court found that a woman’s
spouse, who was dead at the time of trial, had fraudulently
induced her to sign a deed. In finding that the transfer was
voidable upon application of the defrauded wife, the court stated
as follows:
In view of the marital relationship and the fact that Mr. Howell was the more dominant personality and managed the business affairs of the family; that he selected the attorney and was the moving influence in the execution of the deed which was greatly to the disadvantage of Mrs. Howell, we think a confidential relationship existed between them and that the burden of proof rested upon his heirs at law to show that, in executing the deed of 1941, Mrs. Howell was fully and correctly advised of the purpose and effect of the deed and that there is a presumption that the deed was fraudulently obtained.
6 “The relation of husband and wife has been regarded as one of special confidence and trust, and in contracting with each other they must exercise the utmost good faith. The court will closely scrutinize all transactions between them to the end that injustice and oppression may not result.”
Id. at 12. (Emphasis added). The trial court in the instant
case also cited as persuasive authority this court’s opinion in
Lightman v. Magid, 394 S.W.2d 151 (Tenn.App. 1965), which stands
for the principle
[t]hat a confidential relationship exists between a prospective husband and wife who execute an antenuptial agreement while they are engaged to be married which requires the utmost good faith and full disclosure of all circumstances materially bearing on the contemplated contract.
Id. at 156. The trial court in the instant case rationalized
that if parties negotiating a prenuptial agreement stand in a
confidential relationship with one another, then such a
relationship must exist between these parties who were married.
Husband takes the position that “[t]o hold that a
confidential or fiduciary relationship exist[s] between estranged
spouses in a divorce action who are negotiating a settlement
through their attorneys does not reflect reality.” In this case,
we agree with Husband’s position; but we do not agree that this
requires a reversal of the trial court’s most recent orders.
In the instant case, the parties had been separated for
over 17 months before the divorce was granted; each had sued the
7 other for divorce; and each was represented by counsel. There is
nothing in the record to indicate that they had personally
negotiated any aspect of the settlement of the economic issues in
this case. On the contrary, all negotiations appear to have been
undertaken through counsel and the parties apparently did not
even talk to one another after their separation. There is
nothing about the relationship between these separated,
divorcing, represented-by-counsel parties to suggest that their
relationship -- contentious as it then obviously was -- falls
within one of the “three distinct classes” giving rise to a duty
to disclose. See Justice v. Anderson County, 955 S.W.2d 613,
616-17 (Tenn.App. 1997). This case is not like Howell. In that
case, the court was dealing with a transaction between spouses
during an intact marriage. Here, the parties were married in
name only, and they were clearly dealing at arms’ length, through
counsel, with absolutely no trust or confidence reposed by one in
the other.
It is important to recognize what this case does not
involve. There are no allegations or proof in the record that
Husband made an affirmative misrepresentation. He apparently was
not asked in discovery regarding whether his health condition --
about which Wife had some, but incomplete, information -- had
prompted him to consider early disability retirement. This is
also not a case where a party hides the existence of a marital
asset or otherwise makes an affirmative misrepresentation
regarding a marital asset -- one that amounts to an act of fraud.
Obviously, an act of fraud can be the basis for setting aside a
8 negotiated marital dissolution agreement. See Rule 60.02(2),
Tenn.R.Civ.P.
We know of no Tennessee appellate case authority
deciding whether, and to what extent, a confidential relationship
giving rise to a duty to disclose -- as distinguished from a duty
not to engage in an affirmative misrepresentation or a duty not
to hide marital assets -- exists as between divorcing parties.
Other states have recognized such a duty under some
circumstances. See Avriett v. Avriett, 363 S.E.2d 875, 877
(N.C.App. 1988) (holding that the “confidential relationship that
usually exists between husband and wife” terminated when they
“become adversaries” in the course of negotiating a divorce
settlement); Eltzroth and Eltzroth, 679 P.2d 1369, 1372 (Or.App.
1984) (“Because the fiduciary duty is imposed as a result of the
confidential relationship between the parties, it continues while
the parties contemplate divorce, as long as the confidential
relationship remains intact and the parties are not dealing at
arms’ length through separate agents or attorneys.”); Gabbert v.
Johnson, 632 P.2d 443, 446 (Okla.App. 1981) (“Both parties were
represented by able counsel. Once she filed her action, the
woman no longer enjoyed a confidential relationship with her
husband. He did not have to voluntarily disclose anything.”);
Jeffries v. Jeffries, 434 N.W.2d 585, 587-88 (S.D. 1989) (“While
it is generally true that a husband and wife do enjoy a
confidential relationship,...we do not believe that such a
relationship existed here. When the parties to a marriage are
negotiating a property settlement, recognizing that their
interests are adverse to one another and that they are dealing at
9 arms [sic] length, neither spouse owes to the other the duty of
disclosure which he or she would normally owe if their
relationship remained, in fact, a confidential one.”). Cf.
McDonald v. Barlow, 705 P.2d 1056, 1060 (Idaho App. 1985)
(“Throughout the property settlement negotiations, the
relationship between McDonald and Barlow was that of husband and
wife. The fiduciary duty arising from that relationship was not
affected by the parties’ separation.”). In the instant case, we
do not find it necessary to define, by way of a bright-line rule,
when the confidential relationship recognized in Howell
terminates in the context of a divorce. Suffice it to say that
it had clearly terminated in this case.
While we disagree with the reason advanced by the trial
court to justify his judgment in this case, this does not close
our inquiry. On a de novo review, such as the one in which we
are now engaged, we are “called upon to pass upon the correctness
of the result reached in the [t]rial [c]ourt, not necessarily the
reasoning employed to reach the result.” Shelter Insurance
Companies v. Hann, 921 S.W.2d 194, 202 (Tenn.App. 1995). In the
instant case, we agree with the result reached by the trial
court, i.e., the extension of Husband’s alimony obligation until
his monthly disability payments stop or he dies, whichever of the
two events occurs first. We also agree with the trial court
decision to require Husband to pay for Wife’s medical insurance
premiums until May 12, 1998.
In a post-divorce proceeding, a court has the power to
“decree an increase or decrease of [an award of spousal support]
10 only upon a showing of a substantial and material change of
circumstances.” T.C.A. § 36-5-101(a)(1). Unless and until a
petitioning party demonstrates a “substantial and material change
of circumstances,” the existing award of spousal support is res
judicata. Hicks v. Hicks, 176 S.W.2d 371, 374-75 (Tenn.App.
1943).
“Under T.C.A. § 36-5-101(a)(1), it is clear that the
ordinary decree for support remains within the control of the
Court and is subject to modification.” Anderson v. Anderson, 810
S.W.2d 153, 154 (Tenn.App. 1991).
Husband argues that the trial court did not have the
power to change the alimony/insurance provisions because there
was no longer an obligation to pay periodic alimony or provide
for Wife’s medical insurance premiums. He contends that he had
fully satisfied his periodic alimony/insurance obligations before
Wife filed her petition. We disagree with Husband’s analysis.
T.C.A. § 36-5-101(a)(1) gives a court the power to modify a
periodic alimony in futuro decree. That statute does not limit a
court’s right to modify to those situations where the previous
periodic alimony obligation has not been fully satisfied
according to its terms.2 We are not aware of any authority for
the proposition advanced by Husband. Furthermore, we think his
argument is at odds with the broadly-stated right to modify set
forth in T.C.A. § 36-5-101(a)(1).
2 By contrast, “rehabilitative, temporary support and maintenance” stays within the control of the court “for the duration of such award.” T.C.A. § 36-5-101(d)(2).
11 In the instant case, it is clear that the parties
contemplated a retirement by Husband that would result in a
decrease in his income -- the usual situation in the typical
retirement. Instead, Husband’s disability retirement resulted in
substantial income not contemplated at the time of the divorce
judgment -- a monthly disability payment of $5,200. While
Husband’s present net income is not shown in the record, it is
clear that his present gross income is $7,424.07. This compares
with a monthly net of $6,233, the amount upon which the alimony
award of $2,000 per month was originally based. We find that the
circumstances of the parties had changed in a substantial and
material way, justifying the action of the trial court. Thus,
even though we disagree with the trial court’s decision to set
aside the original alimony/insurance decrees because of fraud, we
agree that the court was justified in the changes decreed by it
based upon a substantial and material change in the parties’
circumstances.
III.
Husband argues that the trial court should not have
admitted into evidence a record from the office of Dr. Jerry L.
Miller containing the following statement regarding the doctor’s
conversation with Husband on April 21, 1995, some 21 days before
the parties’ divorce:
Patient and I had a lengthy discussion about his retirement and he wants to apply for social security disability. I encouraged him to do so and he will apply.
12 The stated basis for Husband’s objection at trial was
that Wife had failed to call the records custodian to
authenticate the proffered document. In fact, the record is
clear that the document in question was furnished by Husband’s
counsel in response to a request to produce documents. In
furnishing this document, without qualification, in response to a
request for Husband’s medical records, Husband, in effect,
authenticated the document.
To the extent that Husband now poses additional3
reasons why the document was not admissible, those grounds were
waived when they were not raised at the time the document was
offered as evidence by Wife. See NEIL P. COHEN, ET AL., TENNESSEE
LAW OF EVIDENCE § 103.3 (3d ed. 1995). In any event, and even
assuming for the purpose of discussion that the trial court erred
in admitting the challenged document, we do not find that the
trial court’s ruling amounts to an “error involving a substantial
right [that] more probably than not affected the judgment or
would result in prejudice to the judicial process.” See Rule
36(b), T.R.A.P. This is because we have resolved in Husband’s
favor the issue, i.e., violation of a fiduciary duty, upon which
the document was offered and received into evidence.
IV.
Finally, Husband argues that the evidence preponderates
against the trial court’s determination that Wife needs $2,000 of
3 Husband argues that Wife did not prove each of the elements set forth in Rule 803(6), Tenn.R.Evid.
13 alimony. We disagree. Wife testified to her needs, and it is
obvious that the trial court believed her testimony. The issue
of credibility was for the trial court. Massengale v.
Massengale, 915 S.W.2d 818, 819 (Tenn.App. 1995); Bowman v.
Bowman, 836 S.W.2d 563, 566 (Tenn.App. 1991). We find no error
in the award on this basis.
14 V.
The judgment of the trial court is affirmed. This case
is remanded to the trial court for such further proceedings as
may be required, if any, consistent with this opinion, and for
collection of costs assessed below, all pursuant to applicable
law.
__________________________ Charles D. Susano, Jr., J.
CONCUR:
________________________ Houston M. Goddard, P.J.
________________________ Herschel P. Franks, J.