COURT OF APPEALS OF VIRGINIA 

Present: Chief Judge Moon, Judges Fitzpatrick and Annunziata 

Argued at Charlottesville, Virginia 

MARY ANABEL McCONNELL HUGER 

 MEMORANDUM OPINION* BY 

v. Record No. 0303-96-3 JUDGE JOHANNA L. FITZPATRICK 

 FEBRUARY 18, 1997 

GEORGE DERBYSHIRE HUGER 

FROM THE CIRCUIT COURT OF ROCKBRIDGE COUNTY 

George E. Honts, III, Judge 

 Ellen M. Arthur (Ellen M. Arthur, P.C., on 

brief), for appellant. 

 Thomas C. Spencer (Spencer & Filson, P.C., on 

brief), for appellee. 

 On appeal from the trial court's decision granting George 

Derbyshire Huger a reduction in his monthly spousal support 

obligation, Mary Anabel Huger contends that the court erred in 

its determination of the husband's income for spousal support 

purposes. For the following reasons, we find no error and affirm 

the judgment of the trial court. 

 Throughout the history of this case, both Mary Anabel Huger 

(wife) and George Derbyshire Huger (husband) contested husband's 

spousal support obligation subsequent to the parties' divorce. 

Specifically at issue in the instant case is husband's income 

from various corporations. Husband is the sole owner of the 

Subchapter S corporation Huger Distributing Company, and the 

 

 *Pursuant to Code § 17-116.010, this opinion is not 

designated for publication. 
 2 

 

controlling shareholder of the C corporations Huger-Davidson Sale 

Corporation of Staunton and Huger-Davidson Sale Company.1

 Following a modification of spousal support hearing 

requested by both parties, the trial court, by letter opinion 

dated April 12, 1994, initially denied husband's petition for a 

reduction and wife's petition for an increase of husband's 

spousal support obligation. However, by letter opinion dated 

April 20, 1994, the court withdrew its initial opinion and 

granted husband's petition for a reduction. The court determined 

husband's 1993 income to "approximate" $119,000 and ordered 

husband to pay spousal support to wife in the amount of $1,750 

per month. 

 1"An eligible domestic corporation can avoid double taxation 

(once to the corporation and again to the shareholders) by 

electing to be treated as an S corporation under the rules of 

Subchapter S of the Internal Revenue Code. In this way, the S 

corporation passes its items of income, loss, deduction, and 

credits through to its shareholders to be included on their 

separate returns." William R. Christian, Subchapter S Taxation 

§ 35.01 (3d ed. 1996). 

 The term "S corporation" means, with respect to any taxable 

year, a small business corporation for which an election under 

section 1362(a) is in effect for such year. The term "small 

business corporation" means a domestic corporation which is not 

an "ineligible corporation" and which does not have more than 

seventy-five shareholders, does not have as a shareholder a 

person (other than an estate, certain trusts, and certain 

organizations) who is not an individual, does not have a 

nonresident alien as a shareholder, and does not have more than 

one class of stock. See 26 U.S.C.A. § 1361(a) and (b). 
 3 

 

 The court issued yet another letter opinion on May 11, 1994, 

amending its previous opinion of April 20, 1994. The court 

reiterated that a change in husband's circumstances "justifie[d] 

a decrease in spousal support" and ordered spousal support in the 

amount of $2,200 per month. However, the court again revised its 

ruling by letter opinion dated August 15, 1994, and confirmed its 

previous order setting spousal support at $1,750 per month.2

 The 

court found in an order dated October 19, 1994: 

 Upon consideration whereof, it is hereby 

ordered for the reasons set forth in this 

Court's Letter Opinion dated August 15, 1994 

and this Court's Letter Opinion dated April 

20, 1994, that the Petition of the [husband] 

for a reduction in spousal support is 

well-founded and that commencing with June 1, 

1994, the spousal support shall be the sum of 

$1,750 per month. 

This order was unappealed and became final. 

 The court held another support modification hearing on 

November 22, 1995 at the husband's request for a reduction and at 

wife's later request for an increase. Following the hearing, the 

court issued a letter opinion on December 1, 1995. The court 

 2The court, in its May 11, 1994 letter opinion, included 

$34,650 of investment income in its calculation of husband's 

income. The court reversed this finding in its August 15, 1994 

letter, stating that it could "find no basis for adding $34,650 

to Derbyshire income figures. To have done so was error and it 

is removed from consideration." 
 4 

 

determined, "[u]pon review of the evidence . . . including the 

current status of the parties and the historical data accumulated 

over the years," husband's income to be "$97,500 or $8,092 per 

month, down seventeen percent from the last review." The court 

declined to consider "undistributed, after-tax retained [funds] 

in the Sub-Chapter S Corporation and liquid assets in the other 

corporations as being available as income to husband." The court 

denied an increase in spousal support for wife and granted 

further reduction in husband's spousal support payments due to a 

change in his circumstances. The court denied wife's motion to 

reconsider, and entered its final order on January 17, 1996, 

awarding wife spousal support in the amount of $1,250 per month. 

 I.

 On appeal, wife argues three assignments of error in the 

trial court's determination of husband's income. Wife first 

contends that the court erred in refusing to consider the 

retained earnings of husband's Subchapter S corporation as income 

to husband. Wife argues that, for purposes of spousal support, 

the court should have included the retained earnings of husband's 

Subchapter S corporation in its calculation of husband's income.3

 

 3"Retained earnings accounts contain any accumulated 

earnings and profits (E&P) of the corporation. If the 

corporation has accumulated earnings and profits, it must 

maintain separate accounts for previously taxed income (PTI) and 

the accumulated adjustments account (AAA)." Christian, supra, at 
 5 

 "The trial court's factual findings must be accorded great 

deference." Gamer v. Gamer, 16 Va. App. 335, 345, 429 S.E.2d 

618, 625 (1993). "'The findings of a trial court after an ore 

tenus hearing should not be disturbed on appeal unless they are 

plainly wrong or without evidence to support them.'" Street v. 

Street, Record No. 2363-95-4, slip. op. at 11 (Va. Ct. App. Jan 

21, 1997) (quoting Schweider v. Schweider, 243 Va. 245, 250, 415 

S.E.2d 135, 138 (1992)). "The weight to be given evidence and 

the resolution of conflicts in the evidence are for the fact 

finder. We cannot disturb a chancellor's finding of fact so long 

as it is supported by credible evidence." Gamer, 16 Va. App. at 

345, 429 S.E.2d at 625 (citations omitted). 

 The record demonstrates that the trial court considered the 

retained earnings of the Subchapter S corporation as income to 

the husband, but only as income in 1993, the year in which the 

income was earned. At the November 22, 1995 hearing, the court 

referred to the S corporation's funds and classified it as 

"income that would be reflected in prior statements subject to 

prior hearings." (Emphasis added). Additionally, wife's expert 

Certified Public Accountant, Bruce Blyer, testified regarding 

husband's reported income. He stated that husband's income from 

the S corporation was "properly reported" and that he "saw no 

evidence that [husband] did anything wrong." Husband's 1994 

 

§ 35.01. 
 6 

Individual Income Tax Return reflects income of $22,557 from 

"[r]ental real estate, royalties, partnerships, S corporations, 

trusts, etc." Lastly, the court's December 1, 1995 letter 

opinion also indicates that the court considered the Subchapter S 

corporation's earnings: 

 [Wife] urges . . . the court to consider 

undistributed, after-tax [funds] retained in 

the Sub-Chapter S Corporation and liquid 

assets in the other corporations as being 

available as income to [husband]. . . . 

Finding none of the funds retained excessive 

in relation to the size of the various 

corporations, this court will not impose its 

judgment on what should be retained by the 

corporations over the sound judgment of 

managers, including [husband], of the 

corporations. 

 Upon review of the evidence before me, 

including the current status of the parties 

and the historical data accumulated over the 

years, the Court finds: . . . [Husband's] 

income is determined to be $97,500, or $8,092 

per month, down seventeen percent from the 

last review. 

* * * * * * * 

 [Wife] is not entitled to an increase in 

spousal support; [Husband] is entitled to a 

reduction in his spousal support payments due 

to a change in his circumstances. 

 Accordingly, the court determines [wife] 

is entitled to spousal support in the sum of 

$1,250 per month. 

(Emphasis added). 

 Thus, although the court did not specifically itemize the 

different sources of funds that comprised husband's total income, 

the testimony and the court's December 1, 1995 letter opinion 
 7 

 

demonstrate the court's consideration of these funds, including 

"after-tax [funds] retained in the Sub-Chapter S Corporation." 

After evaluating the evidence, the court declined to include as 

income the Subchapter S corporation's retained earnings that had 

been considered earlier in establishing the amount of husband's 

income at the prior support hearings. The court's calculation of 

husband's income is not plainly wrong or without evidence to 

support it.4

 II. 

 Additionally, wife argues that the trial court erred in 

failing to include in its calculation of husband's income loans 

from husband's Subchapter S corporation that he deposited into 

his personal account. Wife contends that the loans husband 

 4Husband does not dispute that retained earnings may be 

considered as income in a determination of spousal support. 

However, he contends that this income was considered previously 

by the trial court in setting his earlier support obligation of 

$2,750. 

 At the November 22, 1995 hearing, husband's counsel 

represented to the court, "[W]e agree that the Sub-S corporation 

certainly has a value in its assets. But as Your Honor knows 

 . . . that income is entered -- is put on [husband's] 1040, 

whether it comes through on a W-2 or comes through on a Schedule 

E." Wife's counsel argued that the retained earnings of the 

 S corporation, as "an asset or a resource that is liquid, it 

certainly is available to him as income." However, the trial 

court agreed with husband's argument: "Not as income. It's 

available . . . . We stipulate that it's an asset. He could 

liquidate the corporation and get money out of it. It is not, 

however, income in any way, shape, or form, by anybody's 

testimony." 
 8 

received in 1994 and 1995 must be considered income, alleging 

that these loans were used for husband's personal expenses. 

However, as decided above, the record supports the trial court's 

determination of husband's income. 

 At the November 22, 1995 hearing, Blyer testified that 

according to his examination of the records regarding the 

Subchapter S corporation, all the S corporation's income was 

reported on husband's personal tax return. Blyer further stated 

that he found no intercompany transfers of funds between the 

Subchapter S corporation and the C corporations. Finally, Blyer 

testified that he found nothing that was reported incorrectly on 

husband's corporate tax returns or on his individual tax returns. 

 Husband acknowledged that he deposited additional funds in 

his personal checking account including one deposit of 

approximately $80,000, which was a loan he took from the 

Subchapter S corporation. He testified that the purpose of this 

loan was to pay a mortgage on rental property. The evidence 

established that the loan was reflected by a "note receivable to 

stockholder" and by other indicia of husband's obligation to 

repay. The court specifically determined that this money was 

from the Subchapter S corporation, and was not present income, 

but rather "income that would be reflected in prior statements 

subject to prior hearings." (Emphasis added). For the reasons 

stated above, we cannot say that the trial court abused its 

discretion or was plainly wrong in excluding the loans contested 
 9 

by wife from its calculation of husband's present income. 

 III.

 Lastly, wife argues that the trial court erred in failing to 

impute income to husband as a "matter of fact," because husband 

deposited funds in his personal checking account exceeding his 

reported income. Wife contends that funds in excess of husband's 

reported income of $97,500 passed through husband's personal 

checking account and that these funds should have been included 

in the court's determination of husband's income. 

 "'[A] trial court may impute income based on evidence of 

recent past earnings.'" Stubblebine v. Stubblebine, 22 Va. App. 

703, 709, 473 S.E.2d 72, 74 (1996) (quoting Brody v. Brody, 16 

Va. App. 647, 651, 432 S.E.2d 20, 22 (1993)). "In deciding 

whether to impute income, the court 'must look to current 

circumstances and what the circumstances will be "within the 

immediate or reasonably foreseeable future."'" Theismann v. 

Theismann, 22 Va. App. 557, 573, 471 S.E.2d 809, 816-17, aff'd, 

___ Va. App. ___, ___ S.E.2d ___ (1996) (en banc) (quoting 

Srinivasan v. Srinivasan, 10 Va. App. 728, 735, 396 S.E.2d 675, 

679 (1990)). Trial courts must exercise their discretion in 

determining whether income should therefore be imputed. See, 

e.g., Reece v. Reece, 22 Va. App. 368, 376, 470 S.E.2d 148, 152 

(1996). 

 Witness credibility determinations rest within the 

chancellor's sound discretion and will not be disturbed on appeal 
 10 

absent plain error or an abuse of discretion. See Goodyear Tire 

& Rubber Co. v. Pierce, 5 Va. App. 374, 381, 363 S.E.2d 433, 437 

(1987). Where the chancellor is confronted with conflicting 

testimony from interested witnesses on each side of the case, it 

is in his province alone, as fact finder, to assess the 

credibility of the witnesses and the probative value to be given 

their testimony. See Richardson v. Richardson, 242 Va. 242, 246, 

409 S.E.2d 148, 151 (1991). We will reverse a chancellor's 

factual determinations based on ore tenus evidence only if they 

are plainly wrong or without evidence to support them. Id. 

 Thus, the trial court had discretion to believe or 

disbelieve husband's explanation for these deposits. The trial 

court accepted husband's testimony regarding the deposits into 

his personal account as being loans and not income, and 

determined that husband's testimony was credible. The evidence 

presented in this case supports the trial court's decision not to 

impute income, and this decision was not clearly wrong or an 

abuse of discretion. 

 Affirmed.