Opinion ID: 2827194
Heading Depth: 2
Heading Rank: 1

Heading: Equitable Distribution and Alimony

Text: ¶9. The chancellor held a hearing on the issues raised by the remand and the motions for modification and contempt. No special master was appointed to assist the chancellor in valuing Legacy. Tonia put on no evidence concerning Legacy’s value. Drake testified that he had closed Legacy in August 2008 and transferred some of its interests to a sole proprietorship called Legacy Builders. Drake testified that Legacy had a negative value. He presented the testimony of certified public accountant Doris Triplett, who testified that she had closed out Legacy’s 2008 taxes. Triplett testified that she never had performed an audit of Legacy and never had determined what it owned. But Triplett testified that Legacy had assets on its books that actually were owned by Tonia and Drake personally, rather than by 6 Legacy. Some of these assets included the Lewises’ personal home and several of the properties on which Legacy was building homes. These assets had been included in the valuations of Legacy provided by Tonia at the divorce trial that were relied on by the chancellor, but rejected by the Court of Appeals. On remand, neither party provided title documentation showing that any real property had been titled to Legacy. Drake testified that Legacy had owned no real property. ¶10. The chancellor made the following findings regarding the valuation of Legacy: To all intents and purposes, Legacy appears not to have been run as a true corporate entity, but as an alter ego of the parties out of which they paid most of their personal expenses. They commingled monies and worked back and forth between the trust and Legacy Holdings, Inc. [Tonia] also worked on the trust construction, acting in the capacity of an interior decorator, choosing paints, carpet and countertops. Within the business of Legacy Holdings, Inc., [Tonia] assisted in handling some of the bookwork and bills. As to valuing Legacy Holdings, Inc., [Drake] put Doris Triplett, a Certified Public Accountant, on the stand. Ms. Triplett prepared the final tax returns for Legacy Holdings, Inc. Legacy Holdings, Inc., as mentioned above, is one of the marital assets for which this Court must determine what a willing buyer would pay to a willing seller, also under no compulsion. Having heard testimony in 2007 and again in 2012, the Court is once again left with no firm basis on which to form an opinion. The testimony struck down by the remand dealt with the value of Legacy Holdings, Inc., as established through the use of Quickbooks and Quicken documents. These Quickbooks and Quicken documents showed assets that were a mixture of personal and corporate assets, assets that may or may not have been sold, with no supporting schedules or documentation. In the 2012 hearing, Doris Triplett testified that the final tax returns of Legacy Holdings, Inc., and [Drake] were admittedly based upon information that was incomplete and without supporting documentation. She further testified that good practice required that she amend the 2007 and earlier returns to reflect the correct information regarding assets, liabilities, and ownership, but she did not do so. After the trial in 2007, [Drake] sought an extension of time after both sides had ostensibly rested in order to obtain the testimony of his Certified Public Accountant, Scott McElroy. The Court granted that request. [Drake] never provided this information. He has still failed to provide 7 any information on which to base any conclusion as to the worth of Legacy Holdings, Inc. The tax returns show that at the beginning of 2007, Legacy Holdings, Inc. had $988,758.00 in work in progress. According to those tax returns, it held unimproved property worth $1,086,250.00. At the end of the year, it had work in progress of $1,033,556.00, unimproved property valued at $1,032,906.00, and receivables of $65,000.00. The return showed gross receipts of $2,035,930.00. The return showed net loss of $142,787,00. In August, 2008, Legacy Holdings, Inc. was liquidated. At that time, its returns prepared by Triplett showed gross receipts of $1,971,172.00 and cash on hand of $82,465.00, and total assets of $2,322,505.00. Those assets and work in progress were transferred to Drake Lewis d/b/a Legacy Builders. The returns show Legacy Holdings, Inc., had a net loss of $448,521.00. In late 2008, Drake Lewis began doing business as Legacy Builders. By the end of 2008, Drake d/b/a Legacy Builders had gross receipts of $90,361.00, a gross income of $15,168.00, and a net loss of $7,953.00. The 2009 returns show that Drake Lewis d/b/a/ Legacy Builders had gross receipts of $1,134,686.00, gross income of $44,861.00, and net income of $18,953.00. Triplett’s testimony indicated that at the closing of Legacy Holdings, Inc., there was a capital loss carryover of $314,187.00, out of which [Drake] could deduct $3,000.00 per year on passive income until the funds were exhausted. He also had a net operating loss which he could offset against future ordinary income without the $3,000.00 limit per year. What cannot be ignored, however, is that there are not title documents showing that Legacy Holdings, Inc. had any assets other than these accounts receivable, which in essence show income but no assets. There are no real or personal properties. There is no testimony upon which this Court can place a valuation other than a stab in the dark at goodwill, a door which has been definitively closed by the Supreme Court. And after all, what is goodwill but income earning capacity? The Court finds that if there is any value to Legacy Holdings, Inc., that the same should be distributed to [Drake] as his own; that any liabilities are to be distributed to [Drake], and that he hold harmless and indemnify [Tonia] of any and all tax liability for which she might be “saddled” based upon [Drake’s] post-divorce 2008 Legacy Holdings, Inc., return. The chancellor also found that “Legacy Holdings, Inc. is valueless, outside of accounts receivable.” 8 ¶11. The chancellor revisited the holdings on Swamp Road, St. Martin, and Lot 13 Hickory Hills, as directed by the Court of Appeals. In the original decision, the chancellor had valued Swamp Road at $30,000, deemed Swamp Road to be marital, and awarded it to Drake. On remand, Drake testified that his father had purchased Swamp Road and placed it trust for Drake and his sister, with a one-half interest to each. Because the Swamp Road property had been gifted to Drake outside the marital estate, the chancellor found it was nonmarital. ¶12. The chancellor recognized the Court of Appeals’ holding that Lot 13 Hickory Hills should not have been included in the marital estate because it had been traded in a like-kind exchange for the St. Martin property. Accordingly, the chancellor removed Lot 13 Hickory Hills from the property division and determined the status of St. Martin. The chancellor found that, because Lot 13 Hickory Hills had been gifted to Drake by his father, and then Lot 13 Hickory Hills was traded in a 1031 like-kind exchange for St. Martin, St. Martin was Drake’s separate property. The chancellor noted that nothing indicated that Tonia ever had any interest in either Lot 13 Hickory Hills or St. Martin. ¶13. The chancellor made the following findings regarding the equitable distribution and alimony: In the Judgement entered by this Court on January 11, 2008, Tonia was awarded assets totaling $865,733.00 . . . and Drake was awarded assets totaling $1,807,882.00. However, in light of the changes made by the Court supra with regard to Legacy Holdings, Inc., the Swamp Road property, and the St. Martin property, the Court must amend the distribution. After removing the Swamp Road and St. Martin properties from the marital estate and re-valuing 9 Legacy Holdings as directed by the Mississippi Supreme Court, the Court will revisit the applicable Ferguson2 and Armstrong3 factors. In light of the changes made, Tonia Lewis Pagel was awarded $665,733.00 in assets (by removing the St. Martin property from her distribution). Drake Lewis was awarded $649,100.00 in assets (by removing Hickory Hills Lot 13 from his distribution and after concluding that Legacy Holdings, Inc., is valueless, outside of accounts receivable), but his individual assets are increased by $200,000.00 since the St. Martin property is nonmarital. Thus the Court will re-visit the factors in both Ferguson and Armstrong which deal with property brought into the marriage or acquired outside the marital estate. The Court finds that all other Ferguson and Armstrong factors the Court previously analyzed remain the same. Ferguson directs the Court to evaluate, among other factors, the value of assets not ordinarily subject to distribution, such as property brought to the marriage by the parties and property acquired by inheritance or inter vivos gift by or to an individual spouse. This Court, in its original decision, carefully weighed all the factors, but this factor has been affected by the reclassification of assets. Drake Lewis was gifted by his father property valued at approximately $210,000.00. The court finds that after division of the property, Drake’s assets, including his non-marital assets, outweigh Tonia’s assets to the extent that some sort of lump sum alimony must be awarded. As for alimony, the Court must re-visit the Armstrong factor regarding needs and assets of the parties in light of the non-marital property awarded to Drake Lewis. The Court originally awarded Tonia $24,000.00 in rehabilitative alimony, which Drake seeks to modify. . . . As discussed in the prior paragraph, Drake has assets outside the marital estate of approximately $210,000.00. Tonia has no outside assets. The Court finds that in light of all Ferguson and Armstrong factors, and in order to equitably divide the property, Drake Lewis shall pay Tonia Lewis Pagel $100,000.00 in lump sum alimony. B. Termination of Rehabilitative Alimony, Modification of Child Support, Contempt, and Attorney’s Fees ¶14. In a separate order, the chancellor addressed the parties’ dueling motions for modification and contempt. The chancellor granted Drake’s request to terminate rehabilitative alimony due to Tonia’s remarriage and terminated rehabilitative alimony as of 2 Ferguson v. Ferguson, 639 So. 2d 921 (Miss. 1994). 3 Armstrong v. Armstrong, 618 So. 2d 1278, 1280 (Miss. 1993). 10 the date of Tonia’s remarriage. The chancellor found that, because Tonia’s circumstances had changed since the divorce, Tonia should be ordered to share one-half of the college expenses. The chancellor denied Drake’s request for a reduction in child support based on a reduction in income. First, the chancellor found that, because Drake had modified his child support in September 2009 to $849 per month, he was in arrears for nonpayment of child support. Observing that the income Drake had reported on his latest Rule 8.05 financial statement was only slightly less than what Drake had reported at the trial, the chancellor found that Drake had not shown a material change in circumstances warranting a downward modification. Noting Tonia’s agreement that Drake be given extra visitation, the chancellor awarded Drake an extra week of summer visitation. The chancellor denied Drake’s motion for contempt, finding that Tonia’s conduct in moving the children did not rise to the level of contempt. ¶15. The chancellor found that, because Tonia had presented no evidence of the children’s increased needs, her motion for a modification to increase child support should be denied. The chancellor granted Tonia’s motion for contempt for Drake’s admitted failure to pay child support in the amount ordered by the chancery court. He found that Drake was in arrears in the amount of $28,589.39 and ordered him to repay Tonia $500 per month. The chancellor denied Tonia’s other allegations of contempt. Finally, the chancellor awarded Tonia $5,000 in attorney’s fees related to the contempt filing for unpaid child support.