Melvin F. Morris v. Judith Healy Morris ( 1999 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Bray, Annunziata and Frank
MELVIN F. MORRIS
MEMORANDUM OPINION *
v. Record No. 0850-99-2 PER CURIAM
OCTOBER 26, 1999
JUDITH HEALY MORRIS
FROM THE CIRCUIT COURT OF SPOTSYLVANIA COUNTY
J. Peyton Farmer, Judge
(Theodore J. Edlich, IV; J. Scott Kulp;
Joseph A. Vance, IV; Williams, Mullen,
Clark & Dobbins; Joseph A. Vance, IV &
Associates, on briefs), for appellant.
(Murray M. Van Lear, II; Paul A. Simpson;
John K. Byrum, Jr.; Scott, Daltan & Van Lear;
Hirschler, Fleischer, Weinberg, Cox & Allen,
P.C., on brief), for appellee.
Melvin F. Morris (husband) appeals from the final decree of
divorce entered by the Spotsylvania County Circuit Court (trial
court). Husband contends that the trial court erred (1) by
assigning a value to Commonwealth Center, Inc. (CCI), that
exceeded husband's marital interest in the property; (2) by
ordering him to restore $29,093.50 to Meadows Mobile Home Park's
account after transferring these funds to pay a joint obligation
of the parties; (3) by finding that Judith Healy Morris (wife) did
not dissipate assets from Meadows Mobile Home Park (Meadows) and
* Pursuant to Code § 17.1-413, recodifying Code
§ 17-116.010, this opinion is not designated for publication.
Lee Hill Village Mobile Home Park (Lee Hill); (4) by finding that
Preferred Brokers, Inc. (Preferred), is wife's separate property,
and in its valuation of this property; (5) in awarding wife
$12,226.51 in attorney's fees associated with South Carolina
litigation regarding the parties' Myrtle Beach hotel; and (6) by
awarding Meadows to wife. Wife contends that the appeal should be
dismissed based on husband's failure to comply with Rules 5A:8 and
5A:10. Upon reviewing the record and briefs of the parties, we
conclude that the appellate record is sufficient to address the
issues raised by husband, but that this appeal is without merit.
Accordingly, we summarily affirm the decision of the trial court.
See Rule 5A:27.
Background
The parties began co-habiting in 1962, married in 1973, and
separated in March 1993. For a number of years, the parties
operated several businesses together. As of the date of
separation, the parties' business operations included two mobile
home parks--Lee Hill and Meadows, a business entity that sold
mobile homes--Jeff Davis Mobile Sales a/k/a Jeff Davis Homes, Inc.
a/k/a Jeff Davis Mobile Homes, Inc. (collectively Jeff Davis), and
a commercial real estate development firm--CCI. The parties also
acquired, around the time they separated, a hotel in Myrtle Beach,
South Carolina. The parties stipulated that the marital property
should be divided evenly.
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The trial court referred this matter to a commissioner in
chancery who, in dividing the parties' marital property, awarded
wife $2,934,658.70 and awarded husband $3,238,340.67 (less taxes
owed on the CCI). 1 The commissioner awarded Meadows to wife, and
awarded Lee Hill, Jeff Davis, and CCI to husband. The
commissioner also awarded wife $12,226.51 in attorney's fees she
incurred in South Carolina litigation to void a mortgage husband
had placed against a hotel the parties jointly owned. The
commissioner charged husband with dissipating $29,083.50 that he
had withdrawn from the Meadows account to pay another obligation,
but found that wife had not dissipated assets from Meadows and Lee
Hill.
The commissioner found that Preferred, which wife had
incorporated in 1995, was wife's separate property, and valued
wife's one-half interest in that property at $36,709.59.
The trial court ruled that the commissioner had recommended a
fair and just distribution of the parties' property and
incorporated the commissioner's report into the final decree of
divorce.
Wife's Motion to Dismiss
Wife contends that the appeal should be dismissed pursuant to
Rule 5A:8 based on husband's failure to timely file all
1
The trial court ordered husband to execute a note in the
amount of half the difference between the property amounts
awarded the parties and to pay that amount to wife within one
year.
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transcripts from the proceedings below. Husband concedes that
there is no transcript available from the October 23, 1998 hearing
before the trial court where the parties argued their exceptions
to the commissioner's report. No evidence was taken at the
hearing, and husband's exceptions were preserved elsewhere in the
record. Accordingly, this transcript is not necessary for an
adjudication of the issues husband has raised on appeal. See
Goodpasture v. Goodpasture, 7 Va. App. 55, 57, 371 S.E.2d 845, 846
(1988) (if the record on appeal is sufficient despite the absence
of a transcript, the Court of Appeals is free to hear and resolve
the case).
Wife also contends that husband violated Rule 5A:10(c) by
submitting an abbreviated record without her consent. Husband did
not file transcripts from hearings held by the commissioner on
August 5, 1996, September 4, 1996, October 3, 1996, November 6,
1996, December 5, 1996, February 11, 1997, April 18, 1997, May
6-7, 1997, June 5 and 25, 1997, July 30, 1997, August 13 and 20,
1997, September 26, 1997, and October 2, 6 and 15-16, 1997.
Husband responds that the transcripts filed as part of the
appellate record were the only transcripts relied upon by the
trial court in deciding this matter.
Assuming that husband failed to comply with Rule 5A:10(c),
wife has failed to establish that she was prejudiced thereby.
Accordingly, the appeal will not be dismissed.
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Standard of Review
"We review the evidence in the light most favorable to wife,
the party prevailing below and grant all reasonable inferences
fairly deducible therefrom." Anderson v. Anderson, 29 Va. App.
673, 678, 514 S.E.2d 369, 372 (1999). "A commissioner's findings
of fact which have been accepted by the trial court 'are presumed
correct when reviewed on appeal and are to be given "great weight"
by this Court.'" Barker v. Barker, 27 Va. App. 519, 531, 500
S.E.2d 240, 245-46 (1998) (citation omitted).
"In reviewing an equitable distribution award on appeal, we
have recognized that the trial court's job is a difficult one, and
we rely heavily on the discretion of the trial judge in weighing
the many considerations and circumstances that are presented in
each case." Klein v. Klein, 11 Va. App. 155, 161, 396 S.E.2d 866,
870 (1990). "A trial court's decision regarding equitable
distribution will not be altered on appeal unless plainly wrong or
without evidence to support it." Moran v. Moran, 29 Va. App. 408,
417, 512 S.E.2d 834, 838 (1999).
Ownership and Value of CCI
Husband asserted that he owned only ten percent of CCI and
that the remaining ninety percent was owned, in equal shares, by
Joe Morris, the parties' son, Jackie Edwards, husband's daughter
born out of wedlock, and Bernice Kahlor, husband's first wife.
Husband introduced into evidence stock certificates dated
December 1988, which were issued in the names of Morris, Edwards
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and Kahlor. Husband never distributed the stock certificates to
any of the purported owners. Edwards and Morris testified that
they were unaware of the stock certificates until approximately
1995. Morris, Edwards and Kahlor never received any dividends
from the stock, they never served as officers or directors of
the corporation, they were never notified of any shareholders'
meetings, and they did not participate in the operation of the
corporation.
Wife testified that she and husband each owned fifty
percent of CCI. They had purchased together with joint funds
the land on which CCI was located, and had then gifted the land
to CCI. Wife testified that she and husband had equal shares in
all the other businesses they owned. The parties' tax returns
from 1989 through 1995 reflected that husband and wife each
owned a fifty percent share of CCI. Husband never told wife
about the purported stock transfer, and never told her that she
did not own any part of CCI. And when husband and wife borrowed
$300,000 against CCI in 1994, the paperwork listed them as
co-grantors.
The ownership of stock as reflected in corporate records
and stock certificates is prima facie correct, see Young v.
Young, 240 Va. 57, 62, 393 S.E.2d 398, 400 (1990), and
re-titling of stock certificates may be technically sufficient
to transfer title, see Zink v. Stafford, 257 Va. 46, 50, 509
S.E.2d 833, 835 (1999).
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But . . . "it is quite possible and often
happens, for reasons of convenience or
otherwise, that stock held in the name of
one person really belongs to another. In
such a case the certificate, though prima
facie evidence of ownership in the person to
whom it has been issued, possesses no such
magic or sacredness as to prevent an inquiry
into the facts. Sometimes the transferee is
merely a nominal holder or 'dummy,' and in
that event, although the transfer may be
perfectly regular and complete on its
fac[e], the true ownership remains in the
transferor, and that fact may be shown."
Id. at 50-51, 509 S.E.2d at 835 (citation omitted).
A transfer of stock for which no consideration is received
is considered a gift inter vivos and is controlled by the
principles governing such gifts. See Young, 240 Va. at 62, 393
S.E.2d at 401.
In order to establish a gift inter vivos,
the following elements must be shown: (1)
The gift must be of personal property; (2)
possession of the property must be delivered
at the time of the gift to the donee, or
some other for him and the gift must be
accepted by the donee; and (3) the title of
the property must vest in the donee at the
time of the gift. Further, the gift is
effective only if the donor has donative
intent at the time of the gift and if there
is "such actual or constructive delivery as
divests the donor of all dominion and
control over the property and invests it in
[the] donee."
Id. at 62-63, 393 S.E.2d at 401 (citations omitted). Moreover,
"[t]he common law requirements of delivery and acceptance are
not removed by those provisions of the Uniform Commercial Code
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pertaining to the transfer of securities." Id. at 63, 393
S.E.2d at 401.
Husband never delivered the shares of stock to the
purported donees, and the donees never accepted these purported
gifts. Moreover, the evidence proved that husband never
surrendered control of the corporation to any of the purported
donees and that corporate records, including tax returns,
reflected that husband and wife were the corporation's owners.
Accordingly, the trial court did not abuse its discretion when
it held that the transfer was ineffectual, and when it
classified CCI as marital property.
Husband's Transfer of Funds from Meadows
Husband stipulated that in January 1998, he instructed
Virginia Heartland Bank to release $29,083.50 from the bank's
Lee Hill and Meadows accounts and that he paid these funds to
TransAmerica. Wife did not consent to these withdrawals.
The August 12, 1993 pendente lite decree prohibited such
withdrawals from these accounts without the consent of both
parties. The decree also prohibited the parties from
dissipating marital assets. Wife filed a show cause to
determine why husband should not be held in contempt for the
transfers, but no hearing was ever held on the show cause.
Instead, the court, based on the commissioner's recommendation,
directed that husband restore $29,083.50 to Meadows' bank
account.
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In their briefs, the parties identify TransAmerica, and
discuss its role in the parties' businesses. But no such
evidence was ever presented to the commissioner or to the trial
court. Moreover, husband violated the terms of the pendente
lite decree when he withdrew these funds without wife's consent.
Accordingly, the trial court did not abuse its discretion in
ordering husband to replace the funds withdrawn from Meadows'
bank account.
Dissipation of Lee Hill's and Meadows' Assets
Certified public accountant Keith Wampler analyzed the
financial records of Lee Hill and Meadows and testified that the
properties' rent rolls typically exceeded the actual deposits in
1994 and 1995. Wampler testified that the rent rolls were not
the amounts collected from tenants, but were the amounts that
were expected to be collected. Stephane McKeever testified that
the rent rolls exceeded deposits from April 1993 through
December 1993. She admitted, however, that she could not
determine how many people were evicted during this period for
failure to pay rent. She also could not determine whether any
payments had been made late.
Wife denied misappropriating any funds from either Lee Hill
or Meadows. She testified that she was not the person who
actually collected the rents at these properties, and she did
not fill out the deposit tickets. Wife further asserted that
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McKeever's figures for the Lee Hill rent rolls, which were based
on trash collection statistics, were inaccurate.
It is well established that the trier of fact ascertains
the credibility of the witnesses, determines the weight to be
given to their testimony, and has the discretion to accept or
reject the witnesses' testimony. See Street v. Street, 25 Va.
App. 380, 387, 488 S.E.2d 665, 668 (1997) (en banc). "'In
determining whether credible evidence exists [to support the
trial court's findings,] the appellate court does not retry the
facts, reweigh the preponderance of the evidence, or make its
own determination of the credibility of witnesses.'" Moreno v.
Moreno, 24 Va. App. 190, 195, 480 S.E.2d 792, 795 (1997)
(citation omitted).
Wife denied misappropriating funds from Lee Hill or
Meadows. Although husband presented circumstantial evidence
suggesting that wife had dissipated these marital assets, the
trial court believed wife's testimony and rejected husband's
evidence. The trial court did not err, therefore, when it found
that wife had not dissipated the assets of Meadows and Lee Hill.
Classification and Valuation of Preferred
Wife incorporated Preferred on August 29, 1995. Wife
testified that she capitalized the business with just over
$1,000 she received as her last two paychecks from Jeff Davis.
She denied that she used any Jeff Davis funds to capitalize the
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business. Wife owned fifty percent of Preferred, and her son
Theodore Morris owned the other half.
Preferred is in the business of connecting sellers of
mobile homes with those looking to buy mobile homes. Although
the company occasionally buys a mobile home to sell, it
primarily acts as a "middle man," for which services it
generally receives the difference between the price it agrees to
pay the seller and the price it negotiates with the buyer.
As of December 31, 1996, the date of valuation, Preferred
owned no real property and it did not maintain a regular
inventory. The company leased office space, rented office
equipment, and owned a computer and limited amounts of used
furniture worth $4,500. Including cash deposits, the company
had assets worth $97,011 and net liabilities of $53,591.83.
Wife estimated that good will was worth $10,000, for a total net
equity of $53,419.77.
Husband contended that Preferred should be classified as
marital property because it was partially started with marital
funds. He testified that it would not be possible to capitalize
this type of business with less than $30,000. Husband presented
evidence that wife had transferred approximately $19,000 from
Jeff Davis to Preferred, and he asserted that she used this
money to capitalize Preferred. Wife explained that the $19,000
was the proceeds from a Preferred contract that was mistakenly
deposited into Jeff Davis' account.
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Husband further asserted that Preferred should be valued at
$607,563.17. He reached this figure by multiplying his
estimation of Preferred's net income by 2.5. Husband asserted
in a letter by counsel that Linda Tomlin had an agreement
whereby she was to be paid an annual salary equal to thirty
percent of Preferred's net income and that Tomlin earned nearly
$73,000 from Preferred in 1996.
The trial court found that wife's one-half interest in
Preferred was separate property. The court rejected husband's
contention that Preferred had been started with marital funds.
The court valued Preferred at $73,419.17 based on the firm's net
assets and an assigned goodwill value of $30,000. The
commissioner had noted that this goodwill value "seem[ed]
appropriate given the short existence of the business but [its]
relative success." The trial court rejected husband's assertion
that Preferred should be valued based on a net income valuation,
noting that Jeff Davis, which was awarded to husband, had also
been valued based on asset valuation.
Although there is a presumption that all property acquired
during the marriage is marital property, this presumption does
not apply to property acquired after the parties' last
separation. See Code § 20-107.3(A)(2). Property acquired after
the parties' last separation should not be classified as marital
property unless marital assets were used to acquire it. See
Price v. Price, 4 Va. App. 224, 229, 355 S.E.2d 905, 908 (1987).
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"The burden of proving that property purchased after the last
separation is marital is on the proponent . . . ." Id.In making an equitable distribution of property, the trial
court "must assign a value to the property based upon evidence
presented by both parties." Marion v. Marion, 11 Va. App. 659,
665, 401 S.E.2d 432, 436 (1991). "We will not disturb a trial
court's finding of the value of an asset unless the finding is
plainly wrong or unsupported by the evidence." Shooltz v.
Shooltz, 27 Va. App. 264, 275, 498 S.E.2d 437, 442 (1998).
Wife formed Preferred two years after the parties' final
separation, and husband failed to prove that any marital assets
were used to capitalize that firm. Husband asserted that
$19,000 from Jeff Davis had been misappropriated by wife and
used to form Preferred, but he presented no evidence to support
this allegation, and the trial court accepted wife's explanation
of the transfer. Accordingly, the trial court did not err when
it classified Preferred as wife's separate property.
The trial court also did not err in valuing Preferred.
Wife presented evidence supporting a valuation based on asset
valuation, which was the same method of valuation used to value
Jeff Davis. Although there was evidence that Preferred had a
high cash flow, wife testified that net income was relatively
low. Furthermore, although husband asserts that Preferred
should have been valued based on the firm's net income, he
presented no evidence regarding Preferred's net income, and he
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failed to establish that this was a proper method for valuing
this business.
Attorney's Fees from South Carolina Litigation
The parties jointly owned a hotel in Myrtle Beach, South
Carolina. After the final date of separation, husband attempted
to transfer the hotel property deed from a corporation the
parties jointly owned, to a corporation of which he was the sole
owner. When this effort was subsequently voided by a South
Carolina court, husband placed a $500,000 mortgage against the
hotel. The mortgage was held by a corporation that was solely
owned by husband, but that had not loaned the hotel any money.
Wife instituted successful litigation in South Carolina and
obtained an order setting aside the mortgage. She incurred
$12,226.51 in legal fees in this litigation. The South Carolina
court's order makes no reference to attorney's fees. Wife had
no recollection whether she asked for or was denied attorney's
fees.
Husband contends that wife should be collaterally estopped
from claiming attorney's fees because the South Carolina court
denied her request for fees. We disagree.
"The doctrine of collateral estoppel precludes parties to a
prior action and their privies from litigating in a subsequent
action any factual issue that actually was litigated and was
essential to a valid, final judgment in the prior action."
Angstadt v. Atlantic Mut. Ins. Co., 249 Va. 444, 446, 457 S.E.2d
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86, 87 (1995) (emphasis added). For the doctrine to apply,
there must be an identity of issues litigated. See id. at 447,
457 S.E.2d at 88.
The South Carolina order makes no reference to attorney's
fees, and husband has presented no evidence that the issue was
even presented to the South Carolina court. The doctrine of
collateral estoppel is, therefore, inapplicable. Accordingly,
the outcome of the South Carolina litigation did not preclude
the trial court from including these funds as part of the
equitable distribution award. 2
Award of Meadows to Wife
As of December 31, 1996, Meadows was valued at $4,020,000.
The debt on the property included a $2,143,375 note and $35,800
in security deposits. Husband and wife were both listed as
principals on the note.
One of the conditions on the note imposed by the lender
pertained to transferring ownership interests in Meadows:
Transfers of no more than forty-nine percent
(49%) of the ownership interests in
[Meadows] shall be permitted so long as (a)
the Principal owns in aggregate, at least
51% of the ownership interests in [Meadows]
and (b) [husband] remains the sole decision
maker of [Meadows].
2
Husband also contends that this aspect of the equitable
distribution award violated the general rule that parties are
responsible for their own attorney's fees. The appellate record
does not reflect that husband made this argument to the trial
court, and we will not address it for the first time on appeal.
See Rule 5A:18.
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The loan documents further provided that the lender could allow
a transfer of majority ownership interest at its discretion,
with the charge of a fee and costs. In the event of such a
transfer, the transferee would assume all the transferor's
obligations under the loan agreement.
The deed of trust securing the note further provided that
"[u]pon any such prohibited sale or transfer or if [husband]
fails to continue to control the Grantor's business, then
Beneficiary may, at Beneficiary's option, declare all of the
indebtedness to be immediately due and payable." (Emphasis
added.) The deed of trust reiterated that ownership in Meadows
could be transferred at the lender's discretion.
After classifying and valuing the parties' property, "the
court distributes the property to the parties, taking into
consideration the factors presented in Code § 20-107.3(E)."
Marion, 11 Va. App. at 665, 401 S.E.2d at 436. "It is precisely
'because rights and interests in marital property are difficult
to determine and evaluate and competing equities are difficult
to reconcile,' that 'the chancellor is necessarily vested with
broad discretion in the discharge of the duties the statute
imposes.'" Matthews v. Matthews, 26 Va. App. 638, 645-46, 496
S.E.2d 126, 129 (1998) (quoting Smoot v. Smoot, 233 Va. 435,
443, 357 S.E.2d 728, 732 (1987)). And "[i]n challenging the
court's decision on appeal, the party seeking reversal bears the
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burden to demonstrate error on the part of the trial court."
Barker, 27 Va. App. at 535, 500 S.E.2d at 248.
Pursuant to the parties' stipulation, the trial court
evenly divided the parties' marital property. There was no
evidence that the Meadows note holder was likely to call the
note simply because husband was required to transfer his
ownership interest to wife and surrender control over that
business. Moreover, wife assumed the obligation on the note,
and husband has not established that he would be prejudiced if
the lender decided to call the note. Accordingly, husband has
failed to establish that the court abused its discretion when it
awarded Meadows to wife.
For the foregoing reasons, the judgment of the trial court
is affirmed.
Affirmed.
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