A & L, INC. v. Grantham

• Decision Date: 14 October 1999
• Docket Number: No. 97-CA-01193-SCT., No. 98-CA-00496-SCT
• Citation: 747 So.2d 832
• Parties: A & L, INC., JLG Enterprises, Inc., JLG Construction Company, Inc., JLG Concrete Products Co., Inc., Grantham Oil Company, Inc., and John L. Grantham v. Lynn (Ross) GRANTHAM.
• Court: Mississippi Supreme Court

747 So.2d 832

A & L, INC., JLG Enterprises, Inc., JLG Construction Company, Inc., JLG Concrete Products Co., Inc., Grantham Oil Company, Inc., and John L. Grantham v. Lynn (Ross) GRANTHAM.

Nos. 98-CA-00496-SCT, 97-CA-01193-SCT.

Supreme Court of Mississippi.

October 14, 1999.

T. Swayze Alford, Oxford, Attorney for Appellants.

James T. Metz, Greenwood, Jay Gore, III, Grenada, Attorneys for Appellee.

BEFORE PITTMAN, P.J., BANKS AND MILLS, JJ.

BANKS, Justice, for the Court:

¶ 1. This marital dissolution case presents issues involving closely held corporations and their role in the determination of the financial issues of equitable distribution and alimony. We conclude that the chancery court committed no manifest error based upon the evidence before it. Accordingly, we affirm.

I.

¶ 2. John L. Grantham (John) and Lynn Ross Grantham (Lynn) were married on January 12, 1985, in Jackson, Mississippi. One child, Raney, was born of this marriage on October 28, 1985. John's son from a previous marriage, Leland, also lived with the parties during their marriage. At the time of the marriage, John was 100 % owner of a corporation known as A & L, Inc. A & L, in turn, owned JLG Enterprises, Inc., JLG Construction Company, Inc., JLG Concrete Products, Inc., and Grantham Oil Company, Inc. John also owned a one-fourth property interest in the Delta Building. The corporations owned land described as 4 acres of land next to Mid South Produce in Grenada, 21 acres near Newsprint South, and 280 acres of timber land. At the time of separation, the corporations' ongoing businesses and assets consisted mainly of real estate holdings and bank accounts.

¶ 3. Lynn, who worked for the Unitech company in Jackson, Mississippi, was earning $40,000 per year at the time of her marriage to John. After her marriage, Lynn quit her job and the couple moved to Grenada, Mississippi. Before moving to Grenada, Lynn sold her Jackson condominium and her 1983 Maxima. Half the proceeds from sale of the condominium went to Lynn's mother, who was joint owner, while Lynn's share of the sale was used on daily living expenses for her and John.

¶ 4. From the beginning of the marriage, Lynn received a regular paycheck of about $250 per week from the corporate accounts to run the household, although she was not employed by any of the corporations. This amount increased to $500, which she continued to receive when she began working for the companies in 1990. After 1990, the amount given to Lynn remained the same. Instead of increasing the paycheck, she was instructed by John to take money out of the corporate accounts as needed. At this time, John was also working for Hayes Construction in Natchez.

¶ 5. After the marriage, the couple moved into a Grenada home owned by John, which was sold shortly after the marriage for $ 84,349.82 when John and Lynn decided to build a new home. The lot for the new home, 30 Forest Hill Cove, was purchased for $35,000 in December of 1986 by JLG Construction.

¶ 6. After the parties were married, John received $428,999.41 in settlement proceeds from a lawsuit filed before the marriage by a corporation John owned prior to the marriage. The monies from this settlement were deposited into an account held by JLG, Inc. and were used in part to pay for construction of their new home.

¶ 7. During the course of the marriage, the couple also routinely paid personal living expenses out of various corporate accounts, including alimony payments to John's first wife. For income tax purposes, the funds used for personal expenses were reflected as loans to shareholders. The parties signed a promissory note in favor of JLG Construction on April 1, 1988, but the amount to be repaid was not disclosed in the promissory note.

¶ 8. At some point during the marriage, John issued 10% of the stock in the companies to Lynn. The stock certificate, however, was returned to the parties' safe at a date unknown, purportedly signed by Lynn, returning the stock to the corporations.

¶ 9. Lynn withdrew $45,000 in corporate funds on October 7, 1993 and deposited the money into her own account. On October 15, 1993, Lynn and John separated. Lynn then filed for divorce on October 29, 1993, on the grounds of habitual drunkenness, or, in the alternative habitual cruel and inhuman treatment, or in the alternative, on the grounds of irreconcilable differences. John counterclaimed for divorce on the grounds of habitual cruel and inhuman treatment or, in the alternative, irreconcilable differences and for partition of the jointly owned property.

¶ 10. On November 9, 1993, John sold all of his stock in A & L, Inc., which owned all the corporations, to his brother and sister, Robert Grantham and Elizabeth Sanders. The buy-sell agreement required the sellers to pay $10,000 within ninety days and to pay the fair market value of the property owned by the corporations as of November 9, 1993, which was contingent on liabilities and market value appraisals. Under new ownership, A & L, Inc. filed a replevin action against Lynn on February 1, 1994. Lynn filed a complaint against John and the corporate entities on March 29, 1994. These cases were consolidated for discovery and trial purposes.

¶ 11. John and Lynn filed a written stipulation stating their agreement that they had irreconcilable differences, that Lynn would have custody of Raney, and that John could have visitation pending further order of the court. The remaining matters of child support, visitation, alimony, property division, attorney's fees and costs were submitted to the court for determination.

¶ 12. After hearing testimony for six days over a sixteen month span, the chancellor entered an opinion setting aside the conveyance to Robert Grantham and Elizabeth Sanders as fraudulent, piercing the corporate veil, and finding all assets of both parties were available for equitable distribution. The following were found to be marital assets:

Former marital residence $225,000.00 Furnishings, fixtures, and appliances of residence 1,500.00 Plaintiff's jewelry & gifts from defendant's aunt and uncle 10,000.00 Four automobiles and lawn mower 14,000.00 4 acres by Mid South Produce 148,000.00 280 acres timber land 113,000.00 21 acres by Newsprint South 83,500.00 Corporate cash in banks 6,820.00 Grenada Bank Stock-sold net 37,601.00 Depreciable Assets-sold net 59,612.00 LESS: Expenses of JLG & Grantham Oil (80,790.00) Plaintiffs IRA's 19,639.00 Defendant's IRA's 36,724.00 One share of Grenada Country Club 500.00 Defendant's cash & savings at Magnolia Federal 3,000.00 Delta Building ¼ interest 40,000.00 Sums Plaintiff Withdrew at separation 47,000.00 __________ Total $805,106.00

¶ 13. The court found that the value of the various corporations was marital property, based in part on the fact that $1,200,000 in debt John had when the parties married amounted to only $44,000 at the time of separation. The court found that the parties had in fact accumulated assets during the marriage. Lynn was awarded 40% of the marital assets, with John receiving the remaining 60%. Lynn's award included:

Former marital residence $ 225,000.00 Furnishings, fixtures, and appliances of residence 1,500.00 Plaintiff's jewelry & gifts from John's aunt and uncle 10,000.00 Plaintiff's Mercedes, pick-up and lawn mower 14,000.00 Plaintiff's IRA's 19,639.00 Sums Plaintiff withdrew at separation 47,000.00 Cash equitable distribution from Defendant 4,903.00 __________ $322,042.00

¶ 14. John was awarded the rest of the marital assets, including all of the corporations. Lynn was also assessed 80% of any tax liability imposed upon the parties for their use of accounts as loans to shareholders. The disparate assessment of tax liability was termed as lump sum alimony. As part of this lump sum award, Lynn was also released from any liability to John or any of his corporations for sums shown as loans to stockholders.

¶ 15. The Judgment for Divorce was entered on June 10, 1997. John subsequently filed a Motion for New Trial, or in the Alternative, to Alter or Amend Final Judgment, which the court denied. Aggrieved, John appealed to this Court for relief. Subsequent to the original judgment the chancellor heard the issue of Lynn's request for attorneys fees arising out of the fraudulent transfer of corporate stock. John appeals the judgment in Lynn's favor and that appeal has been consolidated with the initial appeal.

II.

¶ 16. John argues that the chancellor erred in including his separate property in the distribution of martial assets. John asserts that the ownership interest he possessed in various corporations and property before his marriage, as well as the land owned by the corporate entities, were not marital assets. He further argues that the proceeds from the sale of the home he owned prior to the marriage were separate property. He contends that the funds used to construct the couple's new home came from his various separate assets, which included the corporations, the proceeds from the sale of his home and the proceeds from settlement of a lawsuit by one of his companies.

¶ 17. The chancellor held, as Lynn asserts, that there was such a commingling of John's separate assets that the nonmarital assets converted to marital assets, subject to equitable distribution.

¶ 18. This Court's review in domestic relations matters is limited such that the Court will not disturb a chancellor's findings unless manifestly wrong, clearly erroneous, or if the chancellor applied the wrong legal standard. Johnson v. Johnson, 650 So.2d 1281, 1285 (Miss.1994)(citing McEwen v. McEwen, 631 So.2d 821, 823 (Miss.1994)). Marital property is defined as any and all property acquired during the marriage. Hemsley v. Hemsley, 639 So.2d 909, 915 (Miss. 1994). Assets so acquired or accumulated during the course of the marriage are marital assets and are subject to equitable distribution by the chancellor. Hemsley, 639 So.2d at 915. However, non-marital assets may...