Lewis v. Lewis, No. 2008-CA-01362-COA (Miss. App. 12/8/2009)

• Decision Date: 08 December 2009
• Docket Number: No. 2008-CA-01362-COA.,2008-CA-01362-COA.
• Citation: Lewis v. Lewis, No. 2008-CA-01362-COA (Miss. App. 12/8/2009), No. 2008-CA-01362-COA. (Miss. App. Dec 08, 2009)
• Parties: DRAKE L. LEWIS APPELLANT v. TONIA D. LEWIS APPELLEE
• Court: Mississippi Court of Appeals

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DRAKE L. LEWIS APPELLANT v. TONIA D. LEWIS APPELLEE

No. 2008-CA-01362-COA.

Court of Appeals of Mississippi.

December 8, 2009.

COURT FROM WHICH APPEALED: HARRISON COUNTY CHANCERY COURT, TRIAL JUDGE: HON. CARTER O. BISE, DATE OF JUDGMENT: 07/11/2008.

DISPOSITION: AFFIRMED IN PART; REVERSED AND REMANDED IN PART.

ATTORNEY FOR APPELLANT: THOMAS WRIGHT TEEL.

ATTORNEY FOR APPELLEE: DEAN HOLLEMAN.

BEFORE KING, C.J., IRVING AND CARLTON, JJ.

IRVING, J., FOR THE COURT:

¶ 1. Tonia and Drake Lewis were divorced by the Harrison County Chancery Court after fifteen years of marriage. In its judgment, the chancery court made an equitable distribution of the marital estate. Feeling aggrieved, Drake appeals and asserts that the chancery court erred in classifying certain property as marital and in its equitable distribution as to multiple pieces of property.

¶ 2. Finding error, we affirm in part and reverse and remand in part.

FACTS

¶ 3. Tonia and Drake were married on March 2, 1991, in Missouri. Three children were born during the course of the marriage. In June 2006, Tonia and Drake separated due to Drake's affair with a family friend. During the course of their marriage, Tonia and Drake formed and operated together a company called Legacy Holdings (Legacy). Multiple pieces of property were bought, improved, and either sold or rented by the parties on behalf of Legacy.

¶ 4. Tonia filed a complaint for divorce on August 30, 2006. No responsive pleading was filed by Drake. Trial was held in July 2007. At the conclusion of the trial, the parties were given the opportunity to submit proposed findings of fact and conclusions of law. Tonia submitted proposed findings, but Drake never submitted anything.

¶ 5. On January 11, 2008, the chancery court issued its judgment, wherein the court granted Tonia a divorce on the ground of adultery, and attempted to make an equitable distribution of the marital estate. At the outset, the chancery court noted that it had "the opportunity to observe the demeanor of the witnesses, and to judge their credibility[, and] that [Drake] is not a credible witness. He made efforts to hide assets and income . . . ."

¶ 6. Additional facts will be related, as necessary, during our analysis and discussion of the issues.

ANALYSIS AND DISCUSSION OF THE ISSUES

¶ 7. Our supreme court has discussed the appellate standard of review in divorce cases as follows:

"Our scope of review in domestic relations matters is limited by our familiar substantial evidence/manifest error rule." Clark v. Clark, 754 So. 2d 450, 458 [( 48)] (Miss. 1999) (citation omitted). "The equitable distribution of marital assets is committed to the discretion of the chancellor, whose findings will not be disturbed . . . unless the chancellor was manifestly wrong, clearly erroneous or an erroneous legal standard was applied." Arthur v. Arthur, 691 So. 2d 997, 1003 (Miss. 1997) (citation omitted).

Jones v. Jones, 995 So. 2d 706, 712 ( 19) (Miss. 2008). Drake contends that the chancery court erred in its distribution of numerous pieces of property; for clarity's sake, we address each separately below. Despite the stringent standard of review applicable to this case, we find that the chancellor was manifestly wrong in his treatment of the marital assets.

1. Legacy Holdings

¶ 8. Drake contends that the chancery court "made its determination about Legacy Holdings based on Exhibits 1, 4, and 7, all of which were offered by . . . Tonia . . . . Drake asserts that these three exhibits are contradictory, inaccurate, and unreliable . . . ." Drake essentially contends that Legacy is worth almost nothing and that it holds no property other than some equipment and vehicles.

¶ 9. In its judgment, the chancery court stated the following about Legacy:

In 2001, the parties formed Legacy Builders, Inc. Its office was in the marital home from 2001 to 2003, after which time it acquired a separate office. Tonia and Drake each owned 50%. Legacy built speculation homes and custom built homes for others. Beginning in 2001, the parties derived most of their regular income from Legacy.

Tonia and Drake continued to invest in other real estate holdings, many times at the suggestion of Drake's father. They purchased a lot in Livingston, Louisiana (Suma Hills) to build a speculation home. They purchased real estate with his father in Missouri (Richland Road)[,] and during the divorce litigation this land was sold with each receiving $ 132,000.00 net profit. They purchased other real estate with his father in Missouri (Grasslands)[,] and during the divorce litigation Drake and Tonia sold their interest for $93,000.00. They purchased more lots in Ocean Springs, Mississippi, (Pinehurst)[,] on which Legacy was building spec homes at the time of the trial.

* * * *

After being formed in 2001, Legacy's business grew quickly. An analysis of its tax returns (Exhibit 8) and records shows a pattern of gross sales as follows:

     2001 — $612,699.00
                     2002 — $811,947.00
                     2003 — $2,491,294.00
                     2004 — $2,068,778.00; and
                     2005 — $2,397,266.00
                

Its `total assets' as shown on its tax returns' balance sheets also is revealing:

     2001 — $1,950.00
                     2002 — $1,622,861.00
                     2003 — $1,621,603.00;
                     2004 — $1,556,589.00; and
                     2005 — $2,219,539.99.
                

The parties' July 2006 Personal Financial Statement (Exhibit 4) showed as follows:

Total Other Assets-$1,756,645.88 (includes Legacy Holdings, Inc[.,] at $1,148,270.48);

Total Liabilities-$108,381.23; and

a net worth of $1,648,264.65.

At trial, Drake's testimony painted a totally different financial picture of the status of Legacy's sales and assets and the value of the marital estate. His testimony was substantially contradicted by the documentary evidence. Much of Drake's posturing for a `poor' financial condition appears to be motivated by his own desire to abandon his marriage to Tonia. . . .

* * * *

At the temporary hearing in September 2006, Drake presented his financial declaration (Exhibit 2) showing his sole income from Legacy of $4,300.00 per month (gross). Based upon these representations, the [c]ourt ordered Drake to pay Tonia $2,776.00 per month in support, her house note of $1,346.00, her car note of $544.00 per month, and her car insurance of $217.00 per month.

Following the temporary hearing, Drake began to surreptitiously draw an additional $4,300.00 per month from Legacy as a repayment by Legacy to Drake for loans they both had made to the company. The records show that Tonia and Drake had loan receivable balances from Legacy as follows:

Exhibit 2a-$156,555.10 as of July 2007;

Exhibit 7-Legacy Balance Sheet shows $147,855.00.

Drake failed to show this asset on his 2006 financial statement (Exhibit 2). Between September 2006 and April 2007 Drake drew $28,848.00 from Legacy as a loan receivable. (Exhibit 9). This money represented a marital asset belonging to both parties, to which he had no unilateral right.

Additionally, in furtherance of his attempts to control the cash assets of the parties and/or Legacy, Drake began doing business as Legacy Builders, a sole proprietorship in September 2006. Drake included Legacy's ongoing work in this new sole proprietorship. He opened a new checking account under this name, purportedly so that Tonia could not get any of the money.

* * * *

The [c]ourt finds from the evidence that the following assets were owned by either or both of the parties at the time of the separation of the parties in June 2006:

* * * *

  Asset       Value          Debt     Equity       Title
                  Comments
                  Legacy      $1,148,270              $1,148,270   Joint    Marital.
                  Holdings,   Ex. 1, 4, 7
                  LLC
                

See balance sheets, Ex. 1, 4, 7

(Footnotes omitted).

¶ 10. It is clear from the chancery court's judgment that it primarily considered exhibits one, four, and seven in reaching its determinations as to Legacy's value. Exhibit one is Tonia's financial declaration. Exhibit four is Tonia and Drake's financial statement, dated July 1, 2006. Exhibit seven is the Legacy Builders/Holdings balance sheet, dated July 18, 2007. We examine the contents of these exhibits to ascertain the propriety of the chancellor's valuation of Legacy.

a. Exhibit One, Tonia's Financial Declaration

¶ 11. Exhibit one, Tonia's financial declaration, included a statement of assets. The statement indicated that lots fifteen and sixteen of the "Grasslands subdivision" had been purchased by Legacy and then sold by Drake for $95,000. Tonia's testimony confirmed that this property was sold "to an investor there in Columbia" for $95,000. Drake's attorney then offered to stipulate that the Grasslands property had been sold, was marital property, and was worth "[a]bout [$]91,000," rather than $ 95,000.

¶ 12. A "Richland Road" property in Missouri was also listed as having been purchased by Legacy and then sold, with each party receiving proceeds of around $132,000 from the sale. Tonia indicated that this property was sold to Drake's father during the pendency of the divorce.

¶ 13. The statement indicated that lots one to four in the Pinehurst subdivision had been purchased by Legacy. The statement further indicated that the lots currently held an equity of $71,701. Tonia testified that these lots were purchased in order for Legacy to build "speculative homes on." Tonia further testified that three of the houses had not been completed as of the time of trial. Tonia answered affirmatively when asked whether her statement provided "the value of those three parcels plus the dirt . . . unimproved."

¶ 14. Ten acres in "St. Martin" were listed as having been purchased by Legacy with "personal monies from sell [sic] of personal properties." The St. Martin acreage was valued by Tonia as worth $200,000. Tonia testified that the St. Martin acreage was actually less than ten acres, although she did not indicate how much less. Tonia further testified that she and Drake discussed the purchase of the property...