Sfreddo v. Sfreddo

• Decision Date: 24 January 2012
• Docket Number: Record No. 0282–11–4.
• Citation: 59 Va.App. 471,720 S.E.2d 145
• Parties: Anthony Michael SFREDDO v. Vanessa SFREDDO.
• Court: Virginia Court of Appeals

59 Va.App. 471

720 S.E.2d 145

Anthony Michael SFREDDO

v.Vanessa SFREDDO.

Record No. 0282–11–4.

Court of Appeals of Virginia, Alexandria.

Jan. 24, 2012.

Allison Crouch Coppage (Walker Jones, PC, Warrenton, on briefs), for appellant.

David L. Duff, Fairfax (The Duff Law Firm, on brief), for appellee.

Before: HALEY, BEALES and ALSTON, JJ.

HALEY, Judge.

I. INTRODUCTION

In this divorce appeal, Anthony Michael Sfreddo (husband) argues the trial court erred in (1) classifying his interest in a family-owned company as marital; (2) awarding Vanessa Sfreddo (wife) an inappropriately large share of the value of that company; (3) valuing a second company partially owned by husband; and (4) failing to consider interest wife could earn from the monetary award when determining spousal support. We agree the trial court should have classified husband's interest in the first company as his separate property, making it unnecessary for us to consider the second assignment of error. Accordingly, since we reverse on the first issue, we necessarily remand the fourth issue for further consideration. We affirm the trial court on the third issue.

II. BACKGROUND

The parties married in June 1990. They separated in February 2009.

During the marriage, husband acquired an interest in two companies: Triple S Termite and Pest Control and APS Investments. At the time the parties separated, he owned a fifty percent interest in each.

In 2004, husband's mother was the sole shareholder of Triple S and husband and his brother worked for the company. All three served as corporate directors—the only corporate directors. Acting in their roles as the only corporate directors, they decided to transfer ownership of the company to husband and his brother. Thus, at a shareholder meeting on December 29, 2004, the company “sold” husband and his brother two hundred shares each at a par value of one dollar per share, for a nominal purported consideration of two hundred dollars from each person. The company simultaneously resolved to redeem the mother's shares for payments over a term of fifteen years. The brothers received their shares the next day, and the mother transferred her shares to the company the following day.

At trial, husband, his mother, and his brother all testified they understood the transferring of the company to the brothers to constitute a gift. Husband testified he never paid his mother anything for the stock and his brother likewise never paid anything. He later continued by stating that “my mother gave it to us.” Husband's brother also testified that he knew of no money changing hands. The mother testified: “In 2004, I agreed to give my two sons ... two hundred shares of my stock.”

In 2003, Triple S had redeemed the half interest of another relative of husband for $1.5 million dollars. Husband's half interest in Triple S at the time of the hearing had a value of $1.636 million dollars.

Husband and his brother started another company known as APS Investments. Under this form, they purchased a house outside of Fredericksburg, Virginia. To fund the purchase, the brother paid five thousand dollars as an earnest money deposit and $48,689 as a down payment. Husband contributed no money. The brothers shared an understanding that if they sold the house, they would return the brother his advance contributions first and then split the remaining funds. Nothing in writing secured the brother's advances; rather, the brothers relied on mutual trust of repayment. The house had a value at the time of the hearing of $290,000. APS also had a bank account that at the time of the hearing had a balance of around $1,100. Aside from the bank account and the house, APS Investments owns no other property.

Regarding the disputed shares of Triple S stock, the circuit court found as a fact that husband's mother intended to make a gift of Triple S stock to him. Despite this finding, the court concluded that since technically the stock came from the corporation, the corporation must also have intended to make a gift. The court found the evidence of a separate corporate intent to make a gift insufficient. It held husband had purchased the stock for value, apparently also finding husband had paid for it. Regarding APS Investments, the court determined the value of the real property and the bank account constituted the value of the company. The court did not consider the advances by husband's brother as affecting the value of APS. Finally, wife received a monetary award of $690,000 and permanent spousal support of five thousand dollars per month. Husband now appeals.

III. ANALYSIS

A. Classification of Company Stock

Husband argues the trial court erred in classifying his stock in Triple S as marital property.¹ He maintains he received it as a gift, making it his separate property.² 1. Standard of Review

We recognize that under our standard of review we view the evidence in the light most favorable to the prevailing party, here wife, as to the classification of the Triple S stock. White v. White, 56 Va.App. 214, 216, 692 S.E.2d 289, 290 (2010). We further recognize that the determination of donative intent is one of fact, Utsch v. Utsch, 266 Va. 124, 128, 581 S.E.2d 507, 508–09 (2003), and that “because the trial court's classification of property is a finding of fact, that classification will not be reversed on appeal unless it is plainly wrong or without evidence to support it,” Robinson v. Robinson, 46 Va.App. 652, 661, 621 S.E.2d 147, 151 (2005) ( en banc ); see also Code § 8.01–680.

Code § 20–107.3(A)(2) “creates a rebuttable presumption that property acquired during the marriage is marital property.” Lambert v. Lambert, 6 Va.App. 94, 99, 367 S.E.2d 184, 187 (1988). “[T]he party ... claiming property as separate has the burden to produce satisfactory evidence to rebut this presumption.” Rexrode v. Rexrode, 1 Va.App. 385, 392, 339 S.E.2d 544, 548 (1986). However, gifts from others to a party represent separate property. Code § 20–107.3(A)(1). When “[i]n the case of a gift ... there is credible evidence presented to show that the property was intended by the donor to be the separate property ... the presumption is overcome, and the burden shifts to the party seeking to have the property classified as marital.” Stainback v. Stainback, 11 Va.App. 13, 17–18, 396 S.E.2d 686, 689 (1990); see also Rahbaran v. Rahbaran, 26 Va.App. 195, 210, 494 S.E.2d 135, 142 (1997).

In order to show a gift, a party must prove several elements: “(1) the intention on the part of the donor to make the gift; (2) delivery or transfer of the gift; and (3) acceptance of the gift by the donee.” Robinson, 46 Va.App. at 665, 621 S.E.2d at 154 (citation omitted). The party asserting the existence of a gift has the burden of proof by clear and convincing evidence. Cirrito v. Cirrito, 44 Va.App. 287, 303, 605 S.E.2d 268, 275 (2004).

2. Corporate Intent to Gift

The trial court held the stock transfer did not constitute a gift because husband failed to prove corporate intent to make a gift. The court found proof of corporate intent necessary since the corporation issued new stock to husband and redeemed the mother's shares, meaning husband received his stock from the company. We observe that the trial court found as a fact that husband's mother intended to make a gift of the Triple S stock to him and that there is no evidence but that the stock was delivered to and accepted by husband. We further observe that there is no evidence of commingling, transmutation or joint titling of the stock. One basis of the trial court's classification of the stock as marital was the purported failure of husband to show corporate donative intent, an issue we now address.

A “corporation can act only through its officers and agents.” Pulliam v. Coastal Emergency Servs. of Richmond, Inc., 257 Va. 1, 24, 509 S.E.2d 307, 320 (1999); see also Greenberg v. Commonwealth ex rel. Attorney Gen. of Va., 255 Va. 594, 600, 499 S.E.2d 266, 269 (1998). “[C]orporate intent is shown by the actions and statements of the officers, directors, and employees who are in positions of authority or have apparent authority to make policy for the corporation.” United States v. Basic Constr. Co., 711 F.2d 570, 573 (4th Cir.1983). “[T]he corporation, being an artificial person created by law, can have no separate intent of its own apart from those who direct its affairs.” Loftin & Woodard, Inc. v. United States, 577 F.2d 1206, 1244 (5th Cir.1978) (citation omitted).

Code § 13.1–673(B) states that “[a]ll corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors.” A board of directors has “ ‘the widest powers,’ ” for “ ‘all the various acts and contracts which a corporation may enter into are entered into by and through the board of directors.’ ” Sterling v. Trust Co. of Norfolk, 149 Va. 867, 878, 141 S.E. 856, 859 (1928) (quoting Taylor v. Sutherlin–Meade Tobacco Co., 107 Va. 787, 791, 60 S.E. 132, 134 (1908)). “The affairs of corporate bodies are within the exclusive control of their board of directors, from whom authority to dispose of their estates must be derived.” Clement v. Adams Bros.–Paynes Co., 113 Va. 547, 549, 75 S.E. 294, 295 (1912). Thus, the intent of the board of directors is necessarily the intent of the corporation, for the corporation as a fictitious entity formulates intent through the board.

Moreover, under appropriate circumstances, a court may consider the intent of a sole shareholder as a factor in determining corporate intent. See In re Roco Corp., 701 F.2d 978, 984 (1st Cir.1983); United States v. Gallagher, 856 F.Supp. 295, 299 (E.D.Va.1994).

Even viewing the evidence in the light most favorable to wife, as the prevailing party in the trial court, Gray v. Gray, 228 Va. 696, 699, 324 S.E.2d 677, 679 (1985), the trial court's conclusion that there was not a corporate intent to gift the shares to...