Smith v. Smith

• Decision Date: 17 September 1992
• Docket Number: No. 91-CA-71,91-CA-71
• Citation: 607 So.2d 122
• Parties: Eugene C. SMITH v. Nancy SMITH.
• Court: Mississippi Supreme Court

Page 122

607 So.2d 122

Eugene C. SMITH v. Nancy SMITH.

No. 91-CA-71.

Supreme Court of Mississippi.

Sept. 17, 1992.

Walter W. Teel, Meadows Riley Koennen & Teel, Gulfport, for appellant.

Gail D. Nicholson, Nicholson & Nicholson, Gulfport, for appellee.

Before DAN M. LEE, P.J., and PITTMAN and BANKS, JJ.

BANKS, Justice, for the Court:

Eugene Smith appeals from an adverse ruling from the Chancery Court of Harrison County in a divorce and support litigation. He claims error in granting periodic and lump sum alimony in excess of his ability to pay and in granting an equitable lien to secure alimony. We find little support in the record for the chancellor's conclusion with regard to Eugene's ability to pay. We therefore reverse and remand for further proceedings.

I

Eugene filed his complaint for divorce on May 30, 1989, on the grounds that Nancy was guilty of habitual, cruel and inhuman treatment under Sec. 93-5-1, Miss.Code Ann. (1972). In the alternative, he asked for a divorce on the basis of irreconcilable differences. Nancy filed a cross-bill for separate maintenance which she later amended to seek divorce on the grounds of adultery, habitual cruelty, and/or desertion.

The Chancellor made his findings and rulings on October 17, 1990. Nancy Smith and Eugene Smith, her husband of more than twenty-six years, were granted a divorce on the ground of adultery alone. The chancellor found that Eugene had deserted the marriage to cohabit with his girlfriend. Because the four children born of the marriage were all of majority age, child support and custody were not an issue. Chancellor Stewart further found that "[Nancy] had assisted her husband in material fashion during most of the marriage, and that she deserved the consideration of being treated as an equal partner in dissolution of the marital state." In considering the relief in this case, the chancellor considered the following factors and thus concluded:

(1) The parties' health: Eugene is generally in good health; Nancy is not since she has a ruptured disc in her lower back and has had emotional problems resulting in anxiety and the like.

(2) The parties' income and earning capacity: Eugene earned $245,202 from 1985-1989, spending about $303,907. It would appear he nets $3,891.88 monthly. One of his accountants estimated that he would earn $80,242 in 1990, the same as in 1989, but Eugene denied that this would happen. Nancy, on the other hand, has little or no income from basic (3) The parties' expenses vis-a-vis reasonable necessities: Eugene says he has fixed expenses of $2,452 for loans and mortgages and $1,479 in alleged living expenses. He asserted that his former love interest is not in the picture, although she still works with him and is paid by a small monthly draw of $400 to $1400. Nancy stated in her financial declaration filed with the court that she requires $644 per month for utilities and the like.

sewing skills, having made a high figure of $200 one month from alterations and drapery making.

(4) The wife's free use of home furnishings and automobile: Eugene left home about five years ago, leaving Nancy alone and without transportation. She has the furnishings in the house. He rents an apartment, has an IRA of $2,000, three shares of stock worth $30 per share; and he asserts that he has no interest in land other than the house, no cash other than $1,000 in a HIMMA account, several computers and some office equipment. He drives a 1985 Buick automobile.

(5) Other relevant facts and circumstances: the Smiths formerly spent about $10,000 per year on their children but this expense is no longer incurred.

As a result of the factors considered, the chancellor ordered Eugene to pay Nancy $850 periodic alimony each month. Additionally, Eugene was to provide health insurance to Nancy. Nancy was awarded the "use and possession of the family home as continuing periodic alimony, with all costs of mortgages, taxes, and existing amount of insurance to be paid by Mr. Smith." Nancy was also awarded a permanent lump sum alimony of $50,000, which was to be secured by a lien in her favor, imposed upon the marital property as security for payment of all alimony awarded. Eugene was assessed the $1,000 attorney's fees incurred by Nancy in this matter.

Eugene filed a motion for reconsideration or, in the alternative, for a new trial, alleging that the chancellor's order did not leave him enough money to pay his debts or to live. Eugene asserted that the $850 per month alimony constituted a windfall, because the testimony at trial revealed that Nancy only needed $400 per month, not including the outstanding mortgages, after deducting her earnings from her stated needs.

On December 18, 1990, upon reconsideration, the chancellor modified the divorce judgment by reducing the periodic alimony award from $850 to $650. The court ordered that the remaining terms in the final judgment remain the same. Aggrieved, on January 11, 1991, Eugene timely filed notice of appeal to this Court.

II

Eugene is a self-employed wood products dealer. His corporation, Smith and Associates, buys and sells wood products. He is essentially a broker. Eugene stated that he has been in this type of business since about January or February of 1986. According to him, Nancy did not contribute any financial assets to the business. Nancy is of the opinion that Smith and Associates was formed following the parties' separation to keep her from bringing a claim to receive part of his corporate assets. Eugene's first business, Specialty Products was incorporated 1983, with Nancy and one of their daughters as fellow incorporators.

Eugene has some college education but did not graduate. Nancy graduated from a business school and worked as a legal secretary and for a soft drink company. For the majority of their marriage, Nancy remained at home and raised the children. She moved her family seven times during the course of the marriage to facilitate Eugene's career. While at home, Nancy earned a small amount of income by sewing.

The bulk of this appeal centers around a dispute between the parties as to Eugene's actual income. Eugene maintains that he cannot afford to expend the amount of lump or periodic alimony to Nancy that the chancellor ordered him to pay. On his financial statement, Eugene's gross income per month was $5,216.41, after taxes are deducted, his net income was $3,891.88 per In 1986, his income tax return showed $39,190 in net income. There were admitted expenditures of $56,719. Again, Eugene identified the source of the excess as the balance of his inheritance and loans. In 1987 and 1988, Eugene was employed by Fernwood Enterprises. The major part of his income was from that employment in 1988.

month. He claims his expenses are in excess of $4,700 per month. In 1985, Eugene's income was shown to be $51,302, but admitted expenditures of $74,231. Eugene asserted that the excess came from an $31,000 he inherited from his father.

For 1987, the adjusted gross income was $35,250 with expenditures of $43,381. In 1988, he reported income of $39,218, and expenditures of $49,334. In 1989, Eugene's adjusted gross income was $51,965. In 1989, Eugene paid taxes on $80,242 but at the time of trial, he did not have a work sheet evincing what he spent that year. Based on the previous year's income, Eugene's accountant predicted that his 1990 income would be about the same as 1989, specifically, around $80,000. Eugene noted a downturn, however, and did not agree with the accountant's estimate, which was done solely for purposes of estimated income tax payments.

According to the business and personal tax returns, 1989 was the first big year for Eugene's wood brokering business. He had gross sales in excess of $1.5 million compared with $535,000 the year before and $355,000 the year before that. Eugene estimated that his gross profit on sales ranged from four to five percent. The corporate tax return for 1988 reflected such a gross in the amount of $27,000 and a net loss in the amount of $6,000. In that year Eugene showed income from a sales enterprise other than Smith and Associates in an amount of approximately $9,000. When that amount was netted against his tax loss from the corporation the result was taxable income equal to the amount he received from Fernwood Enterprises, a little less than $40,000.

Gross profits in 1989 exceeded the five percent level. They were over nine percent or $142,000. Of this Eugene netted $80,000 after expenses. Expenses included approximately $10,000 paid to his former girl friend, who he refers to as his "girl Friday," and over $24,000 for office, automobile, utilities and telephone expenses. It is unclear what services are performed by the former girlfriend. It is certainly reasonable to believe that she is performing valuable clerical services at a cost at or below what others would charge. On the other hand, the relationship between the two might support a conclusion that her compensation is unwarranted.

Eugene testified that he has no office and does all of his work out of his apartment. He works primarily by telephone. He never takes delivery of his products. They are delivered directly from his vendor to his customer.

Corporate assets other than receivables are minimal. Fixed assets consist of two computers valued at less than $3,000. Other assets are two small accounts and a $20,000 note from Eugene to the corporation. According to the tax returns, Eugene borrowed $14,000 in 1987 and the rest after the 1989 tax year. Eugene testified that corporate receivables at the time of trial were $89,333.44 and accounts payable were $128,984 for a deficit of $43,029.70. The corporation shows a negative net worth of $21,587.39.

The only finding made by the chancellor as to Eugene's income placed the figure at $3,892 per month, net. This amount is derived from Eugene's estimate of his level of...