Wallace v. Wallace, 86-82-II

Citation733 S.W.2d 102
Decision Date22 April 1987
Docket NumberNo. 86-82-II,86-82-II
PartiesMargaret Jane WALLACE, Plaintiff/Appellee, v. Lacey Patrick WALLACE, Defendant/Appellant. 733 S.W.2d 102
CourtCourt of Appeals of Tennessee

Jon E. Jones, Michael E. Clift, Moore, Jones, Rader & Clift, Cookeville, for plaintiff/appellee.

Sam Wallace, Nashville, for defendant/appellant.


KOCH, Judge.

This is the second appeal in this protracted divorce proceeding. The Chancery Court for Putnam County granted the wife a divorce in 1983. The husband's first appeal challenged the trial court's alimony award and the manner in which the trial court divided the marital property. This Court affirmed the periodic alimony award but vacated the portions of the decree dividing the parties' stock in a closely held corporation and awarding the wife additional funds to defray her legal expenses. 1

The trial court conducted a full hearing concerning the value and disposition of the corporate stock and the nature of the legal services provided to the wife. On November 6, 1985, the trial court entered an order dividing the remaining marital property and awarding the wife additional funds for the payment of her legal expenses. The husband has appealed again to this Court. In essence, he takes issue with (1) the manner in which the trial court valued and divided the parties' interest in the corporation, (2) the award to the wife for her legal expenses, and (3) the award of periodic alimony. The trial court's decision, as modified herein with regard to periodic alimony, is affirmed.


Margaret Jane Wallace and Lacey Patrick Wallace were married in July, 1953, one month after Mrs. Wallace graduated from high school. Mr. Wallace later graduated from college and obtained a law degree. Mrs. Wallace worked to put her husband through law school and then remained at home to raise the parties' two children who are now adults.

Mr. Wallace practiced law briefly and then worked as a contract administrator. In June, 1975, Mr. Wallace and William K. Adams incorporated a metal fabricating business named Gil, Inc. Later they incorporated another metal fabricating business called A & W Fabricators, Inc. and also formed A & W Rentals, a partnership that owned the plant facilities that were leased to Gil, Inc. and A & W Fabricators, Inc. The parties' dispute concerning the valuation and distribution of their interest in Gil, Inc. is at the heart of this appeal.

Gil, Inc. was on shaky financial footing during its early years of operation. Initially it had difficulty obtaining orders because it did not have an established reputation in the market. It also experienced cash flow problems and as a result had difficulty paying its creditors. The company was required to borrow extensively to obtain operating funds, and its creditors required Mr. Wallace and Mr. Adams to guarantee these loans and to secure these loans with their personal assets.

The parties were experiencing serious marital problems in 1981 because Mr. Wallace was having an adulterous affair. During this time, Mr. Wallace asked Mrs. Wallace to permit the family farm to be used as collateral for another loan to Gil, Inc. Mrs. Wallace agreed to do so only on the condition that Mr. Wallace place one half of his Gil, Inc. stock in her name. Mr. Wallace did so, and thus Mrs. Wallace became owner of record of twenty-five percent of Gil, Inc.'s stock. Mr. Wallace left Mrs. Wallace in July, 1981.

Mr. Wallace commenced divorce proceedings in the Chancery Court for Putnam County on March 23, 1982. Mrs. Wallace counterclaimed for divorce three days later. Mr. Wallace eventually conceded that he had committed adultery. Nevertheless, the original divorce proceedings lasted almost two years because of the parties' dispute concerning the division of the marital estate. The primary disagreement centered on the stock of Gil, Inc. On one hand Mr. Wallace insisted that Mrs. Wallace should not receive any interest in Gil, Inc. On the other hand, Mrs. Wallace insisted that Mr. Wallace was undervaluing this asset.

The trial court granted Mrs. Wallace a divorce on the grounds of adultery and cruel and inhuman treatment on May 19, 1983 and referred the question of the division of the marital estate to a special master. Mr. Wallace claimed during the proceedings before the master that Gil, Inc. was insolvent and that its stock had no value. However, while these proceedings were pending, Gil, Inc. obtained a $825,377 judgment against a customer and one of its guarantors.

Mr. Wallace remarried in July, 1983.

The trial court filed a memorandum opinion on February 1, 1984 dividing the parties' marital property. While it awarded Mr. Wallace sole ownership of A & W Fabricators, Inc. and A & W Rentals, it allowed Mrs. Wallace to keep twenty-five percent of the stock in Gil, Inc. because it was unable to place a value on the parties' interest in the company. The trial court's final decree was entered on February 9, 1984.

This Court vacated the trial court's decision concerning the Gil, Inc. stock. We ruled that Mr. Wallace was entitled to all the Gil, Inc. stock and that Mrs. Wallace should receive a corresponding monetary award to offset the value of the interest in Gil, Inc. she had been awarded originally. We also vacated the award to Mrs. Wallace for attorneys fees because no proof had been presented to the trial court concerning the nature of the services provided or their cost.

The trial court heard this matter again in September, 1986. The proof showed that Gil, Inc. is a thriving defense contractor. It employs ninety-one persons and has a $12,000,000 to $15,000,000 backlog of orders. Its assets increased almost five fold to $3,488,197 in 1985. Its gross sales for 1984 were $4,713,975, and Mr. Wallace projected that the company's total revenues for 1985 would be $7,000,000. The company's gross profit increased from $398,684 in 1980 to $1,533,533 in the first six months of 1985. Its net income after taxes increased from $126,888 in 1980 to $484,300 during the first six months of 1985.

Contrary to his earlier testimony before the special master, Mr. Wallace stated in a pre-trial deposition that Gil, Inc.'s market price was between $4 million and $5 million and that he would accept $2,000,000 for his interest in the company. Mr. William K. Adams, the co-owner of Gil, Inc. stated that the present cash market value of Gil, Inc. was between $3 million and $6 million based upon the company's market position, assets and future earnings. This was confirmed by Gil, Inc.'s former comptroller who stated that the value of Gil, Inc. was between $3 million and $3.6 million as of January, 1983.

Based upon this proof, the trial court found that the present value of the Gil, Inc. stock was between $3 million and $3.5 million and that its value at the time of the parties' divorce was $3 million. Thus, the trial court found that the parties' interest in Gil, Inc. was worth $1.5 million. The trial court determined that this asset should not be divided equally because it had already awarded Mrs. Wallace periodic alimony. Thus, it determined that Mr. Wallace should receive all the stock in Gil, Inc. and, in return, that Mr. Wallace should pay Mrs. Wallace $660,000 for her interest in the company. The trial court decided that this award with interest should be paid in monthly installments over fifteen years. The trial court also awarded Mrs. Wallace $18,000 for the payment of the legal services she had incurred through the first appeal of this case as well as $10,000 for the loss of use of the assets she had been awarded in the first proceeding.

II. The Record on Appeal

The parties have been locked in a dispute concerning the status of the record on appeal. Mrs. Wallace insists that appeal should be dismissed because Mr. Wallace did not file the transcript of the September 24-25, 1985 hearing in the manner required by Tenn.R.App.P. 24(b). Mr. Wallace insists that he has complied substantially with the Tennessee Rules of Appellate Procedure.

Mr. Wallace filed a somewhat premature but timely notice of appeal on October 16, 1985. The court reporter filed the transcript of the proceedings with the clerk of the trial court on November 15, 1985 and provided counsel for both parties with a copy of the transcript. However, counsel for Mr. Wallace failed to comply with Tenn.R.App.P. 24(b) by neglecting to file a proof of service with the trial court clerk and with opposing counsel. Notwithstanding this omission, counsel for Mrs. Wallace conceded during oral argument that he had actual notice that the transcript of the September, 1985 proceedings had been filed with the trial court clerk.

After several unsuccessful attempts to seek this Court's permission to file this transcript as part of the appellate record, counsel for Mr. Wallace obtained an order from the trial court on June 17, 1986 authenticating the transcript and exhibits and directing that they be made part of the record on appeal. Tenn.R.App.P. 24(e) empowers the trial court to direct that a supplemental record be filed in this Court containing matters "properly includable" in the record on appeal. Thus, the trial court's June 17, 1986 order, by itself, is sufficient to bring the transcript and exhibits before this Court.

These materials should be considered by this Court even if the trial court had not directed that a supplemental record be filed. The Tennessee Rules of Appellate Procedure are not intended to erect a technical barrier to considering an appeal on its merits. Tenn.R.App.P. 1 states:

These rules shall be construed to secure the just, speedy, and inexpensive determination of every proceeding on its merits.

Thus, with a few exceptions not pertinent in this case, Tenn.R.App.P. 2 gives this Court the authority to suspend the strict application of the rules when good cause exists. The Tennessee Supreme Court has...

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