West v. West

• Decision Date: 31 May 2012
• Docket Number: Nos. 2008–CA–01700–SCT, 2009–CA–01877–SCT, 2010–CA–00316–SCT, 2002–IA–01158–SCT.,s. 2008–CA–01700–SCT, 2009–CA–01877–SCT, 2010–CA–00316–SCT, 2002–IA–01158–SCT.
• Citation: 88 So.3d 735
• Parties: Charles Timothy WEST, West Quality Food Services, Inc., Coastal Express, Inc., West Leasing Company, West Brothers Leasing Company, West Family Leasing Company and West Investments, LLC v. Deborah Gayle Thornton WEST. Deborah Gayle Thornton West v. West Quality Food Services, Inc., Coastal Express, Inc., West Leasing Company, West Brothers Leasing Company, West Family Leasing Company and West Investments, LLC. Deborah Gayle Thornton West v. Charles Timothy West, West Quality Food Services, Inc., Coastal Express, Inc., West Leasing Company, West Brothers Leasing Company, West Family Leasing Company, KT of Baton Rouge and West Investments, LLC.
• Court: Mississippi Supreme Court

88 So.3d 735

Charles Timothy WEST, West Quality Food Services, Inc., Coastal Express, Inc., West Leasing Company, West Brothers Leasing Company, West Family Leasing Company and West Investments, LLC

v.Deborah Gayle Thornton WEST.

Deborah Gayle Thornton West

v.West Quality Food Services, Inc., Coastal Express, Inc., West Leasing Company, West Brothers Leasing Company, West Family Leasing Company and West Investments, LLC.

Deborah Gayle Thornton West

v.Charles Timothy West, West Quality Food Services, Inc., Coastal Express, Inc., West Leasing Company, West Brothers Leasing Company, West Family Leasing Company, KT of Baton Rouge and West Investments, LLC.

Nos. 2008–CA–01700–SCT, 2009–CA–01877–SCT, 2010–CA–00316–SCT, 2002–IA–01158–SCT.

Supreme Court of Mississippi.

March 22, 2012.

Rehearing Denied May 31, 2012.

Terry L. Caves, Jerry D. Sharp, Mark A. Nelson, James Robert Sullivan, Jr., Jared W. Eastlack, attorneys for appellants.

Patrick F. McAllister, attorney for appellee.

EN BANC.

DICKINSON, Presiding Justice, for the Court:

¶ 1. A judgment creditor served writs of execution on two corporations whose restricted stock was owned by the judgment debtor, who then sold his stock back to the corporations. The chancellor dismissed the writs, holding that the sale of stock rendered them moot.

¶ 2. We hold today that statutory restrictions ¹ on the transfer of restricted shares of corporate stock apply to both voluntary and involuntary transfers of the shares; that—after a judgment creditor serves a corporation with a writ of execution regarding one of its shareholders—repurchasing the shareholder's shares will not excuse the corporation from responding to the writ of execution by filing the statutorily required ² sworn statement; and that the judgment creditor may—to the extent allowed by Mississippi statutes and other applicable law—execute on all benefits due the judgment debtor by the corporation, including the purchase price of the judgment debtor's stock.

¶ 3. These three consolidated appeals—all springing from a divorce granted in 1994—present thirty-eight issues including one of first impression. Because we are reversing the chancellor on three issues and remanding for a new trial; and because the chancellor's resolution of those issues may affect the outcome of others, we hold that all issues not specifically resolved in this opinion may be presented by the parties to the chancellor for adjudication.

BACKGROUND FACTS AND PROCEEDINGS

¶ 4. When Charles Timothy West (“Tim”) and Deborah Gayle Thornton West (“Debbie”) divorced in November 1994, their property settlement agreement (“Agreement”) required Tim to pay child support and to make “bi-weekly periodic payments of one-half of [his] income” as alimony. Debbie was also “entitled to and shall be vested with one half ( 1/2) of all existing marital assets.”

¶ 5. At the time of the divorce, Tim was employed by West Quality Food Services, Inc. (“West Quality”); he owned stock in West Quality and Coastal Express, Inc. (“Coastal”); and he held limited partnership interests in West Leasing Company, West Brothers Leasing Company, and West Family Leasing Company (“the West Leasing Companies”). All of these entities (“West Entities”) are closely-held family businesses.

WEST I

¶ 6. After five years had passed, relying on advice of counsel, Tim reduced his alimony payments according to calculations provided by West Quality's accounting firm, Horne, LLP. Debbie filed a contempt action, and Tim counterclaimed, arguing that the Agreement's alimony and property-division provisions were ambiguous and unenforceable; and that—because the Agreement did not define the term “marital assets”—Debbie was not entitled to an ownership interest in half of his business assets.

¶ 7. On April 30, 2002, the chancellor entered an interlocutory judgment, finding that Tim and Debbie never actually had reached an agreement on alimony and division of property, and that the issue should be presented to the court anew. Debbie filed an interlocutory appeal, arguing the trial court erred in (1) holding the provisions of the Agreement null and void; (2) failing to determine that $411,000 in corporate loans to Tim were actually distributions, in which she was entitled to share; (3) failing to determine that Tim breached his obligations under a predivorce death-benefit agreement. Debbie also argued that she was entitled to attorneys fees, and that—absent the parties' consent—the chancellor had no jurisdiction or authority to void the Agreement and start over. Finally, Debbie argued that the chancellor had erred in quashing her subpoena for certain West Quality documents.

¶ 8. We granted Debbie's application for interlocutory appeal. We held that the portion of the Agreement titled “Support and Division of Income for Wife” was ambiguous, and we resolved the ambiguity by finding it awarded Debbie periodic alimony.³ And because Tim had reduced his payments, we remanded for a determination of whether there had been a material change in circumstances that warranted the reduction.⁴ We also held that the property settlement portion of the Agreement was not ambiguous.⁵

WEST II

¶ 9. After we remanded, Debbie filed an amended complaint, adding the West Entities as defendants, claiming they had conspired with Tim to deprive her of her portion of distributions to Tim by disguising the distributions as “loans” from Coastal Express and West Quality. Following extensive discovery, the chancellor dismissed the West Entities as parties and, finding Debbie had no reasonable basis to pursue a claim against West Entities, ordered Debbie to pay their attorneys' fees.

¶ 10. At the conclusion of the trial, the chancellor issued an extensive, fifty-two-page opinion and final judgment, in which he found that:

1) the November 1994, judgment of divorce was enforceable;

2) Debbie was entitled to one-half of the marital assets; that the law of the case prohibited Tim from relitigating what this Court already had decided; and that Debbie was entitled to a one-half interest in the West Entities, but only if certain transfer restrictions contained in the West Quality stock agreement were lifted;

3) Debbie was entitled to $570,792 in past-due alimony with an interest rate of seven percent, and that all future alimony payments should be calculated using the “Horne” method;

4) the money transferred from West Quality to Tim was in the form of loans and not distributions;

5) Tim was in civil contempt for refusing to comply with the Agreement obligations;

6) Tim breached his duty to keep Debbie informed about financial information, and he must provide Debbie with certain financial documents;

7) Tim breached his obligation to maintain certain life-insurance policies;

8) Tim's alleged violation of an insurance-policy-death-benefit agreement was moot;

9) Debbie was not entitled to any interest in West Investments;

10) Tim was not entitled to a modification of his alimony obligations;

11) Tim was entitled to child support;

12) Debbie was entitled to attorneys' fees totaling $262,468.53; and

13) the West Entities were entitled to attorneys' fees.

¶ 11. From the chancellor's order, both Tim and the West Entities appealed, and Debbie cross-appealed.

WEST III

¶ 12. While the appeal of West II was pending, Debbie filed discovery requests on the issue of the West Entities' attorneys' fees. Then, on June 9, 2009, after holding a hearing, the chancellor entered an order stating that “West Entities were wrongfully made parties to the action,” and they were “entitled to attorneys' fees and expenses.” He ordered Debbie to pay $41,063.71 in attorneys' fees. He later reduced the amount to $33,366.71, from which Debbie has filed a separate appeal.

WEST IV

¶ 13. On November 18, 2008, Debbie attempted to collect her judgment for past-due alimony and attorneys' fees by filing a writ of execution on Tim's distributions from, and shares of stock in, West Quality and Coastal. Tim and West Quality responded with motions to stay, dismiss, or quash the writ, pointing out the prohibitions in the West Quality bylaws and stock agreement. The chancellor stayed the writ of execution and requested briefs on the effect of the restrictions.

¶ 14. Meanwhile, the corporation demanded repayment of the loans they had made to Tim. Tim responded that he would have to sell his stock to pay the loans, so he sold his West Quality stock back to West Quality for $1,552,804, and his Coastal stock to back Coastal for $87,953. West Quality retained the bulk of the stock-sale proceeds–$1,172,205–in satisfaction of Tim's debt. The corporations satisfied the balance of the purchase price of Tim's stock by executing separate promissory notes at 2.96% interest, payable in annual installments.

¶ 15. As a result of the stock sale, the chancellor denied Debbie any relief on her writ of execution, finding it was nullified by his previous stay order and the stock sale. Debbie appealed this decision. We have consolidated all of these appeals.⁶

ANALYSIS

¶ 16. Our standard of review for the issues we address today is well-understood: We will affirm a chancellor's findings of fact when they are supported by substantial evidence, unless the chancellor abused his or her discretion, was manifestly wrong, was clearly erroneous, or applied an erroneous legal standard.⁷ It is a chancellor's duty to determine the weight and credibility due a witness's testimony.⁸ We review questions of law de novo.⁹

The chancellor applied an erroneous legal standard regarding Tim's request for a reduction in periodic alimony.

¶ 17. In considering the alimony issue initially, the chancellor expressed understandable frustration with the Agreement's unusual alimony provisions. He held they were ambiguous and void. But for reasons stated in West I, we reversed and remanded, finding that the provisions were enforceable, and that the alimony was periodic.¹⁰

¶ 18. Upon remand ( West II ), Tim argued a reduction in his income...