COURT OF APPEALS OF VIRGINIA
Present: Judges Benton, Bumgardner and Frank
GARY DOUGLAS LEE MEMORANDUM OPINION * BY v. Record No. 2941-99-3 JUDGE ROBERT P. FRANK OCTOBER 3, 2000 ROBIN ELAINE COWAN LEE
FROM THE CIRCUIT COURT OF LEE COUNTY Ford C. Quillen, Judge
(Timothy W. McAfee, on brief), for appellant. Appellant submitting on brief.
(C. M. Callahan, Jr., on brief), for appellee. Appellee submitting on brief.
Gary Douglas Lee (husband) appeals the October 14, 1999
decision of the trial court affirming its previous award of
spousal support and its previous finding that Robin Lee (wife)
is entitled to spousal support. 1 For the reasons that follow, we
affirm, in part, and reverse and remand, in part.
* Pursuant to Code § 17.1-413, recodifying Code § 17-116.010, this opinion is not designated for publication. 1 The transcript of the October 14, 1999 hearing was not included in the record of this case on appeal. The clerk of this Court issued a show cause to husband to show why the appeal should not be dismissed because of the omission of the October 14, 1999 transcript. Husband answered that the only evidence heard at the October 14, 1999 hearing related to the valuation of the Lee Oil Company for the purpose of equitable distribution. No new evidence was heard regarding the finding that wife should receive spousal support or the amount of the spousal support award. We agree and, therefore, dismiss the show cause. I. BACKGROUND
Wife filed a Bill of Complaint on August 1, 1997, seeking a
divorce from husband on the grounds of adultery and desertion.
By agreement, a pendente lite order was entered on August 8,
1997, which provided that husband was to pay $550 per month in
child support and, in lieu of spousal support, wife was entitled
to withdraw $440 per month from a joint checking account to pay
the mortgage on the marital residence.
On January 5, 1999, a hearing was held pursuant to
husband's notice. Wife also filed a motion to modify the August
8, 1997 pendente lite order to increase child support and to
provide for spousal support. The trial court increased child
support to $1,000 per month and awarded wife temporary spousal
support of $1,000 per month. Husband immediately filed a motion
to stay the order and asked for reconsideration. A subsequent
hearing was conducted on February 10, 1999, and the trial court
refused to amend its January 5, 1999 order. The trial court
entered an order on February 10, 1999, which incorporated its
previous rulings.
On June 23, 1999, the trial court heard ore tenus evidence
on spousal support and the grounds of divorce and entered the
final decree of divorce, reserving jurisdiction over matters of
equitable distribution. On October 14, 1999, the trial court
heard ore tenus evidence on the value of the remaining marital
asset, Lee Oil Company (Company). On November 23, 1999 the
- 2 - trial court entered an order regarding the division of the
Company and restating its earlier award of spousal support to
wife.
Husband owns fifty percent of the stock of the Company.
His brother, Terry Lee, also owns fifty percent of the Company.
At the February 10, 1999 hearing, Paul Harris, a certified
public accountant, testified he prepared the tax returns for
husband and the Company. Harris testified that he discussed the
tax consequences of the Company becoming a Sub-Chapter S
Corporation with Terry Lee, and on January 1, 1997, the Company
elected to become a Sub-Chapter S Corporation for tax purposes.
According to Harris, when a corporation elects Sub-Chapter S
status, each shareholder pays tax for the corporation on his or
her personal income tax return. Harris testified that for the
Company's 1997 tax liability the net income of the Company was
calculated and divided among the shareholders (husband and Terry
Lee) on a Schedule K-1 and they paid the income tax on the
Company's net profit. Harris testified the Schedule K-1 does
not indicate the amount each shareholder actually received but,
instead, reflects each shareholder's portion of the net profit
of the Company. Harris testified husband's 1997 income tax
return showed interest income of $25,045, which was retained by
the Company. Husband's 1997 tax return also showed income of
$342,000, which was husband's share of the net profit of the
Company. Harris testified the Company distributed approximately
- 3 - $130,000 to husband in order for him to pay his taxes but
retained the remainder of its earnings for its operation.
Harris testified that, based on the Company's 1997 interest
income, the Company had approximately $900,000 in savings.
Terry Lee testified he is the president of the Company and
makes all of the Company's financial decisions. He stated he
was conservative and his biggest fear was not having enough
money to pay his bills. He testified the Company planned to
make an acquisition of another business and retained its
earnings for the purpose of a down payment on the purchase of
the other business. He stated it was difficult to borrow money
in the oil business due to environmental risks and, therefore, a
large down payment is necessary to reduce the risk of the loan.
At the June 23, 1999 hearing, the parties stipulated they
both had sexual relations with someone other than their spouse.
Wife's sexual relationship occurred in August 1998, a year after
the parties' initial separation. Husband's sexual relationship
occurred "on or about the time of the separation."
Wife testified she had been employed by a bank for
twenty-six years. She stated she was an assistant vice
president and had "topped out" at the bank and would be unable
to obtain a higher position. She said her gross monthly income
was $3,000. She stated husband held eight jobs over a fifteen
year period prior to his ownership of the Company. She
testified, during that period, husband would be laid off when
- 4 - work was slow and she would support the family during those
times.
Husband testified he was employed by Lee Oil Company. He
stated his salary was approximately $40,000 per year. He
testified his brother, Terry, made all the financial decisions
for the Company, including the determination of salaries and
bonuses. Husband testified he was responsible for the
mechanical aspect of the business.
Wife did not provide any evidence to contradict Terry Lee's
and husband's testimony regarding the operation of the Company
nor the distributions of earnings from the Company.
II. ANALYSIS
Appellant first contends the trial court erred in finding
wife was entitled to $1,500 per month in spousal support.
Appellant argues the trial court erroneously calculated his
monthly earnings by considering the $367,045 shown on his 1997
income tax return, which was his portion of the net profit of
the Company and the interest income retained by the Company.
Husband argues his income should not be based on the $367,045
because that amount was reported on his personal income tax
return due to the Sub-Chapter S status of the Company, not
because he actually received that amount. Appellant argues
there was no evidence he received distributions from the Company
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COURT OF APPEALS OF VIRGINIA
Present: Judges Benton, Bumgardner and Frank
GARY DOUGLAS LEE MEMORANDUM OPINION * BY v. Record No. 2941-99-3 JUDGE ROBERT P. FRANK OCTOBER 3, 2000 ROBIN ELAINE COWAN LEE
FROM THE CIRCUIT COURT OF LEE COUNTY Ford C. Quillen, Judge
(Timothy W. McAfee, on brief), for appellant. Appellant submitting on brief.
(C. M. Callahan, Jr., on brief), for appellee. Appellee submitting on brief.
Gary Douglas Lee (husband) appeals the October 14, 1999
decision of the trial court affirming its previous award of
spousal support and its previous finding that Robin Lee (wife)
is entitled to spousal support. 1 For the reasons that follow, we
affirm, in part, and reverse and remand, in part.
* Pursuant to Code § 17.1-413, recodifying Code § 17-116.010, this opinion is not designated for publication. 1 The transcript of the October 14, 1999 hearing was not included in the record of this case on appeal. The clerk of this Court issued a show cause to husband to show why the appeal should not be dismissed because of the omission of the October 14, 1999 transcript. Husband answered that the only evidence heard at the October 14, 1999 hearing related to the valuation of the Lee Oil Company for the purpose of equitable distribution. No new evidence was heard regarding the finding that wife should receive spousal support or the amount of the spousal support award. We agree and, therefore, dismiss the show cause. I. BACKGROUND
Wife filed a Bill of Complaint on August 1, 1997, seeking a
divorce from husband on the grounds of adultery and desertion.
By agreement, a pendente lite order was entered on August 8,
1997, which provided that husband was to pay $550 per month in
child support and, in lieu of spousal support, wife was entitled
to withdraw $440 per month from a joint checking account to pay
the mortgage on the marital residence.
On January 5, 1999, a hearing was held pursuant to
husband's notice. Wife also filed a motion to modify the August
8, 1997 pendente lite order to increase child support and to
provide for spousal support. The trial court increased child
support to $1,000 per month and awarded wife temporary spousal
support of $1,000 per month. Husband immediately filed a motion
to stay the order and asked for reconsideration. A subsequent
hearing was conducted on February 10, 1999, and the trial court
refused to amend its January 5, 1999 order. The trial court
entered an order on February 10, 1999, which incorporated its
previous rulings.
On June 23, 1999, the trial court heard ore tenus evidence
on spousal support and the grounds of divorce and entered the
final decree of divorce, reserving jurisdiction over matters of
equitable distribution. On October 14, 1999, the trial court
heard ore tenus evidence on the value of the remaining marital
asset, Lee Oil Company (Company). On November 23, 1999 the
- 2 - trial court entered an order regarding the division of the
Company and restating its earlier award of spousal support to
wife.
Husband owns fifty percent of the stock of the Company.
His brother, Terry Lee, also owns fifty percent of the Company.
At the February 10, 1999 hearing, Paul Harris, a certified
public accountant, testified he prepared the tax returns for
husband and the Company. Harris testified that he discussed the
tax consequences of the Company becoming a Sub-Chapter S
Corporation with Terry Lee, and on January 1, 1997, the Company
elected to become a Sub-Chapter S Corporation for tax purposes.
According to Harris, when a corporation elects Sub-Chapter S
status, each shareholder pays tax for the corporation on his or
her personal income tax return. Harris testified that for the
Company's 1997 tax liability the net income of the Company was
calculated and divided among the shareholders (husband and Terry
Lee) on a Schedule K-1 and they paid the income tax on the
Company's net profit. Harris testified the Schedule K-1 does
not indicate the amount each shareholder actually received but,
instead, reflects each shareholder's portion of the net profit
of the Company. Harris testified husband's 1997 income tax
return showed interest income of $25,045, which was retained by
the Company. Husband's 1997 tax return also showed income of
$342,000, which was husband's share of the net profit of the
Company. Harris testified the Company distributed approximately
- 3 - $130,000 to husband in order for him to pay his taxes but
retained the remainder of its earnings for its operation.
Harris testified that, based on the Company's 1997 interest
income, the Company had approximately $900,000 in savings.
Terry Lee testified he is the president of the Company and
makes all of the Company's financial decisions. He stated he
was conservative and his biggest fear was not having enough
money to pay his bills. He testified the Company planned to
make an acquisition of another business and retained its
earnings for the purpose of a down payment on the purchase of
the other business. He stated it was difficult to borrow money
in the oil business due to environmental risks and, therefore, a
large down payment is necessary to reduce the risk of the loan.
At the June 23, 1999 hearing, the parties stipulated they
both had sexual relations with someone other than their spouse.
Wife's sexual relationship occurred in August 1998, a year after
the parties' initial separation. Husband's sexual relationship
occurred "on or about the time of the separation."
Wife testified she had been employed by a bank for
twenty-six years. She stated she was an assistant vice
president and had "topped out" at the bank and would be unable
to obtain a higher position. She said her gross monthly income
was $3,000. She stated husband held eight jobs over a fifteen
year period prior to his ownership of the Company. She
testified, during that period, husband would be laid off when
- 4 - work was slow and she would support the family during those
times.
Husband testified he was employed by Lee Oil Company. He
stated his salary was approximately $40,000 per year. He
testified his brother, Terry, made all the financial decisions
for the Company, including the determination of salaries and
bonuses. Husband testified he was responsible for the
mechanical aspect of the business.
Wife did not provide any evidence to contradict Terry Lee's
and husband's testimony regarding the operation of the Company
nor the distributions of earnings from the Company.
II. ANALYSIS
Appellant first contends the trial court erred in finding
wife was entitled to $1,500 per month in spousal support.
Appellant argues the trial court erroneously calculated his
monthly earnings by considering the $367,045 shown on his 1997
income tax return, which was his portion of the net profit of
the Company and the interest income retained by the Company.
Husband argues his income should not be based on the $367,045
because that amount was reported on his personal income tax
return due to the Sub-Chapter S status of the Company, not
because he actually received that amount. Appellant argues
there was no evidence he received distributions from the Company
other than the 1997 distribution, which was used to pay his
- 5 - income taxes. He argues the earnings retained by the Company
should not be used to calculate his income. We agree.
On appeal, we view the evidence and all reasonable inferences therefrom in the light most favorable to the prevailing party below. Alphin v. Alphin, 15 Va. App. 395, 399, 424 S.E.2d 572, 574 (1992). A presumption exists that the trial court based its decision on the evidence presented and properly applied the law. Williams v. Williams, 14 Va. App. 217, 221, 415 S.E.2d 252, 254 (1992). Furthermore, a trial court's judgment will not be disturbed on appeal unless plainly wrong or without evidence to support it. Jennings v. Jennings, 12 Va. App. 1187, 1189, 409 S.E.2d 8, 10 (1991).
Reece v. Reece, 22 Va. App. 368, 372, 470 S.E.2d 148, 151
(1996).
In this case, we find no evidence to support the trial
judge's determination of husband's monthly income and the amount
of the spousal support award. Husband and Terry Lee testified
husband's salary was approximately $40,000 per year. Further,
there was testimony from Terry Lee and Harris regarding the
retention of the Company's earnings for the down payment on the
purchase of another business and the 1997 distribution to
husband to enable him to pay income tax on the Company's net
profit. Wife offered no evidence to the contrary, nor did she
provide evidence that husband received distributions from the
Company other than the 1997 distribution. Further, wife does
not allege fraud, misrepresentation, or that the Company
retained earnings to reduce husband's income for the purpose of
- 6 - determining spousal support. Our decision is based on the
narrow facts of this case, and we do not create a bright-line
rule that retained earnings should or should not be considered
in calculating a party's income. We, therefore, reverse the
award of spousal support and remand for determination based on
the parties' current circumstances.
Husband next contends the trial court erred in affirming
its earlier ruling that wife is entitled to spousal support.
The trial court awarded wife spousal support, finding her
post-separation adultery did not contribute to the dissolution
of the marriage. The trial court further ruled that had wife's
adultery contributed to the dissolution of the marriage, justice
would require an award of spousal support.
Code § 20-107.1(B) provides:
Any maintenance and support shall be subject to the provisions of § 20-109, and no permanent maintenance and support shall be awarded from a spouse if there exists in such spouse’s favor a ground of divorce under the provisions of subdivision (1) of § 20-91. However, the court may make such an award notwithstanding the existence of such ground if the court determines from clear and convincing evidence, that a denial of support and maintenance would constitute a manifest injustice, based upon the respective degrees of fault during the marriage and the relative economic circumstances of the parties.
Adultery is included as a ground for divorce under Code
§ 20-91(A)(1). See Code § 20-91(A)(1).
- 7 - A party who has committed adultery will not be awarded spousal support unless the trial court finds by clear and convincing evidence that denial of support would constitute a "manifest injustice, based on the respective degrees of fault during the marriage and the relative economic circumstances of the parties." Code § 20-107.1; Barnes v. Barnes, 16 Va. App. 98, 102, 428 S.E.2d 294, 298 (1993). The trial court's decision to award spousal support to a party despite his or her adultery will not be disturbed on appeal unless it is plainly wrong or without evidence to support it. Williams v. Williams, 14 Va. App. 217, 219, 415 S.E.2d 252, 253 (1992).
Rahbaran v. Rahbaran, 26 Va. App. 195, 211-12, 494 S.E.2d 135,
143 (1997).
In this case, the parties were married for twenty-four
years. Wife, with her income from her job at the bank,
supported the family when husband was between jobs. Early in
the marriage, husband was between jobs on a regular basis. The
trial court found wife's post-separation adultery did not
contribute to the dissolution of the marriage. Husband's
admitted adultery occurred on or about the date of the parties'
separation. Husband has greater earning capacity than wife.
Wife testified she was an assistant vice president at a bank and
had "topped out" in terms of potential advancement with the
bank. While husband testified his income was approximately the
same as wife's, he is a fifty percent shareholder in a
corporation that was able to retain earnings of over one million
dollars.
- 8 - We find the trial court considered the parties' respective
degrees of fault and their relative economic situations in
finding that a denial of spousal support to wife because of her
post-separation adultery would be manifestly unjust. The
evidence supports the award of support.
For these reasons, we affirm the trial court's
determination that wife is entitled to spousal support but
reverse and remand the amount of the award for determination
based on the parties' current circumstances.
Affirmed, in part, and reversed and remanded, in part.
- 9 -