Wheeling v. Wheeling

546 S.W.3d 216

Kelly Morris WHEELING, Appellant,

v.Everett Thomas WHEELING, III, Appellee.

No. 08–15–00064–CV

Court of Appeals of Texas, El Paso.

January 18, 2017

Georganna L. Simpson, Georganna L. Simpson P.C., Dallas, TX, John E. Westhoff, Borden & Westhoff, LLP, Weatherford, TX, for Appellee.

Jimmy L. Verner, VernerBrumleyMcCurley PC, Dallas, TX, for Appellant.

Before McClure, C.J., Rodriguez, and Hughes, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice

This is a divorce case in which Appellant challenges only the trial court's findings concerning the property issues that arose at trial. For the reasons that follow, we affirm.

FACTUAL BACKGROUND

Appellant Kelly Morris Wheeling (Wife) and Appellee Everett Thomas Wheeling (Husband) were married on January 28, 1989, in Memphis, Tennessee. Husband and Wife had three children. All issues relating to the children were settled pretrial with a Rule 11 Agreement.

At the time of marriage, Husband worked at SMB Stage Lines loading and unloading cargo planes. All three of the parties' children were born between 1997 and 1999. Between 1998 and 2003, Husband changed jobs and companies twice. First, he became director of operations at Kitty Hawk Air Cargo and then the regional manager for Miami Aircraft Support (a/k/a Worldwide Flight Services). After Husband left Miami Aircraft Support, he became a consultant for Integrated Airline Services (IAS) and six months later, he worked his way up to become the vice president of sales and marketing. Throughout the duration of the marriage, Wife maintained the parties' home and took care of their three children.

In 2006, Husband signed an Executive Employment Agreement (the 2006 Agreement) with IAS and became its President, Chief Operating Officer (COO), and officer of any IAS affiliate. He received an annual salary of $200,000 with yearly increases and bonuses, but did not receive an ownership interest in IAS. The 2006 Agreement provided for a five-year term with a termination date of July 31, 2011. It also included a change of control bonus, which contemplated a two-percent bonus of the net proceeds earned over the five-year employment period, up to and including ten-percent, forgiveness of some debt, and a four-year covenant not to compete. In 2008, as part of the 2006 Agreement, IAS, as sole Member, together with Harry B. Combs, Jr. (Combs) and Husband, as the two Managers, signed the original operating agreement for an IAS subsidiary company, IAS Logistics DFW LLC (Logistics). Husband and Combs organized Logistics to fill a void left by another company that filed for bankruptcy. IAS performed a wide variety of services concerning air freight but lacked the trucking capabilities. As a result, Logistics was formed initially to move pallets at airports but later expanded to making local deliveries, too. Logistics and IAS shared operating facilities. As President and COO of IAS, Husband supervised Logistics, oversaw its operations and executed any management decisions. While Husband denied traveling on behalf of Logistics, his deposition indicated that he did travel for Logistics on occasion. According to Husband, he did not acquire an ownership interest in Logistics, was not employed by Logistics, but he did use a company credit card for gasoline.

As of the date of trial, Logistics was not profitable. A couple of profit and loss statements were admitted at trial. The statement from 2013 indicated that Logistics had revenues of $8,127,683.86 but operated at a 4% loss, losing $332,636.06. Another statement for the end of 2013 provided a loss of only $50,333.00. Finally, a statement for the first two months of 2014 showed a loss of only $5,028.72 on gross receipts of $1,595,087.41.

In August 2011, Husband signed an amendment to the 2006 Agreement, which extended his employment from 2011 to July 31, 2016. In October 2011, Husband borrowed $75,000 from IAS and another $75,000 in December 2011 to maintain the parties' lifestyle. In January 2012, Husband and Wife separated. At that time, Husband was making an annual salary of $350,000. The parties had an understanding that Husband would continue to pay Wife's living expenses. Husband testified regarding the details of the arrangement: [Wife] and I had an understanding from the point in time in which we separated that I would take care of the expenses that she incurred, from a living standpoint, which is your home, her utilities, her automobiles, and all of the other related expenses that she had, as well as take care of the children.

We had an understanding as well that I would compensate her $5,000 a month so that she could use it for fuel, fun and food. [Wife] and I had a lot of understandings, and you're correct, I did make two separate bank accounts when those funds came in.

In February and May 2013, Husband borrowed another $50,000 and $8,000, respectively, from IAS to purchase a car for one of his sons' sixteenth birthday.

In July 2013, Cargo Airport Services (CAS) purchased IAS. Logistic was not included in the sale. Husband signed a new employment agreement with CAS (the 2013 Agreement), which superseded the 2006 Agreement, but it did not provide him with an ownership interest in CAS. Husband also signed a COO Bonus Agreement (Bonus Agreement), which addressed his change of control bonus referenced in the 2006 Agreement. In addition to the 2013 Agreement and Bonus Agreement, members of Logistics, including Husband, signed an Amended and Restated Operating Agreement (Amended and Restated Operating Agreement), which added new Members to Logistics. Five of the six Members were trusts associated with the Combs' family. Under the Amended and Restated Operating Agreement, the trusts owned 10,000 Units in Logistics and Husband owned 10,000 Units. As a result of IAS's sale to CAS, Husband received his change of control bonus discussed above, in the amount of $2,524,000 at the end of July 2013. However, the bonus was taxed as ordinary income and after paying income taxes in excess of $1 million, Husband netted approximately $1,442,292.56. Because of these tax consequences, Husband ultimately employed a tax avoidance device, known as Profits Interest Units (PIUs), and acquired his 10,000 Units in Logistics as PIUs also at the end of July 2013. PIUs are equity ownership interests governed, for tax-treatment purposes, by the Internal Revenue Code, 26 U.S.C. § 83. PIUs are acquired by the rendition of services rather than by capital contributions. Revenue 93–27 clarified the tax treatment of the receipt of a PIU, which may or may not be a taxable event depending on whether the provisions of the safe harbor apply. The safe harbor provides the receipt of such PIUs is not a taxable event so long as (1) the PIUs do not relate to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or high-quality net least; (2) the partner does not dispose of the PIUs within two years of receipt; and (3) the PIUs are not a limited-partnership interest in a "publicly traded partnership" within the meaning of Section 7704(b) of the Internal Revenue Code. Provided that Husband met the above requirements, in addition to the non-transferable provision contained in the Amended and Restated Operating Agreement, monies received as a result of Husband's interest in Logistics would be taxed at a capital gains rate rather than at the substantially higher rates for individual income taxes. The other five Members of Logistics made capital contributions in exchange for their 10,000 Units, totaling $932,917.00. In August 2013, Wife filed her petition for divorce. She later supplemented her petition to add claims for breach of fiduciary duty, actual fraud, constructive fraud, and waste of assets. Husband denied any act of actual or constructive fraud and contended that Wife's claims were "estopped by her own bad acts and fraud on the community." In September 2013, the parties agreed that $175,000 would be disbursed to each of them for the purpose of purchasing their own respective homes. In October 2013, Wife approached Husband and requested an additional $325,000 for the purchase her home.

In January 2014, pursuant to the 2013 Agreement with CAS, which was terminable on 30 days' notice and contained a 12–month do-not-compete provision, save and except for Logistics, Husband began working for CAS as the Executive Vice President of Sales and Business Development, receiving a reduced annual salary of $200,000. In June 2014, CAS terminated Husband's employment and advised him of CAS's intent to enforce its covenant not to compete provision. In September 2014, the trial court issued its rendition and in October 2014, it signed its final judgment, which incorporated its rendition, the parties' Rule 11 Agreement relating to the children of the marriage, the distribution of the proceeds from the sale of the marital residence, and an advancement of $25,000 to Wife to partially pay her attorney's fees. In December 2014, the trial court issued its Findings of Fact and Conclusions of Law.

Waste Claims at Trial

At trial, Wife introduced into evidence several summaries of Husband's expenditures, accompanied by credit card and bank statements that she alleged to constitute waste. The summaries tallied Husband's expenses on trips, gifts, restaurants, clothing, flowers, guns and ammunition, alcohol, spas, golf, and furniture during the two-year period the parties were separated. During this same two-year period, Wife also provided documentation of Husband's ATM withdrawals, in which he received cash back when making purchases. This total included gifts to Husband's paramour, Elizabeth Brown, whom he began dating in Spring 2012, as well as a trip the two took together to Hawaii in August 2013. Husband introduced into evidence his own summaries which accounted for the expenditures that Wife claimed he wasted, most of which were attributable to his employment and the maintenance of...