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Castle v. Castle

Court of Appeals of Mississippi

October 16, 2018


          DATE OF JUDGMENT: 12/20/2016




         EN BANC

          FAIR, J.

         ¶1. After fifteen years of marriage, Mary and Jason Castle separated as a result of Jason's adultery. The Castles later consented to an irreconcilable differences divorce, agreed on all issues related to custody of their three children, and agreed that the chancery court would decide all issues related to the equitable distribution of the marital estate, alimony, child support, and attorney's fees. After a three-day trial, the chancery court divided the marital estate and awarded Mary an "equalization payment" of $584, 608.41, lump-sum alimony of $1, 600, 000, periodic alimony of $6, 500 per month, and child support of $3, 200 per month. On appeal, Jason argues that the chancery court erred by classifying a house as a marital asset. The house was intended to serve as the marital home but was still under construction at the time of the separation, and Jason argues that it was his separate property. Jason also argues that the awards of lump-sum alimony and periodic alimony are excessive. After review of the record, we find the chancellor acted within his discretion. Thus, we affirm.


         ¶2. Mary and Jason married in 1999 in Tuscaloosa, Alabama. At the time, Mary was twenty-three years old, and Jason was twenty-five. During their marriage, the Castles had a son (born in 2001) and two daughters (born in 2002 and 2004).

         ¶3. Prior to the marriage, Mary had finished one semester of community college and had worked at a daycare and as a clerk at a video rental store. During the marriage, Mary was a stay-at-home mother and did not work outside the home. The Castles' daughters both have dyslexia and attend regular tutoring outside of school. The daughters also have health issues that require them to see out-of-town doctors. In addition, all three Castle children are involved in extracurricular activities.

         ¶4. Jason began working for his father in the pipeline industry when he was fifteen years old, and he went to work in the industry full-time when he was eighteen years old. In the early years of the parties' marriage, Jason worked for several different pipeline construction companies operating heavy equipment. Eventually he was promoted to foreman. In 2005, Jason began working for his father's company, Progressive Pipeline Inc. (PPI), as a superintendent, and PPI later promoted him to construction manager.

         ¶5. Jason's father, Mike Castle Sr., and two partners formed PPI in 1999. PPI built transmission pipelines throughout the southeastern United States. Eventually, Mike Sr. bought out his two partners.

         ¶6. In 2008, Mike Sr. formed Progressive Pipeline Holdings LLC (PPH), a holding company with seven subsidiaries. Mike Sr. created PPH for estate planning purposes because his three sons could not have afforded to purchase an interest in PPI. At the time it was formed, PPH had little or no book value because it had no significant assets or contracts. Mike Sr. gave Jason and another son, Mike Jr., each a twenty-percent non-voting interest in PPH. He gave his youngest son, Zachary, a ten-percent non-voting interest. Mike Sr. retained a fifty-percent voting interest.

         ¶7. In 2008 and 2009, PPI subcontracted many of its projects to PPH so that PPH could establish a work history, obtain bonding, satisfy state licensing requirements, and develop client relationships. By 2012, PPH had essentially taken over the operations of PPI. Jason worked as a construction manager for PPH. Between 2010 and 2015, Jason's reported earnings from salary and wages ranged from $148, 620 to $214, 575, with an average of about $180, 000.

         ¶8. In addition to his base salary, Jason also received cash distributions from PPH. As the only voting member of PPH, Mike Sr. decides whether and when to make such distributions. Jason received cash distributions from PPH of $1, 500, 000 in 2012; $1, 000, 000 in 2014; and $2, 000, 000 in 2015. Jason's K-1 statements for those years show that his share of PPH's ordinary business income was $8, 107, 749 in 2012, $3, 887, 401 in 2013, $2, 865, 024 in 2014, and $7, 343, 995 in 2015. PPH pays quarterly tax estimates for Jason based on his share of PPH's income. Jason's share of the PPH's income is reportable income to Jason. However, Jason has no legal right to insist on distributions from PPH. And most of Jason's PPH earnings remain with PPH as retained earnings subject to distribution by his father but nevertheless remaining Jason's property subject to distribution by Mike Sr. At trial, Mike Sr. testified that PPH would not make any distributions in 2016 because business had slowed due to a drop in oil prices. From the $22, 204, 169 credited to Jason's PPH account for 2012 through 2015, he received distributions totaling $4, 500, 000 in addition to the approximately $720, 000 he received in salary for the four years leading up to and including the year of separation and filing for divorce.

         ¶9. Jason and Mary agreed to appoint Annette Herrin to appraise Jason's interest in PPH. Herrin is a certified public accountant, and she testified at trial as an expert in business valuation. Herrin testified that as of December 31, 2014, PPH's net value was $49, 429, 463, and PPH's net income for 2014 was $34, 555, 828. Herrin valued Jason's twenty percent non-voting interest in PPH at $5, 930, 000. Herrin testified that she discounted Jason's interest in the company because it was a closely-held family business controlled by Mike Sr.

         ¶10. In 2008, the Castles moved into a four-bedroom, three-bath home in Collinsville. In 2011, Jason and his brother Zachary formed Castle Holdings LLC to acquire 103.5 acres of land near Meridian, where they planned to build homes. Mike Sr. or PPI loaned Castle Holdings approximately $222, 525, which covered most or all of the purchase price for the land. Mike Sr. testified that he did not expect his sons to repay the loan and considered the money a gift.

         ¶11. Both Jason and Zachary built homes on the property. Jason first built a house at 209A Mt. Horeb Road (the 209A house). The 209A house is a two-bedroom, two-bathroom house with approximately 1, 800 square feet. Jason and Mary agreed that the 209A house was worth $277, 884. At trial, Mary referred to the 209A house as "the barn." She testified that they built the 209A house primarily to store "Jason's toys" and only intended to live in it a short time while they built their "forever home" nearby on the same property. The Castles moved into the 209A house in 2012, at which point they sold their Collinsville home for $365, 000.

         ¶12. In May 2014, Zachary signed a warranty deed conveying 56.6 acres of the Castle Holdings property to Jason and Mary as joint tenants with full rights of survivorship. Jason testified that he did know about the conveyance until after Mary filed for the divorce. Zachary did not testify, and there is no explanation in the record as to why the property was conveyed from Castle Holdings to Jason and Mary at that time.

         ¶13. The same month that the property was conveyed to them as joint tenants, Mary and Jason began construction of a second home at 209B Mt. Horeb Road (the 209B house). The 209B house, which was intended to be the Castles' "forever home," is located only about 600 or 700 feet away from the 209A house. The 209B house is an 8, 237-square-foot, three-story, five-bedroom, seven-bathroom house with an elevator. Mary and Jason agreed that the 209B house is worth $1, 500, 000. Mary referred to the 209B house as "the castle."

         ¶14. Mary testified that she spent almost two years planning and designing the 209B house. According to Mary, she "picked out almost every detail of the whole house," modified some of the floor plan, and "made changes to [the] layouts of some of the rooms." Mary testified that she spent countless hours selecting brick, stone, cabinetry, carpet, tile, stains, lighting, hardware, bathroom finishes, and appliances for the home. She also designed an elaborate staircase in the home.

         ¶15. Mary testified that Jason chose some of the floors, the roof, and an air conditioner, designed a "safe room" for his guns, and helped design a bar area in the basement. However, Mary testified that she "did everything else" as far as designing the home. She testified she interacted with their contractor on an almost daily basis. Jason agreed that Mary helped to design the house, but he disapproved of many of her choices, which he considered extravagant. Originally, the account used to pay for construction of the 209B house was a joint account, and Mary wrote most of the checks for the construction. The account was funded with Jason's distributions from PPH.

         ¶16. In November 2014, Mary discovered that Jason was having an affair. The Castles separated because of Jason's affair. They briefly reconciled, but Mary later discovered that Jason had not ended the affair. They separated again, and in April 2015 Mary filed for divorce on the grounds of adultery or, in the alternative, irreconcilable differences.

         ¶17. In May 2015, the parties consented to an irreconcilable differences divorce. They subsequently agreed to share joint legal custody of their three minor children, that Mary would have physical custody of all three children, and that Jason would have visitation pursuant to an agreed schedule. They also agreed that the chancery court would decide all issues related to child support, equitable distribution, alimony, and attorney's fees.

         ¶18. In May 2015, the chancery court entered an agreed temporary order. The parties agreed and the order provided that Jason would continue to pay the mortgage, insurance, taxes, and utilities on the 209A house; maintain health insurance for Mary and the children and pay all of their uninsured healthcare expenses; continue to pay a number of other expenses and bills for Mary and the children; and pay "temporary family support" of $1, 000 per week to Mary. In March 2016, the temporary order was amended to increase the temporary family-support payment to $1, 300 per week.

         ¶19. After the couple separated, Jason continued to live in the 209A house with Mary and the children until December 2015. Jason then moved into the "castle" at 209B in January 2016. Mary and the children never lived in that house.

         ¶20. A three-day trial on all remaining issues was held in August 2016. Jason admitted to the affair during trial. On December 20, 2016, the chancery court entered a memorandum opinion and final judgment, which granted the parties an ...

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