AUZIE GAIL LAMB V. FAIRY VENEA LAMB
Annotate this Case
Download PDF
RENDERED: July 18, 1997; 10:00 a.m.
NOT TO BE PUBLISHED
NO. 96-CA-0863-MR (DIRECT)
AND NO. 96-CA-1025-MR (CROSS)
AUZIE GAIL LAMB
v.
APPELLANT/CROSS-APPELLEE
APPEAL AND CROSS-APPEAL FROM McLEAN CIRCUIT COURT
HONORABLE DAN CORNETTE, JUDGE
ACTION NO. 93-CI-0110
FAIRY VENEA LAMB
APPELLEE/CROSS-APPELLANT
OPINION
AFFIRMING
* * *
BEFORE:
GUIDUGLI, JOHNSON AND SCHRODER, JUDGES.
SCHRODER, JUDGE:
This is an appeal and cross-appeal from a
judgment in a dissolution action in McLean Circuit Court.
Appellant/cross-appellee, Auzie Gail Lamb (Gail), the former
husband, raises six issues on appeal, and appellee/crossappellant, Fairy Venea Lamb (Venea), the former wife, raises two.
Gail and Venea were married on December 1, 1977.
The
marriage produced two daughters, Cristen and Rachel, both minors
at the time of the dissolution.
Throughout the marriage, both
husband and wife worked for A & S Fabricating Company, Inc., a
company run by Venea's father, Henry Sonner.
The couple
separated on or about July 25, 1993.
Venea filed a petition for
dissolution on September 17, 1993, along with a stipulation and
agreement prepared by Venea's attorney and executed by Gail and
Venea, purporting to resolve all custody, visitation, support,
maintenance and property issues between the parties.
Gail subsequently obtained legal counsel, conducted
discovery and moved to set aside the agreement.
After an
evidentiary hearing, the court found the agreement
unconscionable.
The marriage was dissolved on February 14, 1995.
The court awarded temporary custody to Venea, and ordered Gail to
pay temporary child support in the amount of $300.00 a month.
After extensive additional discovery, trial was held
November 14, 1995.
The court entered findings of fact and
conclusions of law on January 19, 1996.
On March 11, 1996, the
court entered judgment, incorporating by reference the earlier
findings of fact and conclusions of law and reiterating its
conclusions.
The court, inter alia:
(1) granted permanent
custody of the children to Venea, with Gail to have liberal
visitation rights; (2) ordered Gail to pay $68.00 per week in
child support, finding Venea could reasonably anticipate an
annual income of $70,000.00 and Gail $20,000.00; (3) denied
Gail's request for maintenance, aside from the requirement that
Venea provide health insurance for the children; (4) held the
increase in the value of Venea's non-marital stock in A & S
Fabricating was non-marital; (5) held the retained earnings of A
& S Fabricating non-marital; (6) awarded Gail half of the
2
$25,000.00 in a lockbox maintained by Venea; and (7) awarded Gail
$355.00 in copying costs associated with discovery, but no
attorney's fees.
The court also divided the marital property
between the parties.
This appeal and cross-appeal followed.
Three of the issues raised by Gail involve Venea's
stock.
First, Gail contends that the increase in value of
Venea's stock during the couple's marriage is divisible as
marital property.
Venea received eight shares of stock in her
father's company, A & S Fabricating, before marrying Gail, and
seven shares after the marriage, both times as gifts.
The
parties agree that the value of the stock increased substantially
during the relevant period, although they disagree as to how
much.
The circuit court framed the issue in terms of whether the
increase in the value of the stock was the result of the joint
efforts of the parties to the marriage.
As to Gail's first contention, that the increase in
stock value is marital property, the court heard testimony from
Gail, Venea, Venea's father, Henry Sonner, and other employees of
A & S on this issue.
Mr. Sonner employed not only Venea and her
husband, but his other two daughters and their husbands.
Neither
Gail nor Venea had any special training for their positions, and
there was evidence that Gail was frequently absent to attend to
his race car enterprise.
In its findings of fact and conclusions
of law, the court found that "[b]oth Gail and Venea could have
been replaced at A & S at a lesser cost to the company,"
and
concluded that any increase in the value of the stock did not
3
result from the joint efforts of the parties.
The court's
division will not be overturned unless it has abused its
discretion.
Herron v. Herron, Ky, 573 S.W.2d 342 (1978).
We agree with the trial court.
Under KRS
403.190(2)(o), marital property includes all property acquired by
either spouse subsequent to the marriage except the increase in
value of property acquired before the marriage to the extent that
such increase did not result from the efforts of the parties
during the marriage.
Only when the increase in value is a result
of the joint efforts of the parties can the increase in value of
nonmarital property be considered marital.
Goderwis v. Goderwis,
Ky., 780 S.W.2d 39 (1989).
In Goderwis, the husband had built up a business during
the marriage which was the couple's principal source of income,
while the wife contributed as a homemaker.
The Supreme Court of
Kentucky held that the increased value of the business was
marital.
In the case sub judice, neither spouse contributed to
the increased value of the stocks.
Gail argues alternatively that, if the increase in
value in Venea's stock is ruled nonmarital, the undistributed
earnings attributable to Venea's 15% ownership interest are
marital property.
The parties presented conflicting expert
testimony on the amount of earnings A & S retained.
A & S
Fabricating, the business run by Venea's father, was, beginning
in 1987, a Subchapter "S" corporation under the federal tax code.
26 U.S.C. § 1361, et. seq. (1996).
4
As such, the corporation
itself pays no tax, but its shareholders are taxed based upon
their ownership interest.
Gail attempts to treat A & S
Subchapter S income reported on the couple's tax returns the same
as income actually received by Venea.
Gail reasons that since
they paid tax on the undistributed income on a joint return, the
undistributed income should be considered marital property.
Venea responds that, as a 15% shareholder, she has no
power to force A & S to distribute earnings, and is only entitled
to her share of dividend distributions.
She is taxed on 15% of
the company's earnings, whether or not she actually receives
them.
The parties do not dispute that all of Venea's
shareholder interest in A & S is nonmarital.
Under the statute
in force at the time this case was decided, income from a
spouse's nonmarital property was marital.
864 S.W.2d 900, 902 (1993).1
Dotson v. Dotson, Ky.,
The only issue is whether
undistributed earnings of a Subchapter "S" corporation are
income.
The circuit court requested briefs on this issue.
Finding no Kentucky case on point, the court adopted the
reasoning of Thomas v. Thomas, 738 S.W.2d 342 (Tex. App. 1987),
and found the retained earnings nonmarital.
Thomas is remarkably similar to this case.
The husband
acquired 16% of the stock in a Subchapter "S" corporation by gift
and inheritance, the couple paid taxes on the husband's
1
Effective July 15, 1996, income from nonmarital property
is nonmarital. KRS 403.190(2)(a).
5
proportionate share of the company's earnings, and the parties
agreed the company retained earnings.
The Thomas Court noted
that Subchapter S status does not affect ownership of corporate
earnings, but merely determined how they were taxed.
The Court
of Appeals of Texas held that the retained earnings remained the
company's assets, and were not subject to division upon
dissolution of a shareholder's marriage.
Id. at 345.
We agree
with the circuit court on this issue and adopt the holding in
Thomas, supra.
Gail also complains that the circuit court did not
properly estimate Venea's income in establishing the amount of
child support.
In particular, he asserts that the court should
have included Venea's share of A & S Fabricating's undistributed
earnings, as shown on the couple’s tax returns.
The determination of child support is governed by KRS
403.212, and will not be reversed absent an abuse of discretion.
"Income and expenses from self-employment or operation of a
business shall be carefully reviewed to determine an appropriate
level of gross income available to the parent to satisfy a child
support obligation.
In most cases, this amount will differ from
a determination of business income for tax purposes."
403.212(2)(c).
KRS
In 1994, Venea paid taxes based upon
shareholders' income from A & S Fabricating of $112,547.00, in
addition to her salary and bonus from A & S of approximately
$38,000.00.
Gail tendered a child support calculation using
$153,957.00 as Venea's gross income, which would have obligated
6
him to pay $37.20 per week, instead of the $68.00 found by the
court.
The circuit court arrived at a figure of $70,000.00 for
Venea's income.
Based upon evidence in the record, Venea's
income from wages and dividend distributions for the years
immediately preceding the dissolution came to approximately
$70,000.00/year.
The undistributed earnings of A & S, while
taxable to Venea, were not "available" to her.
The court found
Gail's income to be $20,000.00, and that finding was not
challenged on appeal.
The circuit court did not abuse its
discretion in determining Venea's income for purposes of child
support, and correctly calculated Gail's child support obligation
under the guidelines.
Gail's next point of error is that the circuit court
denied his request for maintenance.
An award of maintenance is a
matter within the discretion of the trial court, and will not be
set aside unless clearly erroneous.
Browning v. Browning, Ky.
App., 551 S.W.2d 823 (1977); Newman v. Newman, Ky., 597 S.W.2d
137 (1980).
An award of maintenance is only proper where the
requesting spouse lacks sufficient property, including marital
property apportioned to him, to provide for his reasonable needs
and is unable to support himself through appropriate employment.
KRS 403.200(1).
By the court's division of marital property, Gail
received $61,889.00 in cash, his retirement account at A & S
valued at $33,530.00, a pickup valued at $3750.00, $12,500.00
7
from the lockbox, and a share of a trust.
Gail testified at
trial that he was willing and able to work.
We find no abuse of
discretion in the circuit court's ruling.
Gail also contends that the circuit court erred in
awarding custody of the couple's minor children to Venea.
The
court shall determine custody in accordance with the best
interests of the child.
KRS 403.270.
In reviewing a decision in
a child custody case, the test is whether the findings of the
trial court were clearly erroneous or the court abused its
discretion.
Eviston v. Eviston, Ky., 507 S.W.2d 153 (1974).
The agreement signed by the parties called for joint
custody, with the children to reside primarily with Venea but
with liberal visitation rights for Gail.
After the court set
aside the agreement, Venea moved for temporary custody and child
support.
The court granted temporary custody to Venea, and
specified Gail's visitation terms.
Before trial, Gail moved for
permanent custody of the children.
At trial, the court heard
testimony from Gail, Venea, and Venea's two sisters on this
issue.
Gail testified that, for some time after their
separation, Venea's boyfriend had been living with Venea and the
children.
Venea and her sisters testified about Venea's care of
the children and the children's activities in which Venea
participated.
Venea and the daughters remained in the family
home after the separation and dissolution.
Gail moved in with
his mother.
The circuit court found that both parties had been good
8
parents, but decided that "Venea is in the better position to
raise the girls at this point in their lives," and that granting
her custody would be in the best interest of the children.
The
circuit court did not abuse its discretion in awarding custody to
Venea.
Finally, Gail argues that the circuit court abused its
discretion by denying his request for attorney's fees.
The
allocation of court costs and attorneys fees are entirely within
the discretion of the trial court.
S.W.2d 512 (1975).
Wilhoit v. Wilhoit, Ky., 521
An allowance of attorneys fees is authorized
only where there is an imbalance in the financial resources of
the parties.
Lampton v. Lampton, Ky. App., 721 S.W.2d 736
(1986); KRS 403.220.
This case involved a great deal of discovery, mostly
concerning Venea's assets and her alleged failure to disclose.
Finding that Venea was "less than forthcoming during the
discovery process," the circuit court ordered Venea to pay Gail
$355.00 in copying costs for bank records.
It is true that
Venea's income in the form of salary, dividends, and bonuses from
her father's company is considerably higher than what Gail can
expect to receive.
In view of Gail's financial resources after
the division of marital property, however, we find no abuse of
discretion.
By cross-appeal, Venea protests the circuit court's
decision to award Gail $12,500.00 in cash from a lockbox.
Venea
contends that the cash actually belonged to Henry Sonner, her
9
father, and that she and Gail only borrowed from it.
The
testimony indicated the lockbox was set up in 1983, well into the
couple's marriage.
Mr. Sonner testified that the money was his,
placed there in an effort to avoid inheritance taxes.
similar arrangements with his other daughters.
He had
Gail and Venea
testified that they withdrew money from the lockbox for various
purposes, including a down payment on a house and the purchase of
a race car.
No one, including Mr. Sonner, presented any
documentary proof of how much was in the lockbox initially, how
much was withdrawn, or how much was replaced.
Mr. Sonner's name
did not appear on the lockbox, and he did not personally make any
deposits or withdrawals.
The court set the value at $25,000.00
based on Venea's testimony, and this finding has not been
challenged on appeal.
The parties discuss this issue in terms of marital
property, and the presumption under KRS 403.190(3).
In its
findings of fact and conclusions of law, however, the circuit
court found that the cash in the lockbox was a gift to both Gail
and Venea, and granted half to Gail.
Gifts during marriage from
third parties to both spouses shall be treated as marital
property upon dissolution.
S.W.2d 890, 892 (1992).
Calloway v Calloway, Ky. App., 832
To constitute a gift, there must be
donative intent, delivery and acceptance.
18.
38 Am. Jur. 2d Gifts §
Intent can be shown by acts, or inferred from the relation
of the parties and the surrounding facts and circumstances.
Gifts, § 17.
The record supports the conclusion that, by placing
10
the money completely out of his control, Mr. Sonner made a gift
of the cash to his daughter, Venea.
Venea, in turn, allowed Gail
to use the money, and the two of them replenished it with marital
funds.
We find no abuse of discretion in the circuit court's
decision to divide the lockbox contents equally as marital
property.
Venea next contends that the circuit court abused its
discretion by not enforcing the stipulation and agreement signed
by the parties and filed on September 17, 1993, with the petition
for dissolution.
The agreement purported to resolve all custody,
visitation, support, maintenance and property issues between the
parties.
KRS 403.180(2) provides:
In a proceeding for dissolution of marriage
or for legal separation, the terms of the
separation agreement, except those providing
for the custody, support, and visitation of
children, are binding upon the court unless
it finds, after considering the economic
circumstances of the parties and any other
relevant evidence produced by the parties, on
their own motion or on request of the court,
that the separation agreement is
unconscionable. (Emphasis added.)
The party challenging the agreement as unconscionable has the
burden of proof, and an agreement is not unconscionable unless it
is unfair, inequitable, or the result of fraud, undue influence
or overreaching.
711-712 (1979).
Peterson v. Peterson, Ky. App., 583 S.W.2d 707,
See also, Shraberg v. Shraberg, Ky., 939 S.W.2d
330 (1997).
After retaining counsel, Gail moved to have the
agreement set aside, alleging that Venea had not fully disclosed
11
her assets.
By order dated March 10, 1994, the court placed the
burden on Gail to present proof that the agreement was
unconscionable, and that Venea withheld disclosure of assets.
After the parties conducted discovery, the circuit court held an
evidentiary hearing on February 14, 1995.
behalf and was cross-examined.
proceedings.
Gail testified on his
The court then stopped the
In its written order entered February 16, 1995, the
court found:
1. The agreement of September 16, 1993 is
not fair and equitable. That the agreement
did not provide for Gail to provide any
support for his children is compelling reason
enough not to approve the agreement, and
additionally the financial situation of the
parties is so complex that there is no way to
determine what is fair and equitable without
a trial de novo.
More discovery followed, and trial was held
November 14, 1995.
The court entered findings of fact and
conclusions of law on January 19, 1996, and judgment on March 11,
1996, including a division of property.
Under KRS 403.180, the circuit court was not bound by
the parties' agreement, as it related to child support, custody
and visitation.
Thus, the failure to provide for child support
was not, by itself, sufficient grounds to find the agreement
unconscionable.
It also appears from the record that, at the
time the court halted the hearing on this matter, the court had
not determined that the agreement was unconscionable because of
lack of disclosure on Venea's part.
A court need not explicitly
use the term, "unconscionable," if it can be determined that the
12
court's actions substantially comply with the requirements of KRS
403.180.
Jackson v. Jackson, Ky. App., 571 S.W.2d 90, 92-93
(1978).
Also, the court's ruling on the agreement need not be
set aside unless failure to do so would be inconsistent with
substantial justice.
CR 61.01.
A comparison of the agreement
and the court's ultimate judgment is necessary to address these
concerns.
In its division of property, the circuit court listed
the couple's marital assets and their values, divided by two, and
ordered Venea to pay Gail the difference in cash between the
value of the property assigned to her and that assigned to Gail.
Leaving aside the lockbox, the resulting distribution differed
from the agreement signed by the parties in two respects: the
court ordered Venea to pay Gail $61,889.00 while the agreement
called for $55,000.00, and the court ordered that Gail receive a
sum of money representing one-half the marital interest in a
trust.
The "Henry Sonner Trust," set up by Venea's father, was
funded by Venea and her two sisters.
The agreement did not
mention the trust, and Gail testified he knew nothing about it
when he signed the agreement.
The court found $13,030.00 of the
cash value of the trust to be non-marital.
The judgment required
the parties to determine the cash surrender value of the trust as
of the date of dissolution, deduct the non-marital $13,030.00,
with Venea to pay Gail one-half of her one-third interest of the
balance.
The record indicates that the trust had a cash
13
surrender value of approximately $32,000.00 as of October, 1994.
Applying the circuit court's calculations to that figure, Gail
would be entitled to receive approximately $3200.00 as his
interest in the trust.
Thus, in terms of property alone, Gail
came out approximately $10,000.00 ahead, comparing the agreement
to the court's judgment.
The other differences between the agreement and the
judgment relate to the children.
The agreement required Gail to
maintain their health insurance, and the court placed that
responsibility on Venea as a form of "maintenance."
The
agreement did not call for child support, while the court ordered
Gail to pay $68.00 per week.
The agreement provided for joint
custody, with the children residing with Venea, but the court
granted custody to Venea.
Gail received more money under the court's judgment,
but the additional $10,000.00 represents less than 5% of the
total marital estate, and does not reflect a large adjustment due
to the parties' economic circumstances.
The undisclosed assets
were Venea's 1/3 interest in the Henry Sonner Trust and the
$25,000.00 in the lockbox.
However, the fact that the court's de
novo division of property was quite similar to the parties'
agreement does not mean that the trial court erred in not
enforcing the agreement.
For the foregoing reasons, we affirm the judgment of
the McLean Circuit Court on appeal and cross-appeal.
ALL CONCUR.
14
15
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Stewart B. Elliott
Owensboro, Kentucky
John G. Thacker
Owensboro, Kentucky
16
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
