DIVISION II

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

LARRY D. VAUGHT, JUDGE

CA00-925

May 16, 2001

SANTIFER ENTERPRISES, INC.

APPELLANT AN APPEAL FROM OUACHITA COUNTY

CIRCUIT COURT

V. NO. CIV97-34-2

HONORABLE DAVID GUTHRIE

ARKANSAS PULPWOOD COMPANY CIRCUIT JUDGE

APPELLEE

AFFIRMED

Appellant, Santifer Enterprises, Inc., appeals from a $21,807.23 judgment entered against it as a garnishee. We affirm.

On August 26, 1996, appellee, Arkansas Pulpwood Company, signed a contract to purchase timber on land owned by Mike and Terri Santifer, husband and wife. Arkansas Pulpwood subsequently sued the Santifers alleging breach of the warranty-of-title provision in the contract. A Ouachita County Circuit Court jury found in favor of Arkansas Pulpwood and awarded damages of $16,500. The judgment was affirmed on appeal as to Terri Santifer and dismissed as to Mike Santifer. See Santifer v. Arkansas Pulpwood Co., 66 Ark. App. 145, 991 S.W.2d 130 (1999). Following our decision in that case, Arkansas Pulpwood filed a writ of garnishment against Santifer Enterprises, Inc. on June 5, 1999, alleging that thecorporation was indebted to or had in its possession goods, chattels, moneys, credits, or effects belonging to Terri Santifer. Appellant answered that it was in no way indebted to Terri Santifer nor did it have in its hands or possession any goods, chattels, moneys, credits, or effects that might be used to satisfy a judgment against her.

Arkansas Pulpwood objected to the answer, and a trial was held on February 11, 2000, where its garnishment claim was based on the contention that Terri Santifer was either an employee or an owner of appellant. Appellant argued, however, that it was owned solely by Mike Santifer and that Terri Santifer was not its employee. The trial judge heard the testimony of Mike Santifer, Terri Santifer, and accountant James Semple, all of whom explained that Santifer Enterprises, Inc., was a Subchapter S corporation formed in 1994 and wholly owned by Mike Santifer. Four businesses were operated by the corporation: a car wash, an oil change facility, a rental company, and a car sales lot. Since the inception of the corporation in 1994, Terri Santifer had come into the business five days a week on a regular basis, although she had no set hours. She performed numerous duties for the business including running errands, collecting payments, and dealing with customers when Mike was busy. Further, she had the authority to write checks on the corporate checking account on her own initiative, including checks for personal expenses. In fact, the Santifers had no personal checking account and used the business account to pay their personal expenses of approximately $3,400 per month. Despite these activities, Terri Santifer did not receive a paycheck for her work, nor did the Santifers consider her an owner or employee of the business.

Accountant James Semple testified that the finances of Santifer Enterprises, Inc., were set up so that only Mike Santifer received a regular salary, which was $10,400 per year. Any checks written for personal expenses were shown as draws. On Mike Santifer's 1998 personal federal income tax return, $29,007 was reflected as his draw income, in addition to his salary. However, on the Santifers' 1998 state income tax return, this amount was split, with $14,503 being shown as Mike's income and $14,503 being shown as Terri's income. Semple testified that this split was done on his recommendation as a tax-saving device allowed by Arkansas law.

On cross-examination of the witnesses, appellee pointed out that, in 1999, Terri and Mike Santifer purchased the building where Santifer Enterprises operates. Part of the purchase price was financed and, on the mortgage securing the promissory note, Mike and Terri Santifer were listed as owners of the corporation. Both signed the mortgage, and the $3,500 monthly mortgage check was paid from the business account.

Based upon the above-recited facts, the trial judge found that Terri Santifer was an owner, though not an employee, of the corporation. The judge calculated that the $14,503 amount assigned to Terri on the 1998 state tax return represented her share of ownership in the business, and there was no testimony that the corporation's 1999 or 2000 income would be substantially different. He reduced that amount to the sum of $1,208 per month and gave Arkansas Pulpwood judgment for that amount for the post-garnishment period of June 7, 1999, to March 31, 2000, the date of the order, for a total of $11,807.23. Appellant's first argument on appeal is that the trial judge erred in so ruling.

In reviewing a bench trial in circuit court, we do not reverse a judgment unless we conclude that the trial judge erred as a matter of law or that his findings are clearly against the preponderance of the evidence. Truckers Exchange, Inc. v. Border City Foods, Inc., 67 Ark. App. 231, 998 S.W.2d 434 (1999). Disputed facts and the determination of the credibility of witnesses are within the province of the judge sitting as trier of fact. Id. In order to be liable as a garnishee, appellant must have either owed a debt to Terri Santifer or had in its possession goods or chattels, moneys, credits, or effects belonging to her. See Ark. Code Ann. § 16-110-401(a)(1) (Supp. 1999); L & S Concrete Co. v. Bibler Bros., Inc., 34 Ark. App. 181, 807 S.W.2d 50 (1991).

Appellant argues that, by finding it liable as a garnishee via Terri Santifer's alleged ownership, the trial judge, in effect, disregarded its corporate form and pierced the corporate veil without justification. However, the trial judge expressly found that:

The Court does not deem it necessary in light of its findings and conclusions to determine the validity of the corporate existence of Santifer Enterprises, Inc. or to pierce the corporate veil or to redefine that organization. The organizational paperwork notwithstanding, the evidence more than adequately supports the finding that Terri Santifer has a de facto or equity ownership in Santifer Enterprises, Inc.

The trial judge did not determine that Santifer Enterprises, Inc., was a corporate facade. Instead, he found that Terri Santifer, like Mike Santifer, was an owner of the corporation and, consequently, had income from the corporation in the amount of $14,503. This finding was based on Terri's unlimited access to the corporate checking account for personal expenses and the fact that one-half of the corporate income was attributed to her on the 1998 state income tax return. These factors, along with other factors such as her designation onthe mortgage as an owner of the business, are sufficient indicia of ownership such that appellant is subject to garnishment for a judgment owed by Terri Santifer. We therefore find no error on this point.

The remaining issue on appeal concerns $10,000 that Terri Santifer received as a result of the 1996 timber sale. Terri gave the money to Mike Santifer and, according to him, he used it to purchase merchandise for the corporation. The trial judge found that, because of Terri's status as an owner, the $10,000 should either be considered a capital contribution by her or a debt owed to her by the corporation, and thus subject to garnishment. Appellant argues that the $10,000 was given by Terri Santifer as a gift.

One seeking to show that a gift was made must prove that: 1) the donor was of sound mind; 2) an actual delivery of the property took place; 3) the donor clearly intended to make an immediate, present, and final gift; 4) the donor unconditionally released all future dominion and control over the property; and 5) the donee accepted the gift. Jamison v. Estate of Goodlett, 56 Ark. App. 71, 938 S.W.2d 865 (1997). Such proof must be made by clear and convincing evidence. Id.

We cannot say that the trial judge's finding that the $10,000 was a capital contribution rather than a gift was clearly against the preponderance of the evidence. A capital contribution is a means by which a shareholder makes additional funds available to a corporation without the receipt of additional stock. See Black's Law Dictionary 189 (5th ed. 1979). Given the trial judge's finding that Terri Santifer was a part owner of the corporation, it was logical for him to conclude that the $10,000 was a capital contribution. Further, appellant faced a difficult burden of proof to show that a gift was made. In any case,whether the money was a gift or a capital contribution was, in effect, a credibility question based upon whether the trial judge believed the Santifers' testimony that the money was intended as a gift. As we stated earlier, such questions are the province of the trial judge sitting as trier of fact. Truckers Exchange, Inc. v. Border City Foods, Inc., supra.

Appellants also argue that the circuit judge improperly exercised powers of equity when he ruled that Terri Santifer had a "de facto or equity ownership" in the corporation. There is no merit to this argument. The trial judge was not applying an equitable principle or fashioning an equitable remedy. He merely used the term "equity" to describe the fact that Terri Santifer's ownership was not evidenced by any legal documentation.

Affirmed.

Griffen and Roaf, JJ., agree.