Divorcing Wife Entitled to Extra Time To Complete Business Valuation

Tennessee case summary on business valuation in divorce and gifting a painting.

Jennifer Kate Watts v. Scottie Lee Watts

The husband and wife in this Shelby County, Tennessee,  case had been married for twenty years and had two minor children at the time of their 2014 divorce.  The wife was a certified public accountant, and the husband managed the operations of the couple’s three small businesses.

Prior to trial, the parties agreed that they would obtain an independent valuation of two of the businesses and accept that value.

Prior to trial, the court ordered the wife to sign a revised engagement letter for the valuation expert.  At trial, the wife’s attorney requested a continuance to allow the expert to make a complete valuation.  The court denied the continuance on the grounds that the delay had been the result of the wife’s delay in signing the engagement letter.  Various other issues were heard during the trial, including the disposition of a Ferjo painting.

Both parties appealed to the Tennessee Court of Appeals, raising various issues.

After addressing parenting issues, the appeals court turned to the question of valuation of the business.  The appeals court first noted that the stipulation by the parties to have an outside expert value the businesses was valid and enforceable.  But it also noted that the trial court was not required to delay the trial indefinitely while the valuation was done.  Both parties were required to act diligently in carrying out the agreement.  Therefore, the appeals court looked at the wife’s conduct to see whether she had met this standard.

After reviewing the evidence, the Court of Appeals held that the trial court should have granted a continuance.  There had not been any previous delays, and the continuance was not burdensome to either the court or the parties.

It also found that the delay was not the result of lack of diligence on the wife’s part.  The revision to the engagement letter was necessary due to the need for additional forensic accounting, and the appeals court noted that both parties had contributed to the delay.

Given these circumstances, the appeals court held that the failure to grant the continuance was prejudicial to the wife, and reversed the judgment for that reason.

The property included a collection of artwork, three reproductions and one original painting.  The wife testified that the reproductions were purchased with marital funds, but an accompanying original painting was given to her by the husband as a Christmas gift.  She argued that the original, valued at $6,000, was her separate property.  The husband took the position that all of the artwork was marital property.

The Court of Appeals, however, carefully read the lower court’s order and concluded that all of the artwork had been properly classified.  In particular, it noted that the reproductions were marital property, but the original painting had been properly identified as the wife’s separate property.  For these reasons, the Court of Appeals affirmed this portion of the lower court’s order.

After concluding the other issues in the case, the Court of Appeals affirmed in part, reversed in part, and remanded the case.

No. W2016-01189-COA-R3-CV (Tenn. Ct. App. Jul. 11, 2017).

See original opinion for exact language.  Legal citations omitted.

To learn more, see Business Valuation in Tennessee Divorce.