Business Valuation Expert’s Report Must Be Submitted at Trial
Tennessee business valuation law case summary – Homebuilder. Tennessee divorce and family law from the Tennessee Court of Appeals.
Bowser v. Bowser, 2003 WL 1542148 (Tenn. Ct. App., 2003).
The parties were married in Ohio in 1973 and divorced in that state in 1984. Shortly after the Ohio divorce, the parties began once again living together in the marital residence, and continued living together after moving to the Columbia,Tennessee, area in 1986. The parties decided to move to Tennessee because Mr. Bowser believed that there would be opportunities for his home-building business because of the announcement of the new Saturn plant. The parties separated in 1999 after Mrs. Bowser discovered that Mr. Bowser was having an affair. Both the trial court and the court of appeals agreed that the evidence established a common-law marriage under Ohio law. The parties had stipulated that Mr. Bowser was guilty of inappropriate marital conduct.
As part of the personal property award, the trial court awarded Mr. Bowser all of the tools, equipment, inventory, and accounts receivable of his business, “John Bowser Homebuilders.”
Tax returns for the homebuilding business showed income of $58,000 in 1999, $38,000 in 1998, and $58,000 in 1997. At the time of the divorce, the monthly net business profits were $4,293.
In preparation for trial, Mrs. Bowser had hired a certified public accountant, David Mensel, to review business records of the construction business. She described Mr. Mensel as the forensic accountant. On appeal, Mrs. Bowser argued that this evidence should have been considered at trial and was relevant on the issue of Mr. Bowser’s “real income.” However, Mr. Mensel never testified in the case, and Mrs. Bowser admitted on appeal that her trial attorney (who did not represent her on the appeal) should have offered this evidence.
Mr. Mensel’s involvement in the case first came out during the wife’s cross examination, and in her request for attorney’s fees. Her attorney’s bill included an outside fee for Mr. Mensel’s services, as well as the attorney’s time spent consulting with him. She argued that these were reasonable litigation expenses, whether or not the expert was asked to testify. The husband argued that these expenses were unreasonable, since Mr. Mensel was never called as a witness.
The trial court ordered that Mr. Mensel’s fee was the sole responsibility of the wife, because neither the court nor anyone else had “received any enlightenment” from the expert’s work on the case. Therefore, it was not proper to pay his fee from the proceeds of sale of the marital home. After this ruling, the wife’s attorney made a motion, and argued that since Mrs. Bowser had spent $5,000 in retainer and incurring another $9,700 in fees, that Mr. Mensel’s report should be considered as part of the record for purposes of the appeal.
The Court of Appeals held that the trial court had properly acted within its discretion, and affirmed. The trial court denied the motion because the report had not been considered at trial. The Court of Appeals agreed, since the report had not been part of the evidence offered at trial. The Court of Appeals also concluded that since Mr. Mensel’s report was not newly discovered evidence, the trial court did not err in failing to consider it.
Mr. Bowser, on the other hand, had presented testimony of his accountant, one Mr. Regeon. Mr. Regeon had prepared the tax returns for the business, as well as other financial filings.
One item of property related to the business was a $20,000 note representing a lien on a home built by Mr. Bowser for Mrs. Bowser’s daughter by a previous marriage. The trial court awarded this note to Mrs. Bowser, and deemed this to be a portion of her share of the marital estate. Mrs. Bowser objected, and argued that this note was not a “real asset” and had no real value, since the parties never intended to collect on it. Instead, she argued, the intention of this note was merely to place a lien against the property in case her daughter ever got a divorce. Both the trial court and the court of appeals agreed that the full face value of the note was properly included in Mrs. Bowser’s share of the estate, whether or not she intended to collect.
It should also be noted that both the trial court and Court of Appeals found it relevant that Mrs. Bowser’s had been involved in the home construction business. The trial court found that she had ample experience in the home construction business, and that this background would allow her to find employment in a business such as Home Depot or Lowes. Therefore, the court found that she was not entitled to an award of alimony in futuro.
The Court of Appeals noted that Mrs. Bowser’s work experience during the marriage was limited to working for the construction business, and that she did not receive pay. Therefore, there was little likelihood of her increasing her earning capacity through training. The appellate court agreed that Mrs. Bowser should be expected to maintain employment, but that it was unlikely that she could earn enough to be self-sufficient in the near future. Therefore, the Court of Appeals awarded alimony in the amount of $500 for five years.
See original opinion for exact language. Legal citations omitted.
To learn more about Tennessee business valuation law, see Business Valuation in Tennessee Divorce Law. To learn more about the division and valuation of professional practices in divorce, see When Professionals Divorce in Tennessee: Valuing Professional Practices.
Miles Mason, Sr. JD, CPA handles complex divorce matters including business valuations and forensic accounting issues. View his professional biography listing books and articles published on business valuation and forensic accounting and seminars presented to lawyers, judges, business valuation experts, and forensic accountants. Miles Mason, Sr. authored The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers, published by the American Bar Association. The Miles Mason Family Law Group, PLC’s offices are located in Memphis, Tennessee and serves West Tennessee and Nashville.
