Wife Denied Share of Appreciation of Construction Co & Beer Store

Tennessee business valuation law case summary – Construction Company & Beer Store. Tennessee divorce and family law from the Tennessee Court of Appeals.

Hunter v. Hunter – Tennessee Divorce Business Valuation Case

When calculating an individual’s interest in the appreciation value of a spouse’s separate property upon divorce, a court may take into consideration other factors which may offset the final dollar amount awarded. There was an appeal in Hunter v. Hunter. Although the trial court awarded the wife, Shirley Hunter, an interest in the appreciation in value of her husband’s separate property, she still appealed the decision anyway because she did not agree with the court’s methods and calculations of the amount.

James and Shirley Hunter were married for a little over seven years when Mr. Hunter filed a complaint for divorce on September 8, 1998.  The parties had no minor children at that time.  While married, the couple lived in a house that Mr. Hunter owned prior to the marriage.  Mr. Hunter worked as a general contractor and maintained his office on the property.  Mr. Hunter also owned several income-producing properties, which included two rental houses and two commercial properties. Mr. Hunter operated a beer store on one of these commercial properties and leased the other commercial property to various businesses.

Addressing Mrs. Hunter’s claim to an interest in the appreciation in value of her husband’s separate property, the court noted that all of these properties were unencumbered with the exception of an outstanding mortgage of $39,500 on the beer store property, which was the result of refinancing to which both parties to the marriage were obligated. The court decided that the parties should be jointly responsible for the debt even though the property remained as Mr. Hunter’s separate property. The court saddled Mr. Hunter with the entire balance of the mortgage debt, holding that Mrs. Hunter’s $19,750 share of this joint debt would be considered in calculating her share of the appreciation in value of her husband’s separate property.

The trial court found that Mr. Hunter’s construction business and all related tools, equipment, and supplies, were his separate property. The court found that the assets of the business which Mrs. Hunter claimed to be marital property, including several tools, a word processor, a camera and video equipment, office furniture and equipment, and building materials, were in fact Mr. Hunter’s separate property. The court also decided that the Merrill Lynch account, claimed by Mrs. Hunter to be marital property, was Mr. Hunter’s separate property as well. The court also noted that while the parties were separated, Mrs. Hunter removed $6,000 from the Merrill Lynch account. The court decided that Mrs. Hunter’s withdrawal would be considered in calculating her interest in the appreciation in value of her husband’s separate property.

Addressing the issue of the appreciation in value of Mr. Hunter’s construction business during the marriage, the court noted that the financial statements in the record from the years 1989 and 1998 reflected an increase in value of $30,000 over nine years. Nonetheless, because there was no evidence of the business’ financial status at the time the parties were married in 1991, the evidence failed to confirm the amount the business had appreciated during the marriage. The trial court also found that several items that Mrs. Hunter claimed to be marital property, were, in fact, the separate property of her husband, such as an account at Citizens Bank, containing $4,000, which was the business account of Mr. Hunter’s beer store.  After accounting for Mrs. Hunters’ account withdrawals in addition to her share of the obligation represented by the beer store mortgage, the trial court finally awarded Mrs. Hunter $5,000 for her interest in the appreciation in value of Mr. Hunter’s separate property.

Mrs. Hunter filed an appeal and challenged the the trial court’s award to her representing her interest in the appreciation in value of her husband’s separate property. She complained that she was not awarded any portion of the increase in value of Mr. Hunter’s construction business or the beer store. She also contended that the trial court erred in counting her $6,000 withdrawal from Mr. Hunter’s business account as a part of her interest in the increase in value of her husband’s separate property because she believed the account was marital property.

The Appeals Court upheld the trial court’s decision regarding Mrs. Hunter’s interest in the appreciation in value of her husband’s separate property on the basis that the evidence on the record did not seem to contradict that ruling. The evidence presented showed that the increase in value of Mr. Hunter’s beer store was included in the trial court’s calculation of Mrs. Hunter’s award. As for the increase in value of Mr. Hunter’s construction business, the court could not find sufficient evidence to establish an increase in value during the marriage. The evidence on the record also reflected that the trial court relieved Mrs. Hunter from her share of the obligation on the beer store mortgage and did not require her to repay the money that she removed from her husband’s bank accounts. Taking all those factors into consideration, the Appellate Court believed that Mrs. Hunter’s $5,000 award for her interest in the appreciation in value of Mr. Hunter’s business was reasonable.

Hunter v. Hunter, E2000-00662-COA-R3-CV (Tenn. Ct. App Oct. 4, 2000).

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. Contact us today at (901) 683-1850.