Lawyer’s Premarital Accounts Receivable Too Old to Value

Tennessee business valuation law case summary – law practice. Tennessee divorce and family law from the Tennessee Court of Appeals.

Jahn v. Jahn – Tennessee lawyer divorce with law firm valuation.

In a Tennessee divorce proceeding, a Court must specifically identify the marital assets of the parties and establish the value of those assets in order to equitably divide marital property.

The Tennessee Court of Appeals in Jahn v. Jahn held that a husband’s interest in the assets of his law partnership qualified as marital assets as opposed to separate property since the assets of the firm were created or acquired after husband and wife were married.

Sheryl and Richard Jahn were married on March 29, 1985.  The couple had two children together, Madison Ann Jahn born in 1986, and Hayden Erich Jahn born in 1987.   Ms. Jahn worked as a certified registered nurse anesthetist and Mr. Jahn was lawyer and a partner at his law firm.

On December 6, 1993, Mr. Jahn filed for divorce from his wife.  The Trial Court awarded Mr. Jahn’s interest in his law firm entirely to him.  Ms. Jahn disagreed with the Trial Court’s decision and appealed alleging that the court erred in failing to treat her husband’s interest in the assets of his law partnership as a marital asset.

The Tennessee Court of Appeals heard the case, and in May of 1996 made a decision to vacate and remand on the issue of division of property based on the failure of the Trial Court to make specific findings as to the identity and value of the marital assets and obligations.  Specifically, the Trial Court did not indicate whether it found that Mr. Jahn’s interest in the law firm assets was a separate property interest or a marital asset.

As far as the Tennessee Court of Appeals was concerned, Mr. Jahn’s interest in his law practice was a marital asset. Mr. Jahn offered no evidence that the law partnership’s accounts receivable were in existence before his marriage in 1985, and if they were that old, Mr. Jahn would not have claimed that the accounts were collectible. All evidence on the record indicated that the accounts receivable, as well as other assets of Mr. Jahn’s law firm, were created or acquired after he and his wife were married.

The Court of Appeals declined to consider the value of Mr. Jahn’s interest in his law firm assets at the time of the marriage in order to allow him to offset that amount against the value at the time of his divorce, since the law firm assets that existed at the time of marriage were no longer owned by the firm at the time of the divorce.  Those accounts receivable had already been collected or were no longer collectible and the fixed assets had been discarded. Therefore, since the accounts and the other assets of the law firm were created or acquired during the marriage, they qualified as marital assets.

The Court of Appeals also noted that Ms. Jahn made substantial contributions as a wage earner, wife and mother during the course of the parties’ marriage.  To not include Mr. Jahn’s interest in the assets of his law firm in the division of marital property would be an inequitable result.

However, the Court of Appeals was not able to ascertain the true value of many of the marital assets from the trial record. Consequently, the Appellate Court found it appropriate to remand the case to the Trial Court in order to (a) identify the marital assets of the parties; (b) establish the value of those assets; and (c) equitably divide the assets between the parties, directing the Trial Court to consider the full value of the law firm interest of $180,065 as a marital asset.

932 S.W.2d 939 (Tenn. Ct. App. May 1996).

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.