Forbess v. Forbess

• Decision Date: 10 January 2012
• Docket Number: No. W2011–01105–COA–R3–CV.,W2011–01105–COA–R3–CV.
• Citation: 370 S.W.3d 347
• Parties: Charlotte Scott FORBESS v. Michael E. FORBESS.
• Court: Tennessee Court of Appeals

370 S.W.3d 347

Charlotte Scott FORBESS

v.Michael E. FORBESS.

No. W2011–01105–COA–R3–CV.

Court of Appeals of Tennessee,

Western Section, at Jackson.

Nov. 15, 2011 Session.

Dec. 9, 2011.

Order Denying Petition to Rehear Jan. 10, 2012.

Application for Permission to Appeal

Denied by Supreme Court

April 12, 2012.

J. Thomas Caldwell, Ripley, Tennessee, for the appellant, Charlotte Scott Forbess.

Thomas D. Forrester, Covington, Tennessee, for the appellee, Michael E. Forbess.

OPINION

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J., W.S., and DAVID R. FARMER, J., joined.

J. STEVEN STAFFORD, J.

This case involves the valuation of assets for division of marital property and alimony. Wife filed for divorce, seeking an equitable division of the marital assets, including Husband's one-half interest in a real estate partnership. At trial, each party introduced experts to testify as to the value of Husband's interest in the partnership. The trial court valued the partnership at a fair market value that was between the values testified to by the experts. The court awarded Wife one-half of the value, awarded Wife one-half of a note that was based on property Husband owned prior to the marriage, and awarded Wife alimony. After a motion to alter or amend, the trial court reduced Wife's interest in the partnership and the note to take into account Husband's tax liability. Wife appeals, arguing that the trial court erred in valuing the partnership and in its alimony award. Affirmed.

I. Background

Plaintiff/Appellant Charlotte Scott Forbess (“Wife”) and Defendant/Appellee Michael E. Forbess (“Husband”) were married in June of 1990.¹ When they married, both parties had children from previous relationships. Although the parties were married for over twenty years, they had no children together.

Prior to and during the first several years of the marriage, Husband worked installing insulation for commercial and industrial buildings. While working as an insulation installer, Husband made contributions to a retirement plan, both before and during the marriage. Prior to the parties' marriage, Husband also entered into a partnership with his brother. The partnership, which was established primarily to buy and sell real estate, is called Forbess Brothers Partnership (“the Partnership”). The only asset of the Partnership prior to the marriage was the Smithville Mobile Home Park located in Covington, Tennessee, which was purchased on April 1, 1985. Prior to the marriage, the brothers made several improvements and expansions to the property. However, on January 2, 2004, the brothers sold the Smithville Mobile Home Park for $472,712.00 in cash, along with a $275,000.00 promissory note (“the Smithville Note”) to be paid in installments of $2,320.61 per month until January 2019. The cash proceeds of the sale were divided equally between the brothers; likewise, the payments made under the Smithville Note are also divided between the brothers. Husband used the cash proceeds to buy the marital home and to make improvements to it, to give gifts to both his and Wife's children, and to set up an annuity. After the sale of the Smithville Mobile Home Park, Husband retired from his previous job and lived entirely off income generated from the Partnership.

During the parties' marriage, the Partnership acquired several other assets, including an undeveloped portion of commercial land at the Shelby–Tipton County line, called the Hunter property, another mobile home park, referred to as the Westside Mobile Home Park, and two office buildings in Covington, Tennessee. Later, the brothers entered into a lease-purchase agreement for the Westside Mobile Home Park; the agreement provided that the lessee would pay the Partnership $46,840.64 per month until 2027, again to be divided equally between the brothers. During, or at the end of the lease period (subject to a 3% prepayment penalty if exercised in the first five years of the lease), the lessee has the option to purchase the property for $5.6 million, less the amount already paid. At the time of the trial, a balance of $5,214,615.99 remained on the lease-purchase agreement.

At the time the parties married, Wife had recently quit her job as a factory worker due to surgery to correct her carpal tunnel syndrome. During the first half of the parties' marriage, Wife worked, without drawing a salary, at the Smithville Mobile Home Park, performing general maintenance and administrative tasks for the property. However, once the Smithville Mobile Home Park was sold, neither Wife nor Husband continued to work outside the Partnership. Wife suffered from various illnesses throughout the marriage, including carpal tunnel, severe back pain, tremors, and high blood pressure, which she testified kept her from working after the sale of the Smithville Mobile Home Park. At the time of trial, many of these afflictions had been remedied; however, Wife testified that she could not obtain gainful employment due to her continuing back pain and the fact that she had no marketable skills.

After an altercation at the parties' home in 2008, where Wife alleged that Husband became violent toward her, dragged her throughout the marital home, and kicked her, Wife filed for divorce on March 6, 2008, alleging inappropriate marital conduct and irreconcilable differences. On March 11, 2008, Wife was granted a temporary injunction against Husband, which restrained Husband from having any contact with Wife. Wife filed an affidavit of income and expenses on March 28, 2008. Wife listed no income on the affidavit, but included $2,588.00 per month in expenses, including a $658.00 per month note on the recreational vehicle that she lived in immediately after the separation and $720.00 per month for medical expenses not covered by her insurance and not including the estimated $75.00 per month Wife paid in co-pays.

For several months, Husband apparently remitted to Wife one-half of his income from the Partnership, though nothing in the record indicates that he was under a court order to do so; however, on October 6, 2008, Wife filed a Motion for Hearing on Temporary Support, averring that she had been receiving monthly payments from Husband, but that Husband had reduced the payments with no explanation and that it had come to her attention that Husband was dissipating marital assets. The record does not indicate that a hearing was ever set on Wife's motion.

Husband filed his answer and counter-complaint for divorce on August 6, 2008, likewise alleging inappropriate marital conduct and irreconcilable differences. Because neither party wished to retain the marital home, which Wife vacated after the March 2008 altercation, the parties filed a Motion to list that property for sale on September 10, 2009. Husband filed his own affidavit of expenses on September 20, 2010. In the affidavit, Husband listed a total income of $11,162 per month and expenses totaling $7,726.00 per month, including $500.00 for health insurance, $563.00 for medical bills, $830.00 for a car payment, and $2,100.00 for taxes.

The trial court held a hearing on the divorce on September 20–21, 2010. During the hearing, both parties introduced experts who testified as to the fair market value of Husband's interest in the Forbess Brothers Partnership (although Husband claims that the Smithville Note is his separate property, Husband did not claim that the Partnership itself, including the assets owned by the Partnership as the time of trial, was separate property).

Wife's first expert, Michael T. Orman, a certified general appraiser with Statewide Appraisal Service, testified that he valued the property owned by the Partnership using comparable sales in the area. Under this approach, Mr. Orman testified that the Hunter property had a fair market value of $630,000.00 and the Westside Mobile Home Park had a fair market value of $4,485,000.00. Wife's next expert, Joseph Babb, a certified public accountant and certified valuation analyst with Eaton Babb Smith, then used these figures and the asset approach ² to value Husband's one-half interest in the Partnership as a whole based on the fair market values of the property owned by the Partnership, including the two Covington commercial buildings, which he appraised at $338,670.00 combined. To value Husband's interest in the Partnership under the asset approach, Mr. Babb added up the fair market value of all the Partnership properties, subtracted all the Partnership's liabilities, and divided the resulting number by two to represent Husband's one-half share. Taking Husband's interest in the property, Mr. Babb then declined to apply a discount for lack of control,³ and only discounted the value by 10% based on lack of marketability.⁴ Thus, Mr. Babb concluded that the fair market value of Husband's interest in the Partnership is $1,150,000.00.

Husband employed several experts—some to appraise the property owned by the Partnership and one to value Husband's one-half interest in the Partnership as a whole. According to Van Emerson Boals, a certified general appraiser with Real Estate Appraisers and Land Surveyor, the Westside Mobile Home Park has a fair market value between $3,650,000.00 and $4,170,000. Husband's next expert, Thomas A. Ivy, a certified public accountant and accredited business valuator used the appraisals of other experts, as well as tax assessment appraisals, to determine the value of Husband's interest in the Partnership. Mr. Ivy concluded that the Westside Mobile Home Park has a fair market value of $3,985,000.00, that the Hunter property has a fair market value of $475,000.00, and that the Covington commercial properties have a total fair market value of $287,584.00. Based on these values, Mr. Ivy valued Husband's interest in the Partnership at $610,000.00 using both an income approach ⁵ and an asset approach, and discounting 35% for lack of marketability, lack of control, as...