Adametz v. Adametz

• Decision Date: 24 March 2004
• Docket Number: No. CA 03-782.,CA 03-782.
• Citation: Adametz v. Adametz, 85 Ark. App. 401, 155 S.W.3d 695 (Ark. App. 2004)
• Parties: Kimberly ADAMETZ v. James ADAMETZ.
• Court: Arkansas Court of Appeals

155 S.W.3d 695

85 Ark. App. 401

Kimberly ADAMETZ v. James ADAMETZ.

No. CA 03-782.

Court of Appeals of Arkansas, Division II.

March 24, 2004.

Skokos, Bequette & Billingsley, P.A., by: Keith I. Billingsley, Little Rock, for appellant.

Howell, Trice, Hope & Files, P.A., by: William H. Trice, Little Rock, for appellee.

SAM BIRD, Judge.

Kimberly Adametz and James Adametz were divorced by a decree entered March 31, 2003. Kimberly appeals the portion of the decree pertaining to the distribution of the parties' marital assets and the amount of child support. She contends that the court erred: (1) by failing to award her half of appellee's 8.99% interest in Arkansas Surgical Hospital (ASH); (2) by deducting overhead expenses and 43% income taxes from her share of the accounts receivable of Neurological Surgery Associates, P.A. (NSA); and (3) in finding that she and James had not reached an agreement as to the amount of child support appellee was to pay. We do not agree with her first and third arguments, and we affirm as to those points. However, because we hold that the court erred in deducting the overhead expenses in valuing Kimberly's interest in the accounts receivable of NSA, we reverse and remand on the second point.

Discussion of the Evidence

The parties, both medical doctors, married in 1990 when Kimberly was in her internship and residency, and two children were born to them. James was a practicing neurosurgeon with NSA when the parties married. The parties separated in September 2001, and Kimberly filed for divorce.

At the hearing, Kimberly testified that the parties had agreed that James would pay 21% of his "net income" as child support. Kimberly also testified that James had invested $10,000 in ASH without telling her. She stated that ASH had borrowed $2 million to finance the construction of a specialty hospital. She stated that James's interest in the ASH venture was marital property, and she requested that it be divided equally between them.

James testified that, at a conference in December 2002, the parties and their attorneys had discussed settlement of the child-support issue by agreeing that he pay 21% of his net income but that they had not agreed on sums to be deducted from James's gross income in order to determine the amount of his "net income." He recalled that both attorneys told him that he should pay 21% of his net income as child support and that his attorney had indicated at the conference that James agreed. James also said that, because the parties had agreed to joint custody of the children, and because the children would spend equal time with each parent, he should not have to pay the full amount called for by the child-support chart. James's testimony was that the parties never agreed on the amount of his net income or a dollar amount that he was to pay in child support. He stated that his gross pay in 2002 was $379,191 and that he had deductions for federal, state, social security, and Medicare taxes of $161,776. He stated that his monthly take-home income was $18,117.

James also testified concerning his interest in ASH. He stated that he and several other doctors invested in a limited-liability company in order to purchase land to build a hospital in North Little Rock. He testified that he discussed his investment of $10,000 with his wife prior to making it. He said that ASH borrowed $2 million to purchase the land for between $1.2 million and $1.5 million and to pay for architects' fees and feasibility studies. He also said that he had made no payments on the loan, principal, or interest. James valued his interest in ASH as one-seventh of the value of the land, less the debt owed against it, which he said resulted in a net value of negative $50,000. He also stated that there had been an enormous amount of pressure from other hospitals "in town" to prevent the project from going forward and that several of the original investors and other potential investors had been "scared off" of the project for fear it would lose money and because of the pressure from other hospitals.

Mike Schaufele, a certified public accountant, testified that at the end of 2002 NSA had accounts receivable of $205,709.50 that resulted from James's efforts. He testified that, historically, the percentage of the practice's revenue that goes to pay overhead for NSA averaged 42.15% and that NSA had a historical collection rate of 44.46%. Schaufele said that after, deducting those percentages, the remainder would be paid to James as a bonus upon which he would have to pay income taxes.

Tracy Fox, a certified public accountant and Kimberly's expert, testified that he valued James's interest in NSA at $101,000. He valued James's interest in the "hard assets," such as plant and equipment, at $8,000. Fox testified that James had accounts receivable of $208,067 as of January 15, 2003, and that NSA had a historic collection percentage of 44.46%. Fox testified that overhead was not a component of accounts receivable because no further expenditures would be necessary and that the receivables had already been discounted by the 44.46 collection percentage. Fox testified that James would have to pay taxes on the receivables when they were collected. Fox also stated that, although James had taxes withheld at the rate of 43%, he actually paid taxes in 2001 at the effective rate of 28%.

Rufus Wolff, an attorney for ASH, testified that James was one of seven original investors in ASH and that each original investor had contributed $13,000. Wolff said that James owned eight "units" in ASH, that each unit costs $5,000, and that he and the other original investors would have to contribute an additional $27,000 so that their investment would equal the amount contributed by investors who had come in since the original investors created ASH. Wolff testified that ASH had paid $1.5 million to purchase twenty-eight acres of land on which it intended to build a speciality hospital, that ASH had borrowed $2 million to finance the land purchase and have plans developed, and that James and the other six original investors had each signed a personal guaranty for 125% of their pro rata share of ASH. Wolff testified that James owned an 8.99% in ASH, that James would have to obtain the permission of the company before he could transfer any of his units, and that James's interest has no marketable value at the present time. Wolff said that Kimberly Adametz had not signed the ASH operating agreement and had not agreed to abide by the terms and conditions of the operating agreement.

Wolff said that construction of the hospital would not commence unless and until financing was obtained in the amount of approximately $18 million, and that each investor would have to be approved by the bank as a personal guarantor for their pro rata part of the loan. He stated that plans and copies of the pro forma statements submitted to the bank, which he admitted may not be accurate, included projected net annual income of $1.2 or $1.3 million and that any distributions would be made according to the percentage of ownership. Wolff stated that the bank was interested in making the $18 million loan for permanent financing for the project, the biggest hurdle facing the project. He also stated that ASH was worth what the land would sell for after repayment of the debt.

The Trial Court's Decision

The trial court issued a letter opinion that awarded Kimberly $6,500, representing one-half of the $13,000 invested by James in ASH, but refused to assign any value to ASH itself, referring to the value of such a venture as "speculative."

The trial court found that James's share of NSA's accounts receivable was $205,000, which, by applying the 44.6% historical rate of collection, it reduced to $113,570. The court then further reduced the accounts by 42.15%, representing the historical rate of NSA's overhead expenses, arriving at $65,700 as the pre-tax value of the accounts. The court then reduced the $65,700 by 43%, which it found to be James's income tax bracket, arriving at an after-tax value for the accounts of $37,449, one-half of which ($18,724) it awarded to Kimberly for her share of James's accounts receivable at NSA.

The court found that the parties had not reached an agreement that James would pay 21% of his net income as child support, but had agreed only that the provisions of the child support chart in Administrative Order No. 10 should apply. The trial court based James's child-support obligation on a monthly net income of $19,615, which was computed by deducting taxes and insurance premiums from his 2002 gross income of $451,390 and dividing by twelve. The trial court then deviated from the child-support chart amount, finding that the parties would have equal time with the children, and set James's monthly support obligation at $3,400.

Points on Appeal

For Kimberly's first point on appeal, she contends that the trial court erred with respect to its valuation of James's interest in ASH. On appeal, equity cases, such as divorces, are reviewed de novo. Skokos v. Skokos, 344 Ark. 420, 40 S.W.3d 768 (2001). With respect to the property issues in a divorce case, we review the trial judge's findings of fact and affirm them unless they are clearly erroneous. Id. A finding is clearly erroneous when the reviewing court, on the entire evidence, is left with the definite and firm conviction that a mistake has been committed. Huffman v. Fisher, 343 Ark. 737, 38 S.W.3d 327 (2001). In order to demonstrate that the trial court's ruling was erroneous, an appellant must show that the trial court abused its discretion by making a decision that was arbitrary or groundless. Skokos v. Skokos, supra.

The trial court awarded Kimberly $6,500 for her interest in the funds James invested in ASH, but the court did not award her any interest in the ASH venture. The trial court ruled that assigning any value to ASH would be speculative due to the fact...