Michael v. Michael

• Decision Date: 14 March 1996
• Docket Number: No. 23048,23048
• Citation: 196 W.Va. 155,469 S.E.2d 14
• Court: West Virginia Supreme Court
• Parties: Barbara Mae MICHAEL, Plaintiff Below, Appellant v. Donald Hoover MICHAEL, Defendant Below, Appellee.

Page 14

469 S.E.2d 14

196 W.Va. 155

Barbara Mae MICHAEL, Plaintiff Below, Appellant v. Donald Hoover MICHAEL, Defendant Below, Appellee.

No. 23048.

Supreme Court of Appeals of West Virginia.

Submitted Jan. 17, 1996.

Decided March 14, 1996.

[196 W.Va. 156] Syllabus by the Court

1. " 'In reviewing challenges to findings made by a family law master that also were adopted by a circuit court, a three-pronged standard of review is applied. Under these circumstances, a final equitable distribution order is reviewed under an abuse of discretion standard; the underlying factual findings are reviewed under a clearly erroneous standard; and questions of law and statutory interpretations are subject to a de novo review.' Syllabus Point 1, Burnside v. Burnside, W.Va. , 460 S.E.2d 264 (1995)." Syllabus Point 1, Summers v. Summers, 195 W.Va. 224, 465 S.E.2d 224 (1995).

2. " ' " 'Questions relating to alimony and to the maintenance and custody of the children are within the sound discretion of the court and its action with respect to such matters will not be disturbed on appeal unless it clearly appears that such discretion has been abused.' Syllabus, Nichols v. Nichols, 160 W.Va. 514, 236 S.E.2d 36 (1977)." Syllabus Point 2, Lambert v. Miller, 178 W.Va. 224, 358 S.E.2d 785 (1987).' Syllabus Point 2, Whittaker v. Whittaker, 180 W.Va. 57, 375 S.E.2d 421 (1988)." Syllabus Point 3, Sellitti v. Sellitti, 192 W.Va. 546, 453 S.E.2d 380 (1994).

3. " ' " 'A measure of discretion is accorded to a family law master in making value determinations after hearing expert testimony. However, the family law master is not free to reject competent expert testimony which has not been rebutted.' This statement is analogous to the rule that '[w]hen the finding of a trial court in a case tried by it in lieu of a jury is against the preponderance of the evidence, is not supported by the evidence, or is plainly wrong, such finding will be reversed and set aside by this Court upon appellate review.' Syllabus Point 1, in part, George v. Godby, 174 W.Va. 313, 325 S.E.2d 102 (1984), quoting Syllabus Point 4, Smith v. Godby, 154 W.Va. 190, 174 S.E.2d 165 (1970)." Syllabus Point 1, Bettinger v. Bettinger, 183 W.Va. 528, 396 S.E.2d 709 (1990).' Syllabus Point 5, Kimble v. Kimble, 186 W.Va. 147, 411 S.E.2d 472 (1991)." Syllabus Point 4, Signorelli v. Signorelli, 189 W.Va. 710, 434 S.E.2d 382 (1993).

Appeal from the Circuit Court of Marion County; Honorable Fred Fox II, Judge, Civil Action No. 93-C-393-F.

William L. Frame, Wilson, Frame, Benninger & Metheny, Morgantown, for Appellant.

Russell M. Clawges, Jr., Furbee, Amos, Webb & Critchfield, Morgantown, for Appellee.

PER CURIAM.

In this divorce action, Barbara Mae Michael, the plaintiff below and appellant herein, appeals the December 30, 1994, equitable distribution order of the Circuit Court of Marion County. She contends the circuit court erred by discounting the market value of Michael Machine Company, Inc., a corporation owned primarily by the plaintiff and Donald Hoover Michael, the defendant below and appellee herein. She alleges the circuit court undervalued the corporation by at least $200,000. She also cites as error the distribution of other marital assets. Finally, the plaintiff argues the award of $400 per month alimony is insufficient and should be increased to $1,500 per month.

I. FACTS

The parties were married in 1956. Two children were born of the marriage, both of whom are now emancipated adults. The plaintiff was a teacher with the Marion County Board of Education for more than thirty years. At the time of the final hearing before the family law master, she was making preparations for retirement.

In 1970, the defendant quit his job as a machinist to start the Michael Machine Company, Inc. (Michael Machine). The plaintiff contributed to the business by performing mostly clerical services. Over the years Michael Machine became a very lucrative business which enabled the parties to acquire over $2,000,000 in assets during the course of the marriage. The parties agree that the value of their 92 percent interest in Michael Machine is the largest marital asset. ¹

Two hearings were conducted before the family law master. The parties put forth evidence on the value of Michael Machine, in addition to evidence on the value of their real and personal property. At the conclusion of the evidence, the family law master prepared his recommendation dated November 28, 1994. The circuit court adopted the findings and recommendations of the family law master. The plaintiff assigns as error the equitable distribution of portions of the marital estate as discussed below.

II. DISCUSSION

A. Standard of Review

In Syllabus Point 1 of Summers v. Summers, 195 W.Va. 224, 465 S.E.2d 224 (1995), we articulated this Court's standard of review of a circuit court's equitable distribution order that adopts the findings of the family law master:

" 'In reviewing challenges to findings made by a family law master that also were adopted by a circuit court, a three-pronged standard of review is applied. Under these circumstances, a final equitable distribution order is reviewed under an abuse of discretion standard; the underlying factual findings are reviewed under a clearly erroneous standard; and questions of law and statutory interpretations are subject to a de novo review.' Syllabus Point 1, Burnside v. Burnside, W.Va. , 460 S.E.2d 264 (1995)."

In this case, the circuit court relied upon the testimony of the defendant's expert in placing a fair market value on Michael Machine. For reasons discussed below, we decline to reverse that factual finding. However, we find the circuit court erred in considering the parties' Halflinger horses as the defendant's separate property when there was no evidence showing the horses were given to him as a gift. The classification of the horses as separate property is essentially a question of law which we review de novo.

In reviewing the issue of the alimony awarded to the plaintiff, this Court accords much deference to the circuit court's decision. Syllabus Point 3 of Sellitti v. Sellitti, 192 W.Va. 546, 453 S.E.2d 380 (1994), states:

" ' " 'Questions relating to alimony and to the maintenance and custody of the children are within the sound discretion of the court and its action with respect to such matters will not be disturbed on appeal unless it clearly appears that such discretion has been abused.' Syllabus, Nichols v. Nichols, 160 W.Va. 514, 236 S.E.2d 36 (1977)." Syllabus Point 2, Lambert v. Miller, 178 W.Va. 224, 358 S.E.2d 785 (1987).' Syllabus Point 2,Whittaker v. Whittaker, 180 W.Va. 57, 375 S.E.2d 421 (1988)."

For the reasons discussed herein, we decline to disturb the circuit court's decision to award the plaintiff $400 per month alimony.

B. Michael Machine Company, Inc.

The determination of the fair market value of the parties' 92 percent interest in Michael Machine was the major point of contention in the divorce proceeding. On appeal, the plaintiff asserts the interest in Michael Machine was undervalued by at least $200,000 by the circuit court. The plaintiff's expert witness, Sherry Cunningham, a certified public accountant, valued the stock of Michael Machine by using both the "Revenue Ruling 59-60" and "net book value" approaches. Using the Revenue Ruling 59-60 method, Mr. Cunningham considered the earnings of the company, the earnings retained by the defendant, and the risk factors associated with this type of business. See generally, Signorelli v. Signorelli, 189 W.Va. 710, 434 S.E.2d 382 (1993). When considering all the factors, Mr. Cunningham stated the fair market value of Michael Machine was $823,000. Accordingly, the marital interest in 92 percent of Michael Machine was valued at approximately $750,000. He stated that this finding is consistent with his calculation of the net book value of the corporation.

The defendant's expert witness was Barry Parks, a certified public accountant who had been the accountant for Michael Machine since it incorporated in 1978. Mr. Parks valued the business at $789,462 in book value. However, he testified that "it's a very unusual business to try to value" because the corporation invested in bank stock (currently Huntington Bank shares), and the "value of the bank stock has become much greater than the value of the operating business." Furthermore, he stated that "a buyer would not buy this company to get the investment assets, unless they thought they could make money in the machine shop business." In placing a value on Michael Machine, Mr. Parks testified the book value of the corporation should be reduced by 30 percent on account of unmarketability of the business. He attributed this reduction to the fact that the machine shop business is so dependent upon the coal industry that the business is volatile and the company's profitability is due in large part to the efforts of the defendant. He testified that a 25 percent discount for this type of business is standard, but should the business be sold, the defendant would no longer be working with the business and it would lose the principal man involved in its operations.

The family law master and circuit court accepted Mr. Park's valuation of Michael Machine at $789,462, and reduced this figure by 25 percent to arrive at the fair market value of $592,096. The 30 percent discount recommended by Mr. Parks was not accepted because the evidence showed the defendant had not worked closely with the business over the past few years. Accordingly, the value of the marital portion of Michael Machine was placed at $544,729 ($592,096 X 92 percent).

The plaintiff contends that the 25 percent reduction of the market value of the business was an inappropriate reduction due to anticipated tax liability, ² a practice we condemned in Bettinger v. Bettinger, 183 W.Va. 528, 396 S.E.2d 709 (1990). ³ However, the defendant asserts the reduction did not go towards...