Morgan v. Morgan

• Decision Date: 18 August 1983
• Docket Number: No. 01-82-0596-CV,01-82-0596-CV
• Citation: 657 S.W.2d 484
• Parties: James Albert MORGAN, Appellant, v. Sharon Kay MORGAN, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 484

657 S.W.2d 484

James Albert MORGAN, Appellant, v. Sharon Kay MORGAN, Appellee.

No. 01-82-0596-CV.

Court of Appeals of Texas Houston (1st Dist.).

Aug. 18, 1983.

Rehearing Denied Sept. 15, 1983.

George Karam, Houston, for appellant.

Lewis Dickson, Tom Coleman, Houston, for appellee.

Before JACK SMITH, LEVY and DUGGAN, JJ.

OPINION

DUGGAN, Justice.

Appellant, the husband/respondent in this suit, appeals from that portion of the divorce decree dividing the community property, awarding attorney's fees, and issuing a permanent injunction. He challenges the trial court's findings of fact and conclusions of law relating to these items. The divorce, conservatorship, and child support issues were settled between the parties and approved by the court. Appellant asserts four points of error.

Appellant's first point of error attacks the legal and factual sufficiency of the evidence to support the trial court's Conclusion of Law No. 1 that the division of community property was just, fair and equitable.

The court found, in its Conclusion of Law No. 1, as follows:

At the time of the dissolution of the marriage, neither party was possessed of any separate property, and all property of which the parties were possessed or which they owned or otherwise had an interest was community property. The evidence is sufficient as a matter of law to justify and sustain the division of the parties' community estate and the respective awards in and to the same, as is reflected by the "Final Decree of Divorce" signed by the Court on July 2, 1982, and further that the said respective awards constitute a just, fair and equitable division of the parties' community estate in light of the approximate 18 years of marriage, the joint efforts of the parties in bringing about the growth of the community business, Morgan Machine Shop, Inc., the respective responsibilities of conservatorship, and the disparity between the earning capabilities of the parties, now and in the future.

Appellant's no evidence (legal insufficiency) contention was not properly preserved for review since he made no prejudgment objections or motions on this claim. Commercial Insurance Company of Newark, New Jersey v. Puente, 535 S.W.2d 948, 950 (Tex.Civ.App.--Corpus Christi 1976, writ ref'd n.r.e.). See Cornelius, Appellate Review of Sufficiency of the Evidence Challenges in Civil and Criminal Cases, 46 Tex.B.J. 439 (1983). The issue on appeal is therefore whether the trial court's conclusion that the division was just and fair is against the great weight and preponderance of the evidence. To prevail on this point, appellant must overcome both the presumption in favor of the trial court's judgment, Southwestern Bell Telephone Co. v. Griffith, 575 S.W.2d 92, 96 (Tex.Civ.App.--Corpus Christi 1978, writ ref'd n.r.e.), and the presumption that the trial court properly exercised its broad discretion in dividing the marital property. Murff v. Murff, 615 S.W.2d 696, 699 (Tex.1981); Price v. Price, 591 S.W.2d 601, 605 (Tex.Civ.App.--Texarkana 1979, no writ).

Appellant argues that the trial court erred by placing an excessive valuation on the couple's business, Morgan Machine Shop, Inc. The court's determination of the values and liabilities as to the remainder of the marital estate, all of which was community property, was primarily based upon stipulations of the parties and is not contested. The fairness of the property division turns upon the soundness of the court's Finding of Fact No. 19, which reads:

With regard to the value, and more particularly, the "operating" value of the community business known as Morgan Machine Shop, Inc., having considered the equipment, the various exhibits offered by Petitioner and admitted into evidence, and particularly Petitioner's exhibits 2 through 10 and 24, the testimony of the certified public accountant, Greg Frazier, admitted into evidence without objection, the Court finds that Morgan Machine Shop Inc., has an overall value of at least $450,000.00.

The appellant's complaints regarding this finding center around the competency of the testimony of the appellee's expert witness, a certified public accountant who stated that, in his opinion, the fair market value of the business was $567,000.00.

Appellant's allegation that the expert's testimony should have been excluded because the witness lacked the necessary qualifications to testify to the value of the machine shop is without merit. The qualification of a witness to testify is a matter to be determined by the court, subject to review only upon a showing of abuse of discretion. Hodges v. State, 403 S.W.2d 207, 212 (Tex.Civ.App.--Texarkana 1966, writ ref'd n.r.e.). Appellant asserts no such abuse of discretion by the court here on appeal, and he made no objection to the admission of the witness' testimony at trial. The record indicates that the witness graduated with a bachelor of science degree in accounting and finance from Virginia Polytech Institute and completed graduate courses at Georgia State University; that he was employed by a firm of certified public accountants, working primarily with closely held real estate and manufacturing businesses and individuals; and that he had extensive experience as a certified public account and auditor with Touche Ross & Company, the Zapata Corporation, and an accounting firm in Atlanta, Georgia.

Appellant particularly asserts that the expert lacked the ability to properly determine the value of a machine shop, the bulk of whose business is derived from the oil and gas industry. The witness's testimony showed, to the contrary, his previous evaluation of two businesses similar to a machine shop in operation and his familiarity with the current status of the oil and gas industry. The witness' qualifications are quite adequate. Moreover, the strength or weakness of a witness' qualifications is merely a factor to be considered in weighing his testimony. Dillon v. Troublefield, 601 S.W.2d 141, 143 (Tex.Civ.App.--Austin 1980, no writ).

Appellant also claims the expert's testimony was not "factually sufficient" to support his conclusion that the fair market value of Morgan Machine Shop, Inc., was $567,000. More specifically, he objects that the accountant determined the fair market value by the use of speculative, conjectural, and unorthodox procedures and did not try to establish a market value for the business as of the date of trial, but rather sought to use an income capitalization test based on nine-month-old data. Appellant further complains that certain "adjustments" and "further cash flow" predictions were not justified or explained as procedures customarily and usually relied on by experts in the field.

The machine shop valued by the expert is housed in two buildings, owned by the parties' holding company, at 14434 and 14450 Chrisman in Houston, Texas. The business entity, known as Morgan Machine Shop, Inc., was incorporated in 1976 and is wholly owned by the husband and wife. The accountant's testimony concerned only the fair market value of this operation. He testified that he based his valuation upon the company's income tax returns for fiscal years ending September 30, 1977 through 1981, and upon unaudited financial statements prepared by Starr Thrower & Company, Certified Public Accountants, for the 1978 through 1982 fiscal years. He was informed by a representative of Starr Thrower & Company that those were the most recent statements available. On redirect examination the expert witness reaffirmed that the figures used in his analysis were derived from these records provided by the appellant and his accountants.

This court takes judicial notice that income tax returns and financial statements are the kind of records generally relied upon by accountants in analyzing the worth of a business. Also, appellant's claim that the expert's opinion was premised on hearsay is without merit since all the information was furnished to the C.P.A. by the appellant.

With regard to the age of the documents used, the expert based his calculations upon the latest figures available; the trial was in June of 1982, before the end of the company's 1982 fiscal year. The accountant conceded that he had no idea of the financial status of the company on the day of trial. The currency or lack thereof of the data upon which his opinion was based is a factor bearing upon the weight to be given to his testimony. Further, the record shows a finding by the court that appellant not only resisted motions for production and for the appointment of an appraiser but also refused to permit appellee's attorney to photograph the land, buildings, and equipment of Morgan Machine Shop, Inc. This refusal necessitated a motion for contempt and a court order before such discovery was permitted by appellant. Appellant cannot now prevail by a claim of prejudice from the use of old data when he obstructed appellee's attempts to obtain any data at all.

As to the method by which he obtained an operating value for the shop, the accountant testified that the income tax returns, which were prepared on a cash basis, were inadequate to give him a "picture of the company's performance" since not all the essential information was contained therein. For this reason, he also examined the accrual basis financial reports. The figures from these tax returns and statements were listed by him on a chart and referred to throughout the expert's testimony.

The accountant then evaluated the earnings history and historical growth rate and explained the steps by which he capitalized the annual earnings on an after-tax basis. Concluding that the shop generated a pretax cash flow of $119,961 for 1981, he determined the after-tax cash flow by assuming an amount of $36,550 as compensation appellant would pay himself and factoring in a 30% tax rate, a rate he termed conservative. The after-tax cash flow for 1981 was, for example, $85,000. Finally, the expert chose a capitalization...