Priebe v. Priebe

• Decision Date: 11 September 1996
• Docket Number: No. 19407,19407
• Citation: 1996 SD 136,556 N.W.2d 78
• Parties: Steven L. PRIEBE, Plaintiff and Appellee, v. Mary Gerth PRIEBE, Defendant and Appellant. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 78

556 N.W.2d 78

1996 SD 136

Steven L. PRIEBE, Plaintiff and Appellee, v. Mary Gerth PRIEBE, Defendant and Appellant.

No. 19407.

Supreme Court of South Dakota.

Considered on Briefs Sept. 11, 1996.

Decided Dec. 4, 1996.

Celia Miner and Steven M. Johnson of Johnson, Heidepriem, Miner & Marlow, Yankton, for plaintiff and appellee.

Rick Johnson and Stephanie Pochop of Johnson, Eklund, Nicholson & Dougherty, Gregory, for defendant and appellant.

AMUNDSON, Justice.

¶1 Mary Gerth Priebe (Mary) appeals the valuation of certain property as well as the calculation of the parties' contributions to the accumulation of marital property following her divorce from Steve Priebe (Steve). We affirm.

FACTS AND PROCEDURAL HISTORY

¶2 Mary and Steve were married on July 23, 1977. Before and during their marriage, they acquired a fair amount of property, including a house, land, rental properties, a clothing business, various automobiles, interests in other businesses, and life insurance. Steve's primary contribution to the accumulation of property was his industriousness and efforts concerning his family businesses. Mary contributed mainly the ownership of rental properties and the clothing business, as well as her care for their children and home. In addition, Mary had the opportunity to pursue a college degree while she was married.

¶3 After eighteen years of marriage, Mary and Steve stipulated to a divorce on the grounds of irreconcilable differences. They also stipulated to joint legal custody of the two minor children, with Mary having primary physical custody and Steve having liberal visitation rights. Mary and Steve also stipulated to the equitable division of their miscellaneous personal property. Therefore, the two issues remaining for trial were: (1) division of the remaining marital assets and (2) child support.

¶4 The trial court valued all of the marital property, including Steve's interest in four family businesses, which is the primary focus of Mary's appeal. The businesses included Lloyd Priebe & Sons Construction, Inc. (LP & S Constr., Inc.), ¹ Lloyd Priebe & Sons Farms, Inc. (LP & S Farms, Inc.), ² Lloyd Priebe & Sons (LP & S Ptshp.), ³ and West 40, Inc. ⁴ Steve has a one-quarter interest in all four of these businesses.

¶5 Mary and Steve both presented evidence regarding the value of Steve's interest in the four family businesses. Steve presented testimony from two experts, CPA Dan Loveland (Loveland) and CPA Gary Endorf (Endorf). Mary offered the testimony of expert CPA Timothy Dean (Dean). ⁵ After considering the testimony of these experts, the trial court valued the businesses as follows: LP & S Constr., Inc. at $234,318; LP & S Farms at $295,904; LP & S Ptshp. at $85,454; ⁶ and West 40, Inc. at $29,000.

¶6 Loveland further recommended a forty-percent minority discount in valuing the family businesses, while Dean maintained that such a discount is inappropriate in divorce proceedings. Using its discretion, the trial court applied a forty-percent minority discount to Steve's interest. The result was that Steve's interest in the family businesses was reduced from a total of $644,676 to $386,806.

¶7 Mary appeals the trial court's application of the forty-percent minority discount in valuing the four Priebe family businesses. Mary also claims that the trial court undervalued her contributions to the accumulation of marital property. Steve asserts the trial court's evaluations are correct based on the evidence and the trial court made a fair and equitable division of the property.

STANDARD OF REVIEW

¶8 A trial court's findings of fact are reviewed under a clearly erroneous standard. In applying this standard, the valuation of property involved in a divorce proceeding will not be overturned unless it is clearly erroneous. Grode v. Grode, 1996 SD 15, p 5, 543 N.W.2d 795, 799. "All conflicts in the evidence must be resolved in favor of the trial court's findings." Id. The trial court's conclusions of law, however, are reviewed under a de novo standard. Id.; Bess v. Bess, 534 N.W.2d 346, 347 (S.D.1995). No deference is given under this standard of review. Grode, 1996 SD 15 at p 5, 543 N.W.2d at 799.

¶9 We apply an abuse of discretion standard when the trial court's property division is reviewed. Id. at p 6, 543 N.W.2d at 799; Abrams v. Abrams, 516 N.W.2d 348, 352 (S.D.1994); Radigan v. Radigan, 465 N.W.2d 483, 487 (S.D.1991); Henrichs v. Henrichs, 426 N.W.2d 569, 572 (S.D.1988). The phrase "abuse of discretion" means " 'discretion exercised to an end or purpose not justified by, and clearly against reason and evidence.' " Paradeis v. Paradeis, 461 N.W.2d 135, 137 (S.D.1990) (quoting Bradeen v. Bradeen, 430 N.W.2d 87, 91 (S.D.1988)).

DECISION

¶10 I. Valuation of Marital Property.

¶11 Mary claims the trial court abused its discretion in making an equitable distribution of the property. In evaluating this claim, we recall that a trial court " 'is not bound by any mathematical formula but shall make such award from the material factors before [it,] having due regard for equity and the circumstances of the parties.' " Hanson v. Hanson, 252 N.W.2d 907, 908 (S.D.1977) (quoting Kressly v. Kressly, 77 S.D. 143, 150, 87 N.W.2d 601, 605 (1958)); SDCL 25-4-44.

¶12 The trial court stated that "a minority discount is appropriate because Steve does not own a controlling interest in any of these business interests and because any attempted sale of the properties would result in the value being discounted by a would-be purchaser. The court will allow a 40% discount...." The trial court reiterated this opinion in its findings of fact as follows:

[Steve] does not own a controlling interest in any of the businesses. The businesses are not readily saleable and any attempted sale would result in the value being discounted by a would-be purchaser. Expert CPAs Dan Loveland ... and Gary Endorf testified that under these circumstances a discount of 40% is appropriate. The Court finds that a discount of 40% is proper in the circumstances.

The trial court stated its decision was based on testimony from Steve's experts, Loveland and Endorf. However, the record reveals that Endorf never offered testimony regarding the application of a minority discount.

¶13 Loveland was the only expert who proposed a thirty-five to forty-percent discount in this case. He based this recommendation on experience and materials relating to valuation. At no time did Mary object to the qualifications of Loveland. Furthermore, Mary cited no authority stating that the theory represented by Loveland as to valuing a closely held business was incorrect or unsupported. The extent of Mary's objections consisted of her expert, Dean, countering Loveland's testimony by stating that minority deductions are common only in forced sale and estate planning situations, wherein a thirty-three and one-third percent deduction would be recommended.

¶14 While hearing the aforementioned testimony from three experts, the trial court assessed their credibility. See Kost v. Kost, 515 N.W.2d 209, 213 (S.D.1994). The court then used its discretion and applied the forty-percent minority discount to Steve's interest in the three corporations and one partnership. It is settled law in South Dakota that the trial court has the discretion to determine whether the total value of the asset should be included in the equitable division. See Grode, 1996 SD 15 at p 20, 543 N.W.2d at 801 (citing Cole v. Cole, 384 N.W.2d 312, 314 (S.D.1986)). In addition, Mary cited no authority stating that a trial court has no right to consider a minority discount when making an equitable division of marital assets in divorce cases. SDCL 15-26A-60(6) and the precedent of Fox v. Fox, 467 N.W.2d 762, 768 (S.D.1991); Nielsen v. McCabe, 442 N.W.2d 477, 480 (S.D.1989); Kanaly v. State ex rel. Janklow, 403 N.W.2d 33, 34 (S.D.1987); Kostel Funeral Home, Inc. v. Duke Tufty Co., 393 N.W.2d 449, 452 (S.D.1986), require a party cite authority for positions argued on appeal.

¶15 Courts in other jurisdictions have applied minority discounts when valuing closed corporations in divorce cases. For example, in Arneson v. Arneson, 120 Wis.2d 236, 355 N.W.2d 16, 22 (App.1984), the court determined that a minority discount was applicable because the party's holdings of stock in the closed corporation constituted a minority portion. The trial court's determination in this case was based on expert testimony. Similarly, in Hayes v. Hayes, 756 P.2d 298, 300 (Alaska 1988), the trial court applied a minority discount when valuing a closely held business, rejecting as a matter of law that a minority discount was inappropriate in a divorce settlement case because there is no change of ownership. See also Money v. Money, 852 P.2d 1158, 1161-62 (Alaska 1993) (noting the limited marketability of a minority share in a closely held corporation); In re Marriage of Jorgensen, 180 Mont. 294, 590 P.2d 606, 610 (1979) (mentioning circumstances in which it is proper to apply a minority discount in a closely held corporation); Bowen v. Bowen, 96 N.J. 36, 473 A.2d 73, 81-82 (N.J.1984) (emphasizing the importance of expert testimony regarding the value of closely held corporate stock); Belt v. Belt, 65 Or.App. 606, 672 P.2d 1205, 1208 (1983) (applying a minority discount when determining the value of a closed corporation); In re Marriage of Reiling, 66 Or.App. 284, 673 P.2d 1360, 1364 (1983) (holding it is appropriate to apply a discount to a closely held corporation); Cross v. Cross, 586 P.2d 547, 549 (Wyo.1978) (applying a minority discount to the valuation of a family owned corporate ranching business). ⁷

¶16 Courts in other jurisdictions have also valued partnerships in a similar fashion. The court in In re Marriage of Shockley stated: "As a general matter, it appears that the methods used for valuing closely held corporations are also employed to value partnerships and other types of interests in small businesses." 1989 WL...