Quillen v. Quillen

• Decision Date: 06 August 1996
• Docket Number: No. 29S02-9608-CV-531,29S02-9608-CV-531
• Citation: 671 N.E.2d 98
• Parties: Philip D. QUILLEN, Appellant (Respondent below), v. Linda J. QUILLEN, Appellee (Petitioner below).
• Court: Indiana Supreme Court

Page 98

671 N.E.2d 98

Philip D. QUILLEN, Appellant (Respondent below), v. Linda J. QUILLEN, Appellee (Petitioner below).

No. 29S02-9608-CV-531.

Supreme Court of Indiana.

Aug. 6, 1996.

Jon D. Krahulik, Yosha, Ladendorf, Krahulik & Weddle, Indianapolis, E. Davis Coots, James D. Crum, Coots, Henke & Wheeler, Indianapolis, for Appellee.

Maureen E. Gaddy, Gaddy & Gaddy, Indianapolis, for Appellant.

ON PETITION TO TRANSFER

SULLIVAN, Justice.

We affirm the judgment of the trial court in ordering the dissolution of the marriage of husband Philip D. Quillen and wife Linda J. Quillen to the extent set forth below.

Background

On September 21, 1992, husband was arrested and incarcerated on child molesting charges. ¹ On September 24, 1992, wife petitioned for the dissolution of the couple's nearly 20 year marriage. In ordering the dissolution of the marriage, the trial court entered extensive findings of fact and conclusions of law in dividing the marital property. Husband appealed on multiple grounds and a divided panel of the Court of Appeals affirmed in part and reversed in part. Quillen v. Quillen, 659 N.E.2d 566 (Ind.Ct.App.1995). Concurring in part and dissenting in part, Judge Hoffman argued that to the extent the Court of Appeals majority reversed the trial court, it did so by improperly reweighing the evidence. We agree with Judge Hoffman.

I

In the Court of Appeals, husband contended that the trial court abused its discretion in failing to include in the property distribution $76,000 in funds from Quillen Construction, Inc., that wife used to pay business expenses during husband's incarceration. The Court of Appeals held that these funds had been properly accounted for. Id. at 573.

Husband also argued that the trial court abused its discretion by ordering $135,000 set aside in a trust account to fund any capital gains tax that might become due as a result of the dissolution sale of the marital residence. The Court of Appeals remanded this issue to the trial court for resolution in accordance with its opinion. Id. at 574-75.

Husband asserted that it was error for the trial court to (i) order him to reimburse wife for expenses related to the children and incurred while the dissolution petition was pending and (ii) fail to find that husband's and wife's twin daughters were emancipated. The Court of Appeals affirmed the trial court's findings on both of these issues. Id. at 575-76.

And husband contended that the trial court impermissibly relied on fault when dividing the marital property and allocating expenses. The Court of Appeals rejected husband's contention. Id. at 578-79.

We expressly adopt and incorporate by reference the judgment and opinion of the Court of Appeals on the foregoing issues. Ind.Appellate Rule 11(B)(3).

II

The sole source of husband's and wife's employment income was Quillen Construction, Inc., their jointly-owned business through which they built and sold new homes. Husband was primarily responsible for the physical operation of the business and wife was primarily responsible for office operations, banking, and financial management. Husband argued to the Court of Appeals that the trial court abused its discretion when it valued Quillen Construction at $328,000 as of September 22, 1992, the date the Quillens separated.

A

Recognizing our limited role in assessing evidence on appeal, we resist the temptation to get deeply involved in analyzing the valuation evidence presented at trial. We think it is sufficient for purposes of this opinion to observe that wife's expert, a certified public accountant who specializes in tax and business valuations, capitalized the net income of the business for the preceding five years after making certain adjustments, ² made an additional adjustment for structured debt, applied a "discount for marketability," and arrived at a valuation of $328,000. The balance sheet of the business included in wife's expert's valuation report, prepared according to generally accepted accounting principles (GAAP), showed a net value of all of the business's tangible assets of $174,000. The $154,000 ³ difference between the value of the business as calculated by wife's expert and the GAAP value of the business's tangible net assets was described as the business's "going concern value" or "goodwill." Husband's expert, a university professor with a doctorate in economics, relied upon the data compiled by wife's expert and testified that in his opinion the value of Quillen Construction was $9,959, representing the depreciated value of the business's property and equipment. ⁴ It was his view that the other tangible net assets of the business had no value to a prospective purchaser, and that "goodwill" was a meaningless concept in connection with this type of business. Additional testimony related to the value of the business was taken at trial from wife, from husband, and from the bank executive who handled the business's financing needs. This testimony included discussion of husband's ceasing to operate Quillen Construction as a single-family residential construction business, husband's assisting Naples 38, Inc., a single-family residential construction business managed by the parties' son, and the likelihood that financing would have been available to Quillen Construction from the business's prior lender after husband's arrest.

The trial court made the following finding as to the valuation of Quillen Construction:

Quillen Construction, Inc. is an Indiana Corporation engaged in the business of single-family residential construction and had a net value of $328,000.00 on or about the date of separation (Exhibit 22 and testimony of Mr. Alerding [wife's expert] ). Husband has voluntarily elected to cease operating Quillen Construction. Instead, Husband has assisted the parties' son, Sean, in establishing an identical business. Husband works with or assists son in operating the business and son provides financial support to Husband as Husband requires in lieu of the payment of salary. Son's operation of the single-family residential construction business known as Naples 38, Inc. is a successor-in-interest to Quillen Construction, Inc. in that personal property owned by Quillen Construction, Inc. is used in the operation of the business of Naples 38, Inc. Husband provides assistance, guidance and physical labor to Naples 38, Inc. as well as experience in dealing with members of building trades and real estate developers.

While not disputing that this valuation of Quillen Construction was accurate as of the date of the parties' separation, the Court of Appeals found the trial court's decision to value Quillen Construction on the date of separation to be an abuse of discretion because the value changed "radically" after that date. Quillen, 659 N.E.2d at 573. First, citing cases where a valuation date later than the date of separation was used, the Court of Appeals majority reasoned that because the business was still intact on the date of valuation, with husband and wife still involved in the operations, the valuation did not account for the fact that husband's arrest and incarceration would have a negative effect on the future value of the business. Id. at 572 (citing Staller v. Staller, 570 N.E.2d 1328 (Ind.Ct.App.1991), and Showalter v. Brubaker, 650 N.E.2d 693 (Ind.Ct.App.1995)). Second, the appellate court concluded that so long as husband was either incarcerated, or under threat of incarceration, which he was during the pendency of the entire proceedings before the trial court, financing for Quillen Construction was unavailable. Without financing, the business could not operate and the expectation of continued public patronage with Quillen Construction would be eliminated. Id. Third, the Court of Appeals rejected the trial court's finding that Naples 38 was the successor-in-interest to Quillen Construction because there was "nothing in the trial court's findings to establish that Naples 38 became invested with the rights of Quillen Construction or assumed any of its burdens." Id. at 573.

Judge Hoffman dissented, arguing that the majority had improperly modified the principle that the trial court has discretion when valuing the marital assets to set any date between the date of filing the dissolution petition and the date of the hearing. Quillen, 659 N.E.2d at 579-80 (quoting Eyler v. Eyler, 492 N.E.2d 1071, 1074 (Ind.1986)). He concluded that the majority had reweighed the evidence in its analysis of the valuation of the business. Id.

B

The trial court's findings were entered pursuant to Ind. Trial Rule 52(A) which prohibits a reviewing court on appeal from setting aside the trial court's judgment "unless clearly erroneous." The court on appeal is further required to give "due regard ... to the opportunity of the trial court to judge the credibility of the witnesses." When a trial court has made special findings of fact, as it did in this case, its judgment is clearly erroneous only if (i) its findings of fact do not support its conclusions of law or (ii) its conclusions of law do not support its judgment. Estate of Reasor v. Putnam County, 635 N.E.2d 153, 158 (Ind.1994). Findings are clearly erroneous only when the record contains no facts to support them either directly or by inference. Reasor, 635 N.E.2d at 158.

When reviewing valuation decisions of trial courts in dissolution actions, a similar standard of review has been enunciated: that the trial court has broad discretion in ascertaining the value of property in a dissolution action, and its valuation will not be disturbed absent an abuse of that discretion. Cleary v. Cleary, 582 N.E.2d 851, 852 (Ind.Ct.App.1991). The trial court does not abuse its discretion if there is sufficient evidence and reasonable inferences therefrom to support the result. Id. In other words, we will not reverse the trial court unless the decision is clearly against the logic and effect of the facts and circumstances before it....