Shooltz v. Shooltz
Decision Date | 28 April 1998 |
Docket Number | Record No. 2209-96-4.,Record No. 2205-96-4 |
Citation | 498 S.E.2d 437,27 Va. App. 264 |
Court | Virginia Court of Appeals |
Parties | Thomas C. SHOOLTZ v. Jane Hoffman SHOOLTZ. Jane Hoffman SHOOLTZ v. Thomas C. SHOOLTZ. |
William M. Baskin, Jr. (Southy E. Walton; Baskin, Jackson & Hansbarger, P.C., on briefs), Falls Church, for Thomas C. Shooltz.
David H. Fletcher, Lexington (Martin A. Gannon; Gannon, Cottrell & Ward, P.C., Alexandria, on briefs), for Jane Hoffman Shooltz.
Present: FITZPATRICK, C.J.,1 and BAKER and ANNUNZIATA, JJ. ANNUNZIATA, Judge.
Jane H. Shooltz (wife) and Thomas C. Shooltz (husband) both appeal the equitable distribution order of the trial court. Wife contends the trial court erroneously valued the husband's two businesses, erroneously reduced the monetary award based on tax consequences to husband, and erroneously refused to reopen the equitable distribution hearing to take further evidence on the business valuation issue. Husband contends the trial court erroneously counted a single asset twice in its equitable distribution award. For the reasons which follow, we reverse.
The parties were married in September 1976, and separated in August 1993. Husband filed for divorce in December 1993, and wife responded with a cross-bill for divorce. The trial court referred the matter to a commissioner in chancery, who recommended a divorce based on the separation of the parties for more than one year.
The circuit court held an equitable distribution hearing on September 15 and 17, 1994, during which evidence was taken on the value of the husband's two start-up businesses, Gateway II Limited Liability Corporation ("Gateway II") and Highland Limited Partnership ("Highland"). The trial court granted husband's motion to strike as speculative the valuation testimony of the wife's expert in which he determined the present value of the businesses' future earnings based largely, not on historical earnings, which did not exist, but on husband's income projections.
The parties submitted written memoranda on November 3, 1994. On January 22, 1996, sixteen months after the evidentiary hearing, the trial court rendered its decision by letter opinion. Upon husband's Motion to Reconsider, in which he asked the court to reduce the monetary award made to wife in its January 22, 1996 letter opinion, the trial court reduced the monetary award by letter opinion issued on May 20, 1996.
The matter had been held within the breast of the court for nearly twenty months, during which time husband's businesses had begun operations. The wife thereafter moved for reconsideration, asking, inter alia, that the court revalue the husband's interests in Gateway II and Highland. Wife argued that during the court's delay in reaching a decision, Gateway II had begun operations and that sufficient historical earnings were now available to warrant the application of the wife's expert's methodology for valuation. Wife's expert testified that, as of the hearing, Gateway II and Highland were earning profits, which were substantially consistent with the projections on which he had relied to project Highland's and Gateway II's future earnings.
In denying wife's motion to reopen the equitable distribution hearing to revalue the marital estate in 1996, the court concluded that it lacked the discretionary power under the provisions of Code § 20-107.3(A) to value the businesses as of a date other than that of the equitable distribution hearing. We disagree.
Motions to reopen a hearing to take further evidence are matters within the court's discretion. See Kirn v. Bembury, 163 Va. 891, 900-901, 178 S.E. 53, 56 (1935) () ; Rowe v. Rowe, 24 Va.App. 123, 144, 480 S.E.2d 760, 770 (1997) (citing Morris v. Morris, 3 Va.App. 303, 307, 349 S.E.2d 661, 663 (1986)).2
In the present case, the trial court declined to exercise its discretion to reopen the hearing on the value of the husband's businesses after a sixteen-month delay in bringing the equitable distribution issue to closure and notwithstanding the wife's proffer that the circumstances had substantially changed. In denying the motion to reopen, the court erroneously concluded that the provisions of Code § 20-107.3(A) abrogated the court's discretionary power and confined its review of the issue to the date of the initial evidentiary hearing.3
Prior to its amendment in 1988, Code § 20-107.3 did not fix a valuation date, and the trial court chose a valuation date if the parties could not agree to one. See Mitchell v. Mitchell, 4 Va.App. 113, 118, 355 S.E.2d 18, 21 (1987); see also Clements v. Clements, 10 Va.App. 580, 584 n. 4, 397 S.E.2d 257, 259 n. 4 (1990) (the 1988 amendment) . In Mitchell, 4 Va.App. at 118, 355 S.E.2d at 21, a pre-amendment case, this Court held that the trial court should generally value assets as of the date of the evidentiary hearing and not as of the date of separation, because "the date of trial will usually be the most current and accurate value available."
Following the 1988 statutory amendment, we held in Gaynor v. Hird, 11 Va.App. 588, 593 n. 1, 400 S.E.2d 788, 791 n. 1 (1991), that "the 1988 amendments to Code § 20-107.3(A) codified the rule announced in Mitchell." The adoption of the statutory rule fixing the evidentiary hearing as the presumptively proper date for valuation of property did not, however, change the fundamental policy objectives which underlie it, viz., that, in the interest of just and fair results, the trial court should use a valuation date which is most likely to provide the court with the most current and accurate information available. We do not interpret the amendment to Code § 20-107.3 to preclude this objective, and we find nothing in its provisions which supports the conclusion that the court's inherent authority to reopen a hearing to take additional evidence, including more current evidence, has been curtailed by this statutory provision.4
Accordingly, we find that the trial court erred in concluding that Code § 20-107.3(A) barred it from reopening the hearing on the valuation of assets. The trial court's error of law with respect to its discretion to reopen the hearing was itself an abuse of discretion. As the Supreme Court has recognized, a trial court "by definition abuses its discretion when it makes an error of law." Koon v. United States, 518 U.S. 81, 100, 116 S.Ct. 2035, 2047, 135 L.Ed.2d 392 (1996). Accordingly, we reverse and remand the case for the trial court to consider the issue of reopening the hearing in light of the relevant factors which govern its exercise of discretion.5
We address below the remaining claims of error regarding the valuation of husband's businesses as they may arise again in the course of the proceedings on remand.
Wife appeals the valuation of two businesses developed by husband with marital funds: Gateway II, a family amusement center, and Highland, a mini-storage facility. Both parties presented the expert testimony of accountants at the equitable distribution hearing. At the time of the hearing, Highland had applied for building permits but had not begun construction, which husband's accountant stated would take a year. Gateway II had completed most of the development process and was scheduled to open for business in approximately six weeks, on December 1, 1994.
Applying the "net assets value" method of valuation, husband's expert testified that Gateway II was largely financed by debt, except for an amount husband personally invested in the project, totalling $49,144. Applying the net assets value method, husband's expert concluded that Gateway II had no value. He acknowledged, however, that Gateway II could be considered to have a value of $49,000, the amount of husband's personal investment not financed by loans. When asked how long Gateway II would have to be in operation before he could value the business using an income-based valuation method, husband's expert responded, "I guess you could get some indications after— after a year."
Husband's expert testified that the Highland investment property was worth the same amount as its debt and, therefore, had no value. He also opined that years would pass before Highland would have a positive cash flow.
Wife's expert placed a value on Gateway II and Highland by determining the present value of the projected future earnings of the businesses. The expert arrived at the present value of the projected future earnings by evaluating payments to husband from his partners, the history of the projects, and projections of earnings developed by husband. Wife's expert calculated the present value of Gateway II's projected future earnings to be $1,381,303 and the present value of Highland's projected future earnings to be $1,982,958.
The court granted husband's motion to strike wife's evidence of the value of Gateway II and Highland. The court concluded,
On January 22, 1996, the trial court issued an opinion letter dividing the assets between the parties. The court later determined that the opinion letter contained clerical errors and issued a corrected opinion letter, also dated January 22, 1996. In the opinion letter, the court valued Gateway II at $49,144 and Highland at $0.
The trial court struck wife's expert's opinion of the value of Gateway II and Highland because the expert's projections and opinion testimony were overly speculative and, by implication, unreliable.6 Based on the evidence presented...
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