Sparks v. Sparks

• Decision Date: 26 November 2013
• Docket Number: No. WD 76014.,WD 76014.
• Citation: 417 S.W.3d 269
• Parties: James Taylor SPARKS, Respondent, v. Elizabeth Anne SPARKS, Appellant.
• Court: Missouri Court of Appeals

417 S.W.3d 269

James Taylor SPARKS, Respondent,
v.
Elizabeth Anne SPARKS, Appellant.

No. WD 76014.

Missouri Court of Appeals,
Western District.

Nov. 26, 2013.

[417 S.W.3d 275]

Sarah E. Recker, Parkville, MO, for Respondent.

William Hudnall, Kansas City, MO, for Appellant.

Before Division Three: KAREN KING MITCHELL, Presiding Judge, and LISA WHITE HARDWICK and GARY D. WITT, Judges.

[417 S.W.3d 276]

KAREN KING MITCHELL, Presiding Judge.

Elizabeth Anne Sparks (Wife) appeals the trial court's judgment dissolving her marriage to James T. Sparks (Husband). Wife raises nine points of error on appeal related to the distribution of marital assets and the award of maintenance. Finding no error, we affirm the judgment of the trial court, as amended by this opinion.

Factual and Procedural Background ¹

Husband and Wife married in November 1991 and separated in April 2010. Three children were born of the marriage, and they were ages fourteen, twelve, and nine at the time of the divorce.² Husband is a doctor of veterinary medicine (DVM) who owns and operates his practice, Eagle Animal Hospital (EAH), in Riverside, Missouri. Wife was not employed during the marriage until after the separation, when she began working part time as an office manager.

Husband filed a petition for dissolution of marriage in March 2011, Wife filed a counter-petition in April 2011, and a trial was held on October 3 and 10, 2012. The trial court issued its dissolution decree on November 26, 2012.

Expert Testimony Regarding the Value of EAH and Husband's Income

The parties owned the following marital assets that are central to this appeal: EAH; Sparks, LLC, a company that owns the commercial building in which EAH is located; the marital home; and retirement accounts. The parties stipulated to the value of both the marital home ($204,000) and the commercial property owned by Sparks, LLC ($950,000).³ The retirement accounts had a balance of approximately $204,000. The parties did not agree on the value of EAH, nor did they agree on the amount of Husband's projected income.

Dr. Kenneth Ehlen, DVM, owns a brokerage firm specializing in the sale and appraisal of veterinary practices. Dr. Ehlen practiced as a veterinarian for thirty years and began working in sales and appraisals after retiring from practice. At the time of trial, Dr. Ehlen had been in the business of veterinary sales and appraisals for thirteen years. Husband hired Dr. Ehlen in 2010 to appraise EAH because Husband planned to sell 49% of his practice to his associate, Dr. Matt Silvius. To determine the fair market value (FMV) of EAH, Dr. Ehlen spoke with Husband, reviewed three years of EAH's tax returns (as well as all other relevant financial statements), and visited the practice in August 2010.

In his report, dated August 31, 2010, Dr. Ehlen concluded that the gross earning value of EAH was $1,300,000. After subtracting long-term liabilities, he determined that the FMV of EAH was $1,068,000. This value did not factor in the accounts receivable or accounts payable, as those are considered only at the time of a sale. Dr. Ehlen acknowledged that the accounts payable could lower the value of a business asset. At trial, Dr. Ehlen noted that his valuation was “somewhat

[417 S.W.3d 277]

dated” and that it should be updated in order to effectuate an actual sale. However, Dr. Ehlen also indicated that EAH was a “very good business,” and he did not anticipate a dramatic upward or downward change to the valuation.

There was a proposed stock-purchase agreement between Husband and Dr. Silvius, dated March 2011—the date by which they hoped to complete the sale. The agreed-upon value of EAH for the purposes of the sale was $1,068,000. The sale was not finalized, however, because Wife obtained a court order staying the sale during the divorce litigation. Despite the delay, Husband testified that Dr. Silvius was ready and willing to purchase 49% of the practice and noted specifically that Dr. Silvius was “chomping at the bit.” Husband's desire to sell 49% of his practice to Dr. Silvius centered on two main objectives: (1) Husband believed Dr. Silvius was a “stellar veterinarian” whose skills Husband did not want to compete against in the market; and (2) Husband needed to liquidate the business in order to pay Wife her share of its value (Husband assumed that Wife would be awarded one-half the value of EAH in the pending divorce).

Dr. David Davenport, DVM, who was retained as an expert witness by Wife, practiced as a veterinarian for over forty years and became involved in the business of veterinary practice brokerage and valuation in 2007. Dr. Davenport was retained on September 27 or 28, 2012, to review various financial documents, including Dr. Ehlen's report. Dr. Davenport agreed with Dr. Ehlen's projected gross earning value of $1,300,000. However, he testified that, after factoring in a decrease in existing long-term liabilities and new (unidentified) long-term liabilities, the current FMV was $1,212,000.

John Corbin, a certified public accountant (CPA), testified as Husband's rebuttal witness. Corbin was initially retained by Wife's attorney to review Dr. Ehlen's appraisal report.⁴ Corbin did not interview Husband or prepare his own appraisal of EAH. Corbin analyzed Dr. Ehlen's work and testified that he was not providing his opinion regarding FMV at the trial; rather, he offered his opinion that Dr. Ehlen's 2010 valuation of EAH ($1,068,000) was reasonable, if not high.

Buddy L. Vick, CPA, also testified for Husband and indicated that, starting in 2003, he began preparing Husband and Wife's personal tax returns as well as the tax returns for EAH. In preparation for trial, Vick calculated Husband's projected income, taking into account the proposed sale of 49% of EAH to Dr. Silvius. In this calculation, Vick noted that, in the past, EAH had not paid regular monthly rent to Sparks, LLC, for the use of the commercial building and that, after the sale to Dr. Silvius was completed, rent would be paid annually in the amount of approximately $85,000. Additionally, Vick noted that the proposed sale anticipated monthly payroll bonuses given to Dr. Silvius in an amount equal to the monthly payments he would then pay Husband to effectuate the purchase of 49% of EAH.⁵ After taking the

[417 S.W.3d 278]

proposed sale into account, Vick concluded that Husband's projected income for 2012 was $159,828.

In rebuttal to Vick's testimony, Stan Stark, CPA, testified over Husband's objection. Wife retained Stark two days before he testified.⁶ Stark essentially disagreed with Vick's projected income of $159,828 because the projection did not account for Husband's receipt of annual rental income in the amount of $85,000 if he were awarded Sparks, LLC. Stark opined that Husband's projected annual income was $266,000. In preparation for his testimony, Stark reviewed Husband's 2011 tax return, Exhibit 8 (Dr. Ehlen's adjusted gross income projection for 2012), and Exhibit P (an exhibit not prepared by any testifying witness). Stark did not speak with Husband about EAH, did not visit EAH, and was unaware of any expense obligations of Sparks, LLC. Stark also failed to consider that, if EAH was paying rent to Sparks, LLC, 51% of each rental payment would be paid by Husband as 51% owner of EAH.

Husband's rebuttal witness, Corbin, also testified about Husband's projected income. Corbin explained that it would be inappropriate to impute any income to Husband above a normalized compensation ⁷ because, if a higher income were imputed without any adjustment to the estimated value of EAH, then the value of the business would be counted twice. Corbin explained that the higher Husband's normalized income was, the lower the value of EAH would be, because all of the profit used to determine the FMV of EAH would instead be going toward Husband's higher income. After analyzing Dr. Ehlen's projected income report, Corbin concluded that Husband's normalized annual income would be approximately $100,000. Corbin also noted that he “didn't do any research of veterinary doctors' salaries, ... but [$100,000] didn't strike [him] as unreasonable.”

Wife works twenty hours per week making $20 per hour. Her gross monthly salary is $1,883. Husband did not dispute the amount of Wife's income.

After Husband and Wife separated, she stayed in the marital home, and he moved to a substantially smaller rental home. Husband did not indicate what he paid in monthly rent. Starting at the time of the separation and continuing to the date of trial, Husband deposited a net amount of $6,200 per month into a joint account to support Wife and children.⁸

At trial, Wife testified that her monthly expenses were $10,013, including expenses for all three children. In a document Husband received from Wife's former attorney, however, Wife indicated that her monthly expenses were only $6,200. Wife testified that, because Husband's monthly deposits supported her and the children during the separation, she was able to save two-thirds of her monthly salary. Wife also noted that an expense of $1,075, for a new heating and cooling unit, was temporary

[417 S.W.3d 279]

for the next eight months. Additionally, she indicated that the mortgage on the marital home ($1,500 each month) would be paid in full in thirty months.

Dissolution DecreeDivision of Assets

The court, noting the parties' disagreement as to the value of EAH, credited Dr. Ehlen's report and testimony and found the FMV to be $1,068,000. The trial court found Dr. Davenport's testimony not credible, noting that he was retained as an expert shortly before the trial, he had a “limited time within which to complete an analysis and develop an opinion regarding the valuation of [EAH],” and no reports or curriculum vitae were submitted to the court to support his testimony. The trial court indicated that “Dr. Davenport's testimony was largely based on the calculations completed by Dr. Ehlen[,] and Dr. Davenport's testimony was...