Watson v. Watson

• Decision Date: 24 June 2004
• Docket Number: No. 2001-CA-01178-SCT.,2001-CA-01178-SCT.
• Citation: 882 So.2d 95
• Parties: Robert Michael WATSON v. Patricia Harris WATSON.
• Court: Mississippi Supreme Court

882 So.2d 95

Robert Michael WATSON v. Patricia Harris WATSON.

No. 2001-CA-01178-SCT.

Supreme Court of Mississippi.

June 24, 2004.

Rehearing Denied September 23, 2004.

John R. McNeal, Jr., attorney for appellant.

Richard C. Roberts, III, Jackson, attorney for appellee.

EN BANC.

DICKINSON, Justice, for the Court.

s 1. This is a divorce case in which we are asked by both parties to review the award of alimony and division of marital assets. As is sometimes the case when we are presented sharp, persuasive disagreement by knowledgeable counsel for both parties, we find several areas of the law which need clarification.

s 2. Divorce seldom produces winners. On their wedding day, a man and woman join together as one. Should they separate soon after marriage, their separate estates and obligations to the other may be discerned rather easily. However, should they (as here) stay together for two decades, much changes.

s 3. For instance, they develop a formula known only to themselves which divides between them their respective responsibilities and contributions to the marriage. This allows them to maximize the accumulation of assets which, invariably and to various degrees of complication, are commingled.

s 4. Additionally, they separately develop skills which, when combined, work together to address the full array of life's needs; but when divided, scarcely meet the needs of either.

s 5. Difficult though it may be, the termination of such a marriage requires an accounting and a fair division of those marital assets. It is soon learned that some marital assets cannot be easily divided. Some, not at all. When, as here, the parties cannot agree, it falls upon the courts to make the division.

s 6. This matter proceeded to trial, and a final judgment of divorce was entered. Although neither party contests the granting of divorce, both parties have appealed various aspects of the award of alimony and division of marital assets.

FACTS

s 7. Dr. Robert Michael Watson had just completed his first year of veterinary school at Auburn University, and Patricia Harris Watson was working as a hairstylist in Jackson, Mississippi, when the two were married on June 9, 1979.

s 8. Patricia and her two daughters joined Mike in Auburn, where Patricia established a hair salon business. While attending school and holding down a part-time job, Mike assisted with the management and bookkeeping of the salon.

s 9. After graduation in 1982, the Watsons moved to the Gulf Coast, where Mike accepted employment as a veterinarian, and Patricia worked as a hairstylist. The following year, they moved to Jackson, where Mike went to work for Dr. Jack Ross, and Patricia went to work at Earle and Joseph Salon.

s 10. In 1987, Mike opened his own practice in Jackson, the Magnolia Animal Clinic, which he still owned and operated at the time of trial.

s 11. Patricia was diagnosed in 1991 with two ruptured disks and degenerative disk disease which required a spinal fusion. She was unable to work for 89 days. After the surgery, and up until trial, she continued limited work at Earle and Joseph Salon.

s 12. At some point, Mike began a sexual relationship with one of his employees. On May 12, 1999, he left Patricia and moved in with his paramour and her two children whereupon he began paying the mortgage and utilities for his new residence.

s 13. Patricia filed for divorce in April, 2000. The chancellor granted Patricia a divorce on the ground of adultery, which has not been appealed by either party, and will not be disturbed. We find we must, however, review the chancellor's award of alimony and division of marital assets, including Dr. Watson's professional practice.

DISCUSSION

s 14. This Court employs a limited standard of review when reviewing a chancellor's decision. Miss. Dep't Human Servs. v. Shelby, 802 So.2d 89, 92 (Miss.2001). We will not disturb a chancellor's award of alimony and division of marital assets unless the court was manifestly wrong, abused its discretion or applied an erroneous legal standard. Sandlin v. Sandlin, 699 So.2d 1198, 1203 (Miss.1997).

ALIMONY

s 15. This Court has long recognized the concept that alimony and equitable distribution should be considered together so as to prevent inequity. "Alimony and equitable distribution are distinct concepts, but together they command the entire field of financial settlement of divorce. Therefore, where one expands, the other must recede." Ferguson v. Ferguson, 639 So.2d 921, 929 (Miss.1994) (citing LaRue v. LaRue, 172 W.Va. 158, 304 S.E.2d 312, 334 (1983) (Neely, J., concurring)). "In the final analysis, all awards should be considered together to determine that they are equitable and fair." Id. s 16. In this case, the chancellor awarded Patricia a net estate valued at almost a half million dollars. Additionally, the chancellor recognized that Patricia has separate income of approximately $2,400 per month. Also, from the assets awarded to her, Patricia will realize income between $250,000 and $400,000. Considered together, under the chancellor's award, Patricia would have a separate, net estate, of approximately $700,000, to $1,000,000.

s 17. When considering the Armstrong factors¹ in his original findings, the chancellor stated that Patricia's income was the only source to meet her needs, and that, "for the most part," the assets he awarded Patricia "are not income-producing assets from which [Patricia] could secure additional income without the imposition of alimony." Then, upon reconsideration, the chancellor stated that the assets awarded to Patricia would produce income between $250,000 and $400,000. However, this income which the chancellor did not consider in the original award of alimony did not serve to convince him to lower alimony. Instead, he raised it by $750.00 per month. The precise reason alimony was raised, post-trial, is unclear. A portion of the discussion seems to indicate that the debt payments assumed by Patricia may have been a factor. If so, that would be inappropriate, unless the debt was removed as a factor in calculating the division of assets (which it was not in this case). Otherwise, the same debt serves to advantage Patricia twice; first, to increase her award of assets, and second, to increase her award of alimony.

s 18. We reverse and remand for a new determination of alimony, based upon findings of fact and conclusions of law which take these matters into account.

DIVISION OF MARITAL ASSETS

s 19. Few appreciate the difficulty visited upon a chancellor charged with dividing marital assets in a case such as this. I believe the chancellor's conduct of the proceedings was admirable. His forty-four page Findings of Fact and Conclusions of Law² was obviously crafted after a great deal of study of the record and consideration of the numerous issues and law applicable thereto. Additionally, both parties filed motions for reconsideration, challenging the findings in numerous respects. The chancellor did not hesitate to reexamine his findings. The motions were carefully considered, and the chancellor agreed with, and made, several requested changes.

s 20. To complicate matters, almost a year following the trial in this case, this Court handed down Singley v. Singley, 846 So.2d 1004 (Miss.2002), which, as a matter of first impression in Mississippi, addressed "goodwill" of a professional practice in the context of division of marital assets. When this case proceeded to trial, the chancellor did not have the benefit of the holding in Singley. Therefore, we turn first to the chancellor's valuation of Mike's veterinary clinic.

1. The Veterinary Practice.

s 21. The valuation of a business is nothing more than an appraisal which, depending upon the purpose for which it will be used, can be performed using one of several valid, acceptable methods. Lenders, for instance, view a business as collateral, and their opinion of worth will generally not agree with an owner or investor. Each person or entity seeking an appraisal or valuation must factor in those matters which are, to them, important. They must also exclude those matters which would cause the appraisal to produce a false or misleading value for their purposes.

s 22. So it is with the courts in division of marital property. Where, as here, a chancellor must determine the value of a professional practice, the value must be calculated for that specific purpose, recognizing constrictions which may not be apparent in other contexts.

s 23. This Court carefully considered the issue of valuing a professional practice in Singley. It seems to us at first blush that one should have difficulty misunderstanding the following language:

We join the jurisdictions that adhere to the principle that goodwill should not be used in determining the fair market value of a business, subject to equitable division in divorce cases.

...

The term goodwill as used in determining valuation of a business for equitable distribution in a domestic matter is a rather nebulous term clearly illustrating the difficulty confronting experts in arriving at a fair, proper valuation. Goodwill within a business depends on the continued presence of the particular professional individual as a personal asset and any value that may attach to that business as a result of that person's presence. Thus, it is a value that exceeds the value of the physical building housing the business and the fixtures within the business.

Singley, 846 So.2d at 1010-11 (emphasis added). However, what seemed clear under the facts in Singley, are not so clear under the facts of this case. We shall use this opportunity to clarify our holding in Singley.

s 24. In reaching its conclusion in Singley, this Court carefully reviewed the approach taken in other jurisdictions, and "join[ed] the jurisdictions that adhere to the principle that goodwill should not be used in determining the fair market value of a business subject to equitable division in divorce...