Wilson v. Wilson

• Decision Date: 21 September 2010
• Docket Number: No. 35475,35475
• Parties: DONNA F. WILSON, Petitioner-Appellant v. LEON HUNTER WILSON, Respondent-Appellee
• Court: West Virginia Supreme Court

DONNA F. WILSON, Petitioner-Appellant

v. LEON HUNTER WILSON, Respondent-Appellee

No. 35475

SUPREME COURT OF APPEALS OF WEST VIRGINIA

September 2010 Term

Submitted: September 21, 2010

Filed: November 23, 2010

Appeal from the Circuit Court of Berkeley County

Honorable Gina Marie Groh, Judge

Civil Action No. 05-D-486

AFFIRMED, IN PART, REVERSED, IN PART,

AND REMANDED WITH DIRECTIONS

James P. Campbell, Esq.

Mary Binns-Davis, Esq.

Campbell Flannery, P.C.

Leesburg, Virginia

and

G. Nicolas Casey, Jr., Esq.

Lewis Glasser Casey & Rollins, PLLC

Charleston, West Virginia

Attorneys for Appellant

Charles F. Printz, Jr., Esq.

Julie R. Shank, Esq.

Bowles Rice McDavid Graff & Love LLP

Martinsburg, West Virginia

and

Cinda L. Scales, Esq.

Martinsburg, West Virginia

Attorneys for Appellee

JUSTICE WORKMAN delivered the opinion of the Court.

CHIEF JUSTICE DAVIS and JUSTICE BENJAMIN dissent and reserve the right to file dissenting opinions.

SYLLABUS BY THE COURT

1. “'In reviewing a final order entered by a circuit judge upon a review of, or upon a refusal to review, a final order of a family court judge, we review the findings of fact made by the family court judge under the clearly erroneous standard, and the application of law to the facts under an abuse of discretion standard. We review questions of law de novo.' Syllabus, Carr v. Hancock, 216 W.Va. 474, 607 S.E.2d 803 (2004).” Syllabus Point 1, Staton v. Staton, 218 W.Va. 201, 624 S.E.2d 548 (2005).

2. “'Enterprise goodwill' is an asset of the business and may be attributed to a business by virtue of its existing arrangements with suppliers, customers or others, and its anticipated future customer base due to factors attributable to the business.” Syllabus Point 2, May v. May, 214 W.Va. 394, 589 S.E.2d 536 (2003).

3. “'Personal goodwill' is a personal asset that depends on the continued presence of a particular individual and may be attributed to the individual owner's personal skill, training or reputation.” Syllabus Point 3, May v. May, 214 W.Va. 394, 589 S.E.2d 536 (2003).

4. “In determining whether goodwill should be valued for purposes of equitable distribution, courts must look to the precise nature of that goodwill. Personal goodwill, which is intrinsically tied to the attributes and/or skills of an individual, is not subject to equitable distribution. On the other hand, enterprise goodwill, which is wholly attributable to the business itself, is subject to equitable distribution.” Syllabus Point 4, May v. May, 214 W.Va. 394, 589 S.E.2d 536 (2003).

5. “'The testimony of expert witnesses on an issue is not exclusive and does not necessarily destroy the force or credibility of other testimony. The jury has a right to weigh the testimony of all witnesses, experts and otherwise; and the same rule applies as to weight and credibility of such testimony.' Syllabus Point 2, Webb v. Chesapeake & O. Ry. Co., 105 W.Va. 555, 144 S.E. 100, cert. denied, 278 U.S. 646, 49 S.Ct. 82, 73 L.Ed. 559 (1928).” Syllabus Point 6, Frye v. Kanawha Stone Co., Inc., 202 W.Va. 467, 505 S.E.2d 206 (1998).

6. Profits of a business that are based upon a future contingency or obligation are subject to equitable distribution upon the dissolution of a marriage, but only that portion of the profits for work done during the marriage is actually “marital property.” In determining the amount of profits subject to equitable distribution, sound valuation methods must be used, and it may be necessary for a court to retain continuing jurisdiction over the matter until such profits are determined in order to effectuate an equitable distribution of this property.

7. “Equitable distribution... is a three-step process. The first step is to classify the parties' property as marital or nonmarital. The second step is to value the marital assets. The third step is to divide the marital estate between the parties in accordance with the principles contained in [former] W.Va.Code, 48-2-32 [now W.Va.Code § 48-7-103].” Syllabus Point 1, in part, Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990).

8. “The burden is on both parties to the litigation to adduce competent evidence on the values to be assigned in equitable distribution cases.” Syllabus Point 8, Mayhew v. Mayhew, 197 W.Va. 290, 475 S.E.2d 382 (1996).

WORKMAN, Justice:

The appellant, Donna F. Wilson, ¹ ex-wife of appellee, Leon Hunter Wilson, appeals the June 4, 2009, order of the Circuit Court of Berkeley County. In that order, the circuit court denied Ms. Wilson's motion for reconsideration ² of the court's March 25, 2009, order which reversed the November 21, 2008, final divorce order of the Berkeley County Family Court and remanded the case to the family court for further proceedings. In the March 25, 2009, order, the circuit court reversed the family court's finding that set the net value of Mr. and Ms. Wilson's business at $8,927, 957.00, which included a valuation for enterprise goodwill. More specifically, the circuit court reversed a finding by the family court which ordered Mr. Wilson to pay Ms. Wilson the sum of $4,914, 582.50, and instead, ordered Ms. Wilson to pay Mr. Wilson the sum of $894,286.00 within thirty days of judgment. Based upon the parties' briefs and arguments in this proceeding, a review of the entire record, and the relevant statutory and case law, this Court reverses the circuit court's June 4, 2009, order, and affirms, in part, and reverses, in part, the circuit court's March 25, 2009, order, and remands the case to the family court for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL HISTORY

Mr. Wilson and Ms. Wilson (collectively, “the parties”) were married in 1990 and separated on May 31, 2005. They had no children as part of the marriage. Both parties were involved in aspects of real estate development prior to and during their marriage. In 1993, the parties formed Hunter Company of West Virginia (hereinafter, “Hunter”) ³ to conduct real estate development; each party separately owned one half of the stock. Both parties agree that Hunter is a highly successful business which generated a net income to the parties of nearly $12 million in 2004, and more than $5 million in 2005.

Beginning in 1993, Hunter was chosen by National Land Partners (hereinafter, “NLP”) to manage real estate development projects in West Virginia, which was accomplished through successive Management Agreements. NLP, whose headquarters is in Williamstown, Massachusetts, is involved in large tract real estate development and does business in eleven states. In West Virginia, NLP owns and has financial responsibility for all of its projects. The agreement between Hunter and NLP provides that Hunter is an independent contractor. Hunter does not own any of the real estate involved in any of the projects ⁴ as NLP buys the real estate through one of its wholly-owned subsidiaries. ⁵ NLP also utilizes Inland Management, another one of its wholly-owned subsidiaries, to employ the people who work for NLP, to provide all of the accounting services for the projects, and for other services associated with the financial aspects of completing a project.

Under the Management Agreement, Hunter's duties are to identify property that would qualify for development, and complete due diligence and feasibility studies to determine if NLP should purchase the property. If NLP purchases the property, Hunter then conducts engineering and design work, obtains all permits and subdivision approval, and oversees the construction of the infrastructure. Upon completion of the road system and utilities, Hunter then hires a sales force, ⁶ conducts advertising, marketing, and other promotions, sells all of the building lots, and oversees the closings of properties with the attorneys. Under the Management Agreement, typically at the end of the project, Hunter is paid a manager fee which is defined as any “net profit” remaining after twelve-and-one-half-percent of the gross sales are paid to NLP and all other expenses are paid. If NLP's preferential payment of twelve-and-one-half-percent exceeds the total net profit, Hunter receives no compensation. ⁷

On June 1, 2005, Ms. Wilson filed for divorce. ⁸ The parties, however, stipulated to May 31, 2005, as their date of separation. At the time of the parties' separation, Hunter was the manager of six real estate development projects for NLP at various stages of completion. ⁹ Ms. Wilson was no longer involved in Hunter's business at that time. By May 2008, the parties had divided their personal property and identified and stipulated to the value and distribution of all of their marital assets and debts, except for the calculation and valuation of Hunter's manager fees. The stipulated net marital estate, absent the valuation of Hunter, was $9,536, 682.14, ¹⁰ and Mr. Wilson had advanced Ms. Wilson $4,317, 737.62 towards her share of the marital estate. Accordingly, the sole issue in contention that was litigated before the family court was the valuation of Hunter's manager fees on the projects that existed at the date of separation for purposes of equitable distribution. The difficulty is that each party and each judicial officer attempted to frame the issue of the fees in the context of whether they constituted enterprise goodwill or personal goodwill. In fact, under our jurisprudence, they are neither. Instead, they are a separate item for division before any consideration to goodwill is even discussed.

During the proceedings before the family court, Ms. Wilson presented expert testimony on the valuation of Hunter's manager fees. Ms. Wilson's expert, Kenneth Apple, a certified public accountant (CPA), projected the manager fees at $8,927, 959.00 as of the date of separation and opined that such value was entirely “enterprise goodwill, ” and thus, the entire amount was subject to equitable distribution. While Mr. Wilson did not offer an expert with regard to the manager fees, he did present evidence through NLP financial records...