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Goodwill Value of Automobile Dealership
© 2003 National Legal Research Group, Inc.
OREGON: In re Marriage of Triperinas, 185 Or. App. 283, 59 P.3d 586 (2002).
The trial court erred by failing to assign value to the goodwill of the wife's automobile dealership. The court did not err by reducing the value of the dealership by a 25% minority discount. The court properly failed to award the husband stock in the dealership, as this would unduly entangle the parties' postdivorce finances. But the errors were harmless, as an unequal division was equitable. The wife had custody of the parties' three children, one of whom was disabled, she received considerable debts and few liquid assets, and the husband was in a better position to support himself.
The parties were married for 20 years. The court divided the marital assets by giving the wife the marital home and all of the stock in her family's automobile dealership. While the wife received assets with a gross value of $254,500 and the husband received only $53,700 in assets, the wife's share was hindered by liabilities of $189,400, leaving her with a net award of $65,100, while the husband's share was reduced by only $7,200 in liabilities, leaving him with a net award of $46,500. The husband appealed the unequal division of the marital assets in favor of the wife. The Oregon Court of Appeals affirmed.
The husband first complained about the failure of the trial court to assign value to the goodwill of the dealership. Noting that car dealerships normally have goodwill, the appellate court held that there was substantial evidence present as to the value. Looking to the experts' testimony, whose opinions varied as to the value of the goodwill, the court accepted the husband's suggestion to take the average value ($348,608), and, again for purposes of its later discussion, assumed without deciding that the trial court should have added this amount to the value of the dealership ($1,273,423), which made the wife's 10.5% interest worth $133,709.
The husband further argued with regard to the valuation of the dealership that the trial court should not have applied a 25% minority shareholder discount to the value of the wife's stock. The husband asserted that it was too speculative to apply any discount since there was little likelihood that the wife would ever attempt to sell her interest. The appellate court rejected the husband's contention. Valuation is a fact-based analysis necessarily taken on a case-by-case basis. A contemplated sale is not a predicate before a minority shareholder discount can be utilized for purposes of stock valuation. Considering the facts of the case before it, the appellate court determined that there was no error by the trial court in applying the 25% discount, as that was the figure offered by the husband's own expert as appropriate and no testimony was offered that no discount should be made. Applying this discount to the value discussed above, the wife's interest in the dealership, which should have been treated as an asset for distribution, was $100,282. Finally, the husband claimed error in the trial court's failure to include the value of personal property held and awarded to each spouse, as the wife's property was worth $4,313, while the husband's property was appraised at $500. The court again assumed without deciding that the husband's contention was proper and added these values to each party's share.
Making all of the above adjustments, the result was that the wife would be awarded $134,095 in net assets and the husband would be awarded $47,000 in net assets. The court of appeals then considered if this disparity rendered the award improper so as to require an equalizing judgment or an award of an interest in the wife's stock in the dealership to the husband.
Nevertheless, the court found that the trial court's errors were not a sufficient basis for reversal. It agreed with the trial court that to award the husband a portion of the wife's interest in her family corporation would significantly entangle the parties. Further, stated the court, there were special circumstances present that justified an unequal property division. The wife had the custody and care of the parties' three children, including the disabled child. She had a need for the residence, and she had a need for a vehicle in which to transport the children. Her earning capacity was significantly limited by her disabled child's care requirements. While she was awarded the majority of the marital assets, she was also made responsible for significant debts and liabilities under the court's distribution award. Moreover, the assets she did receive were not liquid and thus would not aid her in covering expenses incurred by herself and the children. For this reason, an equalizing judgment as requested by the husband would be inappropriate since she would already be hardpressed to get by on a month-to-month basis. On the other hand, while the husband received significantly fewer assets, he was in a superior position to support himself and pay his personal expenses. Under these circumstances, the court of appeals concluded that the trial court was correct in its distribution, as it effectuated the goal of disentangling the parties' finances. The appellate court held that an equalizing judgment would be inequitable.
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