|
|
|
Valuation of Business With Inventory Affidavit
© 2003 National Legal Research Group, Inc.
NORTH CAROLINA: Franks v. Franks, ____ N.C. App. ____, 571 S.E.2d 276 (2002).
The wife was not absolutely bound to the value for the husband's business stated on her inventory affidavit, where the husband had reasonable notice that the wife's expert would testify to a higher value. The trial court did not err by choosing to accept the value submitted by the wife's expert and to reject the value submitted by the husband himself, even though the husband was owner and operator of the business.
The parties were granted an absolute divorce in January 1998 with only equitable distribution issues remaining for resolution. Both parties filed inventory affidavits in accordance with the governing statute, N.C. Gen. Stat. 50-21. Among the assets was the husband's painting business. In her valuation affidavit, the wife noted that this business had no known value at the date that the parties separated. At trial, however, she presented evidence from an expert who valued the business at $450,000. The husband offered only a subjective impression that the business had a value of $60,000. The trial court accepted the valuation of $450,000 and, after applying the statutory factors for the division of marital assets, ordered the husband to pay the wife a distribution award of $131,240. The husband appealed.
The husband first argued that the parties to an equitable distribution action are bound by the values stated in their inventory affidavits. The statute, N.C.G.S. 50-21(a), provides that the valuation affidavit shall be subject to amendment and shall not be binding at trial as to completeness or value. The husband argued that he was blind-sided at trial because the wife had not supplemented or amended her valuation affidavit. The appellate court rejected this argument as the record showed that the husband had received a copy of the opinion of the expert witness prior to trial. Despite the lack of a supplemented or amended valuation affidavit, it was found that the trial court committed no error since the husband received appropriate notice of the expert's valuation. The wife was not restricted to her affidavit and she was free to present expert testimony at trial.
The husband also challenged the valuation methods used to determine the value of his business. The wife offered the testimony of an expert who was a forensic accountant and one experienced in business valuations. Relying upon the asset approach, the market approach, and the income approach, and after analyzing business and tax records which included information about accounts receivable, fixed assets, tax liabilities, expenses, customers, and other business components, including goodwill, the expert gave an opinion that the business had a value of $450,000. The husband, on the other hand, offered no expert testimony but merely stated his own opinion as to the value based upon what he would be willing to sell his interest in the business for or what he would pay for the wife's interest, namely $30,000. This, argued the husband, was the best evidence of the value of the entire business $60,000. The trial court disagreed and accepted the valuation supported by the methods employed by the wife's expert. The appellate court affirmed, holding that the lower court had properly relied on the wife's expert. In so doing, it pointed to prior North Carolina case law that specifically mentions that the methods used by the wife's expert were an appropriate means to determine the value of a business. It expressly relied upon the expert's use of the excess earnings method to calculate the value of the business's goodwill. Under this same prior North Carolina case law, it was held that the value of goodwill should be made with the aid of expert testimony. As the record showed that the wife's expert used valuation methods that complied with the standards established by law, the trial court's order was upheld. (DB)
Go to: Valuation of Assets Category
Go to: Cases of Interest by Category
Go to: Previous Page
| Featured Services | |
|
| The Research Center: ( Cases of Interest by Category ) | Research Home | ||||
Find Case Law, Case Analysis, and Divorce Related Information...
| |||||
 How to Hire The Right Divorce Lawyer - You must have the right lawyer to have a successful divorce! provides a road map for finding an effective lawyer and then helps you to monitor his or her performance and fees. |
Comments & Suggestions? or Recommend This Page to a Friend!