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Barnes v. Sherman

August 24, 2000


Before Steadman and Ruiz, Associate Judges, and Pryor, Senior Judge.

The opinion of the court was delivered by: Ruiz, Associate Judge

Appeals from the Superior Court of the District of Columbia (Hon. Stephanie Duncan-Peters, Trial Judge)

(Argued November 19, 1999 Decided August 24, 2000)

This is an appeal from a judgment of absolute divorce awarding equitable property distribution. The trial court awarded Gail Barnes the sum of $40,000, which the trial court determined was her equitable portion of the value of Automotive and Related Industries, Inc. ("AutoBody"), a business that Harvey Sherman began shortly after his separation from Barnes. AutoBody was similar to Service Stations and Related Industries, Inc. ("FuelLine"), a business which the parties jointly owned and operated during their marriage. Barnes agrees with the trial court that AutoBody is marital property, but appeals the amount of the equitable distribution award, arguing that the trial court erred in not crediting Barnes' opinion testimony documenting a substantially higher valuation of the business. Sherman cross-appeals, disagreeing with the trial court's determination that AutoBody is marital property, and, alternatively, arguing that the court's valuation of AutoBody was erroneous. *fn1 We affirm the trial court's determination that AutoBody was marital property; we reverse the trial court's valuation of AutoBody and remand for further consideration in accordance with this opinion.

I. Factual Summary

Harvey Sherman and Gail Barnes, who were married in 1981, incorporated FuelLine in 1983 to publish a commercial trade newspaper for automotive-related industries. The newspaper's sole source of income came from advertisements prepared and placed by automobile dealers and parts manufacturers. Barnes served as President of FuelLine and was responsible for the layout of the newspaper and company administration. Sherman was Executive Vice-President and Director of Sales, primarily responsible for the sale of advertisements. The FuelLine newspaper generated significant revenues and expanded into other regions, providing substantial compensation and profits for Barnes and Sherman up to 1994. The parties' marital difficulties exacerbated a decline in the business and they separated on September 7, 1995; the divorce proceedings were marked by recriminations and reprisals, including claims of mismanagement, theft, fraud and assault. *fn2

On May 2, 1996, Barnes filed a "Motion for Order Terminating the Marital Business" on the grounds that FuelLine was bankrupt and continued operation of the business would drain equity existing in the other marital properties. On May 7, 1996, the parties entered into an agreement to dissolve FuelLine, the provisions of which were stated on the record in open court. Pursuant to this agreement 1) the name and logo of FuelLine was to be awarded to the highest bidder; if neither party bid for the name and logo, neither party would be entitled to use it, 2) miscellaneous corporate property, such as art boards used in laying out the newspaper, and office furniture, was to be purchased by either party at fair market value or sold at auction, and 3) both parties were to receive the subscriber and customer lists of FuelLine. After the appointed receiver memorialized the agreement in writing, Barnes refused to sign the written agreement. The trial court subsequently granted Sherman's motion to enforce the oral agreement "as to the terms of the agreement which were stated on the record in open court on 5/7/96."

Sherman incorporated AutoBody in the first week of June 1996, funding the business with money received from his family. Sherman testified that his brother loaned $13,500 to AutoBody on June 23, 1996. *fn3 The trial court accepted Barnes' contention that, rather than a loan, this amount was a reimbursement of $14,000 in marital funds that Sherman testified he had previously given his brother and sister-in-law. *fn4 Sherman further testified that his mother loaned $10,000 to AutoBody in June 1996 and in March 1997 gave another $30,000 to Sherman, who then transferred one-half of his stock in AutoBody to his mother two days prior to the start of the trial in April 1997. The trial court found that the entire $40,000 provided by Sherman's mother in June 1996 and March 1997 was for the fifty-percent interest in AutoBody.

At trial, Barnes did not call an expert witness to testify to the value of FuelLine and AutoBody. Rather, she provided her own testimony on the issue. Based on her knowledge of FuelLine's operations and finances as owner and president, Barnes testified that in 1991 FuelLine had a fair market value of $6,000,000, which had declined to between $3,000,000 and $4,000,000 as of October 1, 1995, when the parties had just separated. Based on her valuation of FuelLine and review of documents subpoenaed from AutoBody, a similar enterprise, Barnes valued AutoBody at approximately $2,000,000. Barnes testified that her basis to form an opinion of the value of AutoBody was her "knowledge that it goes to the same industry . . . that FuelLine went to," that she was "familiar with the newspaper," and that she was "familiar with the customers." Barnes testified that AutoBody had "the same [growth] potential that FuelLine had." Based on the three months of figures for AutoBody which she had in her possession (July, August, and September 1996), Barnes calculated a profit of "30 to $34,000 a month[,] that's around not quite $400,000 a year." From these figures, Barnes testified that AutoBody "could easily be valued between 1.75 and two million dollars if not more." Sherman testified, on the other hand, that AutoBody's gross receivables for July, August, and September 1996 were "roughly about $50,000" per month, had dropped to $38,000 per month by May 1997, and that AutoBody had a negative value.

The trial court credited neither Barnes' nor Sherman's valuation of AutoBody. Instead, the court found that AutoBody was worth $80,000, stating that "[i]n return for $40,000 from his mother, [Sherman] gave her a one-half interest in his business. Thus, by his own actions, [Sherman] has admitted that he believed AutoBody has a value of $80,000." The trial court deemed it equitable to award Barnes $40,000 of the "admitted" value of AutoBody.

II. Standard of Review

"[T]his court has consistently applied the well-settled principle that the trial court has considerable discretion and broad authority in distributing marital property as part of a judgment of divorce." Dews v. Dews, 632 A.2d 1160, 1164 (D.C. 1993); see also Negretti v. Negretti, 621 A.2d 388, 389 (D.C. 1993); Mosley v. Mosley, 601 A.2d 599, 600-01 (D.C. 1992); Leftwich v. Leftwich, 442 A.2d 139, 142 (D.C. 1982); Benvenuto v. Benvenuto, 389 A.2d 795, 797 (D.C. 1978). The trial court is charged by statute with distributing marital property "in a manner that is equitable, just and reasonable, after considering all relevant factors," D.C. Code § 16-910 (b) (1997), and "so long as the trial court considers all relevant factors, its conclusions will not be disturbed on appeal." Bowser v. Bowser, 515 A.2d 1128, 1130 (D.C. 1986). If "the trial court's findings of fact, conclusions of law and judgment, taken together . . . present an integrated, internally consistent and readily understood whole," its decision will be allowed to stand on appeal. Bowser, 515 A.2d at 1130; see also Dews, 632 A.2d at 1164.

III. Equitable Distribution of AutoBody

A. Whether AutoBody is Marital ...

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