Appeal by plaintiff from judgment entered 31 July 2002 by
Judge Earl J. Fowler, Jr. in Buncombe County District Court. Heard
in the Court of Appeals 27 October 2003.
Robert E. Riddle for plaintiff-appellant.
No brief for defendant-appellee.
HUNTER, Judge.
Charles A. Buzzanell (“plaintiff”) appeals from a Judgment of
Equitable Distribution, concluding that an equal division of the
parties' marital property was equitable. For the reasons stated
herein, we affirm.
Plaintiff and Corina Miller (“defendant”) were married on 30
November 1998. At the time of the marriage, plaintiff was employed
as a palliative care physician by an anesthesia practice.
Plaintiff subsequently terminated his employment on or about 1
December 1998 and opened his own palliative care practice, Blue
Ridge Pain Management and Palliative Care, P.A. (“the PA”), in
Hendersonville, North Carolina. Defendant worked full-time to
assist plaintiff in the administration of his medical practice. Approximately thirteen months after their marriage, the
parties separated on 22 January 2000. Plaintiff filed a complaint
on 20 April 2000 seeking divorce from bed and board and equitable
distribution. Defendant replied and counterclaimed for equitable
distribution and alimony.
The action was heard on 27 November 2001, during which the
parties' assets were identified, valued, and distributed. The
court considered evidence provided by each party's expert in
valuation of medical practices and valued the PA at $155,048.00
after making adjustments to the methodology offered by defendant's
expert. Further, the court found a marital interest in a home
plaintiff purchased prior to the marriage due to certain
improvements and mortgage payments that were made on the home
during the marriage with marital funds. Ultimately, the trial
court determined an equal division to be equitable. Plaintiff was
awarded the PA, certain personal property, the marital interest in
the home, and a debt. Defendant was awarded the commercial
property in Hendersonville, certain personal property, and a
distributive award of $81,058.00. Plaintiff appeals.
In order for this Court to conduct proper appellate review of
an equitable distribution order, the trial court's findings of fact
must be specific enough that the appellate court can determine from
reviewing the record whether the judgment represents a correct
application of the law. See Coble v. Coble, 300 N.C. 708, 714, 268
S.E.2d 185, 190 (1980). “Although the trial court [is] not
required to recite in detail the evidence considered in determiningwhat division of the property would be equitable, it [is] required
to make findings sufficient to address the statutory factors and
support the division ordered.” Armstrong v. Armstrong, 322 N.C.
396, 405, 368 S.E.2d 595, 600 (1988). The equitable distribution
of the property is ultimately vested within the wide discretion of
the trial court and “'will be upset only upon a showing that it was
so arbitrary that it could not have been the result of a reasoned
decision.'” Wall v. Wall, 140 N.C. App. 303, 307, 536 S.E.2d 647,
650 (2000) (citation omitted). On appeal, plaintiff brings forth
nine assignments of error regarding the Judgment of Equitable
Distribution that essentially question whether the trial court:
(I) properly determined the value of the PA; (II) erred in
determining there was a marital interest in the home plaintiff
purchased prior to the marriage; (III) properly considered tax
consequences as a distributional factor; (IV) erred in limiting
plaintiff's cross-examination of defendant's expert witness on
valuation of the PA; and (V) erred in charging defendant twice for
the value of a computer.
I.
Plaintiff argues the trial court erred in valuating the PA.
Specifically, plaintiff contends (1) defendant's expert, Foster
Shriner (“Shriner”), lacked sufficient knowledge about the PA to
accurately determine its value, (2) the court incorrectly adjusted
the valuation methodology used by Shriner to arrive at the PA's
value, and (3) the court failed to properly value the receivables
of the PA when it determined the PA's value. We disagree.
The applicable law as to the valuation of a marital interest
in a professional practice is as follows:
[T]he task of the trial court is to arrive at
a date of separation value which “reasonably
approximates” the net value of the business
interest.
“[A] court should make specific
findings regarding the value of a
spouse's professional practice and
the existence and value of its
goodwill, and should clearly
indicate the evidence on which its
valuations are based, preferably
noting the valuation method or
methods on which it relied. On
appeal, if it appears that the trial
court reasonably approximated the
net value of the practice and its
goodwill, if any, based on competent
evidence and on a sound valuation
method or methods, the valuation
will not be disturbed.”
Offerman v. Offerman, 137 N.C. App. 289, 292-93, 527 S.E.2d 684,
686 (2000) (citations omitted). Further, this Court recognizes
that “[w]hen . . . a professional practice has not been established
for a sufficient period to determine goodwill based upon comparable
past earnings, the capitalization of excess earnings method of
valuing goodwill should be used.”
Conway v. Conway, 131 N.C. App.
609, 618, 508 S.E.2d 812, 819 (1998).
In the instant case, the following findings of fact made by
the trial court are pertinent to defendant's first argument:
6. Plaintiff presented a valuation of the PA
by Mr. David Keller, an expert in the
valuation of medical practices, who
concluded that the after tax value of the
practice was approximately $31,000. . . .
It was his opinion that the practice had
no goodwill, goodwill being “evident if
he had earnings in excess of averageearnings and he was able to transfer
those earnings to a buyer. As of January
31, 2000, the market for his practice
would be almost non-existent”. The court
finds that [Keller's] consideration of
tax consequences is speculative, and an
improper consideration in valuation of
the practice. The court finds further
that the write-off ratios and the
deductions for collection, used by Mr.
Keller were excessive.
7. Defendant presented a valuation of the PA
prepared by Mr. Foster Shriner, an expert
in valuation of medical practices. He
valued the PA at $180,165, by using the
capitalization of excess earnings
method. . . .
8. Mr. Shriner checked his valuation against
comparable market data, and used the
Justification of Purchase test, both of
which supported his conclusions as to the
value of the PA.
9. At trial, Mr. Shriner testified that the
data he used, had been identified as
representing eleven months. At trial,
Mr. Keller testified that it was really
data representing twelve months. The
court finds that an adjustment to the
valuation is necessary, and should be
11/12ths of the amount calculated by
Foster Shriner. Mr. Shriner also
testified that he had not considered a
$10,103 loss, and it appeared that the
loss should have been considered. The
court finds that after considering the
$10,103 loss, and considering the
additional month of time (above), the
value of the business is $155,048. The
court has considered that the business is
a relatively new one, but finds the
valuation prepared by Mr. Shriner, as
corrected, represents the true net value
of the practice.
We conclude that these findings sufficiently set forth the court's
careful consideration of the valuations presented by both parties'
experts. The trial court found that Shriner's valuation, based onthe capitalization of excess earnings method, would correctly
represent the PA's true net value if two adjustments were made.
The trial court's adoption of Shriner's method of valuing the PA
was supported by the evidence. We agree, however, that the trial
court erred in finding of fact 9 in adjusting Shriner's valuation
of simply multiplying that figure by 11/12 and then deducting
$10,103.00. Nevertheless, if the errors identified by the trial
court are corrected mathematically using Shriner's formula, the
value of the PA exceeds the value set by the trial court. Any
error in the trial court's adjustments was, therefore, harmless to
plaintiff.
II.
Next, plaintiff argues the trial court erred in determining
there was a marital interest in the home he purchased prior to the
marriage. We disagree.
In equitable distribution cases, the trial court is required
to identify and classify all property as marital or separate.
McIver v. McIver, 92 N.C. App. 116, 123-24, 374 S.E.2d 144, 149
(1988). “In some instances, however, the property may have a dual
character of both marital and separate, and in that event, the
trial court's classification” of the property must be determined
using the source of funds analysis.
Ciobanu v. Ciobanu, 104 N.C.
App. 461, 464, 409 S.E.2d 749, 751 (1991). This analysis
essentially provides that “the acquisition of property is an
on-going process which 'does not depend upon inception of title but
upon monetary or other contributions made by one or both of theparties.'”
Id. (citation omitted). Thus, with respect to a
spouse's separate property, “the marital estate shares in the
increase in value of separate property 'it has proportionately
“acquired” in its own right' through financial, managerial, and
other contributions, but does not share in the increase in value of
separate property acquired through passive appreciation, such as
inflation.”
Id. at 465, 409 S.E.2d at 752 (citation omitted).
Based on the evidence presented in the case
sub judice, the
trial court found that marital funds had been used to reduce the
mortgage on plaintiff's separate property, i.e. the home, by
$10,730.00 and that improvements made to that home during the
marriage were primarily responsible for its increase in value by
$11,000.00. The court further found that both financial
contributions established a marital interest in the home of
approximately $21,794.00. Because these findings are supported by
competent evidence, we cannot conclude the court abused its
discretion in determining that there was a marital interest in this
home.
III.
Plaintiff also argues the trial court failed to properly
consider and make findings regarding tax consequences as a
distributional factor when it determined equal division was
equitable. We disagree.
In North Carolina, a trial court shall consider all of the
distributional factors listed in N.C. Gen. Stat. § 50-20(c) (2001)
when determining whether an equal division is equitable. One suchfactor to be considered is the “tax consequences to each party.”
N.C. Gen. Stat. § 50-20(c)(11). A trial court abuses its
discretion when it fails to consider any of the distributional
factors for which the parties offered evidence and make findings of
fact regarding them.
See Armstrong, 322 N.C. at 405, 368 S.E.2d at
600.
Here, plaintiff's expert offered evidence relating to “the
after tax value of the practice [being] approximately $31,000.”
After considering the evidence, the trial court found that value to
be “speculative, and an improper consideration in the valuation of
the [PA].” Further consideration of tax consequences by the trial
court was unnecessary because (1) no evidence was offered as to any
anticipated sale of the PA (or the commercial property in
Hendersonville), and (2) the court did not order the liquidation of
property as part of the distribution. Thus, there was no abuse of
discretion by the trial court.
IV.
Plaintiff argues the trial court erred in failing to allow him
to cross-examine Shriner as to whether the valuation methodology
Shriner used in other cases was consistent with his testimony in
the present case. We disagree.
Our Supreme Court has specifically declined to set precise
limits for the scope of cross-examination for impeachment,
requiring only that “'(1) the scope thereof is subject to the
discretion of the trial judge, and (2) the questions must be asked
in good faith.'”
State v. Harrington, 78 N.C. App. 39, 43, 336S.E.2d 852, 854 (1985) (citation omitted). Nevertheless, with
respect to the value of property, the Court has held that “[t]he
impeachment purpose of the cross-examination is satisfied when the
witness responds to a question probing the scope of his knowledge.
Any further inquiry which states or seeks to elicit the specific
values of property dissimilar to the [property] subject to the suit
is at best mere surplusage.”
Power Co. v. Winebarger, 300 N.C. 57,
64, 265 S.E.2d 227, 232 (1980). The questions asked by plaintiff
on cross-examination of Shriner regarding the valuation methodology
he used in other cases and the values he came up with in those
cases were “mere surplusage” and not relevant to the case
sub
judice. Thus, the trial court did not abuse it discretion in
limiting the scope of plaintiff's cross-examination.
V.
Finally, plaintiff argues the trial court erred in charging
him twice for the value of a $2,500.00 computer when making its
equitable distribution award. However, as plaintiff recognizes in
his brief to this Court, there were actually two computers at issue
-- one computer valued at $2,500.00 that defendant bought prior to
the marriage and another computer that defendant bought using a
check from the PA in the amount of $3,200.00. The trial court
identified defendant's computer as a marital asset and assigned it
to plaintiff. The other computer was identified as a tangible
asset of the PA. The court's consideration of two separate
computers does not support plaintiff's argument that he was charged
twice for the same computer; thus, his argument is without merit. In conclusion, the trial court did not abuse it discretion in
determining the parties were entitled to an equal distribution of
their assets.
Affirmed.
Chief Judge EAGLES and Judge GEER concur.
Report per Rule 30(e).
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