COURT OF APPEALS OF VIRGINIA
Present: Judges Benton, Clements and Senior Judge Hodges Argued at Richmond, Virginia
NATHAN D. ZASLER MEMORANDUM OPINION* BY v. Record No. 0564-02-2 JUDGE JAMES W. BENTON, JR. SEPTEMBER 9, 2003 CAROL P. ZASLER
FROM THE CIRCUIT COURT OF HENRICO COUNTY George F. Tidey, Judge
Terrence R. Batzli (Ann Brakke Campfield; Barnes & Batzli, P.C., on briefs), for appellant.
Susanne L. Shilling (Shilling & Associates, on brief), for appellee.
Nathan D. Zasler appeals from a domestic relations final
decree and contests awards to his wife, Carol P. Zasler, of
marital property, spousal support, and fees for her expert witness
and her attorney. For the reasons that follow, we affirm the
decree.
I. Background
The husband and the wife married in 1993 and separated in
2000. Shortly after their separation, the husband commenced this
divorce action, alleging adultery, cruelty, and constructive
desertion. The wife filed an answer and a cross-bill denying
* Pursuant to Code § 17.1-413, this opinion is not designated for publication. adultery and alleging the husband assaulted her and threatened the
mental health of their family. The trial judge determined that
neither party was entitled to a divorce based on fault grounds,
but he ruled that they could argue those issues as having a
bearing on the distribution of the property. On February 12,
2001, the trial judge entered a decree a divorce on the ground
that the parties had lived separate and apart for a period in
excess of one year.
At the conclusion of numerous hearings concerning the
remaining issues, the trial judge entered a final order on
February 7, 2002 that granted custody of the children to the
wife, provided visitation rights to the husband, and ordered the
husband to pay $2,665 per month child support. In addition and
germane to this appeal, the final order valued Concussion Care
Centre of Virginia, Ltd. at $560,000 and granted the wife 40% of
its value, valued Tree of Life Services, Inc. at $190,000 and
granted the wife 40% of its value, valued Tree of Life, LLC at
$450,000 and granted the wife 40% of its value, ordered the
jointly owned farm to be sold and divided the proceeds equally
between the parties, distributed the remaining marital assets
equally, apportioned the parties' tax liability based on their
respective taxable incomes, apportioned marital debts such that
husband bore responsibility for 60% of the debt, ordered the
husband to pay the wife $466,939.74 for her share of the marital
property based on the above distribution, ordered the husband to
- 2 - pay $4,000 per month for spousal support, and ordered the
husband to pay $45,000 for the wife's attorney's fees and
$10,000 for her expert witnesses' fees. The husband appeals
various aspects of this final decree.
II. Standard of Review
On appeal, we review the evidence in the light most
favorable to the party prevailing below and grant all reasonable
inferences fairly deducible from that evidence. Rogers v.
Yourshaw, 18 Va. App. 816, 818, 448 S.E.2d 884, 885 (1994).
Moreover, we give great weight to the factual findings of the
trial judge when those findings are "based upon the judge's
evaluation of the testimony of witnesses heard ore tenus."
Gottlieb v. Gottlieb, 19 Va. App. 77, 83, 448 S.E.2d 666, 670
(1994). We will not overturn a final decree if the judge's
findings are "supported by substantial, competent, and credible
evidence." Id.
III. Valuation
Code § 20-107.3(A) provides that the trial judge, "upon
request of either party, shall determine the . . . value of all
property, real or personal, tangible or intangible, of the
parties." Although a trial judge may not arbitrarily reject
credible evidence of value, Bowers v. Bowers, 4 Va. App. 610,
618, 359 S.E.2d 546, 551 (1987), we have recognized in Zipf v.
Zipf, 8 Va. App. 387, 395, 382 S.E.2d 263, 268 (1989), that a
- 3 - trial judge may select a value within a range of conflicting
opinions.
A. Concussion Care Centre of Virginia, Ltd.
The husband contends the trial judge erred in determining
the value of Concussion Care Centre of Virginia, Ltd. He argues
that the trial judge should have relied on the valuation of his
expert rather then the wife's expert. He further argues that
even if it was not an error for the trial judge to rely on the
wife's expert's valuation, the trial judge's adjustments to that
value were error. Lastly, he argues that the trial judge's
determination of personal goodwill for the husband in valuing
the corporation was inadequate.
The husband, a physician, started Concussion Care in 1994
to provide consulting services, clinical care, and physical
therapy/psychological treatment primarily related to brain
injuries. Although each party produced an expert to establish
the value of Concussion Care, the experts gave extensive
deposition testimonies with "divergent valuations." The record
contains each expert's valuation report with documentation.
William R. Dacey, the wife's expert, testified that his
"approach [was] to determine an estimate of value of [the
husband's] common stock interests, which would provide a fair
and reasonable return on investments to an investor or owner, in
view of the facts available . . . as of the valuation date."
Dacey's "opinion is based on, among other things, [his] estimate
- 4 - of the risks facing [the husband's practices] and the return on
investment that would be required on alternative investments
with similar levels of risk."
After describing various methods of valuation, Dacey
testified that the value of Concussion Care should be determined
by the capitalization of historical income method. Applying
this method of valuation, he opined that the value for
Concussion Care as of December 31, 2000, exclusive of a premium
or discount for control or marketability, was $790,585. Because
the husband's 2000 income tax return indicates he did not pay
himself a salary from Concussion Care, Dacey adduced the income
by determining the cost to replace the husband "with a
physiatrist who was earning the median compensation in the
eastern geographic region of the United States for a physiatrist
as reported in . . . [a] Physician Compensation Book."
Concluding that the median compensation for a physician who
could replace the husband was $143,736, Dacey "divided that
salary between Concussion Care and Tree of Life Services, Inc.,
[a related entity the husband operated,] in accordance with
their gross revenues." Consequently, from Concussion Care's
income of $227,143, Dacey subtracted $56,057 as salary for the
husband. Dacey then added $3,255 of personal expenses from the
husband's corporate credit cards. Dacey testified his valuation
used commercial goodwill but did not take into account personal
goodwill because of the husband's questionable personal life and
- 5 - because the husband is not rated by his peers as one of the best
of his speciality in this geographic area.
The husband's expert, William D. Stephens, used the net
asset value method to determine the value of Concussion Care.
Stephens explained he did not use the income value method
because, even though the husband received money in the form of
shareholder loans, the husband did not pay himself salaries in
1999 and 2000. Stephens further opined that, due to the
consulting component of the business, it would be difficult to
replace the husband with another physician. Therefore, he
decided the value of the company must take into account the
husband's salary, not a replacing physician's. In deciding the
value of the husband's unpaid salary, Stephens relied on an
analysis of the husband's income potential generated by a
placement agency to support his conclusion that the husband
should have been paid $250,000 for the year 2000. Stephens
concluded that the fair value of the business as of December 31,
2000 was $471,100. After subtracting personal goodwill, which
he deemed to be the husband's separate property, Stephens
estimated the total marital value in the business to be
$291,129.
The valuation issue in this case involved a classic battle
of experts. In his July 31, 2001 letter opinion, the trial
judge noted the "great disparity" in the valuations and the
difficulty this disparity caused in making an equitable
- 6 - distribution. The trial judge explained, however, the method by
which he arrived at the $560,000 valuation. From Dacey's
valuation of $790,585, the trial judge deducted $130,000 for
personal goodwill. He also added $100,000 to the salary figure
Dacey used. In short, the trial judge accepted Dacey's
valuation as more persuasive, but made two adjustments to it
based on his view of the evidence.
The record establishes that the trial judge considered the
deposition testimony of the two experts and thoroughly evaluated
those experts' opinions. "We defer to the trial [judge]'s
evaluation of the credibility of the witnesses." Shackelford v.
Shackelford, 39 Va. App. 201, 208, 571 S.E.2d 917, 920 (2002)
(citing Moreno v. Moreno, 24 Va. App. 190, 195, 480 S.E.2d 792,
795 (1997)). He was not required to reject Dacey's valuation
merely because the husband believed his expert's "evidence might
be more accurate, convincing, desirable, or persuasive."
Bowers, 4 Va. App. at 618, 359 S.E.2d at 551. In addition, the
trial judge was not prohibited from making adjustments to the
expert's valuation in order to select a value within a range of
conflicting opinions. See Zipf, 8 Va. App. at 395, 382 S.E.2d
at 268. In view of the evidence before the trial judge, we
cannot say the adjustments the trial judge made were arbitrary.
Therefore, we hold that the trial judge's findings are supported
by credible evidence and that the judge did not err by making
adjustments to a valuation he found more persuasive.
- 7 - B. Tree of Life, LLC
For similar reasons, we reject the husband's contention
that the trial judge erred in valuing the Tree of Life, LLC,
which the husband started in 1997. Tree of Life, LLC owns real
estate and a building and has no employees. Its property is
leased to Tree of Life Services, Inc. which is a related entity
that provides transitional rehabilitation services as well as
long-term living assistance services to people with brain
injury.
Dacey applied the asset value method to determine the value
of Tree of Life, LLC, and he opined that its value was $558,669.
Because the husband's father owns 1% of this entity, Dacey
valued the marital portion at $553,082. Dacey explained he
"based the value upon an adjustment to the book value for the
building and improvements and the land, and [he] relied upon an
appraisal by . . . an independent third party, showing the value
of the land and the buildings to be $1,200,000."
Stephens likewise used the asset value method to determine
the value of Tree of Life, LLC. Relying on a different
appraisal, Stephens determined that the value was $859,663.
Subtracting $834,290 for liabilities, which included unpaid
salary to the husband and money the husband received as
shareholder loans, Stephens concluded that the fair value of
husband's 99% interest in Tree of Life, LLC was $25,119.
- 8 - The trial judge found Dacey's valuation method more
persuasive but reduced the value to $450,000 because of evidence
concerning a "change in acreage in the land." We defer to the
trial judge's evaluation of the two expert valuations. See
Shackelford, 39 Va. App. at 208, 571 S.E.2d at 920. The
evidence does not support a conclusion that the trial judge
erred by accepting Dacey's opinion or in adjusting Dacey's
valuation.
IV. Dissipation of Marital Assets
The husband contends the trial judge erred in failing to
find that the wife had dissipated marital assets and that she
wrongfully sold the husband's separate property. The trial
judge made no specific rulings on the issues. The evidence,
however, does not prove the occurrence of dissipation or that
the wife sold husband's separate property.
We have held that "[d]issipation occurs 'where one spouse
uses marital property for his own benefit and for a purpose
unrelated to the marriage at a time when the marriage is
undergoing an irreconcilable breakdown.'" Clements v. Clements,
10 Va. App. 580, 586, 397 S.E.2d 257, 261 (1990). As we noted
in Clements, "a majority of courts have held that the use of
funds for living expenses while the parties are separated does
not constitute dissipation." Id. at 587, 397 S.E.2d at 261.
Evidence proved that between the date of separation and the
first support hearing in May 2000, the wife sold a number of
- 9 - items to support herself and the children because she was not
receiving support from the husband. The wife sold her
"engagement ring and quite a bit of jewelry," her wedding ring,
a Japanese block art, five horses, and a horse trailer. The
wife borrowed $55,000 from her insurance policy and allowed
timbering on her farm land in exchange for $3,500. The wife
produced a ledger to show that most proceeds from the sales were
spent on ordinary household expenses.
Although the husband testified about expenses he paid, the
record contains no contrary evidence to disprove that the wife
used these funds for support. Viewed in the light most
favorable to the wife, who prevailed at trial, the evidence
tended to prove the funds were used for living expenses and does
not prove the wife sold marital property for her "own benefit
and for a purpose unrelated to the marriage." Clements, 10
Va. App. at 586, 397 S.E.2d at 261.
The final order does not specifically address whether the
wife sold husband's separate property; however, the final order
distributed the marital property as if the allegation of selling
separate property was found untrue. Although evidence proved
the "Japanese woodblock prints" were purchased prior to the
couple's date of marriage, viewed in the light most favorable to
the wife, no evidence proved the property belonged solely to the
husband. The person who sold the prints testified that both
husband and wife were present when the item was purchased.
- 10 - V. Valuation Date
The husband contends the trial judge used an improper date
to value the properties. He argues the trial judge erred by not
accepting December 31, 1999, a date that is close to the
separation date, as an alternative valuation date.
In pertinent part, Code § 20-107.3(A) provides as follows:
The court shall determine the value of any such property as of the date of the evidentiary hearing on the evaluation issue. Upon motion of either party made no less then twenty-one days before the evidentiary hearing the court may, for good cause shown, in order to attain the ends of justice, order that a different valuation date be used.
(Emphasis added).
December 31, 2000, the date the trial judge accepted as the
valuation date, was closer to the evidentiary hearing dates,
which were June 22, 2001, July 30, 2001, and November 5, 2001.
Because the record fails to establish as a matter of law a good
cause to order a different valuation date, we hold the trial
judge properly followed the statute and did not err in choosing
a date that is closer to the date of the hearing.
Although "[o]ne recognized justification for altering the
evaluation date is a showing of dissipation of marital assets,"
Smith v. Smith, 18 Va. App. 427, 430, 444 S.E.2d 269, 272
(1994), we have already noted that the evidence failed to prove
the wife dissipated marital assets. Hence, the trial judge did
not err in selecting a date closer to the evidentiary hearings
- 11 - as the appropriate time to determine value of the businesses.
See Kaufman v. Kaufman, 7 Va. App. 488, 499, 375 S.E.2d 374, 380
(1988).
VI. Inclusion of Shareholder Loans as Marital Debt
During the marriage, both husband and wife attempted to
"maximize cash flow" by taking shareholder loans from their
corporations in lieu of drawing salary. The husband contends
the trial judge erred in failing to consider certain shareholder
loans as marital debt when he included them as assets in
valuating the corporations. He argues the trial judge should
have "either included [the loans] as both corporate assets and
corresponding personal debts or excluded [the loans] as both
corporate assets and personal debts."
At a hearing, the husband's attorney argued the wife should
be responsible for repaying 40% of the shareholder loans because
those loans were included in the valuations of the corporations,
of which she received a 40% interest. The wife's attorney
argued that by awarding the wife only 40% of the value of the
companies, the trial judge did take into account the shareholder
loans. After hearing the arguments, the judge ruled: "the
equitable distribution of the property is made extremely
difficult because of the divergent valuations and the lack of
cooperation by anyone in narrowing the issues. As a result I
made my decision based on what I thought the property interest
- 12 - of each party was." In addition, the trial judge ruled: "I
accept the [wife]'s solution with regard to the debt."
The judge clearly stated he based his decision on what he
found to be the property interest of each party. By "accepting
the [wife]'s solution with regard to the debt," we conclude the
trial judge awarded the wife only 40% rather than a larger share
of the companies as a means of considering her share of the
debt. We find no error.
VII. Spousal Support
A. Adultery
"One who alleges adultery has the burden of proving it by
clear and convincing evidence." Seemann v. Seemann, 233 Va.
290, 293, 355 S.E.2d 884, 886 (1987) (citation omitted).
Although this evidence need not be unequivocal, it must be such
that "'will produce in the mind of the trier of facts a firm
belief or conviction as to the allegations sought to be
established.'" Id. at 293 n.1, 355 S.E.2d at 886 n.1 (citation
omitted). Thus, the Supreme Court has held that "[s]trongly
suspicious circumstances are inadequate" and that "[c]are and
circumspection should accompany consideration of the evidence."
Painter v. Painter, 215 Va. 418, 420, 211 S.E.2d 37, 38 (1975)
(citation omitted). "While a court's judgment cannot be based
upon speculation, conjecture, surmise, or suspicion, adultery
does not have to be proven beyond all doubt." Coe v. Coe, 225
Va. 616, 622, 303 S.E.2d 923, 927 (1983). The husband contends
- 13 - the wife should not be awarded spousal support because the
evidence was sufficient to prove she committed adultery.
The deposition testimony established that the wife had an
adulterous relationship in 1996 before she and the husband moved
to Virginia. The husband agreed to condone the wife's adultery
based on several conditions, including the wife's promise to be
faithful. The wife admitted that since her adultery in 1996,
she engaged in kissing incidents with a deputy sheriff and on
some days paged him twenty times per day. Although the wife
denied a romantic interest in the deputy sheriff and described
their relationship as "very good friends," she admitted that she
and the deputy sheriff had multiple "heavy duty make-out
sessions" in which they "fondled and made out." The evidence
further proved the wife urged the deputy sheriff to leave the
state "before you can be deposed." In that same letter, she
implored, "[i]f you ever cared for me at all, especially when
you were in bed with me and promising to love me forever no
matter what."
The deputy sheriff confirmed those events and added that
the wife hired him at her farm and gave him gifts from time to
time. He testified, however, that he and the wife engaged in
sexual intercourse prior to the date she separated from the
husband and that the wife had informed him of her previous
adulterous affair.
- 14 - The trial judge ruled that there was "not . . . sufficient
evidence of an adulterous affair which would revive the adultery
committed by [the wife] in 1995-96 and later condoned by [the
husband]." He also ruled that "[w]hat ever occurred at the farm
[with the deputy sheriff] did not lead to the breakup of the
marriage." Notwithstanding the weighty burden of proof to
establish adultery, the trial judge's holding is contrary to the
deposition evidence. The evidence proved the relationship
between the wife and the deputy sheriff was more than "strongly
suspicious" and is capable of leading the most "guarded"
reasonable person to the conclusion of adultery. Haskins v.
Haskins, 188 Va. 525, 531, 50 S.E.2d 437, 439 (1948).
B. Manifest Injustice and Imputation of Income
Although we agree with the husband that the trial judge
erred in finding the evidence insufficient to prove adultery,
the trial judge made an alternative finding that it would be
"manifestly unjust" to deny the wife spousal support. He ruled
that the wife's conduct did not lead to the breakup of the
marriage and that "there is great disparity between the incomes
of the parties which would make it grossly inequitable and
manifestly unjust."
Code § 20-107.1(B) provides that "no permanent maintenance
and support shall be awarded from a spouse if there exists in
such spouse's favor a ground of divorce under the provisions of
- 15 - subdivision (1) of § 20-91," which includes adultery. But the
statute's bar is subject to the following exception:
However, the court may make such an award notwithstanding the existence of such ground if the court determines from clear and convincing evidence, that a denial of support and maintenance would constitute a manifest injustice, based upon the respective degrees of fault during the marriage and the relative economic circumstances of the parties.
Code § 20-10.1(B). Thus, when a trial judge finds manifest
injustice and awards support based on "respective degrees of
fault during the marriage and the relative economic
circumstances of the parties," we will uphold the award if the
record supports the finding by clear and convincing evidence.
Congdon v. Congdon, 40 Va. App. 255, 266, 578 S.E.2d 833, 838
(2003).
On the "respective degrees of fault" factor, evidence
proved that both parties contributed to the breakup. The trial
judge's belief that both parties were at fault is evident in the
judge's refusal to grant either party a divorce based on fault
grounds. Even though the trial judge did not enumerate the
various aspects of fault attributed to the parties, the record
is replete with evidence of these events. The wife committed
adultery; the husband used cocaine on numerous occasions during
the marriage and induced the wife to join him. The husband also
was arrested for assaulting the wife with a knife during events
that led to their separation. It is obvious from the record
- 16 - that the judge considered the respective degrees of fault when
he ruled that "[w]hat ever occurred at the farm [between the
wife and the deputy sheriff] did not lead to the breakup of the
marriage."
Evidence likewise proved the trial judge weighed the
relative economic circumstances of the parties when awarding
spousal support. The trial judge determined the wife's maximum
salary to be $48,000. The trial judge also considered the
husband's economic circumstances and determined his annual
income to be $300,000. Although the husband argues his annual
income is lower then that figure, his income history reveals
that he earned $258,963 in 1996, $300,177 in 1997, and $325,000
in 1998 and, thus, supports the trial judge's determination.
"'Where the record contains credible evidence in support of
the finding made by that court, we may not retry the facts or
substitute our view of the facts for those of the trial court.'"
Calvin v. Calvin, 31 Va. App. 181, 183, 522 S.E.2d 376, 377
(1999) (citation omitted). The record supports the trial
judge's findings of clear and convincing evidence. We hold,
therefore, that the trial judge did not err in finding, by clear
and convincing evidence, that denying spousal support would
constitute a manifest injustice based upon the respective
degrees of fault attributable to the parties as well as their
disparate financial circumstances.
- 17 - The trial judge ordered the husband to pay the wife $4,000
per month as spousal support. "'Whether and how much spousal
support will be awarded is a matter of discretion for the trial
court.'" Northcutt v. Northcutt, 39 Va. App. 192, 196, 571
S.E.2d 912, 914 (2002) (quoting Barker v. Barker, 27 Va. App.
519, 527, 500 S.E.2d 240, 244 (1998)). The evidence proved the
wife accepted employment as a nurse at an annual salary of
$48,000. In view of the evidence concerning the operation of
the various corporate entities the parties operated and the
economic risk to which the wife may have been exposed if she
operated her own business, the trial judge did not err in
refusing to impute income to the wife. The record supports the
view that in "look[ing] to current circumstances and what the
circumstance will be 'within the immediate or reasonably
foreseeable future,' not to what may happen in the future,"
Srinivasan v. Srinivasan, 10 Va. App. 728, 735, 396 S.E.2d 675
(1990), the wife was earning at her maximum capability.
"'In fixing the amount of the spousal support award, . . .
the court's ruling will not be disturbed on appeal unless there
has been a clear abuse of discretion. We will reverse the trial
court only when its decision is plainly wrong or without
evidence to support it.'" Moreno, 24 Va. App. at 194-95, 480
S.E.2d at 794 (quoting Gamble v. Gamble, 14 Va. App. 558, 574,
421 S.E.2d 635, 644 (1992)). We hold that the trial judge did
- 18 - not abuse his broad discretion in determining support based upon
the parties' income and the evidence in the record.
VIII. Tax Liability
"Under Code § 20-107.3(C), the trial court had the
'authority to apportion and order the payment of the debts of
the parties.'" Alphin v. Alphin, 15 Va. App. 395, 403, 424
S.E.2d 572, 577 (1992) (citation omitted). "Absent an abuse of
discretion, 'the trial judge's determination will not be
reversed on appeal.'" Howell v. Howell, 31 Va. App. 332, 350,
523 S.E.2d 514, 523 (2000) (citation omitted).
Among the enumerated factors that a trial judge may
consider when apportioning marital debt are: contributions of
each party, monetary and nonmonetary, to the well-being of the
family; contributions of each party, monetary and nonmonetary,
in the acquisition and care and maintenance of such marital
property; the circumstances and factors that contributed to the
dissolution of the marriage; how and when specific items of such
marital property were acquired; and such other factors as the
court deems necessary or appropriate to consider in order to
arrive at a fair and equitable monetary award. Code
§ 20-107.3(E). Many of these factors are applicable to this
case.
To prevent an inequity, the trial judge considered the
relevant factors of Code § 20-107.3(E) and apportioned the tax
liability in direct proportion to the parties' taxable income
- 19 - for the years involved. The ruling was both logical and within
the sound discretion of the trial judge.
IX. Attorney's and Expert's Fees
The husband contends the trial judge erred in granting
wife's request for attorney's fees and expert's fees. As we
have consistently held, however, "[a]n award of attorney's fees
is a matter submitted to the trial court's sound discretion and
is reviewable on appeal only for an abuse of discretion. The
key to a proper award of counsel fees is reasonableness under
all the circumstances." Brooks v. Brooks, 27 Va. App. 314, 319,
498 S.E.2d 461, 463-64 (1998) (citations omitted). The record
does not establish that the judge abused his discretion.
Therefore, we affirm his order granting attorney's and expert's
fees to the wife.
X.
For these reasons, we affirm the judgment.
Affirmed.
- 20 -