Timothy B. Hopper v. Angela C. Hopper (mem. dec.)

• Court: Indiana Court of Appeals
• Decided: August 24, 2016
• Docket: 65A01-1510-DR-1603
• Status: Published

Opinion

MEMORANDUM DECISION Pursuant to Ind. Appellate Rule 65(D), FILED this Memorandum Decision shall not be Aug 24 2016, 9:17 am regarded as precedent or cited before any CLERK court except for the purpose of establishing Indiana Supreme Court Court of Appeals the defense of res judicata, collateral and Tax Court

estoppel, or the law of the case.

ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE Matthew J. McGovern Thomas A. Massey Anderson, Indiana Evansville, Indiana

IN THE COURT OF APPEALS OF INDIANA

Timothy B. Hopper, August 24, 2016 Appellant-Defendant, Court of Appeals Case No. 65A01-1510-DR-1603 v. Appeal from the Posey Circuit Court Angela C. Hopper, The Honorable James M. Appellee-Plaintiff. Redwine, Judge The Honorable S. Brent Almon, Special Judge Trial Court Cause No. 65C01-1405-DR-192

Altice, Judge.

Case Summary

[1] Timothy Hopper and Angela Hopper were married in 1999 and had one child.

In 2014, Angela filed a petition for dissolution of marriage. The trial court Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 1 of 13 dissolved the parties’ marriage, determined custody of the minor child, set child

support, valued the parties’ assets, and divided the marital estate. On appeal,

Timothy challenges the trial court’s valuation of his business for purposes of

dividing the marital estate. Timothy presents two issues for our review:

1. Did the trial court abuse its discretion in valuing the business at $200,000?

2. Did the trial court rely on impermissible hearsay evidence in valuing the business?

Angela cross-appeals, asserting that the trial court abused its discretion in

awarding her only $3000 toward her attorney fees.

[2] We affirm.

Facts & Procedural History

[3] The parties were married on January 15, 1999. In September 2009, Timothy

and a business partner purchased Carter Plumbing and Heating, LLC, (Carter

Plumbing) for $167,500. The business purchase included all intangibles such

as, but not limited to, the exclusive rights to use the name Carter Plumbing and

the goodwill associated with the business through execution of a covenant not

to compete by the seller. In 2012, Timothy bought out his business partner’s

fifty-percent interest in Carter Plumbing for $10,000. As part of the purchase

agreement, Timothy’s business partner signed a non-compete agreement.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 2 of 13 [4] Angela filed a verified petition for dissolution of marriage on April 14, 2014.

During the pendency of the divorce proceedings, Timothy hired an appraiser,

George Pritchett, to value all tangible and intangible assets of Carter Plumbing.

As directed by Timothy, Pritchett used April 14, 2014 as the date upon which to

base his appraisal. As of that date, Carter Plumbing’s balance sheet reflected an

ownership equity1 of negative $43,460.

[5] In addition to considering the ownership equity, Pritchett collected various

information and industry data, which informed him that approximately seventy

percent of the selling price of similar businesses represented the value of

intangibles and non-compete agreements. Pritchett also took into account that

Timothy stated he would not sign a covenant not to compete. He therefore did

not include personal goodwill in his calculation. Based on the information he

compiled, Pritchett prepared an appraisal report in which he concluded that, if

sold, Carter Plumbing had a nominal value of $1,000. Pritchett opined that

even though Carter Plumbing had a negative ownership equity, a potential

buyer might pay $1,000 for use of the name Carter Plumbing.

[6] In contrast to the valuation provided by Pritchett, Angela presented evidence

that Timothy provided his bank with a verified personal financial statement,

dated August 25, 2014, in which he asserted that Carter Plumbing was an asset

valued at $200,000. Timothy attached a balance sheet dated that same day that

1 Pritchett explained that ownership equity is the value of the assets minus the value of the liabilities. Ownership equity does not include a value for intangibles.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 3 of 13 showed Carter Plumbing had an ownership equity of $197,315.72.2 Angela also

presented evidence that in 2013 Timothy retained Strategic Tax Advisors (STA)

to provide tax strategies and business recommendations for Carter Plumbing

and paid them $15,000 for the services provided. STA prepared a report

wherein it was noted that Timothy informed STA that Carter Plumbing had a

value of $400,000.

[7] Finally, Angela presented the expert testimony of Jerry Peters, a Certified

Public Accountant, who noted that Carter Plumbing had a substantial increase

in ownership equity from April 14, 2014, the date used by Pritchett in his

appraisal, and August 25, 2014. Specifically, Peters noted that Carter

Plumbing’s ownership equity increased from negative $43,460 to positive

$197,315. In subsequent months, the balance sheet continued to reflect that the

ownership equity for Carter Plumbing remained steady around $200,000.

Peters acknowledged that his analysis of Carter Plumbing’s balance sheets was

not a valuation of the worth of the business as it did not include a value for

intangible assets (including goodwill).

[8] In contrast to Peters’s testimony, Timothy presented the August 25, 2014

balance sheet to Pritchett. Pritchett testified that some of the entries on the

2 During discovery, Angela requested numerous times that Timothy provide her with financial information pertaining to Carter Plumbing and Timothy did not comply with those discovery requests. Angela obtained Timothy’s personal financial statement and accompanying balance sheet through her own efforts. With the court’s intervention during a hearing, Timothy provided to Angela additional financial information in the form of monthly balance sheets for Carter Plumbing from September 2014 through March 2015.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 4 of 13 balance sheet were “probably” accounting-related entries that had not been

“marked to market.” Transcript Day 1 at 57. Pritchett further testified that if he

had used the August 25, 2014 balance sheet for his valuation, he would have

valued Carter Plumbing at between $40,000 and $50,000.

[9] The final hearing was held on May 8, 2015, and July 29 through July 30, 2015.

The trial court issued its final decree of dissolution of marriage on September

16, 2015, and a corrected decree on September 17, 2015. In the corrected

decree, the trial court dissolved the parties’ marriage, determined custody of the

parties’ only child, set child support, valued the parties’ assets, and divided the

marital estate.

[10] With respect to the property division, the trial court valued Carter Plumbing at

$200,000 and awarded the business in its entirety to Timothy, bringing the

value of his share of the marital estate to $237,580.83. The total value of

Angela’s share was $49,684.98. Finding that the marital estate should be

divided equally, the trial court ordered Timothy to make an equalization

payment of $93,911.93 to Angela.3 The trial court also ordered Timothy to pay

$3000 of Angela’s attorney fees at a rate of $250 per month. Timothy now

3 The trial court allowed Timothy to pay this amount at a rate of $5000 per quarter with statutory interest accruing at 8% per annum, with the first payment to commence on January 15, 2016. The trial court also awarded Angela a lien against Carter Plumbing and certain rental property until Timothy paid the equalization payment in full.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 5 of 13 appeals and Angela cross-appeals. Additional facts will be provided as

necessary.

Discussion & Decision

[11] Where, as here, the trial court enters findings and conclusions sua sponte, the

findings control only with respect to the issues they cover, while a general

judgment standard applies to issues on which there are no findings. In re

Marriage of Sutton, 16 N.E.3d 481, 484-85 (Ind. Ct. App. 2014). We affirm a

general judgment entered with findings if it can be sustained on any legal theory

supported by the evidence. Hurt v. Hurt, 920 N.E.2d 688, 691 (Ind. Ct. App.

2010). When the court has made findings of fact and conclusions thereon, we

review those findings and conclusions using a clearly erroneous standard.

Sutton, 16 N.E.3d at 485. A finding of fact is clearly erroneous when the record

contains no facts to support the findings, either directly or by inference. Hurt,

920 N.E.2d at 691. “A judgment is clearly erroneous if it applies the wrong

legal standard to properly found facts.” Id. In conducting our review, we first

determine whether the evidence supports the findings; then we determine

whether the findings support the judgment. Id.

1. Business Valuation

[12] Timothy argues that the trial court abused its discretion by assigning a value of

$200,000 to Carter Plumbing. The trial court’s valuation of marital assets is

within its sound discretion and will only be disturbed for an abuse of discretion.

Morey v. Morey, 49 N.E.3d 1065, 1069 (Ind. Ct. App. 2016) (citing In re Marriage

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 6 of 13 of Nickels, 834 N.E.2d 1091, 1095 (Ind. Ct. App. 2005)). As long as the

evidence is sufficient and reasonable inferences support the valuation, an abuse

of discretion does not occur. Id. We will not weigh the evidence and will

consider the evidence in the light most favorable to the judgment. Id.

“Although the facts and reasonable inferences might allow for a different

conclusion, we will not substitute our judgment for that of the trial court.”

Nickels, 834 N.E.2d at 1095 (quoting Bizik v. Bizik, 753 N.E.2d 762, 766 (Ind.

Ct. App. 2001), trans. denied).

[13] During the final hearing, Timothy and Angela both put forth evidence

pertaining to the value of Carter Plumbing. The trial court ultimately

determined “the most credible value of Carter Plumbing to be $200,000.00,”

which value Timothy assigned to Carter Plumbing in the August 25, 2014

verified personal financial statement he submitted to his bank.4 Appellant’s

Appendix at 103. This value corresponded with an August 25, 2014 balance

sheet for Carter Plumbing that showed Carter Plumbing had an ownership

equity of $197,315.

4 Generally, the marital pot closes on the date the dissolution petition is filed. Smith v. Smith, 854 N.E.2d 1, 6 (Ind. Ct. App. 2006). However, a trial court has broad discretion in determining the date upon which to value the marital assets, and the trial court may select any date between the date of filing the petition of dissolution and the date of the final hearing. Id. Here, Timothy asked his expert to value Carter Plumbing as of April 14, 2014, the day Angela filed the petition for dissolution. Timothy accepts that the trial court apparently chose to value Carter Plumbing as of August 25, 2014. See Appellant’s Brief at 15 (noting without argument that August 25, 2014 was “the date on which the trial court determined that the business should be valued”).

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 7 of 13 [14] Here, Timothy does not dispute that he identified Carter Plumbing as an asset

valued of $200,000 in the August 25, 2014 personal financial statement he

submitted to his bank. Nevertheless, Timothy argues that the trial court could

not rely on his valuation because there is no basis for that assigned value. See

Court View Centre, L.L.C. v. Witt, 753 N.E.2d 75, 82 (Ind. Ct. App. 2001)

(holding that a business owner is competent to offer an opinion as to the value

of his business so long as there is a basis for that valuation). Timothy asserts

that there is a lack of evidence regarding the methodology he used or what

information he included in arriving at the value he assigned to Carter Plumbing

at that time. Timothy claims that the value the court assigned to Carter

Plumbing may have included his personal goodwill, which is not a marital asset

subject to distribution. Timothy also claims that the balance sheet on which he

relied may not have used figures that had been reduced to market value.

[15] We disagree with Timothy that there is no basis for the $200,000 valuation of

Carter Plumbing he submitted to his bank. Timothy’s $200,000 valuation

directly correlated with the August 25, 2014 balance sheet that he attached to

his personal financial statement. As described by the parties’ experts, the

balance sheets compared Carter Plumbing’s assets and liabilities, with the

ultimate calculation being the ownership equity for Carter Plumbing. As

indicated by the August 25, 2014 balance sheet, Carter Plumbing had

ownership equity of $197,315.22.

[16] We also disagree with Timothy that the $200,000 value assigned to Carter

Plumbing included items that are not marital property subject to disposition.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 8 of 13 The experts’ testimony made it clear that ownership equity is the difference

between the hard assets and hard liabilities and does not include the value of

intangibles, such as personal or enterprise goodwill. Yoon v. Yoon, 711 N.E.2d

1265, 1268 (Ind. 1999) (citing In re Marriage of Talty, 652 N.E.2d 330, 333 (Ill.

1995)) (noting goodwill that is personal to one spouse is not a divisible marital

asset, but enterprise goodwill is a marital asset subject to property division).

[17] To the extent Timothy asserts that the August 25, 2014 balance sheet could not

be relied upon because it was not adjusted to market value, we find that such

claim is not supported by the record. After being shown the August 25, 2014

balance sheet, Pritchett testified that “a lot of those entries in there are probably

accounting related entries and have not been marked to market.” Transcript Day

1 at 57 (emphasis supplied). Pritchett’s testimony does not establish that the

values used in the August 25, 2014 balance sheet were incorrect or improper

and Timothy presented no other evidence suggesting that the August 25, 2014

balance sheet was not accurate. We also find it curious that Timothy found the

August 25, 2014 balance sheet sufficiently accurate to claim in a personal

financial statement submitted to his bank that Carter Plumbing was an asset

valued at $200,000, but that the same balance sheet is not accurate for purposes

of valuing and dividing the marital estate.

[18] Finally, we note that Pritchett, in explaining his appraisal, made much of the

fact that Timothy would not sign a covenant not to compete. Pritchett

therefore did not include any value for goodwill attributable to Pritchett

himself. Pritchett’s appraisal was essentially a valuation of Carter Plumbing

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 9 of 13 based on the April 14, 2014 balance sheet. The $1000 value Pritchett assigned

to Carter Plumbing was the value if the business name was sold.

[19] Here, the trial court based its valuation of Carter Plumbing on the ownership

equity as reflected on the balance sheet as of August 25, 2014. The trial court

did not have to accept Pritchett’s uninformed opinion that such figures had not

been adjusted to market value or assign a value to Carter Plumbing consistent

with its fair market value if sold. See Crider v. Crider, 15 N.E.3d 1042, 1061 (Ind.

Ct. App. 2014) (holding that a trial court is vested with discretion in choosing a

methodology to use and is not required to use fair market value), trans. denied.

[20] As noted above, we will not second-guess the manner in which the trial court

determined the value to assign to Carter Plumbing so long as there is evidence

in the record or reasonable inferences that support the valuation. We find the

trial court’s findings with respect to its valuation of Carter Plumbing are

supported by the evidence and conclude that the trial court did not abuse its

discretion in relying upon Carter Plumbing’s balance sheet in deciding to value

Carter Plumbing at $200,000 for purposes of dividing the marital estate.

2. Hearsay

[21] Timothy also argues that the trial court relied on impermissible hearsay

evidence in valuing Carter Plumbing. Specifically, Timothy asserts that, over

his objection, the trial court erroneously admitted and then considered the STA

report that included his statement in 2013 that he believed Carter Plumbing had

a value of $400,000.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 10 of 13 [22] In its findings of fact, the trial court summarized the evidence as it pertained to

the STA report. Contrary to Timothy’s assertion, however, there is no

indication in the trial court’s conclusions that the court “likely used this

valuation as it narrowed the eventual valuation down to $200,000.” Appellant’s

Brief at 16. Indeed, in its conclusions of law, the trial court referenced only

Timothy’s post-filing assertion in his personal financial statement that Carter

Plumbing was an asset valued at $200,000, which the court found to be “the

most credible” value of Carter Plumbing. Appellant’s Appendix at 103. Thus,

even if the trial court erroneously admitted the STA report into evidence and

then considered it, any error would have been harmless as the evidence likely

did not contribute to the court’s determination regarding the value of Carter

Plumbing. See Techna-Fit, Inc. v. Fluid Transfer Products, Inc., 45 N.E.3d 399, 411

(Ind. Ct. App. 2015) (noting that an error is harmless when the probable impact

of the erroneously admitted evidence on the factfinder, in light of all the

evidence presented, is sufficiently minor so as not to affect a party’s substantial

rights).

3. Cross-Appeal

[23] Angela filed a cross-appeal in which she maintains that the trial court abused its

discretion in not ordering Timothy to pay all of her claimed amount of attorney

fees. Angela maintains that a majority of her attorney fees were incurred as a

result of Timothy’s failure to comply with discovery requests.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 11 of 13 [24] We review a trial court’s decision to award or deny attorney fees in connection

with a dissolution decree using an abuse of discretion standard. Troyer v. Troyer,

987 N.E.2d 1130, 1142 (Ind. Ct. App. 2013), trans. denied. The trial court has

broad discretion in assessing attorney fees, and we will reverse only if its

decision is clearly against the logic and effect of the facts and circumstances

before it or if it misapplies the law. Fackler v. Powell, 923 N.E.2d 973, 981 (Ind.

Ct. App. 2010).

[25] Pursuant to Ind. Code § 31-15-10-1, a trial court may order a party in a

marriage dissolution proceeding to pay a reasonable amount of the attorney fees

of the other party. “When making such an award, the court must consider the

resources of the parties, their economic condition, the ability of the parties to

engage in gainful employment and to earn adequate income and other factors

that bear on the reasonableness of the award.” Hendricks v. Hendricks, 784

N.E.2d 1024, 1028 (Ind. Ct. App. 2003). “‘When one party is in a superior

position to pay fees over the other party, an award of attorney fees is proper.’”

Hartley v. Hartley, 862 N.E.2d 274, 287 (quoting Ratliff v. Ratliff, 804 N.E.2d 237,

249 (Ind. Ct. App. 2004)). Where the parties’ resources are relatively on par

with each other, the only basis for an award of attorney fees are the improper

actions of one party necessitating the incurrence of attorney fees by the other

party. Hendricks, 784 N.E.2d at 1028 (stating that the misconduct that directly

results in additional litigation expenses may be properly taken into account in

trial court’s decision to award attorney fees).

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 12 of 13 [26] Here, the trial court found that Timothy “habitually failed to comply” with

Angela’s “reasonable and necessary” discovery requests even after being

encouraged by the court and then admonished. Appellant’s Appendix at 97, 99.

The trial court specifically noted Timothy’s most egregious violations and

further noted that even after being ordered to comply, Timothy only reluctantly

did so. Upon considering Angela’s request for attorney fees, the trial court

determined that $3000 was a reasonable amount to order Timothy to pay given

the difficulties created by his failure to comply with discovery requests.

[27] Aside from Timothy’s actions concerning discovery matters, Angela asserts no

other basis upon which to support an award of all of her attorney fees. Indeed,

the trial court found that the marital estate should be divided equally and

ordered Timothy make an equalization payment to Angela, thereby putting

them relatively on par with each other. Having reviewed the record, we cannot

say that the trial court abused its discretion in deciding not to award Angela all

of her attorney fees.5

[28] We affirm.

[29] Bailey, J. and Bradford, J., concur.

5 In addition to arguing that she should have been awarded all of her attorney fees she incurred at the trial level, Angela seeks an award of appellate attorney fees. Angela, however, fails to cite any relevant authority or assert any basis upon which an award of appellate attorney fees may be warranted. She has therefore waived the issue for our consideration.

Court of Appeals of Indiana | Memorandum Decision 65A01-1510-DR-1603 | August 24, 2016 Page 13 of 13