### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE Decemb er 11, 2001 Session
STAN WALLACE

MOSLEY v. CAR

RIE LYNN CHEC CHI MOSLEY
Direct Appeal from the Chancery Court for Washington County No. 6976 Hon. Jean A. Stanley, Judge

FILED MARCH 4, 2002

No. E2001-01006-COA-R3-CV

In this divorc e case, the husba nd appea led the c lassific ation and division of

the part ies’ mar it a l propert y and the basis for awarding child sup port. We affirm the Trial Court’s Judgment, as modified.

Tenn. R. App. P.3 Appeal as of Right; Judg

ment of the Cha

ncery Co urt Affi rmed, as m

odified.

H ERSCHEL P ICKENS F RANKS , J., d elivered the opinion of the court, in which H OUSTON M. G ODDARD , P.J., and W ILL IAM H. I NMAN , J., joined. Daniel D. Coughlin, Kingsport, Tennessee, for Appellant, Stan Wallace Mosley. Judith Fain, Johnson City, Tennessee, for Appellee, Carrie Lynn Checchi Mosley.

OPINION

In this divorc e action , the par ties stipulated there were

grounds for divorce, agr

eed that the mother would have custody of the minor child and spousal support to wife of $650.00 per month. The

issues re served f

or trial w ere the

division of

marital p roperty and suppo

rt.
The husband te stified th at he is primary stockholder in Telescan (90%), which he startedin 1987. The wife worked for Telescan be fore they were married, and returned to wor k for the corporation after they were married in April 1995. They had a d a ughter, aged 4 at the time of trial.

The husband offered as a witness a CPA who had worked on the company ’s books since 1998. This witness testified that the book value of Tele scan was $524,00.00 on August 31, 1999, $763,000.00 on December 31, 1998, and $546,000.00 on December 31, 1994. As a witness ,-2-

she was not qualified as an expert in business valuation.

The wife offered a CPA who testified that he was a c ertified valuat ion analyst and accredited

by t he Ameri can I

nstitute of

CPA’s, in bu siness va

luatio n sinc e 1997. The parties stipulated he could testify as a n expert. He was of the opinion that the husband’s in terest in the business at the time of the parties’ marriage w as $639,000.00, and at the date nearest the time of the parties’ separation (December 31, 1998), the husband’ s interest was $8 01,900.00. He further testified that as of the date nea rest the t ime of the parties’ divorce

in Augus tof 1999, the husband’s interes t was $477,000. 00. He te stified th at the 199 9 value w as less re liable because it

was only basedon performance through eig ht months of the year. He explained that Telesca n had been profitab le for seve

n ye ars and t

hen “all of a sudde

n” in 1999 the compa ny lost $201,000.00 by August. He explained that part of the loss was due to a $38,000.00 lawsuit settlement paid out, and there was also a substantial decline in advertising. He testified that Telescan had spent $40,000.00
on advertising in 1998, and had spent less than $2,000.00 in 1999. He further testified that

Telescan ha d exce ss retained earnings compared to the industry norm, and this represented money which should have been distributed as income.

At the conclusion of the trial, the Court found that the wife had made a significant contribution to Telescan, and credited the testimony of the expert reg arding the value of the busine ss. The Court further found that the intangi bles and g oodwill of

the busine ss came a

bout mainly

due to the efforts of the husband, but the husband had admitted he had reduc ed his advertising and other effortsto obtain

new business during the divorce, and that his actions reduc ed the incom e and g rowth of Telescan. The Court relied on the expert’s testimony that the value of the business had increased during the marriage of the parties by an amount

of $162,900.00, and concluded the wife was entitled to a share in the in the amount of $54,000.00.

The Court divided the remainder of the parties’ marital p

roperty , set child

support, and found that

the wife was entitled to additional rehabilitative alimony of $500.00 per month for six months. The husband attempted to appeal the Trial Court’s Judgment, but this Court dismissed the appeal because the Judgment was not final. After remand, the Trial Court entered an Amended Judgmentafter a further hearing on the issue of retained earnings and child support. The Court then determinedthat the ret ained earnings of Telescan was highe r than the industry norm, and tha t $220,000.00 of those earnings should be amortized over three y ears and should be considered as part of the husband’s income for the purpose of setting child support. The Court adjudged the husband’s annual income, finding the same to be $12,675.00 per month gross, and se t child suppor t a t $1,819.00 per month.

On appeal, the husband argues that the Trial Cour

t erred in classif yin g the inc

rease in the value of Telescan as marital property , used the wrong valuatio n date, a nd furthe r erre d in awarding the wife a third of theincrea se in the c ompany ’s value and half of the inc rease in the value of the marital residence. He further insists that the Court erred in imputing the retained earnings of Telesca n to the hus band as income for purposesof child s upport.-3- Husband argues that there is no proof that the wife made a substantial contribution to the increase i n the value o f Telescan. Tenn. Code Ann. §36-4-121 states that “substantial contribu ti on” may inc lude “ the di rect or indi rect co ntrib utio n of a s pouse as a ho memak er, wage earner, parent o

rfamily financia

l manager, together with such other factors as the court having jurisdiction thereof may de termine.”

The Trial Court’s finding that the wife had substantially contributed to Telescan

is supported by t

he evide nce, not o nly

because she testified that she did significant work there (which husband did not really dispute), but that she also contr ibuted as a homemaker and caretaker for the parties’ minor

child. The evidence does not preponderate a gainst this determination. Tenn. R. App. P. 13(d). Also see Wright-Miller v. Miller , 984 S.W.2d 936, 943-944 (Tenn. Ct. App. 1998).

Next, the husband takes issue with the Trial Court’s valuation of Telescan, arguing that the Court should have usedthe opinion of value as of August 1999, which was closer to the dat e of the parties’ divorce, and bases his arg ument on Tenn. Code Ann. §36-4-12 1(b)(1 )(A), which states that marital property “ shall be valued a s of a dat e as nea r as rea sonably

possible to the final divorce hearing dat e.” In this case, the divorce decree wa s in September 1999, and the parties had separated in late 1998.

The valuation of assets is a question of fact, and there is a presumption on appeal that the Trial Court’s valuation is correct. Watte rs v. W atters , 959 S.W.2d 585 (Tenn. Ct. App. 1997). In our vi ew, th e Cour t was c orrect in det ermin ing th e valu e that was reflecte d in Au gu st of 1998, since the evidenceestablishes the business could have been more profitable in 1999, had it not been for the lack of advertising and seek ing new business. The proof is uncontradicted that the husband had complete control over such decisions, and he admitted that he did not adverti se in 1999 a

nd did notseek new c ustome rs because of problems he was having with Sprint, one of his long distance supplier s. Moreover, the one-time laws u it settlement payment which occ urred in 1999 should not be taken into account , according to the expert testimony . There was proof that the husband
man ipulated the expens es of Tel escan by utilizing Telesca

n funds fo

r person al expendit ures an d writing commission checks to “supplement his income”. Under all the circumstances of this case, we affirm the Trial Court’s Judgment as to the value of the Telesc an.

As to the pro-ration of the marital property , the Trial Judge had broad discretion, and its decision

is entitled to great weight on appeal. Mahaffey v. Mahaffey , 775 S.W.2d 6 18 (Tenn . Ct. App. 1989).

The husband’ s appeal f ocuses on t he pro-ration of two assets. The Court awarded the w ife one-third of the increase in value of Te lescan, finding that the husband made a g re ate r contribution to its increase than the wife, and awarded the wife one-half of the increase of

equity in the marital residence. The evidence e stablished that the wife had contribu ted to the incr

ease in s ame by overseeing and/or making improveme nts to the home herself. The valu ati on and increase was based on the husband’s testimony, a nd the Court’s determination as to the increase was supported by the proof. We find the Court’s division was equitable, based upon the wife’s contributions and-4-

the statut ory factor s.
The wife argues that the Trial Court erred in reducing the wife’s share of the inc rease in value of Telescan for goodwill and intangibles, because this was not a business which is reliant upon husband’s personal involvement and reputation. In this case the Court said that “because of the Court’s consideration of the intangibles and good will which the Court f

inds was ma

inly from the efforts of Plaintiff/Counter-Defendant the Court finds that of theincrease, Defendant/CounterPlaintiff is entitled to Fifty-four

Thousand Dollars ($54,000.00).” The court simply attributed more of the increase to the husband, based upon his contri bution to the business, as compared to the contribution of

the wife. This is appropriate under Tenn. Code Ann. §36-4-121, which allows the court to consider the pa

rties’ contributions to the assets in making a property division. Accord: Wright v. Quillen, 909 S.W.2d 804 (Tenn. Ct. App. 1995).

Fi na ll y, the husband argues that it was improper for the Tria l Court to imp

ute incom e to him fr om th e exce ss ret ained earnin gs of Teles can for the purpo se of estab lishing c hild suppor

t. Husbandrelies up on the ca se of Piper v. A ndrews , 1999 WL 772127 (Tenn. Ct. App. Dec. 17, 1997), wherein the Court held that retained earnings of a c orporation of which husband w as the sol e shareholder

would not be imputed to husband a s incom e, because there was no evidenc e that the retained earnings were excessive, and the c ompany’s ac countant testified that the amount of retained earnings was consistent with prudent business practices.

The wife, however, relies upon the case of Sandusky v. Sandusky , 1999 WL 734531 (Tenn. Ct. App. Sept. 22, 1999), whe re the Cou rt held tha t income c ould be imputed to the sole
owner of a business for the purpose of setting child support . It was explained that in a selfemployment

situation where the obligor spouse could control the salary he or she received, the

court should examine whether the obligor had the potential to manipulate his or her income by allowing the company

to accum

ulate pr ofits as r etained e arnings, which could have been distributed as dividends

. In this case, husband is not the sole shareholde r, but does own 90% of the stock, and has the authority to manipulate his income by accumulating retained earning s in the company if he chooses. The proof showed that thecompa ny had $20 0,000 .00 i n retai ned ear nings when the parties married, and had $ 425,000.0 0 in reta ined ear nings at t he end of

1998, and

had $240, 000.00 in retained earning s in August 1 999. The T rial Cour t imputed th

e entire increa se in ret ained earnin gs from December 1994 to December 1998, ($225,000) as income to husband, and amortized it over three ye ars.
The guidelines provide that all income “from any

source” is to be considered (Tenn. Comp. R. & Regs. ch. 1240-2-4-.03(3)), and the evidence suppo rts the imputation of additional income based upon the company ’s excess retained earni ngs and the husband’s control of the corporation. The parties agree in their briefs that the T rial Court should have reduced any amount imputed by 10%, since the husband only owns 90% of the corporation.

Ac co rd in gl y, we affirm the Trial Court’s property division in all respects, but modify the Trial Court’s finding of additional income by reducing that amount

by 10%. Upon remand, the-5-

Trial Court is directed to enter an Order reducing the child support by an amount to reflect

the 10% reduction in income imputed to the husband. The Judgment of the Trial Court is affirmed, as modified, and the cause remanded with the cost of the appe al assessed to Stan Wallace Mosley

.

_________________________ H ERSCHEL P ICKENS F RANKS , J.