Opinion ID: 2361145
Heading Depth: 1
Heading Rank: 2

Heading: Value of Marital Property

Text: The court assigned the parties' marital estate, including several pieces of real estate, business property, and investments, a gross value of $7.1 million and a net value of $4.3 million. Ellen challenges a number of the court's findings regarding the values of different assets and also argues that the court improperly considered potential future tax liability when it calculated the net value of the marital estate. We address each of Ellen's arguments in turn.
Ellen's most substantial claim is that the court erred by reducing the value of certain assets to reflect potential tax consequences of a sale of those assets. She relies on Johnson v. Johnson, where we stated that the tax status of assets in the hands of one of the parties should not affect their fair market valuation, unless the decree necessitates their sale. 158 Vt. 160, 165, 605 A.2d 857, 860 (1992). In that case, we held that the trial court erred by relying on the wife's nonexpert testimony on the possible impact of tax law on the sale of her interest in two limited partnerships, and remanded the matter for reconsideration of the fair market value of those assets. Id. at 164-65, 605 A.2d at 860. For several reasons, we are not persuaded that our holding in Johnson compels reversal in this case. First, we noted in Johnson that, although potential income taxes do not affect the value of a marital asset, they `may be another factor to consider in establishing the amount and method of payment of any monetary award.' Id. at 165, 605 A.2d at 860 (quoting Rosenberg v. Rosenberg, 64 Md.App. 487, 497 A.2d 485, 503 (1985)). In this marriage, the primary marital asset was Tom's substantial investment account with Paine Webber, which the court found had a market value of close to $4 million dollars. Throughout the marriage, the parties funded their lifestyle by borrowing against this account; that way, the parties enjoyed the benefit of the growth in the investments without paying taxes on the gain. The parties have been able to live on paper wealth for many years, because their investments have performed well. A downturn in the market, however, could force Tom to sell investments to repay the debt; in so doing, he would incur substantial tax liability because of his low basis. In light of the parties' unusual financial situation, potential tax liability was relevant to the court's overall evaluation of their finances. Moreover, Ellen requested and received a cash award as her share of the marital property. Had she received real estate or stocks of comparable value, and wished to liquidate those assets, she would have faced large tax payments. Instead, she received the full benefit of her award, with no need to worry about future tax problems. As the court noted, however, Tom presumably had to liquidate assets to pay Ellen, and consequently incurred tax liability on the sales. And, as Tom retains the investment account, he also bears the risk that a market downturn will force him to sell some investments and pay taxes on the gain. Under these circumstances, it was not unreasonable for the court to consider potential tax consequences associated with assets in the marital estate. See id. at 165, 605 A.2d at 860 (in interests of fairness and consistency, court may consider specific, relevant, and material evidence about transaction taxation of assets in determining value, division, and method of allocation of parties' assets). Finally, even if the court underestimated the net value of the marital estate by deducting potential tax liability, the error was not relevant to its decision and was therefore harmless. As the spreadsheet attached to the court's decision reveals, the court was well aware of both the gross and net values of the parties' assets. The court did not award Ellen a fractional share of the estate, but instead calculated an award that would generate an appropriate income, given the duration of the marriage and the standard of living during the marriage. We are convinced, based on the court's thorough discussion of the issue, that redefining the net value of the estate would not change the court's decision. As discussed above, the court would still properly consider the potential tax liability in making its decision. The change would be merely cosmetic.
Next, Ellen contests the court's findings regarding several pieces of real estate. We reject her attempt to relitigate the parties' factual disputes. On appeal, this Court does not disturb the findings of the trial court unless, viewing the evidence in the light most favorable to the prevailing party and excluding the effect of modifying evidence, a finding is clearly erroneous. Semprebon v. Semprebon, 157 Vt. 209, 214, 596 A.2d 361, 363 (1991). Disregarding this standard, Ellen essentially argues that this Court should accept evidence that was rejected by the trial court. That court found that a number of values suggested by Ellen were inflated, some grossly, and that others were simply without foundation. Moreover, the court was not impressed by the testimony of the real estate broker who served as an expert witness for Ellen, finding that many of the broker's property valuations were wide of the mark. As the trier of fact, it was the province of the trial court to determine the credibility of the witnesses and weigh the persuasiveness of the evidence. Bruntaeger v. Zeller, 147 Vt. 247, 252, 515 A.2d 123, 126 (1986); see also Kanaan v. Kanaan, 163 Vt. 402, 405, 659 A.2d 128, 131 (1995) (trial court's findings accorded wide deference on review because court is in unique position to assess credibility of witnesses and weight of evidence); Mullin v. Phelps, 162 Vt. 250, 261, 647 A.2d 714, 720 (1994) (role of Supreme Court in reviewing findings of fact is not to reweigh evidence or to make findings of credibility de novo). Addressing Ellen's specific claims, we first note that the values assigned by the court to Pheasant Hill Lot 4, Bayview Lot 3, and Bayview Lot 4 fell somewhere between the values claimed by the broker and those claimed by Tom. The court was within its discretion to choose a value within the range of the evidence presented. Semprebon, 157 Vt. at 214, 596 A.2d at 364. The court accepted Tom's testimony that a so-called Bayview Orchestra Lot did not exist. And finally, the court was understandably skeptical of the broker's values for the Pheasant Hill Reserve Building Lot and the Black Walnut lots, as she based her calculations on the assumption that the lots were approved and available for sale. The broker admitted on cross-examination that the Reserve Building Lot was not permitted and that her purported valuation was not in fact the market value of the lot as it existed at the time of the trial. Tom, in turn, testified that the Reserve Building Lot was held in common by all the Pheasant Hill lot owners, and could not be developed without their unanimous consent; that most of the Black Walnut lots are the subject of a pending agreement with nearby landowners that would restrict development on those lots; and that one of the Black Walnut lots has no available place for a septic system, and may actually become a liability for Tom. Based on this evidence, the court's findings that the Reserve Building Lot had no value as a separate lot and that the possibility of a positive financial return on the Black Walnut lots [wa]s too remote for inclusion in th[e] marital estate are not clearly erroneous. See Kanaan, 163 Vt. at 407, 659 A.2d at 132 (court not bound to follow opinions of expert witnesses); Bruntaeger, 147 Vt. at 252, 515 A.2d at 126 (trial court's factual determinations will stand if supported by credible evidence, even if inconsistencies or contrary evidence exist).
Ellen's other challenges to the trial court's findings are similarly without merit. She argues that the court erred by omitting Chestnut Street Exchange securities worth over $400,000 from its valuation of the Paine Webber account. During the trial, the court discussed with counsel for both parties the difficulty of valuing the account, given the daily changes in stock prices. The court asked the parties to stipulate to Paine Webber's stated value of the account as of February 28, 1995, the first day of trial on the financial issues. See Kanaan, 163 Vt. at 410, 659 A.2d at 134 (as general matter, marital assets should be valued as close to date of trial as possible). Tom's attorney agreed to obtain a statement from Paine Webber showing the value of the entire portfolio and the debt owed on it as of that date, and stated that if there's any objection to that copy in any way, [Ellen's attorney will have] an opportunity to tell me. Two days later, during Tom's direct testimony, Tom identified a document as a statement from Paine Webber showing the market value of the account as of February 28, 1995 to be approximately $4 million, and the debt on that date to be approximately $2 million. Ellen's attorney did not object to the admission of the document as evidence, nor did he raise the question of the Chestnut Street securities during his cross-examination of Tom or at any other time during the trial. On appeal, Ellen points to another Paine Webber statement which shows a market value of $4.4 million. This document was submitted to the court by Ellen's attorney after the end of the trial, and was not admitted as evidence. Although Ellen may be correct that the statement introduced at trial understated the value of the account, the proper time to challenge those figures was during the trial. The court's findings, which adopt the lower figures, are based on the evidence and are not clearly erroneous. The court's valuation of Tom's interest in The Waterfront Company, a limited partnership that owns commercial real estate in downtown Burlington, is also supported by the evidence. The court rejected Ellen's proposed valuation of the company as not... at all credible. The court found that the company had not performed well and had substantial debt. On paper, the company owes Tom, the general partner, several hundred thousand dollars. The court found, however, that if Tom attempted to collect that debt before repaying the limited partners' investments, the limited partners would sue him. As we have recognized in an analogous situation, the court faced a difficult task in valuing this asset; the market value of a share in a partnership, like the value of a closely held business, may be difficult to fix precisely. See Kanaan, 163 Vt. at 407, 659 A.2d at 132. Given the evidence before the court, its decision to value Tom's interest in the company at $100,000 was not clearly erroneous. Finally, Ellen complains that the court erred in relying on post-hearing evidence in valuing certain personal property, specifically three automobiles, some inoperable, and a motorcycle. Although the court acknowledged that, after the hearing, the items were sold for far less than either Ellen's or Tom's values for them, the court did not value the items at the sale price. Instead, the court adopted Tom's values. Again, the court in its discretion may choose a value for an asset that is within the range of the evidence presented. Semprebon, 157 Vt. at 214, 596 A.2d at 364.