The Court of Appeals upholds valuation of a business based on the net value of its assets, not the capital figure on its balance sheet, in Henderson v. Henderson, 5/15/2018, Record No. 1402-17-2. (A separate opinion issued the same day, with a different case number, addressed husband's appeal of various rulings.) The opinion in "1407" addressed so many different issues that I am describing them in separate posts.
Husband owned a minority share of a partnership whose only asset was a piece of real estate. He testified that the loan on it exceeded its value, so the court valued it at zero. Wife argued that husband should be bound by the "Total Capital" figure on a balance sheet for the company. The Court holds that the trial court had the discretion to believe the husband, or to find that no adequate evidence of value had been presented, and that the wife had the burden of proving the asset's value because it was she who was seeking equitable distribution and valuation of the asset.
Although a court “may not arbitrarily refuse to classify or evaluate marital or separate property where sufficient evidence to do so is in the record,” it is the duty of the court in the first instance to determine whether the record contains “credible evidence of value.” See id. “[W]here the corporation is a real estate holding company,” valuation based upon the fair market value of “the corporation’s net assets has gained wide acceptance.” Bosserman v. Bosserman, 9 Va. App. 1, 8-9, 384 S.E.2d 104, 109 (1989).
Even though it found no value in the asset, the trial court still needed to classify it as harmless error, but this was harmless error since no value was proven, the Court says.
The wife's lawyer tried to get the husband to give lay testimony of the value of his own property by showing him the balance sheet and having him read it. That doesn't do the trick, the Court says. Besides, the sheet was over two years old and there was no testimony about the context in which it was created, which the Court says could make it legitimately different from an appropriate valuation for divorce purposes.