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Miller v. Wilson

Supreme Court of West Virginia

June 16, 2017

Donna Miller, f/k/a Donna Wilson, Petitioner Below, Petitioner
v.
Leon Hunter Wilson, Respondent Below, Respondent

         Berkeley County 05-D-486

          MEMORANDUM DECISION

         Petitioner Donna Miller, f/k/a Donna Wilson, by counsel James P. Campbell, appeals the Circuit Court of Berkeley County's May 17, 2016, order denying her motion for reconsideration of a March 22, 2016, order regarding equitable distribution. Respondent Leon Hunter Wilson, by counsel Richard G. Gay, filed a response. Petitioner filed a reply. This appeal centers on the lower courts' valuation of certain "manager fees" that were earned as of the parties' May 31, 2005, separation. Following an evidentiary hearing, the family court determined, and the circuit court affirmed, that petitioner owed more than $627, 000 to respondent.

         This Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

         Factual and Procedural Background

         This divorce case has been ongoing for more than ten years, having previously reached this Court on appeal in 2010. By way of brief background, the parties were married in 1990 and petitioner filed for divorce on June 1, 2005. The parties stipulated to May 31, 2005, as the date of their separation. There were no children born from the marriage.

         In 1993, the parties formed Hunter Company of West Virginia, for the purpose of conducting real estate development. Each party separately owned one half of the Hunter Company stock. Beginning in 1993, Hunter Company was chosen by a Massachusetts company, National Land Partners ("NLP"), to conduct real estate development in West Virginia. The management of each development project was governed by a Management Agreement. Under each Management Agreement, Hunter Company was paid a "manager fee" that was defined as any net profit remaining after twelve and one-half percent of the gross sales were paid to NLP and all project expenses are paid. It was stipulated that, unless the project made a profit, Hunter Company did not receive any compensation; in fact, it was responsible for any shortfall.

         At the time of the parties' May 31, 2005, separation, Hunter Company was the manager of six real estate projects that were in various stages of completion. By 2008, the parties had divided their personal property and had agreed to the valuation and distribution of their marital property, except with respect to the valuation of the manager fees. Absent an agreement regarding the valuation of the manager fees as of the time of separation, the parties stipulated that the net value of the marital estate was $9, 536, 682.14, and respondent advanced petitioner $4, 317, 737.62 toward her share of the marital estate.

         In 2008, the family court conducted a hearing on the valuation of the manager fees and determined their value to be $8, 927, 959.00. This determination was based primarily on the testimony of petitioner's expert at that time. Based on the valuation of the manager fees, the family court ordered respondent to pay petitioner an additional sum of more than $4 million. Respondent appealed the family court's final order to the circuit court. In a March 25, 2009, order, the circuit court reversed the final order of the family court and found that the value of the manager fees was actually in the negative by over $2 million. The circuit court, therefore, determined that the actual value of the martial estate was lower than the parties' stipulated amount, which resulted in petitioner having been overpaid by almost $900, 000. As a result, the circuit court ordered petitioner to pay respondent the amount of the overpayment.

         Petitioner appealed the circuit court's March 25, 2009, order to this Court. In Wilson v. Wilson, 227 W.Va. 157, 706 S.E.2d 354 (2010), this Court affirmed in part, and reversed in part, the circuit court's order, and remanded the case to the family court with the following direction:

Upon remand, the family court shall hold a hearing for the sole purpose of determining an accurate value of Hunter's manager fees at the time of the parties' May 31, 2005, separation. After the evidence is taken, the trial court should make thorough findings of fact and conclusions of law in reaching its valuation, and should then proceed to the division of any such fees that are ascertained to be marital property.

Id. at 179, 706 S.E.2d at 376. We explained our reasoning as follows:

"Equitable distribution . . . is a three-step process. The first step is to classify the parties' property as marital or nonmarital. The second step is to value the marital assets. The third step is to divide the marital estate between the parties in accordance with the principles contained in [former] W.Va. Code, 48-2-32 [now W.Va.Code § 48-7-103]." Syllabus Point 1, in part, Whiting v. Whiting, 183 W.Va. 451, 396 S.E.2d 413 (1990). Unfortunately, as discussed herein, the parties submitted little credible evidence as to the value of Hunter's manager fees. It is the responsibility of the parties, not the court, to propose values to marital property and the parties are bound by the evidence they present. As we said in Syllabus Point 8 of Mayhew v. Mayhew, 197 W.Va. 290, 475 S.E.2d 382 (1996), "[t]he burden is on both parties to the litigation to adduce competent evidence on the values to be assigned in equitable distribution cases." Likewise, in Syllabus Point 3 of Roig v. Roig, 178 W.Va. 781, 364 S.E.2d 794 (1987), this Court stated, "When the issue in a divorce proceeding is the equitable distribution of marital property, both parties have the burden of presenting competent evidence to the trial court concerning the value of such property."

Wilson, 227 W.Va. at 178, 706 S.E.2d at 375.

         Upon remand, the family court conducted a hearing on May 11 and 12, 2015, to take evidence concerning the value of the manager fees as of the parties' separation on May 31, 2005. The family court heard testimony from petitioner, respondent, petitioner's expert witness Kenneth Apple, CPA, respondent's expert witness Jack Lantzy, CPA, and NLP representative Tim Smith by deposition. The family court found that, as of May 31, 2005, there were six pending projects: (1) Crossings on the Potomac, (2) Ashton Woods, (3) The Springs at Shepherdstown, (4) Overlook at Greenbrier, (5) The Point, and (6) Westvaco. Mr. Apple's methodology focused on the time that respondent individually, as opposed to Hunter Company, had spent on a project. He compiled a chart that listed twenty-three tasks for four of the six pending projects, and indicated whether that task had been completed. Mr. Lantzy, on the other hand, compiled a chart that reflected the total manager fees from each project; the percentage of completion as May 31, 2005; the manager fee income or loss as of May 31, 2005; manager fees paid prior to May 31, 2005; and whether there was a marital asset or liability. Mr. Apple concluded that the value of the marital portion of the manager fees was $2, 154, 255.00. Mr. Lantzy concluded the value to be a negative $2, 291, 256.00.

         The family court considered the testimony and documentary evidence submitted by both experts and found respondent's expert's calculations, which were based on respondent's specific efforts that had been undertaken on each project, to be more compelling and practical than petitioner's expert's methodology, which was based simply on the amount of time respondent had spent on each project. With regard to Mr. Apple's methodology, the family court found as follows:

While Mr. Apple's approach of weighing all tasks equally represents an honest attempt to offer an objective analysis, the Court finds it to be essentially an artificial construct that is not reality based, insofar as the time and effort involved in each of the 23 categories [of work performed on each project] simply is not equivalent.

         As noted above, based on Mr. Lantzy's calculations, the family court determined that, as of May 31, 2005, the manager fees due Hunter Company from the six projects pending at that time to be in the negative in the amount of $2, 291, 256.00. When deducted from the stipulated amount of the marital estate, the marital estate's net value became $7, 245, 426.00. The family court then divided the net equitable estate in half, leaving each party a net estate in the amount of $3, 622, 713.00. Because petitioner had already received an equitable distribution totaling $4, 317, 738.62, the family court concluded that she had been overpaid by $695, 024.00. However, the family court determined that petitioner was entitled to an award of her attorney's fees because of respondent's recalcitrance in disclosing certain information during the course of the proceedings. The family court, thus, awarded petitioner her attorney's fees in the amount of $67, 030.00, which it deducted from the overpayment that she had received in the prior equitable distribution. Accordingly, by "Final Order of Equitable Distribution and Attorney Fees" entered on June 29, 2015, the family court ordered that petitioner pay respondent $627, 994.00. Petitioner moved the family court to reconsider its order, which the family court denied by order entered on September 10, 2015.

         Petitioner appealed the family court's order to the circuit court. Therein, petitioner challenged (1) the family court's reallocation of the manager fees received prior to the date of separation; (2) the family court's crediting of the opinions of respondent based on his knowledge and experience; (3) the family court's adoption of the expert opinions of Mr. Lantzy, which were based on the opinions of respondent; (4) the family court's rejection of Mr. Apple's methodology; and (5) the family court's denial of petitioner's motion for reconsideration. By order entered on March 22, 2016, the circuit court affirmed the family court's final order and its order denying reconsideration thereof. Petitioner then sought the circuit court's reconsideration of its March 22, 2016, order, which the circuit court denied by order entered on May 17, 2016. This appeal followed.

         Discussion

         On appeal, petitioner raises the following six assignments of error: (1) Reallocation of $2, 242, 541 in manager fees received by Hunter Company prior to separation and deposited into marital bank accounts prior to separation as respondent's separate property violated West Virginia Code §§ 48-1-233 and 48-1-237, res judicata, collateral estoppel, and the law of the case; (2) The circuit court and the family court failed to address that income received and deposited into marital accounts prior to separation cannot be separate property because of West Virginia Code §§ 48-1-233 and 48-1-237, res judicata, collateral estoppel, and the law of the case; (3) The family court erred by finding the testimony of Hunter Wilson to be "credible and reasonably reliable, based upon his extensive knowledge and experience" when no such testimony was presented into evidence at trial; (4) The family court erred by crediting the expert opinions of Jack Lantzy, when his opinions were improperly based upon opinions of Hunter Wilson, when Hunter Wilson's opinions were not the kind of information customarily relied upon by valuation experts; (5) The family court erred by failing to credit the expert testimony of Kenneth Apple, CPA, as his opinions were based upon a proper methodology arising from generally accepted accounting practices and valuation methods; and (6) The circuit court erred by denying petitioner's motion for reconsideration.

         This Court applies the following standard of review to petitioner's assignments of error, with the exception of her ...


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