*1 S. CRISMON H. CRISMON Suzanne John 00-65 CA Arkansas

Court Appeals III and IV Divisions 13, 2000 delivered December Opinion * 17, 2001 denied January ] rehearing [Petition grant. Griffen, * Birdand JJ., *2 Eichenbaum, P.A., Hester, Liles & III, H. Penick, by: James

appellant.

Doper P.A., Dixon, & Estes, B. and Monte by: Gary D. Rogers for appellee.

K. MaxKoonce, II, This is an Judge. an order appeal division in a addressing property divorce. The issues on concern the appeal Chancellor’s of a “fair market value” standard for business, interest in valuing an parties’ ongoing the Chancellor’s of certain terms in settle- ment agreement.

findWe no and, reversible error on therefore, either point affirm. The to this case were parties 15, divorced on September 1996. A was entered at the time of the divorce. At issue is the valuation business, of the appellee’s consisting friend,” Garland, partnership “good Larry in two convenience stores and certain commercial property. During divorce, of the pendency appellee’s stake fifty-percent was $462,000 valued from $829,000 to a according September financial statement. Earlier financial personal statements $320,000 valued prepared by his interest at on 16, 1992, $355,000 July 26, 1993, on October October 1997. The become a attempted the business settlement, to the (pursuant where she took over all stores, interest in the convenience and the husband retained all interest in his own but pension accounts), Garland refused. The in the form of a from the court filed for relief then Valuation of Property, Determination Bights Petition for one-half interest (and one-half of seeking appellee’s annual to enforce income guaran- of his seeking pension plan), In the Decree of bonus. and distribution tees Divorce, and was ordered to be was a bonus anticipated, to Mrs. Crismon. given entirely Garland, trial, testified that the

At appellee’spartner, $350,000 based on the entire fair market uncertainties inherent in the business. and numerous his experience standard, a “fair value” testified that under expert million, and the $1 was worth in excess of the partnership $555,000. The then was worth expert applied *3 a final valuation discount”of “reasonable ten-percent, interest at The appellant’sexpert appellee’s in her include written appellee’s expert any report. based on stake in the valued a fifty-percent discount rate of and a marketability a cash flow fifteen-percent the value The court ruled that discount of twenty-five percent. a discount rate. was using twelve-percent property order, written the court awarded In its $182,500, of the court’s valuation of the one-half part representing in the business.1 The court also Garland-Crismon nership distributed, had been and found that the bonus already dispute further relief that or on issue of the denied on point, any From in the setdement. property “guaranteed salary” promised for reversal on two order comes this arguing appeal, erred in a discount in its valuation of the court 1) points: applying the court erred as mat 2) Garland-Crismon partnership, settlement. ter of law in its novo, find cases are reviewed de chancellor’s Chancery are erroneous or will not be disturbed unless they clearly ings of the evidence. O’Neal v. clearly against preponderance 57, O’Neal, Ark. 725 (1996). 55 929 S.W.2d App. 1 receive one-half of the court also ordered that the determination is not in in this but that dispute appeal.

pension,

119 Here, after hearing conflicting expert testimony interest in the chancellor partnership, of fact that the value of made a finding $365,000 based on a fair market value standard. It is the province the trier of fact to determine the of witnesses and resolve credibility 140, v. 27 Ark. 767 conflicting testimony. Shoptaw Shoptaw, App. While there is on whether (1987). S.W.2d conflicting argument should a “fair value” standard be borrowed from other jurisdictions’ suits, the case law on shareholder Arkansas Court has Supreme the use of the “fair market value” standard for explicitly approved held businesses in a marital division con valuing closely 583, text. v. 300 Ark. See S.W.2d 560 Layman Layman, (1989) Skokos, Further, v. 333 Ark. Skokos 968 S.W.2d 26 (1998). the term “fair market value” is in the used marital statute at Ark. Ann. 9-12-315 Code Based on these (a)(4) (Repl.1999). § authorities, the chancellor’s use a “fair market value” standard is not clearly in the first of error is

Implicit allegation whether the trial court erred in dis applying “marketability count” in the valuation calculation. The that con appellant argues Arkansas case law her trolling directs this supports position court’s attention to 29 Ark. Jones, App. In this court refused to thirty-two percent reduction value of an firm that was based on the accounting firm one-third of its customers if one of its losing roughly partners *4 was forced to sell his interest. our court held that there Additionally, was no evidence that the firm was the one- contemplating selling interest, third and therefore the value of the firm should not be $6,000 reduced. We also a down” the rejected of esti “rounding mated value. In the decision our court did not specifically Jones discount to marital reject divi applying “marketability” businesses, sions of but found that the for the discount justification on a (based the and the buy-sell antici agreement among partners loss of business if a was not under the pated left) appropriate case, facts of that case. In the the in discount(s) do present dispute business, not to future lost as in but reflect purport represent that would be incurred in the expenses marketing selling part Further, review, to our de novo we nership pursuant case, reverse in the but modified the chancellor’svalua simply tions, and affirmed as modified. Id. takes issue with the Finally, appellant application First, two in the settlement provisions agreement. appellant $7,500 that the court erred in to award her for the argues failing bonus as stated in the decree. The stated in appellee $5,400 that he the entire pleadings paid appellant, representing bonus to him (with paid remaining twenty-eight percent being withheld his issue for This was not addressed in taxes). employer abstracted from the trial. Without any testimony any conflicting it is that the trial court erred in proof, impossible say accepting that all amounts due to the for the bonus as contemplated in the decree had been original paid.

The second second prong point involves the trial court’s appeal language prop settlement of an annual income for erty regarding “guarantee” from a from the and from salary However, the same with the alimony. lan paragraph “guarantee” also includes “In no event guage shall Husband’s following: $31,000.” annual exceed obligation evidence at alimony trial showed that the had fully complied alimony but that the had not received obligation, any salary because Garland refused to admit her to the part for a “fair-and reasonable” nership. appellant argues interpreta tion of the contract and asked the to order the “guarantee” court make difference between the up alimony paid While such a per year construction “guaranteed.” may circumstances, have been under the it equitable is not mandated settlement, under the and is in fact to the contrary explicit therefore, maximum on the cap trial court’s appellee’salimony; refusal to award relief is not requested we affirm on both Accordingly, points.

Robbins, Neal, Bird, Stroud, C.J., JJ., agree. GRIFFEN concurs dissents part, part.

Wendell L. GRIFFEN, dissent- Judge, concurring part; I concur ing part. majority regarding chancellor’s agreement. *5 However, I dissent the decision to affirm the respectfully valuation of the real estate The chancellor assessedthe partnership. Crismon’s interest in a real-estate partner- John

121 half that and awarded Suzanne Crismon ship amount, the contends that chancellor erred or Appellant “fair market” the value assessing settlement into agreement incorporated parties’ that would decree Crismon transfer to divorce provided John his interest in the Garland real estate Crismon Crismon Suzanne but that if Garland Crismon’s (John partner) partnership, either to Suzanne Crismon as a refused party (appel- or could the court to determine the value of lant petition appellee) that Crismon would Suzanne Cris- pay John the value of mon one half of his interest in one partnership, plus half of his Levi Straus Because the pension. called for court to determine value of the part- that it was error for the chancellor to

nership, agree use a “fair market value” assessment that included a “marketability discount” that decreased the valuation based on assumed costs of that no sale of marketing partnership despite undisputed proof contemplated. course, Of is Arkansas controlling Code legal authority Annotated section which 1998) 9-12-315 that (Repl. provides entered, when a divorce decree is all marital shall be distributed one-half to each unless the court finds such divi party sion to be A chancellor’s the valuation inequitable. finding, regarding of a business will not be overturned unless it is clearly Nicholson, v. Nicholson 11 Ark. 669 S.W.2d 514 App. affirms that Arkansas Code Annotated majority by reasoning section 9-12-315 the chancellor 1998), to assess (Repl. obligated a “fair market value” as con partnership by using trasted with a “fair value” determination. Black’sLaw Dictionary, ed. (6th 1990) defines fair market value as “the amount of which who is but not money purchaser willing obligated buy [a] sell, owner who is but not pay willing obligated [an] into consideration all uses to which the land taking is adapted in reason be Arkansas State might applied.” (citing Comm’n Highway 990, 1000, Ark. DeLaughter, (1971)). hand, On the other of “fair value” in the context of a concept stockholder dissenting seems more facing merger corporation standard, situation in this case. Under “fair applicable value” is determined all assets and liabilities by ascertaining business and the intrinsic value of rather its stock than merely *6 its market value. SeeAmericanGen. 190 A. Corp. appraising Camp, 1937). 225 (Md. that the “fair value” is more than believe approach equitable

a “fair market” to valuation of real estate partnership because this instance circumstances surrounding prop- and the reasons for its value. The owns erty appraising partnership two of real with of a parcels property improvements consisting convenience store and Texaco service station located at the south- Rock, west corner of Dixon Road and 65 in Little and an Highway Exxon service station located at the southeast corner of Dixon Road and 65. The businesseslease Highway improvements and are now owned Garland. partnerships, by filed which valued his half inter-

Appellee discovery responses $600,000, est in the two Dixon at Road less his share of properties $138,000, $462,000. debt valued at for a net equity Discovery documents revealed that stated Garland the value of the $1,650,000 as in a 1997 financial partnership holdings personal statement, with a net for a 50% equity interest. In financial statement appellee prepared personal $1,250,000, which valued the at with his net properties 50% equity $320,000. valued at Another financial state- approximately personal $1,250,000 ment valued the by prepared appellee properties $355,000. net valued at 50% After the divorce equity submitted another proceedings began, financial appellee personal $700,000, statement to his bank and valued his 50% interest at less $18,000, debt for a net equaling equity there was no evidence that the Although was to be sold or that a sale was the chancellor relied contemplated, upon which set the value of the based on the expert testimony value,” “fair market ascribed Garland at the by Larry and the discount” factor hearing “marketability advanced witness. That by valuation how- appellee’sexpert ignores, ever, the obvious interest shared joint Garland and by appellee the value low. Garland had refused setting already accept appel- lant as a his remain partner, thereby clearly signaling preference appellee. agree- sold, ment did not call for to be but for its value to be determined the chancellor and for pay appellant an amount to half his “low equal By balling” of the “fair the value of use appellee’s partnership through value” method and the face of market that there was no intention to sell the undisputed proof properties, collaborated to Garland essentially deny appellant *7 of her half of interest. Had the “fair value” for his interest called to sell and then agreement give the sale market value” half “fair price, approach discount would be marketability appropriate. that whether the chancellor should have agree discount in 50% inter

applied marketability valuing in est based on the notion of its value assessing by the fair market value is a of law which the using approach question chancellor applied incorrectly. for the to be sold in the event Garland provide Therefore,

refused to as his I see no reason partner. a valuation that assumes that the using approach Thus, would be sold. I would reverse and remand with instructions that the value be assessedwithout use of the marketa partnership’s the chancellor when she used bility the “fair employed by market value” standard. As an alternative to the result affirming below, we should at least it the chancellor’s modify by correcting error as we did in Ark. Jones, S.W.2d 873 Jones There we held that the chancellor erred in reducing valuation of a husband’s firm 32% based on the accounting accounts the firm would alleged lose the sale of his one-third upon interest due to divorce when there was no evidence that he was his interest or selling so. We should at least contemplating doing follow same here and delete the approach reduction for the discount where the effect is the same as we rejected reduce namely marital share. our Following would result in a distribution that is facts, consistent with the one that is and one which lacks equitable, unseemly appearance under Ark. Code appellant’s rights ann. 9-12-315 are denied so that and his being can crony § profit.

Concurring part; dissenting part.