In a divorce, assets and debts can be divided equally in North Carolina, but if either party requests equitable distribution, then there may also be an unequal division if that’s what the court deems fair. North Carolina courts can use a variety of entities to determine how to divide a couple’s property, including businesses owned by one of the spouses.
Sneed v. Johnson
In Sneed v. Johnson, Husband appealed an equitable distribution order issued by the court, as well as an order awarding Wife a distributive award of $1,500,000. The distributive award represented half of the appraised value of Husband’s law firm, which he started during the marriage.
The parties entered into a Consent Order that resolved all equitable distribution issues except for the classification, valuation, and distribution of the law firm and all assets owned by law firm. While the chosen appraiser was attempting to evaluate the firm to determine its value, Husband stopped responding and assisting the appraiser. He did not send him information to aid in the valuation and refused to pay his half of the appraiser’s fee, leading Wife to pay the balance owed.
The appraiser provided a final calculation of the value of the law firm, as well as a final invoice for his services. For months, Husband ignored the appraiser’s correspondence regarding the invoice. Wife’s attorney also sent a letter to Husband about the appraisal and the balance. Wife eventually paid the outstanding balance for Husband a second time.
At trial, Husband claimed the value of his law firm was zero or negative due to an outstanding credit line. However, the appraiser valued the firm at $3,100,000. The trial court accepted the appraiser’s value, finding that Husband failed to provide any credible value as of the date of separation or date of trial. The court ordered Husband to pay half of the value of the firm to Wife plus $8,520.64 to reimburse her for the payments she made to the appraiser. Husband appealed.
The appellate court’s task was to determine if the trial court’s approach reasonably approximated the value of the business. If so, it will stand.
The Court of Appeals stated that goodwill can be used to valuate a business, but the value of goodwill should be used with care because the business owner will be ordered to pay their ex-spouse “tangible dollars for an intangible asset at a value concededly arrived at on the basis of some uncertain elements.” The Court of Appeals affirmed the trial court’s classification of goodwill value in the Sneed case.
Ultimately, the appellate court concluded that the trial court did not[1] err in allowing the appraiser to testify, by accepting his reports into evidence, or by finding the appraiser’s calculations credible. The lower court’s decision was affirmed by the appellate court.
[1] On page 10 of the Opinion, the text reads the “trial court did err in allowing Reagan to testify, accepting his reports into evidence, and denying Plaintiff’s Motion to Strike.” However, based on the surrounding text, it seems this may be a typo. I included it here as the court did not err but wanted to point this out in case I’m mistaken.