Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Reed v. Reed

Supreme Court of Idaho

December 2, 2014

STEPHANIE M. REED, Plaintiff-Respondent,
v.
SCOTT AVERY REED, Defendant-Appellant

2014 Opinion No. 128

Page 1110

[Copyrighted Material Omitted]

Page 1111

Appeal from the District Court of the First Judicial District of the State of Idaho, in and for Kootenai County. Hon. Michael J. Griffin, District Judge; Hon. Scott L. Wayman, Magistrate Judge.

The judgment of the district court is affirmed in part and vacated in part.

Dan J. Rude, Coeur d'Alene, argued for appellant.[1]

Suzanna L. Graham, Suzanna L. Graham Attorney At Law PC, Coeur d'Alene and Mark Alan Ellingsen, Witherspoon Kelly, Coeur d'Alene, argued for respondent.

Chief Justice BURDICK, Justices J. JONES, HORTON and Senior Justice Pro Tem WALTERS CONCUR.

OPINION

Page 1112

EISMANN, Justice.

This is an appeal out of Kootenai County from the decision of the district court upholding the judgment of the magistrate court in a divorce action. We vacate four parts of the decision and remand for further proceedings. We affirm the other challenged provisions of the decision.

I.

Factual Background.

Scott Avery Reed (Father) and Stephanie M. Reed (Mother) were married in 1993, and during their marriage they had three children who were born between 1996 and 2004. On December 22, 2009, Mother filed for divorce. They agreed that there were irreconcilable differences between them that justified terminating their marriage. The remaining issues were tried in the magistrate court on January 13 and 14, 2011.

On February 24, 2011, the magistrate court entered a document titled " Judgment for Attorney's Fees," which stated that it granted Mother a judgment against Father in the sum of $10,000 for attorney fees. On the same date, it also entered a document titled " Judgment for Equalization of Property Settlement," which stated that it granted Mother a judgment against Father in the sum of $198,642.00 to equalize the division of community property.[2]

On January 28, 2011, the court orally announced its findings of fact and conclusions of law on the record. On April 7, 2011, the court filed a document titled " Findings of Fact, Conclusions of Law and Final Decree of Divorce," which stated that " [t]he attached Oral Pronouncement transcribed shall constitute the Findings of Fact, Conclusions of Law and Final Decree of Divorce." Attached to the document was a transcript of the proceedings on January 28, 2011, during which the court orally announced its decision.[3]

Father filed motions asking the court to reconsider its findings and conclusions and to make additional findings. They were heard on April 22, 2011, and on May 11, 2011, the court entered its order modifying the custody schedule for spring break; refusing to modify the Father's obligation to pay for health insurance on the children; specifying when Father's child support obligation would commence; ordering the parties to sign all documents necessary to execute the property division and to sign quitclaim deeds to effectuate transfers of community property; and awarding Mother the current balances in specified accounts.

Page 1113

On June 20, 2011, the magistrate court entered a document titled " Amended Final Decree of Divorce." It incorporated by reference the court's oral pronouncements on January 28, 2011, and the " Findings of Fact, Conclusions of Law and Final Decree of Divorce" entered on April 7, 2011. It then set forth that the parties were granted a divorce, the provisions for child support and custody, the real and personal property awarded to each party, the payment to be made by Father to equalize the division of the community property, and the award to Mother of attorney fees in the sum of $10,000.[4] On July 25, 2011, Father filed a notice of appeal from this purported judgment.

Mother obtained a writ of execution to enforce the purported judgment entered on February 24, 2011, in the sum of $198,642.00, plus interest, and the purported judgment entered on the same date for $10,000 in attorney fees, plus interest. She sought to execute upon the community property stock awarded to Father from the two corporations, but the writ was returned unsatisfied because the corporations had not issued any stock. The two corporations were Mountain Health Care, Inc., which owned the building in which Father practiced medicine, and Mountain Health Services, P.C., which was the medical practice for which Father worked. Mother sought an order requiring the corporations to issue stock to Father and to deliver the stock to the sheriff. After the matter was argued, the magistrate entered an order on September 9, 2011, granting the motion. On October 25, 2011, Father filed an amended notice of appeal adding the order as a matter he was appealing. He later filed three more amended notices of appeal, the last being on April 20, 2013.

The appeal was heard by the district court, and on April 5, 2013, it entered its decision on appeal. It affirmed all aspects of the magistrate court's purported judgment except the dates of the qualified domestic relations orders. The district court held that the orders incorrectly listed the date of the parties' divorce as June 20, 2011 (the date of the document titled " Amended Final Decree of Divorce" ) and that the correct date was January 14, 2011 (the date the magistrate orally stated that the parties would be deemed divorced based upon their stipulation at the close of the trial that they wanted to be divorced).[5] Father then timely appealed to this Court.

II.

Standard of Review.

In an appeal from a district court's determination of a case appealed to it from the magistrate court, we review the decision of the district court to determine whether it correctly applied the applicable standard of appellate review. Peterson v. Peterson, 156 Idaho 85, 88, 320 P.3d 1244, 1247 (2014).

III.

Did the District Court Err in Affirming the Magistrate Court's Valuation and Award of the Shares of Stock in Mountain Health Care, Inc.?

a. Valuation of Mountain Health Care, Inc.

Father had interests in two corporations--the professional corporation named Mountain Health Services, P.C., for which he practiced medicine and the corporation named Mountain Health Care, Inc., which owned the land, building, and some equipment leased to the professional corporation. Neither corporation had issued stock at the time of trial, but Father was entitled to 22.97% of the shares of stock in Mountain

Page 1114

Health Care, Inc. His interest in both corporations was community property.

The market value of Mountain Health Care, Inc., was determined by deducting its liabilities from the market value of its assets. Father called an expert who testified as to the market value of the corporation and Father's interest in it. The expert prepared an exhibit listing the values of categories of assets, the amounts of categories of liabilities, and the net asset value. The magistrate court found this expert very credible. With respect to the value of the corporation's real property, the expert stated that he was not qualified to perform real estate appraisals, so he used the market value determined by the real estate appraiser called by Father, which was $2,500,000. The real estate appraiser called by Mother testified that the value of the real property was $4,850,000, which testimony the court found more credible. The expert called by Father testified on cross-examination that if the value of the real property was $4,850,000, the value of the corporation would be $2,795,147 and the value of Father's 22.97% interest would be $642,045. The court found that the market value of Father's interest in the corporation was $642,045.

On appeal to the district court, Father challenged the valuation of his interest in Mountain Health Care, Inc., and he makes several of the same challenges on this appeal. " A trial court's findings of fact will not be set aside on appeal unless they are clearly erroneous." Camp v. East Fork Ditch Co., Ltd., 137 Idaho 850, 856, 55 P.3d 304, 310 (2002). In applying that principle, the appellate court cannot reweigh the evidence, judge the credibility of the witnesses, or substitute its view of the facts for that of the trial court. Argosy Trust ex rel. Andrews v. Wininger, 141 Idaho 570, 572, 114 P.3d 128, 130 (2005). It is the responsibility of the trial court to judge the credibility of witnesses and weigh conflicting evidence. Bream v. Benscoter, 139 Idaho 364, 367, 79 P.3d 723, 726 (2003). The appellate court's role is simply to determine whether there is evidence in the record that a reasonable trier of fact could accept and rely upon in making the factual finding that is challenged on appeal. Miller v. Callear, 140 Idaho 213, 216, 91 P.3d 1117, 1120 (2004). The district court on appeal reviewed the record and concluded that the magistrate court's valuation of the corporation was supported by substantial and competent evidence. Father contends that the district court erred in its analysis.

1. Valuation of real property.

The primary asset of the corporation was the real property that it owned. Mother called a real estate appraiser to testify as to its market value. He had appraised the property in February 2009 on behalf of a bank, and he testified that as of February 2009, the market value of the real property was $4,816,000. Mother also questioned him about the report prepared by the appraiser that Father intended to call as a witness, and he pointed out various criticisms as to that appraiser's analysis. On cross-examination, the appraiser called by Mother testified that the best way to obtain an opinion as to the current market value would be to do a new appraisal; that he was not retained to do a new appraisal; and that he could not say that the market value of the property at the time of trial was $4.8 million. On redirect, he testified that in preparation for testifying he had pulled the data sheets used for appraisals done on other medical buildings sold during the period from October 2009 through December 2010 and that the value per square foot of those buildings was higher than the value per square foot of the corporation based upon his February 2009 appraisal. The real estate appraiser called by Father testified that the market value of the corporation's real property was $2,500,000. The appraisal report stated that the effective date of that appraisal was July 28, 2010.

The magistrate court held that the real estate appraiser called by Mother was more credible than the appraiser called by Father, primarily because of his demeanor during cross-examination and his use of only distressed sales in Shoshone county as comparable sales rather than considering sales between willing sellers and buyers in and around the region. The court found that the value of Father's interest in the corporation was $642,045.

Page 1115

In a divorce action, the community property assets are to be valued as of the date of the divorce trial. Suter, 97 Idaho at 466, 546 P.2d at 1174.[6] The court recognized that neither appraiser offered an opinion as to the market value as of the date of the divorce trial, but it correctly stated that it had to decide the case based upon the evidence it had.

Father argues that when the appraiser called by Mother performed his appraisal, there was a planned addition to the building and he based his appraisal on the addition being completed according to its plans. The proposed, two-story addition would add 7,595 square feet to the building, with 2,875 of the square feet being unfinished and used for records storage. However, the addition actually built contained 382 fewer square feet. Father argues that if the value per square foot of the proposed addition was calculated based upon the value of the proposed addition as determined by Mother's appraiser in 2009 and that value per square foot was multiplied by the reduced square footage, the value of the building should be reduced by $70,505.70. No expert so testified, nor did any expert testify that every square foot of the addition had the same value.

Father next argues that the magistrate court erred in considering that the corporation had insured the building for $3,750,000 after Father had received the appraisal report from his appraiser that the market value of the real property was $2.5 million. The court found that the appraiser's opinion held little weight in light of the opinion of Mother's appraiser, whom the court found to be a very credible witness, and the amount of insurance purchased by the corporation on the building. Father argues that the insurance policy shows that it was replacement cost insurance, which is not the measure of market value.

Although the magistrate court considered the amount of the insurance purchased on the building, it stated, " I find, based on the testimony here, that [Mother's appraiser's] appraised value is the most credible evidence that I have." After discussing that appraiser's testimony regarding reviewing the per-square-foot value of other medical buildings that had been sold in recent years, the court again stated, " based on the totality of the evidence," that the opinion of Mother's appraiser " regarding the value is still the most credible evidence that I have concerning the present fair market value, as of the date of the divorce, of the building." The court concluded that it did not have information regarding how the corporation arrived at the amount of insurance to purchase, but it did have evidence as to how Mother's appraiser arrived at his opinion as to value. The court then stated that " I still find that [Mother's appraiser's] valuation is the correct one and the most accurate one as of the date of divorce."

The magistrate court based its valuation of the real property upon the testimony of the appraiser called by Mother. The court found that the opinion of Father's appraiser was not credible and that the opinion of Mother's appraiser was the most credible evidence it had. The court also noted that it had to decide the case based upon the evidence it had.

2. Valuation of equipment.

Father called the clinic manager to testify regarding various issues unrelated to the value of the Mountain Health Care, Inc.'s equipment. During her testimony she stated that she was the records custodian for both that corporation and the professional corporation. Father told her there had been testimony about some equipment leases and that there had been an issue about some unidentified lease. She was then asked whether she knew what Father was talking about, and she answered, " No." She then added that the corporation owns the x-ray equipment and

Page 1116

leases it to the professional corporation. Father asked whether that lease had ever been challenged by a lender or other financier, and she replied that to her knowledge it had not.

On cross-examination, Mother asked, " Do you have any idea what the fair market value of the x-ray machine is?" to which the manager replied: " I'm gonna say probably they--I'm gonna say around 50,000 maybe. I don't know for sure." Mother then asked, " The only assets held by [Mountain Health Care,] Inc. [are] basically the building, the land and the x-ray machine?" to which the clinic manager answered, " Right."

After the clinic manager testified, Father called the expert who would testify about the value of the corporation. As stated above, that expert had prepared an exhibit listing the values of categories of the corporation's assets and the amounts of its liabilities, and that exhibit was admitted into evidence. The categories of assets listed on that exhibit included " Office Equipment," " Medical Equipment," and " Total Equipment." The expert determined the corporation's assets and liabilities as reported in its financial statements dated December 31, 2009, and then in his November 11, 2010, report he estimated the values of those assets as being 70% of their book value. The book value of the office equipment was $112,691, the book value of the medical equipment was $235,393, and the estimated total value of both categories of equipment was $243,659. The magistrate court found the expert's testimony to be credible and found that the market value of the corporation was as he testified based upon the exhibit, but with the market value of the real property being as testified by Mother's appraiser. Therefore, the court found that the corporation had office and medical equipment with a combined market value of $243,659.

Father contends that the district court erred in finding that this value was supported by substantial and competent evidence. We disagree. Father called the expert to testify as to the market value of the corporation, based upon the values of the corporation's assets and the amounts of its liabilities. The clinic manager testified that the corporation currently insured the contents of the building for $387,400, which she understood to be the value of the contents of the building. The various items that comprised the office equipment and medical equipment were not identified. Father did not offer any evidence that the corporation had disposed of its office equipment or any of its medical equipment since 2009, nor was there any evidence of a change in its business that would indicate that it had disposed of any equipment. The clinic manager's answer to Mother's question that the corporation's only assets were " basically" the land, the building, and the x-ray machine could have been construed to mean that they were the most valuable or significant individual assets. With respect to the value of the x-ray machine, the clinic manager stated that it was " around 50,000 maybe. I don't know for sure." There was conflicting evidence on this issue, and the magistrate court could weigh the evidence and consider reasonable inferences to conclude that the corporation had equipment with a market value of $243,659.

3. Cash on hand and accounts receivables.

The exhibit prepared by Father's expert listed the assets of the corporation as including " Cash & Cash Equivalents" with a value of $125,590 and " Uncollected Accounts Receivable" with a value of $5,637. Father argues that the evidence did not establish those values as of January 13 and 14, 2011. These values were in the expert's exhibit, which was admitted into evidence by stipulation of the parties. Although the values in the exhibit were determined as of December 31, 2009, Father did not offer any evidence showing that the values had decreased by the time of the trial. The magistrate court was entitled to make its decision on the evidence admitted during the trial, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.