The recently-issued McGregor case (unpublished per curiam decision of the Court of Appeals, issued September 30, 2004, Docket No. 247257) proved to be an interesting read. It was yet another case from Kent County, which was surprising to me, as I have been under the (mis)impression that most appeals emanated from Wayne/Oakland counties.
The main issues in McGregor involve the value of H’s interest in a number of related businesses, and the method of distributing W’s interest to her.
I am always intrigued by facts like those faced by the Court of Appeals in this case. W’s CPA valued H’s total interest in the companies at $1,636,462.00, while H’s CPA valued H’s interest at $305,000.00.
How can this be? Is this chicanery at its finest, or can two professionals honestly and objectively simply disagree as to the proper valuation principles to utilize in a particular case? We’ll never know, at least in this case.
In what can only be described in polite circles as “innovative”, the trial court utilized a “hybrid” method of valuation. The judge first accepted H’s expert’s figure, and awarded W 50% of that amount, or $152,354.00. But then the judge ruled that if and when H’s shares in the company were ever sold, he was to pay W 40% of that amount, less the $152,354.00 already paid. Thankfully, the Court of Appeals reversed that ruling.
First, the Court of Appeals cited Olson v Olson, 256 Mich App 619 (2003) for the proposition that a trial court clearly errs when it fails to place a value on a disputed piece of marital property.
Second, the Court of Appeals pointed out that the trial court essentially awarded W the benefit of any increases in the value of the stock that accrued after the divorce. The Court of Appeals cited Byington v Byington, 224 Mich App 103 (1997), for the proposition that assets earned by a spouse during the marriage are part of the marital estate.
There are, nevertheless, two disappointing aspects of the Court of Appeals’ decision. We are not left with an answer as to which valuation method was accepted by the Court of Appeals and why, as it ruled that the trial court was to (1) amend the Judgment of Divorce to remove the future sale provision, (2) recalculate the value of H’s interests in the companies using the evidence already on the record, and (3) give W a cash award based on an appropriate percentage of the value of H’s interests in the companies.
The other disappointing aspect of the decision was that the Court of Appeals mentioned H’s argument that the trial court’s award of spousal support amounted to a “double dip” of his assets, where the amount of spousal support was based on his income from his interests in the three companies, when the trial court had also awarded W an equitable share of the cash value of those interests.
In other words, H claimed that the value of his business interests was calculated based on his potential future income and that the same potential future income provided the basis for the award of spousal support.
However, since H’s argument of that issue was “cursory”, the Court of Appeals ruled that the issue was not properly presented, and it therefore deemed the issue abandoned.
Joe Cunningham, JD, CPA, has written extensively on the “double dip” issue, and has most recently indicated that there is no “right” reason in all cases. He advocates analyzing each case individually in order to obtain the most equitable result depending on the facts of each case.
Now that’s my kind of expert!