Opinion
No. 11-14-00079-CV
03-31-2016
JOHN ROBERT BERLET, Appellant v. SELMA OZEN BERLET, Appellee
On Appeal from the 200th District Court Travis County, Texas
Trial Court Cause No. D-1-FM-13-000757
MEMORANDUM OPINION
This appeal arises from a bench trial in a suit for divorce. The trial court determined the value of several properties and businesses owned by the husband and wife as community property. In three issues, the husband asserts that the trial court overvalued a property that the trial court awarded him and undervalued a property that the trial court awarded the wife and that the court's errors in valuation caused an unjust division of the community property. We affirm.
Background Facts
The community property estate consisted of several pieces of real estate, a partial interest in a real estate investment company, multiple automobiles, and household furnishings. The trial court awarded the community estate's interest in a real estate investment company known as "BRIC 1" to Appellant. In doing so, the trial court valued the community estate interest in the company at $105,545. Appellant challenges this valuation in his first issue.
The trial court awarded a commercial property located on McNeil Drive in Austin (hereinafter referred to as "the McNeil property") to Appellee. The trial court valued the McNeil property at $60,108. Appellant challenges this valuation in his second issue. Based upon his valuation contentions in his first two issues, Appellant asserts in his third issue that the trial court unjustly divided the community estate between the parties.
Analysis
Appellant asserts in his first issue that the trial court overvalued the community estate's interest in BRIC 1. The trial court entered findings of fact that set out the court's valuation of the "disputed community property." The trial court found the value of the community estate's interest in BRIC 1 to be $105,545. Appellant contends that the trial court abused its discretion in making this valuation. He contends that this valuation exceeds the highest value proffered by either party at trial. We disagree.
In a divorce proceeding, the trial court is required to order a division of the parties' community estate in a manner that the trial court deems just and right, having due regard for the rights of each party. TEX. FAM. CODE ANN. § 7.001 (West 2006). The trial court has wide discretion in dividing the estate of the parties, and that division should be corrected on appeal only when an abuse of discretion has been shown. Schlueter v. Schlueter, 975 S.W.2d 584, 589 (Tex. 1998); Murff v. Murff, 615 S.W.2d 696, 698 (Tex. 1981); In re Marriage of C.A.S. and D.P.S., 405 S.W.3d 373, 384 (Tex. App.—Dallas 2013, no pet.). When deciding if the trial court abused its discretion, the legal and factual sufficiency of the evidence are not independent grounds of reversible error, but instead constitute factors relevant to an appellate court's assessment of whether the trial court abused its discretion. In re Marriage of C.A.S., 405 S.W.3d at 383; Moore v. Moore, 383 S.W.3d 190, 198 (Tex. App.—Dallas 2012, pet. denied); Moroch v. Collins, 174 S.W.3d 849, 857 (Tex. App.—Dallas 2005, pet. denied). A trial court does not abuse its discretion if there is some evidence of a substantive and probative character to support the decision. In re Marriage of C.A.S., 405 S.W.3d at 383; Moroch, 174 S.W.3d at 857.
The trial court's determination of the value of a community property asset is a component of making a division of the community property estate. When conflicting evidence of value exists, a trial court is permitted to assign a value within the range of evidence. Moore, 383 S.W.3d at 200 (citing McIntyre v. McIntyre, 722 S.W.2d 533, 536 (Tex. App.—San Antonio 1986, no writ)). Even if we determine that the district court erred in valuing individual community assets, such an error does "not require reversal unless the complaining party shows that, because of the error[] in valuation, the division made by the trial court is manifestly unjust." Cook v. Cook, 679 S.W.2d 581, 585 (Tex. App.—San Antonio 1984, no writ).
As noted previously, BRIC 1 is a real estate investment company. BRIC 1's only asset is an apartment complex located in Bridge City. In the findings of fact and conclusions of law, the trial court valued the community property estate's interest in BRIC 1 at $105,545.
Appellant and Appellee provided competing testimony as to the value of the apartment building. Appellee testified that the apartment building was worth approximately $950,000. She also testified that the apartment complex was appraised at $850,000 in late 2009. At some point in the years following the appraisal, the apartment complex was connected to the city's water and sewer systems. Appellee testified that the sewer and water connections increased the value of the property by approximately $100,000. Appellee testified that there was a mortgage of approximately $525,000 on the property and that she and Appellant owned 25% of BRIC 1, while the other 75% was owned by other shareholders.
Appellant acknowledged that the property was appraised for $850,000 in late 2009. However, he testified that the value of the property diminished to $750,000 in the years following the appraisal. Appellant further testified that there were two liens on the apartment complex. The first lien was a mortgage that carried a balance of $527,820.20 at the time of trial. Appellant testified that the second lien on the property was a loan from the SBA in the amount of $89,000. He also stated that there was a total of $850,000 of debt on the property when one includes the return of principal to investors in the apartment complex. In regards to ownership, Appellant was asked, "You own how much?" Appellant replied: "There's another entity that's called the general partnership, and I have a 50 percent -- Selma and I have a 50 percent interest in the general partnership. Approximately 50 percent. The GP has interest in the LP. Selma and I have a personal interest in the LP of ten percent." Appellee asserts that this language implies a total ownership stake of up to 35%. Appellant attempted to clarify his previous statement by testifying:
SBA refers to the U.S. Small Business Administration.
I believe it's structured like this: The general partnership owns maybe one percent -- somewhere between one and ten, I think one, until all the investors are made whole. The general partnership interest in the property increases at that point, once the limited partners are made whole and their return of their investment happens. So that -- that partnership interest is subject to change.
Given the complex nature of the ownership structure of BRIC 1, the trial court requested further documentation to determine the community estate's ownership interest. The trial court stated: "And granted it is -- does sound complicated if you have general partners, limited partners, and then property, but other than the valuation, all that should be determined by paper." After reviewing the record, we do not find that Appellant provided any documentation to prove the community's ownership in BRIC 1.
Appellant asserts that, based on the competing testimony, the trial court could have found at most that Appellant and Appellee owned 25% of BRIC 1. He further asserts that even if the trial court believed Appellee's testimony that the apartment complex owned by BRIC 1 was worth $950,000, the court would still need to subtract allegedly uncontested debts, which he states are the mortgage on the property, the loan from the SBA, and money owed to investors in BRIC 1. Appellant asserts on appeal that these debts total $757,220. Subtracting the liabilities from the singular asset, and applying the maximum 25% ownership interest, Appellant asserts that the trial court should have valued BRIC 1 at $48,195 at the very most and that it was error for the trial court to value it at $105,545. He relies on Mata v. Mata for the proposition that a trial court abuses its discretion when it bases a property division on values not in evidence. 710 S.W.2d 756 (Tex. App.—Corpus Christi 1986, no writ). The crux of Appellant's argument is that the trial court considered an ownership interest greater than 25%, which would be an amount not supported by the evidence.
(950,000 - 757,220) x .25 = $48,195.
Appellee contends that the trial court could have found that the parties owned 25% of the limited partnership and 10% of the general partnership that owned BRIC 1, totaling 35%. Appellee asserts that, utilizing a 35% ownership, the trial court could have valued BRIC 1 as high as $116,317.37. As the trial court's valuation was less than this, Appellee asserts that the valuation was not an abuse of discretion but was, instead, within the range of potential valuations provided by the competing testimony.
(950,000 - 527,820.20 - 89,844.45) x .35 = $116,317.37.
Neither the final decree of divorce nor the findings of fact and conclusions of law explicitly provided the trial court's formula to reach its valuation of BRIC 1. However, the formula used by the court can be determined from the record as a whole. By our calculations, it appears that the trial court utilized a 25% ownership interest on the part of the community property estate in BRIC 1.
The trial court's findings of fact and conclusions of law valued BRIC 1 at $105,545. It appears to us that the trial court began its calculation by using Appellee's valuation of $950,000 for the apartment complex. The trial court subtracted the $527,820.20 mortgage on the property from Appellee's valuation of $950,000, and then multiplied this figure by 25%: ($950,000 - $527,820.20) x .25 = $105,544.95.
All of the valuations in the findings of fact and conclusions of law are in whole dollars. The $0.05 difference between our calculation and the trial court's calculation appears to be due to rounding.
It appears that the trial court did not include the SBA loan of $89,000 or the debt allegedly owed to investors in BRIC 1 in its valuation, both of which Appellant asserts are uncontested debts. Our review of the record indicates that the trial court had a basis for not including these debts in its final calculation. At the end of the trial, Appellant's counsel submitted a document from the SBA showing a loan balance of $89,844.45. Appellee's trial counsel took issue with the evidence of the loan and stated: "He's testified about it before. I don't have any reason to dispute it, but I have no knowledge of it. I have never seen it, had never heard about it before yesterday." The trial court asked: "Okay. How does that affect -- how does that number affect things?" Appellee's trial counsel replied:
It affects my calculations on the value of BRIC 1, because the only debt that I knew about and know about for sure is that mortgage
of the 527 that I was produced documents for. So I have seen that there's a mortgage of 527.The trial court replied:
He is now claiming there's other debt owed against this property, one them being this $89,000 loan that I had not known about and did not include in my calculations.
Okay. Well, I'll admit it, but we'll talk later about whether I should take it into account based on the allegations that it wasn't produced.
For one thing you-all would need to verify whether it was produced or not, if [Appellant's counsel] thinks it was produced. So it's admitted, but I may unadmit it later.
Based on the court's conditional ruling, it is apparent that the trial court was concerned that Appellant may not have timely disclosed debts other than the mortgage. Thus, the trial court may have ultimately decided against including evidence of other debts in calculating the value of BRIC 1 on the basis that they were not timely disclosed in discovery. See TEX. R. CIV. P. 193.6. We conclude that the trial court's determination of the value of the parties' interest in BRIC 1 was supported by the evidence offered at trial. Accordingly, the trial court did not abuse its discretion in determining the value of the parties' interest in BRIC 1 to be $105,545. Appellant's first issue is overruled.
In Appellant's second issue, he challenges the trial court's finding that the McNeil property was worth $60,108. He contends that the trial court abused its discretion in making this determination because this valuation is $148,000 less than the lowest value proffered by either party at trial. We disagree.
The McNeil property is a piece of commercial real estate where Appellee operates a hair salon and where Appellant previously operated a financial services office. Unlike with BRIC 1, the parties are certain as to how the trial court reached its valuation of the McNeil property. The parties contend that the trial court used a pre-debt value of $235,200 and subtracted the mortgage balance of $152,292 and the secured line of credit of $22,800.22. This calculation produces a valuation of $60,107.78. Appellant does not dispute the debt on the property. However, Appellant challenges the pre-debt value assigned by the trial court.
(235,200 - 152,292 - 22,800.22) = $60,107.78. As with the valuation of BRIC 1, it appears that the trial court rounded up to the nearest whole dollar. --------
As a general rule, the value to be accorded community property that is to be divided in a divorce proceeding is market value. Mandell v. Mandell, 310 S.W.3d 531, 536 (Tex. App.—Fort Worth 2010, pet. denied); see R.V.K. v. L.L.K., 103 S.W.3d 612, 618 (Tex. App.—San Antonio 2003, no pet.) (citing Walston v. Walston, 971 S.W.2d 687, 690 (Tex. App.—Waco 1998, pet. denied)). "Fair market value has been consistently defined as the amount that a willing buyer, who desires to buy, but is under no obligation to buy would pay to a willing seller, who desires to sell, but is under no obligation to sell." R.V.K., 103 S.W.3d at 618 (quoting Wendlandt v. Wendlandt, 596 S.W.2d 323, 325 (Tex. Civ. App.—Houston [1st Dist.] 1980, no writ)); see City of Pearland v. Alexander, 483 S.W.2d 244, 247 (Tex. 1972).
An expert for Appellee testified that the pre-debt value of the McNeil property was approximately $235,000 based on a comparative market analysis that he conducted. Appellee's expert came to this valuation by looking at the cost of two other properties that had sold in the immediate vicinity, as well as the listed price of two properties in the immediate area that were currently for sale. Appellee's expert also considered the pros and cons of the McNeil property, including its limited square footage. He also valued the property using an income approach. He concluded that he could not see the McNeil property being worth more than $235,000.
Appellant asserts that this valuation by Appellee's expert is unreliable and that the McNeil property is worth at least $300,000. It is the only commercial building that sits on the front edge of a BMW dealership, and the owner of the dealership has in the past offered to purchase the property for $300,000. At trial, the owner of the BMW dealership testified that he would still be willing to buy the property for $300,000 if it were on the market. Appellant cites Mandell for the proposition that the car dealer's willingness to pay $300,000 for the property is evidence of its market value. See Mandell, 310 S.W.3d at 531. In response, Appellee cites Lee v. Lee, which provides that "Texas courts have long held that unaccepted offers to purchase property are no evidence of market value of property." 47 S.W.3d 767, 785 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (citing Hanks v. Gulf, Colorado & Santa Fe Ry. Co., 320 S.W.2d 333, 336-37 (Tex. 1959); Sw. Bell Tel. Co. v. Wilson, 768 S.W.2d 755, 762 (Tex. App.—Corpus Christi 1988, writ denied)). Lee goes on to provide that "[t]he courts have found this evidence uncertain and speculative" because "[e]vidence of an unaccepted offer does not establish the good faith of the person making the offer." Id.
The testimony offered at trial showed the pre-debt value of the McNeil property to be between $235,000 and $300,000. Given the conflicting evidence of values of the property, it was within the trial court's discretion to conclude that the property was worth $235,200 pre-debt. In re Marriage of C.A.S., 405 S.W.3d at 391 ("We 'will not disturb a trial court's resolution of conflicting evidence that turns on the credibility or weight of the evidence.'" (quoting Ennis v. Loiseau, 164 S.W.3d 698, 706 (Tex. App.—Austin 2005, no pet.))). As noted previously, the car dealer's testimony concerning an unaccepted offer is not evidence of fair market value. We conclude that the trial court did not abuse its discretion in determining a pre-debt value for the value of the property that was supported by the evidence offered at trial. Appellant's second issue is overruled.
In Appellant's third issue, he asserts that the trial court's division of the community property is manifestly unjust. He premises this issue on the valuation challenges he asserted in his first two issues that we have overruled. In light of our rulings, the trial court's division of the community estate remains at 46.5% to 53.5% in favor of Appellee. Appellant does not challenge this division.
The property division need not be equal, and the trial court may consider many factors when exercising its broad discretion to divide the marital property. Murff, 615 S.W.2d at 699; see also In re Marriage of C.A.S., 405 S.W.3d at 384. Mathematical precision in dividing property in a divorce is usually not possible. Murff, 615 S.W.2d at 700. The party complaining of the division of the community estate has the burden of showing from the evidence that the trial court's division of the community estate was so unjust and unfair as to constitute an abuse of discretion. In re Marriage of C.A.S., 405 S.W.3d at 384. The record does not show that the trial court's division of the community estate was so disproportionate as to constitute an abuse of discretion. We overrule Appellant's third issue.
This Court's Ruling
We affirm the judgment of the trial court.
JOHN M. BAILEY
JUSTICE March 31, 2016 Panel consists of: Wright, C.J.,
Willson, J., and Bailey, J.