Case Notes: Business interests and Equitable Distribution

Valuing assets can be extremely complicated. It takes a lot of experience to determine the type of evidence that is necessary to prove the value of an asset. The courts are often faced with the question of determining how much a business interest is worth. The problem is that the value of a business interest is often difficult to quantify.

In Albert v. Albert (O'Connell), FD86-004609, Allegheny CP (September 5, 2012), Husband purchased a bar from his grandfather before marriage and shared the bar with his brother. Assets acquired prior to marriage are "non-marital" and so not considered in distributing assets. However, the increase in value of non-marital assets is often a marital asset. At trial and in discovery, Husband failed to provide any documentation indicating the value of the business at the date of marriage or the date of separation. With no documentation, the court had to rely on a single verbal comment from Husband that he would sell the business for $100,000. The court estimated the increase in value of the business at this 100K amount which entitled Wife to a portion of the 100K.

Husband appealed arguing that the court valued the business based on insufficient evidence. The court disagreed with Husband, opining that when asked about the operations, earnings, and other information about the bar business, Husband declined to provide any information whatsoever. In fact, the court believed the business was worth in excess of $100,000 but could not speculate. Because the only value provided in court was the off hand remark by Husband, the court was entitled the use this value as it was the only value set forth.

Evaluating non-liquid interests is extremely difficult. Many such cases are best served by using an expert witness. Regardless, it is vital that your attorney understand how to put a case on and to introduce the proper evidence. Parties must be careful about offhand remarks. Without that remark, the business may have been valued at zero. Even an unfounded statement as to your opinion on the value can be binding if no other evidence is set forth. In this case, Wife was poorly served by not having done "discovery" to get documentation on the business value. Husband was poorly served by not understanding the importance of such remarks. Business valuation cases really do demand an experienced and thorough attorney.