Daniel T. Street v. Joyal C. Street ( 1997 )

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Moon, Judges Benton and Elder
Argued at Richmond, Virginia
DANIEL T. STREET
MEMORANDUM OPINION * BY
v. Record No. 1940-95-4 JUDGE LARRY G. ELDER
JANUARY 21, 1997
JOYAL C. STREET
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Rosemarie Annunziata, Judge
M. Lee Anne Washington (Surovell, Jackson,
Colten & Dugan, P.C., on briefs), for
appellant.
Richard J. Byrd (Byrd, Mische, Bevis, Bowen,
Joseph & O'Connor, P.C., on brief), for
appellee.
Daniel T. Street (husband) appeals the trial court's orders
denying his motion to modify pendente lite support and awarding
equitable distribution, spousal support and child support in his
divorce from Joyal C. Street (wife). For the reasons that
follow, we affirm.
I.
FACTS
The parties were married in 1969, separated in 1992 and
divorced in 1995. They had five children, two of whom were
unemancipated at the time of the divorce. In February, 1993, the
trial court entered a pendente lite support order that directed
husband to pay $2,000 per month for spousal and child support,
*
Pursuant to Code § 17-116.010 this opinion is not
designated for publication.
$200 per month for utilities in the marital home, and the entire
monthly mortgage payment on the marital home. In August, 1994,
husband moved the trial court to decrease his pendente lite
support obligations. During a meeting in chambers with the trial
judge, both parties proffered their evidence regarding the
motion. Husband proffered that he had experienced a change in
his financial ability to make his pendente lite support payments
because his business had declined and less cash was available.
Wife proffered that the original pendente lite order was the
result of a counseled agreement between the parties, that the
needs of herself and the children had not changed, and that she
was unable to work due to her continuing treatment for cancer.
The trial court denied husband's motion to modify pendente lite
support and moved the case to a final hearing, stating that its
general policy regarding such motions was to refrain from
modifying pendente lite orders and to instead schedule a final
hearing for the resolution of all issues in the case. Husband
did not object to the trial court's ruling.
On April 24, 25, and May 2, 1995, the trial court heard
evidence on the issues of equitable distribution, spousal support
and child support. The only marital assets for the purposes of
equitable distribution were the husband's carpet installation
business (business) and the marital home. On May 18, the trial
court ruled from the bench that the business had a value of
$160,000 and that the marital home was worth $142,000. It
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awarded the business to husband, the house to wife, and ordered
husband to pay the difference, minus wife's share of a joint tax
liability, in monthly installments. The trial court also found
that husband's monthly income was $7,639, comprised of $6,139
from his business and an additional $1,500 from "side jobs" not
reported on the books of his business. The trial court found
that wife had no income. Based on these figures, the trial court
ordered husband to pay $2,300 per month in spousal support and
$921 per month in child support.
II.
MODIFICATION OF PENDENTE LITE SUPPORT
Husband contends that the equitable distribution award
should be reversed and remanded for a new hearing because the
trial court erroneously denied his motion to modify pendente lite
support, and this error adversely affected the valuation of his
business. Specifically, husband argues that the trial court
abused its discretion when it refused to hold a hearing on his
motion. We disagree.
Divorce courts have statutory authority to make pendente
lite orders to provide for inter alia spousal and child support.
See Code § 20-103. An order for pendente lite support is an
interlocutory order. See Pinkard v. Pinkard, 12 Va. App. 848,
851, 407 S.E.2d 339, 341 (1991); Beatty v. Beatty, 105 Va. 213,
215, 53 S.E. 2, 3 (1906). A trial court has the power to modify
an interlocutory order prior to the entry of a final order in a
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case. See Richardson v. Gardner, 128 Va. 676, 685, 105 S.E. 225,
228 (1920); see also Pinkard, 12 Va. App. at 853, 407 S.E.2d at
342 (stating that "[t]he matter of pendente lite support remains
within the control of the court and the court can change its mind
while the matter is still pending before it"). However, an order
of pendente lite support has the effect of res judicata as to the
facts existing at the time the motion for such support was made,
and a spouse seeking modification of pendente lite support must
show a material change of circumstances subsequent to the entry
of the pendente lite order that warrants the relief sought. See
24 Am. Jur. 2d Divorce and Separation § 583 (1983). In addition,
unlike a motion to modify a final order of spousal or child
support, "the reopening of [an interlocutory order] is not a
matter of right, but rests in the sound discretion of the [trial
court]." Hurley v. Bennett, 163 Va. 241, 250, 176 S.E. 171, 174
(1934).
Assuming without deciding that husband preserved his appeal
of this issue, we hold that the trial court did not abuse its
discretion when it denied husband's motion to modify pendente
lite support without holding a hearing. On appeal, a final order
in a divorce case will not be reversed because of a trial court's
decision regarding pendente lite support unless the record shows
that the pendente lite decision was an abuse of discretion and
that this error adversely affected the final order in the case.
See Pinkard, 12 Va. App. at 853, 407 S.E.2d at 341. The record
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does not indicate that the trial court's decision was arbitrary.
First, husband did not proffer that his purported change in
circumstances warranted a modification of the pendente lite
order. Although husband proffered that a decline in his business
had reduced his ability to pay his pendente lite support
obligations, the trial court could not determine from his proffer
either the substantive nature of his current ability to pay or
whether his inability to pay was caused by his own voluntary act
or neglect. In addition, wife proffered that her needs and the
needs of the children were unchanged and that she was unable to
support herself because of her ongoing treatment for cancer.
Finally, at the time of husband's motion, the case had been
pending for over a year and a half. Based on the proffers of the
parties and the trial court's legitimate concern for the
efficient resolution of the case, we cannot say that the trial
court abused its discretion when it declined to reopen the issue
of pendente lite support and instead moved the case to a final
hearing. See Richardson, 128 Va. at 685, 105 S.E. at 228
(stating that interlocutory orders are generally reconsidered
only "when considerations of justice require it").
III.
PRESERVATION OF ISSUES FOR APPEAL BY HUSBAND
Regarding the trial court's valuation of the marital home,
the record shows that husband stated a general exception in the
final decree of divorce to the trial court's award of equitable
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distribution "and the bases set forth therefore." The award of
the trial court states numerous findings on which it based its
decision, and the record reveals no instance in which husband
stated that a ground for his objection was that the trial court
improperly valued the marital home. Significantly, both the
transcript of the proceedings and husband's motion for
reconsideration contain no argument by husband's counsel on this
issue. Husband's vague exception to the "bases" for the trial
court's award, without more, was inadequate to provide the court
with the opportunity to rule intelligently on the correctness of
its valuation. Although counsel for a party may satisfy Rule
5A:18 by including an objection and reasons therefor in the trial
court's final order, a mere statement in an order that it is
"seen and objected to" is insufficient. Lee v. Lee, 12 Va. App.
512, 515-16, 404 S.E.2d 736, 738 (1991); Konefal v. Konefal, 18
Va. App. 612, 615, 446 S.E.2d 153, 154-55 (1994) (statement in
final order stating that husband "duly excepts" with no other
indication in the record of the grounds for his objection fails
to satisfy Rule 5A:18).
On the other hand, we hold that husband properly preserved
his appeal regarding the trial court's finding of income from
side jobs, child and spousal support, and its valuation of his
business. Unlike the issue involving the value of the marital
home, the record shows that husband adequately made known to the
trial court his position regarding these issues.
Arguments made at trial via written pleading,
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memorandum, recital of objections in a final
order, oral argument reduced to transcript,
or agreed written statement of facts shall,
unless expressly withdrawn or waived, be
deemed preserved therein for assertion on
appeal.
Code § 8.01-384 (emphasis added). Regarding income from side
jobs, husband's counsel argued to the trial court in his closing
argument on May 2 that the evidence was insufficient to prove
that husband regularly received income from jobs not reported on
the books of his business. This argument, which was reduced to
transcript, in combination with the exception taken by husband's
counsel and noted by the trial court in the final decree gave the
trial court the opportunity to rule intelligently on the issue
and satisfied the purpose of Rule 5A:18. Kaufman v. Kaufman, 12
Va. App. 1200, 1204, 409 S.E.2d 1, 3 (1991) (holding that appeal
not barred where appellant made known to trial court his position
through memoranda and other written correspondence and court
noted general objection in decree). Obviously, the determination
of husband's monthly income had a direct effect on spousal and
child support.
Similarly, following the testimony of husband's expert on
the valuation of the business, husband's counsel argued to the
trial court that the value of negative working capital was
actually greater than the figure stated in the report of
husband's expert because husband's expert mistakenly omitted
certain liabilities from his calculation that were included in
the report of wife's expert. In his closing argument, husband's
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counsel argued that husband's expert justifiably adjusted the
value of the business downward to account for the key man problem
and its low profitability. In addition, husband's counsel
endorsed the final decree "seen and . . . partly excepted to as
set forth above" and marked his initials next to the paragraph in
which the trial court states its valuation of the business. 1
Again, this combination of oral argument reduced to transcript
and an objection noted by the trial court in the final decree was
sufficient to make known husband's objection to the valuation of
his business in accordance with Rule 5A:18.
IV.
EQUITABLE DISTRIBUTION: VALUE OF HUSBAND'S BUSINESS
"Code § 20-107.3 requires a trial court to value the
parties' separate and marital property before making a monetary
award. The trial court's valuation cannot be based on 'mere
guesswork.' However, the burden is on the parties to provide the
trial court sufficient evidence from which it can value their
property." Stratton v. Stratton, 16 Va. App. 878, 883, 433
S.E.2d 920, 922 (1993) (citing Bosserman v. Bosserman, 9 Va. App.
1, 5, 384 S.E.2d 104, 107 (1989)). "Fashioning an equitable
distribution award lies within the sound discretion of the trial
judge and that award will not be set aside unless it is plainly
1
Husband's initials appear in the original version of final
decree that was first entered on July 20, 1995. This version
contained minor errors that were subsequently corrected by the
trial court on February 2, 1996.
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wrong or without evidence to support it." Srinivasan v.
Srinivasan, 10 Va. App. 728, 732, 396 S.E.2d 675, 678 (1990).
We hold that the trial court's valuation of the business was
neither plainly wrong nor without evidence to support it.
Husband contends that the trial court erred in valuing his
business because it failed to use the negative working capital
amount that was agreed upon by both parties, which he alleges was
approximately -$100,000. However, the record shows that the
experts did not agree that this figure was the amount of negative
working capital. Both experts agreed that working capital was
determined by subtracting current liabilities from current assets
and that, in the case of husband's business, this amount was a
negative number. Wife's expert testified that she used the
negative working capital in husband's expert's report, -$36,708,
because she did not have access to either husband or his
bookkeeper. Husband's expert testified that, although he
initially estimated negative working capital to be -$36,708, he
had recently discovered additional liabilities and that negative
working capital was probably closer to -$100,000. The trial
court merely resolved this disputed evidence in favor of the
initial estimate of husband's expert.
Husband also argues that the trial court erred when it
failed to adjust the value of the business downward to account
for its purported key man problem and low profitability. Again,
the testimony of the experts conflicted regarding whether the
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computations derived from the Bizcomps data should be adjusted
downward to account for these factors. The trial court found one
of the experts to be more credible, and that finding is supported
by the evidence. Reid v. Reid, 7 Va. App. 553, 563, 375 S.E.2d
533, 539 (1989) (court's finding that one expert's valuation of
wife's interest in travel agency was more credible than others
supported by evidence).
V.
HUSBAND'S INCOME FROM SIDE JOBS: CHILD AND SPOUSAL SUPPORT
Husband contends that the evidence was not sufficient to
support the trial court's finding that husband's income included
$1,500 per month from side jobs not reported on the books of his
business. "Decisions regarding 'spousal support . . . rest
within the sound discretion of the trial court and will not be
reversed on appeal unless plainly wrong or unsupported by the
evidence.'" Konefal, 18 Va. App. at 614, 446 S.E.2d at 154
(citation omitted). Wife testified that husband made an
additional $1,500 to $3,000 a month from side jobs. In addition,
two of the parties' children and two former employees of the
business testified that husband received income from side jobs
that was unreported on the business' books. It cannot be said
that the trial court's conclusion regarding the husband's monthly
income from side jobs was plainly wrong or without evidence to
support it. Furthermore, contrary to husband's assertion, the
trial court did not impute income to husband when it made its
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finding of income from side jobs. A trial court "imputes" income
when it assigns income for the purposes of calculating support
payable by an individual found to be voluntarily unemployed or
underemployed. Bennett v. Commonwealth, 22 Va. App. 684, 691,
472 S.E.2d 668, 672 (1996); Code § 20-108.1(B)(3). In this case,
the trial court did not conclude that husband was voluntarily
underemployed and instead found that the income from side jobs
was income actually earned by husband.
In view of this Court's holding that the trial court did not
err in finding "side job" income of $1,500 per month, in addition
to the $6,139 monthly income from his business, we cannot say
that the trial court abused its discretion or is plainly wrong in
awarding monthly spousal support of $2,300. Likewise, the
monthly child support award of $921 was based on the application
of the child support guidelines to a monthly income of $7,639.
Based on the foregoing, we affirm the decision of the trial
court.
Affirmed.
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Benton, J., dissenting.
The record reveals that eighteen months after the pendente
lite award was entered, the husband filed a motion to modify the
award. At a hearing on August 22, 1994, husband's counsel
proffered evidence that the husband's business was failing and
that the husband did not have sufficient income to pay support as
ordered. Ruling that it was not his "policy" to modify pendente
lite orders, the judge declined to hear evidence on the motion.
A year later, the trial judge heard evidence ore tenus regarding
the divorce issues. The trial judge then entered a final order
setting support. The husband's appeal from that final order
includes a challenge to the judge's refusal to consider the
husband's motion for a modification of the pendente lite support
award.
I would hold that by making a motion to modify the pendente
lite support order, the husband adequately brought before the
judge the issue that he now raises on appeal. Because the judge
accepted proffers from the parties and decided against hearing
the motion to modify, we are not in the position of considering
this issue for the first time on appeal. Moreover, requiring the
husband to object after the trial judge overruled his motion
would result in reargument of issues already decided, unnecessary
delay, and fostering a climate of contentiousness at trial. When
the judge overrules a party's motion, the moving party obviously
objects to the adverse ruling for the reasons stated in the
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motion and motion argument. See Code § 8.01-384.
In addition, requiring the husband to object to the denial
of his motion "would, in effect, recreate the requirement of
noting an exception to a final adverse ruling of the trial
judge." Martin v. Commonwealth, 13 Va. App. 524, 530, 414 S.E.2d
401, 404 (1992). By statute, the husband was not required to
take exception to the trial judge's denial of his motion for
modification of the pendente lite order. "Formal exceptions to
rulings or orders . . . shall be unnecessary; but . . . , it
shall be sufficient that a party, at the time the ruling or order
. . . is made or sought, makes known to the court the action
which he desires the court to take." Code § 8.01-384.
I would therefore hold that the husband is not barred from
appealing this issue after entry of the final decree.
Furthermore, this appeal properly brings before this Court for
consideration issues relating to the effect of the judge's
refusal to reconsider the pendente lite order. We have
previously ruled that "[i]f, after entry of the final order in
the case, the appellant alleges that the final judgment was
adversely affected by the failure of the trial judge to grant
pendente lite support . . . , [the appellant] may appeal the
final order and seek a new trial." Pinkard v. Pinkard, 12 Va.
App. 848, 853, 407 S.E.2d 339, 342 (1991).
The written statement of facts recites that, in support of
his motion, the husband's counsel proffered "that [the husband's]
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business was not doing well, that less cash was available, and
that [the husband] could not make the pendente lite support
payments." The wife's counsel merely "proffered that the
marriage was a long one, that the needs of the wife and children
had not changed, that the wife was unable to work because she was
still being treated for cancer, and that the original pendente
lite order had been agreed upon by the parties at a . . .
conference with counsel present." The wife's counsel did not
refute the avowal of the husband's changed financial condition.
Thus, the husband's "counsel's avowal, the truth of which was
unchallenged . . . , constituted a proper proffer." Whittaker v.
Commonwealth, 217 Va. 966, 969, 234 S.E.2d 79, 81-82 (1977).
Based upon the husband's proffer of financial distress and
the long duration of the pendente lite order, "considerations of
justice require[d]" the trial judge to hear the evidence and
grant the husband's motion for relief. Richardson v. Gardner,
128 Va. 676, 685, 105 S.E. 225, 228 (1920). The record proved
that the judge invoked a "policy" of the court in refusing to
consider the husband's motion for modification of the pendente
lite support award. That ruling was not based upon a sound
exercise of discretion or a consideration of the financial
distress that the husband's counsel proffered in support of his
request for a hearing. The trial judge's refusal because of
"policy" to consider a modification of the pendente lite order
was error as a matter of law. See Newton v. Wilson, 199 Va. 864,
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868-69, 102 S.E.2d 299, 302 (1958) ("The refusal of the lower
court to hear . . . evidence on the issues raised by the [motion
for revocation of the interlocutory order] . . . was error.").
I disagree with the majority's view that the trial judge's
ruling tended to promote an efficient resolution of the case.
The pendente lite order had been in effect for more than a year.
Another year lapsed after the motion to modify the pendente lite
award was filed in July 1994 and before the final order was
entered in July 1995. The trial judge therefore had ample time
to hear the motion without prolonging the final disposition of
the matter.
The husband alleges that the failure to grant a modification
of the pendente lite support award affected the valuation of the
husband's business and the final property distribution award.
The evidence eventually admitted at the April, 1995 ore tenus
hearing revealed that the circumstances of the husband's business
at the time of his motion to modify the pendente lite award amply
supported the husband's proffer. The ore tenus evidence proved
that the husband operated his carpeting business as a sole
proprietorship. The wife's own expert stated that the business'
liabilities exceeded its assets, the business had a negative net
worth, and the business had a negative cash balance of $15,194 at
the end of 1994. The evidence further proved that the husband
drew funds from his business in excess of profits to pay the
pendente lite support. The wife's expert stated that "[the
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husband] has not limited his draw and cash taken out for personal
use to the level of profits. The working capital has been
depleted and liabilities have risen."
The husband's expert assessed the business loss to be
greater than the amount proved by the wife's expert. The report
submitted by the husband's expert showed that since the entry of
the pendente lite support order in February, 1993, the business'
cash flow had declined dramatically. Moreover, the business'
liabilities had increased from $117,054 in 1992 to $183,090 at
the end of 1993. Indeed, at the time of the husband's motion to
modify the pendente lite award, the wife did not dispute the
husband's allegations that the business had deteriorated.
The trial judge found that the business' tax debts continued
to grow partly due to the husband's diversion of funds to pay
support and divorce costs. Specifically, the trial judge found
that "the evidence in the case supports the conclusion that some
of [the husband's] growing debt to the IRS resulted from the fact
that the funds which would otherwise be used to pay the tax
liability were used to pay [the husband's] divorce-related fees
and costs for attorneys, accountants, and support."
Thus, the evidence proved that after the trial judge refused
to consider the husband's motion to modify the pendente lite
support award, the husband continued to draw money from the
business in excess of profits in order to pay the support and
other costs of the divorce. In effect, the husband encumbered
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marital property to pay marital expenses. No evidence proved,
however, that the husband deliberately encumbered the business in
order to diminish the value of the wife's equitable distribution
award. Nevertheless, the trial judge "found it inappropriate to
consider personal liabilities as part of a business' current
liabilities."
In Marion v. Marion, 11 Va. App. 659, 401 S.E.2d 432 (1991),
this Court explicitly stated that when valuing marital property,
"the amount of the indebtedness must be deducted from the gross
value of the property to determine the net value for purposes of
equitable distribution." Id. at 667, 401 S.E.2d at 437. Only if
the spouse deliberately encumbered the property to reduce the
equitable distribution award may the judge refuse to consider the
debt. See Trivett v. Trivett, 7 Va. App. 148, 152, 371 S.E.2d
560, 562 (1988). In addition, "expenditure of funds for items
such as living expenses, support, and attorney's fees,
constitutes a valid marital purpose and is not dissipation or a
deliberate attempt to affect a monetary award." Decker v.
Decker, 17 Va. App. 12, 19, 435 S.E.2d 407, 412 (1993).
Therefore, debts incurred to pay personal and marital expenses,
including support, properly must be used to reduce the value of
the encumbered property. See id.
After erroneously failing to consider the husband's request
for modification of pendente lite support payments, the trial
judge penalized the husband for his compliance with the pendente
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lite order by excluding the marital debt in valuing the sole
proprietorship. Because the record does not establish that the
husband had any other source of meeting his court ordered
obligations, I would hold that the trial judge erred in failing
to consider the effect of her orders in diminishing the value of
the sole proprietorship, a marital property. The trial judge's
valuation of the business was plainly wrong.
Because I believe that the valuation of the business was
flawed by the failure to consider the impact of refusing to
reduce the pendente lite support and the consequential drain of
the business' assets, I would reverse the valuation and remand
for reconsideration of the equitable distribution award.
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