295 Ga. 24
FINAL COPY

                    S14F0006. SULLIVAN v. SULLIVAN.


      HINES, Presiding Justice.

      Pursuant to Rule 34 (4) of this Court, Kristen Marie Sullivan (“Wife”) was

granted a discretionary appeal from the final judgment and decree of divorce

(“Decree”) dissolving her marriage to Christopher Boyd Sullivan (“Husband”).

The focus of the appeal is the equitable division of the appreciation of an

interest in a closely-held corporation. For the reasons that follow, we affirm.

      In 1997, Husband began working for Envirotech Environmental Services,

Inc. (“Envirotech”), a closely-held Subchapter S corporation. In 1998, Husband

purchased 150 shares of stock in Envirotech ($1.00 per share), and made an

additional capital contribution of $35,000. Three years later, on September 29,

2001, Husband and Wife were married. During the next year, Husband sold 50

shares of his stock for a total purchase price of $11,800. Husband retained 100

shares of the 1,000 issued shares of stock. As a minority shareholder, Husband

was apportioned K-1 income to be recorded on his tax return, but the actual cash
was retained in the company.1 The company paid any taxes associated with the

K-1 income.

       On or about January 1, 2011, Husband and Wife separated, and husband

filed for divorce on March 7, 2011. At the bench trial of the issues remaining

in the divorce action,2 Wife maintained that she was entitled to an equitable

division of the appreciation of the value of Husband’s 100 shares of Envirotech

stock from the date of the parties’ marriage to the date of their divorce.

Husband asserted that the 100 shares of stock should not be considered to be

marital property and should be awarded solely to him because they were

acquired prior to the marriage, and any increase in value of the 100 shares that

occurred during the course of the marriage was not attributable to Wife or the

marital unit but to outside market forces.

       In the Decree, which was entered on September 19, 2012, the superior

       1
          In a Subchapter S corporation, the corporation’s shareholders, instead of the corporation
itself, must report their proportionate share of the corporation’s taxable business income on their
individual tax returns and pay the appropriate federal income taxes; the shareholder’s corporate
income is reported on Internal Revenue Service Schedule K-1. See Simmons v. Simmons, 288 Ga.
670 (1) (706 SE2d 456) (2011).

       2
          On December 6, 2011, the parties entered into a settlement agreement which resolved, inter
alia, certain financial issues with the exception of Wife’s retirement funds, Husband’s 100 shares
of Envirotech stock, and attorney fees. Ultimately, the settlement agreement was expressly
incorporated in the Decree.

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court found, inter alia, the following. The parties stipulated that Husband owned

100 shares of Envirotech stock; Husband purchased the 150 original shares of

stock with money gifted to him by his mother; Husband held the position of

Operations Manager for the company, and received a gross monthly income of

$6,790;3 at trial, Wife presented the testimony of an expert on business

valuation, and the expert opined that the value of Husband’s 100 shares of stock

at the time of trial was $780,000; the expert’s prepared valuation reviewed

Envirotech’s earnings only from 2005 through 2011; no evidence was presented

as to the value of the stock at the time of the parties’ marriage; in arriving at his

opinion, the expert did not acknowledge any discounts in the stock value due to

marketability or Husband’s minority shareholder status; and there was no expert

testimony about Husband’s role in Envirotech.

       Citing Halpern v. Halpern, 256 Ga. 639 (352 SE2d 753) (1987), the

superior court found that there was no evidence presented as to what role, if any,

Husband played in the increase in value of the stock; there was no evidence that


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         The superior court found that at the divorce hearing, Wife testified that she had a gross
monthly income of $8,302.62, and had a 401 (k) plan, which then had an approximate value of
$68,086.66. The court also found that at trial, for the first time, Wife claimed that she began
contributing to her 401 (k) prior to the parties’ marriage, and therefore, had a premarital interest of
approximately $7,900 which should be awarded to her as separate property.

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Wife was the cause of any appreciation in the stock value, and that inasmuch as

there was no evidence presented as to the value of the 100 shares of stock at the

time of the parties’ marriage, there was no evidence of appreciation in value

occurring during the marriage for the court to consider. Consequently, the

superior court awarded the entirety of the 100 shares of stock and any

appreciation to Husband.

      1. Certainly, a spouse’s interest in a closely-held corporation may be a

marital asset subject to equitable division in a divorce; this is so even when the

business interest was started as the result of separate pre-marital funds.

Jones-Shaw v. Shaw, 291 Ga. 252, 253 (728 SE2d 646) (2012). The key is

whether there is an appreciation in the value of the business interest during the

course of the marriage as a result of the spouses' individual or joint efforts. Id.

However, appreciation in value of the asset during the marriage does not render

it a marital asset subject to equitable division if the appreciation is solely a result

of market forces. Id. Thus, the determinative factors are the asset’s increase in

value, if any, during the marriage, and that any such gain be due to spousal

effort, either separately or in conjunction with the other spouse. Id.

      Necessarily, before determining whether any appreciation is subject to

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equitable division, the trial court must first be able to calculate what, if any,

amount of appreciation occurred during the marriage. Jones-Shaw, 291 Ga. at

253. This means that the trial court must be able to determine the value of the

interest both on the date of marriage and on the date of divorce. Id. at 254. Three

principal methods for determining the value of a closely-held corporation are:

the income or capitalized earnings method; the market approach method; and the

cost approach method. Id. The trial court has the discretion to choose which

valuation method it will employ, including whether it will choose the valuation

method of one party over another or to perform its own calculation. Miller v.

Miller, 288 Ga. 274, 275 (705 SE2d 839) (2010). The party seeking the

equitable division of the appreciation has the burden to establish the interest’s

true market value at the time of marriage and at the time of divorce. See Barber

v. Barber, 257 Ga. 488, 489 (3) (360 SE2d 574) (1987). Furthermore, opinion

testimony does not establish any fact as a matter of law; consequently, the

factfinder is not bound by the opinion testimony of witnesses as to value of the

property involved, even if such testimony is uncontradicted. Dept. of Transp.

v. Brannan, 278 Ga. App. 717, 718 (629 SE2d 481) (2006).

      2. Wife contends that the superior court erred when it found there was no

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evidence of the amount of appreciation that occurred during the marriage. She

complains that the court should have conducted a “source of funds” analysis, as

outlined in Thomas v. Thomas, 259 Ga. 73, 75-76 (377 SE2d 666) (1989), to

determine what portion of that appreciation should have been awarded to her.

To that end, she has offered two figures from which she asserts the superior

court could have calculated the appreciation.

      First, Wife offers that her expert testified that the value of Husband's

shares was $39,000 at the time of their marriage. Her expert arrived at this figure

at trial by estimating the basis of Husband’s 100 shares in 2002 to be $24,000,

and then appreciated that figure over a ten-year period at a five percent interest

rate ($39,000). Wife argues that given the market value of Husband’s shares at

the time of trial was $780,000, the superior court should have calculated the

appreciation to be $741,000. However, there is no evidence that an individual’s

basis in a stock share of a closely-held corporation necessarily reflects that

share's market worth on any particular date. Consequently, the superior court

cannot be found to have erred for declining to accept the $39,000 figure as

representative of the stock shares’ true market value at the time of the parties’

marriage.

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      Wife further maintains that the superior court could have calculated the

value of Husband’s 100 shares in 2001 by reference to the amount Husband

received for selling 50 of his shares in 2002. Given that the sale price of

Husband’s 50 shares totaled $11,800 in 2002, Wife argues that the remaining

100 shares were worth $23,600 at the time of marriage in 2001. However,

Husband testified that the stock sales were motivated by the need to pay marital

debts, and to free up shares for a new shareholder in the company. No evidence

was presented at trial that the $11,800 price Husband received was

representative of the shares’ true market value at the time of sale in 2002. See

Barton v. Barton, 281 Ga. 565 (639 SE2d 481) (2007) (buy-sell agreements in

closely-held corporation do not necessarily reflect true market value because

such agreements can be manipulated). Therefore, there was no error in rejecting

Wife’s valuation of the remaining 100 shares at the time of marriage based on

the 2002 stock sales price.

      3. Wife also contends that the superior court erred in finding that there

was no evidence of marital investment resulting in stock appreciation.

However, such contention is likewise unavailing.

      In reviewing the results of a bench trial, this Court will not set aside the

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trial court's factual findings unless they are clearly erroneous, and this Court is

to give due deference to the trial court’s opportunity to judge the credibility of

the witnesses. Wood v. Wood, 283 Ga. 8 (1) (655 SE2d 611) (2008). In awarding

the entirety of any stock appreciation to Husband, the superior court necessarily

found that no amount of appreciation was due to the joint or separate efforts of

either spouse. See Bass v. Bass, 264 Ga. 506, 507 (448 SE2d 366) (1994). And,

there is no showing that such finding by the superior court was clearly

erroneous.

      First, although Husband was a shareholder and carried a title indicating

that he managed the operation of the company, testimony at trial showed that he

was primarily responsible for managing the company’s pickups and deliveries,

and that he had comparatively little influence in the running of the company.

Second, Husband testified that the rapid rise in the company’s appreciation was

due to the company’s acquisition of new government contracts, in which he was

not involved. Third, assuming arguendo that K-1 income can be a marital

investment as a matter of law, the superior court did not err in concluding that

the K-1 income in this case was not an investment made by the marital unit.

Here, the marital unit had no control over whether the K-1 income would be

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retained in the company or distributed. If the marital unit did not control

whether K-1 earnings would be retained, their retention cannot be said to be an

investment by either spouse. Fourth, given the preceding findings, Wife cannot

succeed in her argument that her support of Husband’s career was evidence of

marital investment. If Husband did not contribute to any growth in the company,

then by extension Wife’s efforts to support Husband in his career did not

indirectly contribute to the growth of the company either, and is not a marital

investment. The superior court’s finding that there was no evidence of marital

investment in this case was not clearly erroneous.

      4. Lastly, Wife argues that the superior court erred when it applied

Halpern v. Halpern, supra in this case. However, such argument is unavailing.

In Halpern, this Court held that the appreciation during the parties' marriage in

the value of property acquired by one spouse by gift or inheritance prior to or

during the marriage is subject to equitable division but only if the appreciation

in value during the marriage was caused by the efforts of either or both spouses;

increase in value of the asset is exempt from equitable division if solely due to

market forces. Id. at 640. In Halpern, as in the present case, there was no

evidence that either party contributed to appreciation of the shares during their

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marriage. Id. Thus, the shares of corporate stock and any appreciation in their

value were not marital assets subject to equitable division. Id.

      Judgment affirmed. All the Justices concur.



                           Decided March 28, 2014.

      Domestic relations. DeKalb Superior Court. Before Judge Adams.

      Janis Y. Dickman, Kevin T. Moore, for appellant.

      Ellis, Hoyle, King & de Klerk, Dawn E. de Klerk, for appellee.




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