                                          COURT OF APPEALS OF VIRGINIA


            Present: Judges Frank, Humphreys and Kelsey
PUBLISHED


            Argued at Richmond, Virginia


            ROHIT PATEL
                                                                                  OPINION BY
            v.      Record No. 0875-12-2                                   JUDGE ROBERT J. HUMPHREYS
                                                                                  APRIL 9, 2013
            ILABEN R. PATEL


                                 FROM THE CIRCUIT COURT OF HENRICO COUNTY
                                           Catherine C. Hammond, Judge

                            Donald K. Butler (Player B. Michelsen; Butler Armstrong, LLP, on
                            briefs), for appellant.

                            Michael S. Ewing (Batzli Wood & Stiles, PC, on brief), for appellee.


                    Rohit Patel (“husband”) appeals from a final order issued in the Circuit Court of Henrico

            County (“circuit court”) granting Ilaben R. Patel (“wife”) a divorce from their marriage. On

            appeal, husband assigns error to the circuit court’s finding regarding the value of certain marital

            property for the purposes of equitable distribution and to the circuit court’s findings of his

            income for the purposes of determining child and spousal support. 1 On brief, wife includes her


                    1
                       Specifically, husband contends (1) “[t]he [circuit court] erred in valuing Shanti, Inc. at
            $7,9300,000 and in valuing Ashland, Inc., at $4,150,000 based on the MC Miller Appraisal of
            Hampton Inn and Sleep Inn in Ashland, Virginia, and then by adding ‘. . . cash worth $274,299
            . . .’ (Shanti) ‘. . . plus cash totaling $117,000 . . .’ (Ashland) which was not part of the Miller
            appraisal but rather was a part of the Cummings and Salzman appraisals, which the Court
            rejected,” (2) “[t]he [circuit court] erred in finding a zero value for [husband’s] interest in
            Valleydale, LLC; Farmville LLC; Hanover LLC; and Picayune, LLC, which had a negative
            value, where their debts exceeded the value of those assets and for which debts [husband] was
            personally liable, and which debts were in essence marital debts that should be considered in
            equitable distribution,” (3) “[i]f the [circuit court] was correct in finding a zero value for entities
            whose debt exceeded their assets, then the [circuit court] erred in assigning full value to
            [husband’s] loans receivable that were among the debts of those entities,” and (4) “[t]he [circuit
            court] erred in its determination of [husband’s] income in making the child and spousal support
            awards.”
own assignment of error, arguing that if the circuit court did err in its valuation findings for the

purposes of equitable distribution, the case should be remanded to the circuit court to reconsider

its ruling on the division of marital property under Code § 20-107.3(E). 2 For the reasons that

follow, we affirm.

                                            I. Background

       Husband and wife were married on February 1, 1985, and had one child during the

marriage. Wife filed for divorce, and the circuit court granted the parties a divorce on April 23,

2012. As part of the final decree, the circuit court performed an equitable distribution of the

parties’ assets, awarded wife spousal support, and ordered husband to pay child support to wife.

The circuit court determined that wife was entitled to 40% of the marital estate and $7,000 per

month in spousal support in addition to awarding $1,245 per month in child support. The issues

on appeal relate to the value of husband’s interests in and his earnings from his investments in

several hotels and properties.



        Husband also contends that “[t]he [circuit] court’s failure to properly mark all Exhibits
admitted at the [hearing] on February 13, 2012 was a clerical error” and thus, they should be
considered in our analysis on appeal. As wife concedes on brief that the exhibits were
introduced into evidence at the proceedings below, and furthermore, it is clear from the record
that the circuit court considered the exhibits and introduced them into evidence we will consider
the exhibits for the purposes of this appeal.
       2
           Specifically, wife argues

                 [t]he [circuit court] correctly declined to assign negative values to
                 several of Husband’s businesses, and the [circuit court] did, in fact,
                 consider Husband’s personal guarantees of business loans when
                 awarding him 60% of the marital property. However, if the Court
                 reverses the [circuit] court’s ruling on this issue and orders the
                 [circuit court] to assign negative values to Husband’s startup
                 businesses, the case should be remanded to the [circuit court] to
                 reconsider its ruling on the division of the marital property under
                 Code § 20-107.3(E). To assign negative values to the businesses
                 AND award Husband 60% of the marital estate on account of the
                 same debts would amount to a double dip and an inequitable result.

                                                 -2-
        The relevant investments are as follows: Husband has a 33 1/3% ownership interest in

Shanti Investments, Inc. (“Shanti”), which owns and operates a Hampton Inn in Ashland,

Virginia, a 40% interest in Ashland Investments, Inc. (“Ashland”), which owns and operates a

Sleep Inn in Ashland, Virginia, a 15% interest in Valleydale Hospitality, LLC (“Valleydale”),

which owns and operates a Homewood Suites in Hoover, Alabama, a 50% interest in Farmville

Investments, LLC (“Farmville”), which owns land in Farmville, Virginia, a 30% interest in

Hanover Hospitality, LLC (“Hanover”), which owns land in Hanover, Maryland, 3 a 25%

interest in Picayune Hospitality, LLC (“Picayune”), which owns and operates a Holiday Inn

Express in Picayune, Louisiana, and a full interest in Kishan, Inc. (“Kishan”), which owns and

operates a Super 8 in Alliance, Ohio. There is no dispute that husband’s interest in each of these

properties is marital property.

                                            II. Analysis

            A. Valuation of Shanti and Ashland for the Purposes of Equitable Distribution

        Husband first assigns error to the circuit court’s valuation of husband’s interests in Shanti

and Ashland. Specifically, husband argues that the circuit court erred in determining the value of

each company by using the value given by wife’s expert, Mike Miller (“Miller”), adding to that

value the cash that each company possessed as provided by husband’s expert, Larry Salzman

(“Salzman”), and then subtracting the debts of each company. For the reasons that follow, we

find that the circuit court did not err.

        At the divorce proceeding, wife introduced evidence of the value of Shanti and Ashland

through her witness, Miller, whom the circuit court received as an expert in hotel real estate

valuations. Miller used an “income approach” to determine the value of the Hampton Inn that

was owned by Shanti, which yielded a value of $7,930,000. Using the same approach, Miller

        3
         There is construction on a new hotel on this property, although construction began after
the separation of the parties.
                                               -3-
valued the Sleep Inn owned by Ashland at $4,150,000. Husband introduced his own appraisals

of the two properties through his own expert witness, Michael Cummings (“Cummings”).

Cummings used an income approach as well, and determined that the value of the Hampton Inn

was $6,400,000 and the Sleep Inn was $3,500,000.

       Husband also called Salzman, who was qualified by the circuit court as an expert, to

testify as to the value of husband’s interests in Shanti and Ashland. Salzman performed a

fractional interest appraisal of husband’s shares in the companies. To value husband’s interests,

Salzman started with the real estate values of the hotels owned by the respective companies,

which were provided by Cummings, then he added the companies’ other assets, and then

subtracted the companies’ liabilities. Salzman explained that the resulting sum was the net

equity value of the company. Salzman then multiplied the net equity value of the company by

husband’s ownership percentage to get the pro rata equity value. Finally, Salzman discounted

the pro rata equity value to account for other factors that arise as a result of a fractional

ownership of a company. 4 Using this method, Salzman opined that, based on a real estate value

of $6,400,000, cash reserves of $274,299, and a debt of $6,260,000, the net assets of Shanti

equaled approximately $415,000. Salzman then determined that a 35% discount would be

appropriate for husband’s minority share and determined that husband’s shares would be worth

$90,000. Similarly, Salzman testified that Ashland, based on a real estate value of $3,500,000,

cash reserves of $117,000, and debt of approximately $2,148,000, had net assets of $1,469,000.

Salzman determined that a 40% discount would be appropriate for husband’s interest in Ashland,

and testified that husband’s shares were worth $350,000.



       4
         Such factors include the “up side of the real estate, down side of the real estate, the
number of other owners, magnitude, income characteristics, control or lack of control, form of
ownership, sometimes partition ability, finance ability, [and the] the overall marketability” of the
fractional interest.
                                                -4-
       The circuit court found that “the accurate value [of Shanti] is $7,930,000.00. In addition,

there is cash worth $274,299.00, bringing the overall value to $8,204,299.00. From this amount

the loans totaling $6,260,000.00 should be subtracted, leaving a value of $1,944,299.00.

[Husband] owns 33.33%, with a value of $648,035.00.” The circuit court went on to find that

“[w]ith respect to Ashland, Inc., the value is $4,150,000.00 plus cash totaling $117,000.00, less

mortgage loans of $2,147,780.00 and loans of $560,587.00 owed to shareholders. The total

value is $1,558,633.00, and [husband] owns 40%, or $623,453.00.” In reaching its ultimate

finding on the value of husband’s interest for the purposes of equitable distribution, the circuit

court expressly declined to include Salzman’s fractional discount of husband’s shares in Shanti

and Ashland. 5 As “[t]he value of property is an issue of fact, not of law,” Howell v. Howell, 31

Va. App. 332, 340, 523 S.E.2d 514, 518 (2000), we are bound by this finding on appeal, unless it

is plainly wrong or without evidence to support it, Smith v. Board of Supervisors, 201 Va. 87,

91, 109 S.E.2d 501, 505 (1959).

       We begin our review by noting that “‘[circuit] courts valuing marital property for the

purpose of making a monetary award must determine from the evidence that value which

represents the property’s intrinsic worth to the parties . . . .’” Howell, 31 Va. App. at 338, 523

S.E.2d at 517 (emphasis added) (quoting Bosserman v. Bosserman, 9 Va. App. 1, 6, 384 S.E.2d

104, 107 (1989)).

               Intrinsic value is a very subjective concept that looks to the worth
               of the property to the parties. The methods of valuation must take
               into consideration the parties themselves and the different
               situations in which they exist. The item may have no established

       5
          We do not agree with husband’s characterization that the circuit court “rejected”
Salzman’s testimony. On the contrary, the circuit court clearly accepted Salzman’s method of
valuing the pro rata equity value of husband’s interests in the companies. However, the circuit
court did not consider Salzman’s discount of husband’s share of the company for the purposes of
equitable distribution, as it was not proper to do so under the relevant “intrinsic value” review.
Instead, the circuit court determined that “the fact [that husband’s] partial interests are not liquid
and not easily transferred [are] considered [as part of] factor 8 of Section 20-107.3(E).”
                                                 -5-
                market value, and neither party may contemplate selling the item;
                indeed, sale may be restricted or forbidden. Commonly, one party
                will continue to enjoy the benefits of the property while the other
                must relinquish all future benefits. Still, its intrinsic value must be
                translated into a monetary amount. The parties must rely on
                accepted methods of valuation, but the particular method of
                valuing and the precise application of that method to the singular
                facts of the case must vary with the myriad situations that exist
                among married couples.

Id. at 339, 523 S.E.2d at 517-18. Furthermore,

                [b]ecause intrinsic value must depend on the facts of the case, we
                give great weight to the findings of the [circuit] court. We affirm
                if the evidence supports the findings and if the [circuit] court finds
                a reasonable evaluation based on proven methodology and on the
                application of it to the particular facts of the case.

Id. at 339, 523 S.E.2d at 518.

        In this case, three different experts testified as to the value of these two companies.

Miller and Cummings both used an income approach to determine the values of the hotels

operated by the companies. Salzman calculated the full values of the companies themselves, and

then determined the value of husband’s interests in the companies by discounting the value of his

shares to account for his fractional interest. The circuit court ultimately found Miller’s appraisal

to be more persuasive in valuing the hotels, and it is well established that a circuit “court has

discretion to resolve conflicting expert testimony to determine an asset’s value.” Howell, 31

Va. App. at 341, 523 S.E.2d at 519. The circuit court then determined the full value of the

companies using Salzman’s method; that is, the circuit court added in additional assets owned by

the companies besides the hotels, which was cash in this case, and then subtracted the

companies’ debts. However, the circuit court did not discount the value of husband’s shares

using Salzman’s method for fractional interests. As the relevant value for the purposes of

equitable distribution is the intrinsic value of the property, the circuit court did not err in

rejecting Salzman’s discount. Instead, the circuit court considered the illiquid nature of


                                                  -6-
husband’s interests in the companies when determining the “amount of any division or transfer

of jointly owned marital property, and the amount of any monetary award, the apportionment of

marital debts, and the method of payment” for the equitable distribution of the marital property

under Code § 20-107.3(E). However, it did not do so in establishing the value of the interests

themselves under Code § 20-107.3(A). Thus, it is clear that the circuit court did not err in its

valuation of husband’s interests in Shanti and Ashland.

                        B. Valleydale, Farmville, Hanover, and Picayune

       Husband next contends that the circuit court erred in assigning a value of zero to his

interests in Valleydale, Farmville, Hanover, and Picayune despite the fact that each of the entities

had a negative net value. We disagree.

       On appeal, neither party disputes the fact that each of these entities has a negative value.

Nevertheless, the circuit court found that, for the purposes of assigning value to husband’s

interests in these investments for equitable distribution purposes, each entity had a value of zero.

The circuit court found “the intrinsic value for [Valleydale, Farmville, Hanover, and Picayune] is

zero because the debts of each exceed the value of each.” The circuit court held that an offset for

the total value of a marital estate based on the negative value of one asset “is not recognized in

Virginia law governing the equitable distribution of marital property. If the subtraction of

marital debt from the value of a marital asset leaves a negative total, the net value of the asset is

zero. See Hodges v. Hodges, 2 Va. App. 508, 515 (1986).”

       While the value of property is an issue of fact, the circuit court found that husband’s

interests in the entities should be given no value as a matter of law under Hodges, and thus we

must apply a de novo standard of review. See Roseborough v. Commonwealth, 281 Va. 233,

237, 704 S.E.2d 414, 416 (2011).




                                                 -7-
       In Hodges we stated,

               Code § 20-107.3(D) requires that the monetary award be “based
               upon the equities and the rights and interest of each party in the
               marital property.” Where the marital property is encumbered with
               indebtedness which equals or exceeds its value, then for purposes
               of a monetary award it is essentially of no value. Without value,
               there is no basis for a monetary award.

Hodges, 2 Va. App. at 515, 347 S.E.2d at 138. 6

       Unfortunately, Hodges is silent as to the reasoning behind its holding. However, the

rationale of this Court’s decision in Hodges becomes clear in the context of a case such as this.

Here, the marital property at issue includes husband’s interests in several companies that own

and operate hotels. Companies, especially those that are young or expanding, often need to incur

a substantial amount of debt and leverage that debt in order to generate a profit or expand

operations. However, simply because a company’s debts exceed its assets at a given point in

time does not mean that the company has a negative value. Nor does it mean that the company is

incapable of generating profits or that the company does not have a positive cash flow capable of

paying off any debt. Instead, it merely shows that at the time of valuation the company has more

debt than assets.

       Husband argues that the facts of this case are distinguishable from the facts in Hodges,

because husband was personally liable for the debts of the companies. Thus, he argues, if the

company does go out of business, the debts will exceed the assets of the company and he will be

liable for the excess and therefore the excess should count as marital debt. This argument is

misguided. In this case, the calculation of the value of husband’s interests in these four

companies revolves around their intrinsic value at the time of the evidentiary hearing. Code

§ 20-107.3(A); see also Thomas v. Thomas, 40 Va. App. 639, 646, 580 S.E.2d 503, 506 (2003)


       6
         We note that at least one other jurisdiction treats such indebted marital property
similarly. See Kline v. Kline, 581 A.2d 1300, 1308 (Md. Ct. Spec. App. 1990).
                                                -8-
(“Generally, a date as near as possible to the evidentiary hearing should be used for valuation

purposes.”). There was no indication in the record that any of these companies were insolvent or

on a path towards bankruptcy at that time. On the contrary, several of the companies involved

brand new hotels or properties that were purchased with the intent to develop new hotels on

them. Thus, the fact that husband may ultimately be personally liable on the debts at some point

in the future is not properly part of the present valuation calculus, as there was no indication that

the husband was actually or likely liable for the debts at the time of the evidentiary hearing.

                              C. Husband’s Loans to the Companies

       Husband also made personal loans to some of the companies as follows: Ashland –

$224, 235, Farmville – $275,185; Hanover – $550,500; Picayune – $256,250; and Valleydale –

$526,500. In its ruling on equitable distribution, the circuit court awarded husband the notes

payable to him under the loans and valued them collectively as an asset worth $1,910,710.

Husband argues on appeal that these notes payable, which are from the companies that the circuit

court assigned a zero value to, should not count as a marital asset, as the circuit court found that

the companies had no value or debts far exceeding their value. Husband’s argument fails for

many of the same reasons articulated in Section II(B) of this opinion.

       Husband’s argument relies on the premise that, because the company’s assets are

currently worth less than the collective debt, these debts are worthless. However, as discussed

earlier, the intrinsic values of these loans receivable are to be determined at the date of the

evidentiary hearing. At that point, the companies were still operating, and there was no

indication that they were planning on ceasing such operations. Furthermore, there was no

indication that any of the companies had defaulted on any of the loans. Thus, the circuit court

was not plainly wrong in finding that the loans were “valid debts incurred by going concerns”

and that the companies “have the ability to make distributions to shareholders or repay the notes

                                                 -9-
to [husband].” Thus, the circuit court did not err in awarding husband the loans receivable from

the companies, and determining that they were worth their full value for the purposes of

equitable distribution.

                                       D. Husband’s Income

        Finally, husband argues that the circuit court erred in its finding regarding his income in

fashioning the child and spousal support awards. We disagree.

        The issue of husband’s income is a question of fact, and “the judgment of the [circuit]

court on questions of fact is entitled to great weight and will not be disturbed unless it is plainly

wrong or without evidence to support it.” Smith, 201 Va. at 91, 109 S.E.2d at 505. At the

equitable distribution hearing, wife tendered, and the circuit court accepted, Robert Raymond

(“Raymond”) as an expert CPA forensic accountant and business evaluator. Raymond testified

that he reviewed husband’s tax returns and reports prepared by other experts in the case to

perform an analysis of husband’s income. Raymond used a three-year average, from 2008 to

2010, to determine husband’s income. Raymond used this period in order to account for “a

couple of [non-recurring] events 7 that [he] adjusted for in 2009 and 2010,” and under this

approach he was able to “see the numbers did not vary that much once [they were] adjusted for

those [non-recurring] events.” Ultimately, Raymond determined that husband’s monthly income

was $31,736 in 2010, $35,681 in 2009, and $31,246 in 2008. The average of these three values,

rounded to the nearest dollar, is $32,888. Thus, there was clearly sufficient evidence to support

the circuit court’s factual finding.


        7
         The adjustments Raymond made related to husband’s interests in Picayune and
Valleydale. Raymond adjusted for a $2,300,000 depreciation for Picayune that was based on a
“2009 Congress . . . provision allowing special depreciation allowances of up to 50 percent of
qualified property” and a $1,200,000 special depreciation for Valleydale. Raymond testified that
it was “appropriate to adjust for that in determining spousal support for two reasons: One, it’s
nonrecurring, it’s a startup, and hopefully the project will succeed; and two, the losses are non
cash loss that is created entirely to stimulate the economy.”
                                                 - 10 -
        Nevertheless, husband argues that the circuit court was wrong in accepting Raymond’s

adjustments based on the testimony of another expert witness, Leslie Taylor (“Taylor”). Taylor

testified that Raymond’s method of including the two depreciable losses in calculating the

income of Picayune and Valleydale would only serve to “get the income way up” when in

actuality, husband “had a financial loss there, that was deductible for tax purposes, they are

deductible from his income. It’s income [husband] didn’t have.” However, “a [circuit] court is

not required to accept the opinion of an expert. ‘It is well established that the trier of fact

ascertains [an expert] witness’ credibility, determines the weight to be given to their testimony,

and has the discretion to accept or reject any of the witness’ testimony.’” Piatt v. Piatt, 27

Va. App. 426, 434-35, 499 S.E.2d 567, 571 (1998) (quoting Street v. Street, 25 Va. App. 380,

387, 488 S.E.2d 665, 668 (1997) (en banc)). Thus, the circuit court was entitled to disregard

Taylor’s testimony in favor of Raymond’s testimony.

        Husband also argues that the circuit court was wrong in its income calculation because it

did not account for actual cash flow. Code § 20-107.1(A) states, in relevant part, that “upon the

entry of a decree providing . . . for a divorce, whether from the bond of matrimony or from bed

and board . . . the court may make such further decree as it shall deem expedient concerning the

maintenance and support of the spouses.” Subsection E goes on to require a court to consider

certain enumerated factors before determining the nature, amount, and duration of an award. Of

note, the statute requires that the circuit court must consider both the “obligations, needs and

financial resources of the parties” and the “property interests of the parties, both real and

personal, tangible and intangible.” 8

        8
         We also note that the considerations underlying a circuit court’s decision regarding
spousal support are wholly different than the considerations regarding equitable distribution.
“‘Spousal support involves a legal duty flowing from one spouse to the other by virtue of the
marital relationship. By contrast, a monetary award does not flow from any legal duty, but
involves an adjustment of the equities, rights and interests of the parties in marital property.’”
Stumbo v. Stumbo, 20 Va. App. 685, 691-92, 460 S.E.2d 591, 594-95 (1995) (quoting Brown v.
                                                - 11 -
       The circuit court can consider any income husband receives from his interests in the

companies, whether distributed or not, in calculating spousal support. While actual distributions

are clearly income and are thus relevant to spousal support, undistributed proceeds are equally

relevant. Undistributed proceeds remain within the company, and thus, husband’s interest in the

company will reflect the reinvestment accordingly. As a circuit court must consider the

“property interests of the parties, both real and personal, tangible and intangible,” the income

would be accounted for in either instance.

                                          III. Conclusion

       For the aforementioned reasons, we affirm the judgment of the circuit court. 9

                                                                                          Affirmed.




Brown, 5 Va. App. 238, 246, 361 S.E.2d 364, 368 (1987)). “The one-time equitable distribution
of property completed by Code § 20-107.3 is based on the accrued rights of the parties in the
distributed property. This is a separate consideration from that necessary to measure the current
financial positions of the parties in determining spousal support under Code § 20-107.1.
Different statutory considerations are mandated for each.” Moreno v. Moreno, 24 Va. App. 190,
198, 480 S.E.2d 792, 796 (1997).
       9
          Because we hold that the circuit court did not err with regard to husband’s assignments
of error, we need not and do not address wife’s assignment of error.
                                               - 12 -
