Barri L. Ferraro v. Glenn Robert Ferraro

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judges Elder and Bray
Argued at Chesapeake, Virginia
BARRI L. FERRARO
v. Record No. 1117-99-1
GLENN ROBERT FERRARO MEMORANDUM OPINION * BY
JUDGE LARRY G. ELDER
GLENN ROBERT FERRARO MARCH 7, 2000
v. Record No. 1180-99-1
BARRI L. FERRARO
FROM THE CIRCUIT COURT OF YORK COUNTY
N. Prentis Smiley, Jr., Judge
John F. Rixey for Barri L. Ferraro.
Donald K. Butler (Ann Brakke Campfield;
LeeAnn N. Barnes; Morano, Colan & Butler, on
briefs), for Glenn Robert Ferraro.
Barri L. Ferraro (wife) and Glenn R. Ferraro (husband) have
filed cross-appeals from the ruling of the York County Circuit
Court granting them a divorce and making spousal support and
equitable distribution awards. We find no reversible error and
affirm the ruling of the trial court.
We note at the outset that, on appeal, we consider the
evidence on a particular issue in the light most favorable to
the party who prevailed on that issue in the trial court. See
* Pursuant to Code § 17.1-413, recodifying Code
§ 17-116.010, this opinion is not designated for publication.
Wilson v. Wilson, 12 Va. App. 1251, 1254, 408 S.E.2d 576, 578
(1991). "The judgment of a trial court sitting in equity, when
based on evidence heard ore tenus, will not be disturbed on
appeal unless plainly wrong or without evidence to support it."
Peple v. Peple, 5 Va. App. 414, 423, 364 S.E.2d 232, 237 (1988).
I.
WIFE'S APPEAL, RECORD NO. 1117-99-1
Wife contends on appeal that the trial court erred in (1)
holding wife solely responsible for $49,947 in credit card debts
incurred post-separation; (2) admitting evidence of husband's
1998 income in a March 15, 1999 hearing when that evidence had
not previously been provided to wife in discovery; and (3)
reducing wife's expenses and determining that she could earn
$3,700 per month on assets received in the equitable
distribution such that she needed only $3,000 per month in
spousal support.
A.
CREDIT CARD DEBT
Code § 20-107.3(C) provides that "[t]he court shall . . .
have the authority to apportion and order the payment of the
debts of the parties, or either of them, that are incurred prior
to the dissolution of the marriage, based upon the [ten] factors
listed in subsection E" of that same code section. Id.
(emphasis added). Those factors include "the basis for such
debts and liabilities," and "[s]uch other factors as the court
- 2 -
deems necessary or appropriate to consider in order to arrive at
a fair and equitable monetary award." Id. (E)(7), (10). Where
a party claims a post-separation debt is marital, "'the burden
is on the party who last had the funds to establish by a
preponderance of the evidence that the funds were used for
living expenses or some other proper purpose.'" Luczkovich v.
Luczkovich, 26 Va. App. 702, 714, 496 S.E.2d 157, 163 (1998)
(quoting Clements v. Clements, 10 Va. App. 580, 587, 397 S.E.2d
257, 261 (1990)).
Here, wife bore the burden of establishing that the debt of
almost $50,000 she incurred on various credit cards, which she
obtained after the parties' separation and in her name only,
resulted from her payment of living expenses or some other
proper purpose. See id. Although wife testified about the
items she purportedly charged, she provided no credit card
account statements to support her testimony. She gave general
testimony about the types of items she purchased but was unable
to quantify what percentage of the debt resulted from any
particular type of expenditure. Further, she admitted that some
of the medical expenses she claimed to have charged were
reimbursed and could not establish which expenses were not. We
hold the trial court did not abuse its discretion in concluding
that the record contained "no evidence, that the court can
relate to, that would identify any specific item as a legitimate
marital debt under the definition." Therefore, we reject wife's
- 3 -
invitation to reverse the ruling of the trial court on this
ground.
B.
ADMISSIBILITY OF HUSBAND'S 1998 INCOME FIGURES
Determining "the admissibility of evidence is within the
broad discretion of the trial court, and a ruling will not be
disturbed on appeal in the absence of an abuse of discretion."
Blain v. Commonwealth, 7 Va. App. 10, 16, 371 S.E.2d 838, 842
(1988). Evidence is generally admissible if it is both relevant
and material. See Evans-Smith v. Commonwealth, 5 Va. App. 188,
196, 361 S.E.2d 436, 441 (1987). Here, the trial court was
under a duty to determine the current financial status of the
parties for purposes of calculating husband's support
obligation. See, e.g., Jacobs v. Jacobs, 219 Va. 993, 995, 254
S.E.2d 56, 58 (1979) (decided under former Code § 20-107); see
also Code § 20-107.1(1), 1994 Va. Acts ch. 518. 1 It also was
required to consider the tax consequences insofar as "necessary
to consider the equities between the parties." Code
§ 20-107.1(9). Therefore, husband's 1998 income figures, the
1
Although Code § 20-107.1 was amended in 1998, the
legislature specifically provided that those amendments "shall
apply only to suits for initial spousal support orders filed on
or after July 1, 1998." 1998 Va. Acts ch. 604. Wife's request
for spousal support was made in her 1996 bill of complaint.
Therefore, the 1998 amendments to that code section do not
apply. See 1994 Va. Acts ch. 518 (version of Code § 20-107.1
preceding 1998 amendments).
- 4 -
most current income information then available, was relevant for
the court's consideration.
In addition, Gregory F. Lawson's information regarding the
tax consequences of a spousal support award set at a figure
between $3,000 and $5,000 was probative of the amount of the
award to be set in spite of the fact that this amount was lower
than the sum husband previously had paid wife voluntarily.
Husband's evidence established that wife could earn investment
income on her equitable distribution award, which income the
court was required to consider in determining husband's spousal
support obligation. See Code § 20-107.1(1), (8); see Rowe v.
Rowe, 24 Va. App. 123, 129, 480 S.E.2d 760, 767 (1997).
Although a spouse may not be required to invade funds or other
assets received pursuant to the equitable distribution, a court
must consider any income the award may produce. See Rowe, 24
Va. App. at 129, 480 S.E.2d at 767. Finally, wife would have
been entitled to cross-examine the expert to determine the tax
consequences to husband of a spousal support obligation set at
higher levels more similar to the sums husband actually had been
paying. For these reasons, we conclude that the challenged
evidence was relevant and unquestionably admissible if timely
produced.
We assume without deciding that husband's production of his
1998 income figures on the last day of testimony on the issue of
- 5 -
spousal support constituted a violation of a continuing duty to
produce such records as imposed by the court. However,
"Rule 4:12 gives the trial court broad
discretion in determining what sanctions, if
any, will be imposed upon a litigant who
fails to respond timely to discovery." And
a trial court's decision to admit evidence
that is not timely disclosed, rather than
impose the sanction of excluding it, will
not be reversed unless the court's action
amounts to an abuse of discretion.
Rappold v. Indiana Lumbermens Mutual Ins., 246 Va. 10, 14, 431
S.E.2d 302, 305 (1993) (quoting Woodbury v. Courtney, 239 Va.
651, 654, 391 S.E.2d 293, 295 (1990)).
Here, although wife likely was surprised by the 1998 income
figures, the only sanction she requested was exclusion. She did
not request a continuance in order to review and prepare a
response to those figures, even after the trial court denied her
motion to exclude the evidence. Under these circumstances,
given the relevance of the 1998 income figures to an accurate
determination of husband's ability to pay spousal support, we
hold the trial court did not abuse its discretion in refusing to
exclude the evidence.
C.
SPOUSAL SUPPORT AWARD
Decisions concerning 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." Calvert
v. Calvert, 18 Va. App. 781, 784, 447 S.E.2d 875, 876 (1994).
- 6 -
In awarding spousal support, the trial court must consider the
factors set out in Code § 20-107.1. 2 "Those spouses deemed
entitled to support have the right to be maintained in the
manner to which they were accustomed during the marriage, but
their needs must be balanced against the other spouse's
financial ability to pay." Dukelow v. Dukelow, 2 Va. App. 21,
26, 341 S.E.2d 208, 210 (1986). "When the record discloses that
the trial court considered all of the statutory factors, the
court's ruling will not be disturbed on appeal" absent a clear
abuse of discretion. Gamble v. Gamble, 14 Va. App. 558, 574,
421 S.E.2d 635, 644 (1992).
Wife challenges the trial court's ruling that both the
amount of spousal support husband was able to pay and the amount
of spousal support wife needed were lower than wife represented.
Viewing the evidence in the light most favorable to husband, as
we must on appeal, we hold that the trial court's rulings did
not constitute an abuse of discretion. At the March 15, 1999
hearing, the trial court heard extensive evidence from the
parties and explained his consideration of each of the statutory
factors in detail at the March 15, 1999 hearing.
This evidence, viewed in the light most favorable to
husband, supported the trial court's "adjustments" to wife's
expense sheet, based on its finding that the expenses were
"overstated" and that "she [was] unable to justify . . . or
2
See supra note 1.
- 7 -
explain the numbers." We also find no abuse of discretion in
the trial court's determination that wife's need for spousal
support was reduced by the investment income she could earn on
her share of the equitable distribution. Although a spouse may
not be required to invade funds or other assets received
pursuant to the equitable distribution, a court must consider
any income the award may produce. See Rowe, 24 Va. App. at 129,
480 S.E.2d at 767.
Balancing wife's need against husband's ability to pay
support does not alter our holding. We reject wife's argument
that husband's income and level of support in 1997 and previous
years was more probative of the parties' lifestyle and husband's
ability to pay support than his income and level of support in
1998. Husband testified that some of his corporations had
suffered business reversals in 1998, thereby reducing their
profitability. He also explained that the amount of money he
received from the corporations in 1997 was not an accurate
reflection of their profitability and that he took more than
just profits out of the corporations in an effort to keep pace
with wife's requests for money. Finally, contrary to wife's
testimony, husband indicated that they did not have a lavish
lifestyle while married.
For these reasons, we hold that the evidence supported the
trial court's spousal support award and that the trial court did
not abuse its discretion in determining the amount of the award.
- 8 -
II.
HUSBAND'S APPEAL, RECORD NO. 1180-99-1
Husband contends on appeal that the trial court erred in
(1) valuing husband's business interests because it credited a
portion of the testimony of wife's expert, failed to apply
certain discounts to value based on husband's minority ownership
interest and the lack of marketability of his interest, and
considered the parties' opinions as to value; (2) ruling that
the value of all marital property, including husband's business
interests, should be divided equally when husband originally
agreed to an equal division but changed his mind and disputed
such division prior to the court's equitable distribution
hearing, and (3) refusing to allow him to cross-examine wife on
her contributions to husband's acquisition and maintenance of
his business interests.
A.
VALUATION OF HUSBAND'S BUSINESS INTERESTS
"When 'a determination of the value of marital property is
dispositive of the amount of a monetary award, that
determination by the trial court must be reviewable and have a
foundation in the evidence presented.'" Jacobs v. Jacobs, 12
Va. App. 977, 979, 406 S.E.2d 669, 670 (1991) (quoting Trivett
v. Trivett, 7 Va. App. 148, 155, 371 S.E.2d 560, 564 (1988)).
However, in reviewing such an award on appeal, "we recognize
that the trial court's job is a difficult one. Accordingly, we
- 9 -
rely heavily on the discretion of the trial judge in weighing
the many considerations and circumstances that are presented in
each case." Artis v. Artis, 4 Va. App. 132, 137, 354 S.E.2d
812, 815 (1987).
We hold first that husband waived any right to contest the
trial court's consideration of his or wife's opinions as to the
value of husband's interest in the sporting goods stores because
he made no contemporaneous objection when the trial court
elicited that testimony. See Gelletly v. Commonwealth, 16 Va.
App. 457, 460-61, 430 S.E.2d 722, 725 (1993). Once that
testimony was admitted without objection, the trial court did
not abuse its discretion in considering it.
We also conclude that the evidence supports the trial
court's finding that husband's ownership interest in the
sporting goods stores had a value of $1,300,000. Although
husband attacked the trial court's reliance on the testimony of
wife's expert, Dian Calderone, nothing in the record requires a
finding that the portions upon which the trial court relied were
plainly wrong, and it was within the court's discretion to rely
on those figures. Further, the portions of Calderone's
testimony on which the court relied were very similar to the
testimony of husband's expert, Gregory Lawson. Both experts
calculated a book value for the entire corporate entity at
approximately $3,700,000. What the trial court did, in essence,
was to use husband's figures under the method of valuation
- 10 -
called capitalization of excess earnings which included
husband's figure for goodwill. Application of this method
resulted in a value of approximately $1,400,000 for husband's
thirty-four percent share. This was the same value Lawson
obtained before applying discounts for husband's minority
ownership and the lack of marketability of the stock.
In essence, then, what husband contests is the trial
court's refusal to apply the minority and marketability
discounts. Under the facts of this case, we hold the trial
court did not abuse its discretion in refusing to apply these
discounts. As to the marketability discount, husband's expert
represented that the capitalization of excess earnings valuation
method represented the total fair market value of a business.
Further, no evidence established that husband intended to or
would be required to sell any of his ownership interest in order
to obtain the funds to pay wife her share of the equitable
distribution award. Therefore, we find no error in the court's
refusal to apply the marketability discount. See Zipf v. Zipf,
8 Va. App. 387, 395, 382 S.E.2d 263, 267-68 (1989) (upholding
equitable distribution award which did not reflect requested
marketability discount).
Likewise, we hold the trial court did not abuse its
discretion in refusing to discount the value of the stock due to
husband's minority ownership interest. The evidence established
that husband owned minority interests in most of the stores but
- 11 -
that no other person owned a majority interest in any of these
stores either. Although husband testified that other minority
shareholders routinely voted together to control the group of
corporations, the trial court was free to reject husband's
testimony and conclude that husband's minority ownership did not
diminish the value of this asset. Compare Jacobs, 12 Va. App.
at 979-80, 406 S.E.2d at 670-71 (holding that court erred in
failing to consider non-liquidity of wife's minority interest in
closely held corporation where, although husband had equal
minority ownership interest, husband's father owned the
remainder and husband admitted that he had complete control over
the corporation, rendering wife's stock "essentially worthless
until the corporation is dissolved and its assets liquidated").
For these reasons, we hold that the trial court did not
abuse its discretion in valuing husband's interest in the
sporting goods business at $1,300,000.
B.
PERCENTAGE DIVISION OF MARITAL PROPERTY
The parties' attorneys agreed in proceedings before the
court to the equal division of husband's business property, and
the parties posed no objection to this agreement. When wife
prepared an order for entry by the court embodying the issues
resolved in that hearing, including the parties' agreement
regarding the equal division of marital property, husband's
attorney endorsed it without objection. The trial court found
- 12 -
no mistake of fact or misunderstanding existed over the
agreement. Further, husband admits his original agreement to
the equal division but argues that he was entitled to change his
mind. Under Richardson v. Richardson, 10 Va. App. 391, 394-98,
392 S.E.2d 688, 689-91 (1990), we disagree. The evidence
manifests a meeting of the minds and a certainty of terms
sufficient to render the agreement binding, see id., especially
in light of the court's entry of an order embodying the ruling,
to which husband posed no timely objection. Therefore, we
affirm the trial court's equal division of marital property
based on the parties' agreement to same.
C.
CROSS-EXAMINATION OF WIFE ON CONTRIBUTIONS TO BUSINESS INTERESTS
Assuming without deciding that husband properly preserved
for appeal his objection to the denial of cross-examination, and
assuming further that the denial constituted error, we
nevertheless hold any error was harmless. An error of
constitutional dimension is "harmless [if] the reviewing court
is 'able to declare a belief that it was harmless beyond a
reasonable doubt.'" Lavinder v. Commonwealth, 12 Va. App. 1003,
1005, 407 S.E.2d 910, 911 (1991) (en banc) (quoting Chapman v.
California, 386 U.S. 18, 24, 87 S. Ct. 824, 828, 17 L. Ed. 2d
705 (1967)).
Husband asserts on brief that the subject matter on which
he sought to cross-examine wife was her contributions to
- 13 -
husband's business interests, which he contends were negative
contributions. The only equitable distribution issue on which
wife's contributions to husband's business interests was
relevant was the court's determination of the proper division of
marital property. See Code § 20-107.3(E). However, because we
affirm the trial court's division of property pursuant to the
parties' agreement and not pursuant to the trial court's
evaluation of the statutory factors, see discussion supra
Section II.B., wife's contributions, positive or negative, to
the "acquisition and care and maintenance" of the marital
property were not relevant to the trial court's ruling.
Therefore, we conclude that the denial of cross-examination was
harmless beyond a reasonable doubt under the facts of this case.
III.
CONCLUSION
For these reasons, we affirm the ruling of the trial court
in both wife's appeal, Record No. 1117-99-1, and husband's
cross-appeal, Record No. 1180-99-1.
Affirmed.
- 14 -