Case Law: Valuation Experts Play Key Roles in Cases in Texas, Arizona Reviewed by Momizat on . Top State Courts Consider the Value of Goodwill, the Legitimacy of the Income Method of Valuation In State of Texas v. Clear Channel Outdoor, the Texas Court of Top State Courts Consider the Value of Goodwill, the Legitimacy of the Income Method of Valuation In State of Texas v. Clear Channel Outdoor, the Texas Court of Rating:
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Case Law: Valuation Experts Play Key Roles in Cases in Texas, Arizona

Top State Courts Consider the Value of Goodwill, the Legitimacy of the Income Method of Valuation

In State of Texas v. Clear Channel Outdoor, the Texas Court of Appeals considers testimony from an expert regarding the income method of valuation for the billboards; in Walsh v. Walsh, the Court of Appeals of Arizona reassesses the realizable benefits of stock redemption value in a law firm, and determines the net assets of the firm should not be conflated with the husband’s own goodwill based on his reputation and experience.

State of Texas v. Clear Channel Outdoor
2012 Tex. App. LEXIS 8111
September 27, 2012
Judge Higley
Court of Appeals of Texas

Summary:

Appellant, the State of Texas, sought review of a summary judgment entered against it by the County Civil Court at Law No. 3, Harris County, Texas, on the liability portion of appellee billboard owner’s inverse condemnation claim, as well as the subsequent rendition of judgment against the state and in favor of the billboard owner following a trial on damages. 

“…the family court erred in dissolution of marriage proceeding by restricting its analysis of the community interest in a husband’s goodwill to realizable benefits…”

The court held that summary judgment on the liability portion of the billboard owner’s inverse condemnation claim was proper.  It was undisputed that the billboards at issue were improvements situated upon the portion of land taken. Accordingly, they were part of the realty, and the state had to give the billboard owner adequate compensation for them.

Because the state intended to condemn the real property upon which the billboards stood, as well as the lease for the property held by the billboard owner, it followed that the state intended to condemn the billboards, regardless of whether it wanted to condemn the billboards.

The trial court did not abuse its discretion by allowing testimony from the billboard owner’s expert regarding the income method of valuation for the billboards because the income method was not an impermissible method of valuation. 

The court concluded that the evidence was legally sufficient to support the jury’s verdict on the valuation of the billboards based on the income method.  The court affirmed the trial court’s judgment.

 

Walsh v. Walsh
2012 Ariz. App. LEXIS 162
October 2, 2012
Judge Kessler
Court of Appeals of Arizona

 Summary:

The family court erred in dissolution of marriage proceeding by restricting its analysis of the community interest in a husband’s goodwill to realizable benefits of stock redemption value in a law firm of which he was a shareholder, which conflated the net assets of the firm with the husband’s own goodwill based on his reputation and experience.

The error was prejudicial because the wife, through her expert witness, introduced evidence that the husband’s goodwill might have exceeded the stock redemption value.  The case was reversed and remanded to the trial court.

 

Jones v. Jones
2012 Va. App. LEXIS 317
October 9, 2012
Judge Elder
Court of Appeals of Virginia

Summary:

The Circuit Court of Rockingham County (Virginia) concluded that the large farm and house tract were marital property, subject to the children’s trust; that the rental house was marital property; and that the small farm was in a trust created by appellee wife’s father, and that her right to the property vested at the death of her mother.

Appellant husband appealed the equitable distribution award.  After the parties married in 1979, the wife’s father bought them a house on an acre of land. The parties used the property as their marital home. The wife’s father also bought the small farm, which consisted of 14 acres of land for the parties’ use. The wife’s father created a trust specifying that upon his and his wife’s death, the small farm would pass to his daughter. 

The husband testified that he had expected that he and wife would each inherit half-ownership of the small farm upon the death of his wife’s father. The parties subsequently bought the large farm, which consisted of 61 acres, in part using money from the children’s trust funds. Because neither party denied the children’s interest in the properties, the imposition of the constructive trust as opposed to a simple recognition of the parties’ debts to the children did not affect the equitable distribution award.

Thus, the trial court’s authority did not provide the husband with a suitable basis to challenge the equitable distribution award. Also, based on the unambiguous language in the trust, the small farm was the wife’s separate property.  The appellate court affirmed the trial court’s judgment. 

Peter H. Agrapides, MBA, AVA, is a Principal at Western Valuation Advisors, which has offices in Salt Lake City, Utah, and Las Vegas, Nevada. For more information, write Peter directly, or call (801) 273-1000.

The National Association of Certified Valuators and Analysts (NACVA) supports the users of business and intangible asset valuation services and financial forensic services, including damages determinations of all kinds and fraud detection and prevention, by training and certifying financial professionals in these disciplines.

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