Section 21.11 Value of Stock or Business

• Library: Family Law Deskbook and 2014 Supp

3. (§21.11) Value of Stock or Business

In Coleman v. Coleman, 318 S.W.3d 715 (Mo. App. E.D. 2010), the court looked at a ruling on the value of the husband’s interest in the law firm where he worked. The wife argued, on appeal, that the trial court undervalued the husband’s interest in the law firm Lewis Rice & Fingersh, L.C. The Eastern District rejected this argument however, holding that:

The judicial determination of value must be an informed judgment, but fair value is not susceptible of determination by any precise mathematical computation. Generally, the trial court can accept the opinion of one expert as to value over another and can prefer one method of valuation over competing methods based on the particular facts of the case and the circumstances of the entity involved.

Coleman, 318 S.W.3d at 722 (emphasis added) (citations omitted).

When one spouse owns stock in a closely held corporation, the value of that stock will be an important issue in the division of property. The businesses to be valued in Moody v. Moody, 725 S.W.2d 625 (Mo. App. E.D. 1987), were a painting company and a video rental business. The court based its valuations of these businesses on financial statements prepared by “professional accountants.” The court of appeals affirmed the valuations, holding that the statements alone were sufficient proof of value. Id. at 626. Although Moody demonstrates that financial statements can suffice, the better practice is to offer a witness who describes in detail the assumptions on which the statements are based as well as the corporation’s condition since the statements were prepared. In this regard, cases involving shareholder suits against closely held corporations are instructive.

Forinash v. Daugherty, 697 S.W.2d 294 (Mo. App. S.D. 1985), declined to follow on other grounds by Peterson v. Continental Boiler Works, Inc., 783 S.W.2d 896 (Mo. banc 1990), a shareholder suit against the officers and directors of a bank, presents the lesson of how to use insiders’ testimony on value to the outsiders’ advantage. The defendants in Forinash claimed that the dissident shareholders failed to prove the value of their stock after an insider group sold a controlling interest in the bank. The court of appeals rejected this claim, noting that a director and former managing officer of the bank, both defendants, gave admissible opinions as to the stock’s value. Defendant Daugherty, who had been with the bank for 40 years, “was qualified to give an...