Rumpel v. Skaggs: Issues that Arise when One Spouse Owns a Share of a Business

Posted by Steven D. Eversole | Sep 17, 2014 | 0 Comments

Our Birmingham divorce lawyers understand that when one spouse owns a business with other people, there may be significant litigation required to value the marital assets.

Taxes

Rumpel v. Skaggs, a case from the Supreme Court of Kentucky, involved a husband and wife who were married in 1994.  At the time of the wedding, the husband (“Plaintiff”) was working as a police officer.  Plaintiff retired from the police two years later with a full pension.

After retirement, Plaintiff, along with a business partner, formed a corporation to purchase several acres of land.  The land was a strip mall.  They leased three of the commercial spaces to unrelated businesses.  One of the business was a bar.  The majority of the strip mall was used for two house bingo halls that were rented to non-profit organizations for the purpose of hosting gambling.  Plaintiff's company also ran a snack bar in the bingo halls. The company formed a subsidiary for the snack bar, so that it would be separate from the real estate holdings.

Plaintiff's wife (“Defendant”) quit her job to work as a full-time homemaker. She also cared for Plaintiff's grandson who she later adopted.  After this time, one of the employees of the company pleaded guilty to stealing more than $300,000 from her employers.  As part of her sentence, the employee agreed to pay back $2,000 per month, though she was only able to make partial payments.

Following the theft, Plaintiff and his associate agreed to part ways. Plaintiff agreed to pay his former associate a buyout of $22,500, and he agreed to assign his associates all rights to the restitution payments from their former employee. He also agreed to kick in an additional amount per month to cover the deficiencies in the restitution payments and agreed to guarantee his former associate would receive at least $100,000 by the time the former employer was finished repaying the company.

After all of this transpired, Plaintiff and Defendant separated and filed counter-petitions requesting a divorce.  Defendant moved for an order from the court that Plaintiff would pay her attorney's fees.  This is common when one party essentially earned all of the family's income.  The trial judge reserved making a decision on this issue until the conclusion of the trial.

Defendant requested that Plaintiff admit that he had agreed to pay his former associate $132,000 for his interest in the business and that Plaintiff's interest in the business was worth $265,000.   In Alabama, Requests for Admissions in a divorce case are governed by Rule 36 of the Rules of Civil Procedure.

Plaintiff denied both of these requests for admissions. Both parties obtained separate appraisals for the business, and Defendant's appraisal was significantly higher than Plaintiff's.  The court determined that the Plaintiff's figures were lower than the actual value and ordered Defendant to pay $246,000 plus fees and costs and monthly maintenance (alimony) for the next six years.

Plaintiff appealed this ruling to the intermediary court of appeals, which affirmed the trial court's order.  Upon the appeal to the state supreme court,   it was ultimately held that the trial judge had misapplied a state statute and reversed and remanded the case for further proceedings consistent with their opinion.

Contact Birmingham divorce and family law attorney Steven Eversole at (866) 831-5292.

Additional Resources:

Rumpel v. Skaggs, August 21, 2014, Supreme Court of Kentucky

About the Author

Steven D. Eversole

J.D., Samford University's Cumberland School of Law, Birmingham, Alabama B.A., University of Alabama, Tuscaloosa, Alabama

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

We serve the following localities:

Birmingham, Jefferson County including Bessemer, Homewood, Hoover, Irondale, Leeds, Mountain Brook, Trussville, and Vestavia Hills, Shelby County (including Pelham, Alabaster, Chelsea, Calera), Tuscaloosa, Auburn, Huntsville, Calhoun County including Anniston, Etowah County including Boaz and Gadsden, Cullman County including Arab and Cullman, Madison County including Huntsville and Madison, Montgomery County including Montgomery, and all of Alabama.

Menu