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Rohling v. Rohling

Alabama Court of Civil Appeals

June 1, 2018

Robert Joseph Rohling
Lylie Alexandra Rohling Andrew L. McGee, Terry L. Mock, and Bruce Gordon
Lylie Alexandra Rohling

          Appeals from Lauderdale Circuit Court (DR-15-900115)

          PITTMAN, JUDGE.

         These appeals seek review of a judgment entered by the Lauderdale Circuit Court ("the trial court") in a divorce action brought by Robert Joseph Rohling ("the husband") against Lylie Alexandra Rohling ("the wife"). We have consolidated the appeals for the purpose of addressing them in a single opinion.

         In appeal no. 2160859, the husband seeks review of that judgment insofar as it awarded the wife alimony in gross, awarded the wife periodic alimony, awarded the wife child support, awarded the wife a share of the husband's retirement accounts, and ordered the husband to maintain life insurance on his life for the benefit of the wife and the parties' two minor daughters ("the children"). In appeal no. 2160860, Andrew L. McGee, Terry L. Mock, and Bruce Gordon, the attorneys who represented the husband in the divorce action, seek review of the trial court's judgment insofar as it ordered them or the husband to pay fees charged by the wife's expert witness.

         Procedural History

         In April 2015, the husband sued the wife for a divorce; thereafter, the wife counterclaimed for a divorce. At the wife's behest, the trial court appointed a guardian ad litem for the children. The action was tried on September 7, 2016; October 6, 2016; November 1, 2016; February 16, 2017; and February 24, 2017. On April 13, 2017, the trial court entered a final judgment. Among other things, the judgment dissolved the parties' marriage on the ground of incompatibility, awarded the parties joint legal custody of the children, awarded the mother "primary physical custody" of the children, and awarded the husband visitation that would result in the children's being in his care approximately one-half of the time. In addition, the judgment provided, in pertinent part:

"5. CHILD SUPPORT. The evidence showed that the Husband receives a salary from Rohling Dental Laboratory, LLC reported on his W-2 at $96, 658.22 ([Husband]'s Ex. 17). Also, the Husband testified that over the course of any given year he would make various income draws from the business (Schedule K-1 for Partnership or S Corporation), which even in the down-year of 2016 still averaged approximately $7, 000 per year, for a total annual income of $103, 658.22 (or $8, 638 per month). Compare [Husband]'s Ex. 18 (CS Income Affidavit dated February 23, 2017) where the Husband calculated his monthly gross income to be $8, 054.83. Again, these specific income figures for the Husband are for 2016 based on gross sales of approximately $678, 000 per year for Rohling Dental Laboratory, LLC, according to the trial testimony and exhibits.
"Prior to 2016, the business averaged more in gross sales. Other testimony and financial analysis prove actual average gross sales from 2010 through 2015 were $l, 002, 112.00. Based on average gross sales for 2010 through 2015, the Husband calculated his income at $136, 572 per year or $11, 381 per month (Joint Exhibit, [Husband]'s Ex. #1 & [Wife]'s Ex. #1, CS Income Affidavit dated September 17, 2016).
"The Wife found employment as a legal assistant with the law firm of Yates & Spry[, ] reporting monthly income that varied from $2, 356.00 ([Wife]'s Ex. 10) to $2, 513.00 ([Wife]'s Ex. 11) per month. The Wife lost her job with that firm while this matter was pending, then was hired by Attorney Gary Wilkinson at a rate of $1, 733.00 per month ([Wife]'s Ex. 25).
"This Court finds that the amount of income of $11, 381.00 per month is properly attributed to the Husband based on the totality of testimony and evidence at trial. For purposes of the child support calculation, this Court defaults to the amount provable for five (5) of the past six (6) years, as opposed to calculating the child support obligation based on the anomaly of 2016. Further, using empirical data from 2010 through 2015 to calculate the Husband's income ([Husband]'s Ex. 1) takes into account his discretion to make income draws as he sees fit, thereby allowing him to adjust his weekly or monthly income at will.
"The Wife's income, on the other hand, is $1, 733.00 per month.
"Health Insurance for the children is paid directly through the Husband's business as a business expense and, based on the testimony at trial, should not be deducted from the child support calculation as part of the Husband's income or salary from the business. To do so would represent a deviation from well-established pattern and practice. Multiple CS-42 Child-Support Guidelines forms and income affidavits were admitted into evidence by both parties, and at no time did either party claim any manner of 'health-insurance costs' (line 6) to offset the amount of child support owed. Because the insurance is a benefit of the Husband's employment that he does not directly pay, the premium is not included for purposes of Rule 32 Child Support calculation.
"Therefore, the Husband shall pay to the Wife as child support ... the sum of Fifteen Hundred Fifty Dollars and No/100 ($1, 550.00) per month, commencing on the 1st day of May, 2017 ....
"6. CHILD SUPPORT ARREARAGE. After the Husband filed his Petition for Divorce, the parties continued to jointly occupy the marital residence. The Wife moved out of the marital residence and established her own residence on or about July 9, 2016. The Husband remained to make repairs and provide upkeep to the marital residence to facilitate sale of the home and division of their home's equity, which was accomplished ....
"Therefore, based on the facts and evidence, the Husband owes retroactive child support from July 2016 through April 2017 (ten months) in the amount of $15, 500.00. The retroactive child support shall be paid at the rate of Five Hundred Dollars and No/l00 ($500.00) per month, beginning April 15, 2017....
"The total amount of child support due each month is $2, 050.00 beginning May 1, 2017, and then on the 1st day of each month thereafter until the arrearage is paid in full.
"7. HEALTH INSURANCE. The [husband] shall continue to provide major medical health insurance coverage for the minor children. ...
"8. ST. JOSEPH SCHOOL TUITION. The [parties' younger] child ... currently attends St. Joseph School. By the testimony of both parties and the recommendation of the Guardian Ad Litem ..., it is in the best interest of the [parties' younger] child ... to remain in her present school environment at St. Joseph School. The Husband testified that he is willing to continue to pay the tuition for [the parties' younger child] to attend St. Joseph School. Therefore, based on express consent and agreement to pay by the Husband, the Husband shall continue to pay the tuition for [the parties' younger child] to attend St. Joseph School for so long as [she] attends St. Joseph School, which goes through 8th grade. At which point, the parties intend for both children to attend Florence City Schools.
"13. DEBTS. Each party shall be responsible for any and all debts in their sole name, free and clear of any contribution from the other party, unless specifically addressed. The indebtedness from the marriage assigned to each party was based on testimony at trial where each party agreed to assume the debts assigned.
"The Husband, by consent and agreement from his testimony, shall be responsible for the remaining balances owed on the following debts:
"A) Bank Independent Mortgage (related to Rohling Properties, LLC)
"B) Best Buy credit card ...
"C) Lowe's credit card ...
"D) BBVA Compass Bank card ... (1990 Regal Valanti Boat Loan) ($11, 000.00)
"E) Fifth Third Bank secured by the 2010 Lincoln Navigator ($13, 500.00)
"F) Bank of America credit card ... ($22, 000.00)
"G) U.S. Government for any unpaid tax obligation, specifically $22, 000.00 for tax year 2014 and $6, 000.00 for 2015 related to the Husband using monies from 401(k) or other retirement accounts for business operations

         "The Wife, by consent and agreement from her testimony at trial, shall be responsible for the remaining balances owed on the following debts ([Wife's] Ex. 17):

"A) Belk credit card ... ($1, 721.54)
"B) Sears Premier Card ... ($1, 593.69)
"C) Bank of America Visa credit card ... ($7, 811.73)
"D) Advantage Mastercard (American Aviator) ... ($1, 480.00)
"E) Loft Clothing Store (Loveloft) credit card ...
"16. BOAT. The Husband is awarded all right, title, and interest in and to the 1990 Regal Villante Boat ... ('boat') and, based on the trial testimony of both parties, the boat shall be sold as soon as reasonably possible. All proceeds from sale of the boat shall be applied to the debt obligations assumed by the Husband, beginning with BBVA Compass Bank card ... (1990 Regal Valanti Boat Loan) ($11, 000.00)
"17. LIFE INSURANCE. The Husband at his expense shall maintain the current life insurance policy on his life with Northwestern Mutual with a death benefit of $1, 000, 000.00 payable to the Wife as primary beneficiary and payable to the parties' children in equal amounts as secondary co-beneficiaries. ... After the Husband has paid in full the amounts required of him in Paragraph 20 of this Final Decree, then he shall be entitled to reduce the death benefit to $500, 000.00, and the death benefit shall be maintained in full force and effect so long as child support and/or periodic alimony is payable by the Husband under the terms of this Final Decree.
"18. PERIODIC ALIMONY. The Husband shall pay to the Wife as periodic alimony the sum of Eight Hundred Dollars and no/100 ($800.00) per month commencing on the 1st day of May, 2017 and on the 1st day of each month thereafter until the Wife's death, remarriage or cohabitation as defined by law, whichever first occurs. ...
"19. BUSINESS. There are two interrelated business entities: Rohling Dental Laboratory, LLC ('dental lab') and Rohling Properties, LLC. Rohling Dental Laboratory, LLC is owned jointly by the Husband (90%) and his father (10%). The dental lab is the primary asset that generates income. Rohling Properties, LLC is owned jointly by the Husband (50%) and [the] Wife (50%), Rohling Properties' only asset is ... a church building converted to the dental lab. Rohling Properties is responsible for the mortgage on the property held by Bank Independent. Rohling Dental Laboratory, LLC pays rent to Rohling Properties, LLC in the amount of the mortgage, which is then paid to Bank Independent, according to the testimony. Rohling Properties does not operate at a profit or loss but is merely a 'flow-through' entity to pay the mortgage.
"Rohling Dental Laboratory, LLC was founded in 2003 and moved to its present location in 2005. Initially, the Husband's mother was the bookkeeper and his father was active in the business. After his mother and father, in effect, retired, the business is now run by the Husband, along with his brother and sister. After the Husband's mother, the Husband's sister took over the function of bookkeeper for the business. The primary dispute between the parties centered on 'valuation' of the Husband's dental lab business.
"The Husband testified extensively concerning his business and was received by the Court as an expert based on his knowledge, skill, experience, training and education both managing the dental lab and concerning all financial matters related to the dental lab. See R. 702, Ala. R. Evid.
"In turn, the Wife employed Jeremy Blackburn, CPA, CVA, MAFF, of the accounting firm CDPA, PC ('Blackburn').[1] Blackburn was employed or engaged by the Wife 'to estimate the calculated fair value of the Company to be used in negotiations for a dissolution of marriage' ([Wife]'s Ex. 21).
"The Husband, by and though specially associated co-counsel, Bruce Gordon, attempted to attack Blackburn's qualifications as an expert witness by filing an extensive motion and bench brief entitled 'Petitioner's Motion in Limine and/or Motion to Dismiss.' After oral arguments, the Court denied the Husband's motion because the points made went to the weight, not the admissibility, of the evidence. Likewise, Mr. Gordon took Blackburn on an extensive voir dire examination. The main point of the Husband's objection and voir dire focused on the same issue. The Husband objected based on the methodology employed by Blackburn, among many other factors examined by the Husband's counsel. Specifically, the Husband argued that Blackburn conducted the wrong manner of 'valuation, ' that Blackburn conducted a type of 'valuation' referred to in the industry as a 'calculation engagement' as opposed to the more thorough and accurate 'valuation engagement.'
"Co-Counsel for the Husband spent an extensive portion of his cross-examination educating the court, through the testimony of Blackburn, on industry standards for a 'calculation engagement' versus a 'valuation engagement' (see [Husband]'s Ex. 15, Statements on Standards for Valuation Services). Throughout the entire course of the argument, voir dire, and cross-examination it was evident that Blackburn met all the requirements of R. 702, Ala. R. Evid. to qualify him as an expert capable of rendering an expert opinion regarding: 1) financial analysis of the documents provided by Rohling Dental Laboratories, LLC (see [Wife]'s Ex. 19, Financials from Rohling Dental Laboratories, LLC entered into evidence by agreement and stipulation of the parties); 2) valuation of the business pursuant to the requirements for a 'calculation engagement'; and 3) valuation of the business pursuant to the requirements for a 'valuation engagement.' This Court now very well understands that Blackburn only conducted the lesser 'calculation engagement.' However the evidence and record is clear, based on the knowledge, skill, experience, training and education of the proffered expert, Blackburn was properly qualified as an expert witness in those specific areas.
"Analysis of financial records from Rohling Dental Laboratory, LLC admitted into evidence and testified to or summarized by Blackburn indicated that for the five (5) year window from 2010-2015, the Husband's business generated annual sales (gross) of approximately $1, 000, 000.00 per year, with the actual average annual sales being calculated at $1, 002, 112.00. Blackburn also testified that the Husband could take $54, 000.00 annually out of the business and not affect overall business operations. Lastly, Blackburn testified that the 'calculation engagement' he conducted resulted in a 'valuation' of Rohling Dental Laboratories, LLC as follows:
"$530, 080.00 BIZCOMPS Equity Value
"$505, 710.00 Pratt Stats Equity Value
"$512, 000.00 Guideline Transaction Method
"([Wife]'s Ex. 21, Calculation of Valuation of Rohling Dental Laboratories, LLC as of December 31, 2015). The conclusion reached in Blackburn's report states, 'Based on the facts, assumptions, and methodology using our analysis, the calculated estimated fair value of the Company, as of December
31, 2015 is: $509, 000.'[2] Id.
"In determining what, if any, weight to give these findings, the Court fully considered the points made by the Husband by and through Co-Counsel Bruce Gordon. A 'valuation engagement' is more thorough and accurate because it is conducted according to more arduous accounting standards. For example, the accountant will 'go behind' the books or financials provided to verify their accuracy. Also, the accountant conducting a 'valuation engagement' would inspect the premises of the business to personally evaluate the facilities, equipment, fixtures, and inventory for purposes of ascertaining their actual value, depreciation, etc. With a 'calculation engagement' it is basically a 'paper review' along with some industry research for similarly situated businesses (comps) which results in more of an estimated value, as opposed to a true valuation.[3] (And the Court readily acknowledges that this is a grossly oversimplified summary of the many, many points made by the Husband on voir dire and cross-examination, by and through associated co-counsel Bruce Gordon, but this summary suffices to prove the point.)
"The Court, however, declines to take the next step urged by the Husband, which is to consider Blackburn's 'estimate' based on his 'calculation of value' so faulty and flawed as to be purely based on speculation or conjecture, therefore inadmissible.
"Blackburn employed methods recognized and accepted by [the] accounting industry for accountants conducting 'calculation engagements' and that evidence from a qualified expert is due to be considered by this Court. The fact that a more arduous or accurate method (valuation engagement) exists does not preclude the Court's consideration of Blackburn's findings. No evidence, including any portion of the Husband's testimony, directly contradicts the findings of Blackburn's financial evaluation of the Husband's business for the stated years 2010 through 2015. And the Husband did not employ his own expert or pay the increased fee to Blackburn to conduct the more rigorous 'valuation engagement.'
"The Husband was called as a rebuttal witness, in part, to rebut Blackburn's testimony. However, the point of much of the Husband's testimony, whether in his case-in-chief or rebuttal, was to prove that his business fundamentally changed in 2016, thereby discrediting Blackburn's analysis based on gross sales from 2010-2015 (gross sales averaging $1, 002, 112). For example, in his case-in-chief, the Husband testified that annual sales for the lab decreased in 2016 to $500, 000 to $550, 000 due primarily to the changed business environment. In rebuttal, the Husband produced the 'Profit and Loss' report from January through December 2016 (P&L report for 2016) which indicated gross sales for 2016 were actually $672, 824.78. It should also be noted that the same P&L report for 2016 indicated a loss of ($23, 189.90) for the business, which was the first year the business did not make a profit. The Husband testified that, in his opinion, several factors contributed to the reduction in annual sales for the year 2016, specifically loss of several major clients or accounts, and that he believed the business would rebound.
"Based on the foregoing evidence, along with all of the other evidence and testimony at trial, the Husband is awarded all right, title and interest in and to the business known as Rohling Dental Laboratory, LLC and all right, title and interest in and to the business known as Rohling Properties, LLC. The Wife is hereby divested of all her right, title and interest in and to Rohling Dental Laboratory, LLC and Rohling Properties, LLC. The Husband shall have the exclusive ownership, use and possession of the businesses and all assets of Rohling Dental Laboratory and Rohling Properties, LLC. The Husband is awarded all equipment, fixtures, office furniture, supplies, inventory, accounts payable and goodwill associated with and/or owned by said businesses. ...

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