INNERBICHLER V. INNERBICHLER 752 A.2d 291 (2000) CASE BRIEF

INNERBICHLER V. INNERBICHLER

752 A.2d 291 (2000)

NATURE OF THE CASE: Nicholas Innerbichler (H) appealed a judgment awarding Carole Innerbichler (W) a monetary award, and monthly alimony for five years, followed by indefinite monthly alimony, in a suit to determine whether the parties' marital property included the appreciation in value of H's 51 percent ownership interest in the company he co-founded more than a year prior to the marriage.

FACTS: H and W married on January 21, 1984, when H was 41 years old and W was 33. The parties have one child. After eleven years of marriage, H moved out of the marital home and then filed a Complaint for Limited Divorce, and W filed a countersuit, seeking an absolute divorce on the ground of adultery. Her suit was later amended in court to include a two-year separation as an additional ground for divorce. The primary disputes at trial centered on the fair market value of TAMSCO, whether the appreciation in value of TAMSCO constituted marital property, and, if so, the value of the marital interest. H is now 55 years old and resided with his paramour in a home that he purchased for about $600,000.00 and financed with a mortgage and a loan from his business. W is a 47-year-old high school graduate who had completed one semester of college. In October 1982, more than one year prior to the marriage, H co-founded TAMSCO with his friend and colleague, William Bilawa. H was employed by Lockheed Corporation, and remained employed there until June 1983; in the evenings, H worked for TAMSCO. The company provides technical and management services to agencies of the federal government and to the private sector in various disciplines, including program management, integrated logistics support, software development, and data management. H owned 51% of TAMSCO and Bilawa owned a 49% interest in the company. When TAMSCO was founded, H was married to Barbara. In 1983, as part of his divorce settlement with Barbara, H claimed that he waived his interest in the home that they occupied, allegedly worth about $300,000.00, in exchange for Barbara's agreement to waive her claim to TAMSCO, which appellant contends was worth at least as much as the home. W insists that TAMSCO was in its 'embryonic stages' when the parties were first married. Ample evidence was presented at trial showing that TAMSCO was in its fledgling stage of development at the time of the marriage. An 8(a) SBA application, submitted in June 1983, showed that TAMSCO was 'a new business' with only two employees, and its operating equipment consisted of two electric typewriters, a bookcase, a file cabinet, a conference table, and chairs, having a total value of less than $2,000.00. The SBA application listed only two contracts that TAMSCO had completed in the preceding three years: a $13,000.00 contract commenced in February 1983 and a $6,000.00 contract completed in May 1983. The application also identified a contract of $131,000.00 and described it as 'In Progress.' TAMSCO operated from Bilawa's kitchen until August 1984, when it opened its first office in Fort Monmouth, New Jersey. In addition, TAMSCO's income tax return for 1983 revealed that the company had only $52,076.00 in gross receipts and $41,268.00 in assets. Some 83 days after the parties' marriage, TAMSCO obtained the desired 8(a) certification. It is undisputed that the 8(a) program enabled TAMSCO to obtain lucrative sole source government contracts, the first of which was awarded to TAMSCO in September 1984. TAMSCO grew rapidly. For 1995, TAMSCO generated revenues of $46 million and employed over 500 people. In 1996, TAMSCO earned $47,000,000.00 in revenues, followed by $51,000,000.00 for fiscal year 1997. By the time of the divorce trial TAMSCO was no longer eligible to participate in the SBA's 8(a) program, although it still had residual 8(a) business. At the time of trial, H was earning in excess of $650,000.00 in annual salary. H maintains that neither TAMSCO nor the post-marriage appreciation in the company's value constituted marital property. He argues that the company was created before the marriage and its success was directly linked to an Army contract awarded prior to the marriage. H claims that over 97% of TAMSCO's government contracts were 'traceable to contracts won at the company's inception and prior to the marriage.' H served as the President and Chief Executive Officer of TAMSCO from its inception and Bilawa reported to him. Moreover, a resolution adopted by TAMSCO's Board of Directors affirmed H's 'total control of the day-to-day operation' of TAMSCO, with authority to give 'final approval on all matters concerning the operation of the corporation.' An Informal Action of the Board in July 1988 recognized H's efforts and role in TAMSCO's growth and financial stability. Bilawa conceded at trial that appellant consistently made the final decisions regarding TAMSCO. TAMSCO had two disputes with the IRS that would affect its value. TAMSCO's accountant, testified as an expert. He said that if TAMSCO did not prevail in its IRS disputes it could face a tax liability of almost nine million dollars, including interest and costs, for the years 1990-1997. W's expert valued TAMSCO at between $8.3 million and $8.5 million. The expert did not reduce the fair market value of TAMSCO due to the company's disputes with the IRS, because the potential tax liabilities had 'never been reflected on financial statements,' and the company 'represented to the bank [that it] was not an issue that was going to be adverse to the company.' H's expert estimated the present value of TAMSCO at $6,555,000.00. When the parties wed, W was employed in a secretarial capacity at the National Academy of Sciences, where she worked for five years prior to the marriage and almost two years thereafter. Her salary was $26,000.00. W worked as TAMSCO's personnel director, earning approximately $65,000.00 per year. W claims that she was not qualified for the position she held at TAMSCO, and that others executed the functions she could not perform. W claims she suffers from carpal tunnel syndrome in both wrists, which prevented her from performing work as a secretary. W also underwent psychological treatment for depression and, at the time of trial, she was taking Zoloft, a prescription medicine, for that condition. W also served as the primary caretaker for the couple's home and child and for the care of H's three other children. H developed a serious gambling problem. He began a treatment program in April 1997 for a gambling addiction. Apparently, he has not gambled since then. The court awarded H monthly alimony of $8,000.00 for five years, based, in part, on W's anticipated educational expenses. That was followed by an award of indefinite monthly alimony of $6,000.00, based on the court's finding of an unconscionable disparity in income even if the Wife becomes as self-supporting as possible. Additionally, the court initially granted a monetary award to W in the amount of $2,880,000.00. The court believed W's expert as to TAMSCO's value. The court found that the post-marriage 'increase in value of TAMSCO is marital,' and that 'the Husband's share (51%) of the increased value of TAMSCO stock is marital,' because TAMSCO's 'success is attributable to a large degree to the work efforts of H throughout the marriage.' The court also found that the parties had substantial other marital property, worth almost $1.5 million. Eventually the court recalculated the monetary award and reduced it to $2,581,864.75. The court then ordered H to make full payment of that sum over a five-year period, without interest. Of that sum, $430,310.79 was due by July 27, 1999. This appeal resulted.

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