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Giesen v. Giesen

Supreme Court of South Dakota

April 25, 2018

MINDY MARIE GIESEN, Plaintiff and Appellee,
DAVID MICHAEL GIESEN, Defendant and Appellant.



          DAVID R. STRAIT of Austin, Hinderaker, Hopper, Strait & Benson, LLP Watertown, South Dakota Attorneys for plaintiff and appellee.

          GREGORY T. BREWERS of Strange, Farrell, Johnson & Brewers, P.C. Sioux Falls, South Dakota Attorneys for defendant and appellant.

          SEVERSON, Justice

         [¶1.] In this divorce action, the husband challenges the circuit court's valuation of his three business interests, the valuation of a bank account on a date other than the date of divorce, and the decision to recapture into the marital estate the value of home improvements made to a third party's rental property. We affirm.


         [¶2.] Mindy Giesen brought suit for divorce against David Giesen in April 2015. Two children were born during the marriage. At the time of the October 2016trial, Mindy and David had been married approximately sixteen years. When the trial concluded, the circuit court stated certain rulings on the record and reserved ruling on others. In particular, the court reserved ruling on fault, the property division, and Mindy's request for alimony. This appeal concerns the circuit court's valuation and division of property.

         [¶3.] In November 2015, the circuit court issued a detailed memorandum decision valuing and allocating the parties' assets and debts. The court's February 2017memorandum decision set forth the terms of David's cash equalization payment to Mindy to be made as part of the property division. On May 23, 2017, the circuit court entered findings of fact and conclusions of law which specifically incorporated the previous memoranda decisions. On the same day, the court entered a judgment and decree of divorce.

         [¶4.] Because this appeal concerns the valuation of David's business interests, the valuation of a bank account, and the court's decision to include $15, 000 of improvements made to the property rented by David, we detail only the facts and evidence relevant to those issues.

         [¶5.] In 1998, David and his father Norm Giesen entered the trucking business. At the time, David had been working as a diesel mechanic in Norm's shop. After they entered the trucking business, Norm drove truck while David managed his father's shop. Within the first two years, they added a second truck and hired an owner/operator. In 2002, David and Norm incorporated their business as Dakota Valley Trucking, Inc. They each owned 50% of the trucking operation. In 2007, David and Norm started a second trucking operation: Dakota Valley Logistics, Inc. Like Dakota Valley Trucking, David and Norm each owned 50% of Dakota Valley Logistics. David testified that he and Norm began Dakota Valley Logistics because Dakota Valley Trucking had more loads than it could handle. To handle the additional loads, Dakota Valley Logistics operated as a bonded brokerage firm that brokered out loads to other companies.

         [¶6.] In 2008, David individually purchased a truck and started a sole proprietorship. David testified that he started his sole proprietorship because he wanted to "have a truck of [his] own." He explained that he occasionally drove truck but that he hired drivers for his sole proprietorship. David, through his sole proprietorship, contracted with Dakota Valley Trucking as an independent contractor. He testified that his contracts with Dakota Valley Trucking were the same as the other independent contractors. David offered the following example of how a driver is paid for a load.

[I]f we haul for one company, we bid a load. Roughly say going to Los Angeles, we bid the load for $5, 000. The driver would get 26 percent of that $5, 000. Dakota Valley would get 10 percent. If say it's [David's] truck and [his] trailer, [he] gets the rest [(64%)].

         On cross-examination, David agreed that he started his sole proprietorship to build assets and equity and to allow himself to generate more revenue personally.

         [¶7.] David testified that as part of his employment with Dakota Valley Trucking, he received a wage (approximately $35, 000), and Dakota Valley Trucking issued him a W-2 for those wages. Dakota Valley Trucking also transferred David money in the form of a 1099 (1099 transfers). David claimed that the money was for services rendered as an independent contractor. Regardless, David reported his share of Dakota Valley Trucking's revenue on his personal tax return Schedule C, which number was usually around $300, 000 per year. On cross-examination, David admitted that Dakota Valley Trucking had the choice to retain its revenue and buy its own trucks instead of distributing it to David. David explained, "If we wanted to purchase a truck through Dakota Valley Trucking, yes, but I want to purchase a truck through myself."

         [¶8.] David and Mindy presented separate expert testimony on the value of David's three business interests: 50% ownership in Dakota Valley Trucking, 50% ownership in Dakota Valley Logistics, and 100% ownership of the sole proprietorship. David had hired Eide Bailly to calculate the value of his business interests. Kevin Teigen, a business valuation manager from Eide Bailly, testified at trial. He did not participate in or create Eide Bailly's reports on David's business interests. Mindy had hired Michael Snyder, an accountant and lawyer, to offer an opinion on the value of David's business interests. Snyder testified at trial.

         [¶9.] The following chart represents the respective valuations offered by the experts, rounding to the nearest thousand.

Eide Bailly/Teigen
Dakota Valley Trucking
$1, 375, 000.00
$378, 000.00
Dakota Valley Logistics
$102, 000
$56, 000
Sole Proprietorship
$178, 000
$85, 000

         The parties do not dispute that their respective experts used different methods. Eide Bailly performed a calculation engagement and Snyder performed a valuation engagement.

         [¶10.] The difference between the two types of engagements was explained in Eide Bailly's report and was recognized by the circuit court. "A calculation engagement is limited in scope to the extent that the valuation analyst and the client agree on the valuation approaches and methods to be performed; the results of these procedures are expressed as a calculated value." In contrast, under a valuation engagement, "[t]he valuation analyst is free to apply the valuation approaches and methods he or she determines ...

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