Appeal from the Circuit Court of Jackson County; the Hon.
William H. South, Judge, presiding.
JUSTICE JONES DELIVERED THE OPINION OF THE COURT:
Respondent, Gary Dean Wilson, appeals from a portion of the judgment for dissolution of marriage entered on petition of his wife, Karen Lynn Wilson. Respondent contends that the trial court improperly determined the value of his partnership interest in a timber business as well as the value of certain real estate and that the property disposition based on these valuations was erroneous. Respondent also cites as error the court's award of maintenance and child support. We find reversible error in the court's property disposition and, accordingly, do not reach the maintenance and child support issues.
The parties were married in 1972 and have three children, one born in 1975 and twins born in 1977. During the marriage the parties lived in a mobile home located on petitioner's father's property. Upon their separation in June 1980, petitioner moved into her parents' home with the three children, and respondent moved into an apartment.
In May 1978 respondent began a timber business in equal partnership with his brother. He continued to work in the business, known as S & G Timber Products (S & G Timber), through the dates of the bifurcated dissolution hearings. Respondent's income from the S & G Timber partnership was $13,506 before taxes in 1979. He estimated his earnings to be $15,000 in 1980 although he had already earned $12,570 as of August 30, 1980. Respondent testified that most of his income is made by the fall of the year due to the seasonal nature of the timber business. Petitioner, who earned $4,311 in 1980 from various odd jobs, also assisted in the partnership business prior to the separation by keeping books and records, ordering parts and paying bills.
In April 1979 respondent and his brother purchased 10 acres of land and a building for use in the S & G Timber partnership. The property was purchased for $20,000, and at the time of the hearing was subject to an outstanding mortgage of $14,000. The land and building were carried as assets on the partnership books where the land was valued at $20,000, and the building was valued at $207.
Petitioner testified that as of August 1980 the value of the tangible assets of the partnership including trucks, saws, skidders and other equipment was $40,000, but she did not know the amount of the partnership liabilities. Respondent testified that partnership assets were acquired by borrowing to finance those assets and that as of August 1980 the partnership had $47,000 in assets and $56,000 in liabilities. This did not include another truck purchased in December 1980. If he sold the business as of August 1980, respondent stated, the best he could do would be to break even.
The 1979 partnership tax return introduced by petitioner showed an income loss of $9,000 on gross receipts of $111,000, cost of goods sold of $39,000, payments to partners of $38,000 and deductions for operating expenses of $44,000. The return showed an end of the year inventory of $18,000, cash of $3,500, land of $20,000, and depreciated assets of $20,000 for a total of $61,500. The return further showed mortgages, notes, and bonds payable in one year or more of $65,000 and a loss in the partners' capital accounts of $3,650. A depreciation schedule showed assets used by the partnership which were purchased for $30,000 and allocated $10,000 in depreciation, $5,000 of which was current depreciation.
The partnership balance sheet for June 1980 showed assets of $63,000 which included $18,000 for inventory, $20,000 for the land and building, and $25,000 for depreciated assets. Long-term liabilities were listed as $46,000, with partnership earnings of $17,000. The August 1980 balance sheet showed assets of $41,000 and long-term liabilities of $46,000, leaving minus $5,098 in partnership earnings.
Halleck Reese, accountant for S & G Timber, testified that the decrease in book value from $63,000 in June to $41,000 in August was due to the fact that the business sold $18,000 worth of timber which had been carried on the books since the first of the year as inventory. The partners' withdrawals had exceeded actual profits and so included some of the funds generated by borrowing.
Reese stated that book value, which is cost less accumulated depreciation, does not disclose fair market value but is only a book transaction for income tax purposes. He was unable to give an opinion as to the fair market value of the partnership. Reese stated that a determination of fair market value would include a consideration of good will but that no value had been assigned to good will on the books of the partnership because the business was started by the partners themselves rather than being purchased as a going business.
In its judgment entered on April 28, 1981, the trial court found that both the partnership interest and the interest in 10 acres of land were marital property to be divided between the parties along with the couple's mobile home and other household and personal items. The court ordered that:
"1. the undivided one half interest in the 10 acres of land and the building thereon acquired in April 1979 by Gary Dean Wilson and Stanley W. Wilson shall be valued by an independent appraiser and twenty-five percent of the value of the entire tract shall be paid to Petitioner by Respondent in not more than 50 equal monthly installments, without interest if timely paid, commencing 30 days after the date hereof, or as the parties may agree in writing to be filed in this cause within such 30 day period;
2. the undivided one half interest of the Respondent in the business known as S & G Timber products is valued at $12,500.00 and Respondent shall pay 50 percent of that amount to Petitioner in equal monthly installments of not less than $100.00 per month commencing upon the termination of the amount payable as maintenance to Petitioner under paragraph IV hereof. Such payments shall be without interest if timely paid."
The court entered a supplemental order on the same date in which, "having received the respective evaluations of the real estate identified [in the ...