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Smith v. Smith8/17/1993
0 needed to be added to the appraised value of Provident as incorporated by Beck and that the book value of Sonic's investment in Provident as of the date of trial was $4,217,000. This support comes both from Beck's testimony on cross-examination and from defendant's own exhibits. Once again, there was a conflict in the evidence regarding whether adjustments to Beck's valuation were needed, which conflict was resolved by the court in plaintiff's favor. Since there is competent evidence in the record that supports the court's findings regarding the adjustments made, those findings are binding and shall not be disturbed. Nix, 80 N.C. App. 110, 341 S.E.2d 116. Accordingly, we find no error in the court's valuation of Provident or its calculation of the appraisal increment/decrement for that entity.
3. Town and Country Ford, Inc.
Defendant next argues the court erred in its valuation of Town and Country Ford ("Town and Country"), an automobile dealership that is a wholly owned subsidiary of Sonic. The court valued Town and Country by use of the industry standard approach, the approach utilized by plaintiff's expert, Nicholson. Under this approach, the value of the dealership is determined by adding the net "hard asset" value (the value of its hard assets minus its liabilities) and its "blue sky" value.
The expert testimony showed that the blue sky value is basically the value of the dealership over and above the value of its hard assets and is roughly equivalent to goodwill. The blue sky value is determined by multiplying the average pre-tax income of the dealership by a franchise multiple of one to five. The multiple chosen is subjective and is based upon factors such as the type of franchise, its market performance, location, demographics, median income, economy status, sales, and number of locations. The court here used a multiple of three in determining the date of separation value of Town and Country and a multiple of two for the date of trial value. Defendant contends there was no basis for the franchise multiples used by the court and that therefore its valuation of this asset is fatally flawed. We disagree.
Defendant presented evidence showing that Town and Country had a value of $4,900,000 as of the date of separation and $2,400,000
as of the date of trial. These values were obtained, however, by use of a methodology that was not accepted by the court. The court accepted as valid the industry standard approach, used by Nicholson, noting that it was recognized by a national automobile dealers association as a legitimate tool for valuing automobile dealerships. The court found error in Nicholson's application of this methodology, however, in that Nicholson used franchise multiples that the court found inaccurately high. Nicholson valued Town and Country at $7,938,000 as of the date of separation with use of a multiple of five and at $1,931,000 as of the date of trial with use of a multiple of three. The trial court, using multiples of three and two, respectively, valued Town and Country at $5,494,000 as of the date of separation and $876,000 as of the date of trial.
The court made numerous findings regarding the multiples selected including the multiples selected by Nicholson and his justification for his selections; alternative computations of the blue sky component offered by defendant's witnesses, including alternative computations made by defendant's witness, Brooks, with use of different multiples; and the multiples selected by the court, including the reason for its use of a lower multiple for determining the date of trial value. The findings show, among other things, that the dealership
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