In the landmark divorce case, Antolik v. Harvey (761 P.2d 305 (1988)), the primary issue addressed by the Intermediate Court of Appeals of Hawaii was the value of Husband’s chiropractic practice and, specifically, whether a mistake had been made in the trial court’s finding of value.
During a divorce proceeding in Hawaii, all assets (including businesses) deemed to be marital property are subject to division between the two parties. Marital property typically includes assets acquired after marriage, but can also include assets owned by either party before marriage. In the Antolik case, the chiropractic business was acquired by Husband before marriage.
Prior to trial, the parties agreed that Wife should be entitled to half of any increase in the value of the business. To determine if the business had increased in value during the marriage, both Husband and Wife retained independent business valuation experts. Each expert performed two valuations – one as of the date of marriage and one as of the date of separation.
The Court of Appeals ultimately accepted the valuations prepared by Husband’s expert, which indicated that the business had increased in value by approximately $40,000 during the marriage. After making certain discretionary adjustments, the Court of Appeals concluded that the increase in the value of the business was closer to $56,000 and ordered Husband to pay Wife $28,000 as her half of the increase in the value of the business.
The Antolik v. Harvey case established precedence in two key areas of business valuation for divorce purposes in Hawaii: (1) the standard of value to be used is “fair market value,” and (2) professional goodwill should be excluded from the value of a business. These two topics will be discussed in future articles on our website.
As experienced experts, we regularly value businesses for divorce purposes in Hawaii. Please feel free to contact us if you have any questions regarding business valuation issues you might be wondering about.