A Florida appeals court has reversed parts of a divorce ruling involving Malcolm C. King Jr. and Kelsi King. The court found errors in how the trial court valued their shared business and determined alimony payments. This decision impacts the couple's financial arrangements following their marriage dissolution.
The case, Malcolm C. King Jr. v. Kelsi King, was filed on March 4, 2021, in the District Court of Appeal of Florida under docket number 1D19-3280. The couple was married for fourteen years and has three children together. During their marriage, Kelsi King stayed home to care for the children while Malcolm King worked outside the home. Five years before their divorce proceedings began, the couple purchased King Insurance Agency (KIA) from Malcolm’s parents. Malcolm served as the CEO and managed the operations, while Kelsi worked as the company’s bookkeeper.
The couple agreed that KIA was marital property but disagreed on its fair market value and the amount of Malcolm's personal goodwill in the business. The trial court initially valued KIA at $3,223,083, based on expert testimony. However, Malcolm argued that the court overvalued the business and undervalued his personal goodwill. Additionally, the couple disagreed on the amount of alimony Kelsi should receive, with the trial court awarding her $12,000 per month.
The appeals court reviewed the trial court's decisions and found several errors. The court ruled that the trial court did not adequately consider KIA's corporate debt when determining its value. The court stated, "The valuation of a business is calculated by determining the fair market value of the business, which is the amount [for which] a willing buyer and a willing seller would exchange assets[,] absent duress." The appeals court emphasized that both assets and liabilities must be considered in such valuations.
Moreover, the appeals court found that the trial court's determination of Malcolm's personal goodwill was not supported by competent evidence. The trial court had accepted an expert's valuation that placed Malcolm's goodwill at only 7.3% of KIA's total value. The appeals court noted that the expert did not provide sufficient details about the comparable businesses used in the analysis.
In terms of alimony, the appeals court agreed that Kelsi was entitled to support but determined that the trial court erred in calculating Malcolm's ability to pay. The court found that the trial court incorrectly included undistributed income from KIA when determining Malcolm's financial capability. The appeals court stated that undistributed income retained for corporate purposes should not be counted as income for alimony calculations.
Ultimately, the appeals court reversed the trial court's decisions regarding KIA's valuation, Malcolm's personal goodwill, and the alimony amount. However, the court upheld the requirement for Malcolm to maintain a life insurance policy to secure his alimony and child support obligations.
This ruling is significant as it clarifies how courts should evaluate business assets and personal goodwill in divorce proceedings. It also sets a precedent regarding the treatment of undistributed income from S corporations in alimony calculations.
Looking ahead, the case will return to the trial court for further proceedings to reassess the valuation of KIA, the calculation of Malcolm's personal goodwill, and the alimony award based on the corrected income assessment. The court's decision may be appealed further, but details were not available in the court filing.