THE EMERGENCY

Requirements for Participants

Sfreddo v. Sfreddo, 59 Va.App. 471 (2012) 720 S.E.2d 145

“A gift, used here in its ordinary sense, includes not only “something that is voluntarily transferred by one person to another without compensation,” but also “a voluntary transfer of real or personal property without any consideration or without a valuable consideration.” Webster's Third New Int'l Dictionary 956 (1981) (emphasis added).

Notwithstanding the label of a sale in the corporate minutes and the existence of token consideration, a variety of factors that are particular to this transaction indelibly mark its true nature as a gift. First, the corporate minutes, signed by all three directors, reflect that when the corporation redeemed the stock of the *483 mother, it sold two hundred shares to husband and his brother not at fair market value, but at par value of one dollar per share. After the redemption of the mother's stock, husband's new shares constituted half the company.

Using the sale price of half the company from 2003 of $1.5 million dollars, divided by two hundred shares, results in an actual value of $7,500 per share. Using the valuation of the business from the time of trial results in an actual value of about eight thousand dollars per share for every dollar from husband. The vast disparity between sale price and value clearly manifests the board's intent to gift. Second, all three directors testified they understood the transaction to represent a gift. Husband testified neither he nor his brother paid anything for their shares. Rather, he testified that “my mother gave it to us.” Husband's brother also testified he never paid for his shares and had no knowledge of husband paying for the shares.

The mother testified she intended “to give my two sons” stock. Although the trial court's factual finding that husband paid a nominal sum for the shares receives deference under the circumstances of this case, it has significance that all the directors understood the transaction to represent a gift. **152 *484 Lastly, the trial court specifically found that the mother, as the sole shareholder, intended to make a gift, and the mother's testimony supported this finding. The trial court determined: “I think that Mr. Sfreddo's mother ... really thinks that she made a gift of this stock to her two sons, including Mr. Sfreddo and his brother.... I really think she believes that.”

The mother testified she regarded the transaction as a gift of her property: “I agreed to give my two sons ... two hundred shares of my stock.” The trial court's findings and the mother's testimony carry special weight concerning corporate intent in light of the mother's status as the sole shareholder and a director. Obviously, in this family held company, husband and his brother would never have received any shares without their mother's consent. We conclude, under the applicable standard of review, that the trial court was plainly wrong in failing to conclude that Triple S had donative intent in transferring the stock. We further find that intent is proven by clear and convincing evidence.

In Holloway v. Smith, 197 Va. 334, 335, 88 S.E.2d 909, 910 (1955), Holloway sued Milton Smith, Maude Smith, and Warren Ten Brook, as partners, for payment of a note purportedly executed by Ten Brook for the partnership. The Smiths denied that they were partners with Ten Brook at the time of the execution of the note because the proceeds of the note were to be Ten Brook's capital contribution to join the partnership and that, even if they were partners, Ten Brook was not authorized to bind the partnership. Id. at 338–39, 88 S.E.2d at 913. Thus, there was evidence in the record supporting their position. The trial court concluded that Ten Brook was liable on the note, but the Smiths were not. Id. at 335, 88 S.E.2d at 911. Pursuant to then Code § 50–9, partners were bound if the note was executed by a partner “for apparently carrying on in the usual way the business of the partnership.” Id. at 340, 88 S.E.2d at 914.

The Supreme *485 Court reversed the trial court and entered judgment against the Smiths. The Court wrote: When we apply the provisions of Code § 50–9 to the material and pertinent evidence relating to the making of the loan, and the execution of the note, we can reach but one conclusion, and that is, the acts of the partner, Ten Brook, bound the partnership. In reaching that conclusion, we are not unmindful of the respect which attaches to the judgment of the trial court, but when a judgment is plainly wrong or without evidence to support it, it becomes our duty to set it aside. Id. at 342, 88 S.E.2d at 915 (emphasis added); see also Walrod v. Matthews, 210 Va. 382, 391, 171 S.E.2d 180, 187 (1969); City of Va. Beach v. Roman, 201 Va. 879, 882, 114 S.E.2d 749, 751 (1960); Thalhimer Bros., Inc. v. Buckner, 194 Va. 1011, 1013, 76 S.E.2d 215, 217 (1953). In reversing the trial court, we here accept that duty.

3. Consideration

The trial court further concluded husband had paid valuable consideration for the stock and payment of consideration is inconsistent with a gift. The trial court held husband “purchased two hundred shares from the corporation for two hundred dollars.” Wife, likewise, argues that husband purchased the stock for value from Triple S. We hold any nominal sum paid by husband did not represent valuable consideration under the circumstances of this case. The Virginia Supreme Court has stated that a “gift has been defined as a contract without a consideration.” Ott v. L & J Holdings, LLC, 275 Va. 182, 188, 654 S.E.2d 902, 905 (2008). Indeed, “by definition, a deed of gift requires no consideration.” Hill v. Brooks, 253 Va. 168, 178, 482 S.E.2d 816, 823 (1997).

Consideration represents “the price bargained for *486 and paid for a promise.” Smith v. Mountjoy, 280 Va. 46, 53, 694 S.E.2d 598, 602 (2010) (citation omitted). It may come in “a benefit to the party promising or a detriment to the party to **153 whom the promise is made.” GSHH–Richmond, Inc. v. Imperial Assocs., 253 Va. 98, 101, 480 S.E.2d 482, 484 (1997) (citation omitted). We have held that there was an intent that the Triple S stock be separate property, “property acquired during the marriage by ... gift from a source other than the other party.” Code § 20–107.3(A)(1)(ii).

We repeat: a “gift” includes “a voluntary transfer of real or personal property without any consideration or without a valuable consideration.” Webster's, supra, 956 (emphasis added). We caution that while classic principles of the common law of contracts are instructive, those principles are not transmitted unaltered into the context of an equitable distribution. Thus, as here, what may constitute classic contractual “consideration” at law may not be “consideration” for the transfer of property in equitable distribution. In Gamble v. Gamble, 14 Va.App. 558, 569, 421 S.E.2d 635, 642 (1992) (quoting Sawyer v. Sawyer, 1 Va.App. 75, 78, 335 S.E.2d 277, 279 (1985)), we wrote that Code § 20–107.3 defines a structure “for equitable distribution of the marital wealth of the parties: a distribution which will equitably ‘compensate a spouse for his or her contribution to the acquisition of [all marital] property obtained during the marriage.’ ”

In Roane v. Roane, 12 Va.App. 989, 995, 407 S.E.2d 698, 701 (1991), we reversed the trial court's limitation of a wife's interest in transmuted property “in order that the legislative intent that the parties receive a fair proportion of the marital property be complied with, and to assure that the ends of justice be attained.” For example, Virginia equitable distribution law “does not establish a presumption of equal distribution of marital assets.” Watts v. Watts, 40 Va .App. 685, 702, 581 S.E.2d 224, 233 (2003) (citation omitted). While these cases deal with the division of marital property, the equitable principles therein enunciated are likewise applicable to the *487 classification of property acquired during the marriage as separate or marital. We reiterate our caveat that principles of the common law of contracts may not fully apply in equitable distribution.

That said, our decision is nonetheless supported by those common law principles. Virginia has long followed the “peppercorn” theory of consideration, under which even a peppercorn suffices as consideration. 6 See Richmond Eng'g & Mfg. Corp. v. Loth, 135 Va. 110, 156, 115 S.E. 774, 787 (1923). A peppercorn has been equated with a cent. Whitney v. Stearns, 16 Me. 394, 397 (1839).

Under this theory, “[i]t matters not to what extent the promisor is benefited or how little the promisee may give for the promise.” Sager v. Basham, 241 Va. 227, 229, 401 S.E.2d 676, 677 (1991) (citation omitted). “A very slight advantage to the one party or a trifling inconvenience to the other is generally held sufficient to support the promise.” Brewer v. First Nat'l Bank of Danville, 202 Va. 807, 815, 120 S.E.2d 273, 279 (1961). “The owner of the historic estate of ‘Blackacre’ can give it away, and he can sell it for a peppercorn. Courts, though they have long arms, cannot relieve one of the consequences of a contract merely because it was unwise.” Planters Nat'l Bank of Fredericksburg, Va. v. E. G. Heflin Co., 166 Va. 166, 173, 184 S.E. 216, 219 (1936). Nonetheless, it has been recognized that contracts containing only peppercorns as consideration may lack an authentic bargain. Professor Corbin wrote: The gross inadequacy of the consideration, as measured by the opinions of other men; may tend to support the conclusion that the parties did not actually agree upon an *488 exchange, that the “peppercorn” was not in fact bargained for by the promisor. If it was not bargained for, it was not a consideration, according to the definition that makes agreed bargain the **154 test.

Persons sometimes say that they have bargained, when their other conduct shows that they have not.... Courts must first determine the fact of bargain and agreed exchange before they can properly apply the rules of consideration as a bargained exchange. The rule that market equivalence of consideration is not required, and that the value of the consideration is to be left solely to the free bargaining process of the parties, leads in extreme cases to seeming absurdities. When the consideration is only a “peppercorn” or a “tomtit” or a worthless piece of paper, the requirement of a consideration appeared to Holmes to be as much of a mere formality as is a seal. 1 Arthur Linton Corbin, Corbin on Contracts § 127, at 546 (1963). Professor Corbin's emphasis on the fact of an actual bargain reflects one of the main concerns of contracts law. The basic elements of a contract are an offer, acceptance, and consideration. Snyder–Falkinham v. Stockburger, 249 Va. 376, 381, 457 S.E.2d 36, 39 (1995).

An offer “identifies the bargained for exchange.” Chang v. First Colonial Sav. Bank, 242 Va. 388, 392, 410 S.E.2d 928, 930 (1991). Contracts typically require a bargain to exist. Restatement (Second) of Contracts § 17 (1981). Our Supreme Court has stated that “the major consideration underlying contract law is the protection of bargained for expectations.” Filak v. George, 267 Va. 612, 618, 594 S.E.2d 610, 613 (2004). The Virginia Supreme Court acknowledged in Hackett v. Emmett, 215 Va. 726, 214 S.E.2d 139 (1975), that a sale for nominal consideration may lack a bargain and actually represent a gift. The primary issue there was whether there was sufficient corroborative evidence, pursuant to then Code § 8–286, of the delivery of an unrecorded deed, so as to pass title upon delivery. Id. at 727, 214 S.E.2d at 140.

The corroborative evidence established that the conveyance was a gift from *489 the deceased grantor Harris to Emmett. Id. The Court noted that there was a stronger presumption of delivery when there was a gift, or “voluntary conveyance,” rather than in “an ordinary case of bargain and sale,” citing a case for that proposition. Id. at 729, 214 S.E.2d at 141 (citation omitted). Apparently, the deed recited familiar language, that of bargain and sale, stating the deed was made in consideration of the sum of five dollars. Id. Yet the Court stated: “We observe that the evidence is clear that the transaction is one of gift and not bargain and sale. No consideration was involved, other than a token payment of five dollars, and Emmett testified the property was a gift to him from Harris.” Id.

As relevant to the case we here consider, we note (1) that the Hackett Court, as a condition precedent to invoking the stronger presumption of delivery arising from a gift, specifically rejected the recital in the deed that there was consideration for the transfer; (2) that the Hackett Court concluded money was in fact paid (“other than a token payment of five dollars”); and (3) that here the mother testified, necessarily unlike the deceased Harris, that the transfer was a gift. The invocation of the stronger presumption of delivery, which formed part of the standard of review, necessarily was part of the ratio decidendi, “the essential rationale in the case that determines the judgment,” and so part of the holding binding upon us. See Clinchfield Coal Co. v. Reed, 40 Va.App. 69, 73–74, 577 S.E.2d 538, 540 (2003).

The reason for our Supreme Court's holding in Hackett is that while a gift lacks consideration, Ott, 275 Va. at 188, 654 S.E.2d at 905, it has been recognized that where no bargain actually occurred as evidenced by nominal or sham consideration and the surrounding circumstances, the purported consideration is not in fact consideration, see Dulany Foods, Inc. v. Ayers, 220 Va. 502, 514, 260 S.E.2d 196, 203 (1979) (Poff, J., dissenting) (“Unless bargained for, a benefit the offeree confers upon the offeror cannot constitute consideration.”).

The Restatement (Second) of Contracts well illuminates this principle. The Restatement explains: “To constitute consideration, *490 a performance or a return promise must be bargained for.” Restatement (Second) of Contracts § 71(1) (1981). In a comment, the Restatement elucidates this by stating: “[A] mere pretense of bargain does **155 not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration....” Id. cmt. b. In a comment to another section, the Restatement again explains: “Disparity in value, with or without other circumstances, sometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense. Such a sham or ‘nominal’ consideration does not satisfy the requirement of § 71.” Id. § 79 cmt. d. Moreover, the Restatement provides an illustration highly relevant for this case: “In consideration of one cent received, A promises to pay $600 in three yearly installments of $200 each. The one cent is merely nominal and is not consideration for A's promise.” Id. illus.

Both our Supreme Court's decision in Hackett and the Restatement (Second) of Contracts point to a long line of cases holding transactions such as the one here represent a gift. In Salmon v. Wilson, 41 Cal. 595, 604 (1871), the issue concerned whether one of a man's children took property as separate property from a gift or marital property from a bargained for sale. The court held it was a gift. Id. at 605. Regarding the supposed sale price, the court found the difference “between the price named and the value of the estate ... is so enormously large as clearly to indicate that the money consideration did not, in fact, enter into the transaction as one of its material elements.” Id. at 606. See also Oliver v. Grimball, 14 S.C. 556, 567 (1881); Wilkinson v. Sherman, 45 N.J.Eq. 413, 422–23, 18 A. 228 (1889). 7 In *491 Aldridge v. Aldridge, 202 Mo. 565, 101 S.W. 42, 43 (1907), a man purported to sell all his property to his wife and son for ten dollars. Yet the court stated: “Under the circumstances the money consideration named must be considered as nominal only ... the transaction was a gift, the element of an ordinary purchase for a valuable consideration is absent.” Id. In In re Lynch's Estate, 220 Pa. 14, 69 A. 290 (1908), a woman acquired property from her mother for one dollar.

The court held this constituted a gift, stating that “[t]o hold that a deed from a parent to a child naming a consideration of ... $1.00 impressed upon it a grant of bargain and sale would be contrary to the popular understanding of the effect of such a conveyance, and would in every case defeat the manifest intention.” Id. at 292.

More recently, in Green v. Green, 542 So.2d 466, 467 (Fla.Dist.Ct.App.1989), the court held a husband's payment of nominal consideration did not alter the effect of a gift of an interest in a residence. Although the wife argued the nominal consideration made the asset marital property from a sale, the court disagreed and held: “[T]he payment of trivial or merely nominal consideration does not alter the obvious nature of the transaction. These transfers were gifts....” Id.See also Scott v. Scott, 86 Ark.App. 120, 161 S.W.3d 307, 311–12 (2004). **156 *492

We hold that where nominal consideration and the surrounding circumstances of a contract demonstrate a gift rather than a bargained for sale occurred, the court should find the transaction constitutes a gift. 10 The party seeking to show a gift has the burden of proof by clear and convincing evidence. Prizzia v. Prizzia, 58 Va.App. 137, 163, 707 S.E.2d 461, 473 (2011). However, we emphasize this does not protect imprudent persons from poorly made bargains, for even a peppercorn that is bargained for may constitute consideration. In this case, the evidence plainly demonstrates a gift from the company to husband.

The corporate minutes from the meeting in 2004 where the company agreed to transfer two hundred shares to husband reflect that husband paid one dollar per share, for a total of two hundred dollars. Since the company simultaneously agreed to redeem the mother's shares, husband's new stock represented half the company. As noted above, employing the sale price of half the company from 2003 of $1.5 million dollars, divided by two hundred shares, produces an actual value of $7,500 per share. If the valuation of the business from the time of trial is used, the stock had an actual value of about eight thousand dollars per share. We have already found the board of directors, including the sole shareholder mother, regarded the transaction as a gift.

Obviously, no bargained for exchange occurred. The nominal price paid by husband did not change this transaction from a gift into a sale. *493 Since no valuable consideration existed and the company intended to make a gift to husband, the two hundred shares he received represented his separate property from a gift under our equitable distribution statute. 11 See Code § 20–107.3(A)(1). This decision makes it unnecessary for us to consider husband's second assignment of error, which addresses the trial court's decision regarding the share of the company wife should receive if the stock is marital. B. Valuation of APS Investments Husband contends the trial court erred in determining the value of his stock in APS Investments for two reasons.

First, he argues it was inappropriate to place a value on APS in the absence of business valuation evidence such as an appraisal or capitalization rates. Second, husband argues the trial court should have considered evidence of a debt APS owed to husband's brother. We find no error regarding the first issue and hold the second not properly before us. “In Virginia, the courts look to the intrinsic value of the property to the parties to measure value for equitable distribution purposes.” Hoebelheinrich v. Hoebelheinrich, 43 Va.App. 543, 550, 600 S.E.2d 152, 155 (2004). Since “intrinsic value must depend on the facts of the case, we give great weight to the findings of the trial court.” Howell v. Howell, 31 Va.App. 332, 339, 523 S.E.2d 514, 518 (2000).

This Court will “affirm if the evidence supports the findings and if the trial court finds a reasonable evaluation based on proven methodology and on the application of it to the particular facts of the case.” Id. “The intrinsic value principle applies to stock in a family owned company.” Owens v. Owens, 41 Va.App. 844, 854, 589 S.E.2d 488, 494 (2003).

We find the trial court properly valued APS Investments. The evidence before the trial court was that APS owned a single piece of property and nothing else besides a bank *494 account. Under these circumstances, the trial court acted within its discretion in holding the value of the property and the bank account constituted the value of APS. The majority of husband's argument under this assignment of error relates to the **157 failure to reduce the value of APS by the debt to husband's brother. Yet husband cites no authority concerning this.

In fact, the only authorities cited under this assignment of error are two cases after the first sentence, which states: “Valuation cannot be based on mere guesswork.” In light of the trial court's holding that the value of APS was simply the value of the property and the bank account, which we affirm, we do not perceive how consideration of the debt would require guesswork. Furthermore, nothing in this citation addresses wife's argument that husband failed to prove the liability of APS. Husband's reply brief cites no authority of any kind for this assignment of error.

Rule 5A:20(e) directed that husband's brief contain the “standard of review and the argument (including principles of law and authorities) relating to each assignment of error.” Based on this rule, we have repeatedly stated how undeveloped arguments “do not merit appellate consideration.” Reid v. Commonwealth, 57 Va.App. 42, 48, 698 S.E.2d 269, 271 (2010) (citation omitted). In Fadness v. Fadness, 52 Va.App. 833, 851, 667 S.E.2d 857, 866 (2008), this Court held: “If the parties believed that the circuit court erred, it was their duty to present that error to us with legal authority to support their contention.” Where a party's failure to present authority is significant, we may treat an assignment of error as waived. Parks v. Parks, 52 Va.App. 663, 664, 666 S.E.2d 547, 548 (2008). While we may speculate as to how husband's meager authority relates to his argument, the need for such guesswork on our part necessarily means husband has not complied with the rule. We hold husband's failure to present authority significant and treat this portion of his assignment of error as waived. *495 C.

Interest Income Husband maintains the trial court erred in failing to consider the interest income that wife could gain from the monetary award. Husband contends that consideration of this income should result in a diminished spousal support award. Since we reverse the trial court's equitable distribution finding concerning the gift of Triple S stock, we reverse and remand this issue for further consideration. Code § 20–107.1(E)(8) requires that in awarding spousal support, the trial court shall consider the “provisions made with regard to the marital property under § 20–107.3.” “Because the trial court cannot decide the issues pertaining to permanent spousal support until the equitable distribution issue is resolved, we reverse and remand the trial court's award of spousal support.” Duva v. Duva, 55 Va.App. 286, 301, 685 S.E.2d 842, 849 (2009). D. Attorney Fees Both parties seek an award of attorney fees for costs on appeal. As both parties have partially prevailed, we deny any award of fees. See Smith v. Smith, 43 Va.App. 279, 291 n. 6, 597 S.E.2d 250, 256 n. 6 (2004).

IV. CONCLUSION

The trial court erred in holding husband's acquisition of half the stock of Triple S was not a gift. The trial court acted properly in determining the value of APS Investments. We remand on the issue of whether the trial court erred in determining spousal support by not considering interest wife may receive from the monetary award in light of our reversal concerning the status of Triple S stock. For the foregoing reasons, the judgment of the trial court is affirmed in part and reversed and remanded in part for further proceedings consistent with this opinion. Affirmed in part, reversed and remanded in part.
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