Dombrowski v. Dombrowski, 88-062

• Citation: 559 A.2d 828,131 N.H. 654
• Decision Date: 02 June 1989
• Docket Number: No. 88-062,88-062
• Parties: Joan S. DOMBROWSKI v. Robert K. DOMBROWSKI.
• Court: Supreme Court of New Hampshire

Page 828

559 A.2d 828

131 N.H. 654

Joan S. DOMBROWSKI v. Robert K. DOMBROWSKI.

No. 88-062.

Supreme Court of New Hampshire.

June 2, 1989.

John A. Macoul, Salem, by brief and orally, for plaintiff.

Sheehan, Phinney, Bass & Green P.A., Manchester (Edward Haffer on the brief and orally), for defendant.

BATCHELDER, Justice.

The appeal in this no-fault divorce case arises from the property settlement and alimony findings of a marital Master (Stephanie T. Nute, Esq.) which were approved by the Trial Court (Gray, J.). The defendant contends, inter alia, that the master over-valued the estate by more than one million dollars, awarded all of that illusory value to him, and thereby inequitably distributed the marital assets. On appeal, the defendant raises five principal issues. We affirm in part, reverse in part, and remand.

The plaintiff, Joan Dombrowski, filed a libel for a no-fault divorce in October, 1985. In June, 1987, the marital master heard three days of testimony concerning marital assets. The master issued her report on October 2, 1987, which the court approved. The defendant, Robert Dombrowski, then moved to have the master reconsider the decree and in February, 1988, the master modified the decree in part. The Court (McHugh, J.), approved the modified decree. The defendant appeals from the modified order.

The defendant contends first that the result of the master's erroneous valuation is an inequitable distribution of the marital estate, giving the plaintiff two-thirds of its actual three million dollar value and the defendant only one-third. Specifically, the defendant alleges that the master improperly valued: (1) a charitable contribution carry-forward deduction under 26 U.S.C. § 170 at $688,976; (2) a numismatic coin collection at $715,745; and (3) a charitable pledge at zero, instead of as a $106,688 debt. The total amount of error, the defendant asserts, is $1,036,409.

The charitable contribution carry-forward resulted from a donation of approximately 180,000 shares of common stock the defendant gave to his former preparatory school, St. Mary's School of Orchard Lake, Michigan. The stock was that of a company, Profit Technology, Inc., of which the defendant was chairman of the board and director of marketing. At the date of the donation, the value of the common stock given to the school was $765,735.

Based on this donation, the defendant took a tax deduction of approximately $60,000 and $22,000 for the tax years 1985 and 1986, respectively. This left $688,976 remaining for use to compute charitable tax deductions in future years. At trial, the defendant produced an expert witness, David Skiff, who testified that the $688,976 could be carried forward indefinitely until the defendant fully utilized the deduction. In fact, the carry-forward can only be used for five tax years following the contribution, 26 U.S.C. § 170(d)(1), a fact which was not clarified until appeal to this court. The expert also testified that the value of the carry-forward is not the full amount of the carry-forward (i.e. $688,976), but rather the tax savings which result when the appropriate percentage of the carry-forward is subtracted from gross income. Skiff stated that, based upon a federal tax rate of 28%, the maximum value of the carry-forward would be $192,000, but that the defendant would have to earn over two million dollars in income in order to obtain the full benefits from the carry-forward.

The defendant asserts, and we agree, that the master erroneously valued the carry-forward at $688,976, and awarded that value to him. The issue on appeal is what value to assign to the carry-forward. The defendant puts this value at zero, while the plaintiff appears to claim it is $688,976. We accept neither of these numbers. Based on the expert's testimony below, we hold that the value of the carry-forward is the tax savings that result when the deduction is subtracted from gross income. We remand the issue of the valuation of the carry-forward deduction in light of the considerations set forth below.

Accountant Skiff testified that the carry-forward deduction has economic value, although under generally accepted accounting principles a present value would not be assigned because of certain unknown variables, including the defendant's income, the federal tax rate, and interest rates. Despite these uncertainties, we hold that the carry-forward deduction does have economic value which should be included in the marital estate. Because the amount of the deduction depends in part upon the defendant's adjusted gross income, determining the precise amount of the tax savings may be difficult. Courts, however, often must make decisions about value when absolute precision is not possible, and the court must do so here. The master will have for consideration the defendant's tax returns for several years since the contribution was made. His income over time, the portion of the contribution carry-forward deduction already used, the expert's testimony concerning the maximum tax savings of the carry-forward, and the Internal Revenue Code may serve as guides in assigning a value to the carry-forward.

The next area in which the defendant alleges an improper valuation is the numismatic coin collection, determined by the master in the decree to have a value of $715,745. The defendant owned numerous coins at the time of the divorce, some of which were Kruggerands, Mexican silver dollars, and Canadian maple leafs, and in addition, there were various coins designated as numismatic coins. In other words, these were coins whose value is determined by worth in the collector's market, rather than by the amount of gold and silver content, as would be the case with the Kruggerands, Mexican silver dollars, and Canadian maple leafs. In determining the value of the marital assets, a point of reference for the trier of fact in some cases is a view of the values assigned in the respective affidavits of the parties filed pursuant to Superior Court Rule 158. The plaintiff's affidavit lists the numismatic coins at $715,745, together with the remaining coins achieving a total value of $1,040,267, which is the precise amount adopted by the master in awarding the coin collection to the defendant in the decree. The defendant's affidavit, on the other hand, merely lists "coins--$793,562." Based upon the affidavits alone, the difference in the parties' respective views of the value of the coins as marital assets is $246,705.

The major point of contention in the defendant's view of the discrepancy is that the master found in ruling upon the defendant's request that the numismatic coins "must be valued at current market value, and not original cost," and went on to deny a finding concerning the value of the numismatic coins at $475,000. However, the $475,000 value was the only evidence in the case concerning the current market and was in fact disallowed by the master. This results in a record showing a determination by the master that market value governed, yet the finding of numismatic worth was based upon invoices setting forth the purchase prices of the various coins as they were acquired over a period of years. The evidence as allowed in the record, without more, does not provide the necessary underpinning for the ultimate determination of value in this case. In view of this, we remand the issue of the worth of the numismatic coins for further hearing. The questions as to whether the defendant, as owner, Arlington Mills v. Salem, 83 N.H. 148, 140 A. 163 (1927), or as expert, N.H. R. of Ev. 702, may venture an opinion as to market values are determinations to be made in the exercise of sound discretion by the master.

The defendant also alleges that the master failed to value properly a charitable pledge liability of $106,688. We reject this claim. The pledge resulted from the defendant's promise to pay for the construction of a field house at the St. Mary's School, in Michigan. Between 1972 and 1980, he paid all but the remaining $106,688 cost of the $927,767.34 building. The defendant has not made any further payments on that amount since 1980. In 1985, however, he donated $765,735 worth of Profit Technology, Inc. stock to St. Mary's School. The master did not include the stock as a marital asset, but apparently considered the donation to have satisfied the remaining field house pledge for property distribution purposes. We agree with the master's ruling on the debt, notwithstanding the defendant's argument that under the law of Connecticut, where the pledge was made, he had an enforceable obligation to the school. His agreement with the school, which allows the pledge to be paid when the defendant's tax and investment circumstances permit and, presumably, if they permit, made consideration of that pledge unnecessary.

The defendant next contends that the marital master misapplied the equal distribution rule of Hodgins v. Hodgins, 126 N.H. 711, 497 A.2d 1187 (1985). In Hodgins, we stated that, absent special circumstances, the distribution of marital assets...