McCulloch v. McCulloch

• Decision Date: 25 June 2013
• Docket Number: Nos. 2011–139–Appeal, 2010–433–Appeal.,s. 2011–139–Appeal, 2010–433–Appeal.
• Citation: 69 A.3d 810
• Parties: Hope Billings McCULLOCH v. James Robert McCULLOCH.
• Court: Rhode Island Supreme Court

69 A.3d 810

Hope Billings McCULLOCH

v.James Robert McCULLOCH.

Nos. 2011–139–Appeal, 2010–433–Appeal.

Supreme Court of Rhode Island.

June 25, 2013.

David A. Wollin, Esq., Providence, for Plaintiff.

Lauren E. Jones, Esq., Providence, for Defendant.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Justice FLAHERTY, for the Court.

After a protracted, if not epic, battle in the Family Court, the plaintiff, Hope Billings McCulloch (Hope), appeals from a decision that granted her complaint and the counterclaim of the defendant, James Robert McCulloch (James), for an absolute divorce.¹ At the heart of this matter is the distribution of the stock of Microfibres, Inc. (Microfibres), a manufacturer of fabric—of which James is the president and chief executive officer—and Microfibres Partnership Limited (MPL), an affiliated company that owns certain equipment and real estate in North Carolina.

On appeal, Hope argues that the trial justice erred: (1) in his determination of the percentage of MPL that was marital property; (2) by declining to place a value on Microfibres before he divided the marital estate; (3) by disregarding a consent order that set forth the date as of which the marital property was to be valued; (4) by assigning Hope 25 percent of Microfibres, thereby rendering her a minority shareholder in a closely held corporation; (5) by declining to award Hope alimony; (6) by awarding Hope only $1,000 per week in child support; (7) by declining to award Hope fees for her attorneys, experts, and the supervisor of James's visits with their son Lucas James McCulloch (Lucas); and (8) by declining to order the disclosure of certain documents and information concerning James's will, trusts, and estate plans. Conversely, in a protective and conditional cross-appeal, James argues that the trial justice erred when he held that Microfibres was a marital asset and not an advance on his inheritance. For the reasons set forth in this opinion, we affirm in part and vacate in part the Family Court's decision pending entry of final judgment, and we remand the matter to that tribunal for further proceedings consistent with this opinion.

IBackground

Hope and James were married on February 14, 1989. They separated in the early part of 2005, and on June 16, 2006, Hope filed a complaint for an absolute divorce. James filed an answer and counterclaim on May 7, 2007. As grounds for divorce, both parties cited irreconcilable differences which caused the irremediable breakdown of the marriage. The parties have two children, Bay Billings McCulloch, who is no longer a minor, and Lucas, who reached the age of nineteen on June 18, 2013.

AProceedings Below

There were extensive proceedings in the Family Court that spanned almost five years, producing a veritable mountain of documents and transcripts. For the sake of brevity, we will recount only the portions of the record that are relevant to this appeal, and we will provide additional facts in our discussion where necessary.

It is significant that on October 17, 2008, during the course of the divorce proceedings, the parties entered into a consent order that embodied various agreements and stipulations that they previously had made. The pertinent provisions of that consent order read as follows:

“31. Neither party shall challenge: a) the date of valuation of any appraisal of real estate, equipment, machinery or the parties' possessions by any expert after October 1, 2007, or b) the date of the valuation of Microfibres, Inc. by any expert after October 1, 2007.

“32. For purposes of the rule that marital assets should be valued as of the date of trial unless there are compelling circumstances warranting a deviation, and by agreement of the parties, the dates of appraisals and valuation referenced in paragraph 31 above shall be considered as if they were appraised on the date of trial.

“33. Nothing in paragraphs 31 or 32 above shall impair or prejudice the rights of either party to challenge any valuation or appraisal on the merits, other than based on: 1) the date of the valuation or appraisal, or 2) any change in circumstances surrounding the valued assets from February to May 27, 2008, unless such change of circumstances is determined by the trial justice to be an extraordinary change in circumstances that could not have been contemplated by the parties, provided, however, that the party in possession of any asset shall not claim, contend or urge that any such extraordinary change of circumstances shall have occurred with respect to any such asset unless he or she has disclosed such change of circumstances promptly and in no event more than three business days after the change in circumstance having occurred.”

At trial, the court heard testimony from Mary Ann Beirne, the chief financial officer of Microfibres. She testified about the company's plan to purchase a controlling interest in a printing and dyeing company in China (the China venture). Ms. Beirne further testified that if the China venture were to fall through, it would be devastating for Microfibres. James also testified that Microfibres had been losing money each year and that the success of the China venture was vital to the survival of the company.

Three experts testified about the value of Microfibres and MPL. Peri Ann Aptaker, a certified public accountant (CPA), testified on behalf of Hope; John Brough, Jr., CPA, testified on behalf of James; and Jay Fishman, a neutral, court-appointed expert engaged to assist the trial justice regarding the valuation of the two business entities, also testified. Aptaker was called upon first. She testified that she prepared a report embodying her opinion that the fair market value of Microfibres, as of December 31, 2007 was $126,365,000.² However, she also testified that she “couldn't place [a] value o[n] the China investment,”—which was initiated after December 31, 2007—because she had no data available to her that she could use to predict what impact, if any, that that venture might have on Microfibres. Aptaker was later recalled to testify at a time when she had more information available to her about the China venture; however, even in this later testimony, she said that she had not completed an updated valuation of the company and that the numbers she had reviewed with regard to the China venture were merely estimates. Therefore, she remained unable to “provide an opinion of value with respect to the China venture.” Finally, she testified that one must take into account the state of the economy when valuing a company. In fact, the trial justice took judicial notice of the worldwide economic crisis that had occurred since the valuation date to which the parties had agreed.

John Brough, Jr., James's expert, then testified. He opined that a $126 million value for Microfibres was not justified. Rather, his analysis led him to believe that the company had a value of $106 million. Similar to Aptaker, he testified that when valuing the company he “had no available information about the [China venture] because the deal was not closed” as of December 31, 2007.

Finally, Jay Fishman, the court-appointed expert, testified. He said that “there ha[d] been a meltdown in the financial market since” the December 31, 2007 valuation date. He testified that “consumer spending [wa]s way off” and “millions of jobs ha[d] been lost. So the financial conditions of the * * * countries [Microfibres] would sell to and sell in * * * ha[d] changed dramatically.” Additionally, he said, “[b]oth [parties'] experts received insufficient information and, therefore, I received insufficient information to place a value or an economic benefit on the China venture at [December 31, 2007].”

BDecision

On August 17, 2010, the trial justice issued a lengthy written decision in which he granted an absolute divorce to both parties on the ground of “irreconcilable differences between the parties which have caused the irremediable breakdown of the marriage.” He awarded the parties joint custody of Lucas, with primary physical placement with Hope and regular luncheons and other reasonable visitations with James.

The trial justice then addressed the equitable assignment of the marital property. First, he addressed the assets—with the exception of Microfibres and MPL—that the parties had stipulated were marital property. These assets included three homes and their contents, two vacant lots, two automobiles, three country club and golf club memberships, certain jewelry, and various bank accounts and investment accounts that totaled more than $16 million.Before distributing the property, the trial justice examined each factor set forth in G.L.1956 § 15–5–16.1(a).³

The trial justice found that the parties had been married on February 14, 1989 and separated in April 2005, and that, despite some “aggravating” and “hurtful” conduct by both parties, neither one was at fault for the breakdown of the marriage. He then addressed “the contribution of each of the parties during the marriage [in] the acquisition, preservation or appreciation in value of their respective estates.” He found that early in the marriage, Hope contributed to the couple's income from her “minimal employment” and her rental property; however, he then observed that:

“It [wa]s clear and unequivocal that [James] was the primary source of the significant wealth that was accumulated during this marriage. It was [James]'s employment in the family business that made it possible for this family to develop the estate * * *. Likewise, it was [James] who managed the family's investment accounts to the successful point that ha[d] been achieved, notwithstanding the difficult market.”

The trial justice then considered “[t]he contribution and services of either party as a homemaker” He found that Hope “played the role primarily of homemaker,” but that James “provided [her] with either a [n]anny, or household help, or both, in order to reduce...