Caveney v. Caveney
| Decision Date | 12 January 2012 |
| Docket Number | No. 10–P–599.,10–P–599. |
| Citation | 960 N.E.2d 331,81 Mass.App.Ct. 102 |
| Parties | Joann CAVENEY v. Thomas J. CAVENEY. |
| Court | Appeals Court of Massachusetts |
OPINION TEXT STARTS HERE
Robert S. Wolfe for Thomas Caveney.
William Sanford Durland, III, Boston, for Joann Caveney.
Present: KAFKER, GRAHAM, & MILKEY, JJ.
Following a lengthy trial on the former wife's complaint for divorce, a judge of the Probate and Family Court (Probate Court) awarded the wife primary physical custody of the parties' two minor children, divided the parties' assets, and ordered the former husband to pay to the wife alimony in the amount of $940 a week and child support in the amount of $500 a week. The judge later found the husband in civil contempt for failure to comply with certain provisions of the divorce judgment. In these consolidated appeals from the divorce judgment, as amended, and the contempt judgment,1 the husband challenges, among other things, the property division and the alimony award, as well as the judge's decision to find him in contempt. As we agree with the husband that the judge erred in the valuation of the wife's business interests, we remand the matter to the Probate Court for further proceedings. In all other respects, we affirm the divorce judgment, as amended. We also affirm the judgment of contempt.
A. The divorce action. (1) Background. The parties were married in June, 1993, and separated in July, 2005. Two children were born of the union.
The husband was born in 1960 and is in good health. He is a principal/salesman at New England Technical Sales (NETS) where his base salary is $100,000 a year. The husband owns fifty percent of the shares in NETS, his brother owns the remaining shares. The husband is also an owner (forty percent of the shares) and the vice president of sales and marketing at a corporation known as Online Marketing Solutions, Save Harbor, Inc. (OMS).2 He does not currently draw a salary from OMS. The parties stipulated that the fair value of the husband's interest in NETS is $21,000 and the fair value of his interest in OMS is $71,000. The judge also found that the husband has made loans to NETS and OMS in the amount of $675,000 and that the “loans receivable” from NETS and OMS are assets subject to division.
Although the judge found that the husband's base salary from NETS is approximately $100,000 a year, she stated that the husband's “true income” is approximately $200,000 a year. The judge noted that the husband's companies consistently pay for the rental payments on his personal residence, the mortgage payment on property that he owns with his brothers in New Hampshire, and numerous other miscellaneous personal expenses not accounted for as income on his financial statements. Indeed, the judge found that “[t]hroughout the proceedings, the husband has been less than forthcoming with his financial data, less than accurate in his financial disclosures, and consequently, less than credible in his testimony to the Court.”
The wife was born in 1962 and is in good health. She holds a master's degree in science education, and at the time of trial, was employed as a part-time biology teacher earning $8,450 a year. Her employment is not guaranteed.
The wife has ownership interests (24.75 percent of the nonvoting stock) in three closely held S corporations: Scarfo Construction, Inc. (Scarfo Construction), Liberty Manor, Inc. (LMI), and Liberty Homes, Inc. (LHI).3 These interests were given to the wife by her father, who gave identical ownership interests to each of the wife's three sisters. 4 The wife's father owns one percent of each of the companies; his shares are the voting stock. The judge adopted the values of the wife's interests in the companies “as determined by the expert testimony she offered” and “based on the sound and thorough analysis detailed in the oral and documentary evidence submitted.” More specifically, the judge found that as of December 31, 2008, the wife's interest in Scarfo Construction was valued at $291,000 and that her interest in LMI and LHI was worth $75,000.5
The judge found that both parties had made significant contributions to the value and appreciation of the total marital estate, which the judge valued at $2,068,049. While the husband was the primary income earner during the marriage, the wife made substantial contributions to the marital estate through the generous and regular financial gifts she received from her parents and the interests she acquired in the family corporations. The wife was also the primary homemaker and caretaker for the parties' children.
During the marriage the parties enjoyed a “high station in life” which included an expensive home, domestic help, luxury cars, country club memberships, and frequent vacations.6 Since the parties' separation, however, the wife has been unable to maintain her preseparation lifestyle and has been forced to cut back on many of her expenses. The judge found that the husband's station had “essentially remained the same post separation.”
On these findings and others, the judge determined that each party should receive one-half of the total marital estate, or $1,034,024. Noting that the assets assigned to the husband totaled $1,294,167,7 and the assets assigned “thus far” to the wife totaled $773,882,8 the judge ordered the husband to pay to the wife the sum of $260,142 to achieve an equal division of the marital estate. As we have stated, the judge also ordered the husband to pay the wife child support in the amount of $500 a week and alimony in the amount of $940 a week. In addition, the judge ordered the husband to pay the wife $175,000 for legal fees and costs. The husband's motion to stay the judgment was denied.9
(2) Valuation of wife's business interests. The husband challenges on numerous grounds the judge's findings with respect to the values of Scarfo Construction, LMI, and LHI.
(a) Valuation date. Contrary to the husband's assertion, the judge did not abuse her discretion and commit reversible error by “misconstru[ing] the decision of the [d]iscovery [m]aster and alter[ing] valuation dates in the middle of trial.” In her third supplemental report dated November 7, 2008, the discovery master “recommend[ed]” that both parties “shall” use June 30, 2008, as the date for valuation of all businesses which are the subject of this litigation. The discovery master afforded each party, however, the opportunity to seek a different valuation date upon submission of an affidavit no later than January 5, 2009, alleging a material change in circumstances.
By affidavit dated January 5, 2009, the wife's business expert described the changes in the economic climate since June 30, 2008, including the precipitous fall in the real estate market, and the effect of those changes on Scarfo Construction, LMI, and LHI which were “heavily reliant on the current economic climate.” The wife's expert stated that a valuation date of June 30, 2008, would not be as appropriate as utilizing a date much closer to the scheduled date of trial. The question of the date of the valuation was referred by the master to the judge who, apparently, did not reach the issue prior to trial.
At a hearing on a motion in limine, which took place on February 13, 2009 (at the start of the second day of trial), the judge stated:
“A couple things have to be noted here—to decide this motion ... [I]t's very true that the discovery master gave each side—both sides—the opportunity to select the date of December 31st instead of June 30th.
“Whoever chooses not to do that, you do so—I think in this economy—at your peril because I don't think you have to be any kind of expert in any of these matters to know that individuals on a common sense basis whether it's corporations that do what Scarfo Corporation does or Liberty Manor or Liberty Homes, there are very few entities that wouldn't take a value back in June as opposed to a value of 12/30.”
It is apparent from the foregoing that the judge did not simply alter the valuation dates midtrial, but rather recognized that the husband had followed the protocol set out by the discovery master for establishing a change in the valuation date. Based on the changes in the economic climate, the judge indicated that it was reasonable and proper for the wife to utilize a valuation date of December 31, 2008. To the extent the husband claims that he first received the wife's business valuations shortly before trial and that he should have known in advance “the opinions of experts engaged by the opposing party for purposes of preparing cross examination and rebuttal expert testimony,” it is to be noted that the wife's experts did not testify until the third day of trial on April 1, 2009. The husband had sufficient opportunity to prepare for cross-examination.10
(b) The valuation methodologies. The husband argues that the judge erred in her valuation of the wife's companies “[b]y [u]tilizing [f]lawed [v]aluation [m]ethodologies [t]hat [f]ailed [t]o [c]omply [w]ith [g]overning [p]recedents.”
The judge, as we have indicated, adopted the values of the wife's interests in Scarfo Construction, LMI, and LHI based upon the testimony of the wife's experts. In valuing the wife's 24.75 percent interest in the three companies, the wife's business expert, Steven B. Boyles,11 utilized a “fair value standard.” 12 Continuing, Boyles stated that there are three standard approaches to business valuation: the assets approach, the income approach, and the market approach. He determined that the assets approach and, more particularly, a form of that approach called the “adjusted net asset method,” was most appropriate. Boyles explained that the adjusted net asset method “takes the book value of the assets, writes those assets up to market, what they could be sold for in the marketplace—not liquidated but sold in a reasonable time frame—and subtracts all liabilities associated with them.” 13
With respect to Scarfo...
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