Dilanian v. Dilanian

• Decision Date: 21 November 2018
• Docket Number: No. 17-P-173,17-P-173
• Parties: David M. DILANIAN v. Traute L. DILANIAN.
• Court: Appeals Court of Massachusetts

94 Mass.App.Ct. 505

114 N.E.3d 1000

David M. DILANIAN

v.Traute L. DILANIAN.

No. 17-P-173

Appeals Court of Massachusetts, Norfolk..

Argued July 12, 2018

Decided November 21, 2018

Matthew Bove, Quincy, for the husband.

L. Richard LeClair, III, Waltham, for the wife.

Present: Blake, Sacks, & Ditkoff, JJ.

DITKOFF, J.

David M. Dilanian (husband) appeals from the amended judgment of divorce nisi entered by a Probate and Family Court judge and the subsequent denials of his postjudgment motions. The most significant issue revolves around a pension plan that the judge found belonged entirely to the husband but that the husband alleges belonged partially to his now-deceased father and thus now belongs partially to his sister. We discern no clear error in the judge's factual findings, and we conclude that the sister's interests are not impaired by the judgment transferring sixty per cent of the pension plan to Traute L. Dilanian (wife), as the remaining portion is more than sufficient to satisfy any claim by the sister. Further discerning no clear error in the judge's findings regarding the value of the husband's business and the husband's income, and concluding that the judge acted within her discretion in denying the husband's motion for relief under Mass. R. Dom. Rel. P. 60(b), we affirm.

1. Background. The husband and wife were married in 1981, had three children together, and lived a comfortable upper-middle class lifestyle. During their thirty-one year marriage, the wife was the homemaker while the husband was self-employed, running a successful business. The marriage began to break down in 2005, and the husband filed for divorce in January 2011, after five years of counseling and a three-month trial separation. Their children were all of adult age and emancipated, and the parties were able to resolve amicably the disposition of the marital home. Much of the trial concerned the value of the husband's business and the husband's share in various assets and an inheritance from his father.

a. M.E. Dilanian Co., Inc. Since 1984, the husband has worked at M.E. Dilanian Co., Inc. (M.E. Dilanian), a family-controlled company that purchases food products from wholesalers and then sells the products to supermarkets. The husband and his father operated the company as coowners until approximately 1998 or 1999, when the husband became the sole stockholder in the company. The husband's father, however, continued to work at the company until his death in March 2011.

By the time of the divorce proceedings, therefore, the husband was the sole owner of the business with control over both the company accounts and his own compensation. To avoid double taxation on corporate income,¹ the husband took a base salary and then paid himself a bonus out of the year-end profits. Accordingly, he would generally pay out year-end bonuses so that the company would be left with only $5,000 to $10,000 of retained earnings for the year. The husband's financial statement reported that his net income increased from $204,500 in 2008 to $388,000 in 2010. Once the divorce proceedings began, the husband decreased his pay to $217,000 in 2011 and $215,000 in 2012. At the same time, and contrary to prior practice, the amount of cash left in M.E. Dilanian accounts increased by over $294,000 from July 2011 to June 2012. The husband also routinely received additional compensation from M.E. Dilanian in the form of interest payments, pension contributions, lease payments for an automobile, and expense reimbursements.

b. M.E. Dilanian retirement plans. M.E. Dilanian established a defined contribution retirement plan in 1989 and a defined benefit plan at some point between 2002 and 2011. The husband testified that he and his father were the only participants in both plans.

Under the defined contribution plan, the company was supposed to contribute twenty-five per cent of a participating employee's income each year to the plan. At some point, however, the company ceased contributing to the plan. As a defined contribution plan, the money contributed toward each participant's retirement belonged to that participant, assuming he met the vesting requirements, and was to be paid out accordingly upon retirement or death. The plan set the retirement age at sixty-five years of age.² The husband and his father were the only trustees of the plan until the father's death, when the husband became the sole trustee.

Upon the father's death on March 1, 2011, the husband allocated $663,961 of the defined contribution plan's $1,416,769 balance to his father's estate. The husband allocated $46,690 of the defined benefit plan's balance to his father's estate. With one exception, however, the husband failed to produce any documents to substantiate contributions made by M.E. Dilanian to the defined contribution plan on the father's behalf that predate the beginning of divorce proceedings. Similarly, although the husband testified that the defined benefit plan was created in or around 2002, the only documents he produced showing the establishment of a defined benefit plan reflect that it was established after the father's death.

The husband did produce Federal tax forms 5500-EZ that predated the divorce proceedings. These documents, however, vary. They state that the defined contribution plan had one participant in 2007; two in 2008; three in 2009; three at the beginning of 2010, but only one at the year's end; and two participants in 2011.

c. Inheritance. The husband's father's estate was administered by the husband and his sister as joint executors. On its estate tax returns, the estate reported assets of $4,165,798. That amount included $710,651 from the M.E. Dilanian pension plans. The estate also included $847,415 previously placed in the Dilanian Family IRA Spray Trust (spray trust).³ There is no dispute that the balance of the estate, consisting of cash, a brokerage account, and the assets of two other trusts, will be divided evenly between the husband and his sister.

By its terms, the spray trust divides its assets among the children of the husband and his sister. Absent the untimely demise of all of the husband's and his sister's descendants, the trust assets would not be distributed to the husband. Even though the husband was one of the trustees of the spray trust, he testified at trial (in what he later asserted was a mistake) that he and his sister were the only beneficiaries of the father's estate and that he would inherit half of the $4 million estate. His testimony, therefore, assigned to himself the approximately $423,700 that will instead go to his children.

d. Findings and rulings. At trial, the husband valued M.E. Dilanian at $200,000. The judge ultimately credited this valuation, except that she found that the business value of M.E. Dilanian also includes the value of a $150,000 note payable to the husband for a personal loan made to the company.⁴ Accordingly, the judge valued the company at $350,000. The judge also found that the company held cash assets with a value of $634,061.06.⁵ The judge awarded ownership of the company to the husband.

Regarding the husband's income, the judge found that the husband had artificially lowered his income. The judge found that the husband's real annual income was approximately $325,000. The judge found that the wife's imputed annual income was $20,000. The judge then imposed an alimony obligation of $2,000 per week until the husband reaches full retirement age "as defined in G. L. c. 208, § 48."

The judge found that the husband was the only participant in both the defined contribution and the defined benefit plans.⁶ Noting that the father would have been seventy-eight years old when the defined benefit plan was purportedly created and that the records produced by the husband showed that the plan was executed after the father's death, the judge did not credit the husband's claim that the father was a participant in the defined benefit plan. Similarly, based primarily on the husband's failure to produce documents substantiating his claims "despite receiving request for production, trial subpoenas and a court order," the judge did not credit the husband's testimony that the father was a participant in the defined contribution plan.

The judge considered the husband's entitlement to half of his father's estate as a factor supporting his "optimistic outlook of financial stability." The judge, however, found that the inherited assets "were received late in the marriage and were not woven into the fabric of the marriage" and thus should remain with the husband. She ordered the husband to transfer sixty per cent of both the defined contribution plan and the defined benefit plan to the wife.⁷ She ordered the husband to transfer the full amount of two smaller retirement plans to the wife, gave the husband the right to buy out the wife's interest in the marital home and another piece of real estate, divided the joint bank accounts equally, and ordered the husband to pay the wife $150,000. Shortly thereafter, the judge issued an amended judgment of divorce nisi, changing only the time at which alimony commenced. The husband filed a timely appeal.

2. Defined contribution plan and adjudication of third-party rights. Judges are granted "a broad degree of discretion in assigning ‘to either husband or wife all or any part of the estate of the other, including ... retirement benefits, ... pension, profit-sharing, annuity, [and] deferred compensation.’ " Adams v. Adams, 459 Mass. 361, 372–373, 945 N.E.2d 844 (2011), quoting G. L. c. 208, § 34. Although we review the propriety of the legal standards applied by the judge, the discretionary determinations of property division "will not be reversed unless plainly wrong and excessive." Hassey v. Hassey, 85 Mass. App. Ct. 518, 524, 11 N.E.3d 661 (2014).

On appeal, the husband argues that M.E. Dilanian's defined contribution plan belonged partially to his now-deceased father and thus now belongs partially to his sister. It is...