Hanaway v. Hanaway

• Decision Date: 17 January 1995
• Docket Number: Docket No. 152338
• Parties: Rosemary HANAWAY, Plaintiff/Counter-Defendant-Appellant/Cross-Appellee, v. John P. HANAWAY, Defendant/Counter-Plaintiff-Appellee/Cross-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 792

527 N.W.2d 792

208 Mich.App. 278

Rosemary HANAWAY, Plaintiff/Counter-Defendant-Appellant/Cross-Appellee, v. John P. HANAWAY, Defendant/Counter-Plaintiff-Appellee/Cross-Appellant.

Docket No. 152338.

Court of Appeals of Michigan.

Submitted April 19, 1994, at Detroit.

Decided Jan. 17, 1995, at 9:00 a.m.

Released for Publication Feb. 21, 1995.

Chiamp & Associates, P.C. by Carole L. Chiamp and Charlene Snow, Detroit, for plaintiff.

Hyman & Lippitt by Norman L. Lippitt and Paul J. Fischer, Birmingham, for defendant.

Before NEFF, P.J., and WHITE and STACEY, ^* JJ.

WHITE, Judge.

In her appeal as of right of a divorce judgment, plaintiff contests the circuit court's division of property and claims that she should have been awarded alimony, attorney fees, and costs. Defendant cross appeals the court's valuation of his stock in a business. We affirm in part, reverse in part, and remand.

The parties were divorced after twenty-four years of marriage. According to plaintiff's trial testimony, when the parties married in June 1967, she was a twenty-year-old high school graduate who had attended one year of college and was employed. She quit school and work to become a housewife, administering the household physically and financially until late in the marriage. The parties had three children: Caroline, age twenty-three; Christine, twenty-one; and John, Jr., seventeen. Plaintiff testified that she was not satisfied with her life with defendant, mentioning in particular a lack of mutual interests, defendant's emotional distance, defendant's criticisms regarding their sexual relationship, her feeling that defendant did not always have her best interests or those of the children at heart, and a feeling of being manipulated by defendant.

Plaintiff testified that in the first years of their marriage, defendant worked seven days a week and many late hours. She considered him a good provider but not necessarily a good father. She was aware that defendant's father annually had given him shares of stock in Steel Tex, the family business, beginning in 1968, and that their children would also receive stock, though it was her understanding that they were required to work there in order to receive it. Plaintiff testified that some two years earlier, defendant had discussed with her the possibility of selling the company to one of its competitors, indicating that he would be willing to do so for the right price.

In the mid-1980s, one of the daughters required professional counseling. Plaintiff initially merely accompanied her, but eventually sought counseling for herself as well. At the time of trial, December 1991, plaintiff still attended therapy up to three times a week. Plaintiff admitted engaging in an extramarital sexual relationship that apparently started in 1989. She asserted that this relationship was her only infidelity. However, plaintiff identified the "turning point" in her marriage as occurring earlier: the aftermath of an automobile accident that took place in October 1988, during which time defendant's behavior left her convinced that she could not depend on him and would be better off on her own. ¹

Plaintiff moved out of the bedroom she had shared with defendant and into her daughter's unoccupied bedroom in January 1990, and subsequently moved into a basement bedroom. She filed for divorce on June 19, 1990, but remained in the house. Defendant filed a countercomplaint for divorce on September 12, 1990. The following year, in May 1991, because of escalating family tensions, plaintiff moved out of the house and into her own apartment.

Until she began considering divorce, plaintiff did not work outside the home. She had attended community college in 1987 and 1988, taking general courses for the purpose of getting a degree. However, after her accident, she apparently did not resume her schooling. In October 1989, plaintiff began working at Kitchen Studio in Birmingham, and accepted the position of general manager with the company some months later. At the time of trial, plaintiff was still employed there and earned $13 an hour, or approximately $27,000 a year. Plaintiff admitted using money that she and defendant had placed in an account in their daughter Christine's name to pay debts that defendant refused to pay after she filed for divorce, including bills for therapy, car insurance, Christmas presents, utilities, and the expenses of establishing a new residence. ²

Defendant testified that he is the president of Steel Tex Corporation, a family-owned corporation started by his father, Elmer Hanaway. At the time of trial, he owned 41.23 percent of the company, with the remainder belonging largely to his brother, Ron, a vice president. The stock had been given to them by their father over the years with the understanding that they would eventually give it to their children. Defendant intended to honor his father's wishes and had already conveyed some of the stock. He also had involved his children in the family business from the time they were very young, and he encouraged their participation in the business. Caroline was an employee and John, Jr., had also expressed an interest in working in the business. However, defendant also admitted that he had "talked to somebody" about selling the company.

In addition to his Steel Tex holdings, defendant also owned 38.6 percent of a related real estate holding company, the JAR Corporation.

Regarding the marriage, defendant conceded that there was no chance of reconciliation and that divorce should be awarded. Defendant stated that he felt betrayed and deceived by plaintiff's actions and that their marriage began suffering a communication breakdown in the early to mid 1980s. Defendant observed that even before then, plaintiff had been an anxious, excitable, unhappy person with a "bad self-concept," unable to respond to his compliments and encouragements. From the outset, their sex life "never did work very well," and although he generally supported her interest in obtaining counseling, their sexual relationship worsened while plaintiff was in therapy and ceased altogether in 1989. Defendant noted that after plaintiff began working, she chose to pay the therapy bills herself. Defendant was surprised when plaintiff moved out of the bedroom, because he had already accepted her refusal to have sexual relations with him.

Defendant assessed plaintiff as a good mother--involved in family life, doing some of the housework, cooking and dining with the children, and going on family vacations--until 1985, when she developed outside interests and left the home to socialize with her friends. As her involvement increased plaintiff spent more and more time away from home, leaving defendant feeling neglected and their children disturbed by her absences.

Ron Hanaway testified that in 1984, he and defendant executed a stock purchase agreement requiring Steel Tex to buy back stock of a departing shareholder so as to keep the stock in the family. The stock was to be purchased at book value. The agreement was amended in November 1991, a month before trial, to change the stock valuation from book to fair market value. Although the change had been considered as early as 1985, and had been drawn up in a proposed amendment in June 1990, Ron delayed signing the modification, along with a related trust agreement, because of concerns about his son. However, Ron admitted that defendant's impending divorce provided an added incentive to execute the modified agreement. Ron acknowledged that he and defendant had discussed a sale of the business with a competitor who indicated an interest in buying part of the company. However, Ron denied that he and defendant would have sold the company without first seeking their father's approval.

Concerning the value of defendant's businesses, John Stockdale, plaintiff's expert, testified that Steel Tex, which owns two subsidiary companies and employs approximately eighty people, had $10 million in sales in 1990. The book value of Steel Tex common stock on September 30, 1990, was $5,199,697, with defendant's share of the company being worth $2,040,000. ³ Stockdale's analysis of the company's fair market value was $4,177,000; with defendant's share valued at $1,527,000. ⁴ Stockdale viewed as inflated the executive salaries paid by the company, and adjusted their value downward and the company's value upward to compensate. He also used what he acknowledged was an unusually low figure of five percent in assessing the appropriate discount for marketing difficulties in light of defendant's status as a "control group" shareholder and the stock purchase agreement.

Edward Phillips, the Hanaway family accountant, testified that the marital estate's net worth was $1,697,331, including defendant's 41.23 percent share of Steel Tex, worth $480,000. Phillips testified that defendant earned $371,094 from Steel Tex in 1989, $331,097 in 1988, $324,890 in 1987, $246,200 in 1986, and $258,800 in 1985. A figure for 1984 was not available, but tax returns indicated that defendant earned $153,380 in 1983, $113,360 in 1982, $116,220 in 1981, and $110,144 in 1980. Phillips acknowledged that the approximate tripling of defendant's income in the last decade signified vigorous corporate growth during that period, but felt that the company had reached its peak and would not continue to grow unless it diversified. Phillips used a higher discount factor than did Stockdale, considered tax implications, and did not adjust the officers' compensation figures, which he considered reasonable in light of their contribution to the company.

Phillips was aware of both the original stock purchase agreement and the amendment that provided for repurchase at fair market value. He testified that the amendment was not executed in 1990, when it had been prepared, because Ron Hanaway did not transfer shares to his children as he had planned. In November 1991, Ron called Phillips,...