Johnston v. Johnston

• Decision Date: 12 May 1995
• Docket Number: No. 93-P-503,93-P-503
• Citation: Johnston v. Johnston, 649 N.E.2d 799, 38 Mass.App.Ct. 531 (Mass. App. 1995)
• Parties: Edith JOHNSTON v. Ronald R. JOHNSTON.
• Court: Appeals Court of Massachusetts

Page 799

649 N.E.2d 799

38 Mass.App.Ct. 531

Edith JOHNSTON v.Ronald R. JOHNSTON.

No. 93-P-503.

Appeals Court of Massachusetts Worcester.

Argued May 20, 1994.

Decided May 12, 1995.

Michael P. Angelini, Worcester, for Ronald R. Johnston.

William Link, III, Fitchburg, for Edith Johnston.

Before ARMSTRONG, PERRETTA and GREENBERG, JJ.

ARMSTRONG, Justice.

This divorce action is before us on the husband's appeal from the provisions of the judgment nisi.

The parties married in 1967 and had three sons who ranged in age from twelve to sixteen when the parties separated in 1986.The wife filed her complaint for divorce that same year, and obtained a temporary order, incorporating stipulated terms that barred the parties from transferring or encumbering any interest in real estate or stock, except by agreement or court order.The wife was to receive $1,000 per week (later raised to $1,250 ¹), which adequately covered the household expenses for her and the three boys (the marital home, assessed at $186,000, had no mortgage) in the relatively modest middle income lifestyle which they had enjoyed before the separation.

That lifestyle belied considerable wealth.The husband, who was not a college graduate, was a capable and successful entrepreneur.Beginning in the mid-1970s, he had started a number of businesses ², the most important of which to this appeal was Depot Distributors, Inc., located primarily in Fitchburg, the principal business of which is (or was, prior to a posttrial bankruptcy) the distribution of Merrilat kitchen and bathroom cabinets.Depot was the leading distributor of Merrilat products in the nation, and the husband, in the years leading up to and for a period after the separation, realized annual incomes in amounts approaching or exceeding $1 million.The husband often invested his earnings in real estate, some commercial and some residential, most of which stood in his name alone.The real estate held by the parties individually or jointly was appraised one year before the trial in 1991 at a figure of $11,790,000, subject to mortgages totalling $4,966,343.The judge, however, found that she could not put a reliable value on the marital estate, partly because some of the appraisals were outdated, and the parties did not present more current evidence, and partly because she had rejected both parties' estimates of the value of the husband's business interests, particularly Depot.(The wife had been a fifty-percent shareholder in Depot before the separation, but the husband had persuaded her shortly before declaring a $1,000,000 dividend to transfer her shares to him for no consideration.)

The husband presented himself at the trial as one who had been successful in the past but whose business fortunes had taken a severe turn for the worse due to an economic downturn that adversely affected New England generally, and his business particularly.In an effort to save the business, he had incurred very substantial debt and had been forced to encumber or transfer business-related properties that previously stood in his own name to secure Depot's lines of credit (although such transfers violated the 1986 stipulation).

The husband's complex financial dealings were difficult to understand, and the judge in the end accepted the wife's view that much of the complexity was for the purpose of obfuscation and that the husband's financial straits were not as dire as he made them out to be.The upshot was a judgment nisi that made permanent the $1,250 weekly support payment the wife had been receiving and awarded to her real estate, including the marital home, valued at roughly two and one-half million dollars ³; half (roughly $200,000) of the husband's profit sharing account at Depot; and lump sum cash payments totalling $175,000.The judge characterized this as roughly a sixty-forty split with respect to real estate (i.e., sixty percent for the husband and forty percent for the wife) and a fifty-fifty split with respect to personal property.

The husband, on appeal, characterizes the sixty-forty ratio as being the stated rationale for the division and argues that the division, properly analyzed, does not conform to it but is instead vastly more favorable to the wife.What the judge has done in effect, the husband argues, is to give the wife three million dollars, roughly, in unencumbered real and personal property, plus a substantial alimony income that by itself meets all her needs, while the husband is left with heavily mortgaged real estate, a failed business, very substantial business debts, ⁴ and a negative income.⁵Indeed, he points out, four of the parcels of real estate attributed to him for purposes of equitable division and included in his so-called sixty percent share do not even belong to him, but rather to Depot, and are directly subject to the claims of Depot's creditors.⁶

We do not read the sixty-forty ratio, however, as the rationale for the judge's decision.Rather, we understand the judge's reasoning to have been as follows.When the divorce proceedings began in 1986, the parties had, in addition to the husband's businesses, real estate held in their personal names (mostly the husband's) of uncertain value, but apparently, based on the 1990-1991 appraisals, worth something in the order of $11 million or $12 million, subject to relatively small encumbrances (apparently in 1986 not in excess of $3,100,000).The wife attempted to protect this real estate for purposes of division by securing a court order, incorporating stipulated terms, enjoining the husband from transferring or encumbering the properties without prior court order.⁷After the separation, however, the husband embarked on a binge of high living, first with one female companion, then with another, taking frequent Caribbean vacations, and purchasing homes far more sumptuous than the marital home.On Depot's account and Johnston Properties' he invested in a succession of business ventures (or loans to friends in business ventures), all of which--for a total of roughly $1.5 million--were presented as being unrecoverable.In violation of the injunction he transferred four previously unencumbered parcels of land to Depot, totaling over $3 million in value (see note 6, supra ).

The judge's reaction to this activity was that it should not be charged against the wife's fair share of the marital estate."After the parties' separation, other than paying support to the wife, the husband disregarded the marital enterprise.He embarked on a pattern of business expansion and transactions and personal expenditures which were wholly personal to him and which now jeopardize the wife's claim for an equitable division of marital assets."It was the unilateral character of the shrinkage of marital assets that was of concern to the judge.As she emphasized, "This was all done without notice to or consultation with the wife."Thus the judge charged the shrinkage against the husband's share.

There were other elements to the rationale, but they also are not in our view central to the judgment.The judge made clear that she thought the husband's testimony was less than candid.CompareGrubert v. Grubert, 20 Mass.App.Ct. 811, 822, 483 N.E.2d 100(1985);Amrhein v. Amrhein, 29 Mass.App.Ct. 336, 342 n. 4, 560 N.E.2d 157(1990).She obviously suspected that many of the money-losing business transactions were shams.She thought that the husband had not lost his once sure business touch, and that, after the divorce, he would succeed in making his businesses profitable again.

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