Kanaan v. Kanaan

• Decision Date: 24 March 1995
• Docket Number: No. 91-378,91-378
• Citation: 659 A.2d 128,163 Vt. 402
• Parties: Hiyam H. KANAAN v. Hisham R. KANAAN.
• Court: Vermont Supreme Court

Page 128

659 A.2d 128

163 Vt. 402

Hiyam H. KANAAN v. Hisham R. KANAAN.

No. 91-378.

Supreme Court of Vermont.

March 24, 1995.

William M. Dorsch, John D. Shullenberger and Beth A. Danon of Mickenberg, Dunn, Sirotkin & Dorsch, and Donald E. O'Brien, Burlington, for plaintiff-appellant.

Ellen Mercer Fallon and Peter F. Langrock of Langrock Sperry & Wool, Middlebury, for defendant-appellee.

Before GIBSON, DOOLEY, MORSE and JOHNSON, JJ., and NORTON, Supr. J. (Specially Assigned)

DOOLEY, Justice.

Plaintiff, Hiyam Kanaan, appeals a decision of the Windham Family Court in the divorce action against her former husband, Hisham Kanaan. Plaintiff alleges that the trial court erred: (1) in its findings regarding the valuation of the parties' individual businesses and their marital home, (2) in denying plaintiff reimbursement for the couple's joint tax liability, (3) in failing to enforce the parties' initial separation agreement, and (4) by permitting defendant to pay plaintiff's equitable settlement award in installments, thereby decreasing the actual value of that award. We conclude that the trial court erred by failing to enforce the parties' pretrial agreement, and by permitting defendant to pay the equitable settlement award in installments. We reverse and remand on both of these issues. In all other respects, the decision is affirmed.

I.

Plaintiff first claims that the trial court's factual findings regarding the valuation of the couple's individual businesses and their marital home were inadequate. Specifically, she points to the findings supporting the court's valuation of her husband's businesses, collectively known as the Bradley Group; her business, Brattleboro Printing, Inc. (BPI); and the couple's marital home in Brattleboro. Plaintiff contends that for each asset the court's findings were inadequate to support its valuation conclusions. We deal with each argument in turn.

It is well settled that we will not disturb a trial court's findings of fact unless they are clearly erroneous. Semprebon v. Semprebon, 157 Vt. 209, 214, 596 A.2d 361, 363 (1991). The reason the trial court is granted such wide deference on review is that it is in a unique position to assess the credibility of the witnesses and the weight of the evidence presented. Bonanno v. Bonanno, 148 Vt. 248, 250-51, 531 A.2d 602, 603 (1987). Consequently, we will uphold the court's valuation conclusions as long as they are supported by adequate findings, which are in turn supported by sufficient evidence in the record. See Goodrich v. Goodrich, 158 Vt. 587, 590, 613 A.2d 203, 205 (1992).

Plaintiff's first claim of error relates to the court's valuation of her husband's businesses. These businesses are collectively known as the Bradley Group, and are comprised of four separate companies: C.E. Bradley Laboratories, Inc., Bradley VanHolm Corporation, Industrial Coatings, Inc., and 3-R Realty, Inc. The trial court heard extensive evidence from four separate experts regarding how to value this group, and each expert used a different methodology. For example, defendant's expert valued the Bradley group at $735,000 by calculating average earnings over a five-year period and then multiplying that amount by a projected rate of return. One of plaintiff's three experts, and the expert upon whom the court most heavily relied, calculated the worth of the companies by compiling a consolidated balance sheet, and then adding to this value adjustments which reflected the difference between the appraised value of certain assets versus their depreciated value; he originally estimated the worth of companies at $1,450,000.

This expert's calculations, however, did not include the value of 3-R Realty, and plaintiff introduced testimony from another expert regarding the valuation of this company. In addition, C.E. Bradley Laboratories owned 65,000 shares of stock in an insurance company called Verlan, Ltd. Plaintiff provided evidence that the value of this stock was $241,000, and that it needed to be valued separately from C.E. Laboratories. The court also heard extensive testimony regarding the impact on the market value of the Bradley Group of several environmental problems. Again, each expert provided the court with varying opinions as to how these environmental liabilities affected the Bradley Group's value.

Faced with all of this conflicting evidence, the trial court concluded that the Bradley Group should be valued at $1,200,000. To be sure, it did not reach this figure by applying a pure mathematical formula. Instead, the court used pieces of testimony from certain experts, and adjusted these figures based on what it considered to be the overall weight of the evidence. For example, it discounted the evidence on the value of Verlan, Ltd. stock, finding it not credible, and concluded the value of the stock was minimal. Overall, the court placed the most weight on the evidence provided by the expert who originally valued the company at $1,450,000. The court properly observed, however, that this expert did not take into consideration the Bradley Group's full liability for its environmental problems or the value of 3-R Realty. These offsets, although they pulled in opposite directions, had the overall effect of reducing the final valuation.

As a further means of supporting its conclusion, the court noted that it gave "considerable weight" to the testimony of defendant's expert, because of her "expertise, methodology and professionalism"; this expert testified to a valuation of $735,000. When this amount is added to the $146,000 value of 3-R Realty, the total was $971,000, less than the court's final conclusion. When it considered that figure and balanced it against the higher values from other experts, along with the defects in the expert opinions the court found the $1,200,000 valuation to be fair and fully supported by the evidence.

On appeal, plaintiff claims three errors regarding how the trial court valued these businesses: (1) it was error for the court not to identify specifically the methodology it employed in reaching its valuation conclusions; (2) the court failed to indicate what amount it assigned to environmental cleanup costs associated with the defendant's business; and (3) the court did not include the value of either 3-R Realty or Verlan, Ltd., in its final valuation. Plaintiff contends that because of these errors review of the court's conclusions is impossible, and that predictable, consistent decision-making is practically abandoned. See Klein v. Klein, 150 Vt. 466, 473, 555 A.2d 382, 386 (1988) (noting that different judges dealing with same case should reach essentially the same result).

As is often true in the law, and particularly in appellate decision-making, we are dealing with conflicting principles. On the one hand, findings must be adequate to support conclusions. See Andreson v. Andreson, 145 Vt. 634, 636, 497 A.2d 371, 373 (1985). Moreover, we will not speculate as to the basis upon which the court made its findings and reached its conclusions, where the court's decision does not spell out this basis. See McCormick v. McCormick, 150 Vt. 431, 438, 553 A.2d 1098, 1103 (1988); see also Richard v. Richard, 146 Vt. 286, 287, 501 A.2d 1190, 1190-91 (1985) ("The purpose of findings is to provide a clear statement as to what was decided and why; where no indication appears of the method employed and weight accorded various factors, remand is necessary.").

On the other hand, the court's ability to find a proper valuation is limited by the evidence put on by the parties and the credibility of that evidence. See Klein, 150 Vt. at 471, 555 A.2d at 385. The court is not bound to follow the opinions of expert witnesses, Dreves v. Dreves, 160 Vt. 330, 332, 628 A.2d 558, 560 (1993), a principle that is obvious where the testimony of experts is in conflict. Although it is better practice to specify the subsidiary facts upon which ultimate facts are based, it is not reversible error to fail to do so. See Bonanno, 148 Vt. at 251, 531 A.2d at 604.

In balancing these conflicting principles, we are particularly influenced by the difficult task that faced the trial judge in this case. Valuation of a closely held business "is never an easy task." Goodrich, 158 Vt. at 590, 613 A.2d at 205. We have upheld such a valuation as an exercise of the trial court's discretion where it was "within the range of the evidence presented." Semprebon, 157 Vt. at 214, 596 A.2d at 364.

As the trial court emphasized, the evidentiary hearings in this case were prolonged and hotly contested, consuming 14 days of trial time. The valuation of defendant's business was the subject of the testimony of four different experts, supplemented by the testimony of another expert witness on the value of 3-R Realty. The court found none of the experts on overall value to be fully credible. There is no mathematical equation that can put together pieces of opinion evidence from different expert witnesses that can compute a final valuation. The task of the court necessarily involved approximation controlled by judgment and discretion. The court explained its thinking as much as the imprecise process allowed. ¹ We conclude the result is within the range of the evidence and is adequately explained.

Plaintiff also attacks the court's handling of specific valuation issues. Primarily, plaintiff attacks the court's handling of certain environmental cleanup obligations because it found that they reduced the value of the Bradley Group but the court did not determine the extent of the reduction. ² The court's findings indicated that two environmental liabilities, one connected with a superfund site in Massachusetts and the other connected with its Brattleboro plant, would cost in the neighborhood of $500,000 each to resolve over some uncertain period of time. The court found that these obligations reduced the current value of the Bradley Group, and the expert witnesses did not...