Turgeon v. Turgeon

• Decision Date: 07 June 1983
• Citation: 460 A.2d 1260,190 Conn. 269
• Court: Connecticut Supreme Court
• Parties: Theresa TURGEON v. Normand TURGEON.

Page 1260

460 A.2d 1260

190 Conn. 269

Theresa TURGEON v. Normand TURGEON.

Supreme Court of Connecticut.

Argued March 1, 1983.

Decided June 7, 1983.

[190 Conn. 270] Vincent F. Sabatini, Hartford, with whom, on the brief, was Michael P. Carey, Rocky Hill, for appellant (defendant).

Barclay Robinson, Jr., Hartford, for appellee (plaintiff).

Before SPEZIALE, C.J., and PETERS, ARTHUR H. HEALEY, PARSKEY and SHEA, JJ.

PARSKEY, Associate Justice.

The plaintiff and the defendant, who had been married for more than twenty-three years, were granted a dissolution of marriage on February 19, 1981, on the ground of irretrievable breakdown. The major marital assets at that time consisted of the family home in Wethersfield, a greenhouse on the Berlin Turnpike and a machine shop in New Britain. The trial referee assigned the residence to the plaintiff, gave the greenhouse and the machine shop to the defendant, and ordered the defendant to pay the plaintiff $100,000 in lump sum alimony, payable in installments over a period of seven years, an additional $40,000 in two installments over a period of six months, counsel fees of $10,000 and $1500 for expert fees. In his appeal the defendant challenges the monetary awards both individually and in the aggregate. He also challenges the referee's failure to find the plaintiff guilty of adultery. Following the dissolution, the trial court, Covello, J., denied the defendant's motion for modification of the alimony award, adjudged the defendant in contempt for failure to pay the ordered monetary awards and prohibited the defendant from further encumbering the property of the machine shop. In a separate appeal, which has been consolidated with the earlier one, the defendant has challenged the trial court's actions.

I THE ALIMONY AWARD

The defendant has mounted a two-pronged attack on the alimony award. He claims first that the referee made an erroneous valuation of the machine shop business by admitting into evidence a document which inaccurately projected future earnings of the business and by relying on the opinion of an expert who utilized an inappropriate method of valuation. Second, he claims that the referee awarded to the plaintiff an excessively disproportionate share of the marital assets.

A THE MACHINE SHOP

The defendant, who is in good health, is an expert machinist. When he and the plaintiff were married he was employed as a machinist. In 1956, the defendant and four other men formed New England Precision Products, Inc. (NEPP). They rented space and each one invested $3500. Each man had an outside job and so each one contributed ten hours a week to their new venture. In June of 1957, the defendant gave up his regular job and devoted at least fifty to fifty-five hours a week to NEPP until the end of 1957 when he took another outside machinist job and then devoted only ten to fifteen hours a week to NEPP. This was due to insufficient income from NEPP.

In 1966, NEPP grossed about $30,000. In the early 1970s the plaintiff and the defendant discussed the possibility of the defendant taking over the complete ownership of NEPP. The defendant bought out his associates in September, 1973, and became owner of all the outstanding corporation stock. In order to accomplish this, he had to borrow money. At this time NEPP had a gross income of between $60,000 and $100,000. It employed one man and the defendant, who, besides working as a machinist and seeking business, also took care of the company books. By the end of 1973, two additional men were hired. In 1974, the gross income was $125,000 and the defendant hired a sales manager. In 1975, the company gross was $250,000 and increased each year when, in 1979, the gross was $599,000. The income for the year of 1980 suffered because of the distress caused the defendant by the pending lawsuit.

The defendant's skill and know-how have been a major force in developing the business of NEPP. The company, which is located in New Britain, has a lease that may be renewed until 1987. In 1980 and 1981, the company was a viable and going business and had shown development under the defendant's guidance. This had been due to the defendant's skill and the long hours which he had devoted to his task. The defendant's gross weekly income was $750. In addition, many purchases and items of family expense had been paid for by NEPP.

B VALUATION OF THE MACHINE SHOP

Both parties used appraisal experts to evaluate NEPP. Bernard McTeague testified for the plaintiff that by using the capitalization of income approach the company had a value of $250,000 as a going concern. Robert Hadley testified for the defendant that in his opinion the company had a greater value if it were liquidated than if it remained a going concern and that by using the liquidation approach he arrived at a figure of $133,000. The reasons Hadley gave for rejecting the income approach were that the average net earnings of the company for the years 1974 through 1979 were too low to justify treating it as a profitable enterprise, that the company is a "one-man" business and that without the defendant's knowledge, local contacts and management skills it was not likely that the business would continue. The referee, however, accepted the McTeague valuation.

The referee admitted into evidence a document containing financial projections of NEPP for the years 1979 and 1980. This document, which was prepared by certified public accountants from estimates and assumptions made by the defendant, had been submitted by the defendant to the Connecticut development commission as part of a loan application made to the commission by NEPP. The defendant challenged the admission of the document on the ground of relevancy, arguing that in view of the admission of other exhibits showing the actual earnings of the company for the year 1979 and for the first nine months of 1980 the defendant's projections should be rejected as worthless. The defendant's downgrading of his own financial estimates need not be accepted at face value. The fact that the defendant thought enough of these projections to use them as a basis for a substantial loan application suggests that they were entitled to be taken seriously. Additionally, an examination of the projection for 1979 when compared with the actual results for that year demonstrates that, if anything, the projection was on the conservative side, showing, for example, gross sales of $540,000 and net income of $23,000 as against actual sales of $599,000 and actual net income of $73,500. Relevant evidence must be logically probative and sufficiently significant to aid the trier in the determination of a fact in issue. Pitt v. Kent, 149 Conn. 351, 357, 179 A.2d 626 (1962). In determining whether a specific piece of evidence is relevant the trial court exercises a broad discretion. Delott v. Roraback, 179 Conn. 406, 414, 426 A.2d 791 (1980). In admitting the document in question the trial court acted well within its discretion.

The defendant challenges the court's acceptance of McTeague's valuation of the machine shop on two grounds. First, he asserts that there was an insufficient factual basis for utilization of the income approach. Second, he contends that even assuming the appropriateness of the income approach, the use by McTeague of an erratically high earnings year (1979) as an income base produced a distortion in the capitalized value of the business.

"In assessing the value of ... property ... the trier arrives at his own conclusions by weighing the opinions of the appraisers, the claims of the parties, and his own general knowledge of the elements going to establish value, and then employs the most appropriate method of determining valuation. Esposito v. Commissioner of Transportation, 167 Conn. 439, 441, 356 A.2d 175 [1974]; Textron, Inc. v. Wood, 167 Conn. 334, 345, 355 A.2d 307 [1974]. The trial court has the right to accept so much of the testimony of the experts and the recognized appraisal methods which they employed as he finds applicable; his determination is reviewable only if he misapplies, overlooks, or gives a wrong or improper effect to any test or consideration which it was his duty to regard." Greenfield Development Co. v. Wood, 172 Conn. 446, 451, 374 A.2d 1084 (1977). We have approved the capitalization of actual income as an appropriate method of valuation. Uniroyal, Inc. v. Board of Tax Review, 174 Conn. 380, 386, 389 A.2d 734 (1978); Somers v. Meriden, 119 Conn. 5, 7-8, 174 A. 184 (1934). In the present case the defendant's company was, at the time of its valuation in 1980, a going concern. There was no evidence that it was in the process of liquidation. Although the trier was not obliged to accept the income approach he was not precluded from doing so merely because the company is a closely held, "one-man" business.

The defendant does not seriously challenge the use of the income approach for valuation of a going concern. Indeed, the defendant's expert, Hadley, utilized this approach but rejected the valuation based on it because, in his view, an appraisal of the assets using the liquidation value approach would produce a higher valuation. Since both McTeague and Hadley agreed that a capitalization multiplier of five would be appropriate, the narrow issue before us is whether there is any evidence in support of a finding of annual net earnings of $50,000.

In reaching his conclusion that the basic after-tax annual earning power of the company was $50,000, McTeague relied on the financial statements of the company for the years 1977, 1978 and 1979. These showed sales of $325,000, $404,000 and $600,000 respectively, officer's compensation of $25,000, $32,000 and $36,000 and net income of $3000, $7800 and $74,000. McTeague also relied on the defendant's projections for the years 1979 and 1980 which showed sales of $540,000 and $650,000, officer's salary of $39,000 and $40,000 and a net income of $23,000 and $55,000. Finally,...