Opinion
No. 15–P–1459.
10-17-2016
Kimberly FERNANDES–HUFF v. Gregory M. HUFF.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
Gregory M. Huff (husband) appeals from a judgment of divorce nisi regarding the division of the marital estate. He contends that the probate judge erred in valuing his former wife, Kimberly Fernandes–Huff's business, in failing to include the wife's beneficial interest in a family trust, in declining to credit the husband's contribution to the down payment on the marital home, and in dividing the marital estate “nearly equal.” We affirm.
The husband does not appeal the portion of the judgment granting the parties a divorce.
Business valuation. The wife is self-employed, owning and operating since 1994 a kayak retail shop, which also provides kayak lessons and tours. At trial, held over two days in February, 2015, the husband's expert, Donald May, a certified public accountant, using the capitalization of earnings method, opined that the wife's business had a value of approximately $236,000. According to the wife's financial statement submitted at trial, the reported 2014 gross revenues of her business amounted to $251,688, with expenses of $223,433. The judge found that the wife had “under-reported her income over the last several years, as the deposits into her business checking account show additional funds above and beyond what she reported for income tax purposes.” In addition, the judge found that “considerable cash deposits were made by the wife to joint and individual personal checking accounts, with no corresponding checks or withdrawals from the business account,” indicating additional unreported, presumably, cash income. After hearing testimony and reviewing financial records submitted at trial, the judge ultimately settled on a valuation of $200,000 for the wife's business.
In the years 2011 and 2012, the wife reported minimal income; the judge did not find this credible. He also determined that calculating the wife's reported income, and adding back approximately $30,000 in depreciation claimed (which the judge noted would not be a yearly occurrence), the wife's income for 2013 was approximately $71,000, which the judge noted was “unusually high for her.” The wife's 2014 income was better than previous years due to her business relocation; because the wife did not produce her 2014 business financials, the judge attributed $50,000 of annual income to her for that year.
The husband claims that, because his expert provided a definitive valuation of the business, and the wife failed to offer any expert testimony, the judge's business valuation of $200,000 was arbitrary and capricious. We disagree.
“Valuation of a business is a question of fact.” Bernier v. Bernier, 449 Mass. 774, 785 (2007). Thus, we review to determine whether the judge's findings were clearly erroneous. See Mass.R.Civ.P. 52(a), as amended, 423 Mass. 1402 (1996). When the opinion of an expert is offered regarding a business valuation, the judge may “reject expert opinion altogether and arrive at a valuation on other evidence,” Adams v. Adams, 459 Mass. 361, 381 (2011), quoting from Fechtor v. Fechtor, 26 Mass.App.Ct. 859, 863 (1989), so long as that determination is not “ ‘materially at odds with the totality of the circumstances or, in the case of divorcing spouses, at variance with the requirements of the equitable distribution statute.’ G.L. c. 208, § 34,” Adams, supra .
Here, it is clear that the judge considered all of the factors under G.L. c. 208, § 34, in coming to a valuation for the wife's business. Aside from the expert's testimony, the judge had other information pertaining to the wife's finances available to him for consideration—including personal and business bank statements, tax returns, and the wife's financial statement. For these reasons, we discern no error in the judge's determination of valuation of the business.
Interest in trust. Prior to the parties' marriage in 2004, the wife's mother died; at that time, the wife became entitled to an interest in the KMK Realty Trust. Because of alleged irregularities in the handling of this trust, the wife did not receive any part of that interest during the marriage. She filed a lawsuit against the estate to secure her share; however, as of the date of the divorce trial, she had not yet received any benefit from the trust. In his rationale supporting the judgment, the judge concluded that “this trust was never part of the marital fabric in any way,” and declined to include in the marital estate any value of the wife's interest (although he speculated that the interest could be as much as $250,000). The husband argues this exclusion was plainly wrong because all property in which a party holds an interest, whenever acquired, by law becomes part of the marital estate. He further contends that the uncertainty of the value of the wife's interest does not justify its exclusion from the marital estate. We disagree.
The wife's interest in the KMK Realty Trust is no more than an expected asset whose value is speculative at best. “When the future acquisition of assets is fairly certain, and current valuation possible, the assets may be considered for assignment under § 34 ” (emphasis supplied). Williams v. Massa, 431 Mass. 619, 628 (2000). However, when the value of an asset is not clearly fixed, as with an inheritance, an interest in that asset may be considered a mere expectancy, and as such, is not a sufficient property interest to be considered as part of the marital estate. See ibid. The judge has complete discretion to determine the inclusion, or exclusion, of an asset.
“Expectancies ... do not embody either a present or future enforceable proprietary right”; they have only theoretical value. Canisius v. Morgenstern, 87 Mass.App.Ct. 759, 767 (2015), quoting from Adams, 459 Mass. at 374. “Interests considered too remote or speculative for inclusion within the estate are instead weighed under the § 34 criterion of opportunity of each [spouse] for future acquisition of capital assets and income in dividing the marital property.” D.L. v. G.L., 61 Mass.App.Ct. 488, 492–493 (2004) (quotation marks and citation omitted).
It is clear from his findings that, although the judge did not include the wife's trust interest as a divisible asset, he did consider the future benefit the wife may receive when the litigation is resolved. That benefit was offset by the husband's military pension and other benefits, the parties' respective incomes, and the absence of an order of alimony against the husband. Because the judge weighed all of the relevant factors in considering the exclusion of the wife's trust interest, there was no error.
Down payment contribution. The husband's argument that the judge wrongly excluded the husband's down payment contribution for the purchase of the marital home also fails. Contained in the language of the judge's further findings is a detailed explanation of the thoughtful consideration he gave to valuing the marital assets and each spouse's contribution (both monetary and otherwise) in obtaining those assets.
The judge found that, throughout the parties' relationship (both dating and while married), they shared equally the monthly household expenses. While dating, they lived with the wife's parents, paying “reduced rent” in order to save to purchase their own home; in 2000, they purchased a condominium in the husband's name in order to receive veterans' benefits allowances with “no money down and a reduced rate.” In 2004, the parties purchased the marital home, with the husband paying the closing costs from the proceeds of the sale of the condominium; although the home was purchased in the husband's name, shortly thereafter the deed was changed to include the wife's name. The wife paid for the materials used to make the significant number of home improvements; the husband paid the bulk of the mortgage expense. The judge specifically found that, throughout the parties' dating and marriage, they contributed equally to the household expenses, maintaining a “middle-class lifestyle.”
A judge is given broad discretion in considering the contributions of each party in acquiring marital assets; he is not limited to contemplating which spouse's money purchased a particular asset. “Overall, the purpose of a § 34 property division is to recognize and equitably recompense the parties' respective contributions to the marital partnership.” T.E. v. A.O., 82 Mass.App.Ct. 586, 597 (2012) (quotation marks and citation omitted). It was, therefore, within the judge's discretion to recognize the efforts of both parties in acquiring and maintaining the marital home as well as other marital assets, and to determine as he did how those marital assets would be divided upon dissolution of the marriage. “The division must be an honest exercise of judicial discretion, but ‘need not proceed on any precise mathematical formula.’ “ Kelcourse v. Kelcourse, 87 Mass.App.Ct. 33, 36 (2015), quoting from Downing v. Downing, 12 Mass.App.Ct. 968, 969 (1981).
Division of marital estate. The husband finally argues that the judge erred in his “nearly equal” division of the marital estate due to the exclusion of the wife's interest in her mother's estate, and in failing to credit him with his down payment contribution. Review of a judgment equitably dividing the marital estate in accordance with § 34 is a two-step analysis: (1) whether all § 34 factors were considered by the judge, and (2) whether the reasons for the judge's conclusions are apparent in his findings. Adams, 459 Mass. at 371.
Here, it is clear that the judge considered all of the § 34 factors; the language of the judge's rationale and further findings provides a detailed explanation for his conclusions. In addition, in lieu of an order to pay alimony, the judge had broad discretion to assign to either the husband or the wife any part of the estate of the other, after consideration of the § 34 factors, including the wife's occupation, the opportunity for future income, and contributions during the marriage. See G.L. c. 208, § 34.
The judge concluded that the facts of this case would make it appropriate for an alimony award of, estimating a weekly payment by the husband, approximately $215. However, he declined to order such payment, based partially on the husband's ability to pay, and “also in consideration of the total value of the Husband's pension assets being considered in the division, as well as other factors, including the Husband not sharing in any part of the Wife's trust expectancy from her mother's estate.” The judge then divided the estate by ordering what he believed to be “the fairest and most equitable” judgment considering all of the § 34 factors. See Pfannenstiehl v. Pfannenstiehl, 88 Mass.App.Ct. 121, 134 (2015), S.C., 475 Mass. 105 (2016), citing Williams v. Massa, 431 Mass. at 625626. We are satisfied that the distribution of the marital estate was neither wrong nor excessive. Adams, supra.