In re Hebert, 2024

The New Hampshire Supreme Court, in this divorce case appeal, vacated the trial court’s property division and alimony awards but affirmed the trial court’s findings regarding the value of the husband’s business, Microelectrodes Inc., the value of the real estate that the Microelectrodes plant sits on (Pleasant Bay LLC), the imputation of income to the husband, and the award of attorneys’ fees and costs to the wife due to the husband’s violation of court orders. The case was remanded.

Facts.

The couple have one adult child with learning disabilities. They were married in 1995 and filed for divorce in 2018. A temporary hearing ordered the couple’s two residences to be sold and the proceeds held in escrow.

A final hearing was held in September 2021. The homes had been sold by the time of the hearing with the wife’s attorney holding the net proceeds of $247,163 in escrow. The husband “had considerable difficulty in providing discovery requested of him…. It has only been after the entry of orders on motions compelling information that [the husband] [*3] provided information, which should have been provided in the first instance considerably earlier in this process.” Because of this, the wife hired an expert to prepare an income report for the husband as well as to value Microelectrodes.

The husband’s father founded Microelectrodes in 1970, and the husband had worked there for over 40 years. The wife worked at the business sporadically in a limited capacity. When the husband’s father passed away prior to the final hearing in this matter, the husband became the owner of both Microelectrodes and Pleasant Bay, which did not collect rent from Microelectrodes.

Richard Maloney, CPA/ABV, provided two reports: one opining as to the income of the husband and the other as to the value of Microelectrodes. “Maloney’s business valuation report determined that a willing buyer would pay $154,000 for the assets of the company, the largest of which are cash and accounts receivable.” Peter Stanhope, CGA, opined that the value of the property on which the plant sits was $450,000 and the adjacent vacant lot had a value of $160,000, for a total of $610,000.

In 2019, the wife received proceeds from probate litigation of $648,000 less legal fees of $213,000 paid and had remaining legal fees of $52,000. The trial court, among other things, found Microelectrodes worth $154,000 and awarded the wife $77,000; found Pleasant Bay worth $610,000 and awarded the wife $305,000; awarded the wife the $247,163 held in escrow from sale of the houses; “and ordered Husband to pay wife $2,640 per month for 13 years [as alimony].”

Appeal.

On appeal, the husband argued that the trial court abused its discretion when it:

1.       Did not include the lawsuit settlements as marital assets;
2.       Ordered alimony in accordance with Maloney’s report;
3.       Awarded the wife100% of the proceeds of the sale of the houses;
4.       Awarded the wife 50% of the value of Microelectrodes and Pleasant Bay; and
5.       Awarded attorney’s fees to the wife.

The supreme court concluded that the trial court was in error in awarding the lawsuit settlements to the wife as nonmarital assets. Thus, the distribution of assets was vacated. “In the interest of judicial economy, we also address Husband’s additional arguments regarding division of property that are likely to arise on remand.”

The New Hampshire Supreme Court had ruled prior that a settlement one of the divorcing parties received was marital property regardless of the underlying purpose of the award. The trial court’s determination that the proceeds were not marital property was in error. The supreme court was unable to determine what the trial court’s intention was on distribution of marital property because of the noted error. Because the distribution was vacated, the supreme court didn’t need to review the arguments regarding the award of the proceeds of the two homes, nor the percentage of the value of the business and the real estate. However, the supreme court did review the values the trial court assigned to Microelectrodes and Pleasant Bay.

As to Microelectrodes and Pleasant Bay, the husband did not offer any expert testimony but did cross-examine the wife’s witness, Maloney. The trial court found Maloney to be credible with respect to the value of the business. Among other things, the husband asserted that it was error for the trial court “to use a figure contrived by [the wife’s] expert who ignored the reality of debts and liabilities.” The supreme court yielded to the judgment of the trial court as to the credibility of the witness and the weight to be given to the testimony and affirmed the value of Microelectrodes at $154,000.

The husband also argued that the trial court abused its discretion in ruling that the value of Pleasant Bay, i.e., the land on which Microelectrodes plant sits, was worth $610,000. Once again, the husband did not offer an expert report or expert witness testimony as to this value but instead “argued that the trial court should use the Town of Bedford’s property assessment, and that Stanhope’s opinion that the highest and best use of the land was to subdivide it into two parcels was speculative.”

The supreme court disagreed, noting that, in valuing real estate, the courts generally looked to FMV. The supreme court also disagreed with the argument that Stanhope’s value was speculative. The supreme court noted that Stanhope did his due diligence on zoning and the physical state of the property, etc., so that his value was not speculative.

Alimony and attorney’s fees.

The supreme court also noted that Maloney’s detailed analysis of the husband’s income and related expenses, whether business or personal, were within the sustainable discretion of the trial court. The supreme court also affirmed the trial court’s awarding of legal fees that were necessary for the wife to compel the husband to comply with court orders, which he did not do.

Conclusion.

The trial court is vacated in part, affirmed in part, and remanded.