Case Title: Goodrich v. Goodrich

Citation: 

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 1992-04-01T00:00:00Z

Document:
NOTICE:  This opinion is subject to motions for reargument under V.R.A.P.
 40 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 90-270


 Julia H.L. Goodrich                          Supreme Court

                                              On Appeal from
      v.                                      Windsor Superior Court

 Reginald G. Goodrich                         April Term, 1992


 Silvio T. Valente, J.

 Agnes S. Hughes of Lamb & Hughes, P.C., Springfield, for plaintiff-
   appellee

 Jeremy Dworkin, South Londonderry, for defendant-appellant


 PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


      ALLEN, C.J.   Defendant husband appeals from the property award in this
 divorce, challenging the court's valuation of plaintiff's interest in a
 closely held family corporation.  We affirm.
      The parties were married in 1969 and separated in 1988.  They have two
 children.  Neither party brought substantial tangible assets into the
 marriage, but plaintiff later received from her mother and grandmother a
 total of 4,000 shares of the stock of Jamison Door Company, a company
 founded by plaintiff's great grandfather.  These shares represented a little
 more than 5% of the total outstanding stock.  All shares in the corporation
 are held by members of plaintiff's family.  In addition to this stock,
 plaintiff inherited about $130,000 from her grandmother.
      Plaintiff has worked outside of the home since 1973, mainly in clerical
 positions.  Defendant received a college education during the marriage and
 in the course of nearly twenty years has had fifteen different jobs and
 business ventures, including his own carpet business, work for an excavating
 company, a tile business, a grinder company, a collection agency, a metals
 company, his own building business, and a hot tub business.  The parties
 acquired a residence early in their marriage, and both worked to expand and
 remodel what was a camp into a home.  The trial court found that defendant
 in 1986 or 1987 used about $20,000 from the corpus of a trust, which his
 aunt had set up for the parties' children, to support his building company
 and to purchase two family automobiles.
      The trial court awarded the $37,000 net equity in the parties' home to
 defendant, but denied his request for a portion of plaintiff's Jamison Door
 shares, which the court valued at $97,000.  The court made no adjustments to
 the parties' plan for the payment of marital debts.
                     I. Valuation of Jamison Door Stock
      Defendant's principal claim on appeal is that the trial court's
 valuation of the Jamison Door stock was erroneous because the court applied
 inappropriate appraisal criteria.  Defendant's expert, a certified public
 accountant, testified that a company of the size of Jamison Door should be
 appraised on the "formula method" -- a computation based on the fair market
 value of the underlying net assets of the business.  Using this method, the
 expert placed a value of $12,021,000 on Jamison Door, including good will.
 Based on that figure, the value of each share would be $153.46, making
 plaintiff's shares worth a total of $613,840.
      The court rejected defendant's approach and accepted plaintiff's view
 that the valuation of the stock should reflect what a willing buyer would
 pay for the stock from a willing seller.  Plaintiff's expert, also a
 certified public accountant, testified that the company had paid $1.97 in
 dividends in 1988 and $1.90 in 1989.  He used the $1.97 figure to reach an
 annual income for the 4,000 shares of $7,880.  Applying the current interest
 rate on U.S. Treasury bills, he calculated the sum that would be needed to
 yield that amount of income as $97,404 and offered that figure as the value
 of the stock, viewed from a "return on investment" perspective.  The court
 accepted this figure as what a willing buyer would pay a willing seller.  It
 declined to accept a higher valuation ($171,000) based on liquidation value,
 or a lower valuation ($37,000) based on the testimony of plaintiff's expert
 that the purchaser of such a small interest in a family business would
 expect a return of twenty-one percent.  The court did not ignore defendant's
 position that an asset-based valuation should be applied.  It stated in
 Finding 26:

           (d)  . . . While it is true that the tangible assets and
           good will of the Jamison Door divided by the number of
           outstanding shares would place an equity value of
           $153.46 for each share of stock, the Court does not
           view this as the price a willing buyer would pay for
           each share to obtain a 5% interest in the company.

           (e)  The Court finds that a more equitable manner of
           determining fair market value of the 4,000 shares would
           be based on the return on investment value approach.
           The Court finds that a willing buyer would look to his
           return on investment in making the purchase of such a
           small fraction as 5% of the total stock of the Company.

      On appeal defendant urges this Court to mandate a single methodology --
 the "formula method" -- for determining the value of an interest in a
 closely held company.  This we decline to do.  The court's valuation was
 supported by credible evidence in the record, and thus is not clearly
 erroneous.  Morissette v. Morissette, 143 Vt. 52, 61,