MAINE SUPREME JUDICIAL COURT Reporter of Decisions Decision: 2014 ME 112 Docket: Kno

- 13

- 251 Argued : April 7 , 201 4 Decided: September 1 8 , 2014
Panel: SAUFLEY, C.J. , and ALEXANDER, SILVER, MEAD, GORMAN , and JABAR, JJ.

CHRISTINE M. STARRETT

v. IRVEN G. STARRETT

SAUFLEY , C. J. [¶1] Christine M. Starrett appeals from a divorce judgment entered in the District Court (Rockland, Worth, J. ) and from a n order granting in part and denying in part her post

- judgment motion for additional or amended findings o f
fact and conclusion s of law and to amend the divorce judgment. Christine ’s primar y contention is that the court erred or abused its discretion in its valuation of the parties’ privately owned business , Irv’s Drywall

. Christine also challenges the

court ’s estimat e of each party’s income and its decision related to the sale of the parties’ marital real estate. We affirm the judgment

. I. BACKGROUND [¶ 2 ] The following facts are drawn from the trial court’s findings and from
the record. Irven and Christi ne were married on December 6, 198 0. They are both
in their fifties . They have two children who are now adults and are not the subject2 of any dispute. T he court found that t he parties are “intelligent, hard

- working
individual s with many skills [ who ] ha ve contributed equally to the acquisition of
assets and debts .” After nearly thirty years of marriage, they separated in May 2010, and Christine filed a complaint for divorce in June 2010

. [¶3 ] The parties had a difficult separation

. Christine obtaine d a protection from abuse order against Irven , and she was served with a protection from
harassment notice or order. Nonetheless, the parties, with the assistance of counsel, made efforts in advance of trial to resolve many of their disputes. Before
the trial in November 2012, they agreed to sell some of their personal and real property, both marital and nonmarital, and to divide the proceeds . Additionally, from the time of their separation in May 2010 until March 2012, Irven paid Christine support rangi ng from $400 to $1 , 000 per week , totaling $93,000 by the
time of trial

. [¶4 ] A significant portion of the remaining dispute centered on the value of Irv’s Drywall, a closely held corporation owned by the parties that Irven started
and has operated since 1 990 or 1991

. Throughout their marriage, both Irven and Christine derived personal benefit from Irv’s Drywall, including payments for gasoline and cell phone bills for themselves and their children, use of the business’s supplies and equipment, and use of employees’ labor on their property. At its peak , during 2007 and 2008 , the company was quite successful, employ ing3 thirty to forty employees and subcontractors , and recording gross annual receipts of over $2 million in each of those years

. By the time of trial, Irv’s Drywall , affected like many businesses by the ec onomic downturn, had reduced its staff to approximately sixteen employees and showed average annual gross receipts of just over $1.6 million from 2010 to 2012

. The court determined that “[ t ]he evidence does not support optimism now that the corporat ion business will return to its
pre - downturn profitability.” [¶5 ] In preparation for trial, the parties jointly hired an expert to calculate
the value of Irv’s Dryw all. Th e expert testified at tr ial that , as of March 31, 2012,
the fai r market value of the company was approximately $392,000 based on the capitalization

- of

- earnings method . Both parties disagreed with the expert’s opinion. Christine testified that Irv’s Drywall was worth at least $4 50,000 , and
Irven testified that he would sell it if offered $200,000. [¶6 ] The court entered a divorce judgment on February 2 8 , 2013. It rejected the expert’s opinion, fin ding that “ his tes timony on the value of an owner

- operated small sheetrock corpora tion in rural Maine was sufficiently qualified that the [ c ] ourt does not rely on it for value proof here.” The court also rejected Christine’s estimate of $450 ,000 because it “appeared to be strategic rather than supported by
the evidence.” Noting the co mpany’s large amount of debt, the court foun d that “[t]he persuasive evidence does not support a conclusion that, in this economy, the4 business has sale value or fair market value.” The court then undertook an abbreviated liquidity assessment and foun d th at the company’s “business debt appears, thus, to be equal to or more than the value of bus i ness ass e ts including accounts receivable and equipment as of the date of the expert’s report.” Ultimately, the court found, “ the evidence shows that the value of Irv’s D rywall, Inc., is Defendant’s continued ability and willingness to work as he has. ” It
awarded Irven all of the parties’ interest in the business, including its assets and real property, and made Irv en solely responsible for the company’s debt

. [¶7 ] The divorce judgment also ordered the sale of the parties’ marital residence and camp, with any proceeds and debts equally divided between the parties. Irven was ordered to pay the mortgages on both properties, totaling over $5 , 0 00 monthly, 1 until they are sold. The court also granted to Irven the sole authority to choose the list ing realtor for both properties and ordered that, in the event that the parties could not agree on the listing and sale prices, Irven and the listing broker were to determine the prices based upon prevailing market
conditions. [¶8 ] With regard to the parties’ incomes, the court did not find credible Christine’s testimony that she was completely dis abled and therefore unable to

1 The parties’ mortgage payments include $3,300 per month for t heir marital home and $1,900 per month for their camp.5 work. It found instead that, notwithstanding her short

- term disability, Christine

w ould be able to “regain her equilibrium” once the t rauma of the divorce has passed and that she is capable of earning $50,000 annually. The court found that Irven is capable of continuing to operate Irv’s Drywall , throug h which he can earn $93,000 annually. It awarded Christine general spousal support in the amount of $1 , 000 per month until the sale of the residence, and $2 , 000 per month thereafter until the death of either party or until Christine’s remarriage or cohabi tation that is equivalent to marriage. It declined to award transitional support because Christine had already received substantial amounts during the separation. [¶9 ] Christine moved for findings of fact and conclusions of law , and to amend the judgment

. See M.R. Civ. P. 52(b), 59(e). The court denied the motion except to clarify that its independent valuation of Irv’s Drywall took into account
the business ’s assets and accounts receivable as identified by the expert. Christine timely appealed.
II. D ISCUSSION [¶1 0 ] Because a review of the record demonstrates tha t the court’ s factual
determinations regarding the parties’ earning capacities are fully supported by competent evidence , we do not disturb those findings. See Bond v. Bond , 2011 ME 54, ¶¶ 10 , 15, 17 A.3d 1219

. We further conclude that the court did not abuse its
discretion in granting to Irven the authority to facilitate the sale of the marital real6
estate

. See St. Hilaire v. St. Hilaire, 526 A.2d 28, 29 (Me. 1987) ; see also Levy , Maine Fam ily Law § 7.7[1] at 7

- 52 (8 th e d. 2013)

. We address here only the
court’ s factual findings and exercise of discretion in its valuation and distribution
of Irv’s Drywall

. A. Valuation of Irv’s Drywall [¶ 1 1 ] There is no dispute that Irv’s Drywall, which wa s founded and incorporated after the parties were married, is marital property. See 19

- A M.R.S. § 953(2) (2013) (defining “marital property , ” except for certain ex cep tions not applicable here, as “ all property acquired by either spouse subsequent to the

m arriage ”). Rather, t he di s pute centers on the value of that marital asset. Val uing a closely held corporation for purposes of property division in a divorce proceeding when there is no actual intent to sell the business is , at best, a difficult
task. No netheless, as with any factual finding, w e review the court’ s determination
of an asset’s value for clear error. Bond , 2011 ME 54, ¶ 10, 17 A.3d 1219 (citing
Wandishin v. Wandishin , 2009 ME 73, ¶ 12, 976 A.2d 949 ). A trial court’ s factual finding is not clearly erroneous if there is any competent evidence in the record to support it. See B ond , 2011 ME 54, ¶ 15, 17 A.3d 1219. We review the court’ s overall distribution of prope rty for an abuse of discretion. I d

. ¶ ¶ 10 , 15

. [¶1 2 ] As with all other testim ony or evidence, t he court was authorized,
indeed required , to evaluate the credibility of the evidence offered on the value of7 Irv’s Drywall

. See Wandishin , 2009 ME 73, ¶ 13, 976 A.2d 949

. Accordingly, it could reject the expert witness’s opinion that t he business had a fair market value
of $392,000. Similarly, the court acted well within its authority in rejecting
Christine’s estimate of the company ’s value at $450,000. See i d. The court wa s also free to reach a differing valuation based on its inde pendent review of the
evidence , as long as that determination was supported by competent evidence in
the record. See i d. ; see also Levy , Maine Family Law § 7.8[1] at 7

- 65. [¶1 3 ] The court’s conclusion that Irv’s Drywall had no “ sale value or fair
marke t value ” is supported by the record

. Indeed, the business appraiser struggled

to find a way to value the company and acknowledged that his appraisal was for purposes of the divorce, not necessarily for purposes of a sale of the company.
The record cont ains ample evidence from which the court could determine that t his relatively small business, which had taken a hit in the economic downturn, owed
its existence to Irv en ’s ability and w illingness to continue the work; that it was not likely at that time to garner nearly $ 400, 0 00 in an arm ’ s - length sale ; and that the
business’s highest value to the parties is its continued ability to generate an income of $93,000 each year for Irven , through which he can continue to pay spousal support to Christine

. [¶1 4 ] T he court’s findings went astray, however, when the court determined on its own, through the use of an abbreviated liquidation calculation, that the8 company’s debt s exceeded its assets. The court explicitly noted that it drew the facts for that analysis fr om the appraiser ’ s report. However, a review of the
business assets and debts described in the expert report shows that a basic liquidation calculation would r esult in a net positive value of over $47,000 : Irv’s Drywall Assets as of 3/31/2012 Irv’s Drywa ll Debts as of 3/31/2012 Real estate value (current) 2 $265,000 Mortgage (current) 3 $173,966 Cash 42,417 Lien from other sale 10,000 Equipment 4 Not available Accounts p ayable to s upplier 123,630
Accounts r eceivable 49,889 Customer d eposits 2,000 Inven tory 5,000 Line of c redit with Camden National Bank 33,860 Prepaid a ssets 14,606 Debt owed to Ally Bank 1,517 Stockholder a dvances 15,100
Total assets $ 392,012 Total debts $34 4,973 Net Value: $47,039 [¶1 5 ] Thus, the court’s brief liquidation analysis reflects factual error
because the business still had, at that time , a small but not insubstantial positive liquidation value

.

2 The value of Irv’s Drywall’s premises was not separated from the expert’s calculation of the business’s fair market value of invested capital. We therefore use the fair market value found by the co urt after trial: $265,000.

3 The expert report stated that the amount owed on the mortgage was $177,137 as of March 31, 2012. Because we use the fair market value of the Irv’s Drywall premises as of the end of the trial as determined by the court, we us e the amount due on the mortgage at the same time: $173,966.

4 The expert report did not separately estimate the value of Irv’s Drywall’s equipment. Any positive value of the equipment would further increase the liquidation value of the business.9 B. Harmless Error Analysis [¶1 6 ] The question before us is whether that factual error affected
Christine’s sub stantia l rights in the ultimate division of the marital property. A
trial cour t finding , even if in error, does not require us to vacate the judgment if the error did not result in substantial injustice or affect substantial rights. M.R.
Civ. P. 61; M.R. Evid. 103(a). To obtain relief on appeal, a party claiming error must demonstrate prejudice resulting from the error. In re Joshua B. , 2001 ME 115, ¶ 10, 776 A.2d 1240 ; see Field & Murray , Maine Evidence § 103.5 at 18 ( 6th
ed. 2007 ). [¶1 7 ] There is no indicat ion that Christine suffered substantial injustice or was prejudiced by the court’s award of Irv’s Dryw all in its entirety to Irven. Although the liquidation value of the business was a posit ive, rather than a negative, value at the time of the divorce hea ring, it was a relatively small value. Further, a s not ed above, o n this record, we discern no error in the court’s finding that there is no realistic market value for this closely held business, or in its finding that the best value of Irv’s Drywall is it s ability to generate a substantial income for Irven, which will allow him to pay the significant amount of spousal support that
the court ordered. Should Irv’s Drywall rebound more thoroughly than the court expected, it will provide Irven with sufficient resources to address any substantial change in Christine’s need for spousal support. Thus, a lthough the court erred in10 finding that the company had no positive liquidation value, that error ha d little effect on the property distribution to both parties. [¶1 8 ] Accordingly , the court did not abuse its discretion in determining that the business’s payment of Irven’s salary co nstitutes its primary source of value to
both parties and therefore awarding the business to Irven. Any cash that Christine might hav e received from a share of the liquidat ion proceeds of Irv’s Drywall was
more than offset by the court’s order that Irven pa y the parties’ entire mortgages totaling over $5 , 0 00 per month and spousal support of $1 , 000 per month

— payment s that , when annualize d, constitute nearly 80% of Irven’s pre tax wages
. Once the parties’ real properties are sold, Christine’s spousal support will increase to $2 , 000 per month, which is over 25% of Irven’s pre tax wages
. [¶1 9 ] Because the court’s small factual error in the c alculation of the liquidation value of Irv’s Drywall did not affect Christine’s substantial rights or otherwise prejudice her, we affirm the judgment. We are not persuaded by and do not separately address Christine’s other contentions. The entry is: Judg ment affirmed

.11 On the briefs: David M. Lipman, Esq., and James T. Lawley, Esq., Lipman & Katz, P.A., Augusta, for appellant Christine M. Starrett Steven C. Peterson, Esq., West Rockport, for appellee Irven G. Starrett

At oral argument:
Dav id M. Lipman, Esq., for appellant Christine M. Starrett Steven C. Peterson, Esq., for appellee Irven G. Starrett

Rockland District Court docket number FM

- 2010

- 163 F OR C LERK R EFERENCE O NLY