In Re Marriage of DeCosse

936 P.2d 821, 282 Mont. 212, 54 St.Rep. 318, 54 State Rptr. 318, 1997 Mont. LEXIS 66
CourtMontana Supreme Court
DecidedApril 15, 1997
Docket96-118
StatusPublished
Cited by34 cases

This text of 936 P.2d 821 (In Re Marriage of DeCosse) is published on Counsel Stack Legal Research, covering Montana Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Marriage of DeCosse, 936 P.2d 821, 282 Mont. 212, 54 St.Rep. 318, 54 State Rptr. 318, 1997 Mont. LEXIS 66 (Mo. 1997).

Opinions

JUSTICE TRIEWEILER

delivered the Opinion of the Court.

James Warren DeCosse filed a petition for dissolution of his marriage to Dorothy Ann DeCosse in the District Court for the Eighteenth Judicial District in Gallatin County. Following a nonjury trial, the District Court entered its decree and judgment, in which it dissolved [214]*214the parties’ marriage and divided their marital assets. James appeals the District Court’s valuation of his interest in the business by which he is employed. Dorothy cross-appeals the District Court’s refusal to consider her need for maintenance in the future, and the District Court’s refusal to award her attorney and expert witness fees. We reverse in part and affirm in part the judgment of the District Court and remand to that court for proceedings consistent with this opinion.

The following issues are presented by the parties:

1. Did the District Court err when it valued James’s interest in Gallatin Valley Furniture at $1,060,000 and ordered James to pay Dorothy $522,676 to equalize the marital property distribution?

2. Did the District Court abuse its discretion when it refused to reserve the issue of maintenance for future consideration dependent on Dorothy’s health?

3. Did the District Court abuse its discretion when it declined to award Dorothy attorney fees and costs which she incurred responding to James’s post-trial motions?

FACTUAL BACKGROUND

Dorothy and James DeCosse were married on July 14, 1973, and separated on May 26,1993. At the time of their marriage, James was the manager of his father’s business, Gallatin Valley Furniture, and owned thirty-five shares of stock in the company. When James’s father retired in 1985, Gallatin Valley Furniture entered into a series of redemption agreements with James’s father and mother. Pursuant to those agreements, each of James’s parents agreed to sell 1,640 shares of stock to the corporation at a price of $232 per share. The total cost was to be paid in installments. Final payment was due by June 28, 2000. In return, the remaining shareholders — who were James, and his sister and brother-in-law, Michelle and Dennis Cat-tin — agreed to several restrictions, including an agreement that the shareholders would not sell their shares, except to each other, until James’s parents were fully paid pursuant to the terms of the redemption agreements. In addition, the remaining shareholders executed irrevocable proxies with which James’s parents could liquidate the company in the event of any default in the redemption agreements.

The value of James’s parents’ stock was determined at the time of redemption by a certified public accountant, Wayne Neil. In valuing the stock, Neil used the income method of valuation, which is recommended by the American Institute of Certified Public Accountants for the valuation of closely held businesses. Pursuant to the income [215]*215method, Neil weighted the average earnings of Gallatin Valley Furniture for the five years prior to redemption, giving the most recent year the greatest weight. He then applied both a high and low multiple for a return on investment consistent with reports in the National Home Furnishings Association Manual and multiplied it by the weighted average net equity of the business to establish normal earnings. By subtracting the normal earnings figure from the weighted average earnings figure, Neil calculated the excess earnings. Neil then applied a capitalization rate — the rate an investor would expect to receive for his risks in the company — and using both a low of fifteen percent and a high of twenty percent, produced a value for the goodwill of the company. When Neil added that figure to the total value of the net tangible assets of Gallatin Valley Furniture, he determined a high and low fair market value of the business. To determine the per-share value, he divided those figures by the number of outstanding shares of stock. Neil arrived at the final figure of $232 per share by taking the median of the high and low figures and applying a twenty percent minority shareholder discount.

In 1985, at the time James’s parents executed the redemption agreements, James owned 466 shares of Gallatin Valley Furniture stock, and Michelle and Dennis Cattin owned the remaining 466 shares. On Jeme 28, 1985, at the same time the redemption agreement was signed, James, Michelle, and Dennis entered into a shareholders’ agreement with Gallatin Valley Furniture. Pursuant to that agreement, J ames and Dennis were designated “shareholder-employees” and Michelle was designated a “shareholder.” The agreement provided that all transfers or other dispositions of corporate stock made during the lifetime or at the death of a shareholder were subj ect to restriction. Specifically, the agreement provided that if a shareholder-employee attempted a “restrictive transfer” or died, retired, or was disabled, the remaining shareholder-employee was given the first option to purchase the stock for the price and terms set forth in the agreement. The price per share was originally calculated at $230 per share, but the shareholders’ agreement provided that the shareholders would review the price each year. In addition, the agreement provided that if the shareholders failed to recalculate the price of the stock on a yearly basis, the corporation’s accountant would value the stock pursuant to the same method used to calculate the original stock price. The agreement established fifteen annual installments with an interest rate of ten percent as the terms of any purchase from one shareholder by another.

[216]*216At each annual shareholders’ meeting from 1985 through 1994, Wayne Neil recalculated the fair market value of Gallatin Valley Furniture stock pursuant to the income method of valuation. Each year, the shareholders and directors of the corporation adopted the fair market value calculated by Neil. At their 1994 meeting, which occurred prior to the dissolution proceedings at issue in this case, Neil calculated the fair market value of the stock at $744.85 per share. At that time, James owned 521 shares of Gallatin Valley Furniture stock and Michelle and Dennis owned the remaining 521 shares.

At the dissolution proceedings in October 1994, Wayne Neil testified for James that pursuant to the income valuation method James’s share of the stock in Gallatin Valley Furniture was worth $388,066.85 prior to a minority shareholders’ discount. However, Dorothy’s business valuation expert, Martin Connell, testified that the value of James’s one-half interest in Gallatin Valley Furniture ranged from $1,171,026.50 to $1,373,544.00, depending on which of four methods of business valuation were employed. In his final report, Connell valued the business at $2,650,000. Connell therefore determined that James’s one-half share was equal to $1,325,000. Connell admitted at trial that he did not take the 1985 restrictive shareholders’ agreement into account in determining the fair market value of Gallatin Valley Furniture.

On May 9,1995, the District Court entered its findings of fact and conclusions of law. In its findings regarding James’s interest in Gallatin Valley Furniture, the court determined that “[t]he Shareholder’s Agreement has no application to these proceedings.” The court therefore accepted Connell’s valuation of Gallatin Valley Furniture, and held that James’s share of the company was $1,325,000 minus twenty percent for minority shareholders’ discount and lack of marketability. Accordingly, the court held that James’s share of Gallatin Valley Furniture was worth $1,060,000.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Seivert v. Alli
309 Neb. 246 (Nebraska Supreme Court, 2021)
Brozek v. Brozek
874 N.W.2d 17 (Nebraska Supreme Court, 2016)
In re Watterworth
821 A.2d 1107 (Supreme Court of New Hampshire, 2003)
In Re the Marriage of Harkin
2000 MT 105 (Montana Supreme Court, 2000)
In Re the Marriage of Hanni
2000 MT 59 (Montana Supreme Court, 2000)
Marriage of Harper v. Harper
1999 MT 321 (Montana Supreme Court, 1999)
In Re Marriage of DeCosse
936 P.2d 821 (Montana Supreme Court, 1997)

Cite This Page — Counsel Stack

Bluebook (online)
936 P.2d 821, 282 Mont. 212, 54 St.Rep. 318, 54 State Rptr. 318, 1997 Mont. LEXIS 66, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-marriage-of-decosse-mont-1997.