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In re Martin

Supreme Court of New Hampshire

May 23, 2006

In the Matter of Lisa M. Martin and James A. Martin

UNPUBLISHED OPINION

The respondent, James A. Martin, appeals the final decree in his divorce from the petitioner, Lisa M. Martin. In a prior order, we ruled that the respondent's appeal was timely filed and affirmed the trial court's denial of the respondent's second motion for reconsideration on the ground that it was untimely.

In this order, we address the respondent's contention that the trial court erroneously added $50, 000 to the valuation of his plumbing business and erroneously added $21, 389.75 to the amount of his withdrawals from the business. We also address the petitioner's assertion in her cross-appeal that the trial court erred when it determined that the respondent's gross income for child support and alimony purposes was $120, 000. We affirm in part, vacate in part and remand.

I. Valuation of Business

To determine an appropriate division of marital property, courts generally look to the fair market value of the assets. Rattee v. Rattee, 146 N.H. 44, 50 (2001). "Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." In the Matter of Watterworth & Watterworth, 149 N.H. 442, 447 (2003) (quotation omitted).

The valuation of a business is a question of fact, not of law. See id at 450. There is no single best approach to valuing a business. See id. Valuation of each individual business depends upon its particular facts and circumstances. See id. It is within the trial court's discretion to accept or reject such portions of evidence as it finds proper, including that of expert witnesses. Tennessee Gas Pipeline Co. v. Town of Hudson, 145 N.H. 598, 602 (2000). We will not disturb the trial court's findings in this regard unless they are unsustainable on the record. See Watterworth, 149 N.H. at 450.

In its order granting the petitioner's motion for reconsideration, the court explained that it was adding $50, 000 to the valuation of the respondent's business because "[b]oth experts testified that on a sale the seller would keep any cash that was in the business account." This is incorrect. While the petitioner's expert testified to this effect, the respondent's expert, Ernest R. Tyler, testified as follows:

Q. You agree with Mr. Gordon, as I understand it, that, typically, in a sale of this type, it's an asset sale?
A. In closing out businesses, typically, they're all – not all, but the majority are asset sales.
Q. And the seller retains the cash, the accounts receivables, and pays the payables?
A. Not necessarily.
Q. Generally?
A. The only – the only local comparative I have would – would discredit that, completely. The one comparative I have of a local heating and air conditioning company this – this sale was total assets, cash, receivables, less total liabilities, and came up with a selling price. And that's what the company sold for.

Given the court's initial order, we are unable to assess whether or to what extent this error may have affected the court's decision on reconsideration. In its initial order, the trial court accepted the valuation of the business by Tyler, who valued the business at $233, 000 as of year-end 2002. This value, Tyler testified, included the value of the $76, 000 that the business had as cash-on-hand as of the end of December 2002. Tyler testified that he would not add the value of the cash-on-hand to the value of the business unless the cash-on-hand was excessive. As he explained, when assessing the value of a business using income methods, "you never add back all assets." In such assessment methods, "you add back either excess or non-working assets." Excess or non-working assets are assets that are in excess of what "the company need[s] to stay in its operations." All "ordinary assets are used in the trade of business. They're producing the income, which you're capitalizing, or the cash flow that you're capitalizing, " so these assets are taken into account through the use of a multiplier. In Tyler's view, the $76, 000 was the amount of cash that the respondent would need to cover between thirty and forty-five days of normal ...


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