MAINE SUPREME JUDICIAL COURT                                      Reporter of Decisions
Decision: 2014 ME 112
Docket:   Kno-13-251
Argued:   April 7, 2014
Decided:  September 18, 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 an order granting in part and

denying in part her post-judgment motion for additional or amended findings of

fact and conclusions of law and to amend the divorce judgment.              Christine’s

primary 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 estimate 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 Christine were married on December 6, 1980. They are both

in their fifties. They have two children who are now adults and are not the subject
2

of any dispute.   The court found that the parties are “intelligent, hard-working

individuals with many skills [who] have 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 obtained 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 ranging 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 1990 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, employing
                                                                                    3

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 economic 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 corporation 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 Drywall. The expert testified at trial that, as of March 31, 2012,

the fair 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 $450,000, and

Irven testified that he would sell it if offered $200,000.

      [¶6] The court entered a divorce judgment on February 28, 2013. It rejected

the expert’s opinion, finding that “his testimony on the value of an owner-operated

small sheetrock corporation 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 company’s large amount of debt, the court found that

“[t]he persuasive evidence does not support a conclusion that, in this economy, the
4

business has sale value or fair market value.”              The court then undertook an

abbreviated liquidity assessment and found that the company’s “business debt

appears, thus, to be equal to or more than the value of business assets 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 Drywall,

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 Irven 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

$5,000 monthly,1 until they are sold. The court also granted to Irven the sole

authority to choose the listing 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 disabled and therefore unable to
    1
    The parties’ mortgage payments include $3,300 per month for their marital home and $1,900 per
month for their camp.
                                                                                      5

work. It found instead that, notwithstanding her short-term disability, Christine

would be able to “regain her equilibrium” once the trauma 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, through 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 cohabitation 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. DISCUSSION

      [¶10] Because a review of the record demonstrates that 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 real
6

estate. See St. Hilaire v. St. Hilaire, 526 A.2d 28, 29 (Me. 1987); see also Levy,

Maine Family Law § 7.7[1] at 7-52 (8th ed. 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

      [¶11]   There is no dispute that Irv’s Drywall, which was 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 exceptions not

applicable here, as “all property acquired by either spouse subsequent to the

marriage”). Rather, the dispute centers on the value of that marital asset. Valuing

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. Nonetheless, as with any factual finding, we 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 Bond, 2011 ME 54, ¶ 15, 17 A.3d 1219. We review the court’s

overall distribution of property for an abuse of discretion. Id. ¶¶ 10, 15.

      [¶12] As with all other testimony or evidence, the court was authorized,

indeed required, to evaluate the credibility of the evidence offered on the value of
                                                                                    7

Irv’s Drywall. See Wandishin, 2009 ME 73, ¶ 13, 976 A.2d 949. Accordingly, it

could reject the expert witness’s opinion that the 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 id. The court was

also free to reach a differing valuation based on its independent review of the

evidence, as long as that determination was supported by competent evidence in

the record. See id.; see also Levy, Maine Family Law § 7.8[1] at 7-65.

      [¶13] The court’s conclusion that Irv’s Drywall had no “sale value or fair

market 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 contains ample evidence from which the court could determine that this

relatively small business, which had taken a hit in the economic downturn, owed

its existence to Irven’s ability and willingness to continue the work; that it was not

likely at that time to garner nearly $400,000 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.

      [¶14] The court’s findings went astray, however, when the court determined

on its own, through the use of an abbreviated liquidation calculation, that the
8

company’s debts exceeded its assets. The court explicitly noted that it drew the

facts for that analysis from 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 result in a net positive value of over $47,000:

           Irv’s Drywall Assets                    Irv’s Drywall Debts
              as of 3/31/2012                        as of 3/31/2012
                            2
Real estate value (current)     $265,000 Mortgage (current)3           $173,966
Cash                              42,417 Lien from other sale            10,000
            4
Equipment                            Not Accounts payable to            123,630
                                available supplier
Accounts receivable               49,889 Customer deposits                2,000
Inventory                          5,000 Line of credit with Camden      33,860
                                          National Bank
Prepaid assets                    14,606 Debt owed to Ally Bank           1,517
Stockholder advances              15,100

Total assets                            $392,012 Total debts                                  $344,973
                                        Net Value: $47,039

        [¶15]     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 court
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 use 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

      [¶16]    The question before us is whether that factual error affected

Christine’s substantial rights in the ultimate division of the marital property. A

trial court 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).

      [¶17] There is no indication that Christine suffered substantial injustice or

was prejudiced by the court’s award of Irv’s Drywall in its entirety to Irven.

Although the liquidation value of the business was a positive, rather than a

negative, value at the time of the divorce hearing, it was a relatively small value.

Further, as noted above, on 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 its 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, although the court erred in
10

finding that the company had no positive liquidation value, that error had little

effect on the property distribution to both parties.

      [¶18] Accordingly, the court did not abuse its discretion in determining that

the business’s payment of Irven’s salary constitutes its primary source of value to

both parties and therefore awarding the business to Irven. Any cash that Christine

might have received from a share of the liquidation proceeds of Irv’s Drywall was

more than offset by the court’s order that Irven pay the parties’ entire mortgages

totaling over $5,000 per month and spousal support of $1,000 per month—

payments that, when annualized, constitute nearly 80% of Irven’s pretax 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 pretax wages.

      [¶19]    Because the court’s small factual error in the calculation 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:

                      Judgment 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:

        David 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
FOR CLERK REFERENCE ONLY
