Timothy W. HARPER v. Sheryl E. HARPER
Docket: BCD-16-555
Supreme Judicial Court of Maine.
August 1, 2017
2017 ME 171
Submitted on Briefs: June 29, 2017
[¶ 10] More troubling than this error, however, is the overarching question of why a referee was appointed in this matter at all. By all accounts, John‘s estate is modest. It likely comprises real property on which sits a motor home, as well as a couple of motor vehicles, a small amount of cash, and a few other items of personal property, with a total value of no more than $100,000. Nevertheless, in the five and a half years since this litigation began, the parties have not had the benefit of any evidentiary hearing at which their disputes about the composition and value of the estate have been heard, nor any disposition based on an evidentiary record of any sort. See Peaslee, 388 A.2d at 106 (stating that “[d]ue process requires that, before a party can be deprived of property the party must have notice and an opportunity to be heard“). Meanwhile, the costs associated with litigating the administration of the estate have continued to accrue, and may already have exceeded the value of the estate; in January of 2015, for example, Nathan sought roughly $35,000 in attorney fees. Indeed, the referee appeared to recognize the incongruity of the situation by kindly agreeing to forego his own compensation. We need not address Judith‘s contention that she never agreed to the appointment of a referee, nor her challenge to the scope of the work the referee was asked to perform; whatever the court‘s and the parties’ intent or understanding was, the involvement of a referee in the matter was misguided.
[¶ 11] We therefore remand the matter for the Probate Court itself to conduct an evidentiary hearing on the composition and value of the estate as if a referee had never been involved in the matter, and for the court to issue an appropriate decision detailing the distribution of the estate consistent with the evidence produced at that hearing.3 This evidentiary hearing must be conducted and the resulting judgment issued as soon as possible, so that the parties have some hope of finality in this unnecessarily complicated litigation.4
The entry is:
Judgment vacated. Remanded to the Probate Court for further proceedings consistent with this opinion.
Kristin A. Gustafson, Esq., Gustafson Family Law, Augusta, for appellee Sheryl E. Harper
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
JABAR, J.
[¶ 1] Timothy W. Harper appeals from a judgment entered in the Business and Consumer Docket (Horton, J.) partially denying his motion to reconsider and amend a previously-entered divorce judgment distributing his and Sheryl E. Harper‘s assets. We affirm the judgment.
I. BACKGROUND
[¶ 2] The following facts are derived from the court‘s final amended divorce judgment and are supported by evidence in the record. See Berntsen v. Berntsen, 2017 ME 111, ¶ 2, 163 A.3d 820. Timothy and Sheryl were married in New York in 1978. During their approximately thirty-seven-year marriage, the couple amassed considerable assets and managed several businesses. The operation of two of those businesses is of particular importance for the purposes of this appeal.1
[¶ 3] Northeastern Seafood, Inc. (NES) is a commercial lobster business operating from a wharf in Southwest Harbor. NES purchases lobsters from fishermen and resells the lobsters to either commercial or individual buyers. Sheryl was NES‘s original proprietor, starting the business in 1986 and developing it into a successful enterprise over time.
[¶ 4] Beginning sometime between 1997 and 2005, Timothy began managing NES, while Sheryl assumed a less active role. After taking over operation of NES, Timothy instituted a number of changes, including implementing a separate and additional bookkeeping system and removing the credit card processing infrastructure. Timothy removed the credit card systems for the purpose of retaining cash that NES received for retail lobster sales without recording it as corporate income. He also decided to sell lobsters to only two commercial buyers, thereby significantly decreasing NES‘s profits. While in control of NES, Timothy opened and drew down upon two lines of credit that, at the time of the divorce proceeding, carried a total balance of approximately $350,000. This was in stark contrast to Sheryl‘s management of the company; when she gave up control of the business, NES operated with limited debt and substantial cash reserves.
B. The Dictator, Inc.
[¶ 5] The Dictator, Inc. (Dictator) is a corporation of which Timothy is the sole shareholder. It is a profitable business that owns a scallop boat and associated fishing permits, which have a collective value of approximately $4,500,000. Between 2012 and 2015, Timothy engaged in a series of transactions using Dictator operating accounts that were not related to the business, including purchasing automobiles and recreational vehicles for his personal use. He also used Dictator income to pay himself year-end bonuses of $150,000 and $200,000.2
C. Separation and Divorce Proceedings
[¶ 6] The parties separated in July 2012, and on January 8, 2013, Timothy filed a complaint for divorce in the District Court. On April 1, 2014, the District Court (Augusta, Stanfill, J.) entered an interim order granting each party exclusive possession of certain real estate and allocating between them responsibility for operating their various businesses. The order provided that Timothy would be responsible for operating NES and Dictator during the pendency of the divorce proceedings.
[¶ 7] Almost two years after the divorce complaint was filed, on November 19, 2014, the matter was transferred to the Business and Consumer Docket. There, the court conducted a hearing on the complaint in two phases, the first of which began on January 28, 2015. Before the conclusion of the first phase, on February 26, 2015, the court entered a divorce judgment notwithstanding the pendency of other claims. See
[¶ 8] The second phase of the hearing took place over four days beginning on April 7, 2016. At the conclusion of the second phase, the court issued a forty-one-page amended divorce judgment distributing the parties’ assets and directing the referee to oversee the liquidation of the properties and businesses described in the judgment.
[¶ 9] The court found that Timothy engaged in economic misconduct while operating NES and Dictator, which resulted in the marital estate being deprived of “at least $800,000 from what should have been shared income from” the two companies.3 Accordingly, when fashioning a property distribution award, the court imputed to Timothy the receipt of $800,000. See
[¶ 10] The judgment also ordered Timothy to reimburse Sheryl $50,000 in attorney fees after concluding that Timothy engaged in conduct that unnecessarily prolonged litigation and that he improperly used marital funds “in which [Sheryl] had a reasonable expectancy and interest” to pay his attorneys.
[¶ 11] Timothy subsequently filed a motion to reconsider and amend the judgment, which the court granted in part and denied in part. He now appeals.
II. DISCUSSION
A. Economic Misconduct
[¶ 12] On appeal, Timothy challenges the court‘s finding that, through his operation of NES and Dictator, he committed economic misconduct resulting in the diminution of the marital estate by approximately $800,000. “A court‘s finding that a party to a divorce did or did not engage in economic misconduct is reviewed for clear error.” Catlett v. Catlett, 2009 ME 49, ¶ 31, 970 A.2d 287 (quotation marks omitted). We will not disturb a divorce court‘s finding of economic misconduct if that finding is “supported by competent evidence in the record.” Efstathiou v. Aspinquid, Inc., 2008 ME 145, ¶ 35, 956 A.2d 110. Here, where Timothy failed to request further findings of fact pursuant to
[¶ 13] There is competent evidence in the record to support the court‘s finding that Timothy engaged in economic misconduct while operating NES and Dictator. His actions in unilaterally incurring significant liabilities, implementing a separate accounting procedure, systematically retaining cash from retail lobster sales, and refusing to sell lobsters to more than a few commercial buyers while managing NES are well documented in the record. These changes had a detrimental impact on the marital estate, and Timothy provided no legitimate business purpose for instituting them. Likewise, as the court correctly noted, allegations that Timothy engaged in economic misconduct while managing Dictator are substantiated by voluminous records containing evidence of “largely undisputed transactions” through which he unreasonably diminished the value of that marital asset.
[¶ 14] Further, we are not persuaded by Timothy‘s argument that, to prove economic misconduct, Sheryl was required to
[¶ 15] Similarly, Timothy‘s argument that a party must violate a court order to commit economic misconduct is unpersuasive. Apart from the fact that we have upheld trial courts’ findings of economic misconduct in the absence of a violation of a court order, see, e.g., Quin v. Quinn, 1997 ME 131, ¶¶ 7-9, 696 A.2d 432; Berntsen, 2017 ME 111, ¶¶ 3, 16-18, 163 A.3d 820, restricting the application of economic misconduct to only those instances where a party has violated a court order may have the detrimental effect of encouraging savvy litigants contemplating divorce to strategically deplete marital assets before initiating the action. Therefore, the court did not err in finding that Timothy engaged in economic misconduct that deprived the marital estate of approximately $800,000.
B. Attorney Fees and Appointment of Referee
[¶ 16] Finally, Timothy argues that the court abused its discretion in ordering him to pay a portion of Sheryl‘s attorney fees and erred in “appointing” a referee in its final judgment because, upon the issuance of the judgment, the case was no longer “pending” for the purposes of
The entry is:
Judgment affirmed.