Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Steneken v. Steneken

May 18, 2005

MARILYN A. STENEKEN, PLAINTIFF-RESPONDENT,
v.
GARY L. STENEKEN, DEFENDANT-APPELLANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 367 N.J. Super. 427 (2004).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

This appeal requires the Court to address whether, in setting an award of alimony and in establishing equitable distribution in respect of a closely-held corporation, the trial court must use the same method for determining income. Stated differently, the question is whether it is impermissible double counting to use actual income for alimony purposes but a lower "normalized" income amount when valuing a closely-held business for equitable distribution purposes.

Plaintiff Marilyn Steneken and defendant Gary Steneken were married on August 22, 1971. They had three children. After more than twenty-four years of marriage, the Stenekens separated. Eighteen months later, they filed separate complaints for divorce. The parties were able to resolve most of their differences except that they disagreed in respect of the interplay between the amount of alimony and the equitable distribution of Esco Corporation (Esco), the largest marital asset subject to equitable distribution.

Gary Steneken was the sole shareholder and operator of Esco, a company he acquired and built over the course of the marriage, and which allowed the parties to enjoy their marital lifestyle. For the five years leading up to the filing of the complaint for divorce, 1992 through 1997, Gary's salary from Esco increased from $125,961 to $207,961.

When valuing Esco, the trial court accepted the valuation of Gary Steneken's expert, who opined that, in determining his own salary, Gary had paid himself more than the market value of his services and that the reasonable value of his services to the company was, as of 1996, $150,000 per year. As a result, Gary's expert valued Esco as if the salary paid to Gary had been the lower $150,000 figure, thereby increasing the overall value of Esco. When determining the proper amount of alimony, however, the trial court similarly imputed to Gary the "normalized" salary used by the valuation expert in valuing Esco ($150,000) and not Gary's actual salary. On that basis, the trial court awarded Marilyn Steneken alimony in the amount of $4,000 per month.

Marilyn appealed both the amount of alimony and the equitable distribution awarded to her. The Appellate Division affirmed the trial court's valuation of Esco for equitable distribution purposes, but reversed and remanded the trial court's alimony award. According to the Appellate Division, the trial court improperly used Gary's "normalized" income instead of his actual income when computing alimony due Marilyn. The matter was remanded to the trial court, however, because the Appellate Division determined it could not conduct a meaningful review of the alimony conclusion in the absence of sufficient findings of fact and conclusions of law.

On remand, the trial court determined that it "was apparently in error" in utilizing the normalized income figure for Gary to make an alimony determination. After applying the criteria set forth in N.J.S.A. 2A:34-23b, and considering the income Marilyn was then receiving in her recently renewed career as a school teacher, the trial court awarded Marilyn alimony in the amount of $5,500 per month, an increase of $1,500 per month from the earlier award.

Gary then appealed. He claimed that the trial court's use of different income figures for alimony and equitable distribution purposes constituted impermissible double counting. According to Gary, the Appellate Division accurately framed the issue as whether it is impermissible double counting to value Gary's business based on his reasonable, rather than actual compensation, and then to calculate the alimony based on the same salary added back to the business income, thus increasing the value of the corporate asset for which plaintiff already received her share in equitable distribution. The Appellate Division affirmed, concluding that N.J.S.A. 2A:34-23b sets forth the full extent of the prohibition on double counting for alimony versus equitable distribution purposes and applying the restriction to retirement benefits only.

The Supreme Court granted the petition of Gary Steneken.

HELD: In determining the income from a closely held corporation for purposes of awarding alimony, there is no requirement that a court use the same method of calculating income that is used to determine the value of the corporation for equitable distribution purposes. The interplay between an alimony award and equitable distribution is subject to an overarching concept of fairness.

1. The valuation of a closely-held corporation is a difficult task that is fact sensitive. There are three principal methods which can be used for developing a value for ownership in a closely held corporation: 1) the capitalization of earnings or income approach; 2) comparison with price earnings ratios of publicly traded companies; and 3) the appraisal of all underlying assets with adjustment for liabilities. Flexibility is required in determining which approach is best suited in a particular instance. The trial court adopted the income approach valuation methodology propounded by Gary Steneken's own expert, and Marilyn raises no quarrel with it. The use of the income or capitalized earnings approach in the valuation of Esco was appropriate. (pp. 6-9)

2. All alimony awards and equitable distribution determinations must, both jointly and severally, satisfy basic concepts of fairness. Although clearly interrelated, the structural purposes of alimony and equitable distribution are different. The goal of a proper alimony award is to assist the supported spouse in achieving a lifestyle reasonably comparable to the one enjoyed during the marriage. The goal of equitable distribution is to effect a fair and just division of marital assets. Equitable distribution determinations are intended to be in addition to, and not substitutes for, alimony awards. The conclusion that alimony and equitable distribution are separate yet interrelated and ultimately subject to an overriding sense of fairness is buttressed by New Jersey statutes. (pp. 9-12)

3. Gary Steneken argues that Marilyn will receive the benefit of his income twice: once in the increased valuation of Esco for equitable distribution purposes and then again in the computation of alimony. The flaw in this argument is that it mistakenly equates the statutory and decisional methodology applied in the calculation of alimony with a valuation methodology applied for equitable distribution purposes that requires that revenues and expenses, including salaries, be normalized so as to present a fair valuation of a going concern. The proper issue is whether, under the circumstances, the alimony awarded and the equitable distribution made are, both singly and together, fair and consistent with the statutory design. Where, as here, the major marital asset is a closely-held corporation and the supporting spouse has determined what his or her income was during the marriage, the supported spouse is entitled, post-divorce, both to alimony sufficient to maintain a reasonably comparable lifestyle and to a fair division of the asset. The Court does not agree with Gary Steneken's view that this analysis effects a windfall to the supported spouse. Trial courts remain free to consider, in the exercise of their discretion and in accordance with the statutory guidelines, the fair and proper quantum of alimony and equitable distribution attendant to each case before them. (pp. 12-17)

Judgment of the Appellate Division is AFFIRMED, as MODIFIED.

JUSTICE LONG filed a separate dissenting opinion in which JUSTICES ZAZZALI and ALBIN join, expressing the view that by using Mr. Steneken's full salary for alimony while pouring a portion of it back into Esco to estimate the company's future earning capacity, the court considered the same income stream twice. The dissenting members would encourage courts to consider modulating either the corporate value or the alimony award to the extent that the same income was considered in both calculations.

CHIEF JUSTICE PORITZ and JUSTICES LaVECCHIA, and WALLACE join in JUSTICE RIVERA-SOTO's opinion. JUSTICE LONG filed a separate, dissenting opinion, , in which JUSTICES ZAZZALI and ALBIN join.

The opinion of the court was delivered by: Justice Rivera-soto

Argued November 9, 2004

This appeal requires that we address whether, in setting an award of alimony and in establishing equitable distribution in respect of a closely-held corporation, the trial court must use the same income determination. As differently posed by defendant, the question is whether it is impermissible "double counting" to use actual income for alimony purposes but a lower "normalized" income amount when valuing a closely-held business for equitable distribution purposes.

We hold that a trial court's determination of the interplay between an alimony award and equitable distribution is subject to an overarching concept of fairness, bearing in mind the interrelated yet separate purposes of alimony versus equitable distribution. In specific, we hold that, for purposes of computing the proper alimony award, actual income of the paying spouse is the lodestar for determining the extent of that party's alimony obligation. We further hold that, for the purpose of valuing a closely-held corporation in determining the proper equitable distribution thereof, proper valuation techniques, which may include the normalization of excess salary expenses, are to be applied.

I.

Plaintiff Marilyn Steneken and defendant Gary Steneken were married on August 22, 1971. They had three children and, after more than twenty-four years of marriage, the Stenekens separated. Eighteen months later, on April 14, 1997, both parties filed separate formal complaints for divorce. The parties were able to resolve most of their differences except that they disagreed in respect of the interplay between the amount of alimony and the equitable distribution of Esco Corporation (Esco), the largest marital asset subject to equitable distribution. The parties' dispute over that interplay has now generated more than seven years of litigation.

Defendant was the sole shareholder and operator of Esco, a company he acquired and built over the course of the marriage, and which allowed plaintiff and defendant to enjoy their marital lifestyle. For the five years leading up to the filing of the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.