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Strafaci v. Strafaci

July 27, 2010


On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Middlesex County, No. FM-12-763-07D.

Per curiam.


Submitted April 27, 2010

Before Judges Wefing, Grall and LeWinn.

Defendant appeals from certain portions of the judgment of divorce entered on January 6, 2009, and certain portions of the subsequent order entered on March 6, 2009, denying his motion for reconsideration. After reviewing the record in light of the contentions advanced on appeal, we affirm in part and reverse in part.


The parties were married in September 1970 and had two children during the course of their marriage, a son, James A. Strafaci, and a daughter, Michelle Strafaci. In October 2006, plaintiff filed her complaint, seeking a divorce. The litigation was unfortunately acrimonious; although only three witnesses testified, plaintiff, defendant and their son James A., the matter took nine days to try to conclusion. The principal dispute at trial and on appeal is the valuation of Jameer International, Corp. ("JIC"), a business that the parties started in the mid-1980s. At the time plaintiff filed for divorce, plaintiff and defendant each owned 50% of the stock of JIC and each worked in the business; plaintiff was vice-president and secretary, defendant president and treasurer. Defendant was clearly the moving force behind the business when it started and was responsible for generating business.

JIC is in the business of distributing electronic circuit boards for use in various devices. It originally served as the United States representative for Compeq, obtaining purchase orders for Compeq and coordinating shipments from Compeq to the buyer. JIC would receive a commission on these sales. JIC's relationship with Compeq ended with litigation in the early 1990s. Plaintiff contended the litigation was ruinous for JIC, while defendant said it was a success. The trial court did not resolve that dispute factually.

After the relationship with Compeq ended, defendant created a similar relationship for JIC with a Taiwanese company, Century Circuits, Inc. ("CCI"). JIC had a contract as CCI's sales representative in the United States. It took purchase orders for circuit boards, coordinated shipment of the completed boards and received a commission for its efforts. JIC's principal clients were Siemens and Kimball Electronics.

The parties' son, James A., joined JIC in January 1999. He had worked as a consultant for the business for several months prior to that, installing a computer system, which the company had not previously had. His title with the business was operations manager, but he assumed responsibility in a number of spheres, which had the unfortunate result of creating increasing friction between himself and defendant, his father, to the point that their relationship eventually ruptured completely. He sought to move the business in a new direction, away from its commission-based relationship to one in which it purchased circuit boards on its own behalf and then resold them, making its profit on the difference between the purchase price from CCI and the sales price to the end user. This change in business focus led to increased revenue for the company. It also resulted in the company having a greater need for warehouse space than it had previously and the company, which the parties had previously run from their home, moved to new quarters.

Some of the friction between the two men was the result of the son seeking to change the nature of the business his father had built up, and some was due to the father's difficulties in operating under the computerized systems which the son had installed. Plaintiff and James A. said that defendant was becoming forgetful and unable to grasp aspects of running the business and would then seek to inject himself into ongoing matters, causing disruption and confusion. James P. said the problems were due to plaintiff and James A. deliberately not copying him on e-mails in an effort to keep him in the dark. Some of the friction, in addition, was undoubtedly due to defendant's unhappiness at certain personal choices his son had made, specifically with his marriage.

The parties had various discussions with James A. about his purchasing the company. With respect to JIC, two evaluations of the company were made, both prior to plaintiff filing her divorce complaint. The first, by Everingham & Kerr, Inc., reported that the fair market value of JIC's common stock was $1,010,000 as of October 31, 2005. That led to James P.'s proposal to sell the company to his son for $500,000.

James A. countered with $400,000, and a second valuation, by Bederson & Company, LLP, was performed as of March 31, 2006. This appraisal reported two different values, one using the income method, of $350,000 and another, using the market approach, of $1,250,000 to $1,300,000. This latter figure included good will which, according to the report, consisted of the relationship James P. had developed and maintained with CCI. James A. was unwilling to pay anything for that good will and in September 2006 offered $350,000 to purchase all the stock of JIC. While this was acceptable to plaintiff, it was not acceptable to defendant. These discussions eventually broke down completely, principally over two issues: the price James A. would pay and defendant's desire to retain some role with the company until he became sixty-five. Defendant was diagnosed with bladder cancer in 2005, and he was concerned about his ability to obtain health insurance on an individual basis in light of that health history. He wished to retain a relationship with the company so that he could be covered under its group health insurance plan until he qualified for Medicare. Because of their deteriorating business and personal relationship, James A. was unwilling to permit defendant to remain with JIC in any capacity. There is no need to burden this opinion with the acrimonious and insulting e-mails each exchanged with the other and about one another to JIC's principal supplier, CCI during this period.

In addition, James P. wanted to structure the sale in such a way as not to favor his son over his daughter, both of whom, he felt, should share equally in the business he had built up over the years. James P. proposed that James A. pay $500,000 over a ten-year period, in return for 100% of the stock and that James P. would use that money, in turn, to provide for the couple's daughter. James A. wanted to purchase the company outright, to end all involvement with his father. Plaintiff was unwilling to have the ...

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