Bonny T. Barsi v. George D. Barsi (2013)

MEMORANDUM OF DECISION RE MOTION FOR ACCOUNTING AND TO COMPEL PAYMENT, POSTJUDGMENT (164)

The plaintiff in the above captioned motion seeks an accounting of all payments the defendant has received in connection with the sale of the companies, as defined in the memorandum of decision dated March 23, 2012 (133.01) dissolving the marriage of the parties, which decision was corrected by the court by order issued on February 13, 2013(160) (collectively the decision) and payment of the proceeds from the sale found by the court to constitute a part of the marital estate.   For the reasons set forth below, the motion is granted.

FINDINGS OF FACTS

Prior to the trial on the plaintiff's complaint, the defendant entered into a purchase agreement to sell his interests in the companies.   The total purchase price was $870,158. $225,000 was paid by the purchaser (as defined in the decision) at the closing and the remaining balance of $645,158 was payable over seven years in eighty-four installments with interest thereon at the rate of 5%. As a component of the transaction, the defendant, who had been the managing member of the companies, entered into a non-compete agreement.

In the purchase and sale documents the non-compete agreement was alternatively (and conflictingly) allocated a value of (i) $300,000 and (ii) an amount equal to 50.2% of the proceeds payable by the purchaser.   However, as was (belatedly) apparent, $300,000 is not equal to 50.2% of the total purchase price or of the balance of the purchase price payable after the initial closing distribution of $225,000.

The court determined and found that the proceeds payable under the non-compete agreement did not constitute a part of the marital estate, but were more properly treated as being in the nature of a salary.   The court found that $300,000 of the sales proceeds was attributable to the non-compete.   The court then awarded to the plaintiff 50% of all other proceeds paid to the defendant in connection with the sale of the companies.

The companies remain in the process of winding up their business.   The court found in the decision that the members were receiving proceeds from the sale of the company after the payment to AmEx (as defined in the decision) and “other reasonable and customary expenses.”

At the time of the decision, the defendant was receiving $775 a week under the non-compete agreement and $133 a week as a return on his investment.

The order of the court in the decision does provide that the defendant is to pay to the plaintiff one-half of the amounts that he “actually receives.”

The defendant, however, as the managing member of the companies, is the conduit for the distribution to the other members and to the plaintiff and himself of the sales proceeds as and when paid by the purchaser.   Accordingly, the defendant has been determining what expenses are to by paid by the companies in connection with the winding up and liquidation thereof and accordingly, controls what amount he actually receives.

The defendant, in response to discovery requests made by the plaintiff, produced copies of the emails he has sent to the other members which include a summary of the monthly gross receipts from the purchaser, the deduction of the expenses the defendant has paid, and then an allocation of the net proceeds to the members based on their respective percentage of ownership of the companies.

The plaintiff claims that the defendant is inappropriately deducting expenses from the gross proceeds resulting in her receiving a lesser amount as her share of the same and also that the defendant is not correctly computing the portion of the net proceeds allocated to the non-compete agreement.

Taking the second claim first, the court finds that the defendant has, in his distribution of proceeds, allocated to himself, for the non-compete agreement, 50.2% of the net proceeds and for his membership interests, 8.6%. The court does acknowledge that adding 58.8% (i.e., the sum of 50.2 and 8.6) to the percentage interests of the other members does equal 100%.   However, as set forth in the decision, $300,000 of the share of the defendant's proceeds has been allocated to the non-compete and the balance of the proceeds payable to the defendant, without regard to the actual percentage of the net proceeds that may be, has been deemed to be part of the marital estate and to be shared equally with the plaintiff.   Mathematically, if the defendant continues to take 50.2% of the proceeds, he will (assuming the purchaser makes all required payments) receive more than $300,000 under the non-compete.   That does not comport with the order of the court.

The defendant has been taking, as a part of the monthly distribution, varying amounts as the payment for his non-compete—the amounts have varied, in part, due to the amount of expenses he has taken off the gross.   The defendant has also been including interest payable by the purchaser as a component of his non-compete proceeds.   The monthly amounts have been from approximately $2,829 (which is an usually low number when compared to the others), but have more often varied between a low of $3,229 up to $3,843.   In theory, the defendant would be able to continue to take such varying amounts and comply with the order of the court by capping the total of such payments at $300,000 and then distributing to the plaintiff one-half of the total of the payments made thereafter that he would otherwise have treated as allocated to his non-compete;  however, if the defendant were to do so, that may result in the plaintiff receiving less money in the event the purchaser fails to make all the requisite payments.

The order of the court was premised on the finding that the defendant was receiving $300,000 over eighty-four installments—which would be a monthly payment of approximately, $3,571.   The court did not attribute any portion of the interest payable on the purchase price to the non-compete.

The court does find that the amount payable under the non-compete is to be deducted first from the proceeds allocable to the defendant before the balance thereof is to be shared with the plaintiff;  that is, after allocation of the percentages to his other members (36.2% to Wipfler and 5.0% to Erdman), the defendant is to pay himself the amount due under his non-compete of $3,571 and then to share 50% of the remaining balance of his share of the proceeds with the plaintiff.

As to the other claim of the plaintiff, the court acknowledges the credible testimony of the defendant that the other members (Wipfler and Erdman) have not questioned or complained about the categories or amounts of expenses the defendant has deducted from the gross proceeds.   That does not, however, preclude the plaintiff from doing so as she has been awarded 50% of the defendant's share of the gross proceeds from the sale of the business, less reasonable and customary expenses and less the AmEx payment.   To the extent the expenses are not reasonable or customary, then such expense payments are not to reduce the amount of proceeds which are to be shared with the plaintiff.

The court, after considering the credible evidence, including the exhibits outlining the expenses paid by the defendant to AT & T (the provider) for, among other things, television and internet provided to the defendant's residence and for his cell phone usage, does not find all of the expenses paid by the defendant to be reasonable and customary in the wind up of the companies.   The defendant may not include (insofar as it impacts the amount payable to the plaintiff) in the “G & A, phone, internet, postage, supplies” line item (as shown on the summaries provided to the other members) amounts allocated to the television and internet usage.

The court finds the following expenses to be reasonable and customary:  accounting, legal, wire transfer fees, postage, supplies and telephone—all to the extent the same are actually incurred in connection with the winding up of the business of the companies.

The plaintiff did not prove that the legal and accounting fees paid by the defendant were other than reasonable.

The court understands the testimony of the defendant that the costs of the television and internet are less under his “bundled” plan with the provider.   That means the cost to him is less.   It does not mean that because he can pay less for such services by virtue of his bundling the same with legitimate, reasonable and customary expenses of the companies, that doing so is appropriate.

He may not, by paying his household expenses through the companies, reduce the amount payable to the plaintiff.   If the other members of the companies are fine with the way the defendant has been paying the “expenses” he can continue to do so to reduce the gross proceeds to determine the net proceeds to be distributed to such members (not that the court is condoning or otherwise approving the same, but the court has no jurisdiction over the allocation of proceeds other than such proceeds as constitute a part of the defendant's marital estate)—but he must add back the television and internet expenses and any other expenses he pays that are not reasonable and customary prior to paying to the plaintiff her share of the proceeds.

ORDERS

The motion is granted and the court enters the following orders:

1. The defendant shall produce and deliver to the plaintiff an accounting all of the monies received from the purchaser and of the disbursements made therefrom on or before October 18, 2013.   The defendant is to thereafter provide to the plaintiff a monthly statement detailing the amount of gross proceeds and the manner in which her share of the same is determined.

2. The defendant is to simultaneously provide to the plaintiff a reconciliation between the amount disbursed to date to the plaintiff under the prior summaries/accountings produced by the defendant and the amount that should have been paid to the plaintiff had the disbursements been made in accordance with the orders of the court set forth in the decision which orders are to be effectuated as follows:

(a) The defendant is to deduct only the AmEx payment and reasonable and customary expenses from the gross proceeds.   The amount paid to the provider for internet and television is not to be deducted.   The defendant may deduct the telephone, voice and account charges as charged by the provider under the bills submitted as exhibits—even though the court recognizes that the telephone is also utilized as his personal phone.

(b) The defendant is to allocate no more than $3,571 a month to the payment under the non-compete agreement.   To the extent 50.2% of the net proceeds (calculated as above set forth) exceeds $3,571, then the excess is to be shared equally with the plaintiff.   In the event 50.2% of the net proceeds is less than $3,571, then the negative amount is to be made up by deducting the same from the proceeds that would otherwise by payable to the plaintiff as 50% of the defendant's proceeds attributable to the marital estate.

For example:

Assumed Gross Sales Proceeds $9,042.09

Less Expenses:

Wire transfer 15.00

Amex 1,000.00

G & A, phone, internet, postage supplies 503.40

(including the television and internet

at $110.68 and $37.00, respectively)

Legal 0

Accounting 0

Total Expenses $1,518.40

Net Proceeds as calculated by defendant $7,523.69

Distribution of Proceeds

Wipler—36.2% $2,723.58

Erdman—5.0% 376.18

G.D. Barsi non-compete $3,571.00

Subtotal $6,670.76

Balance for distribution of net proceeds

($7,523.69—$6,670.76) $ 852.93

Add back:  Television 110.68

Internet 37.00

Subtotal $1,000.61

50% to Plaintiff $ 500.30

50% to Defendant $ 500.31

3. To the extent after the reconciliation has been done the defendant owes any monies to the plaintiff, he shall pay the same on or before November 29, 2013.

SO ORDERED.

BY THE COURT,

Olear, J.

Olear, Leslie I., J.