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Barton v. Barton

A trial court is not bound by the value of stock set forth in a buy-sell provision of a closely-held corporation's stockholder agreement, when placing a value on such stock for purposes of dividing marital property.

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This divorce case presents a question of first impression in this State: In placing a value on the stock of a closely-held corporation for purposes of dividing marital property, is the court bound by the value set forth in a buy-sell provision of the stockholder agreement The short answer is “no.” The parties had been married for 29 years when wife sued husband for divorce, seeking an equitable division of property and alimony. The matter was referred to an arbitrator who divided the marital assets, but did not award alimony. The arbitration award was adopted by the superior court. In Case No. S06F2159, husband appeals, assigning error to the division of marital property. Wife cross-appeals in Case No. S06X2160, asserting the court erred in failing to award her alimony.1

1. Case No. S06F2159. Husband owns one-half of the stock of Triad Specialities, Inc., a closely held corporation. The stock is subject to a buy-sell provision in the stockholder agreement which provides that in the event of husband’s death, disability, bankruptcy, or other specified triggering event, the other shareholder has a right to purchase husband’s stock at a price to be determined by a formula. Under that formula, the value of husband’s stock would have been fixed at $342,200. Nevertheless, the arbitrator placed a fair market value on the stock of $508,000, and the division of marital property was based on that valuation. Citing Hertz v. Hertz , 657 P2d 1169 N.M. 1983, husband asserts that, in valuing the Triad stock, wife should be bound by the terms of the buy-sell agreement. We disagree.

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