Valuation of Stock Holdings & Interest on Debt in Arizona

In McCune v. McCune, 586 P. 2d 651 (1978), the Court considered whether a Trial Court had followed its instructions. The case involved a valuation of a divorcing wife’s share of a business run by her husband.

Facts of the Case

Mrs. McCune and Mr. McCune lived in Arizona as a married couple until Mrs. McCune filed for dissolution. At that time, their community property included a 76% interest in the business.

The court entered a judgment awarding her half of the stock held by the couple. She appealed that ruling.

She argued that, as a minority shareholder, her “half” of the stock was worth considerably less than Husband’s stock.

She claimed she would have trouble selling it. Since her Husband ran the business, she could not enforce her dividend rights.

She asked to be awarded a sum equal to half of the value of the couple’s interest in the business. The Court of Appeals agreed.

The Court sent the case back to the Trial Court to determine the value of the stock holdings. It was to award a money judgment equal to one-half of that amount to Wife.

The trial court held a hearing and entered a new judgment, from which she appeals.

Valuation Issues

Mr. McCune asked the trial court to limit the issue on remand to how she should be paid $127,190.00. That was the book value of 50% of the McCune’s total stock holding. The trial court granted this.

Wife claims that the book value understated the value of the stock. The trial court said that it would evaluate all of the trial evidence to determine value. It also stated that it had sufficient evidence to make a proper determination.

The Court of Appeals ruled that there was no requirement that the Trial Court take further testimony.

Interest on Debt

The trial court entered an amended decree of dissolution. It stated that Mrs. McCune’s interest in the business is to be purchased by Mr. McCune for $127,190.00. It requires him to pay her $650 per month until the sum is paid in full.

On appeal, Wife argues that she is entitled to interest on the unpaid principal balance. Interest should run from the date of the original divorce decree, January 5, 1976. The Court of Appeals agreed. It noted that in Arizona, the interest for any legal indebtedness is fixed by law at 6% per annum.

Conclusion

The Court of Appeals ordered that the judgment be modified to include interest at 6% per annum on the unpaid principal balance. It otherwise affirmed the judgment below.