Palmerino v. Palmerino & Giaimo v. Vitale

In Palmerino v. Palmerino, the Massachusetts Court of Appealsconsidered whether a trial court erred in valuing the husband’s grocery store. The trial court’s approach had not included discounts—and went further to state that the income approach is preferable for valuation.  Find out what the court decides! 

In Giaimo v. Vitale, the Supreme Court of New York considers the dissolution of a company called EGA Associates. The case involved the sale of 19 residential buildings in Manhattan, accusations of fraud during discovery hearings on fair value, and the applicability of proposed discounts for marketability and built-in capital gains. 

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Palmerino v. Palmerino
2011 Mass. App. Unpub. LEXIS 506
April 15, 2011
Judge Lenk
Massachusetts Court of Appeals

The primary issue before the Massachusetts Court of Appeals was whether the trial court erred in the valuation of the husband’s grocery store.  The trial court’s valuation of the business did not include discounts and further stated that the income approach is preferable; however, the net asset value approach may also be used in the absence of a determinable market value. The appellate court found no clear error in the trial court’s valuation and affirmed the ruling in its entirety.

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Giaimo v. Vitale
2011 NY Slip Op 50714U
April 25, 2011
Judge Friedman
Supreme Court of New York

These proceedings were brought by petitioner, Robert Giaimo, against respondent, Janet Giaimo Vitale, to dissolve EGA Associates, Inc. (EGA) and First Avenue Village Corp.  (FAV). EGA and FAV are family owned, closely held corporations whose assets are 19 residential buildings in Manhattan, some of which contain commercial space and cash.

At the time the proceedings were commenced, petitioner served motions for preliminary injunctions. On August 3, 2007, the court issued temporary restraining orders (TRO) enjoining transfers of each corporation’s property except in the regular course of business.

By stipulation dated October 11, 2007, the parties continued the TROs and adjourned the petitions pending discovery. Respondent Vitale subsequently elected to purchase petitioner’s shares in the corporations. By stipulation dated November 15, 2007, the parties agreed to refer the matters to a referee “to establish fair value under respondent’s election.”

The stipulation provided for the parties to contact the court “in the event respondents either request the sale of a building to satisfy tax requirements or request a board meeting.” The stipulation also stated: “The TRO shall continue in effect until altered by the court. The motions [for preliminary injunctions] are adjourned pending the foregoing.” The parties then conducted protracted discovery between themselves or before Special Referee Louis Crespo. The fair value hearing was held before the Special Referee on January 5-7, 9, 12, 14-16, 20-23, and 28-29, February 4-5 and 18, and March 3, 2009. The parties’ time to submit memoranda of law was extended to October 15, 2009.

The Special Referee issued a Report & Recommendation (Report), dated June 30, 2010.  Petitioner moves to confirm in part, modify in part, and reject in part the Special Referee’s Report.

Respondent Vitale cross-moves to reject, in part, and confirm, in part, the report. Petitioner has also served two contempt motions: The first (TRO Contempt Motion) seeks an order holding respondent Vitale in contempt for violating the August 3, 2007 TRO, appointing a temporary receiver, and directing respondent Vitale to “provide full and unfettered access to the books and records” of the corporation.

The second seeks an order finding respondent Vitale in contempt “for her fraud on the court by concealing assets” of the two corporations at the fair value hearing, and for “an order directing that the undisclosed assets of FAV and EGA be included in their values, without setoff or deduction.” By cross-motion, respondent seeks an order holding that if the record of the fair value hearing is reopened to include additional assets, additional set-offs should also be made for taxes, interest, and professional fees. 

The court confirmed the application of a marketability discount, as well as a discount for built-in capital gains when establishing the statutory fair value of the real estate holding company. 

Peter Agrapides, MBA, AVA, is a senior valuator with Houlihan Partners