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In re Marriage of Honer

California Court of Appeals, First District, Fourth Division

April 9, 2015

In re the Marriage of PENNY and THOMAS MITCHELL HONER,


Mendocino County Super. Ct. No. SCUKCVFL - 0954651, Cindee F. Mayfield, Judge.

Page 688


O'Brien Watters & Davis, Noreen M. Evans, Michael G. Watters and Deirdre Taber Kingsbury for Appellant.

Perry, Johnson, Anderson, Miller & Moskowitz, Lawrence A. Moskowitz and Deborah S. Bull for Respondent.

Page 689


Bolanos, J.[†]

At issue in this dissolution of a 27-year marriage are issues of division of community property and spousal support. Appellant ex-wife questions the court’s valuation of the couple’s two grocery stores because (1) it purportedly used the wrong valuation date, (2) it relied on an expert who used the “marital value” of the properties rather than the “investment value, ” and (3) it denied her posttrial motion to reopen the evidence to update the property valuation. She further contests the amount of spousal support she was awarded, arguing the court (1) failed to properly determine her ex-husband’s ability to pay, (2) failed to consider the parties’ financial disparity, and (3) granted her an “illusory” award of a percentage of the ex-husband’s future distributions from the family business. Finally, she contends the overall distribution of property was not equitable and meaningful. She asks us to reverse the judgment and order the matter retried before a different judge. We find no basis for reversal and affirm.


Thomas Mitchell (Tom) and Penny Honer (Penny) were married in 1982 and separated in 2009. During their long marriage, Tom and Penny[1] together purchased and built up several grocery stores, two of which remained primary marital assets at the time of their separation: Harvest Market in Fort Bragg and Harvest Market at Mendosa’s in Mendocino (Mendosa’s). The Honers opened Harvest Market in 1985 and acquired Mendosa’s in 2006. The businesses were held by Cypress Holdings, Inc. (Cypress Holdings), an S corporation. Tom was and is president and CEO of Cypress Holdings and Penny was Vice President.

The Honers’ markets found success by specializing in an upscale niche for specialty foods and natural and organic products. Tom managed the grocery stores, while Penny designed the logo, decorated the markets, and took care of administrative tasks, such as payroll, billing, advertising, employee training, and customer relations. She also computerized their operations and participated in entertaining business contacts.

Cypress Holdings paid Tom a base salary of $260, 000 per year for his work in the markets, and he also earned $18, 600 as a director of a bank. Penny did not draw a salary from the business, but beginning January 1, 2010 (after separation) she was paid $6, 500 per month as a director. Tom was 64

Page 690

at the time of trial, in good health, and worked fulltime. He testified he intended to work until age 70. At that time, he hoped to pass the markets on to his daughter and her husband.

After 1997, Penny, who was 58 at the time of trial, was less involved with the stores. From 2002 to 2009, she taught elementary school, while continuing to remain peripherally involved in the grocery business. In 2009 she was diagnosed with multiple sclerosis and has not worked since. Her disease is progressive and may be expected to worsen over time.

The couple historically used profits from the grocery stores, rather than borrowed funds, to invest in capital expenditures. Though Penny insists they lived below their means, they were still able to maintain a comfortable lifestyle, which the court characterized as “upper class” and “very nice.” They owned and lived on a 52-acre ranch on Gordon Lane in Mendocino, which included a 3,070 square-foot home, a two-bedroom apartment, six horses and stables, a paddock, and a two-acre pond. They purchased the ranch in 2002 for $1.85 million.

The Honers also used business profits to invest in other real estate holdings through Spring Pond, LLC (Spring Pond), of which Tom and Penny were equal co-owners and Tom was the managing member. In 2006, Spring Pond bought the building in which Mendosa’s was housed, and in 2010 added a hardware store to the grocery operations. Also in 2006, Spring Pond bought another building in Mendocino, known as Paddleford House, which since 2009 or 2010 has housed a veterinary clinic. In 2011, Mendosa’s added a pharmacy run by a separate individual who paid rent to Cypress Holdings.

Spring Pond collected rent from Mendosa’s at the rate of $7, 170.15 per week and rent of $2, 560 per month from the veterinary clinic at Paddleford House ($2, 000 after expenses). Spring Pond received $332, 618 in rent in 2009 and $390, 730 in 2010. Because of the renovations to the properties in 2010, Spring Pond showed net earnings of only $8, 212 in that year.

In 2009, Spring Pond purchased an acre of undeveloped land known as the Art Center for $600, 000, with interest payments monthly and principal payable at $100, 000 per year for six years. There was testimony that it might be possible to develop the Art Center property with a small housing complex (four to nine units), which could provide future income.

Due to the debt on the property and depressed real estate values, the Honers’ equity in the ranch was only $137, 832 at the time of trial (the house and ranch being valued at $1.01 million). After the separation, Tom continued to live on the ranch, while Penny moved to Dallas, Texas to care for her ailing mother. Penny paid $3, 800 per month for a two-bedroom apartment in Dallas.

Page 691

Penny filed for divorce in September 2009. Trial was held before the Honorable Cindee Mayfield in December 2011 and January 2012. On April 19, 2012, the court filed its statement of decision on the property division and spousal support issues, having bifurcated issues relating to attorney fees and costs.

In addition to the major assets identified above, the couple owned several retirement funds and other assets, making their total net worth $6, 667, 040, with the assets being divided by the court as follows:

Awarded to Tom:

a. Cypress Holdings ($3, 180, 000)

b. 10501 Lansing Street (housing Mendosa’s) (stipulated to be worth $4, 072, 500, with $1, 687, 364 in equity)

c. Gordon Lane (marital residence) ($1, 010, 000 with $137, 832 in equity)

d. Two Cypress Holdings Profit Sharing plans (total value $424, 185, of which $207, 539 was awarded to Tom)

Total awarded to Tom after credits and charges:[2] $4, 909, 712

Awarded to Penny:

a. Paddleford House ($375, 000, no debt)

b. Art Center ($385, 000 with $185, 000 equity)

c. Life insurance policy ($180, 949)

d. Three American Funds 401(k) accounts ($430, 250)

e. Two Cypress Holdings Profit Sharing plans (total value $424, 185, of which $216, ...

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