Opinion
No. 1 CA-CV 13-0252 FC
04-30-2015
In re the Marriage of: LINDA JEAN HARNISH CLARK, Petitioner/Appellee, v. EDWARD WAYNE CLARK, Respondent/Appellant.
COUNSEL Bishop & Martin Law Office, PC, Tempe By William D. Bishop, Daniel P. Beeks Counsel for Petitioner/Appellee Sheridan Larson, PLLC, Mesa By Steven K. Larson Counsel for Respondent/Appellant
NOTICE: NOT FOR PUBLICATION. UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED. Appeal from the Superior Court in Maricopa County
No. FC2011-090967
The Honorable Timothy J. Ryan, Judge
AFFIRMED IN PART; AFFIRMED AS MODIFIED IN PART; VACATED IN PART AND REMANDED
COUNSEL Bishop & Martin Law Office, PC, Tempe
By William D. Bishop, Daniel P. Beeks
Counsel for Petitioner/Appellee
Sheridan Larson, PLLC, Mesa
By Steven K. Larson
Counsel for Respondent/Appellant
MEMORANDUM DECISION
Judge Samuel A. Thumma delivered the decision of the Court, in which Presiding Judge Margaret H. Downie and Judge Andrew W. Gould joined. THUMMA, Judge:
¶1 Edward Wayne Clark (Father) appeals from an Amended Decree of Dissolution of Marriage and related orders (Decree) primarily challenging the monetary aspects of the Decree. For the following reasons, the Decree is affirmed in part, affirmed as modified in part, vacated in part and this matter is remanded for further proceedings not inconsistent with this decision.
FACTS AND PROCEDURAL HISTORY
¶2 Father and Linda Jean Harnish Clark (Mother) were married in 1993, separated in January 2010 and Mother served the Petition for Dissolution on Father in February 2011. After a trial, the superior court issued the Decree dissolving the marriage, awarding Mother sole legal decision-making authority over the parties' three minor children and limiting Father's parenting time. As relevant here, the Decree also (1) awarded Mother a lump sum payment of $43,450, representing her share in renewal commissions from Father's insurance agency; (2) divided property held by the community between the parties; (3) ordered Father to pay $2,101.68 per month in child support and to pay Mother $3,000 per month in spousal maintenance for five years; (4) awarded Mother various expert fees and (5) awarded Mother attorneys' fees. From Father's timely appeal, this court has jurisdiction pursuant to Arizona Revised Statutes (A.R.S.) section 12-2101(A)(1) (2015).
Absent material revisions after the relevant dates, statutes and rules cited refer to the current version unless otherwise indicated. This appeal was stayed pending further order of this court, given the automatic stay as a result of Father's filing for bankruptcy protection. Based on Father's filing attaching an order from the Bankruptcy Court vacating the automatic stay, the stay order issued by this court in this case is vacated.
DISCUSSION
I. Electing To Present Testimony By Avowal Does Not Waive The Right To Challenge The Sufficiency Of The Evidence.
¶3 The parties elected to present their trial testimony by avowal. Given this election, Mother argues Father waived any challenge to the sufficiency of the evidence, citing Pearson v. Pearson, 190 Ariz. 231, 946 P.2d 1291 (App. 1997). Pearson cautioned that proceeding by avowal "does not permit the creation of an appellate record suitable for a challenge to a witness or, on that basis, a challenge to the sufficiency of the evidence." 190 Ariz. at 234, 946 P.2d at 1294 (emphasis added). Pearson did not, however, hold that a party waives the right to challenge the sufficiency of documentary evidence by electing to present testimony by avowal. Here, the record includes 165 exhibits that the parties stipulated to admit at trial, with the superior court noting that "every exhibit is now something to be reviewed." Accordingly, and particularly given this documentary evidence, the parties' election to present testimony at trial by avowal does not mean Father waived his right to challenge the sufficiency of the evidence to support the Decree. II. Legal Decision-Making and Parenting Time.
¶4 Father argues the superior court abused its discretion in awarding sole legal-decision making authority to Mother and limiting his parenting time. Father argues (1) the court did not properly apply A.R.S. § 25-403; (2) the award was "only because Mother and Father do not agree" and (3) the court did not properly consider the evidence presented. This court reviews the superior court's decisions regarding legal decision-making and parenting time for an abuse of discretion. See Owen v. Blackhawk, 206 Ariz. 418, 420 ¶ 7, 79 P.3d 667, 669 (App. 2003). Such decisions will be affirmed unless they are not supported by the evidence. Pridgeon v. Superior Court, 134 Ariz. 177, 179, 655 P.2d 1, 3 (1982).
¶5 In deciding legal decision-making and parenting time, the superior court must determine the best interests of the children by considering "all factors that are relevant" to the children's "physical and emotional well-being, including" the factors enumerated in A.R.S. § 25-403(A). In a contested case, the court must make "specific findings on the record about all relevant factors and the reasons for which the decision is in the best interests of the child." A.R.S. § 25-403(B).
¶6 The Decree awarded Mother sole legal decision-making and awarded Father parenting time two afternoons per week and every other Saturday, which could be "reviewed and modified once joint legal custody is deemed appropriate from a therapeutic standpoint." In making these awards, the superior court expressly discussed and applied the A.R.S. § 25-403(A) factors and made detailed findings on the record. In doing so, the court properly incorporated recommendations made by the child custody evaluator and therapeutic interventionist. The court found
the children seem well adjusted in the home, school and community with Mother serving as the primary residential parent providing most of their care on a day to day basis. The court finds that, consistent with the treatment recommendations of the various professionals assigned to this case, that the relationship[s] between Father and the children need additional therapeutic intervention before making adjustments for increased parenting time, as well as increased involvement by Father in other areas of the minor children's lives.Because these findings are supported by the record, Father has not shown an abuse of discretion in awarding Mother sole legal-decision making authority and limiting Father's parenting time. III. Insurance Renewal Commissions.
¶7 Father operates an insurance agency established during the marriage. Future income arising from insurance policies issued during the marriage but renewed later, referred to as renewal commissions, can be considered community property. See Pangburn v. Pangburn, 152 Ariz. 227, 230, 731 P.2d 122, 125 (App. 1986). Here, the superior court appointed certified public accountant Lynton Kotzin to examine the community's interest in the insurance agency and Kotzin valued the renewal commissions. Father disagreed with that valuation and presented his own competing valuation. The superior court ultimately adopted Kotzin's valuation, a determination Father challenges on appeal.
¶8 The selection of a valuation method is a determination relating to the facts and circumstances of a specific case. See Molloy v. Molloy, 181 Ariz. 146, 150, 888 P.2d 1333, 1337 (App. 1994). "The trial court has discretion to rely on various methods of valuing a professional practice." Kelsey v. Kelsey, 186 Ariz. 49, 51, 918 P.2d 1067, 1069 (App. 1996) (citation omitted). This court will not disturb the superior court's factual determination unless clearly erroneous. See In re Marriage of Gibbs, 227 Ariz. 403, 406 ¶ 6, 258 P.3d 221, 224 (App. 2011).
¶9 The primary differences between the competing valuations were (1) a focus on revenue versus policy attrition and (2) the attrition rate used. Kotzin applied an annual revenue attrition rate of 8.3% and valued the aggregate insurance renewal commissions at $86,944. Father argued for an annual policy attrition rate of 14.7% and valued the aggregate insurance renewal commissions at $55,975. In adopting Kotzin's valuation, the superior court stated:
During trial, Mr. Kotzin testified that Father's assessment of the renewal policies had numerous flaws. Mr. Kotzin testified that an attrition rate of 8.3% was appropriate, and that Father's stated attrition rate of over 14% was inaccurate. Mr. Kotzin testified that Father improperly relied upon policy attrition as opposed to revenue attrition. . . . Mr. Kotzin testified that Father's analysis unfairly benefited his sole and separate interests, while Mr. Kotzin's analysis was unbiased (as an appointee of the Court), and fairly compensated the community for its share of the renewal policies at issue.
¶10 Recognizing Kotzin's and Father's approaches conflicted, the superior court's role properly includes weighing and assessing such conflicts. See Bender v. Bender, 123 Ariz. 90, 94, 597 P.2d 993, 997 (App. 1979). Nothing in the record compels the conclusion that the trial court abused its discretion in weighing and assessing the evidence received. See id. Similarly, Father has not shown how the court improperly addressed the tax consequences of awarding Mother her interest in the insurance renewal commissions. Accordingly, Father has not shown that the superior court erred in accepting Kotzin's valuation of the insurance renewal commissions and then awarding Mother half of that valuation. IV. Father's Income For Child Support And Spousal Maintenance.
A. Insurance Agency Income.
¶11 Father argues the superior court erred in calculating his 2010 income from the insurance agency by disallowing valid business expenses. The issue is whether the record supports the court's ruling. See Pearson, 190 Ariz. at 235, 946 P.2d at 1295.
¶12 Under the Child Support Guidelines, A.R.S. § 25-320 app. (Guidelines), "gross income means gross receipts minus ordinary and necessary expenses required to produce income. Ordinary and necessary expenses do not include amounts determined by the court to be inappropriate for determining gross income for purposes of child support." Guidelines § 5(C). "Expense reimbursements or benefits received by a parent in the course of employment or self-employment or operation of a business shall be counted as income if they are significant and reduce personal living expenses." Guidelines § 5(D). Although Father argues the best evidence of his income is from the tax returns, gross income is not determined by the parties' tax returns but, rather, by "the actual money or cash-like benefits received by the household which is available for expenditures." Cummings v. Cummings, 182 Ariz. 383, 385, 897 P.2d 685, 687 (App. 1994) (citations omitted).
¶13 The record shows that Father earned $16,055.84 per month from his insurance work in 2010. Father claimed monthly business expenses of $8,183.43. Mother disputed that portion of Father's claimed expenses attributed to office mortgage and common area maintenance (CAM) as well as cell phone expenses. After considering the evidence, the superior court adopted Mother's position, which Father now challenges on appeal.
Although mentioning "presumed health insurance benefit" and listing child support arrearages as an issue in his opening brief, Father failed to develop such issues, meaning they are deemed abandoned. See DeElena v. S. Pac. Co., 121 Ariz. 563, 572, 592 P.2d 759, 768 (1979); Ariz. R. Civ. App. P. 13(a)(7) (requiring argument portion of brief to contain the contentions of the appellant with respect to the issues presented).
¶14 Father operates his insurance agency out of an office condominium. Father claimed expenses of $2,291.30 per month for mortgage principal and interest and $222.74 for CAM, totaling $2,514.04 per month. A related entity, which is not the agency, owns the office condominium. The trial evidence indicated that $1,500 represented ordinary and necessary rental expenses for such space and the superior court adopted that amount. Although the court could have adopted a different amount, on this record, Father has not shown an abuse of discretion in the court using $1,500 in monthly expenses.
¶15 Father claimed $424.57 in monthly cell phone charges as an insurance agency expense. Mother argued that half that amount was a personal expense and not an insurance agency expense. Father did not provide his phone records to rebut Mother's argument and the superior court adopted her position. The record shows Father did use his cell phone for personal purposes at times. On this record, Father has not shown the court abused its discretion by including one-half the cell phone expense in Father's gross income. Guidelines § 5(D). Nor has Father shown that the court otherwise abused its discretion in determining the agency's ordinary and necessary business expenses, meaning Father has not shown the court erred in determining his insurance agency income.
B. Kaplan Schweser Income.
¶16 In addition to his insurance agency, Father taught financial planning classes for Kaplan Schweser (Kaplan) for many years before the divorce. The superior court included Father's Kaplan income in calculating his income for child support and spousal maintenance. Father argues the court erred in doing so by (1) attributing any Kaplan income to him and (2) calculating the amount of Kaplan income attributed to him. Father also argues the court's award to Mother of her share of Kaplan income improperly included monies representing Kaplan work performed by Father after the date of service of the Petition.
i. Attributing Any Kaplan Income To Father.
¶17 Father argues teaching was a second job, unrelated to his insurance agency, and that he should not have to work two jobs to meet his child support and spousal maintenance obligations. Mother argues the court properly included this income because Father regularly taught at Kaplan for many years. This court reviews such a determination for an abuse of discretion. In re Marriage of Robinson and Thiel, 201 Ariz. 328, 331 ¶ 5, 35 P.3d 89, 92 (App. 2001); Gutierrez v. Gutierrez, 193 Ariz. 343, 348 ¶ 14, 972 P.2d 676, 681 (App. 1998). "For an abuse of discretion to exist, the record must be devoid of competent evidence to support the decision." Platt v. Platt, 17 Ariz. App. 458, 459, 498 P.2d 532, 533 (1972) (citation omitted).
¶18 The Guidelines broadly define "gross income" as:
income from any source, and may include, but is not limited to, income from salaries, wages, commissions, bonuses . . . . Generally, the court should not attribute income greater than what would have been earned from full-time employment. Each parent should have the choice of working additional hours through overtime or at a second job without increasing the child support award. The court may, however, consider income actually earned that is greater than would have been earned by full-time employment if that income was historically earned from a regular schedule and is anticipated to continue into the future.Guidelines § 5(A) (emphasis added). The Guidelines do not "entitle a parent who continues to work the same schedule as he or she consistently worked during the marriage to a decreased support obligation." McNutt v. McNutt, 203 Ariz. 28, 31-32 ¶ 14, 49 P.3d 300, 303-04 (App. 2002).
The court should generally not attribute additional income to a parent if that would require an extraordinary work regimen. Determination of what constitutes a reasonable work regimen depends upon all relevant circumstances including the choice of jobs available within a particular occupation, working hours and working conditions.
¶19 As applied, Father regularly taught for Kaplan for nine years before the divorce. Father testified he began teaching for Kaplan to supplement the family's income at a time when the insurance company limited his ability to sell certain insurance. Mother testified Father worked a combined average of 40 to 50 hours per week selling insurance and teaching. On this record, the superior court properly could find that Father historically and consistently earned income from both selling insurance and teaching for Kaplan. The court also found that handling both jobs did not require an "extraordinary work regimen," a finding supported by the record. Accordingly, Father has not shown the court abused its discretion in attributing income received from Kaplan to Father's income.
ii. Amount of Kaplan Income Attributed To Father.
¶20 Father argues the superior court erred in evaluating the amount of income he earned from Kaplan by including, as income, amounts he received for expense reimbursement. Based on records she obtained from Kaplan, Mother argued Father earned $5,756 per month from Kaplan, a figure the superior court adopted. Father does not dispute that "if some of the reimbursement was for expenditures made during the marriage," it was "partially reimbursable to Mother." The issue, however, is whether the reimbursements should be attributed to Father as income in setting child support and spousal maintenance.
¶21 "Expense reimbursements . . . received by a parent in the course of employment . . . shall be counted as income if they are significant and reduce personal living expenses." Guidelines § 5(D). The record shows the monthly payments from Kaplan include a significant amount in reimbursement for Father's expenses, including airfare, lodging, ground transportation, meals and entertainment. Although some of the reimbursements clearly are "significant and reduce personal living expenses" (for example, per diem amounts for meals, which would be incurred in any event), others do not (for example, ground transportation, which would not be incurred absent business travel). Therefore, this court vacates the determination of income attributed to Father on this ground (which was used for both child support and spousal maintenance) and remands to recalculate his Kaplan income excluding reimbursements that do not reduce Father's personal living expenses and, with that recalculated income amount, to again determine his child support and spousal maintenance obligations. V. Spousal Maintenance.
Although disputing Mother's use of Kaplan income data for 18 months, rather than 12 months, Father has shown no abuse of discretion in the time period used by the superior court. Indeed, after deducting reimbursements from the Kaplan income advocated by Mother, Father's proposed income figure is substantially similar.
¶22 After discussing the factors listed in A.R.S. § 25-319(A) and (B), the superior court awarded Mother $3,000 per month in spousal maintenance for five years starting August 1, 2012. Father argues the court erred "in the amount and duration" of spousal maintenance, seeking a redetermination of spousal maintenance based on "a proper finding of Father's net income." On this record, Father has not shown how the five-year duration for spousal maintenance was erroneous. As to the income determination, as noted above, this court vacates the amount of Kaplan income attributed to Father (which was used for both child support and spousal maintenance purposes) and remands to recalculate his Kaplan income excluding reimbursements that do not reduce Father's personal living expenses and, with that recalculated income amount, to again determine his child support and spousal maintenance obligations. VI. Property Division.
Father also argues that the superior court's rulings permit Mother to "double dip" against his income by awarding her a lump sum payment for her share in the renewal commissions while including renewal commissions in Father's income. Father's argument, however, is without citing any supporting legal authority. Accordingly, although acknowledging differing approaches in other jurisdictions, this court declines to address the issue here. See Brown v. U.S. Fid. & Guar. Co., 194 Ariz. 85, 93 ¶ 50, 977 P.2d 807, 815 (App. 1998) (rejecting argument "wholly without supporting argument or citation of authority"); Ariz. R. Civ. App. P. 13(a)(7) (requiring appellant to provide citation to legal authorities).
A. Post-Petition Kaplan Income.
¶23 Father received $19,510.91 from Kaplan after the date of service of the Petition (February 14, 2011). Mother argued, and the superior court ordered, that Father owed Mother half of that amount, or $9,755.46. Father argues that amount improperly includes income and expense reimbursement for Kaplan work performed after the date of service.
¶24 Although Mother argues Father waived the issue, she does not show how the superior court would have jurisdiction to award her amounts representing work performed by Father after service of the Petition. See A.R.S. § 25-213(B). On the merits, the record shows the court attributed to the community $6,274.57 that relates to Kaplan work performed by Father after service of the Petition. After deducting this amount, the record shows Father received $13,236.34 for Kaplan income earned before service of the Petition. Because Mother was entitled to one- half of that amount, Mother was entitled to reimbursement from Father for $6,618.17 for her community interest earned before the date of service, but received after the date of service. Accordingly, the first sentence of page 10 of the Decree is modified to read: "Father owes Mother $6,618.17 for Mother's community interest in Kaplan income earned prior to the date of service, but received after the date of service in this action."
It is unnecessary to deduct reimbursements because Father paid the expenses before the date of service, meaning Mother is entitled to one-half of those reimbursements.
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B. Bank Accounts.
¶25 The superior court ordered the bank accounts "be divided equally as of February 14, 2011," the date of service of the Petition. Father claims the court erred in dividing three bank accounts equally. The superior court is authorized to "divide the community, joint tenancy and other property held in common equitably." A.R.S. § 25-318(A). This court will not disturb the division of property absent an abuse of discretion. Nace v. Nace, 104 Ariz. 20, 23, 448 P.2d 76, 79 (1968).
i. Account 0644.
¶26 Father argues Account 0644 was a business account containing funds necessary to pay community debts of the insurance agency. The evidence relating to this account reflects regular "paycheck" deposits and payments for a variety of business and personal expenses. Accordingly, Father has not shown that the superior court erred in dividing the balance of this account as of February 14, 2011 equally between Father and Mother.
ii. Account 0985.
¶27 Father argues Account 0985 did not exist on February 14, 2011 and, instead, was opened two weeks later and was not subject to division by the superior court. The evidence supports this argument. Accordingly, the superior court lacked jurisdiction to divide Account 0985 and that portion of the Decree purporting to do so is vacated.
iii. Account 3344.
¶28 Father argues Account 3344 belonged exclusively to the insurance company and is a client fund account. Mother concedes as much but argues Father waived the issue. Because it is a client fund account, the funds in this account belonged to insureds, not the community or the parties here. Accordingly, the superior court lacked jurisdiction to divide Account 3344 and that portion of the Decree dividing Account 3344 equally between Father and Mother is vacated. VII. Fee Reimbursement.
¶29 Father challenges the superior court's rulings requiring him to pay for the fees of the child custody evaluator and family law master and to pay for Mother's attorneys' fees. The superior court, "after considering the financial resources of both parties and the reasonableness of the positions each party has taken throughout the proceedings, may order a party to pay a reasonable amount to the other party for the costs and expenses of maintaining or defending" a proceeding such as this. A.R.S. § 25-324(A). Costs and expenses include "attorney fees, deposition costs and other reasonable expenses as the court finds necessary to the full and proper presentation of the action." A.R.S. § 25-324(C). An award of fees is within the superior court's discretion and will not be disturbed absent an abuse of discretion. In re Marriage of Berger, 140 Ariz. 156, 167, 680 P.2d 1217, 1228 (App. 1983).
A. Custody Evaluator Fees.
¶30 Father contends that because Mother listed the court-appointed custody evaluator Dr. David Weinstock as a trial witness, she should be required to pay his $1,845 trial appearance fee. If a child custody evaluator is appointed, the court "shall allocate cost based on the financial circumstances of both parties." A.R.S. § 25-406(B). Here, the superior court appointed Weinstock to conduct a comprehensive custody evaluation and ordered Father to pay his fees and costs subject to further court order. That order also provided that, "[e]ach party shall have the right to call the evaluator as a witness. If only one party believes that the evaluator's live testimony is necessary in addition to the written report, that party shall initially be responsible for 100% of the costs incurred in connection with the evaluator testifying at the court hearing, subject to reallocation by the court if appropriate." Father paid Weinstock his fees and costs. The court then directed Father to reimburse Mother an additional $1,845 for trial preparation fees she paid to Weinstock. The court had authority to allocate Weinstock's fees based on the financial circumstances of the parties, and Father has not shown an abuse of discretion in directing Father to pay those fees.
B. Family Law Master Fees.
¶31 The superior court directed Father to reimburse Mother $7,100 for fees paid to family law master Kotzin. Father argues he should only be required to pay one-half of those fees. Compensation of a family law master "shall be allocated by the court and shall be treated as a taxable cost." Ariz. R. Fam. L.P. 72(A). Here, the court appointed Kotzin to assess the community's interest in the insurance business and ordered that resulting fees be paid "equally from community funds, subject to further apportionment by the Court." The court had authority to allocate those costs and Father has not shown an abuse of discretion in requiring Father to pay the full amount.
C. Attorneys' Fees.
¶32 The superior court was authorized to award reasonable attorneys' fees and costs "after considering the financial resources of both parties and the reasonableness of the positions each party has taken throughout the proceedings." A.R.S. § 25-324(A). Here, the court awarded Mother $109,132.01 for attorneys' fees and costs, finding Father "has substantially greater financial resources compared to [Mother]. The Court also concludes that Father has taken patently unreasonable positions, driving up the cost of litigation, particularly in the post-trial proceedings."
¶33 On appeal, Father argues this was error because Mother's "post-trial income . . . could approach nearly 50%" of Father's and the superior court "made no finding as to what Father's patently unreasonable positions were and ignored Mother's unreasonable positions taken throughout." Father provides no authority to show that these claimed defects constitute an abuse of discretion. In this context, the appropriate focus is "pre-decree disparity between the parties' financial resources," not post-trial income. Kelsey v. Kelsey, 186 Ariz. 49, 54, 918 P.2d 1067, 1072 (App. 1996). The record shows Father had greater pre-decree financial resources than Mother. Father does not claim that he requested specific findings regarding the determination that he had taken "patently unreasonable positions," meaning no such findings were required. See A.R.S. § 25-324(A). Finally, as Mother argues, the record does support a finding that Father took unreasonable positions that resulted in additional and avoidable costs of litigation. Accordingly, Father has not shown the superior court abused its discretion in awarding Mother her attorneys' fees and costs.
CONCLUSION
¶34 This court (1) vacates that portion of the Decree awarding post-petition Kaplan earnings to Mother and that purports to divide Accounts 0985 and 3344; (2) vacates and remands for further consideration that portion of the Decree calculating Father's Kaplan income, to exclude reimbursements that do not reduce his personal living expenses, and the resulting child support and spousal maintenance awards; and (3) affirms the Decree in all other respects. In its discretion, the court denies both parties' requests for attorneys' fees incurred on appeal. Father is awarded his taxable costs on appeal contingent upon compliance with Arizona Rules of Civil Appellate Procedure 21.