FILED
JAN 15,2015
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
In re the Marriage of: ) No. 31951-2-111 ) FLORENTINA FLORES, ) ) Respondent, ) ) v. ) UNPUBLISHED OPINION ) JULIO V. FLORES, ) ) Appellant. )
BROWN, J. - Julio Flores appeals the superior court's marriage dissolution decree
favoring Florentina Flores. He contends the court erred by (1) valuing his heating and
air conditioning business at $82,500, (2) finding his annual income to be $78,000, (3)
finding he owned a motorcycle included in the property division, (4) finding he took
$34,000 from a jOint savings account, (5) distributing community assets, (6) finding Ms.
Flores needed maintenance, (7) awarding Ms. Flores attorney fees and costs, and (8)
denying his motions for reconsideration. We conclude the trial court did not abuse its
broad discretion or fail to apply the relevant legal factors and affirm. No. 31951·2-111 In re Marriage of Flores
FACTS
Julio Flores and Florentina Flores married in April 1993 and separated in
September 2010. The couple have four daughters ages 18,17,14, and 13. Mr. Flores
owns JR's Heating and Air Services (JR's). Mainly, the parties disputed the business
valuation and the extent of Mr. Flores' income. Ms. Flores works at Prosser School
District and harvests cherries during the summer. Generally, the court received
extensive evidence on all issues, decided the disputed factual issues within the range of
presented evidence, and correctly applied disputed legal factors.
First, regarding the business valuation, in 1996, Mr. and Ms. Flores started JR's
as a sole proprietorship. JR's pre-tax income showed: $30,000 in 2006; $12,622 in
2007; -$5,510 in 2008; $3,505 in 2009; and -$2,433 in 2010. Retained earnings for JR's
showed: $90,613 in 2009; $121,286 in 2010; and $96,828 in 2011. In 2011, Mr. Flores
started using QuickBooks to record his income and expenses. In preparing Mr. Flores'
2011 tax returns, income errors were discovered neceSSitating an amended return.
Certified Public Accountant (CPA) Joseph Reid, with business valuation accreditation,
prepared business valuation reports for ,.IR's and was Ms. Flores' witness.
Initially, in a first report, Mr. Reid used the tax returns from 2006-2011, bank
statements, invoices, and an on-site meeting with Mr. Flores. Using multiple valuation
approaches including the market approach, the asset approach, the capitalization
approach, and the discounting cash flow approach, Mr. Reid concluded JR's value at
$65,000. Later in a second report, Mr. Reid discovered discrepancies in the
No. 31951-2-111 In re Marriage of Flores
QuickBooks files obtained from Mr. Flores and recalculated •.IR's value and Mr. Flores'
income. Using Mr. Flores' mark-up of 65 percent for goods sold and an hourly labor
rate of $85, he calculated JR's gross revenue for 2011 at $228,099. He compared this
value to $222,348, the gross revenue calculated using the national average mark-up for
heating and air companies as determined by the Risk Management Association.
Averaging the two, Mr. Reid determined JR's gross revenue for 2011 was $225,224.
He calculated 2011 net profits at $18,000 after explaining his calculations, then valued
the business at $100,000. He estimated Mr. Flores' annual salary as $60,000,
explaining his calculations. The $18,000 net profit was consistent with the profit
anticipated for the amended 2011 tax return. JR's pre-tax income in 2012 was
anticipated to be $47,000.
The court determined JR's value to be $82,500, the median value between the
initial valuation and the second valuation, and awarded the asset to Mr. Flores. The
court denied Mr. Flores' motion for reconsideration, which included his amended 2011
tax return and 2012 tax return.
Second, regarding Mr. Flores' income, in his second report, Mr. Reid added the
estimated salary ($60,000) and net profit ($18,000) to determine Mr. Flores' annual
income at $78,000. Brian Newhouse, Mr. Flores' accountant, testified he could not
accurately determine Mr. Flores' income based on the existing documentation. But in a
2007 loan application to refinance his home mortgage, Mr. Flores declared his monthly
income to be $10,000. And in a 2012 loan application to buy a work van, Mr. Flores
indicated his annual income was $100,000. The court accepted Mr. Reid's estimation of
Mr. Flores' income at $78,000. The court denied Mr. Flores' motion for reconsideration,
which included his amended 2011 tax return and 2012 tax return.
Third, regarding the 2011 Harley Street Glide Motorcycle, Ms. Flores testified she
saw Mr. Flores driving a 2011 Harley Street Glide and valued the motorcycle at
$20,000. Mr. Flores stated the motorcycle belonged to his brother, however, Mr. Flores
maintained insurance on it and bought parts for the Street Glide. The court found Mr.
Flores owned the Street Glide, valued it at $20,748, and awarded it to Mr. Flores. The
court denied Mr. Flores' motion for reconsideration, which included the motorcycle's
registration and a statement from his brother, Luis Flores, declaring Luis as the owner of
the Street Glide.
Fourth, regarding the Yolanda Flores' obligation, Mr. Flores' mother purchased a
mobile home for $12,000 and made improvements. In 1998, Yolanda sold the parties
land and the mobile home in exchange for them repaying a $30,000 loan to Paul Rupp.
Yolanda and Mr. Flores testified Mr. Flores also agreed to pay an additional $33,500 to
Yolanda. Ms. Flores was unaware of this second obligation. Yolanda later executed
and recorded a deed which indicated the land was a gift. Mr. Flores stated the "gift"
designation allowed them to avoid paying excise taxes. The obligation to Mr. Rupp was
paid in full by 2003. After separation, Mr. Flores withdrew $130,000 from their joint
savings account. He gave his mother $34,000. In January 2011, the court ordered Mr.
Flores to put the money into an account and provide an accounting of any money spent.
Mr. Flores deposited $96,000 and said he used $34,000 for business expenses. Nine
months later, Mr. Flores produced a handwritten note from his mother stating her son
gave her $34,000 to pay for the land and the mobile home. The court found Mr. Flores
took $34,000 from the savings account. The court denied Mr. Flores' motion for
reconsideration, stating it did not find eit~er Mr. Flores' or Yolanda's testimony credible.
Fifth, the court's decree addressed property.division, maintenance, child support,
and attorney fees and costs. The court awarded Ms. Flores 55 percent of the assets
and Mr. Flores 45 percent. The court found Ms. Flores had the need for maintenance
and Mr. Flores had the ability to pay. The court determined monthly child support
payments for the three minor children at $1,919. It set maintenance at $1,500 per
month for 84 months. The court awarded Ms. Flores expert witness fees for the
business valuation appraisal, personal property appraisal fees, and attorney fees.
Standard of Review
[T]rial court decisions in a dissolution action will seldom be changed upon appeal. Such decisions are difficult at best. Appellate courts should not encourage appeals by tinkering with them. The emotional and financial I interests affected by such decisions are best served by finality. The spouse who challenges such decisions bears the heavy burden of showing a manifest abuse of discretion on the part of the trial court. The trial court's decision will be affirmed unless no reasonable judge would have reached the same conclusion.
In re Marriage of Landry, 103 Wn.2d 807, 809-10, 699 P.2d 214 (1985) (internal
citations omitted); see also In re Marriage of Knies, 96 Wn. App. 243, 253,979 P.2d 482
(1999) ("Discretion is abused where it is exercised on untenable grounds or for
untenable reasons.").
ANALYSIS
A. Business Valuation and Mr. Flores' Income
The issue is whether substantial evidence supports both the superior court's
conclusions for JR's business valuation and Mr. Flores' income. Mr. Flores contends
Mr. Reid's expert opinions for business value and his income were based on
speculation and assumption and lacked evidentiary value.
"Goodwill is a property or asset which usually supplements the earning capacity
of another asset, a business or a profession." In re Marriage of Hall, 103 Wn.2d 236,
241,692 P.2d 175 (1984). The value of goodwill is a question of fact. Id. at 246. To
value goodwill, at least one accepted valuation method must be used. In re Marriage of
Luckey, 73 Wn. App. 201, 206,868 P.2d 189 (1994); see Hall, 103 Wn.2d at 243-45
(listing as acceptable methods straight capitalization, capitalization of excess earnings,
the IRS variation of capitalized excess earnings, market value, and buy/sell agreement).
"Findings of fact supported by substantial evidence in the record will not be reversed on
appeal." Hall, 103 Wn.2d at 246. "Substantial evidence is evidence sufficient to
persuade a fair-minded person of the truth of the declared premise." Id.
A trial court's failure to "state on the record which factors and accounting method
were used in arriving at its finding ... will deem the valuation to be unsupported oy
sufficient evidence, necessitating reversal and remand for proper findings." In re
Marriage ofCrosetto, 82 Wn. App. 545,554,918 P.2d 954 (1996). But if a credible
expert testifies his valuation is based on acceptable accounting methods and a trial
court adopts that valuation or a valuation within the range of expert testimony. the trial
court's valuation is supported by substantial evidence and will be affirmed on appeal. In
re Marriage of Harrington, 85 Wn. App. 613, 637, 935 P.2d 1357 (1997). 'To rule
otherwise would be to place the appellate courts in the position of weighing expert
testimony." In re Marriage of Sedlock, 69 Wn. App. 484, 491, 849 P.2d 1243 (1993).
Instead, appellate courts look "to the reasonableness of the trial court's bottom line
result, in light of all the expert testimony." Id. An expert's opinion cannot be "based on
assumptions for which there was no factual basis." Riccobono v. Pierce County, 92 Wn.
App. 254, 268, 966 P.2d 327 (1998).
In computing income, absent a business necessity for retaining the earnings, trial
courts may consider as income a business' retained earnings in addition to the profit
reported on tax returns. In re Marriage of Stenshoel, 72 Wn. App. 800,806-07,866
P.2d 635 (1993). Mr. Reid, a CPA with accreditation in business valuation, used
several legally acceptable methods to value JR's. He reviewed JR's tax returns for the
previous seven years, bank statements, billable hours, hourly rates, cost of goods sold,
the reputation of JR's, and past earnings to calculate JR's value in 2011. Mr. Reid's net
profit calculation was slightly lower than the actual profit seen in the amended 2011 tax
return. As Mr. Reid's two valuation reports were admitted into evidence, the court
chose a value in the middle of the two valuations. The court's finding regarding ..IR's
value was thus supported by substantial evidence.
In calculating JR's profit, Mr. Reid estimated Mr. Flores' annual salary at
$60,000. Given the lack of income records, Mr. Reid reasonably estimated income by
taking into account the need to retain a profit for the business. what it would take to hire
someone to perform Mr. Flores' job, and certain risk factors. Mr. Reid added JR's net
profit to the estimated salary for a final income of $78,000. This amount is below Mr.
Flores' multiple representations that his income was $100,000 or more a year. Notably,
JR's consistently had over $90,000 per year in retained earnings. In the end. the court
accepted Mr. Reid's testimony over Mr. Flores' regarding both the value of JR's and Mr.
Flores' income. The trial court, not the appellate court, decides evidence weight and
witness credibility.
Even if we disagreed with the superior court, the question is whether tenable
grounds and tenable reason existed. The court determined JR's value and Mr. Flores'
income based on Mr. Reid's calculations. Mr. Reid relied on extensive facts and case
law. Mr. Reid has been valuing businesses for a number of years. The court's
valuation of JR's and income computation were well within the range of evidence.
Additionally, the superior court acted within its discretion in denying Mr. Flores'
reconsideration motion. A motion for reconsideration may be brought for the reasons in
CR 59(a).1 We do not reverse reconsideration rulings without a manifest abuse of
1 Mr. Flores contends the following grounds merit granting his motion for reconsideration on all issues: "[a]ccident or surprise which ordinary prudence could not f have guarded against"; U[n]ewly discovered evidence, material for the party making the application, which he could not with reasonable diligence have discovered and produced at the trial"; "[t]hat there is no evidence or reasonable inference from the Il 8 I I f i No. 31951-2-111 In re Marriage of Flores
discretion. Pac. Indus., Inc. v. Singh, 120 Wn. App. 1, 11, 86 P.3d 778 (2003).
"Reconsideration is warranted if the moving party presents new material evidence that
could not have been produced at triaL" In re Marriage of Tomsovic, 118 Wn. App. 96,
109,74 P.3d 692 (2003). Newly discovered evidence is not "evidence presented for the
first time in a motion for reconsideration" unless the party shows he could not have
obtained the evidence earlier. Id.
In Mr. Flores' motion for reconsideration on JR's value and his income, the sole
new evidence claimed was his amended 2011 tax return and his 2012 tax return. The
amended 2011 tax return merely reinforced Mr. Newhouse's trial testimony regarding
JR's profit. Mr. Newhouse testified about expected profit for 2012. As Mr. Flores'
income could not be determined from JR's prior tax returns, nothing indicates these new f t ¥ tax returns would shed light on the issue. The superior court's findings were reasonable
inferences from the evidence. Given all, we conclude the superior court did not abuse
its discretion in denying Mr. Flores' reconsideration motion.
B. Disputed Motorcycle
The issue is whether the superior court erred in determining Mr. Flores owned
the 2011 Harley Street Glide and in denying Mr. Flores' reconsideration motion. Mr.
Flores contends the evidence showed his brother, Luis, was the owner.
An appellate court's "role or function is not to substitute [its] judgment for that of
the trial court or to weigh the evidence or credibility of witnesses." Sedlock, 69 Wn.
evidence to justify the verdict or the decision, or that it is contrary to law"; and "[t]hat substantial justice has not been done." CR 59(a)(3), (4), (7), (9). , 9 t I ~. f r No. 31951-2-111 In re Marriage of Flores
App. at 491. The superior court gave the documentation of Mr. Flores' insurance policy
on the motorcycle and testimony of Ms. Flores more weight than the testimonies of Mr.
Flores and his mother. This is clearly an issue of weighing evidence and credibility of
witnesses for the trial court. As for Mr. Flores' reconsideration request, he argues he
had no indication the superior court did not believe his testimony and substantial justice
was not done. But Mr. Flores did not show Luis was unavailable to testify at trial or
demonstrate Luis' testimony would be persuasive to the court. Accordingly, we
conclude the superior court did not err in denying the reconsideration motion.
C. Yolanda Flores' Obligation
The issue is whether the superior court erred in awarding Mr. Flores $34,000 as
an asset and denying his reconsideration motion. Mr. Flores contends this money
constituted community funds used to pay community debt.
We defer to trial court credibility determinations, and we will not reweigh
conflicting evidence. Keene Valley Ventures v. Richland, 174 Wn. App. 219, 224, 298
P.3d 121, review denied, 178 Wn.2d 1020 (2013). While Mr. Flores' and Yolanda's
testimony could evidence a community debt, the court was not required to find that
testimony persuasive. Instead, the court determined Ms. Flores' testimony, combined
with documentation of the satisfaction of lien and loan documents, were more credible.
Even though the evidence could have supported a finding in Mr. Flores' favor, we do not
reweigh evidence; the superior court did not err. Mr. Flores asserted no new evidence
or contrary law in his reconsideration motion. Thus, the superior court did not abuse its
discretion in denying the motion.
D. Spousal Maintenance
The issue is whether the superior court abused its discretion in awarding Ms.
Flores spousal maintenance of $1,500 per month for 84 months. Mr. Flores contends
the superior court failed to correctly apply the statutory factors seen in RCW 26.09.090,
resulting in Ms. Flores' unjust enrichment. He mainly argues the comt failed to consider
his financial resources when making the award.
A trial court is given broad discretion in awarding maintenance to address the
parties' circumstances. Bulicek v. Bulicek, 59 Wn. App. 630, 634, 800 P.2d 394 (1990).
The sole limitation on a maintenance award under the RCW 26.09:090 factors is justice.
Id. Factors to be considered include: the financial resources of the spouse seeking
maintenance, including community property apportioned her, and her ability to meet her
needs independently; the time needed to acquire education to enable that party to find
appropriate employment; the standard of living established during the marriage; the
duration of the marriage; the age, physical and emotional condition, and financial
obligations of the spouse seeking maintenance; and the ability of the other spouse to
meet his needs while meeting those of the spouse seeking maintenance. RCW
29.09.090. The trial court's paramount concern should be "the economic condition in
which the dissolution decree leaves the parties." In re Marriage of Williams, 84 Wn.
App. 263, 268, 927 P.2d 679 (1996).
Here, the court considered the RCW 26.09.090 factors and decided maintenance
was required under the circumstances. The court split the community assets 55/45
because of Mr. Flores' ability to earn more income than Ms. Flores. Ms. Flores' income
will remain steady at approximately $1,350 per month. Ms. Flores was awarded
approximately $250,000 in community property, including $28,700 in her pension plan,
$96,000 in cash, and $18,000 in equity in the house. She had to take over making
payments on the $158,000 mortgage, $20,000 of which was a business loan for JR's.
Ms. Flores estimated her household expenses for herself and her four daughters was
$5,600 per month. Ms. Flores has no current plans to pursue education.
Comparatively, Mr. Flores' income increased over a three-year period, from a loss of
$3,000 in 2010 to a profit of $49,000 in 2012. He estimated his monthly expenses at
$1,600. The court found Mr. Flores "ha[d] been able to continually purchase non
essential items, such as motorcycle parts." Clerk's Papers (CP) at 5.
Based on the above, the length of the marriage, and ascribing an annual income
of $78,000 to Mr. Flores, the court ordered Mr. Flores to pay $1,500 per month for 84
months as maintenance. This maintenance award lasts two years after the youngest
daughter graduates from high school, so Ms. Flores could return to school if she
desires. The court ordered Mr. Flores to pay $1,919 per month in child support.
Addition of child support and maintenance results in approximately $3,500 per month, a
little more than half of Mr. Flores' gross monthly income. After subtracting Mr. Flores'
monthly expenses, he is left with a little under $1,500 in discretionary income, which is
far more than what Ms. Flores realizes. Thus, after the court's consideration of the
relevant statutory factors, we cannot say the superior court's discretion in awarding
maintenance was based on untenable grounds or manifestly unreasonable.
E. Superior Court Attorney Fees and Costs
The issue is whether the superior court erred in awarding attorney fees and
investigation costs to Ms. Flores. Mr. Flores contends the court failed to consider the
liquid assets it awarded to Ms. Flores in the property division in ascertaining her need
for attorney fees and costs.
The trial court's decision to award attorney fees and costs in a dissolution action
is discretionary. In re Marriage of Mattson, 95 Wn. App. 592, 604, 976 P.2d 157 (1999).
RCW 26.09.140 requires the trial court to "balance the needs of the spouse requesting
them with the ability of the other spouse to pay." Mansour v. Mansour, 126 Wn. App. 1,
16-17,106 P.3d 768 (2004) (no error in trial court's refusal to award wife attorney fees
where wife could pay fees with money received from selling the house). A spouse is not
precluded from receiving an award of attorney fees and costs because she also
received substantial property or maintenance. In re Marriage of Morrow, 53 Wn. App.
579,590,770 P.2d 197 (1989).
The court distributed 55 percent of the property to Ms. Flores and found she had
a need for an award of attorney fees and costs while Mr. Flores had the ability to pay.
Mr. Flores has a higher earning power than Ms. Flores: Ms. Flores' income is one-fourth
of Mr. Flores and, unlike Mr. Flores', is without the capacity to grow. Mr. Flores had
been able "to continually purchase non-essential items, such as motorcycle parts,
during the pendency of the dissolution." CP at 46. Even with the maintenance and
child support, Ms. Flores does not have enough money for her monthly expenses. On
the other hand, Mr. Flores' net monthly calculated income is $5.158. When subtracting
his monthly maintenance. child support, and personal expenses, he is left with
approximately $150 per month, or $1,800 per year.
If one spouse's intransigence caused the spouse seeking the award to incur
additional legal services, "the financial resources of the spouse seeking the award are
irrelevant." In re Marriage of Greenlee, 65 Wn. App. 703, 708, 829 P.2d 1120 (1992).
Examples of intransigent conduct includes obstructionist behavior, filing repetitive or
unnecessary motions, and attempting to make the proceeding unduly difficult with
increased legal costs. Id. Unless intranSigence was seen throughout the entire
proceedings, fee awards should be segregated to show fees incurred as a result of
intransigence versus those incurred for other reasons. Crosetto, 82 Wn. App. at 565.
Mr. Flores was intransigent during the proceedings. He failed to place all the
money he took from the joint savings account into the blocked account. He failed to
timely and accurately account for the miSSing money. Documents produced pretrial and
with ER 904s showed conflicting information necessitating a second business valuation
for JR's. He failed to pay medical expenses for his children, as ordered by the court.
He stopped paying bills on the house, including the mortgage, necessitating court
action. Thus, regardless of Mr. Flores' ability to pay, his intransigent behavior
14 No. 31951-2-111 In re Marriage of Flores
throughout the proceedings serves as a basis for awarding attorney fees and costs to
Ms. Flores.
F. Appe"ate Attorney Fees and Costs
Ms. Flores contends Mr. Flores' appeal is frivolous and requests appellate
attorney fees and costs under RAP 18.1 (a), which authorizes such an award if provided
by applicable law. She requests discretionary attorney fees and costs under RCW
26.09.140, based on her need and his ability to pay. We consider "the arguable merit of
the issues on appeal and the financial resources of the respective parties." In re
Marriage of Booth, 114 Wn.2d 772, 779, 791 P.2d 519 (1990). "An appeal is frivolous if
there are no debatable issues upon which reasonable minds might differ and if it is so
totally devoid of merit that there is no reasonable possibility of reversal." In re Marriage
of Schnurman, 178 Wn. App. 634, 644,316 P.3d 514 (2013). Any doubt about whether
an appeal is frivolous is resolved in the appellant's favor. Id. "An appeal that is affirmed
simply because the arguments are rejected is not frivolous." Id.
While some of Mr. Flores' contentions on appeal lack arguable merit, others do
not. Reasonable minds could differ in valuing JR's and computing Mr. Flores' income.
Furthermore, given Mr. Flores is paying Ms. Flores' attorney fees and costs from the
superior court proceeding and the $96,000 in cash she received from the property
division, Ms. Flores has the ability to pay the fees incurred in this appeal. Accordingly.
we deny Ms. Flores' request for an award of fees.
Affirmed.
15 No. 31951-2-111 In re Marriage of Flores
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
Brown, J.
WE CONCUR:
~~, Siddoway, C.J. C-J::- :!l Fearing,~' s-