CD G -71 %•C ) r;3 r." Cnrtl r
(— CI CO IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON IUD
In re the Marriage of: No. 75967-1-1
LESLIE KAY LINDSKOG, DIVISION ONE
Appellant,
and
CHRISTOPHER MARK BURROWS, UNPUBLISHED
Respondent. FILED: April 9, 2018
Cox, J. — Leslie Lindskog primarily appeals the property valuation,
division, and distribution decisions of the trial court in its decree dissolving her
marriage to Christopher Burrows. She fails in her burden to show that the trial
court abused its discretion in any respect relevant to this appeal. We affirm.
Lindskog and Burrows were married in 1990, and separated February 1,
2015, almost 25 years later. At the time of the dissolution proceedings, Lindskog
was 55 and Burrows was 65 years old.
In 1997, the couple, along with David Jack, formed Evergreen Building
Products, LLC ("Evergreen"), a company specializing in "architectural design No. 75967-1-1/2
elements for residential and commercial properties." Jack later left the company.'
In payment of his ownership interest, he received "preferred units," payable as a
priority upon the liquidation or sale of Evergreen,
Lindskog and Burrows loaned Evergreen $734,421 and received a
shareholder note (the "Note") in return. This Note was a primary subject of
dispute in the marriage dissolution proceedings that followed.
Throughout the majority of their marriage, Lindskog worked at home
raising their children. Burrows worked, first in various businesses, and starting in
1997, at Evergreen.
Lindskog petitioned for dissolution on June 2, 2015. After a four-day trial
in June and July 2016, the trial court entered its findings, conclusions, and a
dissolution decree in October 2016.
Lindskog appeals.
VALUATION OF EVERGREEN AND THE NOTE
Lindskog argues that the trial court abused its discretion by accepting the
valuation of Evergreen by one expert over that of another expert. She also
claims that the valuation of the Note required treating the income stream from it
as a community asset. We disagree with both arguments.
A trial court has broad discretion in valuing property in a dissolution action,
and weighing expert opinions.' This court will not reverse that valuation absent
1 In re Marriage of Gillespie, 89 Wn. App. 390, 403, 948 P.2d 1338(1997); In re Marriage of Sedlock, 69 Wn. App. 484, 491, 849 P.2d 1243(1993).
2 No. 75967-1-1/3
an abuse of discretion.2 A trial court does not abuse its discretion if its property
valuation is within the range of the evidence.3 If a credible expert testifies that
his or her valuation is based on an accepted accounting method and the trial
court accepts that value or a value within the range of the expert's testimony, the
trial court's valuation is considered to be supported by substantial evidence and
should be affirmed on appea1.4
The parties jointly hired Alan Knutson to value Evergreen, and he
submitted his report valuing the company at $270,000 to $356,500, depending on
the valuation method used. He explained that he believed the method resulting
in the $356,500 value was the most "appropriate." He arrived at this figure using •
the "income capitalization method" or "income approach." Under this method,
one of five set out in In re Marriage of Hall, the average net profits of the
company are determined and this figure capitalized at a selected interest rate.5
"This result is considered to be the total value of the business including both
tangible and intangible assets."6
2 Gillespie, 89 Wn. App. at 403; Sedlock,69 Wn. App. at 491.
3 Worthington v. Worthington, 73 Wn.2d 759, 764-65, 440 P.2d 478 (1968); In re Marriage of Soriano, 31 Wn. App. 432, 435,643 P.2d 450 (1982).
See In re Marriage of Harrington, 85 Wn. App. 613, 637, 935 P.2d 1357 (1997).
5 103 Wn.2d 236, 243,692 P.2d 175 (1984).
6 Id. at 244.
3 No. 75967-1-1/4
Knutson explained the assumptions he made when using the income
approach, including imputation of a reasonable compensation to the
owner/manager, anticipated future income stream, and "an appropriate
capitalization or inverse of a multiplier." He determined annual expected
earnings to be $150,000 based on a "weighted five year historical average figure"
with "significant volatility." He then selected and applied a capitalization rate of
25 percent to "compensate for the risk/uncertainty" and determined the gross
value of Evergreen to be $600,000. He subtracted Jack's "owner's equity,"
valued on Evergreen's financial statements at $243,497, for a final value of
$356,500.
Importantly, Knutson testified that because this method values a company
based on its expected future earnings capitalized at a selected rate, net tangible
assets are not part of the calculation.7 Thus, although the Note was shown as a
debt on Evergreen's books, it did not enter into Knutson's calculations because it
would not be repaid to the shareholders and it was irrelevant in calculating the
income stream of the business. Knutson treated the $5,200 monthly interest paid
on the Note as a liability of Evergreen because that interest payment was treated
as income taxable to the community during the parties' marriage.
Lindskog was dissatisfied with Knutson's valuation of Evergreen, and
shortly before trial hired Steve Kessler for a second opinion. Kessler testified at
trial that he was initially unaware of Jack's preferred units and evaluated
7 See Hall, 103 Wn.2d at 243-44.
4 No. 75967-1-1/5
Evergreen at $1.4 million. Once he deducted the obligation owed to Jack,
Kessler adjusted his valuation to $1,156,503.
The trial court found Knutson's valuation to be the more credible of the two
and it valued Evergreen at $356,500. This was at the high end of the range of
values Knutson gave, using the income approach. The court also discussed the
mistakes in Kessler's valuation including a lack of evidence supporting his
projected growth rate, and a discrepancy between the 14.2 percent capitalization
rate he used and the 20 percent rate he claimed to use. The court also noted
Kessler's failure to initially include the preferred interest stock held by Jack,
despite being timely provided with the pertinent information. Significantly, the
trial court further noted that Kessler improperly treated the Note as an asset of
the community despite his acknowledgement that the loan would not be repaid.
Lindskog argues that the trial court abused its discretion because
Knutson's valuation had to be premised on his treatment of the Note as a debt.
She claims that otherwise, Knutson assigned an artificially low value to the
assets of the company. She contends that the gross value of Evergreen cannot
be $600,000 because the resulting value of tangible and intangible assets is
"simply not reasonable" given Evergreen's net income of over $400,000 for each
of the two years before trial, and sales of $10 million.8 We reject Lindskog's
arguments.
8 See id.
5 No. 75967-1-1/6
Knutson explained why he chose a valuation method that did not include
the value of net tangible and intangible assets.9 He explained that, when
determining the fair or present value of the future economic benefit to a business.
owner, it is more important to know the present value of the income stream than
the present value of the assets. The latter is only important if liquidation is
anticipated.
When questioned about his use of the Note to reduce the amount of
tangible assets in his "alternative calculation," he explained that an attempt to
compare his valuation using income stream with a valuation based on net assets
is like trying to compare "apples and oranges." We agree, as did the trial court.
In sum, the trial court properly exercised its discretion in choosing the
valuation to which Knutson testified. That income approach valuation does not
value assets, as Lindskog argues.
The trial court's determination as to Evergreen's value is within the range
of credible evidence. As such, it is supported by substantial evidence.19
The other argument Lindskog makes is also unpersuasive. She claims
that the Note should have been treated as a community asset and divided as part
of the court's division of the assets of the parties. The record does not support
this argument.
9 See id. at 244.
19 See Worthington, 73 Wn.2d at 764-65.
6 No. 75967-1-1/7
The evidence at trial was that the community benefited from the Note
during the marriage of the parties due to the monthly interest thereon. But the
claim that the Note would continue to be a community asset was illusory because
it was uncontested that it would not be paid upon the sale of the company. Thus,
it was not a community asset to be distributed on dissolution. The trial court did
not abuse its discretion by not including this Note as an asset to be divided
between the parties.
DISTRIBUTION OF COMMUNITY ASSETS
Lindskog argues that the trial court's distribution of the community assets
was disproportionate and inequitable and must be reconsidered. We disagree.
In dissolution proceedings, the trial court must make a "just and equitable"
distribution of the parties' assets and liabilities based on the factors set forth in
RCW 26.09.080.11 The statute requires the trial court to consider (1) the nature
and extent of the community and separate property,(2) the duration of the
marriage, and (3)"[Ole economic circumstances of each spouse" at the time of
dissolution.12 The statutory factors are not exclusive.13
11 In re Marriage of Larson and Calhoun, 178 Wn. App. 133, 137, 313 P.3d 1228(2013)(quoting RCW 26.09.080).
12 RCW 26.09.080.
13 Larson, 178 Wn. App. at 138.
7 No. 75967-1-1/8
"A just and equitable division 'does not require mathematical precision or
an equal distribution" but it must be fair in light of all the circumstances.14 In
addition, the longer the marriage, the greater the likelihood that the trial court will
determine that a disproportionate distribution of the parties' assets is just and
equitable.15 Finally, the trial court may "consider the property division when
determining maintenance and may consider maintenance in making an equitable
division of the property."16
Because the trial court is in the best position to assess the parties' assets
and liabilities and to determine what is fair and equitable, this court will not
reverse the trial court's decision absent a manifest abuse of discretion.17 "A trial
court abuses its discretion if its decision is manifestly unreasonable or based on
untenable grounds or untenable reasons."15
The trial court considered all of the criteria set forth in the statute and
distributed approximately 58 percent of the total community assets to Burrows
and 42 percent to Lindskog. It awarded the Crystal Mountain condominium
(Capital Skier's Stock) valued at $245,000 to Lindskog as her separate property
14Id. (quoting In re Marriage of Crosetto, 82 Wn. App. 545, 556, 918 P.2d 954 (1996)).
15 In re Marriage of Rockwell, 141 Wn. App. 235, 243, 170 P.3d 572 (2007).
16 In re Marriage of Estes, 84 Wn. App. 586, 593, 929 P.2d 500(1997).
17 In re Marriage of Brewer, 137 Wn.2d 756, 769, 976 P.2d 102(1999).
18 In re Marriaqe of Littlefield, 133 Wn.2d 39, 46-47, 940 P.2d 1362(1997).
8 No. 75967-1-1/9
even though Burrows claimed it was community property.19 It found that the
community had a $21,511 lien on that property based on contributions for dues
and upkeep. The trial court awarded Lindskog the community residence and the
majority of the liquid assets including investment accounts.
The trial court awarded Evergreen to Burrows. The parties, along with
Burrows' mother, also owned a warehouse that they rent to Evergreen. The trial
court awarded the warehouse to Burrows but adopted the valuation provided by
Lindskog's expert, finding that it was worth $990,000 with an outstanding
mortgage of $510,000.
Burrows was awarded half of the community's 401(k) retirement account
and an additional $25,888 that he had contributed after the parties separated.
He was also assigned the credit card debt and education loans of the parties'
children totaling over $46,000. As an "equalization payment," the trial court
awarded Lindskog a $100,000 lien payable upon the sale of Evergreen.
Based on the parties' combined monthly income of $21,200, the trial court
awarded $8,500 per month maintenance to Lindskog until she reaches age 60. It
decreed that Burrows could move to modify maintenance if he retired before the
maintenance obligation expired, but he would still have to prove that modification
was warranted.
Lindskog argues that the trial court's division resulted in a "patent disparity
in the parties' economic circumstances" and must be reversed as a manifest
19 See RCW 26.09.080(1).
9 No. 75967-1-1/10
abuse of discretion. She claims that the trial court unfairly awarded Burrows
more than 50 percent of the community assets and that its distribution left him
with more income despite the court's alleged attempt to equalize the parties'
earning capacities. We reject Lindskog's arguments because the record
supports the trial court's discretionary decision.2°
For example, Lindskog argues that she only receives a third of the income
available to Burrows because he had a monthly income of $42,808 and could
withdraw up to $16,666 a month. But she bases that argument on amounts
derived from the parties' 2014 tax return, which the court applied only when
determining the proportion of education expenses that would be required from
each party to support their youngest child who was still in college.
For purposes of asset allocation and maintenance, the court considered
all of the evidence relevant to expected future monthly earnings and found
Burrows' income to be $19,200 and Lindskog's to be $2,000. In support of its
determination, the trial court noted that Evergreen has had "ups and downs" as
reflected in the parties' tax returns. It determined that Burrows' assets and
income, because they were tied to the business, were more volatile and there
were risks associated with the sale of Evergreen.
There was substantial evidence supporting the trial court's findings
regarding the volatility of Evergreen's earnings and profits and how that volatility
might impact Burrows' future income and Evergreen's future value. At the time of
20 In re Marriage of Wright, 179 Wn. App. 257, 262, 319 P.3d 45(2013).
10 No. 75967-1-1/11
trial, Evergreen had limited inventory and it was at the top of its $1.3 million credit
limit with the bank. It had pledged both accounts receivable and inventory to
borrow on the line of credit.
In addition, Evergreen's growth rate from 2014 to 2015 was a negative
3.22 percent and growth from 2015 to 2016 was only 6.18 percent. Its pretax
income increased in 2014 by 74.15 percent but then decreased by 3.21 percent
in 2015 and another 10.2 percent the following year. Finally, although Burrows'
current agreement with the bank allowed him a maximum withdrawal of $16,666
per month,future allowances were not guaranteed.
Lindskog further argues that the trial court abused its discretion in
justifying its decision based on the risks and costs associated with sale of the
business when there was no evidence that sale of the business was imminent.21
But the record shows that, in allocating assets, the trial court considered the
uncertainty of the business as a whole, which included the unknown risks and
costs associated with any potential sale.
Lindskog claims that the division was unjust because, while Burrows
saved $25,000 for retirement during the parties' separation, her earnings plus
maintenance were less than her monthly expenses.22 She argues that in five and
a half years when her maintenance runs out, she will be expected to live off of
her limited retirement plus the $24,000 annual minimum wage that the court
21 Cf. In re Marriage of Berg, 47 Wn. App. 754, 759, 737 P.2d 680 (1987).
22 See yVright, 179 Wn. App. at 262.
11 No. 75967-1-1/12
expects she can earn. In comparison, Burrows will have increased his
retirement, "likely still own the community business, have interest payments of
$5,200, company draws, income from the Tahoma building and social security."
Lindskog's arguments fail to establish a manifest abuse of discretion
because there was evidence in the record showing a less optimistic financial
future for Burrows and a more optimistic one for her.
For example, although Lindskog claims that she was unable to save
money while receiving maintenance, there was evidence showing that she spent
discretionary funds after separation on nonessential trips and purchases. There
was also evidence that her own savings increased from $18,050 to $35,853 in
the six month period of October 2015 to March 2016. Finally, although she
claims she will have to live off her limited retirement and minimum wage when
her maintenance runs out, the trial court considered the $100,000 lien transfer to
be part of her retirement.
As to Burrows' financial future, he is 10 years older than Lindskog and
recently diagnosed with glaucoma. He was 65 at the time of trial, and testified
that he was hoping to retire at age 66. Unless he establishes a change in
circumstances, he will be paying Lindskog $8,500 per month until he is 70. His
ownership of Evergreen constitutes a significant portion of his assets and its
value is volatile.
Lindskog's arguments ask this court to override the trial court's broad
discretion by reweighing the evidence. We refuse to do so. Rather, we conclude
that given Burrows' age and proximity to retirement, and the uncertainties
12 No. 75967-1-1/13
regarding Evergreen's future at the time of trial, the trial court did not abuse its
discretion in distributing the assets.23
LIEN ON EVERGREEN
Lindskog argues that the trial court abused its discretion in awarding her a
$100,000 lien on Evergreen, payable when Burrows sells the company, without
also including interest on the lien. She claims that lien does not provide for
payment of her share of the community property within a "reasonable time" of
dissolution.24 We disagree.
As part of the overall property division, this court reviews for abuse of
discretion the lien award.25
Lindskog argues in her briefing on appeal that because it is unknown if or
when Burrows may sell Evergreen, the award of a lien leaves her without her full
share of the community property for an indefinite period that is solely within
Burrows' control. She relies on In re Marriage of Foley, to support her argument
that the use of the lien violates her right to receive her share of the community
property within a reasonable amount of time.26 Her reliance is misplaced.
23 See Rockwell, 141 Wn. App. at 243.
24 See In re Marriage of Foley, 84 Wn. App. 839, 844, 930 P.2d 929 (1997).
25 Id.
26 84 Wn. App. 839, 844, 930 P.2d 929(1997).
13 No. 75967-1-1/14
In Foley, David Foley was awarded the house, the parties' most valuable
asset, which he was required to sell within four months.27 On appeal, Division
Three of this court held that it was within the trial court's discretion to order Foley
to equalize the property distribution by refinancing or selling the house.28 But
that decision does not mean that the trial court in this case abused its
considerable discretion by making a different decision here, especially since the
lien was only a portion of the total assets awarded to Lindskog in the decree.
Lindskog also cites to this court's opinion in Byrne v. Ackerlund, but that
decision fails to help her.29 In Byrne, Pauline Byrne sought to enforce liens on
real property that had been awarded to her spouse William Ackerlund under a
settlement agreement in dissolution proceedings.3° This court held that when a
property settlement does not fix a time for disposition of the parties' assets, the
court will presume that a reasonable time was intended.31
Byrne did not bring suit to enforce the liens until 10 years after the
dissolution decree.32 At that point, she was entitled to seek payment of the liens
27 Id.
28 Id.
29 44 Wn. App. 1,719 P.2d 1363(1986), rey'd, 108 Wn.2d 445, 739 P.2d 1138 (1987).
30 Id. at 3.
31 Id. at 5.
32 Id. at 3.
14 No. 75967-1-1/15
by involuntary sale if necessary because a reasonable amount of time had
passed.33 This decision does not support Lindskog's argument.
Her financial declaration submitted in support of her request for an award
of attorney fees on appeal states, "Chris paid me the $100,000 'lien' that was
owed to me under the decree in September 2017.. . ."34 She does not argue,
nor could she, that payment of this lien within a year from the entry of the
dissolution decree exceeds a "reasonable time" for distribution of the $100,000
amount awarded in the decree.
In any event, the supreme court reversed this court's decision in Byrne in -
part because the property division and lien award there were the result of an
enforceable agreement between the parties.35 The supreme court also noted
that "it may be inappropriate for a dissolution court to order a lien/title division of
property where the parties have not agreed to it and the possibility of future strife
is great."36 In view of the record before us, the Byrne case does not support
Lindskog's argument.
Lindskog also argues that because Burrows is not required to sell the
property and pay the lien within a reasonable time from dissolution, the trial court.
should have awarded her a judgment instead of a lien so that she would have
33 Id. at 5.
34 Financial Declaration of Appellant dated February 6, 2018 at 7.
35 Byrne v. Ackerlund, 108 Wn.2d 445, 451, 739 P.2d 1138 (1987).
36 Id. (emphasis added).
15 No. 75967-1-1/16
been entitled to statutory interest on the award pending payment.37 We again
disagree.
First, it appears that the property has been sold —Lindskog has been paid
the full amount of the lien. Whether the trial court should have entered a
judgment instead of using a lien to distribute funds to her is now moot.
Second, this argument disregards the award of the majority of the
community's liquid assets to Lindskog and the assignment of all of the
community's debt to Burrows. It also disregards Burrows' testimony that he was
considering retiring in two years. The trial court was well within its discretion in
using a lien as the method for making the $100,000 distribution to her.
MODIFICATION OF MAINTENTANCE
Lindskog argues that the trial court improperly ruled that Burrows is
entitled to a hearing to modify his maintenance obligation if he retires before that
obligation terminates without providing the statutorily required "substantial
change in circumstances." Lindskog is wrong.
RCW 26.09.170(1) provides that maintenance may only be modified "upon
a showing of a substantial change in circumstances."38 Lindskog argues that
Burrows' retirement is not a substantial change in circumstances because it was
within the contemplation of the parties at tria1.39 She further argues that just
37 See Ovens v. Ovens, 61 Wn.2d 6, 10, 376 P.2d 839 (1962).
38 See Wagner v. Wagner, 95 Wn.2d 94, 98, 621 P.2d 1279 (1980).
38 Id. at 98-99.
16 No. 75967-1-1/17
because Burrows retires, there is no evidence his ability to pay maintenance
would change because there is no evidence Burrows' income would drastically
decrease if he did retire. Her arguments are unpersuasive.
The final dissolution order does not and could not change the statutory
standard for modification. Rather, it merely states that "the court shall make a
determination whether modification is warranted" at the time of retirement.4°
This provision recognizes the financial uncertainties presented by Burrows' age
and his testimony that his income may drop due to a sale of the company.
Because the trial court could not then determine what effect, if any, Burrows'
retirement might have on his financial condition, the decree provides that the
issue of Burrows' ability to pay can be revisited if he retires. There is not a
modification of the requirements of RCW 26.09.170(1) to show a substantial
change with regards to his financial circumstances before maintenance could be
modified.41 Any reading to the contrary of the trial court's decision is not well-
taken.
ATTORNEY FEES
Finally, Lindskog asks for an award of her attorney fees on appeal. We
deny the request.
40(Emphasis added.)
41 See In re Marriage of Coyle, 61 Wn. App. 653, 658, 811 P.2d 244 (1991).
17 No. 75967-1-1/18
Pursuant to RCW 26.09.140, this court has discretion to award attorney
fees to either party. In considering a request for fees pursuant to RCW
26.09.140, this court considers "the parties' relative ability to pay" and "the
arguable merit of the issues raised on appeal."42
Lindskog argues that she has used her limited funds to pay for her
attorney fees below, and she does not have the ability to pay her fees on appeal.
She further argues that appeal was necessary because of Burrows'"untenable
positions" with regard to property division and valuation of Evergreen. Finally,
she argues that, regardless of whether this court reverses or affirms, her need
relative to Burrows' ability to pay warrants an award of fees on appeal
The record does not support her claim that she is unable to pay her
attorney fees on appeal. Accordingly, we deny her request for such an award.
We affirm the decree of dissolution and deny her request for attorney fees.
on appeal. Cvx Jr.
WE CONCUR:
42 In re Marriage of Leslie, 90 Wn. App. 796, 807, 954 P.2d 330(1998).