Marriage of Rangel

• Court: Colorado Court of Appeals
• Decided: August 22, 2024
• Docket: 23CA1222
• Status: Unknown

Opinion

23CA1222 Marriage of Rangel 08-22-2024

COLORADO COURT OF APPEALS

Court of Appeals No. 23CA1222

Weld County District Court No. 22DR30047

Honorable Randall C. Lococo, Magistrate

In re the Marriage of

Anel Rangel,

Appellee,

and

Joel Rene Vazquez Vargas,

Appellant.

JUDGMENT REVERSED AND CASE

REMANDED WITH DIRECTIONS

Division V

Opinion by JUDGE HARRIS

Brown and Lum, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e)

Announced August 22, 2024

Melusky Law, LLC, David J. Melusky, Greeley, Colorado, for Appellee

Donald E. Janklow, Greeley, Colorado, for Appellant

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¶ 1 In this dissolution of marriage proceeding involving Joel Rene

Vazquez Vargas (husband) and Anel Rangel (wife), husband appeals

permanent orders as they relate to the property division.

Specifically, he contends that the magistrate erred in valuing his

business. We reverse the judgment and remand the case for further

proceedings.

I. Relevant Facts

¶ 2 In January 2022, after seventeen years of marriage, wife filed a

petition for dissolution. At that time, husband was self-employed

through his remodeling and concrete business, and wife was

unemployed.

¶ 3 On May 30, 2023, the magistrate issued a dissolution decree

and entered permanent orders. The court made the following

findings:

• Husband’s business was marital property. It was formed in

2015 and had a “good reputation based on [husband’s] hard

work and reputation.”

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• The value of the business’s equipment was uncertain given

the limited testimony.

• All real property in the marital estate, including a mobile

home, owned, in whole or in part, by husband’s business

was marital property subject to equitable division and

excluded from the business’s value.

• Husband’s business was worth only its goodwill, which was

valued at $351,238.

• Husband was receiving significantly more income from the

business than he claimed, evidenced by the fact that his

alleged income did not cover his reported business and

personal expenses. Husband’s actual monthly income was

$11,300.

¶ 4 From those findings, the court (1) allocated the business to

husband; (2) ordered husband to pay wife an “equalization”

payment of $175,000; and (3) directed husband to pay wife monthly

maintenance of $2,325 for 110 months.

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II. Property Division

¶ 5 Husband asserts that the magistrate improperly valued the

business’s goodwill and, as a result, the property division cannot

stand. We agree.

A. Relevant Legal Principles and Standard of Review

¶ 6 “The value of goodwill has long been accepted as an attribute

of a business relevant to determining its value.” In re Marriage of

Medeiros, 2023 COA 42M, ¶ 41. Goodwill generally refers to those

intangible assets of a business, such as reputation and on-going

relationships with customers and suppliers. See In re Marriage of

Nichols, 43 Colo. App. 383, 385, 606 P.2d 1314, 1315 (1979) (“A

professional, like any entrepreneur who has established a

reputation for skill and expertise, can expect his patrons to return

to him, to speak well of him, and upon selling his practice, can

expect that many will accept the buyer and will utilize his

professional expertise. These expectations are a part of goodwill,

and they have a pecuniary value.”); see also In re Marriage of

Banning, 971 P.2d 289, 292 (Colo. App. 1998) (location, reputation,

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customer base, and customer relations constitute the goodwill of a

business).

¶ 7 The court has considerable discretion to achieve an equitable

property division, and absent an abuse of that discretion, we will

uphold the court’s decision. Medeiros, ¶ 28. The court abuses its

discretion when its decision is manifestly arbitrary, unreasonable,

or unfair, or when it misapplies the law. See id.

¶ 8 Valuing property is also within the court’s discretion, and we

will not disturb the court’s valuation if it is reasonable in light of

the evidence as a whole. In re Marriage of Krejci, 2013 COA 6, ¶ 23.

The court may select the valuation of one spouse over that of the

other spouse, or make its own valuation, and the court’s

determination will be upheld on appeal unless clearly erroneous,

meaning no evidence in the record supports it. See id.; see also

Van Gundy v. Van Gundy, 2012 COA 194, ¶ 12.

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B. Discussion

¶ 9 Neither party called an expert to opine on the value of the

business.

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Husband testified that the business had a value of

$15,000 or $20,000. Wife, who acknowledged that she had no

“experience with running a business” and no “accounting

experience,” offered only that the business was worth “a lot.”

¶ 10 Despite husband’s testimony that the business had some

value, his proposed findings and conclusions did not include any

value for the business. On the other hand, while wife was unable to

provide any evidence of the business’s value during the hearing, her

proposed findings and conclusions asserted that the business was

worth over $1,000,000, including $351,238 of goodwill. In

calculating goodwill, she applied what she called the “average

profits method.” According to wife, under that method, “goodwill is

1

Wife explained in her written closing argument that she had

suggested that the parties hire an expert to value the business, but

husband rejected that idea. She said she could not afford to hire

an expert on her own, so no valuation expert was retained. Wife did

not request that the court appoint an expert under C.R.C.P. 16.2(g)

or otherwise bring her request for an expert to the court’s attention

before her closing argument.

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equal to the average profits for a set time period, multiplied by the

number of years.” She averaged the business’s profits over seven

years (2016 through 2022), multiplied that number by seven, and

arrived at a value of $351,238.

¶ 11 The magistrate adopted wife’s valuation in part. The court

first found that the value of the business was all goodwill. It

explained that although the business had some property —

equipment, real property, and a mobile home — it had allocated

that property “elsewhere” as part of its division of the marital estate.

Then, using wife’s “average profits method,” it valued the goodwill at

$351,238.

¶ 12 We recognize that the magistrate was at a distinct

disadvantage in valuing the business given the state of the

evidence. Nevertheless, we conclude that the magistrate erred by

accepting wife’s proposed “average profits method” to value the

business’s goodwill. See Medeiros, ¶ 28.

¶ 13 True, the business’s annual profits were introduced into

evidence through tax returns. But there was no evidence presented

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that multiplying a business’s average profits by a number of years

would yield an accurate value of its goodwill.

¶ 14 Nor did the court make any finding based on the evidence that

the “average profits method” was a reasonable way to calculate

goodwill. And there is no case law, in Colorado or elsewhere,

indicating that this method is a reliable and recognized method to

determine business goodwill.

¶ 15 Indeed, under this method, the court effectively equated the

business’s actual net income over seven years with the value of the

business’s goodwill. But “goodwill is a property or asset which

supplements the earning capacity of . . . a business . . . and

therefore, it is not the earning capacity itself.” In re Marriage of

Graff, 902 P.2d 402, 405 (Colo. App. 1994) (emphasis added).

¶ 16 Though wife suggests that the court’s valuation might be

justified based on husband’s underreporting of income, she does

not dispute that the court’s methodology was flawed. On appeal,

she concedes that “[i]t has to be acknowledged . . . that the method

used by the [t]rial [c]ourt is suspect.”

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¶ 17 Because the magistrate erred in valuing husband’s business,

we reverse this portion of the permanent orders and remand the

case for the court to revalue the business and redetermine an

equitable property division. See In re Marriage of Corak, 2014 COA

147, ¶ 31; see also Krejci, ¶ 18. On remand, the court may take

additional evidence concerning the value of the business as of the

date of the decree. See In re Marriage of Mohrlang, 85 P.3d 561, 564

(Colo. App. 2003); see also § 14-10-113(5), C.R.S. 2024 (property

must be valued at the time of the decree or of the hearing on

disposition, whichever is earlier).

¶ 18 Also, the court must allow the parties to present evidence

concerning their economic circumstances at the time of the remand

proceedings. See § 14-10-113(1)(c) (the court considers the parties’

economic circumstances at the time the property division “is to

become effective”); In re Marriage of Powell, 220 P.3d 952, 961 (Colo.

App. 2009) (court required to consider the parties’ financial

circumstances existing at the time of remand when reconsidering

property division and maintenance).

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III. Maintenance

¶ 19 Because the court on remand must redetermine the property

division, the court must also reconsider wife’s maintenance award.

See Medeiros, ¶ 25 (court must reconsider the issue of maintenance

on remand of the property division); see also In re Marriage of de

Koning, 2016 CO 2, ¶ 26. And given that maintenance is based on

the parties’ financial circumstances at the time the order is entered,

on remand, the court should consider the parties’ current

circumstances for this purpose as well. See In re Marriage of

Stradtmann, 2021 COA 145, ¶ 35.

IV. Appellate Attorney Fees

¶ 20 Wife seeks her appellate attorney fees under section 14-10-

119, C.R.S. 2023. Apart from citing the statute, she provides no

basis for the request, and as a result, we must deny it. See C.A.R.

39.1 (a party seeking appellate attorney fees must explain the legal

and factual basis for the award; “[m]ere citation to th[e] rule or to a

statute, without more, does not satisfy the legal basis

requirement”); In re Marriage of Newell, 192 P.3d 529, 538 (Colo.

App. 2008).

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V. Disposition

¶ 21 The judgment relating to the value of husband’s business is

reversed and the case is remanded to the district court to

reconsider the issue. The court on remand may take additional

evidence on the value of the business as of the date of the decree.

Mohrlang, 85 P.3d at 564; see also § 14-10-113(5). In light of its

new valuation finding, the court must reconsider the entire property

division to achieve an equitable result. See Corak, ¶ 31; see also

Krejci, ¶ 18. The court on remand should also reconsider the issue

of maintenance. The court must consider the parties’ economic

circumstances at the time of the remand when dividing the marital

property and determining maintenance. See Powell, 220 P.3d at

961; see also Stradtmann, ¶ 35.

JUDGE BROWN and JUDGE LUM concur.