Walsh v. Walsh

286 P.3d 1095, 230 Ariz. 486, 644 Ariz. Adv. Rep. 20, 2012 WL 4504602, 2012 Ariz. App. LEXIS 162
CourtCourt of Appeals of Arizona
DecidedOctober 2, 2012
DocketNo. 1 CA-CV 11-0269
StatusPublished
Cited by42 cases

This text of 286 P.3d 1095 (Walsh v. Walsh) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Walsh v. Walsh, 286 P.3d 1095, 230 Ariz. 486, 644 Ariz. Adv. Rep. 20, 2012 WL 4504602, 2012 Ariz. App. LEXIS 162 (Ark. Ct. App. 2012).

Opinion

OPINION

KESSLER, Judge.

¶ 1 Cheryl Walsh (“Wife”) appeals from the family court’s valuation of E. Jeffrey Walsh’s (“Husband’s”) professional goodwill and its award of child support. For the following reasons, we reverse the goodwill valuation and award of child support and remand for further proceedings consistent with this decision. Specifically, Husband’s goodwill and the community’s interest in that goodwill was not limited to Husband’s stock redemption value in the national law firm of which he was a shareholder.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 Husband and Wife, both licensed attorneys, were married in December 1986. In January 2010, Wife filed a Petition for Dissolution of Marriage. The parties have three children, including one who is still a minor. Husband and Wife have agreed to joint legal custody of that child with Wife serving as the primary residential parent.

¶ 3 Financial success by each spouse allowed the parties to have an extremely high standard of living during their marriage. With the national economic collapse, however, Wife’s income from her marketing and public relations company fell dramatically. Despite that collapse, Husband, an attorney and shareholder at the Phoenix branch of a national law firm (the “firm”), continued to earn substantial compensation between 2006 and 2009.

¶ 4 During the dissolution proceeding, the parties disagreed over the community’s interest in Husband’s intangible professional goodwill. Husband took the position that his interest in the firm should be $140,000 — his stock redemption value pursuant to the firm’s Amended and Restated Stockholder’s Agreement (“the Agreement”).1 Husband’s expert witness testified that while Husband had personal goodwill, as of the date of divorce, the only realizable benefit from Husband’s employment was the $140,000 redemption value.2 Thus, Husband’s position [489]*489was that any personal goodwill he had in his legal practice was limited to the $140,000 stock redemption agreement with his firm. Wife’s expert applied a eapitalization-of-earn-ings approach3 and examined Husband’s tax returns, historical income performance, earning sustainability, reputation, and client loyalty.4 Based on those factors, and giving little weight to the Agreement, Wife’s expert valued Husband’s professional practice at $1,269,000.

¶ 5 In November 2010, the family court found that Husband’s interest in the firm and the value of Husband’s law practice were limited to the $140,000 stock redemption value contained in the Agreement:

[T]he Court finds that under a “realizable benefits” standard, Husband’s interest in [the firm], goodwill or otherwise, is limited to the $140,000 contained in the Agree-ment____It would be mere speculation to find that Husband could leave [the firm] and continue to earn the income he has received for the past three years. Wife’s contention that Husband could move from, [the firm] with his book of business, does not take into account a number of difficulties with such a move including conflicts that may occur at another law firm and the assistance of [the firm’s] “platform" in assisting Husband to bring in clients.
Accordingly, the Court finds that the community interest in Husband’s law practice and membership interest in [the firm] is limited to the redemption value of the stock as contained in the Agreement which equals $14-0,000 ____To find otherwise would necessitate that the Court create a fiction.

(Emphasis added.)

¶ 6 In addition, although Wife requested $2000 in monthly child support, the family court declined to deviate from the Arizona Child Support Guidelines. See Ariz.Rev.Stat. (“A.R.S.”) section 25-320 app. (Supp.2012) (“Guidelines”).5 Accordingly, the court ordered Husband’s monthly child support obligation to be $1270 effective December 1, 2010, and $1277.02 effective December 1, 2011.

¶ 7 Husband moved to alter or amend the family court’s findings of fact and conclusions of law, and Wife filed an application for [490]*490attorneys’ fees and costs. The family court granted both motions,6 and Wife timely appealed. See ARCAP 9; Ariz. R. Fam. Law P. 82. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) (Supp.2011).

ISSUES AND STANDARD OF REVIEW

¶ 8 Wife argues that the family court erred by: (1) measuring the value of Husband’s professional practice by Husband’s stock redemption value; and (2) failing to deviate from the Guidelines in calculating child support.

¶ 9 “The valuation of assets is a factual determination that must be based on the facts and circumstances of each case.” Kelsey v. Kelsey, 186 Ariz. 49, 51, 918 P.2d 1067, 1069 (App.1996). We view the evidence in the light most favorable to upholding the decision, Mitchell v. Mitchell, 152 Ariz. 317, 323, 732 P.2d 208, 214 (1987) (“Mitchell II”), and “will not disturb [the] trial court’s factual findings unless clearly erroneous,” Hrudka v. Hrudka, 186 Ariz. 84, 92, 919 P.2d 179, 187 (App.1995). “A court abuses its discretion if it commits an error of law in reaching a discretionary conclusion, it reaches a conclusion without considering the evidence, it commits some other substantial error of law, or ‘the record fails to provide substantial evidence to support the trial court’s finding.’ ” Flying Diamond Airpark, L.L.C. v. Meienberg, 215 Ariz. 44, 50, ¶ 27, 156 P.3d 1149, 1155 (App.2007) (quoting Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 456, 652 P.2d 507, 529 (1982)). Moreover, we review legal issues and the application of law de novo. See City of Tucson v. Clear Channel Outdoor, Inc., 218 Ariz. 172, 180, ¶ 16, 181 P.3d 219, 227 (App.2008). “Although we will not disturb a court’s award of child support absent an abuse of its discretion, we will review its interpretation of the Guidelines de novo as a question of law.” Hetherington v. Hetherington, 220 Ariz. 16, 21, ¶ 21, 202 P.3d 481, 486 (App.2008) (citations and internal quotation marks omitted).

DISCUSSION

A. VALUATION OF HUSBAND’S PROFESSIONAL GOODWILL

¶ 10 Wife argues that the family court erred in valuing the community’s interest in Husband’s goodwill at $140,000. Husband, on the other hand, argues that the court correctly applied a “realizable benefits” standard when making its determination. To the extent the family court held that Husband’s professional goodwill as an attorney was limited to his stock redemption interest in his law firm, we agree with Wife.

¶ 11 “[R]eferred to as the most intangible of intangibles, goodwill is essentially reputation that will probably generate future business.” Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1, 3 (1983) (citation and internal quotation marks omitted); see also Mitchell II, 152 Ariz.

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Cite This Page — Counsel Stack

Bluebook (online)
286 P.3d 1095, 230 Ariz. 486, 644 Ariz. Adv. Rep. 20, 2012 WL 4504602, 2012 Ariz. App. LEXIS 162, Counsel Stack Legal Research, https://law.counselstack.com/opinion/walsh-v-walsh-arizctapp-2012.