In Re the Marriage of Bookout

require a reconsideration of factors which factors. appropriate In re the MARRIAGE OF Deanne BOOKOUT, Appellee M. clearly court has wide discre

A trial Cross-Appellant, property in matters of division. See In tion Faulkner, 652 P.2d 572 re Bookout, Appellant David B. Nevertheless, (Colo.1982). legal when a Cross-Appellee. exists, may the court not dis standard oth regard that standard in favor of some No. 90CA1636. rule, contro legal must decide the er but Appeals, Colorado Court therewith. Buckmil versy accordance Div. III. Stores, Inc., 727 P.2d Safeway ler v. (Colo.1986). Dec. 1991. Rehearing Denied 1992. Feb. property may change recognize

We during pendency of an in character Aug. Certiorari Granted 1992. i.e., sold, may appeal, property encum- for Certiorari Denied Cross-Petition bered, longer cir- or no exist. Under such (Wife) Aug. cumstances, such the court must consider changes have oc- facts. no such

curred here. it error we conclude that was the court to base its redetermination of

for changes on in the parties

economic circumstances of since the decree of dissolution

had occurred security

and on considerations of the social might which be available to hus-

benefits

band. conclusion,

By imply do not applying

the trial they existed at

standards to facts decree,

the time of the could not on remand equitable

determine division of that an an award of the would include

entirety to the wife. of the PERA benefits reversed, cause is

The order is and the

remanded the trial court for further PERA bene- and award wife’s ex-

fits not inconsistent with the views

pressed herein. CRISWELL, JJ.,

METZGER and concur. gen-

000. Husband’s used the same however, approach; eral he valued the practice at because he considered competition much it to be riskier because of and the referral nature of the business. expert’s The trial court found that wife’s reasoning thought was more out and and, planned given history prac- the of the demonstrating tice that husband was well able to secure and maintain a comfortable industry, rejected niche in the it the 100% capitalization by rate used the husband’s However, expert. the court also found income earned the business 1988 was distorted to a certain extent be- Michaels, P.C., M. Frey, Lach Susan & and, therefore, cause of various factors Lach, Collins, appellee for and cross- Fort valuing using concluded that a the business appellant. five-year weighted average ap- was more Litvak, P.C., D. Lit- and Ronald Litvak propriate. the court determined that Mehrtens, Denver, vak, ap- Timothy R. for $595,000. practice was worth pellant cross-appellee. and concluding equitable that an appropriate, of was the trial court Opinion by Judge NEY. practice comprised observed that husband’s action, marriage In this of dissolution over one-half of the marital and (husband) appeals and David B. Bookout liquidation might of most of the assets (wife) cross-appeals M. Bookout Deanne consequences. entail tax substantial permanent orders relative to mainte- which, it entered an award nance, property, distribution of specific addition to the assets awarded to attorney port, fees and costs. We wife, required pay to wife the husband part, part, reverse in and remand affirm $150,000. sum of The ordered that court proceedings. for further paid period years, this sum over of $10,000 ap- paying princi- married for with of the Husband and wife were years. pal yearly, together chil- proximately fourteen Three with interest on the balance, marriage. unpaid commencing August of the Husband dren were born physical therapist is a who has established 1991. In the court awarded wife $10,000 private practice employ- ten an additional sum to assist her a full-time with taxes, fees, high-school graduate paying attorney is a and in income ees. Wife employed secretary par- expert until the witness fees which it found amount- as a $15,000. recently ties’ first child was born. She ed to designer employed became as an interior The court further observed that wife had $1,000. monthly gross with a income of showing furnished a financial affidavit $9,120, party monthly living expenses testified as to the and that Experts for each practice. up by value While each this “statement was backed [her] method, opin- accounting, approximately capitalization their which covered utilized $294,000 $745,000. period ranged representing from 19 months” imme- ions Nevertheless, opinion diately prior separation. her Wife’s that, “given parties earned in found primarily upon the income 1988 the court great history that it reflected the and the income available both because she felt ap- parties,” the last reasonable needs were growth in the business over few wife’s per After con- years. proximately she also indicated that month. estate using five-year sidering of the marital the value of the business the size $595,- wife, monthly living ex- weighted her average income would be awarded to tempo- practice accomplished by consequences fixing tax penses, the family support, salary and the fact rary orders for amount which the level of the $150,000 cash that interest on the distribu- owner exceeds that which would have been year, the payable would not be for one employee by person tion an earned as temporary wife maintenance education, court awarded qualifications similar experi- $1,000 month, per payable August until ence, capability. If the owner’s actual average income exceeds the total of the employee norm and a return on the invest- determina- The court commented physical ment in the assets of the support presented tion of child a difficult the excess would be the basis for evaluat- problem income of because combined ing goodwill subject capitaliza- and is to a shown parties exceeded the maximum Dugan Dugan, tion factor. guidelines by on the child over 457 A.2d 1 $7,000. finding After wife’s income to be $1,000 $2,150 (which per month included earnings represent These excess the investments) maintenance or interest from earnings produce which a business can $15,250 per and husband’s income to be period operated by over a of time if it is a month, the court concluded that wife con- manager disinterested whose aim is to approximately parties’ of the tributes 13% profits. They computed by maximize are $17,Í91, and combined income of husband taking earnings from last the five to ten contributes 87%. years, adjusting them for sal- unreasonable sup- the child The court then noted that perquisites, averaging aries and and then guide- port computed by application of the them. regressive percentage of com- lines was Appraisers try to determine reasonable Nevertheless, gross bined income. after given industry by utilizing salaries in a finding that the net child care costs were salary journals studies from trade or month, per it concluded that at $450 15% government agencies. Walzer & Gabriel- income, parties’ gross the recom- son, Closely Valuation in Held Stock support obligation child mended basic Corporations at the Time of $2,728.75, 19%, at it would be would be Dissolution, Matrimonial J.Am.Acad. $3,233 Then, per on the month. based desig- Law at Such salaries are premise that needs were wife’s reasonable nated the market salaries and form the $6,000 ability that had the to husband goodwill line from which the value of base needs, meeting in those the court assist is determined. summarily concluded that the amount of $4,000 per month was Here, expert determined that wife’s paid by to be husband. salary per market survey of salaries year upon a 1986 I. Physical Thera prepared by the American challenging In the court’s valuation of According study, that py Association. practice by capitalizing means of his his therapist male with over full-time salaried earnings, first contends yearly husband physical experience as a thera years nine accepting that the trial court erred $43,- gross income of pist had a 1986 mean opinion expert of wife’s as to his market contrast, self-employed a full-time $70,- salary. argues the use of a He that length the same therapist male figure supported 000 annual income is not $101,876. making Wife’s experience was in the record and is by sufficient evidence figure for the the income expert utilized inconsistent with other made individual, cover added salaried finding specifically the court’s responsibilities which she managerial $15,000per that his income was over month of, capable and in felt husband would support purposes. disagree. for child We by eight percent per year sum creased this from 1986 the increase salaries appropriate method to deter to reflect One goodwill professional to 1988. mine the value of expert determining failed his under the child that the income

Husband contends guidelines. survey port he interpret properly the because salary upon which argues that the correct earnings should be compute excess II. are not self-employed individual. We of a Next, capital cases, many closely practice. in a Rutkin, (1981); generally A.H. 343 see may pay salaries to its own- held business 37.05(1) (1991). Family Law & Practice § ordinarily higher than would ers that are However, minority contrary this view is they per- justified by the duties that be adopted the law in this which have Miles, Appraisal form. Business R. Basic jurisdiction. Marriage In re Nich- See of (1984). 119 (1979) ols, 383, Colo.App. 43 606 P.2d 1314 Furthermore, expert indicated that wife’s (the goodwill practice to a value of incident deposi- upon she had not relied acquired during marriage). is an asset testimony, she informed of tion which Furthermore, good of value Nevertheless, hus-

prior hearing. to the will which is to be determined at the time $60,- testimony that he could earn band’s synonymous of dissolution is not with a upper range in a 000 to at spouse's expectation earnings. of future together physician-owned practice, Lukens, Wash.App. Marriage In re 16 of which can be made reasonable inferences 481, (1976); Marriage 558 P.2d 279 In re of testimony, supports the market from such Fortier, 384, Cal.App.3d Cal.Rptr. 109 34 accepted salary upon which the business (1973). Dugan Dugan, 915 See also valuation was based. (future earning capacity per supra se goodwill). earnings simply a not Such are finding of Lastly, inasmuch as the if factor which are considered to decide support purposes is man income for child exists, goodwill Lopez, Marriage In re by statutory provisions and is not dated of (1974), Cal.Rptr. Cal.App.3d 38 113 58 hypothetical figure, as is the market sala it is latter that is valued and this asset Stock, supra, at we ry, see Valuation of parties dissolu allocated between the to a inconsistency in internal the court’s find no Stern, tion. 331 A.2d Stern v. Indeed, of busi order. the determination (1975). simply not 257 Goodwill reflects directly relating purposes ness income for possibility earnings, proba but a of future may differ operation to the of the business existing bility on circumstances. based gross income that is de from the level of supra. Dugan Dugan, satisfy termined to obligation. support Report child of marriage pro In a dissolution of Support on Child Colorado Commission goodwill should be ceeding, the value of (1985). arriving present value at a measured by ac Furthermore, upon past results and not has we note that husband postmarital efforts of the counting in for the the trial court erred not asserted that

805 Greenblatt, port, Marriage In re 789 the method see spouse. professional of here, (Colo.App.1990); Marriage P.2d 489 In re capitalizes the of valuation Inwegen, at 757 P.2d 1118 earnings of the business Van past historical of 1988),and, rate to iden- it should have trans appropriate capitalization an possessed by higher lated the children’s standard of liv tify a value of the ing specific monetary requirements. at the date of dissolution into the business Schwaab, valuing on P.2d problem Marriage of a business In re 794 avoids See of Thus, earnings (Colo.App.1990). 1112 the award of post-dissolution the basis of Foster, Marriage support 42 cannot stand in the profits. In re See Cal.Rptr. meaningful findings that indi Cal.App.3d absence cate the basis for the court’s determination. past a valuation on the basis Marriage English, In re 757 P.2d represents advantage current- earnings (Colo.App.1988); In re by the as shown ly possessed business Inwegen, supra. Van in ex- ability to earn income its historical earned if the cess of that which would be IV. tangible property

owner had invested Zipp, leased it to other businesses. cross-appeal, In her wife first asserts Interests: Business Divorce Valuation of failing that the trial court erred to award Earnings Approach, Capitalization A net her one-half of the assets. To Fam.L.Q. see 89 at 109 & contention, argues she that the court Udinsky, Putting a on generally Value findings regarding her failed to make as- Goodwill, 9 Fam.Adv. 37 assets; dissipated had sertion liability failed to consider the tax on the asset is a or Goodwill and child unallocated maintenance supplements earning capacity of which orders; during temporary that she received asset, profession, or a another findings failed to enter sufficient and and, therefore, earning capaci it is not the unequal division. We are not justify an Hall, Marriage 103 ty itself. In re of persuaded by arguments. these (1984). Hence, 236, 692 P.2d 175 Wash.2d professional and a practicing while both a The of marital division earning professional bring an ca salaried discre resting is a matter within the sound pacity comprised of skill and education ruling and its there tion of the trial directly supple positions, their on review when it on will not be disturbed capacity only of the earning ments the supported by competent evidence. In re is professional. Marriage re practicing In of Price, (Colo. P.2d 1073 Marriage 727 of (Colo.App.1991). 820 P.2d 1194 Keyser, Further, 1986). statutory requirement identification, Thus, that the we conclude re property equitably does not to divide valuation, good- and of husband’s Marriage quire equal an division. In re of therapy physical his portion as a of will 294, Colo.App. 44 616 P.2d Warrington, future not divide husband’s practice did did not receive a wife income. Here, expressly not the trial court recovery. double findings hus ed in its that wife believed pend- dissipated during the had assets band III. orders, temporary that hus ency of but Finally, husband contends that The not done so. claimed he had band findings regard any court failed to make by each includes exhibits submitted record needs of the children ing the reasonable respective positions. supporting their party pre minimum not calculate the and did further Thus, although the order lacks support under sumptive amount of of this explain the evaluation agree. guidelines. We evidence, presume that the trial may we presented by the evidence court considered required to calculate The trial court was implicitly decided parties when it amount of both presumptive the minimum expressed In re not inconsistent with the views dissipation had occurred. See no (Colo.1989). respects, judgment 780 P.2d 499 herein. all other Marriage of Udis, is affirmed. Furthermore, the trial court found approximately for attor owed wife METZGER, J., concurs. taxes, fees, income and a ney finding supported is landscaping bill. This CRISWELL, J., specially concurs. inferences by the and reasonable evidence Therefore, an award could be made. which Judge specially concurring. CRISWELL satisfy obligations these was majority opinion. agree I with the How- the court’s discretion. See In re within ever, separately emphasize my I write Marriage Kiefer, 738 P.2d 54 as to the extent to which that asset views 1987). “goodwill” con- referred to should be Finally, specifically the court ob trial sidered court on remand required that it not to divide served determining relating issues to maintenance property equally. In it found support. and child majority was not that the vast “goodwill” The nature of as an asset is practice consisted of liquid; that husband’s subject one which has been the of some estate, necessarily one-half of the but over controversy. judicial Substantially all of him; liqui had to remain with and that recognized have that a the courts business might entail dation of most assets possesses “goodwill” only to the extent Hence, consequences. tax substantial business, probable that it is that the as a equitable, find no error in the award of an patron- will to attract continue equal, property. rather than an division of Foster, age. Marriage In re Cal.Rptr. Cal.App.3d V. asset, goodwill, if it exists as an greater award Wife also contends that only probabil- it reflects a valuable because of child should have been made receipt ity of the income. See future of, amount, that the and the extent Kimbrough Kimbrough, 228 Neb. maintenance was insufficient. (1988); In re opinion, part as we indicated in III of this Hall, 103 Wash.2d 692 P.2d 175 of child cannot stand award Dugan Dugan, 457 A.2d 1 addressed on remand. must be (1983); Holbrook, Holbrook v. 103 Wis.2d Furthermore, inasmuch issues of 327, Mar- But see maintenance and child are interre- Lukens, Wash.App. riage 16 558 lated, Micaletti, Marriage 796 see In re Marriage Lopez, P.2d 279 In re (Colo.App.1990), that it P.2d 54 we conclude Cal.App.3d Cal.Rptr. 113 58 is also to remand the issue of therefore, that, generally agreed, It is to maintenance for further consideration here present the value of such an determine to the specific and more asset, legitimate one method of evaluation Sinn, Marriage award. re See In may used is to determine the histor- be (Colo.1985). P.2d 333 goodwill, to to as- ical income attributable direct the trial court to probability sess the of that income’s contin- findings upon clarify and its elaborate uance, by risks in- discounted the business existing regarding wife’s reasonable record volved, engage “capitalization” in and to factors, than the size needs and the other reducing the future estimated method of estate, upon of the which its order marital present income to worth. See is based. Hall, supra. supra; Dugan Dugan, v. judg- capitalization method of evaluation Accordingly, portions of the Such capitalization method of is similar to the relating ment to maintenance and to reversed, reducing any future income stream port and the cause is remand- are present Brady Burlington, v. proceedings further worth. See ed to the trial court for 1988) (reduction P.2d lectively provide available to for the chil- employee’s wages present worth). dren’s support. future to future

Here, in considering presented by both witnesses such income for support purposes, court, income parties, cannot adopted as well as the upon looked as the sole income of the party capitalization evaluating this method of who is to receive the payments. future “goodwill” of husband’s business. That Rather, to the produc extent that the asset evaluation, therefore, upon was based ing that income has been by requir divided premise that husband would continue to ing party pay part to of the asset’s And, future income. to the receive extent present worth to the other party, a sum that an interest that asset was transfer- representing the interest transferred must wife, red to (although she received in a be subtracted from the transferor’s income form) portion different of the future in- and added to the transferee’s income be predicted come that that asset was pro- applying statutory fore guideline. Fail duce. ure to make such an income allocation corollary, right As a to receive would, my opinion, give to the transferee is, such income was reduced. That while a double credit. Stemper Stemper, he continue to pro- will receive the future supra. produced asset, ceeds such he is re- my opinion that, it is remand, on quired pay to wife a sum representing court, in determining parties’ in- present portion value of a of that fu- purposes come for support, of child must ture income. subtract from husband’s income and add to circumstances, my Under these it is view part wife’s income that being funds that the treating trial after in- this received husband that is attributable to terest future income as an asset and goodwill which, that share of the asset it, dividing purposes cannot for of mainte- order, under the division support, nance or child continue to treat all required (by payment to transfer of its of it as husband’s sole income. value) present to wife. I deciding While have found no cases

question respect to the of a

professional several courts have respect

reached a similar conclusion with

other assets whose value is upon ability produce their future income. KENNEDY, Mary Charles and Generally, example, for it has been held Plaintiffs-Appellants, right to the extent that the to receive pension payments in the future has been CO., corporation AERR a Colorado considered an asset for Hamm, Defendants, and John purposes, payments may those not also be considered as income for maintenance or Concerning support purposes. Stemper See v. Stem Company, Admiral Insurance per, (S.D.1987); 403 N.W.2d 405 Pelot v. Garnishee-Appellee. Pelot, 339, 116 Wis.2d No. 90CA1814. D’Oro, N.J.Super. D’Oro v. 377, 454 A.2d 915 also Innes v. Appeals, Colorado Court of Innes, (1990) 569 A.2d 770 Div. III. (decided adoption codifying after of statute Dec. 1991. rule). D’Oro Rehearing Denied 1992. Jan. agree I do not at least for child Aug. Certiorari Denied support purposes, right to receive fu- solely ture income should be considered

an asset and not as income. To do so accurately depict

would not the funds col- notes persuaded. income, future income izing excess his property. valued and divided as stream is weight The to be accorded to basing argues he an order techniques of an is for valuation upon and child of maintenance determination, depending upon trial court’s inequitably awards wife a same income reliability the court’s assessment recovery. disagree. We double 703; particular in a case. See CRE data personal The few courts that consider Caroselli, 653 P.2d 754 v. Stone nothing probable more than goodwill as 1982). earning capacity concluded future have expert explained, the differ- As wife’s not a marital goodwill is divisible as- salary the level of earned ence between Kimbrough Kimbrough, set. See self-employed individual and a salaried Neb. Holbrook build-up person primarily Holbrook, 103 Wis.2d 309 N.W.2d

Case Details

Case Name: In Re the Marriage of Bookout

Court Name: Colorado Court of Appeals

Date Published: Aug 17, 1992

Citation: 833 P.2d 800

Docket Number: 90CA1636

Court Abbreviation: Colo. Ct. App.