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In re Marriage of Schickner

Court of Appeals of Arizona, First Division

April 16, 2015

In re the Marriage of: DANIEL C. SCHICKNER, Petitioner/Appellee,
v.
RENNA M. SCHICKNER, Respondent/Appellant.

Appeal from the Superior Court in Mohave County No. S8015DO201000482 The Honorable Charles W. Gurtler, Judge The Honorable Rick A. Williams, Judge

Rowley Chapman & Barney, LTD., Mesa By Paul S. Rowley and Nathaniel H. Wadsworth Counsel for Petitioner/Appellee

The Wilkins Law Firm, PLLC, Phoenix By Amy M. Wilkins Counsel for Respondent/Appellant

Judge Michael J. Brown delivered the opinion of the Court, in which Presiding Judge Samuel A. Thumma and Judge Patricia A. Orozco joined.

OPINION

BROWN, JUDGE

¶1 Renna M. Schickner ("Wife") appeals from two provisions of the trial court's decree dissolving her marriage to Daniel Schickner ("Husband"). Wife argues the court (1) undervalued two jointly-owned business interests, Western Medical Eye Center, LLC ("WME") and Physicians Surgery Center, LLC ("PSC"), and (2) erroneously found she was not entitled to one-half of the monies distributed to Husband from those business interests during the three-year period between the filing of the petition for dissolution and entry of the decree. We conclude that sufficient evidence exists in the record supporting the court's valuation as to PSC, but not WME, and therefore vacate and remand the court's ruling for a redetermination of the value of WME. Regarding the post-petition distributions Husband received, we vacate the court's ruling and remand for further proceedings.

BACKGROUND

¶2 The parties married in 1998 and have two minor children. During the marriage, the parties acquired a 50% community interest in WME, located in Kingman, where Husband practices as an ophthalmologist. The parties also acquired a 20% community interest in PSC, also located in Kingman, where Husband performs surgeries.

¶3 In June 2010, Husband filed a petition for dissolution of marriage. Early in the case, Wife filed a motion for temporary orders seeking a declaration that pending a final decree, she was entitled to receive a one-half share of all distributions made from WME and PSC. The trial court held a hearing on the motion and received testimony from Husband and Wife as well as Husband's certified public accountant, Brandon Bull. The court then determined that "no matter how the distributions are characterized, the parties must report the same as taxable income. There were no reductions in capital accounts. . . . [T]he distributions are appropriately characterized as salary or earned income." The court therefore denied Wife's request for one-half of the distributions made to Husband. As to other issues raised in the motion for temporary orders, the court ordered that Husband reimburse Wife for one-half of the mortgage payments on the family residence occupied by Wife and pay $7, 000 per month as spousal maintenance.

¶4 As the matter progressed to trial, the case was re-assigned to a different judge. The primary contested issues were the valuations of WME and PSC for the purpose of determining the amounts Husband owed to Wife for acquiring her share of the marital community's interests in the two businesses.

¶5 Through his experts, John Pinto and Stephen Koons, Husband presented multiple valuations for the parties' jointly held 50% business interest in WME: (1) $475, 000 (Pinto - applying minority share and marketability discounts), (2) $620, 000 (Koons - applying minority share and marketability discounts), and (3) $830, 000 (Koons-not applying minority share or marketability discounts). As to the parties' jointly held 20% interest in PSC, Husband's experts provided the following values: (1)$580, 000 (Pinto-applying minority share and marketability discounts), (2) $490, 000 (Koons-applying minority share and marketability discounts), and (3) $540, 000 (Koons-not applying minority share or marketability discounts). Through her expert, Calvin Swartley, Wife presented a valuation of WME at $3, 233, 000 with the community's 50% interest in WME being $1, 617, 000 and a valuation of PSC at $5, 261, 000 with the community's 20% interest in PSC being $1, 052, 000.

¶6 In general, the three experts testified to the complexity of the valuations, explaining that factors such as assets, liabilities, taxes, liquidity, depreciation, interest expenses, revenue, cash flow, rents, goodwill, operating expenses, management agreements, operating agreements, market size and share, capitalization rates, marketability, and control were considered in reaching the final calculations. Each of the experts also prepared written reports documenting their respective valuations of the two businesses.

¶7 Husband disputed Swartley's valuation, arguing, among other things, that Swartley applied a capitalization rate that was too high and did not include a discount for lack of marketability and lack of control as to both businesses. Wife countered that Husband's experts incorrectly approached the valuation question by assessing the marketable value of Husband's interests in WME and PSC as if he were selling to a third party. Wife asserted that discounts for lack of marketability and lack of control are only considerations if an outside buyer is buying into a practice, and are not appropriate factors when evaluating the value of a present owner "buying out" the interest of another present owner. Wife also raised claims regarding "inflated rents" and excessive salaries paid to family members.

¶8 The parties also disputed the character of the distributions from the businesses following Husband's filing of the petition for dissolution. Husband argued Wife was not entitled to any of the monies paid to him because they were in the nature of salary and earned income and thus constituted his separate property. Wife countered that Husband's salary from WME was limited by contract to $250, 000 per year and therefore all monies he received above ...


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