Simone v. Thompson, IV ( 2020 )

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.
IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
In re the Matter of:
CARA LEE SIMONE, Petitioner/Appellee,
v.
RUSSELL SNOW THOMPSON, IV, Respondent/Appellant.
No. 1 CA-CV 19-0384 FC
FILED 8-4-2020
Appeal from the Superior Court in Maricopa County
No. FN 2017-092845
The Honorable Adele Ponce, Judge
AFFIRMED
COUNSEL
Wilkins Law Firm PLLC, Phoenix
By Amy M. Wilkins, Laura C. Brosh
Counsel for Respondent/Appellant
McWhorter Law Firm PLLC, Mesa
By Heath H. McWhorter
Counsel for Petitioner/Appellee
SIMONE v. THOMPSON, IV
Decision of the Court
MEMORANDUM DECISION
Judge Jennifer B. Campbell delivered the decision of the Court, in which
Presiding Judge Paul J. McMurdie and Judge Kent E. Cattani joined.
C A M P B E L L, Judge:
¶1 Russell S. Thompson, IV (“Husband”) appeals the decision of
the superior court assessing a value of $195,000 for his law firm and
awarding Cara Lee Simone (“Wife”) an offset of $97,500 in value for her
community interest. For the following reasons, we affirm.
BACKGROUND
¶2 The parties married in 2012. In 2013, Husband formed
Thompson Consumer Law Group (“TCLG”), a law firm that accepted
referrals from a marketing company named AFC Legal Marketing LLC
(“AFC”). In May 2017, TCLG purchased AFC from Marshall Meyers for
$2.28 million. Under the purchase agreement, the purchase price included
“any amounts owed under the [previous] agreement between Seller, Buyer
and [Thompson] dated January 22, 2016.” The agreement also included an
attached “Schedule [1.5] of included fees [totaling $477,843.92],” which
reflected the amount owed to AFC by TCLG.
¶3 In June of 2017, Wife filed a petition for legal separation that
was later converted into a petition for dissolution of marriage. In the
dissolution proceeding the parties retained David Cantor, a forensic
accountant, to determine the value of TCLG and Law Cent (the marketing
arm of TCLG) as of June 30, 2017. Cantor assigned an overall value of
$195,000 to TCLG, with one of its assets being AFC, which was valued at
$2.28 million. Cantor used the $2.28 million purchase price as AFC’s asset
value because the purchase transaction occurred within a few months of the
valuation date.
¶4 Husband challenged Cantor’s valuation, contending Cantor
should have reduced the value of AFC on TCLG’s balance sheet to reflect
the Schedule 1.5 fees and a $25,000 loan previously owed to Meyers, but not
mentioned in the purchase agreement documentation. Husband claimed
that the Schedule 1.5 fees were still owed and should be counted as a
liability on TCLG’s balance sheet. Cantor offered to conduct further
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SIMONE v. THOMPSON, IV
Decision of the Court
analysis to determine whether TCLG had received revenue for the referrals
before or after the valuation date.
¶5 Husband declined to provide additional documentation to
Cantor and instead retained another forensic accountant, Glenn Karlberg,
to conduct a separate business valuation. Karlberg valued AFC as an asset
worth $1,777,156 after deducting from the $2.28 million purchase price the
$25,000 loan owed to Meyers and the Schedule 1.5 fees. Based on those
assumptions, Karlberg testified at trial that the business value of TCLG on
June 30, 2017, was negative $391,765.
¶6 Cantor testified there was no reference to a loan by Meyer for
$25,000, and that in any event, such a loan, along with the $477,843.92
Schedule 1.5 fees, was rolled into the $2.28 million purchase price, which
included a block of assets including referrals, good will, and account
receivables. Cantor noted that the promissory note made no reference to a
$25,000 loan or a $477,843.92 liability. Cantor also pointed out that if in fact
these were liabilities at the time of purchase, Husband would have paid to
purchase a company with a negative value.
¶7 Ultimately, the superior court relied on Cantor’s valuation
and found that “the purchase price of $2.28 million reflected the value of
[AFC], including any and all liabilities.” In support of its finding, the court
noted that the purchase agreement provided the purchase price for AFC
and explicitly stated it incorporated previous amounts owed and the
Schedule 1.5 fees. Accordingly, the court determined the value of TCLG to
be $195,000 and awarded Wife an offset of $97,500.
DISCUSSION
¶8 We review for abuse of discretion the superior court’s
business valuation in a dissolution proceeding. Schickner v. Schickner, 237
Ariz. 194, 197, ¶ 13 (App. 2015). The court abuses its discretion when 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’” or when the court commits
an error of law. Flying Diamond Airpark, LLC v. Meienberg, 215 Ariz. 44, 50,
¶ 27 (App. 2007) (quoting Grant v. Ariz. Pub. Serv. Co., 133 Ariz. 434, 456
(1982)). We consider the evidence in the light most favorable to upholding
the court’s ruling. Gutierrez v. Gutierrez, 193 Ariz. 343, 346, ¶ 5 (App. 1998).
“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
(App. 1996). The superior court has the discretion to rely on various
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methods of valuation. See In re Marriage of Molloy, 181 Ariz. 146, 152 (App.
1994). We will affirm if reasonable evidence supports the court’s decision.
Id. To the extent Husband’s challenge presents an issue of contract
interpretation, we review de novo. Miller v. Hehlen, 209 Ariz. 462, 465, ¶ 5
(App. 2005).
¶9 Husband claims that although the superior court correctly
held that the value of AFC was $2.28 million, it erred in interpreting the
purchase agreement to mean that TCLG had to book the entire $2.28 million
as an asset without accounting for the Schedule 1.5 fees, which he asserts
remained a liability.
¶10 But the agreement incorporated amounts previously owed.
Cantor testified that he discussed with Husband that the $25,000 loan to
Meyers was rolled into the new agreement as part of the $2.28 million
purchase price. Cantor explained that in valuing AFC, “[t]o have also
included the $25,000 as a second liability . . . would be double counting the
$25,000 liability.” As for the Schedule 1.5 fees, Cantor testified it would have
been “completely improper” to pull the fees out of the $2.28 million
purchase price because the liability was booked.
¶11 We reject Husband’s argument that Cantor’s opinion was not
based on accepted accounting principles. Cantor testified that he did not
know whether TCLG had received all the revenues associated with the
Schedule 1.5 fees as of the valuation date. But he said that if those fees were
to be collected after the valuation date, that would be a subsequent event
recorded later on the balance sheet, and would not require an adjustment
to the balance sheet as of the valuation date. That Cantor had requested
additional information to determine whether an adjustment to his report
was necessary, which Husband denied, does not render Cantor’s testimony
invalid. Cantor’s view was consistent with the purchase agreement, and it
was within the court’s discretion to rely on Cantor’s valuation
methodology. See Molloy, 181 Ariz. at 152. Because we find substantial
competent evidence to support the business valuation, we find no abuse of
discretion. See Lee v. Lee, 133 Ariz. 118, 123 (App. 1982).
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SIMONE v. THOMPSON, IV
Decision of the Court
CONCLUSION
¶12 For the foregoing reasons, we affirm the superior court’s
ruling. We award costs to Wife upon compliance with ARCAP 21. We
decline to award attorneys’ fees to either party.
AMY M. WOOD • Clerk of the Court
FILED: AA
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