Mortensen v. Mortensen

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UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL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:

BARBARA MORTENSEN, Petitioner/Appellant,

v.

JERRY MORTENSEN, Respondent/Appellee.

No. 1 CA-CV 15-0097 FC
FILED 6-9-2016

Appeal from the Superior Court in Maricopa County
No. FN2011-091456
The Honorable Timothy J. Ryan, Judge

AFFIRMED IN PART; VACATED IN PART; AND REMANDED

COUNSEL

Mandel Young PLC, Phoenix
By Taylor C. Young, Erin Ford Faulhaber
Counsel for Petitioner/Appellant

Ellsworth Family Law, P.C., Mesa
By Steven M. Ellsworth, Glenn D. Halterman
Counsel for Respondent/Appellee
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MEMORANDUM DECISION

Judge Patricia K. Norris delivered the decision of the Court, in which
Presiding Judge Lawrence F. Winthrop and Judge Kenton D. Jones joined.

N O R R I S, Judge:

¶1 Barbara Mortensen, petitioner/appellant, appeals from a
decree of dissolution, challenging the family court’s denial of her request to
continue trial, its rulings on spousal maintenance and the value of the
community business, and its award of expert costs and attorneys’ fees to
respondent/appellee Jerry Mortensen. We agree with Barbara that the
family court should have granted her motion to continue, and thus we
vacate its ruling on spousal maintenance and remand with instructions to
re-determine that issue. We disagree, however, with Barbara’s other
arguments and affirm the remainder of the family court’s decree.

FACTS AND PROCEDURAL BACKGROUND

¶2 On April 19, 2011, Barbara petitioned for dissolution of her
marriage to Jerry. Pursuant to the parties’ stipulation, the family court
appointed a business valuator to value the family business, Canyon State
Drywall, Inc., (“CSD”). Because of various delays, Stephen Koons,
CPA/ABV/CFF, ASA, replaced the original business valuator. The parties
also stipulated that CSD would be valued as of December 31, 2011. Koons
valued CSD at zero dollars.

¶3 Barbara then hired Mark Hughes, CPA, ABV, CFF, who
valued CSD as of April 30, 2013, at $1.22 million. Before trial, Jerry moved
in limine to exclude Hughes’ opinion under Arizona Rule of Evidence 702.
The family court, however, did not rule on the motion before trial. Instead,
it allowed Hughes to testify at trial, explaining it needed to hear his
testimony to evaluate the motion.

¶4 At trial, both parties examined Koons and Hughes. Jerry then
testified. At that point, the parties had used, in approximately equal
portions, their three hours of allotted trial time. Barbara’s counsel moved
for a continuance to cross-examine Jerry and present Barbara’s testimony,
but the family court denied the motion and instead allowed Barbara to

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submit an affidavit. It also authorized the parties to submit written closing
arguments.

¶5 On November 27, 2013, the family court entered the decree
and awarded Barbara $3,100 per month in spousal maintenance until May
2018. The family court found CSD had a zero value, relying on Koons’
opinion. In so doing, and as discussed below, it rejected Hughes’ opinion
and ordered Barbara to pay for Koons’ services. See infra ¶¶ 13-19, 22. After
extensive post-trial proceedings, the family court awarded Jerry $5,000 in
attorneys’ fees finding Barbara had taken unreasonable positions, as
discussed further below. See infra ¶¶ 22-24.

DISCUSSION

I. Trial Continuance

¶6 Barbara argues the family court abused its discretion in
denying her motion to continue because she did not have adequate time to
cross-examine Jerry and to testify.1 Dykeman v. Ashton, 8 Ariz. App. 327,
330, 446 P.2d 26, 29 (1968) (reviewing family court’s ruling on motion to
continue for abuse of discretion). Under the circumstances presented here,
we agree.

¶7 The family court “enjoys broad discretion to impose
reasonable time limits.” Volk v. Brame, 235 Ariz. 462, 468, ¶ 20, 333 P.3d 789,
795 (App. 2014) (internal quotations and citations omitted). “[W]hen the
resolution of an issue before the court requires an assessment of
credibility,” however, the court must allow the parties sufficient time to
present sworn oral testimony and cross-examination of necessary
witnesses. Id. at 464, ¶ 1, 333 P.3d at 791. The family court may not instead
conduct a “trial by affidavit.” Id. at 467, ¶ 16, 333 P.3d at 794. Nevertheless,
the court is not required to “indulge inefficient use of time by parties or
their counsel.” Id. at 469, ¶ 22, 333 P.3d at 796.

¶8 Here, the family court did not find, nor does the record
demonstrate, that the parties used their time inefficiently. Koons and

1On appeal, Barbara argues the family court violated her due
process rights to a fair trial in denying her motion to continue. Although
Jerry argues Barbara waived this argument because she did not object on
due process grounds in the family court, the core of Barbara’s argument
concerns the family court’s denial of her request to continue the trial.
Barbara did not waive that argument. She moved for a continuance in the
family court, and so we address the issue on the merits.

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Hughes presented competing testimony about CSD’s value, and Jerry
testified about his positions on the issues in dispute. Still, because the family
court had only allocated three hours for trial, Barbara was not able to cross-
examine Jerry or to present her own testimony.

¶9 In his answering brief, Jerry asserts that Barbara, through
counsel, had agreed to the three-hour time limit. Assuming this to be the
case, the record reflects this occurred before Jerry moved in limine to
exclude Hughes’ expert opinion. As discussed below, the hearing not only
addressed the merits of the disputed issues, but also served as a Daubert
hearing. See infra ¶ 14.

¶10 Even though the family court allowed Barbara to submit an
affidavit in lieu of testifying, that affidavit was not an adequate substitute
for her testimony. As Barbara’s affidavit makes clear, she disputed Jerry’s
testimony on key issues. To resolve these issues, the family court needed to
assess the parties’ credibility. See Volk, 235 Ariz. at 464, ¶ 1, 333 P.3d at 791.
For example, at trial, Jerry testified he had no ability “whatsoever” to pay
Barbara “$6,000 a month for life.”2 In her affidavit, Barbara stated, however,
“Jerry has kept tens of thousands of dollars (cash) in a leather jacket,” and
he “continues to go on [] golf outings, [] out of state guided fishing trips,
maintains Loge Seats at Sun Devil Stadium, remains an active donating Sun
Angel and has front row season tickets to Sun Devil Basketball games.”
Accordingly, the affidavit was an inadequate substitute for Barbara’s oral
testimony and cross-examination of Jerry.

¶11 We therefore agree the family court abused its discretion in
not granting the motion to continue. We disagree, however, with Barbara’s
assertion that this error affected “every part of the trial and post-trial
proceedings.” At trial, Barbara’s counsel informed the court that “spousal
maintenance issues, living, lifestyle, and more along the lines of what the
business is producing today for income purposes” still “need[ed] [to be]
done”—which Barbara’s affidavit supported. She swore to the many
“beautiful trips” they took as a family, their “dream home,” her inability to
“hold a job,” and how she budgeted her spousal maintenance request.
Barbara’s affidavit did not, however, specifically challenge the division of
real and personal property, financial accounts, or credit card debt in her
affidavit, post-trial briefs, and, indeed, she has not done so on appeal.

2Jerry,however, agreed to pay Barbara spousal maintenance,
but disagreed as to the amount and duration.

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¶12 We therefore vacate the family court’s ruling on spousal
maintenance only. Volk, 235 Ariz. at 468, ¶ 21, 333 P.3d at 795 (“If, during
the progress of a scheduled hearing, it becomes apparent that the court
lacks sufficient time to receive adequate testimony, then the court must
allow reasonable additional time or continue the hearing to permit it to
perform its essential tasks.”). We remand to the family court to re-
determine the amount and duration of spousal maintenance to Barbara.

II. Business Valuation

¶13 Barbara argues the family court abused its discretion when it
“excluded Hughes’ calculation of value.” State v. Foshay, No. 2 CA-CR 2014-
0252, 2016 WL 1158118, at *1, ¶ 5 (Ariz. App. March 23, 2016) (reviewing
exclusion of expert testimony for abuse of discretion); Sample v. Sample, 152
Ariz. 239, 242, 731 P.2d 604, 607 (App. 1986) (reviewing family court’s
choice of valuation date for abuse of discretion).

¶14 Arizona Rule of Evidence 702 adopted the Daubert v. Merrell
Dow Pharmaceuticals, Inc. standard for admitting expert testimony. 509 U.S.
579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993). Rule 702 allows an expert
witness to testify if the testimony, as relevant here, “is based on sufficient
facts or data,” “is the product of reliable principles and methods,” and “the
expert has reliably applied the principles and methods to the facts of the
case.” The family court rejected Hughes’ valuation because he “did not
provide sufficient reference to AICPA [American Institute of Certified
Public Accountants] Statement on Standards for Valuation Service,” “his
investigation and determination of the necessary facts was not thorough
and complete,” “his opinions were not supported by reliable principles
regarding business valuation,” and “he did not reliably apply the principles
and methods regarding business valuation to the facts of the case.”

¶15 Barbara retained Hughes to perform a “calculation of value,”
an engagement in which the analyst and the client agree on the method to
use in the valuation. In contrast, Koons was retained to render an “opinion
of value,” an engagement in which the analyst uses his own independent
judgment to determine which method(s) to use in valuation. An opinion of
value also requires more procedures than a calculation of value. According
to Koons, it “is an application of all relevant valuation procedures, all
relevant data, all relevant valuation methods.”

¶16 Even if we assume the family court should not have rejected
Hughes’ calculation of value under Rule 702, its decision to rely on Koons’
valuation and not Hughes’ valuation was harmless as the court was the

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ultimate fact-finder in determining the credibility and weight of Hughes’
testimony. See Vincent v. Nelson, 238 Ariz. 150, 155, ¶ 18, 357 P.3d 834, 839
(App. 2015) (“family court is in the best position to judge the credibility of
witnesses”); Ariz. R. Civ. P. 61 (error that does not affect the substantial
rights of the parties is not grounds for disturbing an order); see also U.S. v.
Rouse, 410 F.3d 1005, 1011 (8th Cir. 2005) (when court was fact-finder
regarding credibility of expert testimony, possible error in excluding
evidence under Daubert harmless).

¶17 As discussed, the family court rejected Hughes’ valuation,
finding it incomplete and unreliable. The record contains evidence
supporting these findings. Gutierrez v. Gutierrez, 193 Ariz. 343, 346, ¶ 5, 972
P.2d 676, 679 (App. 1998) (“We view the evidence in the light most favorable
to sustaining the trial court’s findings and determine whether there was
evidence that reasonably supports the court’s findings.”). For example,
Hughes relied on ten months of unaudited data, used a gross profit margin
that did not reflect CSD’s financial history, did not interview CSD
personnel, and used outdated comparison transactions to check the
reasonableness of his valuation. Koons described Hughes’ valuation as
“very speculative,” and testified that “I would seriously question whether
the gross profit margin can be maintained at 21.5 percent, which affects the
bottom line 5 percent of net operating income because [Jerry has] never
done it.” He also testified that Hughes’ valuation is “just an acceptance of
that internal financial statement, which I [have] serious questions about.”

¶18 The family court was thus left with only Koons’ opinion of
CSD’s value. Although Barbara argues the family court should not have
relied on Koons’ valuation because he “did not use the most appropriate
method of valuation, failed to consider all appropriate data, and contained
missing data and unrealistic assumptions,” her argument fails to show
more than minor flaws and matters of credibility that are within the family
court’s discretion. State v. Bernstein, 237 Ariz. 226, 229, ¶ 14, 349 P.3d 200,
203 (2015) (“The overall purpose of Rule 702 . . . is simply to ensure that a
fact-finder is presented with reliable and relevant evidence, not flawless
evidence.”) (quotations and citations omitted).

¶19 Barbara also argues Koons’ valuation was stale, as he valued
CSD as of December 31, 2011, and trial did not take place until August 22,
2013. The family court, however, has broad discretion in deciding what
valuation date to use as long as it does not create an inequitable result.
Sample, 152 Ariz. at 242, 731 P.2d at 607. Here, Jerry and Barbara stipulated
to value CSD as of December 31, 2011, and the record reflects that only after
Koons valued CSD, did Barbara hire Hughes and begin to argue the

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December 31, 2011, valuation date was stale. Under these circumstances,
and given the inadequacies the family court found in Hughes’ work, the
family court did not abuse its discretion in using the 2011 valuation date or
in valuing CSD at zero dollars based on Koons’ opinion of value.

III. Attorneys’ Fees and Expert Costs

¶20 Barbara argues the family court abused its discretion in
ordering her to pay the entire cost of Koons’ services and $5,000 of Jerry’s
post-trial attorneys’ fees. MacMillan v. Schwartz, 226 Ariz. 584, 592, ¶ 36, 250
P.3d 1213, 1221 (App. 2011) (reviewing an award of attorneys’ fees and costs
for an abuse of discretion).

¶21 Arizona Revised Statute section 25-324(A) (Supp. 2015)3
allows the family court to order one party to pay the other’s attorneys’ fees
and costs after it “consider[s] the financial resources of both parties and the
reasonableness of the positions each party has taken throughout the
proceedings.”

¶22 Here, the family court ordered Barbara to pay for Koons’
services despite having previously ordered the parties to split the cost
(subject to further reallocation) because it found Barbara’s “unreasonable
positions taken on the issue of business valuation warrant this as an
appropriate sanction.” Substantial evidence supports the family court’s
finding. Barbara originally stipulated to use Koons as the court-appointed
business valuator and to use December 31, 2011, as the valuation date, but
only when she disagreed with his valuation, she hired another business
valuator to value CSD. See supra ¶¶ 2-3.

¶23 After extensive post-trial proceedings, the family court also
ordered Barbara to pay $5,000 of Jerry’s post-trial attorneys’ fees because it
was “necessary to create a disincentive for [Barbara] to keep reiterating [the
valuation of CSD];” her claim for pre-judgment interest on spousal
maintenance that had not yet been decided was unsupported by fact and
law; and she had “made it known that it was her intent to make this
litigation as protracted and costly as possible.”

¶24 The record reflects, as the family court found, that, Barbara
continued to base many of her post-trial positions on an equal division of
CSD despite the family court’s decision to award it to Jerry. Furthermore,

3We cite to the current version of the statute, which has not
been materially changed since 2010—before Barbara petitioned for
dissolution of her marriage.

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“[t]he issue of whether pre-judgment interest is a matter of right is well
settled in Arizona.” Malecky v. Malecky, 148 Ariz. 121, 122, 713 P.2d 322, 323
(App. 1985). When the amount of a claim is unclear, as when the amount
of spousal maintenance is still to be decided, the claim is unliquidated, and
thus the “interest does not begin to run . . . until the rendition of the
judgment.” Cockrill v. Cockrill, 139 Ariz. 72, 75, 676 P.2d 1130, 1133 (App.
1983). The family court did not enter the decree of dissolution until
November 27, 2013. Thus interest did not begin to accrue until that date.

¶25 Barbara also argues the family court failed to provide legal
authority for its award of attorneys’ fees to Jerry. Although the family court
did not specifically cite A.R.S. § 25-324(A), Barbara had notice of the statute
because Jerry cited it in his post-trial request for attorneys’ fees and the
family court explained it was awarding fees based on Barbara’s
unreasonable positions, which is a clear reference to A.R.S. § 25-324(A).

¶26 Therefore, we affirm the family court’s rulings on expert costs
and post-trial attorneys’ fees and costs.

CONCLUSION

¶27 We vacate the family court’s award of spousal maintenance
to Barbara, and remand for the family court to re-determine the amount and
duration of the spousal maintenance she should receive. We affirm the
remainder of the decree. We deny the parties’ competing claims to an
award of attorneys’ fees and costs on appeal.

:AA

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