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In re Marriage of Colton

Court of Appeals of Oregon

May 15, 2019

In the Matter of the Marriage of Raymond Henry COLTON, Petitioner-Appellant, and Nancy Engelhard COLTON, nka Nancy Englehard, Respondent-Respondent.

          Argued and submitted February 5, 2018

          Deschutes County Circuit Court 14DS0104; A. Michael Adler, Judge.

          Kimberly A. Quach argued the cause for appellant. On the briefs were Craig M. Cowley and Gevurtz Menashe, P.C.

          Janet M. Schroer argued the cause for respondent. Also on the brief were Lindsay H. Duncan and Hart Wagner LLP.

          Before Hadlock, Presiding Judge, and DeHoog, Judge, and Aoyagi, Judge.

         Case Summary:

         Husband appeals a general judgment in which the trial court dissolved the parties' long-term marriage, distributed their assets and debts, and imposed both spousal and child support. His three assignments of error focus on the trial court's calculation of his monthly income, which served as the basis of the support awards. He requests de novo review of the court's factual finding as to that income; he also contends that the court's factual finding is not supported by the evidence and raises the legal issue whether, given that wife was awarded half the value of the parties' jointly owned business in the property distribution, the court erroneously attributed that business's entire income stream to husband in determining his monthly income for purposes of calculating spousal and child support. Held: This was not an exceptional case justifying de novo review, and the trial court's finding as to husband's income was supported by the evidence. Moreover, husband did not raise before the trial court the legal argument that it was outside of the court's discretion to "double-count" the income stream from the parties' business in wife's favor; accordingly, his claims of error were not preserved for appeal.


         [297 Or.App. 533] DEHOOG, J.

         Husband appeals a general judgment in which the trial court dissolved the parties' long-term marriage, distributed their assets and debts, awarded wife both spousal support and child support for one child, and awarded child support directly to a second child who was attending school. Husband challenges those support awards in three assignments of error. The focus of each of husband's challenges, however, is on the trial court's calculation of his monthly income, which served as the basis of the court's spousal and child support awards. It is undisputed that the sole source of husband's income is a privately owned business, Validation Resources, LLC (VR), which is a successful scientific testing facility previously equally owned by husband and wife. In its property distribution, the trial court awarded VR to husband, but divided the value it attributed to the business- $2.8 million-equally between the parties; after taking into account the court's distribution of the parties' other assets and liabilities, wife's one-half interest in VR resulted in an equalizing judgment in the amount of $1, 008, 565, which the court ordered husband to pay wife over 14 years at a rate of $8, 490.01 per month. Husband does not challenge that property division or resulting obligation on appeal. They are, however, central to husband's contentions on appeal. That, in part, is because, based largely on its award of VR solely to him, the trial court found husband's income to be $55, 000 per month, from which it ordered husband to pay an additional $12, 500 per month in spousal maintenance to wife, who is disabled and unable to work, and to pay child support totaling $1, 844 per month. Other than a challenge to the trial court's factual findings, which we conclude have evidentiary support and will not disturb, husband's appeal of those support awards reduces to a single legal issue: whether, given that wife was awarded half the value of VR in the court's property distribution, the court erroneously attributed that business's entire income stream to husband in determining his monthly income for purposes of calculating spousal and child support. As explained below, however, husband did not raise that issue before the trial court, and husband's corresponding claims of error are therefore not preserved for appeal. ORAP 5.45(1). Accordingly, we affirm.

         [297 Or.App. 534] As an initial matter, husband requests de novo review of the trial court's factual finding that his present monthly income is $55, 000. However, husband's argument in favor of de novo review focuses solely on the significance of that finding of fact to the trial court's ultimate award; husband does not meaningfully address the other standards that guide our determination whether de novo review is warranted. As a result, we are not persuaded that this is an "exceptional case" justifying de novo review. ORS 19.415 (3)(b) (in an appeal in an equitable action, the court, "acting in its sole discretion, may * * * make one or more factual findings anew upon the record"); ORAP 5.40(8)(c) ("The Court of Appeals will exercise its discretion to * * * make one or more factual findings anew on the record only in exceptional cases. Consistently with that presumption against the exercise of discretion, requests under paragraph (a) or (b) of this section are disfavored."). Consequently, "we are bound by the trial court's express and implicit factual findings if they are supported by any evidence in the record." Morton and Morton, 252 Or.App. 525, 527, 287 P.3d 1227 (2012). We recite the pertinent facts-many of which are undisputed- consistently with that standard.

         Husband and wife married in 1988. At the time of trial in September 2015, Husband was 56 years of age and wife was 55. They have two children together, a son, J, who was age 19 and a college student at the time of trial, and a minor daughter, O, then age 15. Pursuant to an earlier stipulated limited judgment, wife has sole custody of O and husband has no parenting time with her. Prior to the parties' separation, the family enjoyed a very comfortable lifestyle.

         Husband is a chemical engineer; he also holds a Master of Business Administration degree. He was in good health at the time of trial. In 2001, he founded VR, which tests and analyzes extractables and leachables for biophar-maceutical companies. Although wife was a 50 percent owner of VR during the parties' marriage, husband was its president and chief executive officer. In the recent years leading up to trial, VR provided substantially all of the parties' income. As noted, the trial court valued VR at $2.8 million.

         [297 Or.App. 535] Wife has master's degrees in education and exercise science. She was employed full time as a professor at Central Oregon Community College until 2000, when she reduced her workload to care for the children. Wife left her job entirely in 2008, when she was diagnosed with a rare and difficult-to-treat form of non-Hodgkin's lymphoma. She underwent lengthy and challenging treatment, and she continues to have related health issues. The trial court found that wife is "medically and emotionally totally disabled" as a result of her bout with cancer and that her health insurance expenses and uninsured medical expenses for her ongoing care exceed $3, 000 per month; those findings are not challenged on appeal.

         In 2014, husband filed the petition for dissolution of marriage. At the parties' joint request, a reference judge was appointed to hear the case pursuant to ORS 3.305.[1] Over the course of a four-day trial in September 2015, the parties presented extensive evidence regarding husband's income and earning capacity, which, as noted, are the focus of husband's appeal. That evidence included testimony from VR's accountant, from wife's accounting expert, from the business appraiser who had conducted a business valuation of VR at the joint request of the parties, and from husband himself, as well as associated financial records, including VR's 2014 business tax return, a draft of the parties' 2014 personal income tax return, VR's profit and loss summary for the years 2010 through 2014, and a VR "Profit & Loss YTD Comparison," dated August 2015.

         Following trial, the court issued a proposed decision. See ORS 3.315(1) (requiring, generally within 20 days after close of evidence, that reference judge provide the parties with a proposed written report containing the court's findings of facts, conclusions of law, and judgment). The court found VR's value to be $2.8 million, awarded the business [297 Or.App. 536] itself to husband, and awarded wife an equalizing judgment that reflected half of VR's assigned value. Specifically, taking into account its distribution of the parties' other assets and liabilities, including the parties' home and 12-acre property (which the court awarded to wife), wife's PERS account, a home equity line of credit, husband's 4Ol(K) accounts, other credit and bank accounts, insurance policies, jewelry, horses, cars, and household goods, the court's proposed decision resulted in an equalizing judgment to wife of $1, 008, 565, which husband was required to pay in monthly installments of $8, 490.01 over a 14-year period.

         Notably, the court's proposed decision stated an initial finding that husband's earning capacity was $43, 500 per month.[2] Using that income and the statutory child-support guidelines, the court calculated husband's obligation to be $848 per month, payable to wife, as child support for O, and $848 per month in child support payable directly to J, a child attending school. See ORS 107.108. Additionally, the court awarded wife indefinite spousal maintenance support in the amount of $12, 500 per month.[3]

         Husband filed written objections to the proposed decision and requested a hearing. See ORS 3.315(2), (3) (any party may file written objections and suggested modifications or corrections to the reference judge's proposed report; if requested, the reference judge must conduct a hearing on the proposed objections before preparing the final written report and judgment). Regarding the court's assessment of his income, husband argued:

"The [reference judge's] letter opinion found that Husband's gross monthly income was $43, 500 per month. However, as he testified at trial, his available income to pay support and other obligations is substantially lower, because he pays the sum of $14, 000 per month on existing loans and capitalized [297 Or.App. 537] leases, so this income is not available to him. Therefore, his true gross monthly income is $29, 500 per month. This figure should be used by the court in both the child support calculation and in reducing the spousal support award to Wife. Even if his gross monthly income is considered to be $43, 500 per month, the child and spousal support obligations are over $14, 000 per month and the property equalization award payment is over $8, 500 per month for a total payment of over $22, 500 per month. Considering that he then has $14, 000 in business debt payments, and $13, 000 in state and federal and payroll tax obligations, he will have a negative cash flow position before he even takes a salary to pay his own living expenses. Clearly, the current support and money awards as set forth in the proposed General Judgment set up Husband for a default on his obligations and financial ruin."[4]

         At the hearing on husband's objections, husband clarified that he was not questioning the court's factual finding that his income was $43, 500; rather, he was contending that, because he had $14, 000 in monthly debt payments that had not been accounted for in calculating the net income of the business, $29, 500 "would be a better figure to use for * * * income that's actually available for paying support." In other words, husband emphasized that it was not "an income issue but a cash flow issue," offering the explanation that the reason the loans did not appear on VR's profit and loss statement was because they were principal-only payments. Husband did not challenge the court's valuation of VR or its distribution.

         Wife responded that the evidence presented at trial showed husband's monthly income to be approximately $67, 000 per month, rendering the court's figure of $43, 500 "actually low." As for husband's argument that the $43, 500 figure had failed to account for his monthly debt obligation on behalf of VR, wife's counsel contended that he had "impeached [that] very argument" at trial.

         Nonetheless, the court agreed to further consider the question of husband's and wife's income-in particular, husband's argument that the court had not properly [297 Or.App. 538] accounted for husband's obligation to make monthly payments of $14, 000 to pay for VR's business debt. The court permitted the parties to submit post-hearing memoranda and supporting excerpts from the trial transcript, which the court reviewed before rendering its final decision.[5]

         In its final written report and judgment-which included further findings and conclusions-the court rejected husband's argument that its monthly income figure had erroneously failed to account for husband's monthly debt payments, explaining that it was "disregarding husband's newly suggested cash flow analysis as it appears to be disingenuous and self-serving." The court specifically found that

"[h]usband's testimony, as well as the financial representations in his exhibits, is consistently inconsistent and inaccurate at least when it comes to his alleged income and expenses. Indeed his evidence on these issues appears to be intentionally misleading. Accordingly, I have come to view husband's testimony on financial matters with grave mistrust."

         Referencing specific trial exhibits and testimony, the court found that husband's earning capacity was "well documented to be at least $55, 000 per month," a figure it viewed as "very conservative."[6]

         Despite increasing its estimate of husband's monthly earnings from $43, 500 to $55, 000, the court adhered to its proposed order requiring husband to pay wife $12, 500 in monthly maintenance support. In addition to relying on the earning disparity it had found between the parties, the court also reasoned that, because husband has no overnights with the children, wife "must devote more of her time and energy to the children" and, with the exception of husband's child [297 Or.App. 539] support payments and his obligatory contribution to any medical expenses the children may incur, wife was solely responsible for supporting all of their daily expenses and activities.[7] The ...

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