Engel v. Landman
Annotate this Case
Download PDF
IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE In re the Matter of: ) ) DEVON S. ENGEL, ) ) Petitioner/Appellant/ ) Cross-Appellee, ) ) v. ) ) JULIE KAY LANDMAN, ) ) Respondent/Appellee/ ) Cross-Appellant. ) __________________________________) DIVISION ONE FILED: 04/30/09 PHILIP G. URRY,CLERK BY: DN No. 1 CA-CV 07-0587 DEPARTMENT A O P I N I O N Appeal from the Superior Court in Maricopa County Cause No. FC 2004-000812 The Honorable Edward W. Bassett, Judge AFFIRMED IN PART; REVERSED IN PART; VACATED IN PART AND REMANDED Sternberg & Singer, Ltd. By Melvin Sternberg Attorneys for Petitioner/Appellant/Cross-Appellee Phoenix The Cavanagh Law Firm, PA By Christina S. Hamilton Attorneys for Respondent/Appellee/Cross-Appellant Phoenix S W A N N, Judge ¶1 This is an appeal and cross-appeal from orders modifying the amount of child support Devon Engel ( Father ) is to pay Julie Landman ( Mother ). erroneously attributed We hold that the trial court hypothetical income and childcare expenses to a voluntarily unemployed parent because the Arizona Child Support Guidelines do not support the use of attribution to increase the burden on the employed parent. such We further hold that the court erred in computing Father s stock option income. I. ¶2 FACTUAL AND PROCEDURAL BACKGROUND The parties were divorced pursuant to a consent decree in July 2004. The decree provided that Father would pay $2,000 per month in child support -- $73 more than that prescribed by the Arizona Child Support Guidelines. See Arizona Revised Statutes ( A.R.S. ) § 25-320 app. (2007) ( Guidelines ). At that time, Father s income was $25,000 per month and Mother was not employed. ¶3 Father filed a petition to modify child support in September 2006. been the In support of his contention that there had necessary circumstances, Father continuing presented and substantial evidence that change of Mother s investment assets had substantially increased as a consequence of her receipt of an inheritance from her father and an annuity from his former employer. The court ultimately found that Mother s monthly income, excluding spousal maintenance, exceeded $13,000. Because Mother was voluntarily unemployed, Father also 2 sought to attribute income to her in an amount equal to her earning potential as an accountant. Mother responded that Father s employment income had risen dramatically and his child support obligation therefore should increase, not decrease. Mother also argued that any income the court chose to attribute to her should be offset by the childcare costs that would be necessitated by full time employment, and warned that the result might be an increase in child support. that the parties investment Mother also asserted portfolios, each substantially exceeding $1,000,000, should be treated as a wash. ¶4 Despite the parties respective assertions that each endeavored to settle the matter, and the fact that the amounts in dispute are small compared to their personal resources (and the cost of the litigation), the parties litigated the issues vigorously. hearing. The family court held a two-day evidentiary On June 18, 2007, the court modified the child support order downward to $1,686.99 per month. her attorneys fees. It also awarded Mother Father filed a motion for new trial, to which Mother did not substantively respond, and a response to Mother s fee application, to which Mother did not reply. Before the court ruled on the motion for new trial, Father filed a notice of appeal on July 19, 2007. cross-appeal on August 14, 2007. 3 Mother filed a notice of On September 11, 2007, the court ruled on Father s motion for new trial. significant Though the court ruled against Father on several issues, including the calculation of his gross income and the attribution of income and childcare costs to Mother, it ruled in his favor on a few minor adjustments to educational and childcare expenses that had the net effect of lowering his support obligation further still. 11 minute entry, Mother s favor. the court also vacated In the September the fee award in On September 17, 2007, unaware of the court s ruling, Father sought to withdraw his motion for new trial. The September 11 minute entry was filed on September 21, 2007. On September 21, 2007, after learning of the ruling, Father sought to withdraw his previous motion to withdraw the motion for new trial. Mother objected and on September 27, 2007, filed a motion to strike the court s September 11 order. ¶5 On October 9, 2007, Father filed a supplemental notice of appeal from the September 11 order and from the earlier order modifying his support obligation. On November 21, 2007, in an unsigned minute entry, the court granted Father s request to withdraw his motion to withdraw his motion for new trial and denied Mother s motion to strike the ruling on the motion for new trial. On November 30, 2007, Mother filed a notice of appeal from the November 21, 2007 order. 4 ¶6 We have jurisdiction over Father s appeal pursuant to A.R.S. § 12-2101 (C), (F) (2003). over Mother s cross-appeal and We discuss our jurisdiction her appeal from the November order below. ¶7 its Father s appeal argues that the family court abused discretion by: (1) attributing hypothetical childcare expenses to Mother; (2) erroneously computing Father s income; and (3) denying his request for fees.1 ¶8 Mother raises a like number of issues in her cross- appeal, but she did not file a separate brief on her direct appeal. We first address the jurisdictional issues presented by Mother s cross-appeal and separate appeal. II. A. ¶9 We review de DISCUSSION Jurisdiction novo trial court rulings involving questions of pure law, including the court s jurisdiction to enter its orders of September 21, 2007 and November 21, 2007. See Hall v. Lalli, 194 Ariz. 54, 57, ¶ 5, 977 P.2d 776, 779 (1999). We also review independently our own jurisdiction over the parties appeals. 1 Father s opening brief was filed while Mother s motion to strike the order ruling on Father s motion for new trial was still pending. The other issues Father sought to advance in this appeal are moot as a consequence of the trial court s ruling on the motion for new trial. 5 1. ¶10 Father s Premature Appeal In Barassi v. Matison, 130 Ariz. 418, 419-20, 636 P.2d 1200, 1201-02 (1981), the supreme court held that a notice of appeal filed after the denial of a motion for new trial but before the entry of final judgment was sufficient to secure appellate jurisdiction. Because the lower court s substantive decision had become final, and only ministerial tasks remained to accomplish the entry of a final judgment, the court reasoned that dismissal of such a premature notice punish the appellant for being too diligent. of appeal would Id. at 421, 636 P.2d at 1203. The court pointed out, however, that appellate courts lack jurisdiction when a litigant attempts to appeal where a motion is still pending in the trial court or where there is no final judgment. Id. at 422, 636 P.2d at 1204; see also Baumann v. Tuton, 180 Ariz. 370, 373, 884 P.2d 256, 259 (App. 1994) (concluding that appellate courts lack jurisdiction over an appeal that was filed while the appellant s time- extending motion was still pending in the lower court, and that such a premature notice of appeal is a nullity ). ¶11 In Performance Funding, LLC v. Barcon Corporation, 197 Ariz. 286, 289, ¶¶ 10-13, 3 P.3d 1206, 1209 (App. 2000), we held that a notice appellee s defective. of appeal time-extending filed motion Performance Funding during was the not interpreted 6 pendency of the jurisdictionally Baumann narrowly the court construed Baumann to mean simply that a premature notice of appeal did not operate to effect a withdrawal of the appellant s own motion for new trial. Funding also declined to follow Id. at ¶ 10. as dictum the Performance language in Barassi that warned that a notice of appeal filed during the pendency of a time-extending motion was insufficient to confer appellate jurisdiction. ¶12 If Id. at 288, ¶¶ 7-8, 3 P.3d at 1208. Performance Funding still controlled, we would conclude that the prematurity of Father s notice of appeal and Mother s notice jurisdiction. of cross-appeal did not deprive us of But in Smith v. Arizona Citizens Clean Elections Commission, the supreme court underscored its commitment to the more restrictive rule first expressed in Barassi: [A]ppellate courts should dismiss a case for lack of jurisdiction while [a time-extending] motion was still pending in the trial court. 212 Ariz. 407, 415, ¶ 38, 132 P.3d 1187, 1195 (2006) (citing Barassi, 130 Ariz. at 422, 636 P.2d at 1204). Smith not only interpreted the Barassi exception to the final judgment rule as narrowly as possible, it read Baumann more broadly to defeat jurisdiction over an appeal commenced while a motion for new trial was pending. Id. at ¶¶ 37-39. court s the reprise of extending motions in language as mere cautionary Barassi, dictum. In view of the supreme language concerning time- we can no longer dismiss that Though 7 Smith did not discuss Performance Funding, the court concluded that outside the slim exception announced in Barassi, premature notices of appeal are ineffective because they disrupt the court process and prevent two courts from assuming jurisdiction and acting at the same time. Id. at ¶ 39. ¶13 Here, Father s initial appeal to this court was premature because he filed his notice while his own motion for new trial was still pending before the superior court. Baumann, 180 Ariz. at 372, 884 P.2d at 258. Under Baumann, Father s premature notice of appeal was a nullity and did not constitute an abandonment of the pending motion for new trial. Id. at 373, 884 P.2d at 259; see also Smith, 212 Ariz. 415, ¶ 39, 132 P.3d at 1195. We jurisdiction to therefore consider conclude the the motion family for court new retained trial. It is Father s October 9, 2007 supplemental notice of appeal following the signed minute entry disposing of the motion for new trial that confers jurisdiction on this court. ¶14 In addition, the court correctly motion to strike its September order. denied Mother s Arizona Rule of Family Law Procedure ( ARFLP ) 32(E) provides that a motion to strike is available to request that the court order stricken from a pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. (Emphasis added.) 8 Compare with Ariz. R. Civ. P. 12(f). ARFLP 32(E) provides no basis for the court to strike its own order from the record.2 2. ¶15 We now Mother s Premature Cross-Appeal consider this court s jurisdiction over the cross-appeal. For the same reasons we held that Father s first notice of appeal was premature, we notice of cross-appeal was premature. never filed September 11 a supplemental order nor made notice any also hold that Mother s But unlike Father, Mother of other cross-appeal effort to issues she raised in her premature cross-appeal. from the revive the Because the notice of cross-appeal was premature and Mother did not file a supplemental notice to cure this defect, we cannot consider the 2 We note that the use of motions to strike to challenge all manner of items in the record, though regrettably common in practice, should be avoided except when authorized by rule. Motions to strike are not properly used to voice objection to the content of a court order. Rule 12(f) motions are generally viewed with disfavor because striking a portion of a pleading is a drastic remedy and because it is often sought by the movant simply as a dilatory tactic. Waste Management Holdings, Inc. v. Gilmore, 252 F.3d 316, 347 (4th Cir. 2001)(quoting 5A A. Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1380, 647 (2d ed. 1990)). The use of motions to strike beyond the narrow purpose articulated in the rules frequently has the consequence of impeding the efficient resolution of cases and increasing the cost of litigation. The proper procedural vehicle by which to challenge the court s order in this case would have been a motion for reconsideration, which would not have required a response and reply absent the court s permission. ARFLP 35(D). 9 cross-appeal. See Smith, 212 Ariz. at 415, ¶ 39, 132 P.3d at 1195; Baumann, 180 Ariz. at 372-73, 884 P.2d at 258-59. ¶16 We also cannot consider the issues raised in Mother s cross-appeal as cross-issues on appeal. cross-appeal, answering the brief appellee only if may the raise issue In the absence of a a cross-issue does not in result in the an enlargement of appellee s rights or a lessening of appellant s rights on appeal. ARCAP 13(b)(3) ( The appellate court may direct that the judgment be modified to enlarge the rights of the appellee or to lessen the rights of the appellant only if the appellee has cross-appealed seeking such relief. ); see also Davis v. Cessna Aircraft Corp., 182 Ariz. 26, 37, 893 P.2d 26, 37 (App. 1994)). The issues raised in Mother s cross-appeal all seek an enlargement of her rights and a lessening of Father s rights because she seeks to increase the child support amount and obtain conclude we an do award of not have attorneys fees. jurisdiction to Accordingly, consider we Mother s arguments in her cross-appeal. 3. ¶17 Mother s Direct Appeal The November order from which Mother directly appeals was not signed by the family court judge as required by ARFLP 81. Ordinarily, this would require us to suspend the appeal to allow Mother to obtain a written, signed order corresponding to the minute entry order of November 23, 2007. 10 See Eaton Fruit Co. v. Calif. Spray-Chemical Co., 102 Ariz. 129, 426 P.2d 397 (1967). However, we must first address whether the November order was substantively appealable. ¶18 An requirements. appealable post-judgment order must satisfy two Arvizu v. Fernandez, 183 Ariz. 224, 226, 902 P.2d 830, 832 (1995). First, the issues raised by the appeal from the order must be different from those that would arise from an appeal from the underlying judgment. Id. The second requirement is that the order must either affect the judgment or relate to it by enforcing it or staying its execution. Id. at 227, 902 P.2d at 833 (quoting Olson v. Cory, 673 P.2d 720, 197 Cal. Rptr. 843 (1983)). ¶19 Applying the first requirement here, we conclude that the appeal from the November order does not raise any issue that could not have been raised in an appeal from the September order. See Arvizu, 183 Ariz. at 226, 902 P.2d at 832. The November order merely (1) denied Mother s motion to strike on the ground that it had jurisdiction to rule on the motion for new trial despite Father s premature appeal to this court; and (2) denied attorneys fees. Because all of the substantive issues addressed in the November order were previously addressed in the September order, the first requirement of Arvizu has not 11 been met.3 Therefore, we conclude that the November order is not an appealable post-judgment order, and we lack jurisdiction over Mother s direct appeal. B. ¶20 Attribution of Childcare Expenses Generally, we review child support awards for abuse of discretion. McNutt v. McNutt, 203 Ariz. 28, 30, ¶ 6, 49 P.3d 300, 302 (App. 2002)(citing Kelsey v. Kelsey, 186 Ariz. 49, 53, 918 P.2d 1067, 1071 (App. 1996)). erroneous, we accept the trial Unless they are clearly court s findings of fact; however, we draw our own legal conclusions from facts found or implied in the judgment. Id. (quoting Burnette v. Bender, 184 Ariz. 301, 304, 908 P.2d 1086, 1089 (App. 1995)). We review de novo the trial court s interpretation of the Guidelines. Clay v. Clay, 208 Ariz. 200, 202, ¶ 5, 92 P.3d 426, 428 (App. 2004). ¶21 Section 5(E) of the Guidelines implements the policy that both parents, regardless of their employment status, must provide appropriately for their children s reasonable needs. The section allows a court to attribute hypothetical income and expenses to protect a working parent from paying a disproportionate amount of the total support obligation when the other parent has chosen not to earn income to the extent he or 3 Because the first requirement is not satisfied, we do not consider the second. 12 she is able. Id.; see also Little v. Little, 193 Ariz. 518, 521, ¶ 6, 975 P.2d 108, 111 (1999). ¶22 Section 5(E) requires the court to consider the manner in which a parent s decision not to work (and the consequent reduction in income available for child support) will affect the children, and to weigh that impact against the benefits of the parent s choice. The benefits must be determined on a case-by- case basis, and the court may consider such factors as whether the decision is (1) designed to enhance future earning capacity; (2) places the children in financial peril; (3) allows a parent more needed time at home with his or her children; and (4) appropriate in view of the individual needs of a particular child. ¶23 After conducting the necessary balancing, the court may decide to attribute income to the voluntarily unemployed parent for purposes of the child support computation. Id. In addition, [i]f income is attributed to the parent receiving child support, attributed. appropriate Id. The childcare intended expenses effect of may also be attribution of hypothetical income is typically to deny the unemployed parent the unilateral ability to effect a downward modification of his or her child support obligation (or to impose an enhanced obligation on the other parent) by choosing not to work. Little, 193 Ariz. at 522, ¶¶ 12-13, 975 P.2d at 112. 13 See ¶24 and The manner in which attribution of hypothetical income expenses obligation affects merits the parents examination. A actual child monthly support support calculation begins with the computation of the parents combined adjusted gross income. Guidelines § 5. The Guidelines prescribe the specific Basic Child Support Obligation based upon income and the number of children entitled to support. certain adjustments are made to the Id. at § 8. Basic Child After Support Obligation, the Total Child Support Obligation is computed. Id. at § 9. The parents Proportionate Shares of that amount are then determined by reference to income, certain expenses and parenting time as percentages. Id. at §§ 10-11. The Total Child Support Obligation is a combined obligation, shared by both parents according to their Proportionate Shares. Id. at § 10. ¶25 Voluntary reduction in income by one parent has two effects it usually lowers the Basic Child Support Obligation available for the support of the children and also lowers the Proportionate Share of the Total Obligation that the parent is required to pay. hypothetical The net effect, without any attribution of income, is both to reduce the total amount of support contributed for the benefit of the children and increase the burden on the employed parent. 14 ¶26 The importance of distinguishing between the effect of unemployment on the Total Support Obligation and the parents Proportionate Shares is underscored in cases such as this, where one parent s income exceeds $20,000 per month. Because the total support prescribed by the Guidelines reaches its maximum when the combined income of the parents equals $20,000 per month, no change in Mother s income -- up or down -- would have had any effect on the total support allocated for the children. The only effect of a change in her income, real or attributed, would be to increase her Proportionate Share of responsibility for the total amount, with a resulting reduction in the amount Father is increase required in to income pay. is And where, hypothetical, as the here, net Mother s effect of attribution of income is that the children bear the burden of Father s reduced payment with no additional by attribution contribution by Mother.4 ¶27 The problem created of income was compounded, however, when the court attributed $900 per month in hypothetical childcare expenses to Mother. 4 Because the parties For example, if the working parent s income is $25,000 per month, and the other parent s income is $4,000 from spousal maintenance, the Basic Child Support Obligation is $2,039. Absent adjustments, the working parent would pay $1,712.76 per month under the 2005 guidelines. If an additional $4,000 were attributed to the unemployed parent, the Basic Child Support Obligation remains the same but the working parent would pay only $1,476.52 despite the fact that the unemployed parent has no actual additional funds to contribute. 15 combined income already exceeded the maximum recognized by the Guidelines, the attributed increase in income to Mother had no effect on the hypothetical Support Basic childcare Obligation Child Support expenses almost dollar Obligation. increased for the dollar. But Total And the Child because Father s proportionate share of the total support amount far exceeded Mother s, the net effect of the attribution was to significantly increase the amount that Father was required to pay. Therefore, instead of attenuating the effect on Father of Mother s unemployment, the entire actually amplified the effect.5 process of attribution And while the court properly could have found that Mother s decision to remain at home was in the children s best interests, nothing in the Guidelines or in Little suggests that a parent should be able to use hypothetical attribution to transform a decision to remain unemployed into an increase in child support received.6 Because we conclude that 5 Mother warned of this potential anomaly and did not seek this result. 6 When the court finds that voluntary unemployment is in the children s best interests, it may choose not to attribute income and thereby require the working parent to bear the burden of the unemployment. But it may not use attribution under § 5(E) to enhance that burden. Where circumstances require, deviation from the support prescribed by the Guidelines may be accomplished pursuant to § 20, not through the fiction of attribution. 16 the attribution of income and childcare expenses worked a result contrary to that intended by the Guidelines, we reverse.7 C. ¶28 Father contends Father s Income that the family court erred by aggregating the stock options he received in 2004, 2005, and 2006 to determine his income for 2007. ¶29 We agree. At trial, Father testified that the stock options he received from his employer vested over a two year period, and that the employer used a method known as Black-Scholes to project the value of those options. See In re Marriage of Robinson v. Thiel, 201 Ariz. 328, 334, ¶ 14, 35 P.3d 89, 95 (App. 2001) (disapproving the Black-Scholes valuation method). Although Father did not argue that the court should use the Black-Scholes formula, he suggested that the court should treat his mature, unexercised vested stock options as liquid assets and attribute a five percent annual return to them. Father testified that his vested matured stocks were worth $1,147,000, and suggested that $57,350 should be added to his income for the purposes of determining his child support obligation. 7 Father also contends that the family court abused its discretion by failing to annualize the cost of a nanny because the children attend summer camp for four weeks and would not need a nanny during that time. In view of our decision that the attribution of such costs cannot be squared with the Guidelines on these facts, this assignment of error is moot. 17 ¶30 Rejecting Father s method of valuing his stock options, the trial court adopted a valuation method used in an Ohio case, Murray v. Murray, 128 Ohio App.3d 662, 716 N.E.2d 288 (1999). It noted that this method of valuation had been approved by the Arizona courts in Robinson. ¶31 In Robinson, the court held that mature, vested stock options must be imputed as part of a parent s gross income. 201 Ariz. at 333, ¶ 12, 35 P.3d at 94. To hold otherwise, would allow the parent to shield a significant portion of [the parent s] income from the courts, and deprive [the] children of the standard of living they would otherwise enjoy. Id. (quoting Murray, 128 Ohio App.3d at 669, 716 N.E.2d at 294). The Robinson court concluded that vested, matured stock options must be employee valued independently parent s decision to of and without actually regard exercise to the them. Id. (citing Fisher v. Fisher, 564 Pa. 586, 769 A.2d 1165 (2001)). ¶32 The Robinson court declined to adopt[] a universal method of valuing such options and [left] that to the trial court s discretion, based on the facts and circumstances of each case. chose Id. at 330, ¶ 1, 35 P.3d at 91. not Murray to foreclose approach] upon warranted it. further noted the remand trial if In dictum, the court court the from facts and adopting circumstances Id. at 334, ¶ 16, 35 P.3d at 95. that [t]he appropriateness 18 of [the the Robinson valuation method will depend on such factors as the nature of the stock options, market conditions, tax consequences, ease of application, and other facts and circumstances peculiar to each case. Id. ¶33 The method employed by the Ohio court in Murray was to account for the options appreciation in value as determined on the grant and exercise dates of the options [that] fall into the income year at issue. 298. 128 Ohio App.3d at 675, 716 N.E.2d at Under this approach, each option grant is valued on the most recent dates for which an option could be exercised minus the price on the date the option was granted. Id. A shorthand method of doing this calculation is to add together the total number of unexercised shares from all the options, and multiply this number by the stock price increase for the income year at issue. ¶34 method In and Id. at 676, 716 N.E.2d at 299. this found case, that the family Father had court adopted the Murray 20,020 vested, unexercised shares of General Dynamic stock, which had been granted to him in 2004, 2005, and 2006. The court multiplied 20,020 by the price per share increase ($13.88) that had occurred in 2006, and concluded that the value of 19 the appreciation of these unexercised stock options was $277,877 during 2006. The court added that figure to Father s annual income.8 ¶35 Father argues that this method of valuation constituted an abuse of discretion because it used three years of option awards to calculate one year of income. In its ruling on Father s motion for new trial, the family court declined to consider Father s arguments because his legal argument . . . was never raised at trial. During trial, Father proposed a method options of rejected. valuing his stock that the family court The trial court adopted the Murray method sua sponte. Because Father could not reasonably have anticipated the court s ruling, we conclude that his arguments were entitled to consideration. ¶36 In addition to its conclusion that Father waived his challenge, the family court explained that the alternative methods presented in the motion for new trial were contrary to Robinson: Moreover, the suggested alternate ways of valuing vested but unexercised stock options as income imputing an estimated investment return and/or considering as income only the appreciation in value of one year of stock options both appear to ignore the issue addressed in Robinson: the fact that vested but unexercised stock options, as a component of compensation, have some value as income each year until exercised. 8 This calculation of income did not include restricted shares of General Dynamics stock because the holding period had not ended for any restricted shares granted to Father. 20 ¶37 While we agree that vested but unexercised stock options have some value as income, the critical question is whether the Murray method is consistent with the policies and purposes of the Guidelines. 16, 35 P.3d at 95. See Robinson, 201 Ariz. at 334, ¶ The overarching purpose of the Guidelines is to establish a standard of support for children consistent with their needs and the ability of parents to pay, and to make child support awards consistent for persons in similar circumstances. Cummings v. Cummings, 182 Ariz. 383, 385, 897 P.2d 685, 687 (1994) (citing Guidelines § 1 (1992)); Ariz. at 520, ¶ 4, 975 P.2d at 110. see also Little, 193 The paramount factor a trial court must consider when applying the Guidelines is the best interest of the child. See Little, 193 Ariz. at 522, ¶ 12, 975 P.2d at 112. ¶38 The inherent problem with the Murray method is that it makes the interest of the child dependent on market fluctuations that have no actual effect on the funds available to support the children. Child support obligations should not be governed by the volatility of the marketplace, and the implicit assumption in Murray that options will appreciate year to year does not comport with the realities of the market. Moreover, the Murray approach may lead to an unfair calculation of income based upon 21 the actual present value of years of accumulated wealth, rather than the rate of return properly attributed to such wealth. ¶39 Valuation of unexercised, vested, matured options must be performed on a case-by-case basis. stock We agree that the amount of child support should not be subject to the investment decisions Robinson, 201 disagree with Ariz. the at or whims 333, dictum in ¶ of 12, the employee 35 P.3d at 94. Robinson that allowed parent. But for we the inclusion in income of the unrealized present market value of stock options earned years before. ¶40 Though we do not require trial courts to follow any single valuation method, one approach that serves the purposes of the Guidelines and reflects economic reality is to examine the value the parties placed on the stock options when they entered into their employment compensation agreement. case, the parties agreement is readily Executive Compensation Summary report. found in In this Father s That report contains a summary of Father s executive compensation package, including his base salary, his bonus, and his stock option awards. The report, though not conclusive, purports to represent the amount that both Father and his company thought was a fair value of Father s work during the year at issue. The report used the Black-Scholes method to project the value of the stock over a five year period. And while the calculation is not revealed in 22 the report, it is not the calculation itself that is relevant it is the fact that the employer and employee agreed to its result, and an arm s length agreement is admissible evidence of the actual value of the options granted in the year at issue.9 By making this observation, however, we do not constrain the ability of the trial courts to consider all admissible evidence, including expert testimony. ¶41 As noted in Robinson, there are numerous available for valuing employee stock options. 334, ¶ 16, 35 P.3d at 95. company s options. projections to methods 201 Ariz. at The court is not required to use a determine the value of the stock It should, instead, select a valuation method based on the evidence presented at trial that accounts for the nature of the stock options, market conditions, tax consequences, ease of applications, and other facts and circumstances peculiar to each case. Id. After determining the value of the options, the court has wide discretion in selecting a reasonable rate of return that accounts for all relevant factors, including a parent s decision not to exercise mature options. 9 In Robinson, we question[ed] the practicality of these models for use in litigation. 201 Ariz. at 334, ¶ 14, 35 P.3d at 95. Though the concern with the use of Black-Scholes purely as a litigation tool remains, that concern is satisfied when the parties to a contract choose to use the method in a commercial context. 23 ¶42 We therefore reverse the court s determination of the stock option component of Father s income and remand for recalculation of child support consistent with today s holding. D. ¶43 Father s Attorneys Fees at Trial Father also argues that the family court abused its discretion by not awarding his reasonable attorneys fees at trial. new Mother argues that the court s ruling on the motion for trial was unjustified attorneys fees. and that Father should pay her Mother, however, cannot raise this as a cross- issue on appeal because ruling in her favor would expand her rights by awarding her attorneys fees. ¶44 We regarding will not attorneys disturb fees the absent See ARCAP 13(b)(3). family an court s abuse of decision discretion. Gutierrez v. Gutierrez, 193 Ariz. 343, 351, ¶ 32, 972 P.2d 676, 684 (App. 1998). The court may consider the parties settlement positions in determining reasonableness under A.R.S. § 25-324. Id. at ¶ 34. ¶45 The family court s findings indicate that both parties took reasonable and unreasonable positions at times on various issues. The record supports these findings. In neither party appeared inclined to settle this matter. no abuse of discretion in denying attorneys fees. 24 Father s addition, We find request for E. ¶46 Attorneys Fees on Appeal Both parties request an award of attorneys fees. In our discretion, we decline to award attorneys fees on appeal. IV. ¶47 court s For the rulings foregoing concerning attributed childcare costs. CONCLUSION reasons, the we parties vacate income the family and Mother s We reverse the court s ruling that Father waived his right to review of the calculation of income from stock options and remand for a recalculation of his income and child support in accordance with today s holdings. Further, we hold that we do not have jurisdiction to consider the issues raised in Mother s direct appeal of the November orders or her cross-appeal. In all other respects, we affirm the family court s rulings. ___________________________________ PETER B. SWANN, Judge* CONCURRING: ____________________________________ MICHAEL J. BROWN, Presiding Judge ____________________________________ DANIEL A. BARKER, Judge * Pursuant to Article VI, Section 3 of the Arizona Constitution, the Arizona Supreme Court designated the Honorable Peter B. Swann, Judge of the Arizona Superior Court, to sit in this matter. 25
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
