Williams v.

• Decision Date: 23 May 2017
• Docket Number: No. 2 CA-CV 2016-0056,2 CA-CV 2016-0056
• Parties: IN RE THE MARRIAGE OF DESIREE ALBERTINA WILLIAMS, F/K/A DESIREE ALBERTINA HERNDON, Petitioner/Appellee, and JEFFREY ALAN HERNDON, Respondent/Appellant.
• Court: Arizona Court of Appeals

IN RE THE MARRIAGE OF DESIREE ALBERTINA WILLIAMS, F/K/A DESIREE ALBERTINA HERNDON, Petitioner/Appellee, and JEFFREY ALAN HERNDON, Respondent/Appellant.

No. 2 CA-CV 2016-0056

ARIZONA COURT OF APPEALS DIVISION TWO

May 23, 2017

THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.

NOT FOR PUBLICATION

See Ariz. R. Sup. Ct. 111(c)(1); Ariz. R. Civ. App. P. 28(a)(1), (f).

Appeal from the Superior Court in Pima County

No. D20143488

The Honorable Jeffrey Bergin, Judge

The Honorable Deborah Bernini, Judge

The Honorable James E. Marner, Judge

AFFIRMED IN PART AS CORRECTED; VACATED IN PART AND REMANDED

COUNSEL

Mark J. DePasquale, PC, Phoenix

By Mark J. DePasquale

Counsel for Petitioner/Appellee¹

Solyn Law, PLLC, Tucson

By Melissa Solyn

Counsel for Respondent/Appellant

MEMORANDUM DECISION

Judge Miller authored the decision of the Court, in which Presiding Judge Staring and Judge Espinosa concurred.

MILLER, Judge:

¶1 Jeffrey Herndon appeals from the trial court's decree dissolving his marriage to Desiree Williams and several related rulings. In his 125-page opening brief, Herndon challenges virtually all of the court's factual findings, as well as numerous procedural rulings made throughout the litigation. We affirm in part as corrected, vacate in part, and remand for further proceedings.

Factual and Procedural Background

¶2 "We view the facts in the light most favorable to upholding the trial court's decree." In re Marriage of Foster, 240 Ariz. 99, ¶ 2, 376 P.3d 702, 703 (App. 2016). Williams filed for dissolution of the twenty-year marriage on October 17, 2014, and the trial court issued a preliminary injunction restricting the transfer of propertythe same day.² Herndon was served with the petition and preliminary injunction on October 22, 2014. The focus of much of the litigation was the proper disposition of the parties' interests in Plum Windows and Doors, Inc. (hereinafter, "Plum"), and in Herndon Investments, LLC (hereinafter, "HI"), which owns the office building where Plum is located. The parties stipulated, and the court found, Plum and HI to be community property.

¶3 After the preliminary injunction had been entered, Herndon, who was then the manager of Plum, worked with Leamon Crooms to create a new entity in 2015 called Plum Arizona North, LLC (hereinafter, "Plum North"). Herndon claimed Plum North was intended to be a vehicle by which to expand Plum's business into the Phoenix-area market. At all relevant times Crooms was the sole member and manager of Plum North, and Plum had no interest in it. Crooms contributed no capital to Plum North and did not bring "anything of value to the deal, other than some consulting services with nebulous value."

¶4 Despite the preliminary injunction, Herndon directed Plum to transfer $30,000 to Plum North in May 2015. Herndon maintained the $30,000 was a loan, but Plum North had no assets with which to repay the purported loan and put down no collateral to secure it. Plum North did not pay Plum any consideration for use of the Plum name, nor for the use of Plum employees in getting Plum North off the ground. Moreover, Herndon caused Plum to enter a lease on a Mesa commercial property that exposed Plum to another $100,000 of potential liability, knowing that Plum's cosigner, Plum North, had no assets at the time. Herndon actively concealed the entire Plum North scheme from Williams and from the parties' joint expert accountant Mark Fleischman, representingas late as June 2015 that "Plum does not do business in Phoenix and the Phoenix metropolitan area."

¶5 Williams became aware of the Plum North transactions soon after and filed a motion for a temporary restraining order on June 24, 2015. The trial court held a hearing on June 29,³ and the following day the court ordered "that given the threat of destruction of the community property and the depletion of all assets, [Williams] is deemed the sole manager of Plum," and Herndon "is removed as signatory and manager of [HI] and Plum . . . until further order of the Court." Herndon nevertheless continued to hold himself out as the president and owner of Plum, and his interference with Williams's attempts to implement the court-ordered changes before the Arizona Corporation Commission (ACC) and the Arizona Registrar of Contractors (AROC) caused Williams to incur additional attorney fees.⁴

¶6 On October 20, 2015, Herndon moved to continue the trial in order to give Fleischman more time to complete a valuation of Plum. The trial court denied the motion after a hearing. On November 6, Williams requested findings of fact and conclusions of law pursuant to Rule 82, Ariz. R. Fam. Law P. Trial commenced on December 1.

¶7 The trial court issued its under-advisement trial ruling on January 7, 2016. The court found Herndon had "kept [Plum's dealings with Plum North] secret" from Williams and "[t]hese omissions were material to this matter and constitute fraud." It concluded Herndon had "deliberately engaged in a conspiracy to secrete assets [in Plum North] and defraud" Williams "under cloak of secrecy and deception, in breach of the Preliminary Injunction" and other court orders. The court also found that Herndon's characterization of the $30,000 payment to Plum North as a loan was not credible, and that Plum had "no real expectation . . . of repayment." These actions "positioned [Plum] so that [its] valuewould be based on a business that had been drained of its cash," which would be detrimental to Williams in the property division.

¶8 The trial court awarded Plum to Williams at a value of $115,000. The court also awarded HI to Williams at a value of $350,000. It ordered that Herndon be charged with $375,000 of waste and $265,000 in lost profits. It also made rulings related to particular payments or debts that affect the issues on appeal.

¶9 On January 26, 2016, Herndon filed a motion for clarification of the under-advisement ruling, and on February 2, he appealed. This court suspended the appeal and revested jurisdiction in the superior court to clarify its under-advisement ruling and to address outstanding motions. Herndon filed several more motions in the trial court, citing Rules 83 through 85, Ariz. R. Fam. Law P. Williams also filed a motion for clarification in the court following revestment.

¶10 On August 11, the trial court issued an amended decree that included numerous clarifications of the under-advisement ruling, but few changes to the damages and property division plan previously ordered. The court certified the amended decree as final and appealable pursuant to Rule 78(B), Ariz. R. Fam. Law P., and Herndon filed a new notice of appeal. We have jurisdiction pursuant to A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).⁵

Dismissal of Appeal

¶11 As a threshold matter, we first address Williams's request that we dismiss this appeal because Herndon is in ongoingcontempt of various trial court orders. Dismissal of an appeal based on a party's contempt is a discretionary determination that depends on the facts of the particular case. Stewart v. Stewart, 91 Ariz. 356, 360, 372 P.2d 697, 700 (1962); In re Marriage of Margain & Ruiz-Bours, 239 Ariz. 369, ¶¶ 15, 18, 372 P.3d 313, 316-17 (App. 2016).

¶12 In view of the quasi-equitable nature of the sanction of dismissal, we decline to dismiss an appeal when the requesting party did not come before the court with "clean hands." Margain, 239 Ariz. 369, ¶¶ 18-20, 372 P.3d at 317-18, quoting MacRae v. MacRae, 57 Ariz. 157, 161, 112 P.2d 213, 215 (1941). Here, the record reveals that Williams (like Herndon) took funds for personal expenses from Plum, a closely held corporate business, and intermingled business and personal expenses. Williams's hands are not entirely clean; therefore, in our discretion, we decline to dismiss the appeal.

Factual Challenges

¶13 As an overarching argument, Herndon maintains the trial court failed to exercise its independent judgment in making findings of fact, instead adopting Williams's proposed findings of fact wholesale. He cites Elliott v. Elliott, 165 Ariz. 128, 796 P.2d 930 (App. 1990), but as that case makes clear a court may adopt a party's proposed findings of fact as long as "those findings are consistent with the ones [the court] reaches independently after properly considering the facts." Id. at 134, 796 P.2d at 936. Although the court utilized Williams's proposed findings of fact as a template in creating its own, a comparison of the proposed findings and the under-advisement ruling shows that the court did not improperly "delegate[] its obligation to independently weigh the evidence," cf. Nold v. Nold, 232 Ariz. 270, ¶ 14, 304 P.3d 1093, 1096-97 (App. 2013), but made numerous significant alterations and additions. The court did not "abdicate its responsibility to exercise independent judgment." Id., quoting DePasquale v. Superior Court, 181 Ariz. 333, 336, 890 P.2d 628, 631 (App. 1995).

¶14 Herndon challenges more than a dozen particular factual findings the trial court made.⁶ Many of these challenges are requests for this court to credit Herndon's own testimony, which the trial court specifically found not credible. "We will defer to the trial court's determination of witnesses' credibility and the weight to give conflicting evidence." Gutierrez v. Gutierrez, 193 Ariz. 343, ¶ 13, 972 P.2d 676, 680 (App. 1998). And we will affirm the court's findings if they are reasonably supported by the evidence. Id. ¶¶ 5, 13.

Valuation of Plum

¶15 Herndon argues the trial court abused its discretion in valuing Plum at $115,000. See Schickner v. Schickner, 237 Ariz. 194, ¶ 13, 348 P.3d 890, 893 (App. 2015) (business valuation in divorce proceeding reviewed for abuse of discretion). Fleischman, the parties' expert accountant, testified that Plum's adjusted book value was $184,100 as of June 30, 2015, but could have been worth less than that amount. The court adopted Fleischman's calculation that Plum's unadjusted book value as of June 30, 2015 was...