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In re Marriage of Crosetto

filed: July 12, 1996.


Superior Court of Pierce County. Superior Court Docket No. 91-3-03099-4. Date Filed In Superior Court: December 22, 1993. Superior Court Judge Signing: Thomas Swayze.

Written By: Houghton, Acj. Concurred IN By: Bridgewater, J., Turner, J.

Author: Houghton

HOUGHTON, A.C.J. -- James J. Crosetto appeals from the trial court's property distribution, business valuation, and denial of child support and attorney fees in an action dissolving his marriage to Laurel E. Crosetto. We affirm in part, reverse in part and remand for proceedings consistent with this opinion.


James and Laurel Crosetto were married on August 10, 1970. During the marriage they adopted a child, Mary Alice, who was born on February 7, 1984. James and Laurel Crosetto separated on May 15, 1991.

Laurel Crosetto is certified to teach kindergarten through sixth grades. She taught school during the early years of the parties' marriage. The Crosettos moved to Guam for a year and Laurel Crosetto taught second grade there. After their return to Washington, Laurel Crosetto worked as a substitute teacher until Mary Alice was adopted. The Crosettos agreed that Laurel Crosetto would not work while Mary Alice was a baby.

Following their separation in spring of 1991, Laurel Crosetto applied for a position with the Tacoma School District, and again in 1992 and 1993. At the time of trial, she was working full time as a substitute teacher with the Tacoma School District for $100 a day. Laurel Crosetto testified she was still looking for a full time teaching position but that elementary positions were limited.

Laurel Crosetto made several allegations of abuse against James Crosetto that were ultimately determined to be unfounded. She testified that James Crosetto was abusive to her and Mary Alice during the marriage As a result of Laurel Crosetto's allegations of abuse, James Crosetto had court-ordered supervised visitation with Mary Alice. Laurel Crosetto described bruises and other injuries she noticed on Mary Alice following her visits with James Crosetto. Laurel Crosetto stated she was not able to take Mary Alice to a doctor, and admitted these bruises were not reflected in the supervisor's report. James Crosetto denied physically abusing Laurel Crosetto, but admitted to slapping her on two occasions.

Laurel Crosetto also suspected that Mary Alice had been sexually abused after she discovered some pictures Mary Alice drew of James Crosetto in the nude. She found the pictures in February 1992 and showed them to a doctor in March 1992. A pediatrician examined Mary Alice and did not discover any evidence of penetration. James Crosetto denied ever exposing himself to Mary Alice.

These allegations of abuse eventually resulted in court-ordered supervised visits between James Crosetto and Mary Alice. Child Protective Services conducted an investigation in April 1992, based upon the allegations of sexual abuse. Child Protective Services determined there was no risk and closed its case. A second investigation was conducted in August 1992, which led to a dependency petition being filed. The petition was later dismissed due to unfounded allegations.

James Crosetto had supervised visitation until August 1992. The trial court then awarded primary care to him after Laurel Crosetto was warned not to interfere with his visitation and to comply with court orders. The trial court ordered supervised visitation between Laurel Crosetto and Mary Alice.

Janice Pitt, a Parenting Investigator, stated in her report that Mary Alice appeared to be comfortable with her father during their visits, and that James Crosetto demonstrated "appropriate parenting skills." Pitt also stated that it was doubtful that Mary Alice drew the pictures of her father, and that the child denied drawing them. She also believed that Laurel Crosetto behaved inappropriately at times during her visits with Mary Alice and opined that Laurel Crosetto was unable to meet the emotional needs of her child.

James Crosetto owns a real estate appraisal business. He has worked as an independent appraiser since March 1983, and primarily performs residential appraisals. He is not licensed to do commercial appraisals. James Crosetto performs contract work for mortgage lenders, insurance companies, and banks, but very little (less than one percent) for the general public. In order to do appraisals for federally insured lending institutions, he must submit a package and receive a vote of approval by a board each year. He does not have the same clients each year. James Crosetto has an office in Tacoma. His name and number are listed under Appraisers in the telephone directory, but there is no advertisement in the directory.

James Crosetto testified that he lent Laurel Crosetto's mother (Alice Mack) $103,000 between 1988 and 1991 for a building rehabilitation project and that this loan was not repaid. He also stated he borrowed some money from his mother in order to make the loan to Mack. He stated that the bank foreclosed on Mack's property but did not look to him for payment. James Crosetto identified a promissory note signed by him and Mack, acknowledging the loan to her.

James Crosetto testified about his business assets, including $2000 in accounts receivable, a computer, printer, and other equipment, and stated that the total value of the business was worth $3000 to $5000. He stated that he owed $15,000 to the IRS and over $50,000 to his mother. He testified that he paid Laurel Crosetto $400 a week until October 1991, and $200 a week thereafter, made the house and utilities payments, and paid other bills.

Michael Gocke, a CPA, testified that there was no goodwill in James Crosetto's business. He compared the business with that of an anesthesiologist or a pathologist. He determined the value of the business was $2040 (assets minus liabilities).

David Nelson, also a CPA, valued the business at $125,582 and attributed this entire value to goodwill. He based this valuation upon a determination of gross income less operating expenses and multiplying the average by a factor of 1.5. He also testified about the concepts of "stream of income" and goodwill.

Child support worksheets submitted at trial indicate James Crosetto's business income is $3205 a month, with net monthly income of $2447.50. Laurel Crosetto's monthly net income is listed as $1756.05. In its oral ruling, the trial court stated that James Crosetto was capable of earning $75,000 a year.

The trial court awarded "custody" of Mary Alice to James Crosetto, and secondary "custody" (unsupervised) to Laurel Crosetto.*fn1 The trial court awarded James Crosetto a car, boat and trailer, bank account, retirement plan, appraisal business (valued at $50,000), and various items of personal property. Laurel Crosetto was awarded the family home, a car, money owing to the community by her mother (which the trial court found unlikely would be paid due to her bankruptcy) and various personal property.

The trial court found that the community debts included the first mortgage ($54,000), the second mortgage (estimated at $14,000 but later corrected to $11,101.25), IRS debt ($14,000), a Sears auto loan ($800), and the loan from Rose Crosetto ($34,000). James Crosetto's remaining separate debts and liabilities consisted of his attorney fees of $15,000.

The trial court found that Laurel Crosetto's separate debts consisted of attorney fees in excess of $25,000 and $5000 owed on a Discover card. James Crosetto was ordered to pay the second mortgage ($11,101.25), Sears loan ($800), debt to Rose Crosetto (estimate $34,000), and his obligations incurred since separation. However, the trial court stated that it did not expect that James Crosetto would be required to pay back his mother, "in view of her condition and the fact that he's the sole heir." Laurel Crosetto was ordered to pay the first mortgage ($54,000), the Discover card balance ($5000), and her obligations incurred since separation. James Crosetto sought $52,000 in attorney fees and costs. The parties were ordered to pay their own attorney fees and costs. James Crosetto appeals.


A. Business Valuation

James Crosetto first contends that the trial court erred in determining his business had intangible value. He asserts that the business has no goodwill and that a finding of intangible value of the business cannot be used as a substitute for goodwill. He further asserts that the value of the business is $5,000, or the value of its tangible assets and accounts receivable.

The existence of goodwill is a question of fact. In re Marriage of Knight, 75 Wash. App. 721, 726, 880 P.2d 71 (1994), review denied, 126 Wash. 2d 1011, 892 P.2d 1089 (1995). A valuation of goodwill is also a question of fact. In re Marriage of Luckey, 73 Wash. App. 201, 206, 868 P.2d 189 (1994). Findings of fact supported by substantial evidence will not be reversed on appeal. Luckey, 73 Wash. App. at 206. Substantial evidence is evidence sufficient to persuade a fairminded person of the truth of the declared premise. In re Marriage of Hall, 103 Wash. 2d 236, 246, 692 P.2d 175 (1984).

Goodwill has been defined as the "'expectation of continued public patronage.'" Hall, 103 Wash. 2d at 239 (quoting In re Marriage of Lukens, 16 Wash. App. 481, 483, 558 P.2d 279 (1976), review denied, 88 Wash. 2d 1011 (1977)). Goodwill has also been described as "a property or asset which usually supplements the earning capacity of another asset, a business or a profession" and is not the earning capacity itself. Hall, 103 Wash. 2d at 241. Professional goodwill is ...

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