Hurley v. Hurley

• Decision Date: 10 June 1980
• Docket Number: No. 12567,12567
• Citation: 615 P.2d 256,94 N.M. 641,1980 NMSC 67
• Parties: Lloyd A. HURLEY, Petitioner-Appellee and Cross-Appellant, v. Zenobia E. HURLEY, Respondent-Appellant and Cross-Appellee.
• Court: New Mexico Supreme Court

Page 256

615 P.2d 256

94 N.M. 641

Lloyd A. HURLEY, Petitioner-Appellee and Cross-Appellant, v. Zenobia E. HURLEY, Respondent-Appellant and Cross-Appellee.

No. 12567.

Supreme Court of New Mexico.

June 10, 1980.

Rehearing Denied Sept. 2, 1980.

Klecan & Roach, Eugene E. Klecan, Albuquerque, Bingaman, Davenport & Lovejoy, Anne K. Bingaman, Santa Fe, for respondent-appellant and cross-appellee

Johnson & Lanphere, Nicholas R. Gentry, Albuquerque, for petitioner-appellee and cross-appellant.

OPINION

FEDERICI, Justice.

This appeal arises out of a divorce action. On April 26, 1977, appellant-wife filed suit for divorce but later dismissed that lawsuit pursuant to a reconciliation and alleged contract. In December of that same year, appellee-husband filed suit for divorce in the District Court of Bernalillo County. In his petition, he requested: that the marriage be dissolved; that appellant be awarded custody of their minor child and that he be awarded reasonable visitation rights; that he be ordered to pay reasonable child support; and that the community property and debts of the parties be divided equitably. Appellant-wife answered and counterclaimed, seeking alimony, attorneys' fees and damages for breach of contract. Judgment was entered granting the divorce; dividing the community property; giving custody of the parties' minor child to appellant; and granting child support ($500 per month), alimony ($1,000 per month) and attorneys' fees (of $3,500). It is from this judgment that appellant appeals and appellee cross-appeals.

Appellant raises the following issues on appeal:

I. The trial court erred in finding that there was no good will in the professional association of Schultz & Hurley.

II. The trial court erred in determining that appellant was only entitled to a community interest in 80% of appellee's retirement benefits.

III. The trial court erred in finding that the debt on the Tobruk stable was a community debt.

IV. Appellant was denied a fair trial due to the trial judge's alleged prejudice against her attorney.

V. The trial court erred in failing to find that appellant had a viable cause of action for breach of contract.

VI. The alimony awarded by the court was so inadequate as to amount to an abuse of discretion.

VII. The attorneys' fees awarded to appellant were so inadequate as to amount to an abuse of discretion.

We affirm the decision of the trial court with respect to Points III, IV and V. We reverse and remand for further consideration of Points I, II, VI and VII.

I.

New Mexico has not addressed the issue of valuation of good will in a professional practice. Appellant correctly relies upon Durio v. Johnson, 68 N.M. 82, 358 P.2d 703 (1961), for the proposition that good will can and does exist in a professional practice even though founded upon the personal skill and reputation of an individual. Appellee's reliance on Muckleroy v. Muckleroy, 84 N.M. 14, 498 P.2d 1357 (1972), for the proposition that a medical license is not community property for purposes of the community property laws of New Mexico is likewise correct. However, that case is not controlling on the issue of good will now before this Court. We believe a sound rule to apply is that although the individual right to practice is a property right which cannot be classed as community property, the value of the practice as a business at the time of dissolution of the community is community property. In re Marriage of Lopez, 38 Cal.App.3d 93, 113 Cal.Rptr. 58 (1974); Marriage of Lukens, 16 Wash.App. 481, 558 P.2d 279 (1976).

Appellee urges that the saleability or lack of same is dispositive of the issue of value of good will. See Nail v. Nail, 486 S.W.2d 761 (Tex.1972). We agree with appellee to the limited extent that his good will may not be readily saleable; however, it does not follow that such good will is without some value.

Accordingly, we do not think the dispositive factor is whether Dr. (Hurley) can sell his goodwill. His goodwill has value despite its immarketability, and so long as he maintains his . . . practice . . . he will continue to receive a return on the goodwill associated with his name.

Marriage of Lukens, supra, 558 P.2d at 282.

The mere difficulty of valuation is not sufficient reason to ignore the existence of good will. In re Marriage of Lopez, supra. Once its existence and value are established, it should be included in and divided along with other community property. See Berg v. Berg, 72 Wash.2d 532, 434 P.2d 1 (1967).

There appears to be no definitive rule for the determination of the value of good will. In re Marriage of Foster, 42 Cal.App.3d 577, 117 Cal.Rptr. 49 (1974). Each case must be determined on its own facts and circumstances. Mueller v. Mueller, 144 Cal.App.2d 245, 301 P.2d 90 (1956); In re Marriage of Lopez, supra; In re Marriage of Lukens, supra. Opinion evidence is admissible but is not conclusive. In re Marriage of Foster, supra. Further, since a community interest can only be acquired while the parties are married, the value must be determined at the time of dissolution without dependence upon the potential or continuing income of the professional spouse. In re Marriage of Fortier, 34 Cal.App.3d 384, 109 Cal.Rptr. 915 (1973). Some of the factors to be considered in arriving at the value of good will are: the length of time the professional has been practicing, his comparative success, his age and health, and any past profits of the practice. Attention should also be given to the physical and fixed resources of the practice. In re Marriage of Lopez, supra.

Here there was conflicting testimony on the value of Dr. Hurley's good will. Dr. Lybecap, an economist, testified on Dr. Hurley's behalf and argued that the practice had no good will due to its nonsaleability. However, the value of community good will is not necessarily the amount of money that a willing buyer would pay for such good will. In re Marriage of Foster, supra.

Mr. Zimmer testified on behalf of Mrs. Hurley. He used a capitalization of excess earnings method in determining a value for the good will of Dr. Hurley's practice. Using this method he arrived at a value. We feel that this is a legitimate, although not an exclusive, method of evaluation of community good will which should have been considered by the trial court. In re Marriage of Foster, supra.

II.

Appellant next contends that she is entitled to a community interest in 100% of the benefits possible under appellee's retirement plan. Both parties agree that as of the date of divorce the appellee's interest was at least 80% vested and that he would become 100% vested two years after date of divorce. Appellee's witness testified that the value of an 80% vested interest was $89,360.75. Once the interest becomes 100% vested, Dr. Hurley will be entitled to approximately $111,000 in benefits. Appellant maintains that she is entitled to that portion of retirement pay which was earned during coverture. LeClert v. LeClert, 80 N.M. 235, 453 P.2d 755 (1969). She alleges that appellant had contributed $111,000 in cash to the plan as of the date of divorce, and that she is entitled to one-half of such amount, regardless of whether it was technically "vested" on the date of divorce.

In Copeland v. Copeland, 91 N.M. 409, 575 P.2d 99 (1978), this Court held that a spouse is entitled to a community share of that portion of state retirement which is vested but unmatured as of the date of divorce. In Ridgway v. Ridgway, 19 N.M.St.B.Bull. 455, 94 N.M. 345, 610 P.2d 749 (1980), we set forth alternate methods of valuation which may be applied by the trial court in determining the community interest, and methods of payment in private pension plans.

The record in this case indicates that the plan is 100% vested, but only 80% matured. The trial court did not have sufficient evidence before it to make a determination of the percentage of the pension to which appellant is entitled, nor the proper method of payment to adopt under the circumstances. The district court is reversed and directed to hear additional evidence and to place a community value on the plan, together with an appropriate method of payment, based upon the principles of law announced in this opinion, and in LeClert, Copeland and Ridgway, supra.

III.

Appellant next challenges the court's finding that the Tobruk property is community property and that the mortgage on that property is a community debt. Appellant correctly cites McElyea v. McElyea, 49 N.M. 322, 163 P.2d 635 (1945), for the proposition that the status of property is fixed by law as of the time of its acquisition until changed in a manner authorized by law. She urges that the finding of the trial court that this property was community, despite language indicating otherwise on the warranty deed, is correct, since the parties were still married at the time of its acquisition, and the closing costs and some monthly payments were made out of community funds. However, she further contends that due to the unilateral action of appellee in purchasing the property without her knowledge and attempting to take title in his name only, the mortgage on the property should be classified as his separate debt. We find neither statutory nor case law to support her position. We find that the decision of the trial court is correct and supported by substantial evidence.

IV.

Appellant contends that she was denied a fair trial due to an alleged lack of impartiality on the part of the trial judge. She bases this contention upon the fact that four months after entry of judgment in this case the trial judge recused himself from all proceedings in which her attorney may be involved. We find no evidence in the record which would support a conclusion that the trial court had been biased or prejudiced toward appellant.

V.

Appellant next contends that in return for her forebearance from prosecution of a divorce action in April of 1977, appellee promised to refrain from infidelity,...