Marriage of Brooks, In re
| Decision Date | 09 December 1987 |
| Docket Number | No. 14454,14454 |
| Citation | 742 S.W.2d 585 |
| Parties | In re MARRIAGE OF BROOKS. William Paul BROOKS, Petitioner-Appellant, v. Rose Marie BROOKS, Respondent-Respondent. |
| Court | Missouri Court of Appeals |
Harold A. Kyser, Butler, for petitioner-appellant.
George R. Lilleston, Clinton, for respondent-respondent.
This is a proceeding for dissolution of a marriage of 21 years. The only issue tendered is whether a family business was properly valued by the trial court as an asset subject to distribution as marital property under the provisions of § 452.330, RSMo 1986. 1 The cause was argued and submitted to this court at its regular September 1986 Session at Springfield. Because the appeal involves valuation and distribution of that intangible asset called "goodwill" as marital property and because we were aware that consideration of goodwill as an intangible asset subject to distribution as marital property had been undertaken by our Supreme Court, we deferred adjudication of this case. With the filing of Hanson v. Hanson, Graham v. Graham (consolidated), 738 S.W.2d 429 (Mo. banc 1987), and Taylor v. Taylor, 736 S.W.2d 388 (Mo. banc 1987), we have the benefit of our Supreme Court's guidance, even though the court did not make its decisions retroactive. Hanson decided, primarily, that the goodwill of a professional practice is a marital asset subject to division in dissolution proceedings. Further, Hanson reaffirmed that goodwill is property in the following language:
"Is goodwill property? Our courts have long recognized that 'the good will of a business is property....' Sessinghaus Milling Co. v. Hanebrink, 247 Mo. 212, 152 S.W. 354, 357 (Mo.1912); Montgomery v. Getty, 284 S.W.2d 313 (Mo.App.1955); Magee v. Pope, , 112 S.W.2d 891, 899 (Mo.App.1938); Kreger Glass Co. v. Kreger, 49 S.W.2d 260 (Mo.App.1932). Goodwill produced in a professional setting is no less property than that arising from a commercial setting.
Accounting texts define goodwill as Welsch, Zlatkovich, and Harrison, Intermediate Accounting, 438 (6th ed. 1982). '[It] is an intangible asset that attaches to a business as a result of such favorable factors as location, product superiority, reputation, and managerial skill....' Niswonger and Fess, Accounting Principles, 257 (12th ed. 1977).
Courts have defined goodwill as 'nothing more than the probability, that the old customers will resort to the old place.' Cruttwell v. Lye, 17 Ves. 335, 346, 34 Eng.Rep. 129, 134 (Ch. 1810). In re Brown, 242 N.Y. 1, 6, 150 N.E. 581, 582 (1926).
The common theme in all of these definitions is that the goodwill which can be sold, and is therefore property, attaches not to an individual but to a business entity. Goodwill has no separate existence; it has value only as an incident of a continuing business."
The court's opinion was focussed upon the goodwill of a professional practice acquired during marriage. In valuing such goodwill as marital property, the court stated its strong preference for fair market valuation both as evidence of the existence of goodwill and of its true value, and rejected capitalization formulae because of: a) the speculative nature of such formulae in a professional context; b) the tendency of such formulae to place a present value on the future earning capacity of the individual professional, and c) because of the See Taylor, 736 S.W.2d at 390.
Nevertheless, we do not read Hanson, Graham and Taylor as rejecting all capitalization formulae as methods of valuing goodwill as an intangible asset of a commercial corporation or other business organization, no matter the nature of the business involved. 2 We undertake no gloss on the Hanson and Graham opinions, but there is apparently no end to the types of business enterprise which have been recognized as marital assets under the provisions of the Uniform Marriage and Divorce Act, 9A U.L.A., p. 156 (1987). 3 Manifestly no single method of valuing a business as a marital asset can be made applicable to every case, nor to the goodwill incident to that business, except where a professional practice is concerned.
Turning to the case at hand, the most remarkable characteristic of the marriage was its material success. At the time the parties were married, the petitioner (plaintiff) was 20 years of age, the respondent (defendant) 21. Both parties were employed by Western Electric in Kansas City. Plaintiff was employed as a tool and die maker; the defendant was employed as a production worker. The parties lived at Adrian, in Bates County, and commuted to work.
The family business began as a hobby. Plaintiff testified that he "ran machines at work and ... enjoyed it and ... actually started [the business] just as a hobby." Plaintiff bought a lathe, put it in his garage and started turning out machinery spare parts for Remington Arms. In 1966 plaintiff terminated his employment at Western Electric to work full time at home. By that time, plaintiff's original lathe had become a machine shop. The defendant did not, according to the plaintiff, work in the shop "doing production" but did some of the "book work." The defendant's version of the facts was that she was active in the management of the business; she did the clerical work, looked after the payroll, maintained the inventory, and kept the records in order. The trial court could readily have found that the machine shop was a family-owned, family-operated business.
The plaintiff wanted to expand, but found that commercial property was very expensive. Through the efforts of one Buerge, a banker at Butler, Missouri, the plaintiff obtained a favorable ground lease from the local airport commission and an S.B.A. loan through Buerge's bank. The proceeds of the loan were used to finish paying for the business in Adrian, to construct a building to house the new business, and as operating capital. From that time--June or July of 1968--the business was operated as the Brooks Machine and Tooling Company. Although one witness referred to a "corporate" bank account, it does not appear that the business was ever incorporated.
The precise nature of the work done by the Brooks Machine and Tooling Company is not clear. The business appears to be--and is referred to--as a "machine shop," albeit a very elaborate one. By the time the dissolution and distribution of property was undertaken, Brooks had machinery and tools of the value of $82,670 on hand, and accounts receivable in the amount of $12,000 due.
For the 5 years preceding dissolution, Brooks had a net income as follows:
1980 $128,797
1981 $132,460
1982 $172,575
1983 $ 97,621
1984 $160,174
It is also quite clear that the parties lived well on the earnings of the Brooks Company. The defendant's evidence was that in 1982, the parties transferred $138,325 from the business to their personal account; in 1983, deposits to their personal account from Brooks were $106,150; in 1984, $156,200 was taken from the business as personal income, and in the first 6 months of 1985, $55,350 was transferred from the business to the parties' personal bank account.
The parties also acquired a great deal of other property, including farmland and a herd of Simmental cattle, originally intended as a tax shelter. They also acquired a great many substantial debts. It is not necessary to consider the conflicting evidence of the value of the whole marital estate at length. On the basis of all the evidence, the trial court found the value of the marital estate to be $1,311,785, subject to various debts and charges amounting to $515,288. A schedule of the assets and debts, as found by the trial court, is attached as Schedule "A." In distributing the marital property, the trial court awarded the defendant two automobiles; all household and personal items in her possession at the time of trial; a life insurance policy, and $300,000 (the value of her interest in Brooks Machine and Tooling Company) to be paid in monthly installments of at least $2,500 beginning September 1, 1985, until the entire sum is paid in full.
The scope of our review is narrow. It has often been held that we are required by the rules to limit our review to the points properly briefed, and this rule is applicable to court-tried cases as well as cases tried to a jury. State ex rel. Plymesser v. Cleaveland, 387 S.W.2d 556, 558 (Mo.1965); Smith v. Welch, 611 S.W.2d 398, 399 (Mo.App.1981); Kurtz v. Fischer, 600 S.W.2d 642, 645 (Mo.App.1980). Plaintiff's sole point on appeal, as stated, is that "[t]he trial court erred in finding the value of the business to be $481,750.00 in that such amount was based upon conjecture and speculation and did not take into account inventory, equipment, work in process, cash reserves, or debt on contracts." We are cited to Boling v. Boling, 683 S.W.2d 661 (Mo.App.1984); Oldfield v. Oldfield, 666 S.W.2d 17 (Mo.App.1984), and Moseley v. Moseley, 642 S.W.2d 953 (Mo.App.1982). The plaintiff does not contend that the Brooks Machine and Tooling Company was not marital property; his sole contention is that the business was improperly valued, and he focuses his argument on the goodwill assigned to the Brooks Company.
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