Marriage of Fleege, Matter of, No. 45274

CourtUnited States State Supreme Court of Washington
Writing for the CourtROSELLINI; WRIGHT; STAFFORD
Citation588 P.2d 1136,91 Wn.2d 324
Docket NumberNo. 45274
Decision Date04 January 1979
PartiesIn the Matter of the MARRIAGE OF Herbert W. FLEEGE, Respondent, and Elizabeth D. Fleege, Appellant.

Page 324

91 Wn.2d 324
588 P.2d 1136
In the Matter of the MARRIAGE OF Herbert W. FLEEGE, Respondent,
and
Elizabeth D. Fleege, Appellant.
No. 45274.
Supreme Court of Washington, En Banc.
Jan. 4, 1979.

[588 P.2d 1137] Alfieri & Pittle, Ralph D. Pittle, Seattle, for appellant.

Allison & Allison, Daniel Allison, II, Seattle, for respondent.

Page 325

ROSELLINI, Justice.

On this appeal from a decree of marriage dissolution, entered April 13, 1976, error is assigned to the Superior Court's determination that the goodwill of the husband's dental practice was not an asset subject to division as a part of the community property.

The parties, who were both 58 years of age at the time of trial, had been married for approximately 32 years. They have five children, and the appellant, trained as a dietician, has not been gainfully employed during the marriage.

The respondent is a dentist, from whose practice the net profits in 1975 were $106,452.61. At the trial, the appellant presented the testimony of two certified public accountants, both of whom served clients in the medical and dental professions, who testified that the value of the respondent's practice included a goodwill factor, which had a present value. One of these set the value of the practice (evidently including accounts receivable and tangible property) at approximately $200,000. The other gave his opinion that the value of the goodwill would be equal to the gross receipts over a 2- to 3-month period. One of the experts stated that the respondent's net annual profits exceeded those of the average practitioner by approximately $50,000.

[588 P.2d 1138] Challenging this expert testimony, the respondent produced a dentist who declared that he had never known of a dentist selling his practice and including a factor of goodwill amounting to more than a few dollars.

Despite the overwhelming evidence of the existence of an element of goodwill in the respondent's practice, the court refused to include it as an asset subject to distribution. In this the court erred.

Goodwill is property of an intangible nature and is commonly defined as the expectation of continued public patronage. In re Marriage of Lukens, 16 Wash.App. 481, 558 P.2d 279 (1976); In re Marriage of Foster, 42 Cal.App.3d 577, 117 Cal.Rptr. 49 (1974). Among the elements which engender goodwill are continuity of name, location, reputation for honest and fair dealing, and individual talent and

Page 326

ability. In re Estate of Glant, 57 Wash.2d 309, 356 P.2d 707 (1960).

At the time this case was decided in the Superior Court, no appellate court in this state had ruled upon the question whether goodwill can attach to a professional practice, as well as to a commercial business. Subsequently, the well-considered opinion in In re Marriage of Lukens, supra, was published. In that opinion, conflicting arguments which are also presented in this case were analyzed, the authorities examined, and the conclusion reached that goodwill is indeed a factor which has value to a professional person and should be included among the assets distributed upon a marriage dissolution. We approve both the reasoning and the result reached in that case.

As the Court of Appeals pointed out, while the goodwill of a professional practice may not be readily marketable and the determination of its exact value may be difficult, that element may nevertheless be found to exist in a given professional practice. The determination of its value can be reached with the aid of expert testimony and by consideration of such factors as the practitioner's age, health, past earning power, reputation in the community for judgment, skill, and knowledge, and his comparative professional success.

A dentist who has practiced many years and established a good reputation can expect his patients to return to him and to speak of him in a manner that enhances that reputation and encourages others to seek his services. Also, he can expect a large number, if not most, of these patients to accept as their dentist a person to whom he sells his practice. These prospects are a part of goodwill, and they have a real pecuniary value.

The respondent argues that the goodwill of a dental practice is not "true" goodwill, because it cannot be successfully transferred to a purchaser without certain services being performed by the practitioner. These services consist of introductions to the seller's patients and encouragement of patients to accept the buyer as their dentist. He insists

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that the amount purportedly paid for "goodwill" is in fact paid for these services, and represents "future earnings" which are not subject to division as community property.

The testimony of the accountants, both of whom had large numbers of doctors and dentists among their clients, shows, however, that goodwill exists in a going practice, whether or not a sale is in the offing. Documents brought to this court by the respondent indicate that prospective purchasers are interested in the quality of the practice not merely a dentist's willingness to introduce them to patients. They show that subsequent to the entry of the decree below, the respondent attempted to sell his practice through ads in professional periodicals. Numerous similar advertisements appeared in these journals. Each describes the thing for sale as a dental "practice." Only one or two contain an offer to stay and introduce the purchaser to the seller's patients. But assuming such services are necessary, they are not the thing sold as "goodwill," but simply the means of transferring it.

In any event, the important consideration in this marriage dissolution case is not whether the goodwill of the practice could be sold without the personal services [588 P.2d 1139] of the respondent to effectuate its transfer, but whether it has a value to him. This fact is well brought out in In re Marriage of Foster, supra, where it was conceded that the goodwill of the appellant's medical practice was community property subject to distribution, the only question being whether the proper method of evaluation had been used in the lower court. There had been no testimony as to what a willing buyer would pay or a willing seller would accept for the goodwill of the practice. However, a certified public accountant, declared by the court to be a proper expert in the matter, had given his opinion of the value of the goodwill in the doctor's medical practice. In sustaining a judgment adopting that value, the California appellate court said:

The value of community goodwill is not necessarily the specified amount of money that a willing buyer would

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pay for such goodwill. In view of exigencies that are ordinarily attendant (upon) a marriage dissolution the amount obtainable in the marketplace might well be less than the true value of the goodwill. Community goodwill is a portion of the community value of the professional practice as a going concern on the date of the dissolution of the marriage. As observed in Golden (V. Golden, 270 Cal.App.2d 401, 75 Cal.Rptr. 735 (1969)), ". . . in a matrimonial matter, the practice of the sole practitioner husband will continue, with the same intangible value as it had during the marriage. Under the principles of community property law, the wife, by virtue of her position of wife, made to that value the same contribution as does a wife to any of the husband's earnings and accumulations during marriage. She is as much entitled to be recompensed for that contribution as if it were represented by the increased value of stock in a family business." (270 Cal.App.2d 401, 405, 75 Cal.Rptr. 735.)

(Footnote omitted.) In re Marriage of Foster, supra, 42 Cal.App.3d at 584, 117 Cal.Rptr. at 53.

The respondent's ads in professional journals proclaimed that his practice grossed over $225,000 per year, a fact which would have been of no interest to a prospective buyer if all that was being purchased was the respondent's equipment and accounts receivable (the only aspects of the practice to which the trial court attributed value). This and other advertisements appearing in the journals constitute convincing evidence that there is a market for the sale of dental practices, and that such practices include more than equipment and accounts receivable.

The respondent sold his practice to his son within a year after the decree was entered, thus relieving himself of the obligation to make support payments under the decree. The purchase price was $80,000, which was approximately $32,000 more than the value of the equipment and accounts receivable which was found by the trial court. Furthermore, the accounts receivable had been reduced by $5,000...

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56 practice notes
  • Endres v. Endres, No. 18812
    • United States
    • Supreme Court of South Dakota
    • June 26, 1995
    ...(overruled, on other grounds by Ellsworth v. Ellsworth, 97 N.M. 133, 637 P.2d 564 (1981)); In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979). See also Annot., 52 A.L.R.3d 1344 (1973); 76 A.L.R.4th 125 (1990); 79 A.L.R.4th 171 (1990); 24 Am.Jur.2d Divorce and Separation § 899 So......
  • Washburn v. Washburn, Nos. 49309-0
    • United States
    • United States State Supreme Court of Washington
    • February 16, 1984
    ...has a value and should be included among the assets distributed upon a marriage dissolution. In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979); In re Marriage of Kaplan, 23 Wash.App. 503, 597 P.2d 439 (1979); In re Marriage of Freedman, 35 Wash.App. 49, 665 P.2d 902, rev. denie......
  • Prahinski v. Prahinski, No. 1187
    • United States
    • Court of Special Appeals of Maryland
    • September 1, 1987
    ...Goger v. Goger, 27 Or.App. 729, 557 P.2d 46 (1976); Nail v. Nail, 486 S.W.2d 761 (Tex.1972); In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979) (en banc ); Holbrook v. Holbrook, 103 Wis.2d 327, 309 N.W.2d 343 (1981). The specific issue of the professional goodwill of an attorney......
  • Sorensen v. Sorensen, No. 870102-CA
    • United States
    • Court of Appeals of Utah
    • February 10, 1989
    ...Gardner, the Utah Supreme Court relied on Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1 (1983), and In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979), to support its conclusion that the goodwill of a professional corporation is subject to distribution in a divorce proceeding. See Gar......
  • Request a trial to view additional results
56 cases
  • Endres v. Endres, No. 18812
    • United States
    • Supreme Court of South Dakota
    • June 26, 1995
    ...(overruled, on other grounds by Ellsworth v. Ellsworth, 97 N.M. 133, 637 P.2d 564 (1981)); In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979). See also Annot., 52 A.L.R.3d 1344 (1973); 76 A.L.R.4th 125 (1990); 79 A.L.R.4th 171 (1990); 24 Am.Jur.2d Divorce and Separation § 899 So......
  • Washburn v. Washburn, Nos. 49309-0
    • United States
    • United States State Supreme Court of Washington
    • February 16, 1984
    ...has a value and should be included among the assets distributed upon a marriage dissolution. In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979); In re Marriage of Kaplan, 23 Wash.App. 503, 597 P.2d 439 (1979); In re Marriage of Freedman, 35 Wash.App. 49, 665 P.2d 902, rev. denie......
  • Prahinski v. Prahinski, No. 1187
    • United States
    • Court of Special Appeals of Maryland
    • September 1, 1987
    ...Goger v. Goger, 27 Or.App. 729, 557 P.2d 46 (1976); Nail v. Nail, 486 S.W.2d 761 (Tex.1972); In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979) (en banc ); Holbrook v. Holbrook, 103 Wis.2d 327, 309 N.W.2d 343 (1981). The specific issue of the professional goodwill of an attorney......
  • Sorensen v. Sorensen, No. 870102-CA
    • United States
    • Court of Appeals of Utah
    • February 10, 1989
    ...Gardner, the Utah Supreme Court relied on Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1 (1983), and In re Marriage of Fleege, 91 Wash.2d 324, 588 P.2d 1136 (1979), to support its conclusion that the goodwill of a professional corporation is subject to distribution in a divorce proceeding. See Gar......
  • Request a trial to view additional results

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