Marriage of Fortier, In re

• Decision Date: 28 September 1973
• Citation: 34 Cal.App.3d 384,109 Cal.Rptr. 915
• Court: California Court of Appeals Court of Appeals
• Parties: In re the MARRIAGE of Rita G. and John J. FORTIER. Rita G. FORTIER, Appellant, v. John J. FORTIER, Respondent. Civ. 40674.

Page 915

109 Cal.Rptr. 915

34 Cal.App.3d 384

In re the MARRIAGE of Rita G. and John J. FORTIER Rita G. FORTIER, Appellant, v. John J. FORTIER, Respondent.

Civ. 40674.

Court of Appeal, Second District, Division 5, California.

Sept. 28, 1973.

Hearing Denied Nov. 21, 1973.

Jack R. Tyrell, Alhambra, for petitioner and appellant.

Millikan, Montgomery & Olafson by C. E. Millikan, Jr., Pasadena, for defendant and respondent.

STEPHENS, Associate Justice.

This is an appeal from an interlocutory judgment of dissolution of marriage. (Code Civ.Proc., § 904.1, subd. (j).)

In brief, appellant wife and respondent husband were married in Michigan in 1952. At the time of the marriage, Dr. Fortier had just graduated from medical school and was a resident physician in Michigan for approximately one year thereafter. Mrs. Fortier worked as a choral music supervisor in Detroit and then as a public relations personnel employee for American Blower Corporation. They moved to Colorado, where the doctor was a resident doctor at Colorado State Hospital and his spouse worked as a teacher in junior high school, and then in a real estate office. When the couple moved to Springville, California, the doctor had a residency occupation for two years and Mrs. Fortier worked as a switchboard relief operator at the hospital and did some technical typing for the director of the hospital; she also directed a junior youth group for the local church, as well as giving piano lessons. The doctor served two years in the Army Medical Corps and was stationed at the Denver Fitzsimmons Army Hospital. In 1958, the Fortiers returned to California and the doctor entered private practice as an internist in Alhambra, in association with another doctor. Mrs. Fortier worked as a bookkeeper full time in the medical office for a few months and part-time thereafter for some eight years. In about 1965, the associate relationship under which Dr. Fortier had practiced terminated due to the retirement of the other doctor, and at that time Dr. Fortier purchased all of the interest in the equipment as well as the goodwill of his associate. ¹ Dr. Fortier (hereinafter, respondent) thereafter worked at his medical practice until, by a written partnership agreement dated January 17, 1969, he was joined by a Dr. Cifarelli.

On July 14, 1969, Mrs. Fortier (hereinafter, appellant) instituted proceedings for dissolution of marriage. On September 21, 1971, the trial court entered an interlocutory judgment of dissolution which, among other things, awarded to appellant the custody of the couple's three children, ordered respondent to pay certain amounts of spousal and child support, and evaluated and divided the community property. In particular, the trial court made a finding of fact that the goodwill of respondent's medical practice was a community property asset and fixed the value of that goodwill at $10,963.

On appeal, appellant's sole contention is that the trial court used an incorrect method of evaluating the goodwill of respondent's medical practice and as a consequence erroneously undervalued the couple's community property by approximately $284,000, and that there was no evidence to support the judgment as rendered. We disagree.

The trial court explained its method of evaluating the goodwill in its Memorandum of Intended Decision: 'The medical practice involved in this case had good will which is a valuable asset. To the court the value of this asset is its market value; what a willing buyer would pay for it. I cannot believe the goodwill of a medical practice upon divorce means one thing, and upon a sale of the business means another . . .. ( ) In this case the court feels the value of the goodwill was established when Dr. Cifarelli became a partner of (respondent). . . . They dealt at arm's length and agreed on an amount that Dr. Cifarelli would forego for a period of time before he became an equal partner. ² That amount was $10,963 which the court finds to be the value of the goodwill of this business.'

Appellant argues, however, that market value was not the correct method of evaluating the goodwill. Appellant argues that the goodwill should have been measured by any one of the following three different methods employed by her expert witness, one William Eager: (1) if respondent's net yearly income is greater than the net yearly income of like professional practices, then goodwill is: 10 X (respondent's net yearly income--the net yearly income of a like professional practice); (2) goodwill is 4 X (respondent's net yearly income); (3) if respondent's net yearly income is greater than the net yearly income of like professional practices, then goodwill is equivalent to an amount of principal that, when returned at 8% Interest over a period of time equivalent to the actuarial remainder of respondent's professional career, would create monthly returns of principal and interest in an amount equivalent to the difference between respondent's net monthly income and the net monthly income of a like professional practice. Eager testified at trial that his first method showed respondent's goodwill to be $293,000, his second method showed respondent's goodwill to be $290,000, and his third method showed respondent's goodwill to be $300,000. From this, appellant argues that the actual goodwill of respondent's practice is the average of these three figures, $294,333.

In considering appellant's arguments, we note preliminarily that the goodwill of respondent's medical practice was, in fact, community property. (Todd v. Todd, 272 Cal.App.2d 786, 791--794, 78 Cal.Rptr. 131; Golden v. Golden, 270 Cal.App.2d 401, 404--405, 75 Cal.Rptr. 735; Cf. Brawman v. Brawman, 199 Cal.App.2d 876, 877, 882, 19 Cal.Rptr. 106.) The difficulty with each of appellant's methods of evaluating that goodwill, however, is that the future income controls in each method valuing the goodwill. Since the philosophy of the community property system is that a community interest can be acquired only during the time of the marriage, it would then be inconsistent with that philosophy to assign to any community interest the value of the post-marital efforts of either spouse. ³ It must be recognized that the value of the goodwill must exist at the time of the dissolution. That value is separate and apart from the expectation of the spouses' future earnings. As we analyze the determination of the existent value of the goodwill applicable in dissolution of marriage actions, that value must be...