Marriage of Foster, In re

CourtCalifornia Court of Appeals
Writing for the CourtMOLINARI
Citation42 Cal.App.3d 577,117 Cal.Rptr. 49
PartiesIn re the MARRIAGE OF Iris Ann and William Theodore FOSTER. Iris Ann FOSTER, Respondent, v. William Theodore FOSTER, Appellant. Civ. 34078.
Decision Date22 October 1974

Page 49

117 Cal.Rptr. 49
42 Cal.App.3d 577
In re the MARRIAGE OF Iris Ann and William Theodore FOSTER.
Iris Ann FOSTER, Respondent,
v.
William Theodore FOSTER, Appellant.
Civ. 34078.
Court of Appeal, First District, Division 1, California.
Oct. 22, 1974.
Rehearing Denied Nov. 14, 1974.
Hearing Denied Dec. 18, 1974.

Page 50

[42 Cal.App.3d 579] Rawles, Golden, Hinkle & Finnegan by John J. Golden, Ukiah, for respondent.

Barry Wood, Ukiah, for appellant.

MOLINARI, Presiding Justice.

In this dissolution of marriage proceeding the primary question presented on appeal is whether the trial court used a proper method of evaluating the goodwill attributable to appellant's medical practice. It is conceded by appellant that any goodwill attributable to his medical[42 Cal.App.3d 580] practice is community property. 1 A determination by us that a proper evaluation method was used by the trial court requires that we decide whether the evidence is sufficient to support the lower court's evaluation.

Page 51

Commencing in August 1966 appellant became associated with Dr. Smalley in a medical practice in Willits, California, at a compensation which included a monthly salary of $1,750 and an additional sum of $100 per month for car expense. This association continued for approximately nine months when appellant and Dr. Smalley formed a partnership for the practice of general medicine. On January 1, 1971, the partnership was incorporated as the 'Willits Medical Group.' The corporation was dissolved in August 1971 and Dr. Smalley and appellant went their separate ways, each to pursue an individual medical practice in Willits. On June 1, 1972, appellant opened a new office location. It contained 3,500 square feet occupied by four examination rooms, one baby room, one minor surgery room, one physical therapy room, one consultation room, one waiting room and a visitor's office. Appellant regularly employed four persons and worked between 50 and 60 hours per week. He made hospital calls every day and sometimes twice a day.

The testimony concerning the value of the goodwill of the medical practice was conflicting. Donald Heller, an accountant whose qualifications as an expert were stipulated to, testified that he had examined appellant's financial records and that in his opinion the value of the goodwill was $27,000. On direct examination Heller was asked to explain 'some of the ways available to determine the fair value of goodwill of a medical practitioner.' Heller stated that 'One way is to take the net income for the year and subtract from that what a comparable employer (sic) would have as a salary in a comparable situation, and take that difference, and multiply that by a factor anywhere from, one year factor of anywhere from two to ten.' He testified further that 'You can take the net earnings of the business, one year's net earnings of the business. You can take two years net earnings of the business. You can take three years net earnings of the business. You can take three months charges to accounts receivable. You can take three months receipts on accounts receivable.'

Heller testified further that there is no definite method by which the value of goodwill can be determined and that it is 'always just somebody's [42 Cal.App.3d 581] opinion.' When queried as to how he arrived at the figure of $27,000 he stated he applied 'these methods' and took into consideration other factors such as the facts that Willits is a small town and appellant's office was near a hospital. Finally, he stated as follows: 'Mathematically I took the approximation of three months received on account, latest three months that I had, because some of the other ways I felt were resulted in a figure that was too high.'

On cross-examination Heller was asked what he meant by 'goodwill.' He replied: 'Goodwill is value that somebody has built up. . . . it is part of the business; it is separate from the accounts receivable, and is in addition thereto.' When asked if he was representing to the court that appellant could find a buyer who would pay $27,000 in addition to the other assets, Heller said 'not necessarily.' He explained that if appellant continued in his practice, his business had a value of $27,000 in excess of tangible items, but that it depended on how long appellant let the practice, 'sit,' whether he abandoned it, or whether he passed away. He said he had no opinion as to whether appellant could obtain $27,000 for goodwill from a buyer, but stated he would receive an amount for goodwill if he sold the practice. Heller reiterated that the $27,000 valuation for goodwill did not mean that appellant could obtain that sum by selling the medical practice and that he had no opinion as to the amount of money that could be obtained for goodwill upon a sale.

Appellant testified that the goodwill of his medical practice had no value as of July 31, 1972, the date that the parties separated. The trial court found that as of this date the goodwill of appellant's medical practice had a value of $27,000.

Page 52

The specific issues tendered on this appeal are whether a proper method of evaluating goodwill was used by Heller and whether the evidence is sufficient to support a finding that the value of the goodwill of appellant's medical practice was the sum of $27,000.

In considering these issues we first observe that the parties apparently concede that a medical practice has a goodwill and that such goodwill has a value. The proceedings below were tried on the theory that appellant's medical practice had a goodwill and the sole issue with respect to this aspect of the case was confined to whether the goodwill of appellant's medical practice had a value, and, if so, what that value was.

'The 'good will' of a business is the expectation of continued public patronage.' (Bus. & Prof.Code, § 14100.) The following is a more complete definition:...

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67 practice notes
  • Community Redevelopment Agency v. Abrams
    • United States
    • United States State Supreme Court (California)
    • December 29, 1975
    ...829), business affairs (see Smith v. Bull (1958) 50 Cal.2d 294, 325 P.2d 463), marital dissolution (see In Re Marriage of Foster (1974) 42 Cal.App.3d 577, 117 Cal.Rptr. 49), and probate (see Rankin v. Newman (1896) 114 Cal. 635, 46 P. 742); and that it is taxable as such (Cal.Const., art. X......
  • In re Marriage of Ackerman, No. G034582.
    • United States
    • California Court of Appeals
    • December 27, 2006
    ...calculation of goodwill. We disagree. No rigid rule applies for determining the value of goodwill. (In re Marriage of Foster (1974) 42 Cal.App.3d 577, 583, 117 Cal.Rptr. 49.) Rather, it "may be measured by `any legitimate method of evaluation that measures present value by taking into accou......
  • Redevelopment Agency of San Diego v. Mesdaq, No. D047927.
    • United States
    • California Court of Appeals
    • August 31, 2007
    ...including those with liquor licenses, introduced further speculation into the calculations.14 (See In re Marriage of Foster (1974) 42 Cal.App.3d 577, 584, 117 Cal. Rptr. 49 ["a proper means of arriving at the value of ... goodwill contemplates any legitimate method of evaluation that measur......
  • Marvin v. Marvin
    • United States
    • United States State Supreme Court (California)
    • December 27, 1976
    ...between nonmarital partners in factual settings essentially indistinguishable from the present case. (In re Marriage of Foster (1974) 42 Cal.App.3d 577, 117 Cal.Rptr. 49; Weak v. Weak, supra, 202 Cal.App.2d 632, 639, 21 Cal.Rptr. 9; Ferguson v. Schuenemann (1959) 167 Cal.App.2d 413, 334 P.2......
  • Request a trial to view additional results
67 cases
  • Community Redevelopment Agency v. Abrams
    • United States
    • United States State Supreme Court (California)
    • December 29, 1975
    ...829), business affairs (see Smith v. Bull (1958) 50 Cal.2d 294, 325 P.2d 463), marital dissolution (see In Re Marriage of Foster (1974) 42 Cal.App.3d 577, 117 Cal.Rptr. 49), and probate (see Rankin v. Newman (1896) 114 Cal. 635, 46 P. 742); and that it is taxable as such (Cal.Const., art. X......
  • In re Marriage of Ackerman, No. G034582.
    • United States
    • California Court of Appeals
    • December 27, 2006
    ...calculation of goodwill. We disagree. No rigid rule applies for determining the value of goodwill. (In re Marriage of Foster (1974) 42 Cal.App.3d 577, 583, 117 Cal.Rptr. 49.) Rather, it "may be measured by `any legitimate method of evaluation that measures present value by taking into accou......
  • Redevelopment Agency of San Diego v. Mesdaq, No. D047927.
    • United States
    • California Court of Appeals
    • August 31, 2007
    ...including those with liquor licenses, introduced further speculation into the calculations.14 (See In re Marriage of Foster (1974) 42 Cal.App.3d 577, 584, 117 Cal. Rptr. 49 ["a proper means of arriving at the value of ... goodwill contemplates any legitimate method of evaluation that measur......
  • Marvin v. Marvin
    • United States
    • United States State Supreme Court (California)
    • December 27, 1976
    ...between nonmarital partners in factual settings essentially indistinguishable from the present case. (In re Marriage of Foster (1974) 42 Cal.App.3d 577, 117 Cal.Rptr. 49; Weak v. Weak, supra, 202 Cal.App.2d 632, 639, 21 Cal.Rptr. 9; Ferguson v. Schuenemann (1959) 167 Cal.App.2d 413, 334 P.2......
  • Request a trial to view additional results

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