Marriage of Hull, In re

Decision Date21 January 1986
Docket NumberNo. 85-275,85-275
Citation219 Mont. 480,712 P.2d 1317,43 St.Rep. 107
Parties, 54 USLW 2467 In re the MARRIAGE OF Ronald Keith HULL, Petitioner and Appellant, and Jane Ann Hanks Hull, Respondent and Respondent.
CourtMontana Supreme Court

Harrison, Loendorf & Poston, John P. Poston, Helena, for petitioner and appellant.

Morrow, Sedivy & Bennett, Edmund P. Sedivy, Jr., Bozeman, for respondent and respondent.

WEBER, Justice.

In November 1983, the Gallatin County District Court entered a decree of dissolution of the marriage of Ronald K. Hull (husband) and Jane Ann Hanks Hull (wife). In February, 1985, the findings of fact, conclusions of law and judgment were entered with regard to property distribution, maintenance and support. The husband appeals. We affirm in part and reverse and remand in part.

The issues for review are:

1. Did the District Court err in determining that goodwill of husband's sole professional anesthesiology practice is a marital asset subject to property division in a dissolution of marriage?

2. Did the District Court err in setting the value of the goodwill attributable to the husband's anesthesiology practice?

3. Did the District Court abuse its discretion in distributing the marital property without regard to a portion of the debt payable by husband?

The parties were married in 1971. At that time the husband had completed medical school at the University of Kansas and the wife had completed her training as an elementary teacher. During the next few years the husband was completing his residency training in several specialties, ending with anesthesiology. During the same time, the wife did some teaching but was unable to find full time teaching jobs in most places. In 1976, the parties moved to Alaska where the husband practiced private anesthesiology for one year. At that time the parties adopted the first of two children. The wife then became a full time mother. In 1977, the family moved to Bozeman so that the husband could begin the practice of anesthesiology. Since that date the husband has been doing business as a professional corporation, working in a co-operative arrangement with two other anesthesiologists in sharing an office. These three doctors perform anesthesiology in Bozeman Deaconess Hospital on a basis whereby they set up their own schedules and rotate the patients as they require services. Essentially these three have a monopoly on the anesthesiology practice in Bozeman, as the only other person giving anesthetics is a general practitioner who does not work nights. The husband's practice is based in the hospital and he does not follow-up or see patients in an office. The anesthesiologist is normally assigned to a patient by room number and neither the surgeon nor the patient normally select the anesthesiologist.

During 1982, and immediately prior to the parties' divorce, the three anesthesiologists each earned approximately the same annual net income, being something over $130,000. This net income figure includes their respective contributions to their own pension plans. In 1982 the husband received $104,085 net salary and contributed 25% of his gross salary, $26,021.29 to his pension plan. During each of the past five years, the husband's salary has increased.

At the time of the divorce, the husband was 39 and the wife was 37 years of age. Since residing in Montana the wife has pursued a master's degree in counseling and is seeking to obtain certification as a drug and alcohol counselor. She testified that she was interested in obtaining a Ph.D. in clinical psychology and counseling.

During the marriage the parties acquired a substantial amount of property. Because of the nature of the issues, we will set forth the description of the assets and the values fixed by the District Court:

                 NET ASSETS TO WIFE
                Cash value--N.W. Mutual Life
                 Insurance                         $10,122.00
                 Pension profits sharing plan        7,683.15
                 Cash on hand                       15,000.00
                 House                              20,634.00
                 Silver                              7,200.00
                 Dodge car                           6,000.00
                 Furniture                           5,000.00
                 Sapphire ring                         750.00
                 Trailer                             1,300.00
                 Alaska land                        27,500.00
                 Pay mortgage on house              52,216.00
                 Interest in profit sharing plan    53,775.00
                 Gun                                   100.00
                                                  -----------
                   TOTAL                          $212,280.15
                                                  -----------
                Ranch                            $57,339.00
                Heifers                              487.00
                Farm equipment                     1,532.00
                Tools                              1,000.00
                Furniture                          2,000.00
                1977 Subaru                        1,700.00
                Corporation book value           136,410.00
                Pension profit sharing plan       58,775.00
                Cash on hand                       9,090.00
                Equitable policies--cash value     3,872.00
                                                -----------
                  SUBTOTAL                      $272,205.00
                Less mortgage indebtness to be
                 paid by Petitioner (mortgage
                 debt on house distributed to
                 wife)                            52,216.00
                                                -----------
                   TOTAL                        $219,989.00
                                                -----------
                

As pointed out by the District Court, the real bone of contention was the assignment of goodwill to the individually owned corporate practice of the husband. The wife called as her expert witness a CPA who valued husband's professional corporation. He valued the net physical assets at $33,000, which was the figure furnished by the accountant for the husband, so there is no dispute as to that amount. In addition, the wife's CPA assigned a going concern or goodwill value to the professional corporation of $103,410. These two figures together make the $136,410 listed as corporation book value on the District Court list of net assets distributed. Husband contends that no goodwill or going concern value should have been assigned.

I

Did the District Court err in determining that goodwill of husband's sole professional anesthesiology practice is a marital asset subject to property division in a dissolution of marriage?

No Montana cases have specifically addressed the issue of goodwill in a professional medical practice. The District Court set forth a memorandum of authorities upon which it based its conclusion. We substantially agree with the holdings on the part of the District Court. The District Court pointed out that in Cromwell v. Cromwell (1977), 174 Mont. 356, 570 P.2d 1129, this Court held that there must be recognition given to the most valuable asset of the marriage, that being the job, education and training of Mr. Cromwell. At most this could be interpreted as an implication of the recognition of goodwill of a professional practice.

In the 1973 annotation entitled Accountability for Goodwill of Professional Practice in Actions Arising from Divorce or Separation, 52 A.L.R.3d 1344, we find limited authority. Starting in 1956 a few California cases recognized the accountability for goodwill of a professional practice in actions arising from a divorce. On the other hand, Texas refused to recognize goodwill of a medical practice for divorce purposes. However, the annotations subsequent to the original article suggest that a majority of the courts are assigning goodwill to professional practices. The District Court found Matter of Marriage of Fleege (1979), 91 Wash.2d 324, 588 P.2d 1136, to be well-reasoned authority which was adopted by the District Court. In Fleege, the husband was a dentist whose expert testified that he had never known of a dentist selling his practice and including a factor of goodwill. In opposition, the wife produced testimony of two certified public accountants who served clients in medical and dental professions and who testified that the value of a dental practice included a goodwill factor, which had a present value. These CPA's testified that the dentists' net profits exceeded the average practitioner by $50,000 and gave an opinion that the value of the goodwill would be equal to gross receipts over a two or three month period. Additional testimony was given to suggest a total valuation of the practice, counting tangible property and goodwill, of $200,000. In reversing the lower court and remanding the cause for a determination of the value of the goodwill of the dental practice as it existed on the date of dissolution, taking into account the testimony of experts and other factors, the Fleege court made the following statements:

Goodwill is property of an intangible nature and is commonly defined as the expectation of continued public patronage. [cases cited] Among the elements which engender goodwill are continuity of name, location, reputation for honest and fair dealing, and individual talent and ability. [case cited]

... 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.

... 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 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...

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24 cases
  • Prahinski v. Prahinski
    • United States
    • Maryland Court of Appeals
    • September 1, 1988
    ... ... (e) Marital property.--(1) "Marital Property" means the property, however titled, acquired by 1 or both parties during the marriage ... Page 230 ...         (2) "Marital property" does not include property: ...         (i) acquired before the marriage; ... Ct.App.1987); Hanson v. Hanson, 738 S.W.2d 429 (Mo.1987); Taylor v. Taylor, 736 S.W.2d 388 (Mo.1987); In re Marriage of Hull, 219 Mont. 480, 712 P.2d 1317 (1986); Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1 (1983); Hurley v. Hurley, 94 N.M. 641, 615 P.2d 256 (1980), ... ...
  • Endres v. Endres
    • United States
    • South Dakota Supreme Court
    • June 26, 1995
    ... ... The trial court granted a divorce to each party, finding Husband and Wife had equally contributed to the dissolution of the marriage ...         The parties began their marriage in 1961 with few assets. Husband had started farming; he owned four cows and shared some farm ... 786, 424 N.E.2d 421 (1981); Heller v. Heller, 672 S.W.2d 945 (Ky.Ct.App.1984); Hanson v. Hanson, 738 S.W.2d 429 (Mo.1987); In re Marriage of Hull, 219 Mont. 480, 712 P.2d 1317 (1986); Poore v. Poore, 75 N.C.App. 414, 331 S.E.2d 266 (1985); Weaver v. Weaver, 72 N.C.App. 409, 324 S.E.2d 915 ... ...
  • Skrabak v. Skrabak
    • United States
    • Court of Special Appeals of Maryland
    • September 1, 1995
    ... ...         During the family's summer vacation in 1991, Dr. Skrabak talked with his wife about separating. The marriage had suffered from a variety of problems from its inception, none of which are relevant here. Dr. Skrabak left the family home on October 7, 1991 ... Olsen, 125 Idaho 603, 873 P.2d 857, 860 (1994); Clark v. Clark, 782 S.W.2d 56, 60 (Ky.Ct.App.1990); In re Marriage of Hull, 219 Mont. 480, 712 P.2d 1317, 1322 (1986); Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1, 9-10 (1983); Hertz v. Hertz, 99 N.M. 320, 657 P.2d 1169, 1174 ... ...
  • Kafka v. Montana Dept. of Fwp
    • United States
    • Montana Supreme Court
    • December 31, 2008
    ... ... See Section 70-1-104(4), MCA; In re Marriage of Hull, 219 Mont. 480, 484-85, 712 P.2d 1317, 1320-21 (1986). However, this does not necessarily mean that such intangibles can be "taken" in the ... ...
  • Request a trial to view additional results
8 books & journal articles
  • Commonly Used Experts
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2018 Contents
    • August 4, 2018
    ...expert determined the best approach was a market data/sales approach and concluded the value to be only $5,000. In re Marriage of Hull , 712 P.2d 1317 (S. Ct. Mont. 1986), involved the valuation of a medical practice. The court noted that the determination of its value could be reached with......
  • Commonly Used Experts
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2016 Contents
    • August 4, 2016
    ...expert determined the best approach was a market data/ sales approach and concluded the value to be only $5,000. In re Marriage of Hull , 712 P.2d 1317 (S. Ct. Mont. 1986), involved the valuation of a medical practice. The court noted that the determination of its value could be reached wit......
  • Table of Cases
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2015 Contents
    • August 4, 2015
    ...1993), §180 In re Marriage of Battenburg, 28 Cal. App. 4th 1338, 1345, 33 Cal. Rptr. 2d 871 (1994), §444 In re Marriage of Hull , 712 P.2d 1317 (S. Ct. Mont. 1986), §553.4 In re Methyl Tertiary Product Liability Litigation , File No. 1:00-1898, MDL No. 1358 (SAS), No. M21-88 (S.D.N.Y. June ......
  • Commonly Used Experts
    • United States
    • James Publishing Practical Law Books Archive Qualifying & Attacking Expert Witnesses - 2019 Contents
    • August 4, 2019
    ...expert determined the best approach was a market data/sales approach and concluded the value to be only $5,000. In re Marriage of Hull , 712 P.2d 1317 (S. Ct. Mont. 1986), involved the valuation of a medical practice. The court noted that the determination of its value could be reached with......
  • Request a trial to view additional results

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