Marriage of Lukens, In re

Citation16 Wn.App. 481,558 P.2d 279
Decision Date06 December 1976
Docket NumberNo. 1801--II,1801--II
PartiesIn re the MARRIAGE OF R. M. LUKENS, Petitioner, and D. L. Lukens, Respondent.
CourtWashington Court of Appeals

James H. Morton, Ken Fielding, Bonneville, Viert & Morton, Tacoma, for appellant.

Edward M. Lane, Johnson, Lane & Gallagher, Tacoma, for respondent.

REED, Judge.

On March 14, 1975, Roberta M. Lukens was granted a dissolution of her marriage to Dr. David L. Lukens. Dr. Lukens appeals from those portions of the Pierce County decree that pertain to: (1) the inclusion of an intangible element of professional goodwill as an asset of his medical practice; and (2) the valuation and division of this intangible as part of the property distribution. We affirm.

The parties were married in August 1965, at which time Mrs. Lukens was teaching school and Dr. Lukens was entering his final year of osteopathic school in Philadelphia. Upon completion of his education Dr. Lukens commenced a year's internship in Grand Rapids, Michigan, and Mrs. Lukens secured employment as personnel manager in a department store. In 1967 the Lukens moved to Tacoma, where they temporarily resided with her parents. Dr. Lukens obtained his license to practice in December of 1967 and immediately associated with another osteopath under a salary-bonus arrangement. Mrs. Lukens resumed school teaching in September of 1968 and remained with the University Place School District until June 1970. In 1972 Dr. Lukens established his own practice, which he still maintained and operated at the time of the dissolution. The new practice was financed with a loan, which was repaid in 1973 by withdrawing $21,000 from the parties' joint savings account. Mrs. Lukens also participated in the organization of the new practice: she maintained the personnel records, established office procedures, including a bookkeeping system, hired the office workers, and aided in the design of the office. She continued to help with the office administration until she filed for a dissolution in 1974.

Dr. Lukens enjoys a large clientele and his practice has been very successful, averaging over $50,000 net income per year. He employs a registered nurse, a full-time secretary-receptionist, and a part-time office worker. The trial court found that his practice consists of physical assets, including an X-ray machine valued at $16,000, accounts receivable valued at $33,600, and cash in the amount of $6,200. The trial court also found an element of professional goodwill and valued it at $60,000, bringing the total worth of his practice to $115,800. It is the $60,000 item that is the subject of this appeal.

Dr. Lukens contends that professional goodwill has no market value and that it is therefore not subject to disposition in a dissolution proceeding. The questions presented in this appeal require consideration of the nature of goodwill, and an examination of the means by which goodwill contributes to the economic profits of the professional practice.

Goodwill is property of an intangible nature and is commonly defined as the expectation of continued public patronage. In re Marriage of Foster, 42 Cal.App.3d 577, 117 Cal.Rptr. 49 (1974). Justice Story, in an oft-quoted definition, characterized goodwill as

a benefit or advantage 'which is acquired by an establishment beyond the mere value of the capital, stock, funds or property employed therein, in consequence of the general public patronage and encouragement, which it receives from constant or habitual customers on account of its local position, or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices'.

J. Crane and A. Bromberg, Law of Partnership § 84 (1968), quoting from J. Story, Partnership § 99 (3d ed. 1850). See also 14 Williston on Contracts § 1640 at 116 (3d ed. W. Jaeger 1972); In re Glant's Estate, 57 Wash.2d 309, 356 P.2d 707 (1960); Cooper & Co. v. Anchor Sec. Co., 9 Wash.2d 45, 113 P.2d 845 (1941); Stanton v. Zercher, 101 Wash. 383, 172 P. 559 (1918).

Goodwill is most often associated with commercial ventures. Nevertheless, it is recognized that the practice of an attorney, physician, or other professional person may include such an element, even though the goodwill in such instances is personal in nature and not a readily marketable commodity. See E.g. 6A A. Corbin, Contracts § 1393 (1962); Lockhart v. Lockhart, 145 Wash. 210, 259 P. 385 (1927); In re Marriage of Lopez, 38 Cal.App.3d 93, 113 Cal.Rptr. 58 (1974); Golden v. Golden, 270 Cal.App.2d 401, 75 Cal.Rptr. 735 (1969). Factors contributing to professional goodwill include the practitioner's age, health, past earning power, reputation in the community for judgment, skill, and knowledge, and his comparative professional success. In re Marriage of Lopez, supra, 38 Cal.App.3d at 68, 113 Cal.Rptr. 58.

The question of whether professional goodwill is an asset that is properly before the court in a dissolution proceeding has received limited discussion. In Nail v. Nail, 486 S.W.2d 761, 52 A.L.R.3d 1338 (Tex.1972), it was recognized that professional goodwill is not fixed or localized, but rather attaches to the person of the professional man or woman as a result of confidence in his or her skill and ability. Nail found that goodwill does not possess value or constitute an asset separate and apart from the professional and his ability to practice his profession, and that in the event of his death or retirement, it would be extinguished. The texas court went on to conclude that the goodwill of a medical practitioner was an expectancy wholly dependent upon the continuation of existing circumstances, that it was without value because there was no assurance it would prove beneficial in the future, and that it was not property subject to division under a divorce decree. Nail v. Nail, supra at 764.

A different line of authority has developed in California. In In re Marriage of Foster, supra, the court did not adopt the rationale of Nail, but instead focused on the fact that subsequent to a marriage dissolution the professional practice continues to benefit from the same goodwill that it possessed during the marriage. Recognizing that the goodwill remains intact and is not affected by a marriage dissolution, the court found that it was an asset whose value should be accounted for in the property division. See also, In re Marriage of Lopez, supra; Golden v. Golden, supra.

In the instant case, Dr. Lukens takes the position adopted in Nail and argues that as a sole practitioner any goodwill associated with his practice is personal, unmarketable, and without value. He emphasizes the personal nature of his goodwill by pointing out that all income produced in his practice is derived solely from his individual labor, and that if he should cease to practice, his goodwill will not generate any income on its own.

While we do not disagree with the doctor's argument that his goodwill is not readily salable, we do not think it follows a fortiori that his goodwill is without value. The fallacy of Dr. Luken's argument is demonstrated by resort to common experience. The recently graduated young professional who goes into business for himself may reasonably expect the initial years of his practice to be less profitable, this expectation being...

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  • Papin v. Papin, Docket No. 45277
    • United States
    • Idaho Supreme Court
    • December 20, 2019
    ...future earnings. See In re marriage of Bookout , 833 P.2d 800, 804 (Colo. App. 1991), citing In re Marriage of Lukens [16 Wash.App. 481], 558 P.2d 279 (Wash. App. 1976) ; Dugan v. Dugan [92 N.J. 423], 457 A.2d 1 (N.J. 1983) (other citation omitted); see also In re Marriage of Hall [103 Wash......
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