Mocnik v. Mocnik

• Decision Date: 07 July 1992
• Docket Number: No. 72658,72658
• Parties: Jack Johnny MOCNIK, Jr., Appellant/Cross Appellee, v. Barbara Ann MOCNIK, Appellee/Cross Appellant.
• Court: Oklahoma Supreme Court

Page 500

838 P.2d 500

1992 OK 99

Jack Johnny MOCNIK, Jr., Appellant/Cross Appellee, v. Barbara Ann MOCNIK, Appellee/Cross Appellant.

No. 72658.

Supreme Court of Oklahoma.

July 7, 1992.

As Corrected July 9 and 22,

and Aug. 18, 1992.

Appeal from the District Court of Tulsa County; Sharron M. Bubenik, Judge.

Both parties appeal this decree of divorce. Husband urges that goodwill of medical practice is not a divisible marital asset. We review trial courts' award of property division, alimony in lieu of property division, child support, support alimony, and counsel fees. PROPERTY DIVISION, SUPPORT ALIMONY AND ATTORNEY FEES MODIFIED. TRIAL COURT AFFIRMED IN PART AND REVERSED IN PART. REMANDED.

Sam P. Daniel, Jr., Doerner, Stuart, Saunders, Daniel & Anderson, Richard B. Noulles, Gable & Gotwals, Tulsa, for appellant/cross appellee, Jack Johnny Mocnik, Jr.

C. Michael Zacharias, Rineer, Zacharias & Corbitt, Tulsa, for appellee/cross appellant, Barbara Ann Mocnik.

SUMMERS, Justice:

The primary legal question in this appeal is whether the goodwill of a medical practice is a marital asset subject to property division in a divorce. Since the case was tried below we have ruled in Travis v. Travis, 795 P.2d 96 (Okla.1990), that the goodwill of a law practice of a sole practitioner is not a divisible marital asset. We now conclude that the trial court erred in awarding the wife judgment based on an interest in the goodwill of her husband's medical practice because the value of the Husband's interest was determined by the stockholder's agreement. The award for alimony in lieu of property division is accordingly reduced. Upon review of other issues urged on appeal, we increase the award of support alimony, affirm the order for child support, alter one additional aspect of the property division in favor of the wife, reverse and remand on the issue of counsel fees and costs, and otherwise affirm the trial court.

I. FACTS AND PROCEDURAL POSTURE

Barbara and Jack Mocnik were married on May 21, 1971, and separated in 1988. Two children were born of the marriage: Shay in 1979 and Matthew in 1982. During the course of the marriage Jack attended medical school, and then did his internship and radiology residency while on active duty with the Navy. Barbara was employed until Shay was born, and then remained at home. After his service in the Navy Jack joined the Tulsa Radiology Associates, and practiced as a radiologist throughout these proceedings.

On December 21, 1988, a divorce was granted to the parties, and a decision on the balance of the issues was deferred until January 5, 1989, the date of the Decree of Divorce. As to property awarded in kind, according to the figures ascertainable from the trial court's order, the wife was awarded $37,950.00 in joint marital property, and the husband was awarded $43,575.00 in joint marital property. ¹ The trial court separately valued the professional corporation and the husband's interest in the corporation. To arrive at the Husband's interest therein, the trial court used the value of his stock, together with his proportionate ( 1/15) part of the accounts receivable, sums due under a non-competition agreement, and goodwill. From this value, the court awarded to the wife as a property alimony judgment the amount of $111,088.00, to be paid in a lump sum within 120 days or as a monthly payment for sixty months, such payments to include interest.

The award for support alimony was in the amount of $60,000.00, payable over thirty-six months. Child support was set at $2,000.00 per month. The husband was required to maintain medical and dental insurance for the children and he was also ordered to pay one-half of the medical, dental, psychiatric and psychological expenses of the children. ² Both parties appeal from this award. As appellant, Husband urges that the trial court erred in considering the goodwill of the professional corporation to be a divisible asset of the marriage. He also challenges the amount of child support awarded. Wife, as cross-appellant, urges that the value reached by the trial court as to the goodwill was too low. She also asserts that the amount of support alimony and child support is insufficient, and that Husband should have been required to attend counseling with the children. She challenges the court's ruling on certain funds she took at time of separation and the court's failure to recognize an alleged birthday gift. Lastly, she seeks payment of her attorney fees.

II. MOTION TO STRIKE BRIEF

Before reaching the merits of this appeal, we must first address a procedural issue raised by Wife. Wife has filed a motion to strike the brief of Husband for failure to comply with Rule 19 of this Court's Rules. See 12 O.S.1981 Ch. 15, app. 1. Specifically, she urges that the margins and type size are incorrect, and if corrected the brief would exceed the thirty page limit. This Court ordered that the brief be amended to conform with the Rules, and set a date for compliance. Resolution of the motion was deferred for discussion with the merits of the appeal.

Husband filed a brief as required by the order of this Court, and we find that it complies with the requirements of Rule 18 for briefs printed by professional printers. The motion is denied. Meharg v. Eddleman, 183 Okl. 102, 80 P.2d 219, 221 (1938).

III. DIVISION OF ASSETS OF THE PROFESSIONAL CORPORATION

The trial court set a value on the husband's interest in Tulsa Radiology Associates at $203,550.00. This amount included the husband's stock value, a contractual 1/15th share of accounts receivable, the value of sums owed the corporation under a noncompetition agreement and the goodwill of the professional corporation.

At trial, Wife's expert submitted three different methods by which the value of the goodwill of the professional corporation could be valued. ³ One of the methods used as a key figure that amount earned by Husband over and above the average salary of a radiologist. This figure was then "capitalized" to determine the dollar value of the goodwill of the company. Capitalizing is a method of converting a periodic payment, in this particular case the excess earnings per year of $46,000, into an equivalent capital sum or sum in hand. ⁴

The expert stated that these figures were only for the purpose of marital dissolution Husband's expert witness testified that the Stock Purchase Agreement set the value of his share of corporate stock at $9,652.53. The agreement stated that in the event of Husband's termination of employment he would be entitled to that amount, plus a proportionate share of the discounted accounts receivable.

and that a different value would be used for selling the practice. The trial court used capitalized excess earnings to place a value upon Husband's share of goodwill in the corporation. It appears he valued the Husband's share of goodwill at $115,000.00.

In determining the Husband's share of the value of TRA, the court added stock value ($9,653.00), Husband's portion of the discounted accounts receivable ($63,898.00), his portion of the non-competition agreement ($15,000.00) and his portion of the goodwill of the corporation ($115,000.00) to reach a total of $203,550.00. The court then awarded one-half of this amount plus $9,313.00 (apparently a discretionary amount to somewhat equalize the "in kind" property division). The total alimony in lieu of property awarded to Wife amounted to $111,088.00.

In Travis v. Travis, supra, we addressed the question of whether the goodwill of the sole practitioner's law practice was a marital asset. Goodwill has been defined as the "favor or prestige that a business has acquired beyond the mere value of what it sells." Webster's New Collegiate Dictionary 496 (1973); The Oklahoma Statutes define it as, "the expectation of continued public patronage...." 60 O.S.1991 § 315. According to Travis the goodwill value of a business "is the value that results from the probability that old customers will continue to trade with an established concern." Id. at 96 quoting Freeling v. Wood, 361 P.2d 1061, 1063 (Okla.1961). We held in Travis that the law practice of a sole practitioner had no goodwill value because "the reputation of the lawyer cannot be purchased by another seeking to acquire an established practice." Id. at 100. This is especially true when the professional is a sole practitioner.

Although the trend seems to favor the recognition of goodwill as a divisible asset, we pointed out that courts are divided on this issue. Id. at 97 n. 1. Relying on the reasoning of our sister jurisdictions, we noted that goodwill value, if considered an asset divisible in divorce, is particularly difficult to quantify especially in light of the probability that the practitioner could not realize in dollars that goodwill value.

There is a disturbing inequity in compelling a professional practitioner to pay a spouse a share of intangible assets at a judicially determined value that could not be realized by a sale of another method of liquidating value. Hertz v. Hertz, 99 N.M. 320, 657 P.2d 1169 (1983).

Consistent with our holding in Travis, the Pennsylvania Supreme Court in McCabe v. McCabe, 525 Pa. 25, 575 A.2d 87 (1990) held that for all practical purposes, the goodwill of a partnership could not be considered marital property. It pointed out there is no market by which the value of that particular practice may be compared. The court relied on the partnership agreement, and held that the rights of the partners and values of their interests were fixed by that agreement. See also Moebus v. Moebus, 529 So.2d 1163 (Fla.Dist.Ct.App.1988); In re Marriage of Hogeland, 448 N.W.2d 678 (Iowa Ct.App.1989); Sweeney v. Sweeney, 534 A.2d 1290 (Maine 1987); Hertz, supra; Saint-Pierre v. Saint-Pierre, 357 N.W.2d 250 (S.D.1984); Smith v. Smith, 709 S.W.2d 588 (Tenn.Ct.App.1985); Finn v. Finn, 658 S.W.2d 735 (Tex.Ct.App.1983); Johnson v. Johnson, 771 P.2d 696 (Utah Ct.App.198...