Nail v. Nail

• Decision Date: 11 February 1972
• Docket Number: No. 17291,17291
• Parties: James B. NAIL, Jr., Appellant, v. Alice J. NAIL, Appellee.
• Court: Texas Court of Appeals

Page 395

477 S.W.2d 395

James B. NAIL, Jr., Appellant, v. Alice J. NAIL, Appellee.

No. 17291.

Court of Civil Appeals of Texas,

Fort Worth.

Feb. 11, 1972.

Rehearing Denied March 10, 1972.

Fillmore, Parish, Martin, Kramer & Fillmore, and Howard L. Martin, Wichita Falls, for appellant.

Friberg, Martin & Richie, and Gene Richie, Wichita Falls, for appellee.

OPINION

BREWSTER, Justice.

In this non-jury divorce case the trial court's judgment, dated August 12, 1971, granted the plaintiff, Mrs. Nail, a divorce and divided the property of the parties.

The defendant, Dr. James B. Nail, Jr., is an M.D., who specializes in opthalmology. He and Mrs. Nail married in 1945 which was several years before he was licensed to practice medicine. He has practiced his profession in Wichita Falls, Texas, since 1956.

The evidence showed and the trial court found that from his medical practice Dr. Nail grossed $82,859.60 in 1970; in 1969 he grossed $83,446.60; in 1968 he grossed $87,350.25; and in 1967 he grossed $69,072.13.

In his findings of fact the court found that the value of the assets of Dr. Nail's medical practice, including all fixtures, furniture, and equipment and the value of the good will that has accrued to the medical practice during the existence of the marriage of the parties was $131,759.64. The court further found that Dr. Nail's earning capacity was $52,000.00 a year and that Mrs. Nail is not trained for employment. The parties have two grown children. The court also found that the total value of the office furniture and equipment the parties accumulated in connection with the medical practice was $735.47 and that there were no accounts receiveable accumulated by the business because the medical practice was operated on a cash basis.

The trial court's conclusion of law No. 3 read in part as follows: '. . . that it is fair and equitable to grant to the Petitioner Alice Jane Nail, the following property: . . . (d) A community interest in the medical practice of James Barry Nail, Jr., in the sum of $40,000.00, which said sum shall be payable at the rate of $400.00 per month for a period of 24 months beginning August 1, 1971, nd continuing until July 1, 1973. Beginning August 1, 1973, the monthly payments of James Barry Nail, Jr. to Alice Jane Nail should be reduced to $300.00 per month and continue thereafter until the total of $40,000.00 shall have been paid by James Barry Nail, Jr . to Alice Jane Nail, or until the said James Barry Nail, Jr. shall cease to practice medicine; . . ..'

The court's conclusion of law No. 4 provided in part as follows: 'I conclude that the Respondent, James Barry Nail, Jr., should be awarded . . . (b) the medical practice that he maintains, including his office furniture, equipment and supplies and all other assets of such medical practice, subject however to the payment to Alice Jane Nail of the sum of $40,000.00 as set out above; . . ..'

In the judgment the court found the value of Mrs. Nail's community interest in the medical practice, 'including the good will accrued thereto' to be $40,000.00, and ordered Dr. Nail to pay that amount to Mrs. Nail at the rate of $400.00 per month for the first 24 months after judgment and thereafter at the rate of $300.00 per month, and such payments were to continue until the entire $40,000.00 was paid off or until Dr. Nail ceased to practice medicine.

Dr. Nail has appealed and he makes no complaint about the court's action in granting the divorce and makes no complaint about the way the court divided the property of the parties other than that part of the division relating to the alleged good will of the medical practice as hereinabove set out.

Dr. Nail urges three points of error on the appeal. They are all based on the proposition that the part of the court's decree that awarded Mrs. Nail $40,000.00 and ordered Dr. Nail to pay her that amount in monthly payments until he had paid it all, or until he ceased to practice medicine, was an order requiring him to pay permanent alimony. Dr. Nail contends that since this part of the decree is an award of permanent alimony that it is against the public policy of the State and therefore void and unenforceable and that the trial court therefore erred in making such award.

During the trial evidence was offered on the question as to whether or not Dr. Nail's medical practice had a good will. Evidence was also offered as to the value of such good will. Based on this evidence the trial court found that the value of the furniture, fixtures and equipment and other assets, including good will, of the medical practice was $131,759.64. Appellant on this appeal does not question the sufficiency of the evidence to support these findings.

The record reflects that the award of the $40,000.00 item was made by the trial court on the basis that Dr. Nail's medical practice had acquired a valuable good will during the long years of the marriage, that this good will was an asset and was community property, and that it should be considered in dividing the property.

We were surprised to find that apparently there has been no divorce case prior to this time appealed in Texas involving the question of whether a professional business that depends on the personal skill, confidence in, and reputation of a particular person can have a good will, and, if so, whether that item should be considered in dividing the property of the parties, and, if so, how a court goes about dividing a good will in such a business.

It has long been established in Texas that an individual's merchandising business can have a good will and that this item of good will is property, even though it is an intangible asset. It can have a value, and is salable. See Gates v. Hooper, 90 Tex. 563, 39 S.W. 1079 (1897); Sanderfur v. Beard, 249 S.W. 274 (San Antonio Tex.Civ.App., 1923, no writ hist.); Howell v. Bowden, 368 S.W.2d 842 (Dallas Tex.Civ.App., 1963, ref., n.r.e.); and Scott v. Doggett, 226 S.W.2d 183 (Amarillo Tex.Civ.App., 1949, ref., n.r.e.).

Judge Hickman said in Texas & P. Ry. Co. v. Mercer, 127 Tex. 220, 90 S.W.2d 557 (Tex.Com.App., 1936) at page 560: 'Good will is property. It may be sold and it may also be damaged. There is no principle of law making any distinction between it and other property with respect to the right of the owner thereof to recover damages for its destruction . . . Good will, though intangible, is an integral part of the business the same as are the physical assets .'

A key determination to be made in deciding this case is whether or not, in Texas, the principles of law above announced relating to the good will of a mercantile business applies also to a business or profession that depends solely on the personal ability, skill, integrity or other personal characteristics of the owner.

Throughout the United States there are presently two lines of decisions on this point. See 38 C.J.S. Good Will § 3, p. 952, and 38 Am.Jur.2d 916, Good Will, Sec. 7. One line of cases hold that good will does not exist in a professional practice or business that depends on the personal skill of and confidence in a particular person, and the other line of cases hold that good will may exist in a professional practice or business founded on personal skill or reputation.

The situation as it now exists throughout the United States on this point is well explained in 24 Am.Jur. 808, Good Will, Sec. 11, wherein the following is said: '. . . it has been held that salable good will can exist only in commercial or trade enterprises and that it cannot arise in a professional business depending upon the personal skill and confidence in a particular person. This view seems traceable to the early and narrow definition given to good will by Lord Eldon. The better doctrine, however, appears to be that good will also exists in a professional practice or in a business which is founded upon personal skill or reputation. Where a person acquires a reputation for skill and learning in a particular profession, as, for instance, in that of a lawyer, a physician, or an editor, he often creates an intangible but valuable property by winning the confidence of his patrons and securing immunity from successful competition for their business, and it would seem to be well settled that this is a species of good will which may be the subject of transfer. The courts have not infrequently adjudicated rights relating to good will in such cases with seemingly no question as to the reality of the existence of this property right.'

We have not been cited to an opinion involving a Texas divorce case wherein this question was before the court, and we have not been able to find such a case.

The only divorce case in any United States Court that we have found dealing with this question is the case of Mueller v. Mueller, 144 Cal.2d 245, 301 P.2d 90 (1956). This case holds that a professional practice may, under certain circumstances, have a transferrable good will attached to it.

On three different occasions Texas courts have had to decide, in cases other than divorce cases, the question of whether or not a professional man can acquire a good will as an asset of his practice or business. Each of those cases involved medical doctors, as does the one here. Each such case held that a professional man, such as a doctor, may acquire good will as an asset of his business. These cases are: Wolff v. Hirschfeld, 23 Tex.Civ.App. 670, 57 S.W. 572 (1900, no writ hist.); Yeakley v. Gaston, 50 Tex.Civ.App. 405, 111 S .W. 768 (1908, no writ hist.); and Randolph v. Graham, 254 S.W. 402 (San Antonio Tex.Civ.App., 1923, writ ref.).

We hold in line with these three cases that a professional man can acquire a good will in connection with his practice or profession and, if such good will does in fact exist, it is an asset and it is property, even though intangible.

The questions of whether or not Dr. Nail had acquired a good will in connection with his medical practice, and...