Schmidt v. Schmidt

• Court: Florida District Court of Appeals
• Writing for the Court: STEVENSON
• Citation: Schmidt v. Schmidt, 120 So.3d 31 (Fla. App. 2013)
• Decision Date: 30 August 2013
• Docket Number: No. 4D11–3379.,4D11–3379.
• Parties: Brian SCHMIDT, Appellant, v. Deborah SCHMIDT, Appellee.

120 So.3d 31

Brian SCHMIDT, Appellant,

v.Deborah SCHMIDT, Appellee.

No. 4D11–3379.

District Court of Appeal of Florida, Fourth District.

July 10, 2013.

Rehearing Denied Aug. 30, 2013.

Thomas E. Warner and Dean A. Morande of Carlton Fields, P.A., West Palm Beach, for appellant.

Martin L. Haines, III, of Martin L. Haines, III, Chartered, Lake Park, for appellee.

STEVENSON, J.

The instant appeal arises out of a final judgment of dissolution ending the nearly thirty-year marriage of Brian and Deborah Schmidt. The final judgment distributed nearly $6 million in assets to the husband, nearly $850,000 in assets to the wife, and requires the husband to pay the wife an equalizing payment of approximately $2.5 million. The assets awarded to the husband include the husband's retail optical business, which the trial court valued at $2,520,562 for purposes of equitable distribution. The judgment requires the payment of $25,000 per month in alimony and $3,192 per month in child support for the parties' adult, disabled daughter, $2,000 of which is to be paid into a trust to be established for the benefit of the daughter. In this appeal and cross-appeal, both parties claim there are errors in the judgment. We agree. The most significant of the errors concern the valuation of the husband's business and the alimony award. Remand is required to address these issues and several others.

Valuation of the Husband's Business

Enterprise goodwill, defined as the value of a business “which exceeds its tangible assets” and represents “the tendency of clients/patients to return to and recommend the practice irrespective of the reputation of the individual practitioner,” is a marital asset subject to equitable distribution. Thompson v. Thompson, 576 So.2d 267, 269 (Fla.1991). Personal or professional goodwill attributable to the skill, reputation, and continued participation of an individual is not a marital asset. See id. at 270 (explaining “ ‘[a]ny value which attaches to the entity solely as a result of personal goodwill represents nothing more than probable future earning capacity, which ... is not a proper consideration in dividing marital property’ ”) (quoting Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851, 858 (1986)). Thus, the value of personal or professional goodwill must be excluded when assigning a value to a business for purposes of equitable distribution.

When valuing the enterprise goodwill of a business, the necessity of a covenant not to compete is significant as it signals the existence of personal goodwill, which cannot be included in determining the value assigned to the business for purposes of equitable distribution. Walton v. Walton, 657 So.2d 1214 (Fla. 4th DCA 1995), and Held v. Held, 912 So.2d 637 (Fla. 4th DCA 2005), illustrate the point. In Walton, the trial court was faced with the task of valuing the husband's accounting practice. 657 So.2d at 1214–15. The evidence established that it was the husband's name on the door, the husband who conducted the majority of client conferences, and the husband who was responsible for bringing clients to the practice. Despite such testimony, the wife's expert opined the practice had enterprise goodwill valued at $47,250. The wife's expert admitted, though, that the business could not be sold without an accompanying covenant not to compete. The trial court accepted the wife's expert's valuation for purposes of equitable distribution. This court reversed, finding that “[t]he most telling evidence of a lack of any institutional goodwill was the wife's expert's testimony that no one would buy the practice without a noncompete clause.” Id. at 1216. “If the business only has value over and above its assets if the husband refrains from competing within the area that he has traditionally worked, then it is clear that the value is attributable to the personal reputation of the husband.” Id.

Held involved the valuation of the husband's insurance agency. 912 So.2d at 638. The husband specialized in high-risk policies and, at the time of the hearing, the agency had about sixty accounts that generated large commissions. The parties stipulated to the adjusted book value of the agency, but disagreed as to the existence of enterprise goodwill. The wife's expert calculated enterprise goodwill by resort to sales data, but admitted he did not know whether these sales required the seller's continued involvement in the business and/or execution of non-compete or non-piracy agreements. In valuing the agency's enterprise goodwill, the trial court relied upon the testimony of the wife's expert and predicated the value on the assumption that the husband would execute a non-solicitation/non-piracy agreement precluding him from doing business with the agency's existing customers. This court reversed that valuation, finding that, for purposes of separating enterprise goodwill from professional goodwill, there was no distinction between a non-compete agreement and a non-piracy agreement and that the trial court's valuation inserted into the enterprise goodwill an aspect of the husband's personal goodwill, i.e., the value of the husband's personal relationship with the sixty clients. Id. at 640–41.

Here, the trial court accepted the testimony of the wife's expert in valuing the business. According to the wife's expert, the business had a total fair market value of $3,519,519. The expert testified that $974,199 of this figure represented personal goodwill attributable to the husband and that, after deducting personal goodwill and the husband's premarital interests, the business had a value of $2,520,562 for purposes of equitable distribution. The expert expressly testified, however, that this $2,520,562 value assumed and required that the husband execute both a non-compete and some type of transitional consulting agreement. And, when pressed, the expert testified he had not performed an analysis as to the value of the business were the husband not to sign a non-compete. Because the $2,520,562 value requires execution of a non-compete agreement, it is clear that such valuation still includes a personal goodwill component. This personal goodwill must be excised from the value assigned to the business for purposes of equitable distribution. We thus reverse the judgment's valuation of the business and remand for further proceedings.

Alimony

The trial court awarded $25,000 per month in alimony, finding this was a 29–year marriage; the wife had raised the couple's children and, by agreement of the parties, had not worked outside the home; and, the parties had lived a lavish lifestyle, with the husband earning $100,000 per month. The court rejected “portions” of the wife's expert's analysis and “portions” of the husband's expert's analysis. There were no specific factual findings supporting the $25,000 figure.

The wife's expert testified the wife's monthly needs were $18,934, requiring an award of $29,129 after accounting for taxes. The $18,934 assumed continuation of expenses associated with the wife's continued residence in the former marital home; included $3,115 per month for home owners' insurance, although the parties owned the home and had not carried such insurance for years; and included $786 allocated to the wife as her half of the annual cash surplus estimated by the wife's expert. According to the husband's expert, the wife's “needs” amounted to approximately $9,000 per month. This amount excluded the housing costs associated with the marital residence.

The $25,000 award is clearly more in line with the wife's expert's analysis but, given the findings in the judgment, the award is not supported by the record. The wife's expert's analysis included in excess of $3,000 per month for homeowners' insurance the parties had not carried for years. It also included the significantexpenses associated with the upkeep of the marital home. The final judgment, though, required that the husband pay these expenses pending the sale of the home. Additionally, the wife's expert's “needs” analysis included $786 in annual cash surplus. Such amount may not be deemed a “need” of the wife as alimony may not include a savings component. See Rosecan v. Springer, 985 So.2d 607, 610 (Fla. 4th DCA 2008). When these amounts are excluded, as they...