Spheeris v. Spheeris
| Decision Date | 29 December 1967 |
| Citation | 155 N.W.2d 130,37 Wis.2d 497 |
| Parties | Elene SPHEERIS, Respondent, v. Andrew J. SPHEERIS, Appellant. |
| Court | Wisconsin Supreme Court |
Maurice Weinstein, Milwaukee, for appellant.
Samuel Goldenberg, Milwaukee, for respondent.
Five issues are raised on the principal appeal:
1. Did the trial court incorrectly determine the defendant's net worth?
2. Is the $97,000 award to the plaintiff fair and equitable?
3. Did the trial court err in ordering the defendant to pay plaintiff's attorneys' fees, costs and disbursements of the action, and medical expenses?
4. Did the court err in specifically awarding the plaintiff certain real estate as a part of the $97,000 property division?
5. Did the court err in ordering the defendant to pay certain cash sums as a part of the property division?
These issues will be considered seriatim.
This court's standards when reviewing the findings of a trial court in a divorce action were stated in Merten v. National Manufacturers Bank of Neenah 1 as follows:
Net Worth.
The trial court found that the defendant had a net worth of $231,250 on May 31, 1964, consisting of:
The defendant claims that the computation of his net worth is erroneous on two grounds. One, that the amount of $25,000 representing the good will of the Spheeris Merchandise Corporation should not have been included; and two, that the court improperly excluded $42,919.22 in liabilities.
Legal writers have had great difficulty in defining the concept of 'good will.' 2 In its broadest sense the intangible asset called good will may be said to be reputation; 3 however, a better description would probably be that element of value 'which inheres in the fixed and favorable consideration of customers arising from an established and well-conducted business.' 4
No rigid and unvarying rule for the determination of the value of good will has been laid down by the courts; therefore, each case must be determined on its own facts and circumstances. 5
For purposes of its own analysis the trial court made its own appropriate observations on the concept of good will. The trial court stated:
Spheeris Merchandise Corporation is a retail discount store located at 72nd and Capitol Drive in Milwaukee. The court found that the corporation had good will valued at $50,000 and that the defendant's share of the good will was $25,000.
During the trial, Howard Volz, a certified public accountant, testified on plaintiff's behalf. It was his opinion that the Spheeris Merchandise Corporation had good will valued at $52,127.96. William Brauer, a real estate broker and appraiser, testified on defendant's behalf that the corporation had no good will.
In situations such as this, it is the duty of the trier of fact to determine the credibility of witnesses and resolve the conflicting testimony. 6 Defendant claims that Mr. Volz's testimony was incompetent and should not have been considered by the trial court. Volz's opinion was grounded on one of the formulas for the computation of good will set forth by H. A. Finney, a leading authority on accounting. 7
Initially, he determined that the average annual gross income of the Spheeris Merchandise Corporation over its three-year existence was $22,082.84. (This amount is not disputed.) He then ascertained the corporation's total capital to be $72,406.80. (This amount represented the total of the invested capital and the accumulated earnings and is also not in dispute.) Volz estimated that 12 1/2 percent represented a fair rate of return on the total capital, which percentage of the total capital is $9,050.85; therefore, the corporation produced excess profits of $13,031.99. The excess profits were capitalized at 25 percent (i.e., multiplied by four), thereby giving the $52,127.96 sum.
Defendant attacks the trial court's determination as to good will principally on the ground that the only way to establish 'good will' is through a purchase price agreed upon in a voluntary arm's length transaction. It is true that the best indicator of good will would be such a purchase price. However, there is no authority in Wisconsin that would either proscribe or preclude the use of mathematical computations to determine the value of good will. Actually, the employment of such mathematical formulas in determining good will appears to be widespread. 8
Formulas for determining the value of good will are merely standards or guides, and are not intended to set an exact amount. As stated by the trial court:
Assuming that the trial court was correct in giving considerable weight to the testimony of Mr. Volz in which he valued the good will, such computation was nevertheless based on one incorrect factor. Mr. Volz used the undisputed average yearly income before taxes in his computations. This amount was $22,082.84. The yearly income after taxes was $14,542.27. Had Volz used the after-taxes figure and kept the other components constant, the good will would have been $21,965.68 of which $10,982.84 would represent the defendant's share.
We think that in determining average annual income preliminary to the computation of good will it is correct to employ income figures after taxes, not before. This is the precise formula endorsed for federal income tax purposes. 9
Because the finding of the trial court as to good will is based on the opinion of Mr. Volz in which his computation of good will was, in turn, predicated on determining average annual income from the income figure before taxes rather than after, we conclude that the trial court's finding in this respect was erroneous. We remand to the trial court with directions to make a new determination of good will on the basis of the proper income factor.
The defendant also contends that when it determined the defendant's net worth the trial court erroneously excluded certain income tax liabilities.
On January 16, 1964, the Bureau of Internal Revenue issued a notice of assessment ('thirty-day letter') against the defendant for income taxes allegedly due for the years 1960--1962 in the sum of $23,225.90. On the same date assessments were also directed to the Spheeris Merchandise Corporation (defendant's share being $12,361.57), Spheeris Realty, Inc. (defendant's share, $1,380.72), and Clay Fralick, Inc. (defendant's share, $1,701.03). Defendant claims that these assessments should have been included by the trial court as liabilities, but plaintiff correctly argues that they are only contingent liabilities and, because the defendant is contesting the assessments, he may end up not paying them or paying only a portion of them. It should also be observed that if an additional tax is imposed, it will be predicated on an increase in taxable income, and, therefore, it is doubtful that the defendant's net worth will be diminished. We find no error in the trial court's exclusion of these income tax assessments.
The two other liabilities...
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In re the Marriage of Tracy J. Mcreath
...goodwill is a necessary starting point. In 1967, we recognized a business's goodwill as a divisible marital asset. Spheeris v. Spheeris, 37 Wis.2d 497, 155 N.W.2d 130 (1967). In doing so, we underscored the difficulty in defining the concept, but set forth the following definition: In its b......
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Endres v. Endres
...11 Va.App. 411, 399 S.E.2d 166, 169 (1990); Marriage of Hall, 103 Wash.2d 236, 692 P.2d 175, 179-80 (1984); Spheeris v. Spheeris, 37 Wis.2d 497, 155 N.W.2d 130, 135 (1967); Neuman v. Neuman, 842 P.2d 575, 581 (Wyo.1992). See also 2 Arnold H. Rutkin et al., Valuation & Distribution of Marita......
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Wisner v. Wisner
...Miner, 67 Ariz. 109, 120, 191 P.2d 734, 741 (1948). It has also been defined as, in its broadest sense, reputation. Spheeris v. Spheeris, 37 Wis.2d 497, 155 N.W.2d 130 (1967). These definitions are more usable in this case since they capture the essence of the concept, without placing undue......
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Anderson v. Anderson
...Hennen v. Hennen (1972), 53 Wis.2d 600, 193 N.W.2d 717; Williams v. Williams (1969), 44 Wis.2d 651, 171 N.W.2d 902; Spheeris v. Spheeris (1967), 37 Wis.2d 497, 155 N.W.2d 130.11 See: Severson v. Severson (1976), 71 Wis.2d 382, 238 N.W.2d 116; Thies v. MacDonald (1971), 51 Wis.2d 296, 187 N.......