Strauss v. Strauss

• Decision Date: 01 September 1993
• Docket Number: No. 1344,1344
• Parties: Howard STRAUSS v. Josephine M. STRAUSS. ,
• Court: Court of Special Appeals of Maryland

Page 490

101 Md.App. 490

647 A.2d 818

Howard STRAUSS v. Josephine M. STRAUSS.

No. 1344, Sept. Term, 1993.

Court of Special Appeals of Maryland.

Aug. 31, 1994.

Reconsideration Denied Oct. 25, 1994.

H. Gregory Skidmore, Cumberland (Linda M. Thomas, Skidmore & Alderson, Cumberland, Thomas C. Ries and Bruce A. Kaufman and Rosenthal, Kaufman & Ries P.A., Baltimore, on the brief), for appellant

Gorman E. Getty, III, Cumberland (Thomas D. Murphy, Rockville, on the brief), for appellee.

Argued before FISCHER, HARRELL and MURPHY, JJ.

HARRELL, Judge.

On 26 February 1993, the Circuit Court for Allegany County granted Jo Strauss, appellee and cross-appellant, an absolute divorce from Howard Strauss, appellant and cross-appellee. The divorce judgment provided her with a monetary award of $881,289.00 and indefinite alimony in the amount of $15,000.00 per month. Mr. Strauss filed a Motion to Alter or Amend Judgment on 5 March 1993, contending, inter alia, that the amount of alimony was excessive, the monetary award was inequitable, and the court had erred in valuing the parties' marital property. The court responded on 12 May 1993 by reducing the alimony amount established in the previous order to $2,000 per month, but leaving its other determinations

unchanged. Both parties appeal from this final judgment and present the following issues, which we have slightly rephrased, for our review:

By Howard Strauss

1. Did the trial court err in granting the monetary award because:

(a) its determination and valuation of professional goodwill as marital property were incorrect;

(b) its valuation of the tangible assets of the professional practice was clearly erroneous;

(c) its valuation of the parties' personal property was clearly erroneous; and

(d) ordering the award to be paid "forthwith" represented an abuse of the court's discretion?

By Jo Strauss

2. Was the reduction in alimony from $15,000 per month to $2,000 per month clearly erroneous, an abuse of discretion, and error?

FACTS

The parties were married on 4 May 1972 in Silver Spring, Maryland. At the time of the marriage, Howard Strauss was a student in the University of Maryland Dental School and Ms. Strauss was employed as a nurse. In 1978, after Dr. Strauss completed an internship program in oral surgery at University Hospital in Baltimore, the parties moved to Cumberland, Maryland, where he opened a private office for the practice of oral and maxillofacial surgery. Ms. Strauss assisted her husband with the opening of the office, but returned home to be with the couple's children after he hired a full time staff. Dr. Strauss earned his board certification in oral and maxillofacial surgery in 1980.

In May of 1990, Dr. Strauss hired Lisa Long as a part-time registered nurse in preparation for the opening of a second surgical suite in his Cumberland office. The two became involved in a romantic and intimate relationship, which Ms On 11 February 1992, Ms. Strauss filed a Complaint for Absolute Divorce on the grounds of adultery. A trial was held on 25 and 26 January 1993, during which the parties' financial situation was publicly dissected. First, the parties set forth several stipulations they had agreed upon regarding the division of marital property: (1) Ms. Strauss would receive the former marital home, valued at $297,600, free and clear of liens or encumbrances; (2) Dr. Strauss would receive possession of the vacation property, valued between $252,000 and $281,000, free and clear of liens or encumbrances; and (3) Ms. Strauss would retain certain items of personal property valued at $103,239 while Dr. Strauss's agreed items would total $53,473.

Strauss discovered in April of 1991. Although the parties subsequently took a family vacation and participated in counseling in an attempt to reconcile their marriage, these efforts failed and they separated on 22 June 1991. At this time, Ms. Strauss learned of another instance of her husband's infidelity that had occurred even earlier in their marriage.

The court also considered the financial situation of Ms. Strauss and the Strauss' three children. As far as her income was concerned, Ms. Strauss testified that she had contributed no more than ten percent of the total family earnings, as she had abandoned her career as a Registered Nurse upon the birth of her first child in 1974. She also submitted a statement of her monthly expenses, which indicated that she required $7,429.37 each month to meet her personal needs and $5,105 to address adequately the needs of the children. Ms. Strauss testified that this expense list reflected her average monthly expenses for the thirteen month period immediately preceding trial.

By the time of trial, Dr. Strauss had opened a satellite office in Oakland, Maryland. The gross annual revenues from his total practice exceeded $1,000,000. He was the only board-certified specialist in oral and maxillofacial surgery in Western Maryland, drawing patients from a 75 to 100 mile radius of Cumberland to his main office. The court considered the Ms. Strauss' expert, Jon O. Clark, estimated the fair market value of the dental practice to be $1,197,000. He based this figure on market data and hypothetical transactions taken from an annual publication of a Philadelphia health care group entitled The Goodwill Registry. Mr. Clark included goodwill as a part of his computation, which he explained that the Registry defined as

value of the dental practice as a part of the determination of marital property, and heard testimony from two opposing experts to establish its value.

a combination of intangibles varying on a case-by-case basis as to existence and value. That combination might include location, use of a practice or individual's name, patient information, (embodied in a clinical record), a favorable leasehold, a covenant not to compete, compensation for past or future management and entrepreneurial services, payments made for referral to an associate or recommendation of a successor, patient lists, credit records, patient care and/or employee contracts, as well as assignments of future income.

Mr. Clark elaborated that "[h]ow they [The Goodwill Registry ] view goodwill is they bundle it in intangibles." Mr. Clark also considered two other valuation methods, which produced similar results, but rejected them based on his belief that they were inconsistent with Maryland caselaw.

On cross-examination, Mr. Clark explained that his estimate represented a combination of the business' adjusted book value ($546,000) and its intangible, or goodwill, value ($651,000). Counsel for Dr. Strauss inquired into these figures:

Counsel: Well, you've got this $651,000 goodwill figure. How much of the $651,000 represents goodwill of the corporation and how much of the $651,000 is based solely on the skill, experience and reputation of Howard Strauss?

Mr. Clark: My opinion is that the total amount represents the practice goodwill and that's the total amount that could be sold in a transaction, and of course, I base that on the Counsel: But that market data, this is from the Goodwill Registry, doesn't that specifically state to you that goodwill is also a combination of the individual's name and reputation?

facts from this market data that has shown that amount that is possible to be sold.

Mr. Clark: I just answered in the affirmative. Yes, that's one of several factors that they list in the definition.

Counsel: In your opinion, can goodwill ever be separated into two components; namely, number one, professional goodwill, the goodwill of the corporation, and number two, goodwill which is personal to the practitioner?

Mr. Clark: Yes.

Counsel: Why didn't you do that in this case?

Mr. Clark: In this case, I'm basing my opinion on the market data, these transactions which represent the goodwill accruing to the practice, not the goodwill accruing to the person. So I am using these data to estimate the value of the practice goodwill.

Counsel: Then by completely disregarding the individual and his reputation, Howard Strauss, essentially what you have provided us with is an opinion of the goodwill of this corporation where the oral surgeon is John Doe. Isn't that correct?

Mr. Clark: That's correct.

Mr. Clark's testimony ended with the following exchange with the trial judge, who inquired about the value of personal goodwill in the expert's analysis:

Court: Do I interpret your testimony correctly when I assume that I have heard you say that, in effect, you did not break out of the goodwill figure, that you assigned to this business, any amount attributable solely to the personal reputation of Dr. Strauss?

Mr. Clark: Yes, Your Honor. That's correct.

Court: All right. In the market value approach in your schedule of the 17 transactions, I gather that there was no Mr. Clark: Yes, Your Honor. That's my understanding from the definition in the market data report that I read; that they considered to be professional practice goodwill. I believe they even call it that.

attribution to personal reputation of any of the practitioner sellers in those cases. Is that a fair conclusion?

Court: Is there an acceptable method for breaking out, that is evaluating separately, the general goodwill of the business and that which is attributable solely to the personal reputation of the practitioner?

* * * * * *

Mr. Clark: I'm sorry. Difficult question to answer.... If we look at these data that I've presented in Exhibit 11 and following the guidance provided in the explanatory notes that come with the Goodwill Registry that it includes the professional goodwill that has gone along with the practice, the practice professional goodwill, and if we also assume, as the Courts have assumed, that personal goodwill cannot be sold, cannot be transferred, then what you have is a series of transactions in which there has been no personal goodwill recorded because ipso facto it cannot be transferred. And so the assumption in all this data is that...