Theilen v. Theilen, WD

• Decision Date: 24 November 1992
• Docket Number: No. WD,WD
• Citation: 847 S.W.2d 116
• Parties: Jerry E. THEILEN v. Virginia D. THEILEN. 45658.
• Court: Missouri Court of Appeals

Page 116

847 S.W.2d 116

Jerry E. THEILEN v. Virginia D. THEILEN.

No. WD 45658.

Missouri Court of Appeals Western District.

Nov. 24, 1992.

John R. Shank, Jr., Gunn, Shank & Harman, P.C., Kansas City, for appellant.

Michael P. Keleher, Keleher & Eastman, Gladstone, for respondent.

Before KENNEDY, P.J., and SPINDEN and SMART, JJ.

SMART, Judge.

This dissolution of marriage proceeding raises questions concerning the valuation of certain marital property interests and concerning the adequacy of maintenance and child support awards. Judgment is affirmed in part and modified in part.

Dr. Theilen ("Husband") is a 43 year old dentist practicing in Claycomo, Missouri. He had been married to his wife, Virginia, almost 19 years at the time of the decree. He has been practicing dentistry 15 years. He and his twin brother, James Theilen, each own fifty percent of the stock in their professional corporation. He and his brother are partners in a real estate partnership (Twin Center) which owns the building occupied by their practice. In addition, they are partners in a venture (Dental Data) which owns and leases equipment to their professional corporation.

The trial court calculated Husband's stock in the professional corporation to have a value of $105,000.00. The value of Husband's general partnership interest in Twin Center Partnership was determined to be $80,000.00. The court valued Husband's interest in Dental Data Services at $60,000.00. Thus, Husband's interest in the three entities together was $245,000.00. The marital residence was found to have a net value of $127,000.00. Other marital property was valued at $146,391.00.

Husband was ordered to pay $1,040.00 in child support for his two teenage daughters, $520.00 for each child. Husband was also ordered to pay Mrs. Theilen ("Wife") $800.00 per month in maintenance. $92,970 in marital property was awarded to Wife, and Husband received $53,421 in other marital property. Husband, who was awarded the residence and the businesses, was ordered to pay $166,226.00 to Wife as additional distribution of marital property.

Appellate review of this action is governed by the standards set forth in Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976), which require the trial court's judgment to be affirmed unless it is against the weight of the evidence, erroneously declares the law, or erroneously applies the law.

Twin Center Partnership

Husband's first point on appeal is that the trial court erred in finding the net value of the Twin Center Partnership to be $160,000.00. Husband contends that the sole asset of the partnership, a commercial building, is encumbered by a debt which exceeds its fair market value.

Thomas Smeed, Husband's expert, testified at trial that in his opinion the commercial building in which Husband's dental practice is housed had a fair market value of $825,000.00 and an outstanding debt of $867,438.00, resulting in a negative value of $42,438.00. The building, which was completed in 1985, contains about 9,200 square feet. It is a two story building. The primary tenant of the building is the dental practice of Jerry and James Theilen, which occupies the first floor. The building had recently lost the other tenants in the building. The evidence did not reveal any particular reason to expect the building to continue to lack occupancy. Robert Boland, Wife's expert, testified that the net value of Husband's interest in the partnership was $118,949.00. Using the capitalization of income approach, Mr. Boland calculated the value based upon a weighted average of the previous four years and nine months of the partnership's operation. Mr. Boland testified that a valuation method focusing on the vacancies in the building would not be appropriate because this type method ignores the cyclical nature of real estate. Wife's expert used a capitalization of income method which took into account the financial data of past years in determining a current value. The court's valuation of the partnership interest at $80,000.00 was within the range of the two valuations. See Howerton v. Howerton, 796 S.W.2d 665, 667 (Mo.App.1990). It is the trial court's job to analyze all of the evidence and assess the credibility of the witnesses. When the trial court calculates an amount that is "within the range of evidence, an appellate court generally will not find the determination erroneous or weigh the evidence." In re Marriage of Lewis, 808 S.W.2d 919, 925 (Mo.App.1991); see also Vohsen v. Vohsen, 801 S.W.2d 789, 792 (Mo.App.1991). The trial court's determination was within the range of the values testified to and therefore, cannot be faulted. Point I is denied.

Dental Data Services

Husband's second argument on appeal is that the trial court erred in valuing his interest in Dental Data Services at $60,000.00, because such a value is based upon an historical approach of capitalization and fails to take into account current economic conditions. In his brief, Husband refers this court to a profit and loss statement dated October 8, 1991, for Dental Data Services. In the comments on this statement, Husband states that Theilen & Theilen is two months behind on its rent payments to Dental Data due to cash flow problems and that Dental Data has had to purchase $26,314.32 of additional equipment. Husband did not offer testimony at trial as to the value of his interest. Mr. Boland, Wife's expert, testified that the partnership interest was worth $124,515.00 in 1990, and that he had insufficient data from which to base the value in 1991 because he had never received from appellant the financial documents he had requested to make this determination. Mr. Boland utilized a cash flow method with a weighting factor in valuing the partnership interest. The trial court valued the interest at $60,000.00. Again, based upon the evidence presented, the trial court's valuation fell within the range of the evidence. Lewis, 808 S.W.2d at 925. Husband has not shown any error on the trial court's valuation. Point II is denied.

Theilen & Theilen, D.D.S., P.C.

Husband challenges the trial court's valuation of his interest in the professional corporation at $105,000.00. He argues that this determination is erroneous in that it relies on the capitalization of income approach. In valuing the professional corporation, Husband's expert, Mr. Smeed, utilized an approach he called the "Comparable Characteristics" method which calculates a fair market value based on valuation of three components: 1) the in-place value of physical assets; 2) the face value of consumable supplies; and 3) the value of any intangible assets. Mr. Smeed's valuation included valuation of the dental equipment ($37,995.00), office furnishings and equipment ($2,600.00), dental supplies ($5,000.00), office supplies ($200.00), accounts receivable (he valued Husband's share at $16,707.20) ¹ and intangibles ($0.00). Mr. Smeed testified that he valued intangibles at zero because of the difficulty of predicting where Husband's patients would go after a sale of his interest to a third party. Mr. Smeed also did not include the value of any corporation bank accounts. Wife's expert, Mr. Boland, took another approach to value, employing a capitalization method in valuing Husband's interest. Mr. Boland valued Husband's interest at $149,670.00, which was based upon valuation of the corporation's tangible assets ($37,672.74), accounts receivable ($91,992.48), and intangibles ² ($169,676.00). Mr. Boland multiplied the total corporation value of $299,341.22 by 50%, thus determining Husband's one-half interest to be $149,670.00.

Husband contends on appeal that Mr. Boland's calculation of his interest was erroneous, and that the trial court erred in valuing Husband's interest at $105,000.00. Husband relies on Hanson v. Hanson, 738 S.W.2d 429 (Mo. banc 1987) in charging this error. In Hanson, which involved a spouse's interest in an oral surgery partnership, the Supreme Court of Missouri examined goodwill as a marital asset in dissolution proceedings involving a professional practice. Id. Goodwill in a professional practice has been defined as "the value of the practice which exceeds its tangible assets and which is the result of the tendency of clients/patients to return to and recommend the practice irrespective of the reputation of the individual practitioner." Id. at 434 (Mo. banc 1987). Reliance by patients/clients on the reputation and skill of the individual practitioner is generally related inversely to the number of practitioners in the practice. Id. at 435. In determining the evidentiary standard for proving the existence of goodwill, the court in Hanson indicated that the acceptable method of valuation was the "fair market value" approach. The court stated:

Because of the difficulties inherent in separating the reputation of the professional from that of his enterprise, evidence that other professionals are willing to pay for goodwill when acquiring a practice is, in our view, the only acceptable evidence of the existence of goodwill. Thus, as a matter of proof, the existence of goodwill is shown only when there is evidence of a recent actual sale of a similarly situated professional practice, an offer to purchase such a practice, or expert testimony and testimony of members of the subject profession as to the existence of goodwill in a similar practice in the relevant geographic and professional market.

Id.

Under Hanson, the trial court may not include a value for goodwill or intangible factors without there being specific evidence, such as evidence of a recent actual sale of a similar practice, to support it. Id. The court in Hanson rejected capitalization as an approach to determining goodwill because of the speculative nature of placing a present value on the future earning capacity of the individual professional, and because of the inequity of compelling a professional practitioner to pay a share of a value that is not...