JULIE ANN GASKILL v. JON KEVIN ROBBINS
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RENDERED:
DECEMBER 8, 2006; 10:00 A.M.
NOT TO BE PUBLISHED
MODIFIED:
DECEMBER 22, 2006; 10:00 A.M.
DISCRETIONARY REVIEW GRANTED BY KENTUCKY SUPREME COURT:
OCTOBER 24, 2007
(2007-SC-0190-DGE & 2007-SC-0207-DGE)
Commonwealth Of Kentucky
Court of Appeals
NO. 2005-CA-002088-MR
JULIE ANN GASKILL
v.
APPELLANT
APPEAL FROM WARREN FAMILY COURT
HONORABLE MARGARET RYAN HUDDLESTON, JUDGE
ACTION NO. 03-CI-01652
JON KEVIN ROBBINS
APPELLEE
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE:
JUDGE.
COMBS, CHIEF JUDGE; HENRY, JUDGE; PAISLEY,1 SENIOR
HENRY, JUDGE:
Julie Ann Gaskill appeals from the circuit
court’s “Findings of Fact, Conclusions of Law and Decree of
Dissolution of Marriage,” which granted her ex-husband, Jon
Kevin Robbins, sole custody of the parties’ son to Robbins and
1
Senior Judge Lewis G. Paisley, sitting as Special Judge by assignment of the
Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and
KRS 21.580.
which provided for an equal division of marital property between
the parties.
Upon review, we reverse and remand for a new trial.
The parties were married on May 24, 1992 in Christian
County, Kentucky, with the marriage producing a son, C.H.R.
Gaskill is an oral and maxillofacial surgeon who, at the time of
the marriage, had already opened a successful professional
practice in Russellville, Kentucky.
She eventually opened a
practice in Bowling Green, Kentucky, as well, once the parties
were married.
Robbins was employed with Thomas & Thorngren and
handled a number of tax and client relation matters; however, he
also assisted Gaskill in opening her Bowling Green office by
interviewing and training staff, setting up the physical
structure of the office, and assisting in clerical matters.
He
was also involved in the tax, payroll, and accounting matters of
Gaskill’s business, prepared profit and loss statements,
negotiated lease agreements for the office space, and terminated
employees when necessary.
The parties both contributed to
maintaining their household and caring for their son.
Gaskill and Robbins separated on August 1, 2003, and
Gaskill filed a “Verified Petition for Dissolution of Marriage”
in the Warren Family Court on October 14, 2003.
The primary
issues of concern in the parties’ divorce proceedings were the
valuation of Gaskill’s professional practice, how the marital
property should be divided, and who should have custody of
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C.H.R.
On September 30, 2005, the family court entered a
judgment entitled “Findings of Fact, Conclusions of Law, and
Decree of Dissolution of Marriage” giving sole custody of C.H.R.
to Robbins and dividing the marital assets of the parties in an
approximately 50/50 ratio.
This appeal followed.
On appeal, Gaskill first argues that the family court
erred in failing to allow the introduction of a prior
inconsistent statement made by Dr. Bruce Fane, a psychologist,
ruling that the statement was inadmissible hearsay.
Initially,
the family court granted temporary joint custody of C.H.R. to
both parties, with Gaskill serving as his primary residential
custodian.
As noted by Robbins, Dr. Fane became involved in
this case following allegations that C.H.R. witnessed sexual
activity while in Gaskill’s care.
He interviewed Robbins and
C.H.R. on November 12, 2003, and wrote a letter that was
submitted to the family court on November 17, 2003 along with
Robbins’ motion for a modification of temporary custody and
supporting affidavit.
The letter was reviewed by the court in
an emergency hearing conducted on November 19, 2003, along with
an affidavit tendered by Gaskill.
After considering these
items, the court temporarily granted Robbins’ motion and held
that Gaskill was to receive only supervised visitation until an
evidentiary hearing could be held on November 21, 2003.
After
hearing additional testimony from Dr. Fane at this hearing in
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which he stated his belief that C.H.R. had been exposed to some
sort of sexual behavior, the court subsequently entered an order
– agreed to by the parties - on November 25, 2003 in which
Robbins was named primary residential custodian of C.H.R. and
Gaskill was allowed co-parenting and unsupervised visitation.
At trial, Dr. Fane testified about his conclusions
concerning the relationship of the parties with each other and
with their son.
During his testimony, he stated that he did not
believe that either parent could be considered better than the
other, as both of them had good qualities.
On cross-
examination, counsel for Gaskill attempted to question Dr. Fane
about an alleged statement that he had made to Dr. John Buchanan
indicating that Gaskill was a better parent than Robbins.
Dr.
Fane testified that he did not recall making such a statement or
expressing any opinion about the parties’ parenting skills, but
admitted that he did remember talking to Dr. Buchanan about the
case.
Gaskill subsequently attempted to call Dr. Buchanan to
rebut Dr. Fane’s denial and to impeach his testimony.
Counsel
for Robbins objected and the family court sustained the
objection, ruling that the proffered evidence constituted
inadmissible hearsay.
The testimony was then introduced into
the record by avowal out of the family court judge’s presence.
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KRE2 801A(a)(1) provides that a “statement is not
excluded by the hearsay rule, even though the declarant is
available as a witness, if the declarant testifies at the trial
or hearing and is examined concerning the statement, with a
foundation laid as required by KRE 613,” when the statement is
“[i]nconsistent with the declarant’s testimony.”
Consequently,
“the credibility of any witness, including one’s own witness,
may be impeached by showing that the witness has made prior
inconsistent statements.”
472 (Ky.App. 1978).
Wise v. Commonwealth, 600 S.W.2d 470,
This is because “when a witness has
testified about some of the facts in a case, the jury is
entitled to know what else the witness has said about the case,
so long as it is relevant to the merits of the case as
distinguished from mere collateral issues.”
Id.
Under Kentucky
law, prior inconsistent statements may be introduced not only
for impeachment purposes, but also to serve as substantive
evidence.
1969).
See Jett v. Commonwealth, 436 S.W.2d 788, 792 (Ky.
We also note that such statements can be introduced
through the testimony of another witness and need not be limited
to impeachment purposes.
Wise, 600 S.W.2d at 472.
Trial judges
are afforded “a broad discretion in deciding whether or not to
permit the introduction of such contradictory evidence.”
Id.
Accordingly, we review a trial court’s evidentiary rulings for
2
Kentucky Rules of Evidence.
-5-
abuse of that discretion.
Goodyear Tire & Rubber Co. v.
Thompson, 11 S.W.3d 575, 577 (Ky. 2000), citing Tumey v.
Richardson, 437 S.W.2d 201, 205 (Ky. 1969); Transit Authority of
River City (TARC) v. Vinson, 703 S.W.2d 482, 484 (Ky.App. 1985).
An appellant claiming that an evidentiary ruling was in error
must prove that the ruling was arbitrary, unreasonable, or
unsupported by sound legal principles.
Id. at 581, citing
Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999).
After reviewing the record, we believe that the family
court clearly erred and abused its discretion in refusing to
allow the impeachment testimony of Dr. Buchanan to be introduced
into evidence on the justification that it was inadmissible
hearsay.
First and foremost, the statement in question appears
to satisfy the requirements of KRE 801A(a)(1), so the court’s
conclusion that it was inadmissible hearsay is questionable,
particularly as it also appears from the record that Gaskill
laid a proper foundation for Dr. Buchanan’s testimony to be
heard.
Indeed, Robbins disputes neither of these facts.
Moreover, the findings of fact reveal that Dr. Fane’s testimony
was relied upon by the family court in its custody
determination.
We note that it was the letter from Dr. Fane
that ultimately changed Gaskill’s status as primary residential
custodian.
The court also cited to Dr. Fane’s testimony that
Gaskill had boundary issues with C.H.R. that had the potential
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of being “dangerous emotionally” to him in its judgment.
Consequently, a statement made by Dr. Fane pertaining to who was
the better parent between Gaskill and Robbins – given the weight
afforded to his testimony about both parents - would certainly
be a relevant and material evidentiary matter for the court to
consider in its custody determination.
Therefore, we believe
that its omission on purely hearsay grounds was in error.
Whether this error, standing alone, is one that merits
reversal as to the family court’s custody determination is – in
our view – arguable.
However, ultimately this is a question we
need not consider, as we also believe that the court erred in
making findings of fact that relied upon unsworn statements made
at a September 9, 2005 hearing dealing with a motion of the
Guardian Ad Litem to review temporary custody.
At this hearing,
counsel for Robbins, as well as the Guardian Ad Litem, recited a
number of hearsay accounts about Gaskill’s purported
interference with C.H.R.’s schooling, including statements
allegedly made by a principal at C.H.R.’s school and by C.H.R.
to Robbins.
Specifically, the Guardian Ad Litem stated that she
had requested the temporary custody review because the principal
at C.H.R.’s school had contacted her about disciplinary problems
that the boy had been having at school.
The principal also
expressed concern that C.H.R. was getting a “bad name” at
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school, and that he would never be able to escape it.
Counsel
for Robbins also expressed concern about alleged actions taken
by Gaskill regarding C.H.R.’s enrollment at his new school.
These actions included Gaskill obtaining disciplinary records
from C.H.R.’s previous school and delivering them to his new
teacher, making disparaging remarks about public school and
public school teachers in C.H.R.’s presence, and telling C.H.R.
not to worry if he got into trouble at his new school because
she would “take care of it.”
Gaskill subsequently filed an
affidavit on September 14, 2005, in which she admitted obtaining
C.H.R.’s disciplinary records from his previous school and
taking them to his new teacher.
However, she denied the other
allegations made at the hearing.
In its findings of fact, the family court noted that
it was “particularly troubled that [Gaskill] may have set out to
hinder with her son’s adjustment at his new school.”
The court
also expressed concern that Gaskill had taken it upon herself,
without being asked, to deliver her son’s behavior records to
his new school; had scheduled therapy appointments for her son
on her visitation days without informing Robbins; and had tried
to get her son to deny these appointments to Robbins.
Gaskill
argues that all of these factual findings came directly from the
arguments made by Robbins’ counsel at the aforementioned
temporary custody hearing and that no sworn testimony supporting
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these findings was ever taken at said hearing.
Accordingly,
they were based on inappropriate hearsay.
Robbins makes little effort to dispute Gaskill’s
contentions.
Instead, he argues that trial judges are generally
presumed to be able to discern “the grain from the chaff, and to
decide the case alone upon the law,” G.E.Y. v. Cabinet for Human
Resources, 701 S.W.2d 713, 715 (Ky.App. 1985), citing Andrews v.
Hayden’s Adm’rs, 88 Ky. 455, 11 S.W. 428 (1889), and that such a
rule should apply here.
He further argues that Gaskill “cannot
seriously argue that the trial court’s custody decision
ultimately turned on the responsive arguments of counsel during
a hearing after the evidence had closed.
Instead, the trial
court was persuaded by a mountain of evidence, and it did not
improperly consider statements which [Gaskill,] herself,
verified.”
Consequently, we read Robbins’ contention to be
that, even assuming that an error occurred here, it is not of a
reversible nature.
We are inclined to disagree.
In doing so, we acknowledge Robbins’ position that
“when a judge acts as a fact finder it is presumed that he will
be able to disregard hearsay statements.”
Id.
With this said,
however, “where, as here, it is apparent that he relied on the
hearsay in making his decision, the error in the admission of
the unreliable evidence cannot be deemed harmless or
nonprejudicial.”
Id.
“Admission of incompetent evidence in a
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bench trial can be viewed as harmless error, but only if the
trial judge did not base his decision on that evidence ... or if
there was other competent evidence to prove the matter in issue
....” Prater v. Cabinet for Human Resources, Com. of Ky., 954
S.W.2d 954, 959 (Ky. 1997), citing G.E.Y., 701 S.W.2d at 715;
Holcomb v. Davis, 431 S.W.2d 881, 883 (Ky. 1968); Escott v.
Harley, 308 Ky. 298, 214 S.W.2d 387, 389 (1948) (Emphasis in
original).
As noted above, the family court noted in its factual
findings that it was “particularly troubled that [Gaskill] may
have set out to hinder with her son’s adjustment at his new
school.”
Consequently, it cannot be said that the statements
and arguments made at the temporary custody hearing did not
impact the court’s decision.
Moreover, there was not “other
competent evidence” to prove the matter in issue.
While
Gaskill’s affidavit admitted that she delivered C.H.R.’s
behavior records to his new school, she denied the other
allegations made at the custody hearing.
We must therefore
conclude, per G.E.Y., that the court’s consideration of these
items was prejudicial, particularly when this fact is coupled
with our previous finding of error with respect to the court’s
failure to allow the impeachment testimony of Dr. Buchanan.
Consequently, we are compelled to conclude that the family
court’s custody determination must be reversed and remanded for
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a new trial, the evidence in support of the court’s decision
notwithstanding.
Given our ruling and decision to remand, we
decline to consider Gaskill’s remaining arguments relating to
the sufficiency of the evidence supporting the family court’s
custody determination.
Gaskill next argues that the family court erred in
assigning value to the parties’ marital property by failing to
properly exercise its discretion with respect to assigning
goodwill value to Gaskill’s business and by failing to
distinguish between “personal” and “enterprise” goodwill.
We
address each of these contentions in turn.
Steve Wheeler, a certified public accountant
(“C.P.A.”), performed a business valuation on Gaskill’s behalf
and testified that the value of the goodwill attributable to her
oral and maxillofacial surgery practice was $0.00 because any
goodwill the practice enjoyed was actually “personal” goodwill
attributable in its entirety to Gaskill.
Accordingly, he
ultimately opined that the fair market value of the practice was
$114,000.00.
Robbins employed Richard Callahan, also a C.P.A.,
to conduct his own evaluation of Gaskill’s practice.
Callahan
included goodwill in his valuation calculations and opined that
the practice had a value of $669,075.00.
Obviously, then, the
decision to include or not to include goodwill in the valuation
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process was a notable one in the context of determining the
practice’s value.
The family court rejected the valuation given by
Wheeler, stating that “[t]here is no reported legal authority
for the distinction in goodwill made by Mr. Wheeler.”
The court
further stated, “To the contrary, it is generally accepted in
Kentucky that the goodwill of a closely held medical corporation
should be assigned value in a dissolution proceeding,” citing to
Drake v. Drake, 809 S.W.2d 710 (Ky.App. 1991), Clark v. Clark,
782 S.W.2d 56 (Ky.App. 1990), and Heller v. Heller, 672 S.W.2d
945 (Ky.App. 1984), in support of this proposition.
The court
also took issue with Wheeler’s valuation because he “did not
adequately explain why he approximately doubled the salaries of
the practice’s staff when calculating its value,” noting that
“Mr. Callahan testified that this single adjustment reduced the
value of the business by $315,890.”
The court subsequently
concluded that Callahan’s valuation of the practice was more
credible and assigned it a value of $669,075.00.
Gaskill first contends that the family court erred
because it operated under the misconception that it was
compelled to assign a goodwill value in valuing her practice, as
demonstrated by the court’s statement that “it is generally
accepted in Kentucky that the goodwill of a closely held medical
corporation should be assigned value in a dissolution
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proceeding.”
We agree.
In Gomez v. Gomez, 168 S.W.3d 51
(Ky.App. 2005), we addressed another case in which the issue at
hand was whether a value for goodwill should have been assigned
to a medical practice.
While we acknowledged that “the goodwill
contained in a business should be considered when arriving at
the value of a practice,” Id. at 55, citing Heller, 672 S.W.2d
at 947 (Emphasis added), we rejected the argument that Heller
held that all businesses have goodwill.
Id.
Consequently, we
upheld the trial court’s decision to not include an amount for
goodwill in valuing the appellee’s medical practice, concluding
that the trial court’s decision was supported by substantial
evidence.
Id. at 56.
As Gaskill points out here, it appears from the family
court’s opinion that it felt required to assign a goodwill value
in this case and had no discretion to do otherwise.
The
question therefore arises as to whether the court gave
appropriate consideration to the issue and properly exercised
the discretion afforded to it in matters of valuation.
See
Clark, 782 S.W.2d at 60, citing Platt v. Platt, 728 S.W.2d 542
(Ky.App. 1987).
We believe that it did not.
As the court was
laboring under the misconception that providing a value for
goodwill was compulsory in reaching its decision, we believe
that it cannot be said that the court exercised its discretion
appropriately.
Cf. University of Kentucky Albert B. Chandler
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Medical Center v. Partin, 745 S.W.2d 148, 149 (Ky.App. 1988)
(holding that the trial court “did not exercise its discretion
using appropriate standards” in deciding whether or not to
dismiss an appeal when the court mistakenly “felt constrained by
CR3 6.02 to require a showing that the Medical Center failed to
learn of the entry of a judgment or order affecting the time for
appeal”); Adkins v. Adkins, 574 S.W.2d 898, 900 (Ky.App. 1978),
citing Malloy v. Malloy, 460 S.W.2d 15 (Ky. 1970) (holding that
the trial court failed to exercise appropriate discretion when
it mistakenly believed that it lacked the authority to award
attorney’s fees).
Accordingly, we believe that the issue
requires remand for further consideration.
With this said, we have also been asked by Gaskill to
consider the related issue of whether a distinction should be
drawn between “personal” goodwill and “enterprise” goodwill for
the purposes of valuing a business in a divorce proceeding.
The
family court declined to make such a distinction, citing a lack
of precedent for such a distinction, and we similarly can find
no Kentucky case law in which this distinction has been made.
Gaskill submits that “there is a majority trend in the
United States for courts to distinguish between enterprise
goodwill and personal goodwill in a divorce.”
Specifically, she
cites to the West Virginia Supreme Court’s decision in May v.
3
Kentucky Rules of Civil Procedure.
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May, 589 S.E.2d 536 (W.Va. 2003), in which a survey conducted by
that Court found that 25 jurisdictions have adopted the view
that these two categories of goodwill should be distinguished,
with only “enterprise” goodwill constituting divisible marital
property.4
According to May, Kentucky’s current position is in
line with 12 other jurisdictions.
Gaskill argues that we should
join the majority position and find that there should “be
personal goodwill that belongs to the individual professional
and is not attributable to the enterprise.
That personal
goodwill should be left with a professional who brought it into
the marriage from inception.”
She further submits that failing
to create such a distinction as a matter of law “is to grant the
non-professional spouse a property interest in the future
earning capacity of the professional spouse.”
The issue of business goodwill in the context of a
dissolution of marriage proceeding is one for which Kentucky has
4
The May Court defined “enterprise” goodwill as follows: “Enterprise goodwill
attaches to a business entity and is associated separately from the
reputation of the owners. Product names, business locations, and skilled
labor forces are common examples of enterprise goodwill. The asset has a
determinable value because the enterprise goodwill of an ongoing business
will transfer upon sale of the business to a willing buyer.” May, 589 S.E.2d
at 541, citing Courtney E. Beebe, The Object of My Appraisal: Idaho's
Approach to Valuing Goodwill as Community Property in Chandler v. Chandler,
39 Idaho L.Rev. 77, 83-84 (2002); Frazier v. Frazier, 737 N.E.2d 1220, 1225
(Ind.Ct.App. 2000). It further defined “personal” goodwill as being
“associated with individuals. It is that part of increased earning capacity
that results from the reputation, knowledge and skills of individual people.
Accordingly, the goodwill of a service business, such as a professional
practice, consists largely of personal goodwill.” Id. at 542, citing Diane
Green Smith, ‘Til Success Do Us Part: How Illinois Promotes Inequities in
Property Distribution Pursuant to Divorce by Excluding Professional Goodwill,
26 J. Marshall L.Rev. 147, 164-65 (1992).
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limited authority.
We first dealt with the issue, in depth, in
Heller v. Heller, supra.
There, we cited to In re Marriage of
Nichols, 606 P.2d 1314 (Colo.Ct.App. 1979), for the proposition
that “the value of goodwill incident to a professional practice
is a divisible marital asset.”
Heller, 672 S.W.2d at 948.
In
reaching this decision, we explicitly distinguished between “the
value of goodwill in an existing business and the value of an
advanced educational degree” as follows:
[P]rofessional practices that can be sold
for more than the value of their fixtures
and accounts receivable have salable
goodwill. A professional, like any
entrepreneur who has established a
reputation for skill and expertise, can
expect his patrons to return to him, to
speak well of him, and upon selling his
practice, can expect that many will accept
the buyer and will utilize his professional
expertise. These expectations are a part of
goodwill, and they have a pecuniary value
... This limited marketability distinguishes
professional goodwill from the advanced
educational degree, which, because it is
personal to its holder and is nontransferable, was held not to be property in
Graham.
Id., citing In re Marriage of Nichols, 606 P.2d at 1315; In re
Marriage of Goger, 557 P.2d 46 (Ore.Ct.App. 1976); Hurley v.
Hurley, 615 P.2d 256 (N.M. 1980), overruled on other grounds by
Ellsworth v. Ellsworth, 637 P.2d 564 (N.M. 1981); Slater v.
Slater, 100 Cal.App.3d 241, 160 Cal.Rptr. 686 (1980), superseded
by statute as stated in In re Marriage of Ostler & Smith, 223
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Cal.App.3d 33, 272 Cal.Rptr. 560 (1990).
Heller drew no
distinction between “personal” and “enterprise” goodwill,
instead suggesting that both categories were subject to division
as marital assets.
In Clark v. Clark, supra, we again ruled that “the
goodwill contained in a business or professional organization is
a factor to be considered in arriving at the value of the
practice.”
Clark, 782 S.W.2d at 59.
We defined “goodwill” as
“the expectation that patrons or patients will return because of
the reputation of the business or firm,” and noted that “[t]his
goodwill has specific pecuniary value.”
Id.
We further
recognized that “[g]oodwill has also been defined as the excess
of return in a given business over the average or norm that
could be expected for that business.”
Hanson, 738 S.W.2d 429 (Mo. 1987).
Id., citing Hanson v.
We also held that “[t]he
age, health and professional reputation of the practitioner, the
nature of the practice, the length of time the practice has been
in existence, past profits, comparative professional success,
and the value of its other assets, are all factors of goodwill.”
Id., citing Poore v. Poore, 331 S.E.2d 266 (N.C.Ct.App. 1985).
Again, we drew no distinction between “personal” and
“enterprise” goodwill.
Indeed, in setting forth the factors of
goodwill, we included items that could be considered as falling
under both categories.
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In Drake v. Drake, supra, we again faced the question
of whether goodwill could be considered as an asset in valuing a
closely held corporation in a dissolution action.
There we
deferred to our holdings in Clark and Heller and concluded that
goodwill should be considered.
Drake, 809 S.W.2d at 713.
In
doing so, we noted that the facts in Drake were similar to those
in Clark in that the latter involved a physician’s one-third
interest in a medical practice.
Id.
Again, we made no
distinction between “personal” and “enterprise” goodwill.
After considering the issue and the facts of this
case, we are not inclined to deviate from long-standing
precedent by creating a wholesale change of law holding that
“personal” and “enterprise” goodwill should be distinguished for
purposes of property valuation in a divorce proceeding – even
given that Gaskill’s practice is a sole proprietorship.
Issues
of stare decisis aside, we believe that “[i]t would be
inequitable to hold that the form of the business enterprise can
defeat the community’s interest in the professional goodwill.
Such a result ignores the contribution made by the nonprofessional spouse to the success of the professional ....”
Mitchell v. Mitchell, 732 P.2d 208, 211 (Ariz. 1987).
As
further noted by the California Court of Appeal in Golden v.
Golden, 270 Cal.App.2d 401, 75 Cal.Rptr. 735 (Cal.Ct.App. 1969):
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[I]n a divorce case, the good will of the
husband’s professional practice as a sole
practitioner should be taken into
consideration in determining the award to
the wife.... [I]n a matrimonial matter, the
practice of the sole practitioner husband
will continue, with the same intangible
value as it had during the marriage....
[T]he wife, by virtue of her position of
wife, made to that value the same
contribution as does a wife to any of the
husband’s earnings and accumulations during
marriage. She is as much entitled to be
recompensed for that contribution as if it
were represented by the increased value of
stock in a family business.
Id., 270 Cal.App.2d at 405, 75 Cal.Rptr. at 737-38.
This view
of thinking was also adopted by the Supreme Court of New Jersey
in Dugan v. Dugan, 457 A.2d 1 (N.J. 1983):
After divorce, the law practice will
continue to benefit from that goodwill as it
had during the marriage. Much of the
economic value produced during an attorney’s
marriage will inhere in the goodwill of the
law practice. It would be inequitable to
ignore the contribution of the non-attorney
spouse to the development of that economic
resource. An individual practitioner’s
inability to sell a law practice does not
eliminate existence of goodwill and its
value as an asset to be considered in
equitable distribution. Obviously,
equitable distribution does not require
conveyance or transfer of any particular
asset. The other spouse, in this case the
wife, is entitled to have that asset
considered as any other property acquired
during the marriage partnership.
Id. at 6.
In doing so, the Court distinguished “goodwill” from
“earning capacity,” stating that goodwill:
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... reflects not simply a possibility of
future earnings, but a probability based on
existing circumstances. Enhanced earnings
reflected in goodwill are to be
distinguished from a license to practice a
profession and an educational degree. In
that situation the enhanced future earnings
are so remote and speculative that the
license and degree have not been deemed to
be property. The possibility of additional
earnings is to be distinguished from the
existence of goodwill in a law practice and
the probability of its continuation.
Id.
Here, the record reflects that Robbins made a number
of contributions to Gaskill’s business, including training a
number of administrative personnel and handling a number of
financial aspects of the practice.
Consequently – given these
facts – we believe that it is equitable to conclude that the
goodwill of Gaskill’s practice should remain a relevant
consideration in valuing the marital property on remand, keeping
in mind – of course – that “[t]he determination of goodwill is a
question of fact rather than law, and each case must be
determined on its own facts and circumstances.”
S.W.3d at 55, citing Clark, 782 S.W.2d at 60.
Gomez, 168
Given that the
assignment of goodwill value must be reconsidered on remand, we
decline to consider Gaskill’s remaining contentions as to the
court’s distribution of the marital property as a whole.
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The judgment of the Warren Family Court is hereby
reversed and remanded for further proceedings consistent with
this opinion.
COMBS, CHIEF JUDGE, CONCURS.
PAISLEY, SENIOR JUDGE, CONCURS IN PART, DISSENTS IN
PART, AND FILES SEPARATE OPINION.
PAISLEY, SENIOR JUDGE, CONCURRING IN PART AND
DISSENTING IN PART:
The trial judge in this case conducted an
eight-day trial and heard testimony from 27 witnesses.
Her
Findings of Fact and Conclusions of Law, which are 35 pages
long, are very comprehensive and clearly show that she gave
thorough and appropriate consideration to all the issues in this
case and also expressly considered the applicable authority.
As
appellee has pointed out, our task is to determine whether those
findings are clearly erroneous, whether the correct law was
applied, and whether the trial court abused its discretion. B.C.
v. B.T. and K.F., 182 S.W.3d 213 (Ky. App. 2005).
Although I
agree with the majority that the trial court erred when it did
not allow the impeachment testimony by Dr. Buchanan, it seems
clear to me that the error was harmless as the evidence in
question did not materially affect the trial court’s custody
ruling.
I also do not believe the reference to the unsworn
statements of the GAL and by counsel amount to reversible error,
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if it is error at all.
I would affirm the trial court’s award
of sole custody to appellee.
With respect to the trial court’s ruling valuing the
medical practice of appellant, I believe she makes a compelling
case that “personal” goodwill should not be considered marital
property to be divided between the parties.
I believe, however,
that this is a matter to be addressed to our Supreme Court.
I
cannot find that the trial court erred in its ruling on this
issue under current Kentucky law.
I concur with the majority on
this issue.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEE:
James E. Keller
Lexington, Kentucky
David A. Lanphear
Bowling Green, Kentucky
Glen S. Bagby
J. Robert Lyons, Jr.
Lexington, Kentucky
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