Case Name: Michael Lawrence WEINSTOCK, Appellant, v. Ronda C. WEINSTOCK, Appellee
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 1994-03-31
Citations: 634 So. 2d 775
Docket Number: No. 92-2911
Parties: Michael Lawrence WEINSTOCK, Appellant, v. Ronda C. WEINSTOCK, Appellee.
Judges: GOSHORN, J., concurs.
Reporter: Southern Reporter, Second Series
Volume: 634
Pages: 775–782

Head Matter:
Michael Lawrence WEINSTOCK, Appellant, v. Ronda C. WEINSTOCK, Appellee.
No. 92-2911.
District Court of Appeal of Florida, Fifth District.
March 31, 1994.
Richard D. West of Richard D. West, P.A., Orlando, and Samuel J. Weiss, of Samuel J. Weiss, P.A., Winter Park, for appellant.
J. Cheney Mason of J. Cheney Mason, P.A., Orlando, for appellee.

Opinion:
PETERSON, Judge.
This appeal involves the valuation of goodwill attributable to a professional practice for the purpose of making an equitable distribution in a marital dissolution. In Thompson v. Thompson, 576 So.2d 267 (Fla.1991) the supreme court held that goodwill may be factored in determining the value of a professional practice. In answering the certified question involving the goodwill of a law practice the court stated:
If a law practice has monetary value over and above its tangible assets and cases in progress which is separate and distinct from the presence and reputation of the individual attorney, then a court should consider the goodwill accumulated during the marriage as a marital asset. The determination of the existence and value of goodwill is a question of fact and should be made on a case-by-case basis with the assistance of expert testimony.
Thompson at 270.
In Young v. Young, 600 So.2d 1140 (Fla. 5th DCA), rev. denied, 613 So.2d 13 (Fla.1992), this court considered, in light of the Thompson opinion, the valuation methods of two expert appraisers. In Young we concluded that neither appraisal conformed to the Thompson formula and rejected both. The experts' opinions in Young were rejected because they failed to use the fair market value approach mandated by Thompson. In Young, the husband's expert, Michael Mard, testified that he first arrived at an "economic net worth" of the husband's medical practice and then determined "excess earnings." The "excess earnings" represented goodwill, but, by using such an approach, he could not determine what portion of the excess earnings should be allocated for personality, presence and reputation. Mard concluded that since most of the value of goodwill was attributable to the husband's personal demean- or and philosophy, any goodwill could not be supported if the husband was removed from the practice. The wife's expert created a "nonsensical rule of thumb to arrive at an inflated figure" by simply equating goodwill to one-half of the prior year's gross billings. Young, 600 So.2d at 1142.
Mard was also the husband's expert witness on valuation in the instant case and based his appraisal on the "excess earnings" approach disapproved in Young. He testified that part of the value of the husband's dental practice was attributable to goodwill, but that there was no way to prove that goodwill existed independently of the husband's goodwill, that is, his personal demean- or, philosophy and reputation.
The wife's expert witness presented an appraisal that differs from the ones presented in Young. Her expert was a dentist who has become a consultant for dentists and other health care professionals who are in need of an evaluation of a practice for the purpose of sales, purchases, loans and dissolution proceedings. This appraiser reviewed the husband's appraisal prepared by Mard and financial records of the practice. He compared gross sales of eleven other similar Florida dental practices sold between 1991 and 1992 and opined that the husband's practice, apart from tangible assets and accounts receivable, was worth from $300,000 to $440,-000. The trial court found the goodwill to be worth $300,000, the tangible assets $40,000, and accounts receivable $65,000 for a total value of the practice at $405,000.
The husband argues that the wife's appraiser failed to reduce goodwill by the Thompson requirement that personal goodwill be subtracted based upon the reputation and presence of the practitioner. Judge Gos-horn addressed this problem in his concurring opinion in Young. He noted that producing evidence that goodwill exists separate and apart from a professional's reputation is impossible but that the Thompson valuation method automatically separates reputation from the other elements of goodwill. He reasoned that:
The fair market value approach adopted in Thompson as an exclusive method of evaluating the goodwill of a professional association requires the court to determine the amount of money that a willing buyer would pay a willing seller. It is obvious that a willing buyer would not pay for that which he is not getting. A willing seller of the assets of a professional association, once he sells, is no longer part of the business, and therefore the seller's reputation cannot be part of the goodwill a willing buyer is purchasing. Thus, the fair market value method has, by definition, separated professional reputation from the remaining elements of goodwill, such as established patients, referrals, location, associations, and office organizations which may attach to the buyer.
Young, 600 So.2d at 1143 (Goshorn, C.J., concurring) (footnote omitted) (emphasis added).
In Thompson, the supreme court directed that the fair market value approach is to be used as the exclusive method of measuring the goodwill of a professional assoeiation. The court described the fair market value approach in traditional terms as "what would a willing buyer pay, and what would a willing seller accept, neither acting under duress for a sale of the business." Thompson, 576 So.2d at 270. However, the fair market value does not include the continued presence of the marital litigant or the continuing influence of the personality and reputation of the litigant upon patients after the sale:
[I]f goodwill depends upon the continued presence of a particular individual, such goodwill, by definition, is not a marketable asset distinct from the individual. Any value which attaches to the entity solely as a result of personal goodwill represents nothing more than probable future earning capacity, which, although relevant in determining alimony, is not a proper consideration in dividing marital property in a dissolution proceeding.
Thompson, 576 So.2d at 270, quoting Taylor v. Taylor, 222 Neb. 721, 731, 386 N.W.2d 851, 858 (1986).
In the instant case, the testimony of the wife's expert indicates that in the compa-rables used to value the husband's practice, "quite often the seller will sell the practice and remain with the practice for a year or two after the sale." During cross-examination, the witness indicated that in all of the comparables relied upon for the valuation at trial the selling dentists continued to practice at the location for some time after the sale. There were no comparables in which the presence of the selling dentist was discontinued. The testimony of the wife's expert on this point during cross-examination by the husband's attorney follows:
Q. Okay. I guess the Lakeland, 1990 sale would be different. The Clearwater— let me see, there was one, two Clearwaters for 1990. In how many of these cases did the dentist not stay on, or the dentists?
A. When you say "not stay on", you mean leave within a short period of time, a few weeks after the sale?
Q. Picks the check up at the closing, walks out the door, gone. Any of them?
A. Clearwater, but we're not using Clear-water.
Q. Right, right.
A. Clearwater wasn't—
Q. We're not using the 1990 Clearwater.
A. Yes.
MR. MASON: No. All right. Just a minute. Counsel doesn't say what we're using or not using. We're not using a 1990. That certainly is a—
THE COURT: She's not asking about that.
MR. MASON: We are using it.
THE COURT: I understand.
BY MS. WEBER:
Q. So, none; is that a none?
A. None of the ones that you have asked me questions about, we were considering, from your perspective, could be used.
Q. Okay. So, then in none of them the guy died and you were dealing with an estate for the seller?
A. None of these particular sales, that's correct.
It is an inescapable conclusion that none of the comparables included a situation where a selling professional did not remain with the buyer in the conduct of the professional practice for a period of time after the closing of the sale. The wife's counsel asked no questions on redirect examination that would allow one to conclude otherwise. The compa-rables used cannot serve as competent evidence of value in view of the language in Thompson that "such goodwill, to be a marital asset, must exist separate and apart from the reputation or continued presence of the marital litigant." Thompson, 576 So.2d at 270. The wife's expert opinion also would not be competent evidence under Judge Gos-horn's reasoning in Young since there was no attempt to deal with the problem of the continued presence of the dentists after the comparable sales took place.
We believe that husband's counsel asked appropriate questions upon cross-examination of the witness that may have ferreted out the proper method for determining the value of goodwill. She asked whether any of the comparables were for a dentist who "just quit." The purest form of comparable in the sale of any business would be a sale in which, on the day of closing, the seller simply picks up the sales proceeds and retires or moves out of the area, thus eliminating any further personal influence the seller could have on the business.
The inclusion of the goodwill as a marital asset was improper because the evidence failed to establish a value for this goodwill apart from the husband's continued presence. However, because the monthly cash flow to the wife and payments by the husband will be substantially decreased in the absence of any asset value being assigned to goodwill, the entire scheme of alimony and equitable distribution of assets is vacated. See Noah v. Noah, 491 So.2d 1124, 1128 (Fla.1986) ("[T]he trial court should be given an opportunity on remand to reconsider the entire distribution scheme, including . alimony, as these are interrelated remedies and part of one overall scheme."). On remand, the trial court shall refashion an equitable distribution of the marital assets excluding the "goodwill" as an asset and reconsider the amount of alimony to be awarded.
The final judgment of dissolution is vacated except that portion that dissolves the marriage.
VACATED IN PART; REMANDED.
GOSHORN, J., concurs.
W. SHARP, J., dissents with opinion.