Opinion ID: 2575848
Heading Depth: 3
Heading Rank: 3

Heading: The Superior Court Erred in Treating Excess Profits Earned by the Clinic During the Separation Period as Jayne's Separate Property.

Text: Marital property includes all property acquired during the marriage, `excepting only inherited property and property acquired with separate property which is kept as separate property.' [21] The clinic was started during the marriage, and Jayne's primary means of employment was her clinic work. The parties do not dispute that the business was marital property. However, spousal income earned after a final separation leading to divorce is not marital property. [22] Blanton accepts this general principle but argues that some of the post-separation profit that Jayne earned from the business was not her separate income, but represented excess earnings or profits stemming from the other clinic activities, such as the efforts of various technicians and sales of speciality services and cosmetics. He posits that these profits are marital property. [23] Jayne responds that the superior court found that all of the business profits were from her sole efforts and that there were no excess profits. We agree with Blanton that the court erred in declining to consider the amount of separation period excess earnings. The clinic's unmarketability made it unnecessary to determine the value of the clinic's goodwill. [24] But lack of goodwill does not address and is irrelevant to the separate question of whether there were profits from clinic activities other than Jayne's efforts as a dermatologist during the separation period that should be divided between the parties. [25] Thus, because the court relied on its resolution of the goodwill issue to avoid examining the clinic's excess profits, it erred. Jayne relies on the language of the superior court's written order, arguing that its statement that there may be $20,000 in excess earnings and its failure to apportion any earnings support the conclusion that there were no excess profits. However, the court's oral decision and an exchange between the court and Blanton's counsel support Blanton's argument that the court did find there to be some excess profits. But the court then declined to consider the source of this profit or its value based on its conclusion, which was unrelated to the excess profits issue, that the practice lacked marketable goodwill. [26] Because the court acknowledged that some excess profits existed, but then failed to identify the source of these profits or quantify their value, we reverse its decision to treat excess profits from the clinic as Jayne's separate property. On remand, the court should determine what portion of the clinic's post-separation income involved excess profits stemming from clinic activities above and beyond Jayne's work as a dermatologist and then classify this sum as marital property.