Opinion ID: 2635274
Heading Depth: 3
Heading Rank: 1

Heading: Characterization of professional goodwill

Text: James disputes the magistrate judge's characterization of his portion of the professional goodwill in DCI as community property to be divided in a divorce. This Court has held that good will is an appropriate factor in determining the value of a business. Olsen v. Olsen, 125 Idaho 603, 606, 873 P.2d 857, 860 (1994). The goodwill of a business is the custom which it attracts, and the benefits or advantage it receives from constant or habitual customers, and the probability that the old customers will continue to come to the place. Harshbarger v. Eby, 28 Idaho 753, 761, 156 P. 619, 621 (1916); see also McAffee v. McAffee, 132 Idaho 281, 286, 971 P.2d 734, 739 (1999). The question presented by this case is whether goodwill is an appropriate factor to consider in determining the community property value of a professional services corporation, an issue of first impression. Any division of property in a divorce proceeding begins with the presumption that all property acquired after marriage is community property. Reed, 137 Idaho at 58, 44 P.3d at 1113. The trial court reasoned that James acquired all of his interest in DCI during marriage and that the value of his interest in DCI, including goodwill, was community property. There seems to be no principled reason to treat the goodwill of a business differently when it is a professional services corporation. The property rights of individuals with professional educations and licenses do not differ from the rights of people engaged in other types of business. Determining the value of goodwill in small professional services corporations may indeed be difficult, since Idaho law treats personal skill and reputation as separate assets rather than community property. See Wolford v. Wolford, 117 Idaho 61, 67, 785 P.2d 625, 631 (1990) (holding that personal attributes, including knowledge, skill, and reputation, were not property, either separate or community); Olsen, 125 Idaho at 606, 873 P.2d at 860 (stating that knowledge, background, and talent are personal assets rather than community property). Where a professional business is an independent entity, however, goodwill is calculable and divisible in divorce just as goodwill in any other business. DCI was such an independent entity, and it was possible for the magistrate judge to distinguish between James' identity and the separate identity of DCI. A practitioner's knowledge, skill, and background are personal attributes. To the extent a professional services corporation has goodwill value beyond these personal assets, however, that goodwill is community property.