Opinion ID: 1974156
Heading Depth: 1
Heading Rank: 2

Heading: Good Will Value as Marital Property

Text: The appellant first contends that the trial court erred when it failed to include good will in the valuation of the husband's dental practice. Having reviewed the opinion of the trial court, a majority of the panel for a plurality of reasons finds that the failure to include good will was based on an error of law. My reasons are as follows. The trial court relied on two cases, Beasley v. Beasley, 359 Pa.Super. 20, 518 A.2d 545 (1985) and DeMasi v. DeMasi, 366 Pa.Super. 19, 530 A.2d 871 (1987), in determining that the good will value of Dr. Fexa's dental practice was not to be considered as marital property subject to equitable distribution. I find the instant case to be materially distinguishable. In Beasley v. Beasley, 359 Pa.Super. 20, 518 A.2d 545 (1985), we held that good will was not a factor in valuing a law practice operated as a sole proprietorship because the good will involved could not be sold or transferred. The trial court found as fact that its value lay solely in the professional reputation of Attorney Beasley himself and was incapable of sale from Attorney Beasley to another, ethical considerations aside. Similarly, in DeMasi v. DeMasi, 366 Pa.Super. 19, 530 A.2d 871 (1987), we held that the good will of a professional corporation composed of two physicians could not be valued for equitable distribution, because the trial court had found that the two physicians practiced in different specialties and did not share patients. Despite incorporation, each physicians' practice was conducted as though it were an individual practice. Based upon the trial court's findings of fact, this Court concluded each physician's good will was personal to the physician. It was not shared in common with that of his partner in a manner which could be transferred to the other physician involved in the practice. [1] Before deciding whether Beasley and DeMasi are distinguishable, it is necessary to consider three other cases involving similar situations  Buckl v. Buckl, 373 Pa.Super. 521, 542 A.2d 65 (1988), Ullom v. Ullom, 384 Pa.Super. 514, 559 A.2d 555 (1989), and McCabe v. McCabe, ___ Pa. ___, 575 A.2d 87 (1990). In Buckl, this Court held that the good will of an architectural partnership was to be considered in placing a value on the husband's marital property. The fact that the business had a distinct identity tied to an association, rather than merely an individual, and that the work of the association could be continued by either partner, was found to create a sufficient probability that the business could remain a going concern in either partner's absence. That being the case, the good will of the clients toward the partnership could not be deemed purely personal to individual professionals in the corporation, and to that limited extent the partnership's alienable good will value could be included as part of the partnership assets for the purpose of buying into or withdrawing from the business itself. In Ullom, this Court held that it was error not to include good will value when determining a spouse's interest in an auto dealership corporation. In that case, the court had found good will to be an asset of the family owned auto dealership, but nonetheless excluded it from marital property for equitable distribution. This Court reversed the trial court reasoning that despite its intangible nature, good will would often comprise a large portion of the marketable value of a business and so it could not be ignored when determining the proper value of assets available for distribution. Recovery of good will value in Ullom was limited though. Under the terms of incorporation when any family member desired to sell their shares in the corporation, they first had to offer them to the other family members at a set price. If the shares were not purchased by the family at that price, the shares could be offered then to any other buyer for a price which, according to expert testimony, would include a substantial sum based on the good will value of the dealership. This Court found that since an ascertainable and reasonably realizable good will value could be determined, it was error for a trial court not to include its value as an asset available for distribution. Our Supreme Court was faced with a slightly different equitable distribution question in McCabe which they nonetheless answered by way of a similar rationale. In McCabe, our Supreme Court was called on to decide whether the husband's partnership share of the value of a law firm as a going concern (including good will value) should be included in the marital property equitable distribution or whether the value to be included should be limited to the amount that the husband could actually realize on withdrawal from the firm, which was limited by contract. The Court stated (I)f Mr. McCabe were able to sell, liquidate or otherwise realize the `going concern' value assigned to his partnership interest, it should be included as marital property. However, it has been clearly established that the `going concern' value cannot be realized in any manner. It would be unrealistic, therefore to assign this value to the partnership interest for purposes of equitable distribution. 575 A.2d at 87-88. From the foregoing cases, I would distill the following general considerations. If the nature of the economic good will is purely personal to the professional spouse, it is not alienable; hence, it cannot actually be realized and may not be included in the equitable distribution. Cf. McCabe; Ullom; Beasley; DeMasi. If, however, a portion of the economic good will is attributable separately to the corporation or business and can be realized by sale to another (by selling the enterprise in whole or in part, buy-in's and buy-out's included), then to that extent, there is good will value subject to equitable distribution. McCabe; Ullom; Buckl. When, as here, partners have bought-in and have been bought-out, and the dental practice has been maintained, there is a clear basis upon which to determine that the good will enjoyed by the dental practice was not entirely personal to the individual professionals involved. Likewise, when professionals share clients within the corporation, there is a basis upon which to conclude the good will is not purely personal. Buckl. On the other hand, when the corporation has remained intact throughout its history and the professionals do not share clients, there is no clear basis for concluding that there is any good will other than that inalienably attached to the individual professionals involved in the corporation. DeMasi; Beasley. The determination of whether alienable/realizable good will value exists in a particular case may often be a difficult and subtle question of fact. [2] The determination may be complicated by additional difficulties regarding the ethics and/or legality of selling professional clients  especially with regard to attorneys and doctors, whose possession of client confidences complicates matters considerably. [3] Moreover, there may also be difficulties in determining a credible value for the alienable/realizable good will; whether these difficulties are surmountable may vary with the peculiar facts of particular cases. Judge Johnson, concurring, construes Beasley more narrowly, would effectively disclaim DeMasi, and would construe Buckl more broadly so as to render good will distributable regardless of whether the business is a sole proprietorship. In one sense, I agree. If it can be shown that, despite organization as a sole proprietorship, good will value may be actually realized through sale of the business or practice, then good will value must be included. However, to the extent good will is actually personal and inalienable, and thus cannot be actually realized through sale, I would find that McCabe would preclude distribution. I note, though, that such non-distributable good will value would have to be included as part of that spouse's future earnings capacity in alimony and support determinations. Cf. Beasley, supra, 518 A.2d at 553. Judge Olszewski, on the other hand, would appear to construe Beasley and DeMasi to provide a broad personal talents exclusion. Semantically, I agree. If the good will is wholly personal and inalienable, then it cannot be actually realized, and consequently the value of that good will may not be included in equitable distribution. Beasley, supra, 530 A.2d at 881. I disagree, however, that this record would permit a conclusion that there was no good will value in the spouse's dental practice other than the personal and inalienable good will which was not realizable and so not includable. In the dental partnership involved in the instant case, the husband has had various full-time, long-term partners since approximately 1969, who were involved in the practice, and in ownership of the business. (N.T. 12/18/87 at 108A-113A, 165A-116A). Following the dissolution of various partnerships, the business continued as an entity and new partners were periodically absorbed into the business. The form of the business and its work continued unchanged despite personnel changes, thereby demonstrating that the good will of the clients of the business toward the business was not tied exclusively to the presence or skills of particular individuals but was tied to some extent to the services that could be provided by any of a number of dentists. Here, as in Buckl, the good will was capable of being valued for the purpose of buying into or withdrawing from the partnership itself, making it an asset to the business, rather than a purely personal asset. In the case before us, expert testimony on the value to be attributed to the good will of the dental partnership had been presented. As would be expected, there was a difference in the amounts proffered as the value of the good will by each party; nonetheless, despite the differences in the values determined by the experts, I find that the evidence established that husband could realize some discernable good will value on the sale of his interest in the dental practice. (N.T. 1/27/88 at 238A). Because the valuation of the alienable/realizable good will value requires a factual determination, the case must be remanded to the trial court for a determination of the proper valuation of good will to be included for equitable distribution purposes.