Court Opinion

ID: 2728787
Source: CourtListenerOpinion
Date Created: 2014-09-08 21:36:15.448226+00
Date Added: 2024-06-11T12:40:00.145208
License: Public Domain

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before
any court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.

ATTORNEY FOR APPELLANT:                                 ATTORNEY FOR APPELLEE:

ROBERT E. SAINT, ESQ.                                   DEBORAH FARMER SMITH
Emswiller, Williams, Noland                             Campbell Kyle Proffitt LLP
  & Clarke, P.C.                                        Carmel, Indiana
Indianapolis, Indiana

                                                                               FILED
                                                                         Nov 29 2012, 9:44 am
                               IN THE
                     COURT OF APPEALS OF INDIANA                                 CLERK
                                                                               of the supreme court,
                                                                               court of appeals and
                                                                                      tax court

H. WAYNE BURNETT, M.D.,                            )
                                                   )
       Appellant-Respondent,                       )
                                                   )
               vs.                                 )   No. 29A02-1203-DR-180
                                                   )
PAMELA A. BURNETT, M.D.,                           )
                                                   )
       Appellee-Petitioner.                        )

                     APPEAL FROM THE HAMILTON SUPERIOR COURT
                          The Honorable William J. Hughes, Judge
                             Cause No. 29D03-0909-DR-1207

                                        November 29, 2012

                 MEMORANDUM DECISION - NOT FOR PUBLICATION

BAILEY, Judge
                                      Case Summary

       The marriage of Appellant-Petitioner H. Wayne Burnett, M.D. (“Husband”) and

Appellee-Respondent-Cross-Appellant Pamela A. Burnett, M.D. (“Wife”) was dissolved on

February 7, 2012. Husband now appeals the valuation of his partnership interest in a medical

practice and the award of expert witness fees to Wife. Wife cross-appeals the division of the

marital assets. We affirm.

                                           Issues

       Husband presents three issues for our review, which we consolidate and restate as the

following two issues:

       I.     Whether the trial court abused its discretion in determining the value of
              Husband’s partnership interest in a medical practice; and
       II.    Whether the trial court abused its discretion in awarding expert witness fees to
              Wife.

       Wife presents a single issue on cross appeal:

       I.     Whether the trial court abused its discretion when it deviated from the statutory
              presumption of equal division of the marital estate.

                              Facts and Procedural History

       Husband and Wife were married on June 25, 1985, and two children were born of the

marriage. Husband and Wife separated on September 28, 2009, and Wife petitioned to

dissolve the marriage on the same day. On October 6, 2011, Wife filed a request for findings

of fact and conclusions of law. On October 11 and 12, 2011, the trial court held a final

dissolution hearing. On February 7, 2012, trial court entered findings of fact and conclusions

of law, and dissolved the marriage. In its dissolution order, the trial court provided for an

                                              2
equal division of the marital estate, except it provided that Husband and Wife each should

receive his or her interest in Kentucky real estate which each had received from family by

gift or inheritance. (Appellant’s App. at 74.)

                                  Discussion and Decision

       The trial court’s order includes findings of fact and conclusions of law pursuant to

Indiana Trial Rule 52, therefore we must determine whether the evidence supports the

findings and whether the findings support the judgment. Mayer v. BMR Props., LLC, 830

N.E.2d 971, 978 (Ind. Ct. App. 2005). Findings of fact are clearly erroneous when the record

lacks any reasonable inference from the evidence to support them, and the trial court’s

judgment is clearly erroneous if it is unsupported by the findings and conclusions which rely

upon those findings. Dallas v. Cessna, 968 N.E.2d 291, 296 (Ind. Ct. App. 2012).

       In establishing whether the findings or judgment are clearly erroneous, we consider

only the evidence favorable to the judgment and all reasonable inferences to be drawn

therefrom. Id. We neither reweigh the evidence nor judge the credibility of witnesses, and

we will affirm the trial court’s decision if the record contains any supporting evidence or

inferences. Id. While we defer substantially to findings of fact, we evaluate the trial court’s

conclusions of law de novo. Id.

            Valuation of Husband’s Partnership Interest in a Medical Practice

       Husband raises two issues concerning the expert testimony and report of R. James

Alerding (“Alerding”), which we restate as the single issue of whether the trial court failed to

separate Husband’s personal goodwill from the enterprise goodwill inherent in Anesthesia

                                               3
Consultants of Indianapolis, LLC (“ACI”) while valuing Husband’s partnership interest in

ACI, and thus abused its discretion.

       A trial court has broad discretion in ascertaining the value of property in a dissolution

action, and its valuation will not be disturbed absent an abuse of that discretion. Frazier v.

Frazier, 737 N.E.2d 1220, 1225 (Ind. Ct. App. 2000). The trial court has not abused its

discretion if its decision is supported by sufficient evidence and reasonable inferences

therefrom. Id. We do not substitute our judgment for that of the trial court even where the

circumstances would support a different award. Id.

       The law regarding valuation of a business that is part of a marital estate is well settled:

       [T]he trial court must consider whether goodwill included within the total value of a
       business enterprise is personal to one spouse. Yoon v. Yoon, 711 N.E.2d 1265, 1269
       (Ind. 1999). Goodwill is the value of a business or practice that exceeds the combined
       value of the net assets used in the business. Id. at 1268. Enterprise goodwill is based
       on the intangible, but generally marketable, existence in a business of established
       relations with employees, customers and suppliers, and may include a business
       location, its name recognition and its business reputation. Id. Goodwill that is
       attributable to the business enterprise is divisible property, while goodwill that is
       personal, a surrogate for the owner’s future earning capacity, is not divisible. Id.
       Stated alternatively, goodwill that is based on the personal attributes of the individual
       is excluded from the marital estate.

Id. In calculating the value of a business that is part of a marital estate, the court must

separate personal goodwill from enterprise goodwill. Enterprise goodwill inheres in the

business, is independent of any single individual’s personal efforts, and will outlast any

person’s involvement in the business. Yoon, 711 N.E.2d at 1268-69. To the extent a

business has goodwill, quantified as value in excess of its net assets, it is a factual issue to

what extent, if any, that goodwill is personal to an individual and to what extent it is

                                                4
enterprise goodwill and therefore divisible property. Id. at 1270. It is possible for some of

the value of enhanced gross revenue to inhere in the business, even if it was generated by an

individual’s personal effort. Id. at 1271. The trial court must identify the portion of the

value that is attributable to the business without the professional’s continued participation

when calculating the value of a business that is part of a marital estate. Id. at 1272. To the

extent a part of the value of the business is attributable to factors unique to an individual,

such as unusually long hours, any enterprise value is only whatever value exists in the patient

base, and would be transferrable to a buyer unwilling to work the same long hours. Id.

       Here, Alerding testified that his method of calculating the value of Husband’s interest

in ACI excluded Husband’s personal goodwill, and left only ACI’s enterprise goodwill. He

further testified that his calculated value of Husband’s interest in ACI “could assume a sale

of the practice, it could assume a sale of his interest, it could assume he stays or leaves[.]”

He calculated that, before a discount for lack of marketability, Husband’s interest in ACI was

worth $337,000, and after the discount, it was worth $253,000. Furthermore, the trial court

entered extensive findings of fact and conclusions of law addressing the value of Husband’s

interest in ACI:

       43.     Mr. Alerding expressed his opinion of the value of Husband’s interest in ACI
       as $337,00[0].00, on an investment value basis, and $253,000.00, on a fair market
       value basis. . . . Each partner who left received $100.00 plus a “termination benefit[.]”
       . . . Thirty-two (32) partners have joined ACI since 2001; each has paid $100.00 to
       become a partner.
       44.     Husband is one of 68 partners in ACI. This number has not changed
       significantly since the date of filing.
       ...
       47.     The value for each member’s interest in ACI, as initially established by ACI, is
       $100.00. ACI has never re-determined a value after the determination of the initial

                                               5
value.
48.     Each partner in ACI holds an equal ownership interest; each partner’s
ownership interest is 100%, divided by the number of partners. However, according
to ACI’s Operating Agreement, each partner does not receive an equal share of ACI’s
income. Instead, each partner receives unequal partnership distributions pursuant to a
formula.
49.     Each ACI partner is required to execute a Partner Compensation Agreement
(“PCA”). Each PCA is identical, except for identifying information specific to the
individual member. . . .
57.     ACI is a large practice. It has formalized organization structures and systems.
In their PCAs, all its partners have executed covenants not to compete with ACI in the
event of their dissociation from ACI. Although each partner is compensated based on
the partner’s production, ACI’s ability to generate revenue is not heavily dependent
on the personal services performed by any one partner. ACI’s name does not include
the name of any partner, and its identity has remained the same for a decade despite
the addition and withdrawal of partners. Contracts between ACI and the facilities at
which it provides services are owned by ACI and not by any individual partner. None
of ACI’s contracts with any facility where it provides services requires that Husband,
or any individual partner, be available to provide anesthesia services. . . . ACI alone
determines what partner will provide services in each operating room and at each
facility; no facility controls what partners will provide services there and no partner
controls where he/she will provide services. Husband’s ability to provide anesthesia
services at ACI facilities is not dependent on his personal relationship with any
patients or with any surgeons. Even if Husband were not on the requested list of any
surgeon, he would still be scheduled to work full-time so long as he is available to
work full-time. If Husband were not a partner in a large practice, which had exclusive
contracts to provide anesthesia services at multiple facilities, Husband would have to
obtain and schedule work, bill, and collect for it. This would occupy time for which
he would not produce billable ASUs. [ASUs, also known as ASAs, are billing units
for anesthesiologists, similar to billable hours for attorneys.]
...
59.     The American Society of Anesthesiologists is a trade association of
anesthesiologists. It has created and published billing standards for the provision of
anesthesia services which are widely used and generally accepted among the national
community of anesthesiologists. Pursuant to its billing standards, anesthesia services
are recorded and billed based on ASA units or ASUs. . . .
60.     ACI compensates its partners based on ASUs[.] . . .
61.     The Medical Group Management Association is a trade association. It
compiles and publishes data relating to the management of health care entities.
Beginning in 2009, MGMA has complied and published statistics regarding the
number of ASA units billed annually by anesthesiologists. Such statistics are
published in percentile increments, so that it is possible to discern how the number of

                                       6
       ASA units billed by an individual anesthesiologist compares to the production of
       other anesthesiologists. . . . For each of . . . [2009 and 2010], Husband has produced
       ASA units slightly below the 90th percentile but above the 75th percentile. . . .
       62.    Husband’s earnings in 2009 exceeded the compensation reported by the
       MGMA for anesthesiologists at the 90th percentile in the United States even though
       Husband’s 2009 ASA units were slightly below the 90th percentile as reported by the
       MGMA. It is this difference in actual earnings [o]f Husband when compared to
       industry standards that was used as excess earnings to capitalize under the
       methodology of valuation employed by Mr. Alerding.
       ...
       5.     Mr. Alerding[] . . . [is an] expert[] in the field of business valuation, and
       therefore entitled to offer opinion testimony on or related to the issue of the value of
       Husband’s interest in ACI. [He] has extensive experience and education in the field
       of business valuation. Mr. Alerding employed reliable scientific principles in
       performing his assignment. He did so using methodology commonly accepted in the
       accounting field. [He] holds multiple certifications in the area of business valuation.
       The testimony . . . has assisted the Court in understanding the evidence and in
       determining a fact in issue.
       ...
       8.     The Court is required to identify, and to include in the marital estate subject to
       division, the tangible and intangible value of Husband’s interest in ACI. The
       intangible value to be included is required to include Husband’s enterprise goodwill
       and to exclude Husband’s personal goodwill. . . .
       13.    By virtue of its existing and long-standing arrangements with multiple facilities
       to provide anesthesia services, and also by virtue of the covenants not to compete
       signed by all 68 partners, ACI will continue to have value even if Husband no longer
       participates. This is indicative of enterprise goodwill. . . .
       14.    Mr. Alerding’s capitalization of Husband’s excess earnings, by calculating
       only Husband’s earnings which exceed the earnings of anesthesiologists in the United
       States who bill a similar number of ASUs as Husband does as reported by the
       MGMA, properly eliminated Husband’s personal goodwill from the calculation. . . .
       16.    The Court may adopt as its value, any value which is within the range of
       competent evidence presented to the Court. The range of competent evidence as to
       the value of Husband’s interest in ACI, including enterprise goodwill but not personal
       goodwill, is from $253,000.00 to $337,000.00. The value determined by the Court,
       $253,000.00, is within this range of values.

(Appellant’s App. at 41-67.) The evidence clearly supports the trial court’s determination

that the value of Husband’s interest in ACI, excluding Husband’s personal goodwill, was

$253,000. Therefore, the trial court did not abuse its discretion in reaching its decision.

                                               7
         Husband argues that this case is similar to Frazier, in which we remanded the case to

the trial court for a determination of value, excluding personal goodwill, when we were

unable to determine from the trial court’s findings and conclusions whether any portion of

the aggregate value was attributable to personal goodwill. 737 N.E.2d at 1225. However,

here we have no such problem: we are clearly able to determine from the trial court’s

findings and conclusions what portion of the aggregate value given by Alerding was

attributable to Husband’s personal goodwill, that is, none. Alerding’s method of calculating

the value of Husband’s interest in ACI excluded Husband’s personal goodwill, and left only

ACI’s enterprise goodwill.1

         To the extent Husband requests that we reweigh the evidence or reassess the

credibility of a witness, we decline to do so. Frazier, 737 N.E.2d at 1223-25. We affirm as

not clearly erroneous the trial court’s determination of the value of Husband’s divisible

interest in ACI.

                                        Expert Witness Fees

         Husband contends that the trial court abused its discretion in allowing a fee award to

Alerding without evidence to support the reasonableness of the “extraordinary fee.”

(Appellant’s Reply Br. at 13.) However, failure to raise an issue before the trial court waives

that issue on appeal. Salsbery Pork Producers, Inc. v. Booth, 967 N.E.2d 1, 3 (Ind. Ct. App.

2012).

1
  We recognize that Husband raises an argument alleging violation of Indiana Trial Rule 702 based on the
inclusion of an improper factor under Yoon. However, it is essentially the same as his previous argument
on this issue, which we have already addressed.

                                                    8
          Here, Alerding testified as to his fees, and Husband neither objected to nor cross-

examined him regarding the amount of or basis for the fees. In addition, a review of the trial

record discloses no document or filing that could be construed as raising the issue. Having

failed to raise the issue of Wife’s expert witness fees before the trial court, Husband has

waived that issue on appeal. Id.

                          Deviation from Presumptive Equal Distribution

          Wife contends that the trial court abused its discretion in awarding more than half of

the marital estate to Husband. She does not challenge the evidence, and concedes that the

evidence supports the trial court’s findings of fact. (Appellee’s Br. at 19.) Instead, she

asserts that the findings of fact fail to support the trial court’s conclusion of law deciding to

deviate from the presumptive equal division of the marital estate. She claims that the trial

court’s findings fail to justify its conclusion that Husband and Wife are each entitled to retain

the value of the interest each received in land in Kentucky by way of gift or inheritance from

their families. The crux of her argument is that the trial court considered only the source of

the property in question,2 and failed to give equal weight to evidence of the other statutory

factors.

          The law regarding deviation from an equal division of a marital estate is well settled:

          The division of marital assets lies within the sound discretion of the trial court, and we
          will reverse only for an abuse of discretion. When a party challenges the trial court’s
          division of marital property, [s]he must overcome a strong presumption that the court
          considered and complied with the applicable statute, and that presumption is one of
          the strongest presumptions applicable to our consideration on appeal. We may not
          reweigh the evidence or assess the credibility of the witnesses, and we will consider

2
    See Ind. Code § 31-15-7-5(2)(B).

                                                  9
         only the evidence most favorable to the trial court’s disposition of the marital
         property. Although the facts and reasonable inferences might allow for a different
         conclusion, we will not substitute our judgment for that of the trial court.

Hartley v. Hartley, 862 N.E.2d 274, 285 (Ind. Ct. App. 2007) (quoting DeSalle v. Gentry, 818

N.E.2d 40, 44 (Ind. Ct. App. 2004)). Under Indiana Code Section 31-15-7-5, the court is to

“presume that an equal division of the marital property between the parties is just and

reasonable.” Ind. Code § 31-15-7-5. A party may rebut this presumption with relevant

evidence that an equal division would not be just and reasonable. Id. If the trial court

determines that a party opposing an equal division has met his or her burden under the

statute, the court must state in its findings and judgment its reasons for deviating from the

presumption of an equal division. Hartley, 862 N.E.2d at 285. The trial court must consider

all of the statutory factors, rather than focusing on just one factor, but need not explicitly

address all of the factors in every case. Eye v. Eye, 849 N.E.2d 698, 701-02 (Ind. Ct. App.

2006).

         Here, the trial court entered extensive findings of fact and conclusions of law

addressing the division of the property:

         21.    Each party made reasonable contributions to the acquisition of assets according
         to his or her talents and roles within the parties’ relationship. Husband’s income-
         producing contributions exceeded Wife’s, and Wife’s non-income producing
         contributions exceeded Husband’s.
         22.    Husband is entitled to a modest deviation from the presumptive equal division
         of the marital estate based on I.C. § 31-15-17-5(2), because Husband inherited an
         ownership interest in farmland in Kentucky. Wife is entitled to a[] modest deviation
         from the presumptive equal division of the marital estate based on [§] 31-15-17-5-(2)
         because Wife inherited a life estate, subject to her father’s life estate, in rental
         property in Kentucky. The value of Husband’s inherited interest exceeds the value of
         Wife’s inherited interest. Neither party’s inherited property represents a significant
         percentage of the parties’ marital estate.

                                               10
       23.     Wife’s economic circumstances are substantially weaker than those of the
       Husband as [of] the time the division of the marital estate is to become effective.
       Even though her circumstances are not as good as Husband[’]s she leaves this
       marriage in substantial financial health receiving a net distribution in excess of 2.2
       Million dollars with very little debt. . . .
       26.     Each party engaged in spending which furthered that party’s interests as
       opposed to the joint marital enterprise. Neither party’s spending choices were
       excessive in the context of a marital net worth of over Four Million Dollars and in the
       context of the parties’ annual income. Neither party has established dissipation by the
       other party.
       27.     Wife's earnings and earning ability are not as good as Husband’s, and it is not
       anticipated that Wife’s earning ability will ever equal Husband’s earning ability.
       28.     Considering the foregoing findings and conclusion regarding a deviation from
       the equal division of the marital estate, the Court concludes that neither party is
       entitled to a deviation from the presumptive equal division of the marital estate[,] . . .
       except that each of the parties should retain the value of the interest he or she received
       in the land in Kentucky by way of gift or inheritance from their families.

(Appellant’s App. at 68-70.) Furthermore, the trial court acknowledged in its findings of fact

and conclusions of law that it was “required to consider all factors enumerated in I.C. [§] 31-

15-7-5, and to refrain from giving special weight to any one factor.” (Appellant’s App. at

67.)

       The trial court’s findings of fact and conclusions of law clearly disclose that the court

considered all of the statutory factors required by Indiana Code section 31-15-7-5, and

determined that the factors in favor of an unequal division of property outweighed the factors

supporting an equal division. “Balancing these statutory factors and the evidence related to

them is the essence of the trial court’s work in crafting a just and reasonable property

division.” Gaskell v. Gaskell, 900 N.E.2d 13, 20 (Ind. Ct. App. 2009). As such, the trial

court did not abuse its discretion, and we decline Wife’s invitation to reweigh the evidence or

substitute our discretion for that of the trial court. Id. Therefore, we affirm as not clearly

                                              11
erroneous the trial court’s unequal division of the marital estate.

                                        Conclusion

       The trial court’s determination of the value of Husband’s divisible interest in ACI and

unequal division of the marital estate were not clearly erroneous. Husband has waived his

ability to appeal the issue of the propriety of Wife’s expert witness fees.

       Affirmed.

RILEY, J., and CRONE, J., concur.

                                             12