Court Opinion

ID: 9790811
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:59:55.798951+00
Date Added: 2024-06-11T07:37:31.772376
License: Public Domain

Judge CRISWELL
specially concurring.
I agree with the majority opinion. However, I write separately to emphasize my views as to the extent to which that asset referred to as “goodwill” should be considered by the trial court on remand in determining issues relating to maintenance and child support.
The nature of “goodwill” as an asset is one which has been the subject of some judicial controversy. Substantially all of the courts have recognized that a business possesses “goodwill” only to the extent that it is probable that the business, as a business, will continue to attract patronage. See In re Marriage of Foster, 42 Cal.App.3d 577, 117 Cal.Rptr. 49 (1974). Thus, goodwill, if it exists as an asset, is valuable only because it reflects a probability of the receipt of future income. See Kimbrough v. Kimbrough, 228 Neb. 358, 422 N.W.2d 556 (1988); In re Marriage of Hall, 103 Wash.2d 236, 692 P.2d 175 (1984); Dugan v. Dugan, 92 N.J. 423, 457 A.2d 1 (1983); Holbrook v. Holbrook, 103 Wis.2d 327, 309 N.W.2d 343 (1981). But see Marriage of Lukens, 16 Wash.App. 481, 558 P.2d 279 (1976); In re Marriage of Lopez, 38 Cal.App.3d 93, 113 Cal.Rptr. 58 (1974).
It is generally agreed, therefore, that, to determine the present value of such an asset, one legitimate method of evaluation that may be used is to determine the historical income attributable to goodwill, to assess the probability of that income’s continuance, discounted by the business risks involved, and to engage in a “capitalization” method of reducing the future estimated income to present worth. See Marriage of Hall, supra; Dugan v. Dugan, supra. Such a capitalization method of evaluation is similar to the capitalization method of reducing any future income stream to present worth. See Brady v. Burlington, *807752 P.2d 592 (Colo.App.1988) (reduction of employee’s future wages to present worth).
Here, both expert witnesses presented by the parties, as well as the court, adopted this capitalization method of evaluating the “goodwill” of husband’s business. That evaluation, therefore, was based upon the premise that husband would continue to receive future income. And, to the extent that an interest in that asset was transferred to wife, she received (although in a different form) a portion of the future income that that asset was predicted to produce.
As a corollary, husband’s right to receive such income was reduced. That is, while he will continue to receive the future proceeds produced by such asset, he is required to pay to wife a sum representing the present value of a portion of that future income.
Under these circumstances, it is my view that the trial court, after treating this interest in future income as an asset and dividing it, cannot for purposes of maintenance or child support, continue to treat all of it as husband’s sole income.
While I have found no cases deciding this question with respect to the goodwill of a professional business, several courts have reached a similar conclusion with respect to other assets whose value is based upon their ability to produce future income. Generally, for example, it has been held that, to the extent that the right to receive pension payments in the future has been considered an asset for property division purposes, those payments may not also be considered as income for maintenance or support purposes. See Stemper v. Stemper, 403 N.W.2d 405 (S.D.1987); Pelot v. Pelot, 116 Wis.2d 339, 342 N.W.2d 64 (1983); D’Oro v. D’Oro, 187 N.J.Super. 377, 454 A.2d 915 (1982). See also Innes v. Innes, 117 N.J. 496, 569 A.2d 770 (1990) (decided after adoption of statute codifying D’Oro rule).
I do not agree that, at least for child support purposes, this right to receive future income should be considered solely as an asset and not as income. To do so would not accurately depict the funds collectively available to provide for the children’s future support.
However, in considering such income for support purposes, that income cannot be looked upon as the sole income of the party who is to receive the future payments. Rather, to the extent that the asset producing that income has been divided by requiring that party to pay a part of the asset’s present worth to the other party, a sum representing the interest transferred must be subtracted from the transferor’s income and added to the transferee’s income before applying the statutory guideline. Failure to make such an income allocation would, in my opinion, give to the transferee a double credit. See Stemper v. Stemper, supra.
Thus, it is my opinion that, on remand, the court, in determining the parties’ income for purposes of child support, must subtract from husband’s income and add to wife’s income that part of the funds being received by husband that is attributable to that share of the goodwill asset which, under the property division order, husband was required to transfer (by payment of its present value) to wife.