Court Opinion

ID: 9571769
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:35:00.582654+00
Date Added: 2024-06-11T12:30:55.676735
License: Public Domain

Rosellini, J.
(dissenting) — This case involves the twin issues of characterization and valuation of a spouse's professional education. The majority declines to address whether the professional degree should be characterized as property, and simply holds that the expectation of future financial benefit derived from supporting a spouse through professional school is a relevant "factor" which must be considered in making a just and equitable division of property and liabilities or a just maintenance award. While I am in general agreement with this holding, I would characterize this interest as a marital asset in the context of increased earning capacity subject to distribution.
The majority's holding on the issue of valuation/recovery is limited to an award to the supporting spouse in the form of reimbursement and/or rehabilitative maintenance or property distribution. I do not agree that such an award is a just and equitable distribution of the assets of the community. I would hold that the value of the educational degree is measured by the increased earning capacity inherent in the particular education and as such is subject to a just and equitable distribution.
I
The dissolution of marriage act, RCW 26.09, provides a *185flexible manner of determining what are the assets of the community subject to distribution and includes the respective earning capacities of the parties.
RCW 26.09.080 reads in part:
In a proceeding for dissolution of the marriage, legal separation, . . . the court shall, without regard to marital misconduct, make such disposition of the property and the liabilities of the parties, either community or separate, as shall appear just and equitable after considering all relevant factors including, but not limited to:
(1) The nature and extent of the community property;
(2) The nature and extent of the separate property;
(3) The duration of the marriage; and
(4) The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to a spouse having custody of any children.
In addition to the four subsections in RCW 26.09.080, which include " [t]he economic circumstances of each spouse at the time the division of property is to become effective," the court should also consider the age, health, education and employment history of the parties and their children, and the future earning prospects of all of them in determining a just and equitable division. DeRuwe v. DeRuwe, 72 Wn.2d 404, 408, 433 P.2d 209 (1967); In re Marriage of Rink, 18 Wn. App. 549, 551, 571 P.2d 210 (1977). See also Comment, Property Dispositions in Dissolution Proceedings: The Criteria in Washington, 12 Gonz. L. Rev. 492 (1977); Reike, The Dissolution Act of 1973: From Status to Contract?, 49 Wash. L. Rev. 375, 403-05 (1974).
Additionally, RCW 26.09.090 sets forth the factors to be considered by a trial court in determining the propriety of a maintenance award. These factors include the financial resources, health and education of the respective parties, the duration of the marriage and the standard of living established therein.
Support for characterizing the professional education degree as a divisible asset is found in other areas of intan*186gible and speculative property rights considered to be divisible upon dissolution.
The accounting concept of goodwill, like an advanced professional degree, is by nature an asset with an elusive value. However, this court and the lower appellate courts have held that professional goodwill, although intangible and commonly defined as the expectation of continued public patronage, is a factor which has a value and should be included among the assets distributed upon a marriage dissolution. In re Marriage of Fleege, 91 Wn.2d 324, 588 P.2d 1136 (1979); In re Marriage of Kaplan, 23 Wn. App. 503, 597 P.2d 439 (1979); In re Marriage of Freedman, 35 Wn. App. 49, 665 P.2d 902, review denied, 100 Wn.2d 1019 (1983); In re Marriage of Lukens, 16 Wn. App. 481, 558 P.2d 279 (1976), review denied, 88 Wn.2d 1011 (1977). While the goodwill of a particular professional practice may not be marketable and the determination of its value difficult, it is nonetheless an asset of the community because it has a value to the professional spouse. Fleege, at 326-27; Freedman, at 52. The nonprofessional spouse, having contributed to the building of the professional practice through the provision of services, financial, domestic, or otherwise, has a valuable interest in the goodwill of the professional spouse's practice. The mere fact that goodwill is an amorphous asset and a value cannot be precisely determined is an improper basis for a court's refusal to acknowledge and to consider the existence of the goodwill value when dividing the value of a professional practice between spouses in a marital dissolution proceeding. Fleege, at 327-30; Lukens, at 484.
Methods of placing a value on professional goodwill vary according to the circumstances of each case. Factors considered when valuing the goodwill of a professional practice include the length of time that the professional spouse has practiced, the comparative success of the spouse's professional practice, the professional spouse's age and health, the past profits of the practice, the fixed resources of the practice, and the physical assets of the practice. Fleege, at 326; *187Lukens, at 484.
The crucial point for our inquiry is not the means by which goodwill is valued, but that a property interest is found in an intangible.
The divisibility of pension and retirement benefits of an employed spouse upon dissolution provides another analogy to support the proposition that the professional degree be considered an asset subject to distribution. Even though pension and retirement benefits normally are not mature, but are future interests, contingent future interests, or even expectancies, the benefits may have a value to both spouses that is capable of division as property. See Wilder v. Wilder, 85 Wn.2d 364, 534 P.2d 1355 (1975); DeRevere v. DeRevere, 5 Wn. App. 741, 491 P.2d 249 (1971). See also Foster & Freed, Spousal Rights in Retirement and Pension Benefits, 16 J. Fam. L. 187 (1977-78).
In a wrongful death or a personal injury action, courts consistently have recognized the need to determine the value of a professional education in order to compensate fully a plaintiff for loss of future income. Damages in a personal injury or wrongful death action are unliquidated; no one fixed mathematical formula is used to decide each case. Rather, each case involves different facts, considerations, and probabilities to which courts cannot attempt to apply a formula. Instead, courts must assume that each situation is unique and recognize that a determination of damages involves some speculation, uncertainty, and arbitrariness. Courts, however, rarely deny a remedy for lost future earning capacity in a personal injury or wrongful death action merely because assessing future earning capacity involves the court in some speculation. We should be equally hesitant to deny relief to a nonstudent spouse who has lost the economic potential of the partial value of the education that she helped to provide. See Peck & Hopkins, Economics and Impaired Earning Capacity in Personal Injury Cases, 44 Wash. L. Rev. 351 (1969).
A court easily can extend the tort concept of valuation of future earning capacity to a situation in which the support*188ing spouse will lose the economic benefits of the degreed spouse's education upon dissolution of the marriage. The nonstudent spouse will lose the same expectancy as the plaintiff will in the personal injury or wrongful death action. See Comment, The Interest of the Community in a Professional Education, 10 Cal. W. L. Rev. 590 (1974).
A number of recent cases from sister jurisdictions have held that the supporting spouse is entitled to a distribution of increased earning potential for his or her support of the family while the other spouse obtained an education.
The leading case cited most often for the proposition that a professional degree is not property is the Colorado Supreme Court decision of Graham v. Graham, 194 Colo. 429, 574 P.2d 75 (1978), where by a sharply divided vote (4 to 3) that court held that an educational degree was not property capable of division in marriage dissolution proceedings. Nonetheless, the majority in Graham did conclude that a spouse's contributions to the acquisition of a professional degree could be considered in matters of alimony for support and maintenance and for property settlement where marital property existed to be divided. It should further be noted that the Graham majority, unlike Washington, appears to consider goodwill as not a community asset subject to distribution.
In In re Marriage of Horstmann, 263 N.W.2d 885 (Iowa 1978), the Iowa Supreme Court agreed with the pronouncement of the Colorado Supreme Court in Graham that a professional degree is not an asset to be considered in the distribution of the marital property. However, the court held that the increased earning potential made possible by the degree was an asset for distribution by the court. The court said, at page 891:
We hold a trial court in a dissolution case where proper evidence is presented may consider the future earning capacities of both parties and in determining those capacities it may consider the education, skill or talent of both parties. This statement of principle, articulated in Schantz [v. Schantz, 163 N.W.2d 398 (Iowa *1891968)], applies to the court's determination of an equitable distribution of assets and property and to a determination of whether alimony should be awarded and, if so, to the amount to be awarded. In re Marriage of Beeh, 214 N.W.2d 170, 174 (Iowa 1974).
In Wisner v. Wisner, 129 Ariz. 333, 631 P.2d 115, 122-23 (Ct. App. 1981), the court held that while an education itself is not properly subject to division in a dissolution of marriage proceeding, it is still a factor to be considered, in addition to others, in arriving at an equitable property division and in determining manner of spousal maintenance and child support:
We agree with the majority opinion in Graham that education is an intangible property right, the value of which, because of its character, cannot properly be characterized as property subject to division between the spouses. In our opinion, the marital property concept simply "does not fit." However, while an education itself is not property subject to division, it is still a factor to be considered, in addition to others, in arriving at an equitable property division and in determining matters of spousal maintenance and child support. Thus, while education, along with the potential for greater earning capacity which can accompany it, is doubtless a factor to be considered by the trial judge in determining what distribution of property would be "equitable", and is even more obviously relevant upon the issue of spousal maintenance, it cannot be deemed property as such within the meaning of the Arizona statute.
(Citations omitted.) Wisner, at 340-41.
In In re Marriage of Vanet, 544 S.W.2d 236 (Mo. Ct. App. 1976), the court held that a professional education and right to practice in a particular field are in the nature of a financial resource and a realistic assessment properly entails consideration of anticipated earning capacity.
Recently the Court of Appeals of Michigan in Woodworth v. Woodworth, 126 Mich. App. 258, 260-61, 337 N.W.2d 332, 334 (1983) held that the husband's law degree, which was the end product of a concerted family effort, was marital property subject to distribution upon dissolution of *190the marriage:
The facts reveal that plaintiffs law degree was the end product of a concerted family effort. Both parties planned their family life around the effort to attain plaintiff's degree. Toward this end, the family divided the daily tasks encountered in living. While the law degree did not pre-empt all other facets of their lives, it did become the main focus and goal of their activities. Plaintiff left his job in Jonesville and the family relocated to Detroit so that plaintiff could attend law school. In Detroit, defendant sought and obtained full-time employment to support the family.
We conclude, therefore, that plaintiff's law degree was the result of mutual sacrifice and effort by both plaintiff and defendant. While plaintiff studied and attended classes, defendant carried her share of the burden as well as sharing vicariously in the stress of the experience known as the "paper chase".
We believe that fairness dictates that the spouse who did not earn an advanced degree be compensated whenever the advanced degree is the product of such concerted family investment. The degree holder has expended great effort to obtain the degree not only for himself or herself, but also to benefit the family as a whole. The other spouse has shared in this effort and contributed in other ways as well, not merely as a gift to the student spouse nor merely to share individually in the benefits but to help the marital unit as a whole.
Numerous other states have also granted relief to the supporting spouse based in part on increased earning capacity. See, e.g., Moss v. Moss, 639 S.W.2d 370 (Ky. Ct. App. 1982); DeLa Rosa v. DeLa Rosa, 309 N.W.2d 755 (Minn. 1981); Hubbard v. Hubbard, 603 P.2d 747 (Okla. 1979); O'Brien v. O'Brien, 114 Misc. 2d 233, 452 N.Y.S.2d 801 (1982); Daniels v. Daniels, 20 Ohio Ops. 2d 458, 185 N.E.2d 773 (Ct. App. 1961). See also Ind. Code § 31-1-11.5-ll(c) (1980), overruling Wilcox v. Wilcox, 173 Ind. App. 661, 365 N.E.2d 792 (1977).
Accordingly, I would characterize the professional education as a marital asset in the context of increased earning capacity subject to distribution.
*191II
Having determined that the professional degree is an asset of the marital community, we must next determine what method of valuation should be used to compensate the supporting spouse.
I reject the restitution and rehabilitation methods adopted by the majority. Application of these methods can be seen in the New Jersey decisions of Mahoney v. Mahoney, 91 N.J. 488, 453 A.2d 527 (1982); Hill v. Hill, 91 N.J. 506, 453 A.2d 537 (1982); Lynn v. Lynn, 91 N.J. 510, 453 A.2d 539 (1982).
An assumption that a professional education is solely a monetary purchase underlies the restitution and rehabilitation method of valuation. The court merely measures the supporting spouse's recovery by the amount of contributions to attainment of the degree and loss of earnings to the community while the student spouse is attaining an education, together with opportunities the supporting spouse has forgone.
This measure of recovery undercompensates the supporting spouse by completely ignoring the value of the professional education as a marital asset. Acquiring an education represents more than a mere monetary contribution and forfeiture of opportunity. Limiting the recovery to restitution and rehabilitation (lost opportunity) does not provide the supporting spouse his/her expectation of economic benefit from the career for which the education laid the foundation. The degree was a family investment, rather than a gift or benefit to the degree holder alone. See Woodworth v. Woodworth, 126 Mich. App. 258, 337 N.W.2d 332 (1983); Pinnel, Divorce After Professional School: Education and Future Earning Capacity May Be Marital Property, 44 Mo. L. Rev. 329, 335 (1979); Loper, Horstmann v. Horst-mann: Present Right To Practice a Profession as Marital Property, 56 Den. L.J. 677, 689 (1979). A just and equitable distribution of this asset requires valuation of the increased earning capacity inherent in a professional education.
Placing a value on an individual's earning potential is not *192compensation for a failed expectation that the professional spouse would realize his/her full economic potential. Rather the valuation is upon the effect of the present right to practice a particular profession on the spouse's earning capacity. See Note, Family Law: Ought a Professional Degree Be Divisible As Property Upon Divorce?, 22 Wm. & Mary L. Rev. 517 (1981); Comment, The Interest of the Community in a Professional Education, 10 Cal. W. L. Rev. 590 (1974).
The Michigan Court of Appeals set forth the relevant factors in valuing a professional degree:
[T]he length of the marriage after the degree was obtained, the sources and extent of financial support given plaintiff during his years in law school, and the overall division of the parties' marital property. In determining the degree's present value, the trial court should estimate what the person holding the degree is likely to make in that particular job market and subtract from that what he or she would probably have earned without the degree. Recompense for Financing Spouse's Education: Legal Protection for the Marital Investor in Human Capital, 28 Kan L Rev 379, 382-384 (1980).
(Footnote omitted.) Woodworth v. Woodworth, 126 Mich. App. at 269.
The Supreme Court of Kentucky in Inman v. Inman, 648 S.W.2d 847 (Ky. 1982) indicated that if the issue were before the court, the proper formula to be followed in placing a value on an educational degree secured by a spouse, to which the other spouse contributed financially, is to measure the recovery by the amount of money the nonstudent spouse contributed toward living expenses, the amount of money contributed for educational costs, and the potential for increase in future earning capacity made possible by the degree, thus not treating the degree as marital property.
The method for valuation of the increased earning capacity should require a comparison of the student spouse's earning capacity at the time of marriage with that at the time of dissolution or permanent separation. From this value a just and equitable distribution should be made *193between the parties. Where a marriage has endured for some time after the degree is obtained, the supporting spouse may already have been benefited from the increased earning capacity and such should be taken into account in making a just and equitable distribution. Because this method of calculation is akin to the method used to ascertain damages for loss of earnings in a tort or wrongful death action, a body of knowledge already exists in the field of economics to make this type determination.
Ill
Turning to the cases before the court, I would reverse and remand both decisions for a valuation of the professional education and a just and equitable distribution in accordance with the mandate of RCW 26.09.080. In the event that there is insufficient property to make a just and equitable award to the supporting spouse, the trial court may award a lump sum payment to be distributed by the professional spouse in periodic payments over a reasonable period of time.