Court Opinion

ID: 2917804
Source: CourtListenerOpinion
Date Created: 2015-09-10 22:22:19.695567+00
Date Added: 2024-06-11T14:56:19.818335
License: Public Domain

NO. 12-06-00265-CV

                       IN THE COURT OF APPEALS

          TWELFTH COURT OF APPEALS DISTRICT

                                    TYLER, TEXAS

EDWARD LEWIS VON HOHN, II,                       §            APPEAL FROM THE 307TH
APPELLANT

V.
                                                 §            JUDICIAL DISTRICT COURT OF
SUSAN JOAN VON HOHN, AND IN THE
INTEREST OF H.B.V.H. AND A.S.V.H.,
MINOR CHILDREN,
APPELLEE                                         §            GREGG COUNTY, TEXAS

                                            OPINION
       Appellant Edward Lewis Von Hohn, II appeals the trial court’s final decree of divorce. On
appeal, Edward presents three issues. We affirm in part and reverse and remand in part.

                                          BACKGROUND
       Edward and Susan Joan Von Hohn were married on June 28, 1997 and are the parents of two
children, H.B.V.H. and A.S.V.H. Susan filed for divorce in July 2004, and the parties agreed that
Susan be appointed sole managing conservator of the children and that Edward be appointed
possessory conservator. Edward was also ordered to pay child support. The parties could not agree
on a division of their community property, particularly the community property interest, if any, in
Edward’s ownership interest in the law firm of Nix, Patterson & Roach (the “Nix Law Firm”).
       Edward and the other partners of the Nix Law Firm signed a partnership agreement. The
partnership agreement allotted each partner a certain number of units of participation, assigned each
partner an undivided profits account and a capital account, and included a formula for calculating
a partner’s interest in the partnership as of the date of his death and as of the effective date of his
retirement, withdrawal, or expulsion. The partnership agreement did not provide a method of
valuing a partner’s interest in the event of his divorce. The trial court granted, in part, Edward’s
motion to exclude the expert testimony of James C. Penn, concluding that the proper measure of the
value of the community property interest in the Nix Law Firm included methods other than those set
forth in the partnership agreement. However, the trial court found that no more than two years of
the Nix Law Firm’s future earnings should be considered in valuing Edward’s interest in the firm.
Ultimately, a jury found that the value of Edward’s interest in the Nix Law Firm was $4.5 million
dollars, subject to taxes. This appeal followed.

                                               EXPERT WITNESS
         In his second issue, Edward argues that the trial court erred in failing to exclude the testimony
of Susan’s expert, James C. Penn. He contends that Penn’s testimony did not meet the relevance and
reliability requirements of rule 702 of the Texas Rules of Evidence, was not based on a reliable
foundation, and was based on unreliable methods, analysis, and principles. Further, he argues that
there was no evidence that Penn’s methodology in valuing a business, particularly a law firm, was
used by other valuation experts.1
Standard of Review
         The qualification of a witness as an expert is within the trial court’s discretion. Broders v.
Heise, 924 S.W.2d 148, 151 (Tex. 1996). An appellate court will not disturb a trial court’s exercise
of its discretion absent clear abuse. Id. “The test for abuse of discretion is whether the trial court
acted without reference to any guiding rules or principles.” Id. (quoting E.I. du Pont de Nemours
& Co. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995)). Further, the party offering the expert’s

         1
           Edward also argues that Penn’s testimony did not assist the jury in resolving disputed fact issues, served
only to confuse, mislead, and prejudice the jury, and that the probative value of Penn’s testimony was substantially
outweighed by the danger of unfair prejudice and confusion of the jury. Edward’s brief contains citations to case law
on the standards of admissibility of expert opinions, but does not contain a clear and concise argument for these
contentions or citations to the record. See T EX . R. A PP . P. 38.1(h). Therefore, we do not address these arguments.
Further, Edward contends that the “analytical gap” was too great between the relevant underlying data and Penn’s
expert opinion, and that Penn’s methodology is contrary to current case law. W e will address these arguments later
in this opinion.

                                                          2
testimony bears the burden to prove that the witness is qualified under rule 702 of the Texas Rules
of Evidence. Id.
Applicable Law
        Rule 702 contains three requirements for the admission of expert testimony: (1) the witness
must be qualified, (2) the proposed testimony must be scientific, technical, or other specialized
knowledge, and (3) the testimony must assist the trier of fact to understand the evidence or to
determine a fact in issue. TEX . R. EVID . 702; see also Robinson, 923 S.W.2d at 556. In order to
constitute the type of knowledge that will assist the trier of fact, the proposed testimony must also
be relevant and reliable. Robinson. 923 S.W.2d at 556. The trial court is responsible for making the
preliminary determination of whether the proffered testimony meets the standards. Id. Rule 702's
language makes no pertinent distinction between “scientific” knowledge and “technical” or “other
specialized” knowledge. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147, 119 S. Ct. 1167,
1174, 143 L. Ed. 2d 238 (1999). Thus, any such knowledge might become the subject of expert
testimony. Id., 526 U.S. at 147, 119 S. Ct. at 1174.
       To be relevant, the proposed testimony must be “sufficiently tied to the facts of the case that
it will aid the jury in resolving a factual dispute.” Robinson, 923 S.W.2d at 556 (quoting United
States v. Downing, 753 F.2d 1224, 1242 (3d Cir. 1985)). Additionally, any such evidence that is not
grounded “in the methods and procedures of science” is no more than “subjective belief or
unsupported speculation.” Robinson, 923 S.W.2d at 557 (citing Daubert v. Merrell Dow Pharms.,
Inc., 509 U.S. 579, 590, 113 S. Ct. 2786, 2795, 125 L. Ed. 2d 469 (1993)). Unreliable evidence is
of no assistance to the trier of fact and is therefore inadmissible under Rule 702. Id. Nonetheless,
the inquiry into the reliability of an expert’s testimony is a “flexible one.” Nenno v. State, 970
S.W.2d 549, 560-61 (Tex. Crim. App. 1998) (quoting Daubert, 509 U.S. at 594, 113 S. Ct. at 2797).
       There are many factors that a trial court may consider in making the threshold determination
of admissibility under Rule 702, including (1) the extent to which the theory has been or can be
tested; (2) the extent to which the technique relies upon the subjective interpretation of the expert;
(3) whether the theory has been subjected to peer review and/or publication; (4) the technique’s
potential rate of error; (5) whether the underlying theory or technique has been generally accepted
as valid by the relevant scientific community; and (6) the nonjudicial uses that have been made of

                                                  3
the theory or technique. Robinson, 923 S.W.2d at 557. If the trial court determines that the proffered
testimony is relevant and reliable, it must then determine whether to exclude the evidence because
its probative value is outweighed by the danger of unfair prejudice, confusion of the issues, or
misleading the jury, or by considerations of undue delay, or needless presentation of cumulative
evidence. Id.
Analysis
         Before trial, Edward filed a motion to exclude Susan’s expert, James C. Penn, who was to
testify regarding Penn’s valuation of the Nix Law Firm. The trial court held a hearing on Edward’s
motion, during which Penn testified. The trial court partially granted Edward’s motion finding that
the proper measure of the value of the community interest in the Nix Law Firm could include
methods other than those set forth in the partnership agreement. The court allowed Penn to testify
regarding his valuation based on withdrawal value, the asset approach, and/or the income approach.
However, the court ordered that Penn limit any valuation utilizing the income approach to income
reasonably expected to be collected within two years from the valuation date.
         We will not disturb the trial court’s decision to allow Penn to testify absent clear abuse. See
Broders, 924 S.W.2d at 151. In his brief, Edward contends that Penn’s methodology was unreliable
and flawed and, as support, points to six statements made by Penn or matters taken into
consideration by Penn in his valuation.2 These statements were not part of Penn’s testimony at the
Daubert hearing, but instead, were made by Penn at a prior hearing on Susan’s motion for additional
discovery. Edward complains that Penn could not recall a specific instance when he had taken
specific cases, valued them, and then adjusted the assets of a law firm’s balance sheet. He also
points out that Penn testified he had never used information from patent cases in valuations of law
firms. However, in the Daubert hearing, Penn stated that he had been performing business
valuations for approximately fifteen years and had been an expert witness for a professional business
valuation about seventy-five to one hundred times. According to his curriculum vitae, he had been
a speaker at a variety of seminars on topics such as valuations, commercial and personal goodwill,

         2
           Additionally, Edward complained that Penn’s methodology was flawed and unreliable because Penn relied
on another expert, David W illiam Carstens. According to Penn, Carstens stated it was reasonable to assume that the
pending cases would have a type of payment similar to the ones that had settled. W e will address this argument later
in this opinion.

                                                         4
and business valuation of a partner’s interest in a law firm. Penn stated that he had previously
testified in court regarding valuation of a partnership interest using the income approach and had
relied on the types of projections used here in valuing a contingency fee practice in Dallas, Texas.
        Trial courts must ensure that those who purport to be experts truly have expertise concerning
the actual subject about which they are offering an opinion. Broders, 924 S.W.2d at 152. The
proponent of the testimony has the burden to show that the expert possesses special knowledge as
to the very matter on which he proposes to give an opinion. See id. at 152-53 (quoting 2 RAY ,
TEXAS LAW OF EVIDENCE : CIVIL AND CRIMINAL § 1401 at 32 (Texas Practice 3d ed. 1980)). Further,
the expert must have knowledge, skill, experience, training, or education regarding the specific issue
before the court that would qualify the expert to give an opinion on that particular subject. See
Broders, 924 S.W.2d at 153. In this case, Penn had experience performing business valuations, had
valued a partnership interest using the income approach, and had valued a contingency fee practice
by relying on the same type of projections he used in this case. Although he had never used
information from a patent case in valuing a law firm, the specific issue in this case was valuation of
a partner’s interest in a law firm, for which Penn had specialized knowledge, skill, experience,
training, or education. See id. at 152-53. Thus, the trial court did not abuse its discretion in allowing
Penn to testify as an expert.
        Edward also complains that Penn stated that he needed someone to review the Nix Law
Firm’s case files and give him some range of values and some estimated time frame as to when those
cases might settle. Otherwise, Penn opined, his analysis and valuation would not be thorough and
complete. He also agreed that he would not value the Nix Law Firm’s cases, and stated that was the
role of the court appointed master in chancery. He believed that if the master considered the law
firm’s pleadings, responses to pleadings, and the case files, the master would realize that she was
receiving “one side of the story,” and would make some type of determination regarding that
analysis. He believed that even “one side of the story” provided enough information for the master
to give him a range of potential settlements.
        According to the record, the trial court appointed a master in chancery in 2005 to perform
certain duties including reviewing the Nix Law Firm trust accounts, employment contracts,
settlement sheets on cases that had been settled but proceeds not yet distributed, and potential cases

                                                   5
that the firm anticipated being filed within the next year. All of the master’s duties and all of the
documents reviewed were to remain confidential and made known only to the trial court in a manner
that did not include client names or client identifying information. A Daubert inquiry must be “tied
to the facts” of a particular case. See Kumho Tire Co., 526 U.S. at 149, 119 S. Ct. at 1175 (quoting
Daubert, 509 U.S. at 594, 113 S. Ct. at 2786). Penn stated in the prior hearing that because of the
appointment of a master, he relied upon the master’s expert review of the Nix Law Firm’s files and
her range of case values, settlements, and potential settlements. Edward states that these “dynamics”
have been shown to be improper or unreliable. However, his brief does not contain a clear and
concise argument to support this statement or to support his contention that Penn’s reliance on the
master rendered his testimony unreliable. See TEX . R. APP . P. 38.1(h).
       Moreover, Penn testified in the Daubert hearing that he relied on the expert report and
documents provided by David William Carstens, a patent attorney. Additionally, he received
information from Edward and the Nix Law Firm as a result of discovery orders regarding settlement
agreements, contracts between the Nix Law Firm and clients, and licensing agreements.
Significantly, Penn did not mention any reliance on the master’s reviews in his methodology.
Further, Edward complains that Penn could not, “as we sit here today,” give Edward’s attorney a
peer review paper that suggested the asset approach was proper in valuing a law firm. However, we
note that in the Daubert hearing, Penn specifically rejected the asset approach and testified that the
income approach was appropriate for most professional practices because it is the best indicator of
value. Finally, Edward argues that there was no evidence that Penn’s methodology in valuing a
business, particularly a law firm, was used by other valuation experts. At the Daubert hearing, Penn
testified that he valued the Nix Law Firm in a divorce case approximately five years prior and used
the same methodology as in this case. He also stated that both he and the opposing expert in the
previous divorce case used the income approach to value the partnership interest in the Nix Law
Firm. Thus, these complaints are without merit.
       Based upon our review of the record, we conclude that, under the facts of this particular case,
the trial court did not abuse its discretion in allowing Penn to testify regarding his valuation of
Edward’s interest in the Nix Law Firm. See Kumho Tire Co., 526 U.S. at 149, 119 S. Ct. at 1175.
Accordingly, Edward’s second issue is overruled.

                                                  6
                           PARTNERSHIP AGREEMENT AND GOODWILL
        As part of his first issue, Edward argues that the trial court erred in its interpretation and
application of the law regarding the division of a community property interest in a professional
partnership. He contends that his interest in the Nix Law Firm was defined by the partnership
agreement and that the community estate was not entitled to a greater interest than that to which he
was entitled in the firm’s commercial goodwill.
Applicable Law
        Professional goodwill attaches to the person of the professional man or woman as a result
of confidence in his or her skill and ability, and would be extinguished in the event of the
professional’s death, retirement, or disablement. Keith v. Keith, 763 S.W.2d 950, 952 (Tex.
App.–Fort Worth 1989, no writ). Such professional goodwill is not property in the estate of the
parties and, therefore, not divisible upon divorce. Id. To the extent that goodwill exists in the
professional practice separate and apart from the professional’s personal ability and reputation, that
goodwill has a commercial value and is community property subject to division upon divorce. Finn
v. Finn, 658 S.W.2d 735, 740 (Tex. App.–Dallas 1983, writ ref’d n.r.e.). In order to determine
whether goodwill attaches to a professional practice that is subject to division upon divorce, we
apply a two prong test: (1) goodwill must be determined to exist independently of the personal ability
of the professional spouse; and (2) if such goodwill is found to exist, then it must be determined
whether that goodwill has a commercial value in which the community estate is entitled to share.
Id. at 741.
Analysis
        In partially granting Edward’s motion to exclude Penn, the court found that the proper
measure of the value of the community interest in the Nix Law Firm could include methods other
than those set forth in the partnership agreement. In the court’s charge to the jury, the court stated
that, although the jury could not consider personal goodwill or time and labor to be expended after
the divorce, the jury could consider the commercial goodwill, if any, of the firm, the partnership
agreement, and the amendments to the partnership agreement.
        We must determine if the trial court erred in determining that the jury could consider the
commercial goodwill, if any, of the Nix Law Firm. As to the two prong test for determining if

                                                  7
commercial goodwill attaches to a professional practice, Edward does not dispute that the first prong
has been met, i.e., that goodwill exists independently of the personal ability of the professional
spouse. See Finn, 658 S.W.2d at 741. However, he argues that the goodwill does not have a
commercial value in which the community estate is entitled to share and directs us to the facts and
analysis in Finn. See id. In Finn, the trial court found that the husband’s law firm had goodwill
independent and apart from the professional ability of the husband. Id. at 741. However, the
pertinent question was whether the community estate was entitled to share in the value of the law
firm’s commercial goodwill. Id. The court determined that the community estate was not entitled
to a greater interest than that to which the husband was entitled in the firm’s goodwill. Id.
According to the court, the extent of the husband’s interest was governed by the partnership
agreement. Id.
       According to the partnership agreement, if the husband in Finn had died or withdrawn from
the firm, he would have been entitled to certain amounts based on his capital account, undistributed
earned income, and interest in the firm’s reserve account. Id. at 741-42. The court acknowledged
that the partnership agreement did not provide any compensation for accrued goodwill to a partner
who ceased to practice law with the firm, nor did it provide any mechanism to realize the value of
the firm’s goodwill. Id. at 742. In Finn, the only mechanism through which the husband could
realize the value of the accrued goodwill was through continuing to practice law as a member of the
firm. Id. Thus, the court found, such realization in the future is no more than an expectancy
dependent on the husband’s continued participation in the firm and, therefore, his interest in the
firm’s goodwill was not property of the community estate. Id.
       The decision in Finn was en banc with four justices joining the majority opinion, two justices
concurring, and five justices dissenting. Id. at 735. Justice Stewart wrote a concurring opinion,
stating that the firm’s goodwill is an asset of the partnership entity and, thus, does not belong to
either the separate or community estate of the individual partners. Id. at 749 (Stewart, J.,
concurring). According to Justice Stewart, the partnership agreement did not control the value of
the individual partnership interests. Id. The asset being divided was the husband’s interest in the
partnership as a going business, not his contractual death benefits or withdrawal rights. Id. The
formula in the partnership agreement may represent the present value of the husband’s interest, but

                                                 8
should not preclude a consideration of other facts. Id. The value of the husband’s interest, Justice
Stewart concluded, should be based on the present value of the partnership entity as a going business,
which would include consideration of partnership goodwill. Id. Goodwill is property and, although
intangible, is an integral part of a business. Id.
        The Fort Worth court of appeals agreed with the concurrence in Finn, concluding that
because a partnership is not being terminated, the provision in the partnership agreement determining
the value of the business in the event of the partner’s withdrawal or death is not applicable. Keith,
763 S.W.2d at 953. The court stated that the formula in a partnership agreement with respect to
death or withdrawal is not necessarily determinative of the value of a spouse’s interest in an ongoing
partnership as of the time of divorce. Id. In another case, the dissent noted that none of the
triggering events specified in the agreement had occurred and that, until such event, a trial court
should not be limited to the formula in the agreement when determining the value of an individual’s
share upon divorce. R.V.K. v. L.L.K., 103 S.W.3d 612, 623 (Tex. App.–San Antonio 2003, no pet.)
(Marion, J., dissenting). The dissent also stated that the value of the party’s interest should be based
on the present value of the entity as a going business, taking into consideration the limitations
imposed by commercial goodwill. Id.
        In this case, Edward became a partner in the Nix Law Firm in 1999 and signed the Fourth
Amendment to the Nix Law Firm Partnership Agreement. The original partnership agreement
specified the payment for a partner’s interest in the partnership in the event of the partner’s death,
withdrawal, retirement, or expulsion. If a partner died or withdrew, he would be entitled to any
unpaid draw, his capital account, and his undivided profit accounts, based upon his units of
participation. At the time of trial, Edward testified that he was a partner in the Nix Law Firm, that
he had not withdrawn, and that he had no plans to withdraw.
        Based on these facts, we agree with the concurrence in Finn that the Nix Law Firm
partnership agreement does not control the value of the individual partnership interests in the event
of a divorce. See Finn, 658 S.W.2d at 749. The Nix Law Firm was an ongoing partnership as of
the time of divorce, Edward had not died nor had he withdrawn from the partnership, and, thus, none
of the triggering events specified in the partnership agreement had occurred. See R.V.K., 103
S.W.3d at 623; Keith, 763 S.W.2d at 953. Consequently, the formula in the partnership agreement

                                                     9
was not determinative of the value of Edward’s interest in the Nix Law Firm. See Keith, 763 S.W.2d
at 953. Therefore, the trial court did not err when it determined that the proper measure of the value
of the community interest in the Nix Law Firm could include methods other than those set forth in
the partnership agreement. Accordingly, we overrule that portion of Edward’s first issue regarding
the trial court’s interpretation of the partnership agreement.

                                        FUTURE EARNINGS
       As part of his first issue, Edward contends that the trial court erred in allowing future
earnings to be used to determine the commercial goodwill of the Nix Law Firm. More particularly,
he argues that neither case law nor current valuation methodology permits commercial goodwill to
be valued using speculative future income streams.
Applicable Law
       In a decree of divorce, a court shall order a division of the estate of the parties in a manner
that the court deems just and right, having due regard for the rights of each party. TEX . FAM . CODE
ANN . § 7.001(Vernon 2006). We review a trial court’s division of property under an abuse of
discretion standard. Moroch v. Collins, 174 S.W.3d 849, 857 (Tex. App.–Dallas 2005, pet. denied);
see also Garza v. Garza, 217 S.W.3d 538, 548 (Tex. App.–San Antonio 2006, no pet.). A trial court
does not abuse its discretion if there is some evidence of a substantive and probative character to
support the decision. Garza, 217 S.W.3d at 549; Moroch, 174 S.W.3d at 857. Moreover, we should
reverse a court’s division of property only if the error materially affects the court’s just and right
division of the property. Henry v. Henry, 48 S.W.3d 468, 475 (Tex. App.–Houston [14th Dist.]
2001, no pet.). Similarly, errors in the valuation of property do not require reversal unless, because
of such errors, the division made by the trial court is manifestly unjust. Cook v. Cook, 679 S.W.2d
581, 585 (Tex. App.–San Antonio 1984, no writ). However, once reversible error affecting the “just
and right” division of the community estate is found, an appellate court must remand the entire
community estate for a new division. Sheshtawy v. Sheshtawy, 150 S.W.3d 772, 780 (Tex.
App.–San Antonio 2004, pet. denied) (quoting Jacobs v. Jacobs, 687 S.W.2d 731, 733 (Tex. 1985)).
       A spouse is not entitled to a percentage of his or her spouse’s future earnings. Smith v.
Smith, 836 S.W.2d 688, 692 (Tex. App.–Houston [1st Dist.] 1992, no writ). A spouse is only

                                                 10
entitled to a division of property that the community owns at the time of divorce. Id. All assets of
the community estate are valued as of the time of dissolution of the marriage. Finn, 658 S.W.2d at
749 (Stewart, J., concurring). Further, a jury must have an evidentiary basis for its findings. Salinas
v. Rafati, 948 S.W.2d 286, 289 (Tex. 1997).
Analysis
       At trial, Penn testified regarding his valuation of Edward’s interest in the Nix Law Firm using
the income approach. He stated that he included the commercial goodwill of the firm, but excluded
personal goodwill and future time, toil, and labor. According to the trial court’s instructions, he
considered income reasonably expected to be collected by the Nix Law Firm within the next two
years. Penn valued Edward’s interest in the general law firm at $1.5 million. He testified that in this
analysis, he considered the general law firm’s historical operations and attempted to normalize
income that would occur in the future, but deducted nonrecurring events, any Data Treasury3 case
income, and partner compensation. Penn testified that Edward’s interest in the settled Data Treasury
cases was $400,000.00. He stated that the settlement agreements with these defendants have two
types of payment terms. The first type of payment is fixed, and paid both “up front” in cash and over
a specified number of years. The second type of payment is based on a royalty rate to be paid in the
future. Consequently, he testified, some settlement money had been received while additional
settlement money had yet to be received. For most of the settled defendants, he had a payment
history based on their settlement and royalty agreements and was able to estimate payments to be
received in the next two years. However, two defendants had not begun making payments and,
without such history, Penn refused to speculate and valued Edward’s interest in these settled
defendants at zero.
       Using a royalty rate based on the prior settlement agreements, he valued Edward’s interest
in the pending but unsettled Data Treasury cases at $4.1 million dollars. In this analysis, Penn
focused on the four large defendants that would most likely settle in the next two years. He also
testified that if all the pending Data Treasury cases, including all the smaller defendants, settled in
the next two years, Edward’s interest would increase by $2.2 million dollars. At the conclusion of

       3
           According to Penn, the Data Treasury cases are “seminal type cases,” analogous to the tobacco litigation.

                                                         11
the trial, the jury found that the value of Edward’s interest in the Nix Law Firm was $4.5 million
dollars, subject to taxes.
        We must determine if there was some evidence to support the jury’s valuation of Edward’s
interest. Penn’s valuation of Edward’s interest in the Nix Law Firm and the settled Data Treasury
cases totaled $1.9 million. Edward’s interest in the settled Data Treasury cases is based on settlement
agreements that were executed before the date of divorce. According to Penn, Edward does not have
to expend future time or labor to collect his interest in these proceeds. We agree, concluding that
Edward’s right to receive these proceeds is contractual and the amounts to be received are fixed or
readily ascertainable. See Barraza v. Law Offices of Smith & Gopin, 918 S.W.2d 608, 611 (Tex.
App.–El Paso 1996, no writ) (concluding that one’s rights in a contract and in the settlement
proceeds are satisfied when payment is received); Randall B. Wilhite, Practical Business Valuation,
in 30th ANNUAL MARRIAGE DISSOLUTION INSTITUTE 21-44 (2007) (stating that if “a case with a
structured settlement has already settled, the amount of the settlement, and consequently the
associated attorney’s fees, are readily ascertainable” and that once the settlement is signed, the “right
to receive funds is contractual”). Further, because no future time or labor is necessary to receive
these proceeds, Edward’s income from the settled Data Treasury cases is not future earnings. See
Rathmell v. Morrison, 732 S.W.2d 6, 18 (Tex. App.–Houston [14th Dist.] 1987, no writ)(concluding
that the value of a company should exclude the time, toil, and talent to be expended following
divorce).
        Penn valued Edward’s interest in the pending Data Treasury cases at $4.1 million with an
additional $2.2 million for the other pending cases. Susan is not entitled to Edward’s future
earnings, and all assets of the community estate must be valued as of the date of divorce. See Smith,
836 S.W.2d at 692; Finn, 658 S.W.2d at 749 (Stewart, J., concurring). Penn admitted that no money
had been received by the firm from the pending but unsettled Data Treasury cases. Revenue from
these cases is no more than an expectancy interest and any money to be received constitutes future
earnings to which Susan is not entitled. See Smith, 836 S.W.2d at 692. There was no other evidence
from which the jury could have concluded that Edward’s interest in the Nix Law Firm totaled $4.5
million dollars.
        Because Edward’s future earnings are his separate property, which the trial court may not

                                                   12
divest, we conclude the property division is manifestly unjust. See Licata v. Licata, 11 S.W.3d 269,
277-78 (Tex. App.–Houston [14th Dist.] 1999, pet. denied); Cook, 679 S.W.2d at 585. Accordingly,
we sustain that portion of Edward’s first issue contending that future earnings could not be used in
valuing his interest in the Nix Law Firm.

                                        DIRECTED VERDICT
        In his third issue, Edward argues that the trial court erred in failing to grant his motion for
a directed verdict at the conclusion of both parties’ case in chief. More specifically, he contends that
the only testimony offered in Susan’s case in chief to support the valuation of his interest in the Nix
Law Firm was unreliable and inconsistent with case law as noted above. Further, Edward argues that
if Susan’s expert testimony had been properly excluded, his expert’s opinion would have been the
only appropriate and legal testimony to support a proper valuation. Thus, he contends, the trial court
erred in failing to instruct the jury to return a verdict consistent with his expert’s valuation.
        It is error for the trial court to instruct a verdict when a material issue is raised by the
evidence. Facciolla v. Linbeck Constr. Corp., 968 S.W.2d 435, 440 (Tex. App.–Texarkana 1998,
no pet.). If there is any conflicting evidence of a probative nature in the record, a determination of
the issue is for the jury. Id. At the close of Susan’s case in chief, Edward’s attorney requested a
directed verdict based on the fact that Penn excluded the partnership agreement and the effect of
withdrawal on the valuation of the Nix Law Firm from his testimony. He stated that this was
contrary to case law and that Penn did not establish himself as an expert on valuing patent cases.
Edward’s attorney requested the trial court enter a directed verdict, finding that the partnership
agreement controlled the valuation of the Nix Law Firm and that Edward’s interest should be
calculated according to the withdrawal provisions. The trial court denied Edward’s motion. At the
conclusion of Edward’s case in chief, his attorney requested a directed verdict along the same terms
as his previous motion for directed verdict. Again, the trial court denied his motion.
        In this case, we have already determined that the partnership agreement did not control the
valuation of Edward’s interest and that the trial court did not err in allowing Penn to testify. Thus,
these bases for Edward’s motions for directed verdict are without merit. Further, Susan’s and
Edward’s experts differed on their valuation of Edward’s interest in the Nix Law firm, the only

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material issue at trial. Because there is conflicting evidence on a material issue, the determination
of the valuation of Edward’s interest in the Nix Law Firm was for the jury to determine, and it would
have been error for the trial court to have granted an instructed verdict. See id. Accordingly,
Edward’s third issue is overruled.

                                                      DISPOSITION
         Having sustained a portion of Edward’s first issue, we reverse the portion of the final decree
of divorce dividing the marital estate and remand to the trial court to determine a just and right
division of community property. In all other respects, the trial court’s judgment is affirmed.

                                                                     SAM GRIFFITH
                                                                         Justice

Opinion delivered July 23, 2008.
Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.

                                                       (PUBLISH)

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