Court Opinion

ID: 9797156
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:14:31.477205+00
Date Added: 2024-06-11T08:52:48.420886
License: Public Domain

Justice JONES
Concurring in Parts IIIA, IIIC, and IV, and Concurring in the result of Part IIIB.
The Court’s treatment of the issue of professional goodwill is right on point. James had urged that the Court make a distinction between the personal goodwill of his professional practice and the “enterprise” or professional goodwill of the business. In my view, the goodwill of a business, whether professional or otherwise, if it exists and is properly characterized as community property, is subject to division upon divorce. With regard to the maintenance award, I would not disturb the result reached by the trial court but do think two matters raised on appeal by James should be addressed.
With regard to the goodwill issue, the Court was correct in declining James’ invitation to draw a distinction between enterprise goodwill and personal goodwill when considering the value of his business. In urging the adoption of this distinction, James called our attention to May v. May, 214 W.Va. 394, 589 S.E.2d 536 (2003), wherein the West Virginia Supreme Court asserted “there are two types of goodwill recognized by courts in divorce litigation: enterprise goodwill (also called commercial or professional goodwill) and personal goodwill (also called professional goodwill).” Id. at 541. Before one jumps to the conclusion that both types of goodwill are one and the same, i.e. professional goodwill, the West Virginia Supreme Court went on to say:
‘Enterprise goodwill attaches to a business entity and is associated separately from the reputation of the owners. Product names, business locations, and skilled labor forces are common examples of enterprise goodwill. The asset has a determinable value because the enterprise goodwill of an ongoing business will transfer upon sale of the business to a willing buyer.’
‘[Pjersonal goodwill is associated with the individuals. It is that part of increased earning capacity that results from the reputation, knowledge and skills of individual people. Accordingly, the goodwill of a service business, such as a professional practice, consists largely of personal goodwill.’
Id. at 541-2. James would have the Court enter the morass of trying to draw a distinction between the value attributable to a professional practice by virtue of the individual *685attributes of the professional and the value of goodwill not attributable to those personal assets, valuing each separately, and then dividing the latter but not the former. Quite frankly, such an approach does not make a good deal of sense.
Some businesses, regardless of whether they are professional practices, retail businesses, or manufacturing operations, will have more value than a competitive business because of the energy, good sense, and other personal attributes of the person or persons operating them, as compared to the competitor. When valuing service businesses, such as restaurants, retail sales operations, and the like, an income approach is often employed. A business that provides exceptional service will often produce a greater income, and larger income approach valuation, than one which does not. The value created by extra effort, skill, and attention to detail is comparable to the value created by the personal attributes that a successful professional adds as goodwill in his or her professional practice. We have held that special attributes of a proprietor, adding to the value of a restaurant business, can be goodwill to be considered in establishing the business value for purposes of division of community property. Chandler v. Chandler, 136 Idaho 246, 32 P.3d 140 (2001). There is no reason why value added to a professional practice by virtue of the personal attributes of the professional practitioner cannot also be treated in such fashion.
While the professional attributes and skills of the marital partners are not community property, the employment of those attributes and skills during the course of the marriage can produce value in a business, whether professional or otherwise, that becomes community property. Wolford v. Wolford, 117 Idaho 61, 785 P.2d 625 (1990) tells us that personal attributes, including knowledge, background and talent, are not in themselves community property. Id. at 67, 785 P.2d at 631. However, Wolford also says that “Personal attributes can enhance income which ... is community property ...” Id. Personal attributes can also enhance the value of a business, including a professional practice, thus creating value that is community property. We don’t shrink back from considering a spouse’s earning capacity, based upon knowledge, background and talent, in determining the amount of future spousal maintenance, where such an award is appropriate, nor in considering how much that spouse must contribute to the support of minor children. Neither should we ignore the value of goodwill built up by a spouse in a business or professional practice during the course of the marriage because that value is a present value that can be allocated between the parties. It is not an allocation of future earnings. Rather, it is a calculation of what the business or professional practice might be worth on the market, based upon expert evidence presented by one knowledgeable in calculating such value.
In this case, Sally’s expert presented credible testimony regarding valuation of the goodwill built up in James’ professional practice during the course of the marriage. James’ expert sought to call the methodology into question but did not offer any testimony regarding a different calculation of the value. The trial court, although identifying the methodology concern noted in the Court’s opinion, wrote that the result produced by Sally’s expert was “nevertheless reasonable because it was consistent with other resources and ... the best evidence in the record from which the court can fix the value of James’ interest in DCFs goodwill.” The Court properly affirms that result.
With regard to the issue of spousal maintenance, James argues on appeal that the trial court erred in two respects, neither of which is addressed in the Court’s opinion. First, James contends that the trial court was incorrect in concluding that the retirement accounts awarded to Sally “would incur penalties and taxes if liquidated.” Second, James contends that the trial court erred in failing to consider the income that Sally could earn on the cash assets awarded to her in the 12-year period in which the court ordered that maintenance payments be made. Both matters were obviously relevant to the spousal maintenance issue but there is no indication in the record as to whether James raised *686either matter in the trial court proceedings.2 A review of the record does disclose that James presented no evidence on either matter.
The trial court assumed that Sally would be subjected to penalties and taxes if she drew upon her “substantial retirement accounts” during the 12-year period she would receive spousal maintenance payments, until she reached early Social Security retirement age of 62. The judge did not identify which accounts he had in mind in reaching that conclusion. James points out that “the record is completely silent with regard to any penalties Sally would incur by withdrawing the funds she was awarded.” That statement appears to be true. Neither party seems to have presented evidence as to the tax status of the accounts awarded to Sally, whether they were tax deferred accounts, and what consequences, if any, would result if any or all of the accounts were drawn upon by Sally before she reached age 62. It is not clear how the court reached the conclusion that penalties would be imposed if funds were withdrawn from some or all of the accounts prior to Sally reaching age 62. James contends the largest account, a Schwab One account with a balance of $446,920, was pre-taxed and that no penalty would result from making withdrawals prior to age 62. However, he cites to no evidence to support that contention. The reporter’s transcript contains no evidence on the matter, nor do any of the exhibits before the Court. However, certain of the exhibits were not contained in the record before the Court and there is a possibility that some omitted exhibit may have a bearing on the matter. Two of the accounts, totaling $72,400, do appear to be IRA accounts, a fact the trial court may have judicially noticed in reaching its conclusion regarding the penalty issue.
The lack of evidence on the matter would tend to support the conclusion that the issue was not raised by James below. With an incomplete record, it would be inappropriate for this Court to speculate on the matter. We will not assume error on appeal, rather the party asserting it must affirmatively show it. Student Loan Fund of Idaho v. Duerner, 131 Idaho 45, 54, 951 P.2d 1272, 1281 (1997). The trial court appears to have determined that the level of monthly maintenance ordered was appropriate, assuming that the accounts awarded to Sally remained intact during the 12 years leading to her attainment of the age of 62. Whether or not withdrawals from the accounts would or would not be subject to tax and penalties may therefore be irrelevant to the issue. Thus, although it is uncertain how the trial court reached its conclusion that there might be penalties imposed on withdrawals, the issue may be beside the point since the court set the level of support based on the assumption there would be no withdrawals from the accounts.
James contends, also, that the trial court should have considered the income Sally could have earned from the accounts awarded to her during the 12-year period until she reached the age of 62. James points out that she was awarded bank and investment accounts in the total amount of $788,372.11, which should have produced substantial income during the 12 years in question. This would undoubtedly have been a relevant consideration in the spousal maintenance inquiry, if it was raised below. James states that Sally’s expert testified as to various tax-free rates of return that “Sally should be able to receive” from the accounts during the 12-year period. There is testimony in the record by Sally’s expert regarding rates of return, but the testimony is more in the abstract and, particularly with regard to a period of up to 10 years, is more a guesstimate than an assertion of an available rate of return. The testimony was elicited by Sally’s counsel, not the attorney representing James. Again, there is no indication that the issue was raised by James before the trial court and we are left to speculate on that. What is clear is that the trial court did not discuss it and James presented no evidence on it. It does not appear that the *687matter was preserved for determination on appeal.
If one does not consider these two matters, it does not appear that the trial court abused its discretion in setting the amount and duration of the spousal maintenance payments. While I believe these two matters would have certainly been relevant, had they properly been raised below and preserved for appeal, it does not appeal’ that they were raised below and therefore I concur in the result reached by the Court.

. In fairness, it should be noted that appellate counsel did not represent James at the trial court level.