Opinion
No. A-10-1003.
08-23-2011
LORIE D. O'DONNELL-STATES, APPELLANT, v. TRENT J. STATES, APPELLEE.
Claude E. Berreckman, Jr., of Berreckman & Davis, P.C., for appellant. R. Bradley Dawson, of Lindemeier, Gillett, Dawson & Troshynski, for appellee.
MEMORANDUM OPINION AND JUDGMENT ON APPEAL
NOTICE: THIS OPINION IS NOT DESIGNATED FOR PERMANENT PUBLICATION AND MAY NOT BE CITED EXCEPT AS PROVIDED BY NEB. CT. R. APP. P. § 2-102(E).
Appeal from the District Court for Lincoln County: Donald E. Rowlands, Judge. Affirmed.
Claude E. Berreckman, Jr., of Berreckman & Davis, P.C., for appellant.
R. Bradley Dawson, of Lindemeier, Gillett, Dawson & Troshynski, for appellee.
IRWIN, CASSEL, and PIRTLE, Judges.
IRWIN, Judge.
I. INTRODUCTION
Pursuant to this court's authority under Neb. Ct. R. App. P. § 2-111(B)(1) (rev. 2008), this case was ordered submitted without oral argument. Lorie D. O'Donnell-States (Lorie) appeals from a decree of dissolution entered by the district court, which decree dissolved her marriage to Trent J. States; awarded Lorie custody of the parties' two children, child support, and alimony; and divided the marital assets and debts. On appeal, Lorie asserts that the district court erred in determining the value of Trent's dental practice and, as a result, erred in dividing the parties' marital estate. For the reasons set forth below, we affirm.
II. BACKGROUND
The sole issue raised on appeal is the valuation of Trent's dental practice, States Dental Clinic. Accordingly, we focus our recitation of the factual background of the case on the evidence relevant to the valuation of States Dental Clinic.
Trent and Lorie were married in March 1992. At the time of the parties' marriage, Trent was enrolled in dental school in Lincoln, Nebraska. When Trent graduated from dental school in 1994, the parties moved to North Platte, Nebraska.
In August 1994, Trent purchased an interest in States Dental Clinic, which is located in North Platte. At the time of the purchase, States Dental Clinic was owned and operated by James States, Trent's father, and Jerry States, Trent's uncle. In August 1994, Jerry retired and sold his entire interest in the clinic to Trent.
The asset purchase agreement executed by Trent and Jerry indicates that Trent paid $140,000 for Jerry's interest in the clinic, which included Jerry's personally owned equipment and instruments, Jerry's one-half interest in the equipment and supplies owned by the clinic, and Jerry's covenant not to compete with Trent's dental practice.
From August 1994 through December 2008, Trent owned and operated States Dental Clinic with his father, James. Trent and James were equal partners in the clinic. They each received income from the clinic based on their individual production. They divided any excess profits equally between themselves. Most of the physical assets of the practice were owned individually by Trent and James. In fact, the building where the practice is located is owned by James and the practice pays rent for the use of the space.
In December 2008, James retired from the dental clinic. Trent now owns and operates the clinic as a sole practitioner.
On December 19, 2008, Lorie filed a complaint for dissolution of marriage. At the dissolution proceedings held in August and September 2010, both Lorie and Trent offered the expert testimony of a certified valuation analyst concerning the value of States Dental Clinic.
Lorie called Dehn Renter to testify. Renter testified that he valued States Dental Clinic as of December 2008, when James was still a partner in the practice. Renter's report indicates that he did not account for the disposition of James' interest in the clinic. Renter testified that the value of the practice in December 2008 was $562,648. Renter indicated that he utilized the market method to value the clinic. Such method required him to average the gross sales of the clinic for the previous 5 years. Pursuant to his research with the Institute of Business Appraisers' database, Renter then multiplied that 5-year average by 61 percent, which represents the average selling price of dental practices when compared to gross sales.
Trent called Robert McChesney to testify concerning the valuation of the dental clinic. McChesney also valued the practice as of December 2008. However, McChesney factored into his analysis James' retirement and the agreement between James and Trent regarding the retirement, including the amount of money that would need to be paid to James for the work he had completed during 2008. McChesney testified that the value of Trent's interest in the practice in December 2008 was $104,067. McChesney indicated that he utilized the net asset method of valuation. The net asset method of valuation required McChesney to value all of the assets of the practice, including equipment or supplies that were owned individually by Trent and James.
In their testimony, both Renter and McChesney focused on whether to include the value of any "goodwill" in their calculations. McChesney explained the concept of goodwill and the two types of goodwill in his testimony: "The nonmarketable goodwill would . . . be this personal goodwill whereby an individual professional will retain his practice following no matter where his physical location is at, whereas practice goodwill, the client will return to that physical location regardless of who is practicing there as a professional." Both McChesney and Renter testified that the value of personal goodwill should not be included in a valuation conducted for the purpose of dissolution proceedings. McChesney testified that he believed the marketable goodwill, or practice goodwill, in States Dental Clinic would be a very small percentage of the value and difficult to quantify. McChesney did not include any type of goodwill in his valuation of the practice. McChesney opined that Renter must have included goodwill in his valuation because Renter relied on the practice's revenue, which includes Trent's earning ability. McChesney indicated that earning ability is the "basic definition" of goodwill. To the contrary, Renter testified that he did not include the value of any type of goodwill in his valuation of the dental clinic.
In the decree of dissolution, the district court accepted the testimony of McChesney in valuing States Dental Clinic. The court found that the value of the clinic is $104,067. In explaining its decision, the district court stated:
The Court heard from two exceptionally well-qualified certified public accountants and certified valuation analysts in this case. . . . Based upon my personal observation of the two experts, and taking into consideration the fact that [Trent] does not own the building wherein his dental practice is located, and further finding that a covenant not to compete within a radius of approximately 50 miles from North Platte would be essential to guarantee any potential buyer that the selling dentist would not immediately relocate and compete with a purchasing dentist, I determine that no goodwill exists in this case with reference to the dental practice . . . except professional goodwill which is personal in nature and, therefore, not readily salable or marketable. Under the circumstances of this case, there is no goodwill independent of the professional generating the income. I therefore have accepted the testimony of [McChesney] in valuing the dental practice . . . .
Lorie appeals here.
III. ASSIGNMENTS OF ERROR
On appeal, Lorie asserts that the district court erred in determining the value of Trent's dental practice and, as a result, erred in dividing the parties' marital estate.
IV. STANDARD OF REVIEW
In actions for dissolution of marriage, an appellate court reviews the case de novo on the record to determine whether there has been an abuse of discretion by the trial judge; this standard of review applies to the trial court's determinations regarding division of property. Gangwish v. Gangwish, 267 Neb. 901, 678 N.W.2d 503 (2004). An abuse of discretion occurs when the trial court's decision is based upon reasons that are untenable or unreasonable or if its action is clearly against justice or conscience, reason, and evidence. Adams v. Adams, 13 Neb. App. 276, 691 N.W.2d 541 (2005).
V. ANALYSIS
On appeal, Lorie asserts that the district court erred in valuing States Dental Clinic. Specifically, she argues that the district court erred in accepting McChesney's testimony concerning the value of the clinic. She also argues that the district court erred in valuing the dental practice at an amount less than $140,000, which is the amount Trent paid for his interest in the clinic in 1994. Finally, Lorie argues that the court erred in failing to include the value of any goodwill in its valuation of the dental clinic. Based upon our de novo review of the record, we cannot say that the district court abused its discretion in valuing States Dental Clinic. As a result, we affirm the decision of the district court.
1. MCCHESNEY'S TESTIMONY
Lorie argues that the district court erred in accepting McChesney's testimony concerning the value of States Dental Clinic. Lorie asserts that McChesney's calculations were "abbreviated" and "limited in scope" and that Renter's calculations were more reliable. Brief for appellant at 14-15.
The determination of the weight that should be given expert testimony is uniquely the province of the fact finder. Anania v. Anania, 6 Neb. App. 572, 576 N.W.2d 830 (1998). When evidence is in conflict, an appellate court may consider, and give weight to, the fact that the lower court heard and observed the witnesses. Connealy v. Connealy, 7 Neb. App. 117, 578 N.W.2d 912 (1998).
Lorie and Trent each offered the expert testimony of a certified valuation analyst to prove the value of States Dental Clinic. The two experts gave conflicting testimony about the value of the clinic. Not surprisingly, Lorie's expert valued the clinic at a much higher value than Trent's expert. In the decree, the district court indicated that it had considered the testimony of each expert and had determined that the testimony of Trent's expert, McChesney, concerning the valuation of the clinic was more credible.
Upon our review of the record, we cannot say that the district court erred in accepting the testimony of McChesney in its valuation of the dental clinic. The two experts gave conflicting testimony about the best way to value the dental clinic and, ultimately, about the value of the clinic. The district court was in the better position to determine the credibility of the witnesses. We will discuss the district court's specific findings about the value of the clinic below.
2. VALUING CLINIC AT AMOUNT LESS THAN PURCHASE PRICE
Lorie also argues that the district court erred in valuing the dental practice at an amount less than $140,000, which is the amount Trent paid for his interest in the clinic in 1994. Lorie argues that the clinic has "improved substantially and . . . grown significantly throughout the parties' marriage" and that it should, at least, be valued at $140,000.
The asset purchase agreement signed by Trent and Jerry indicates that a vast majority of the purchase price of $140,000 was allocated to Jerry's agreement to sign a covenant not to compete with Trent's practice. Trent paid only $23,493 for Jerry's interests in the assets of the clinic, which included Jerry's personally owned equipment and instruments and Jerry's one-half interest in any equipment and supplies owned by the clinic.
in addition, the record reveals that since Trent purchased his interest in the clinic in 1994, States Dental Clinic has undergone changes. Perhaps the most notable change is the retirement of Trent's father, James, from the practice. After December 2008, Trent became the sole owner and operator of the clinic. And, in the years prior to James' retirement, James started to reduce the amount of hours he worked and the amount of patients he saw.
The record also reveals that the majority of the physical assets used by States Dental Clinic are not owned by the clinic, but, instead, are owned personally by Trent and James. In fact, evidence at the dissolution hearing revealed that James owns the building where the clinic is housed. In addition, Trent and James testified that all of the earnings of the clinic are paid out as either compensation for individual production or dividends.
When we view the entirety of the evidence presented at the hearing, we cannot say that the district court erred in valuing States Dental Clinic at an amount less than the initial purchase price of $140,000.
3. GOODWILL
Lorie argues that the court erred in failing to include the value of any goodwill in its valuation of the dental clinic. In Taylor v. Taylor, 222 Neb. 721, 386 N.W.2d 851 (1986), the Nebraska Supreme Court addressed whether goodwill associated with a professional practice can be considered in determining the value of property in a marital estate to be divided in a dissolution proceeding. There, the court defined goodwill as follows:
"'Goodwill is the advantage or benefit which is acquired by an establishment beyond the mere value of the capital, stock, funds, or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers, on account of its local position or common celebrity, or reputation for skill or affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices.'"Id. at 727-28, 386 N.W.2d at 856-57 (quoting Haverly v. Elliot, 39 Neb. 201, 57 N.W. 1010 (1894)).
The Nebraska Supreme Court held that before goodwill in a professional business organization can constitute property subject to division in a dissolution proceeding, a party must produce appropriate evidence to establish the salability or marketability of the goodwill as a business asset independent of the presence or reputation of a particular individual. Taylor v. Taylor, supra. Whether goodwill exists and whether goodwill has any value are questions of fact.Id.
There is no evidence in the record to demonstrate the value of any goodwill, nor is there evidence to prove whether such goodwill constitutes personal or professional goodwill. Each of the parties' expert witnesses indicated that he had not included the value of any goodwill in the ultimate valuation of States Dental Clinic. McChesney and Renter agreed that the value of any personal goodwill should not be included in their calculations and each testified that they were not qualified to perform the type of analysis to determine the value of any professional goodwill. Without such evidence, the district court did not err in failing to include the value of any goodwill in its valuation of States Dental Clinic.
VI. CONCLUSION
Having reviewed the case de novo on the record, we find no abuse of discretion by the district court with respect to the valuation of States Dental Clinic. We affirm.
AFFIRMED.