Burnett v. Burnett

H. WAYNE BURNETT, M.D., Appellant-Respondent,

v.PAMELA A. BURNETT, M.D., Appellee-Petitioner.

No. 29A02-1203-DR-180

COURT OF APPEALS OF INDIANA

Dated: November 29, 2012

Pursuant to Ind.Appellate Rule 65(D), this Memorandum Decision shall not be regarded as precedent or cited before any court except for the purpose of establishing the defense of res judicata, collateral estoppel, or the law of the case.

ATTORNEY FOR APPELLANT:

ROBERT E. SAINT, ESQ.

Emswiller, Williams, Noland

& Clarke, P.C.

Indianapolis, Indiana

ATTORNEY FOR APPELLEE:

DEBORAH FARMER SMITH

Campbell Kyle Proffitt LLP

Carmel, Indiana

APPEAL FROM THE HAMILTON SUPERIOR COURT

The Honorable William J. Hughes, Judge

Cause No. 29D03-0909-DR-1207

MEMORANDUM DECISION - NOT FOR PUBLICATION

BAILEY, Judge

Case Summary

The marriage of Appellant-Petitioner H. Wayne Burnett, M.D. ("Husband") and Appellee-Respondent-Cross-Appellant Pamela A. Burnett, M.D. ("Wife") was dissolved on February 7, 2012. Husband now appeals the valuation of his partnership interest in a medical practice and the award of expert witness fees to Wife. Wife cross-appeals the division of the marital assets. We affirm.

Issues

Husband presents three issues for our review, which we consolidate and restate as the following two issues:

I. Whether the trial court abused its discretion in determining the value of Husband's partnership interest in a medical practice; and

II. Whether the trial court abused its discretion in awarding expert witness fees to Wife.

Wife presents a single issue on cross appeal:

I. Whether the trial court abused its discretion when it deviated from the statutory presumption of equal division of the marital estate.

Facts and Procedural History

Husband and Wife were married on June 25, 1985, and two children were born of the marriage. Husband and Wife separated on September 28, 2009, and Wife petitioned to dissolve the marriage on the same day. On October 6, 2011, Wife filed a request for findings of fact and conclusions of law. On October 11 and 12, 2011, the trial court held a final dissolution hearing. On February 7, 2012, trial court entered findings of fact and conclusions of law, and dissolved the marriage. In its dissolution order, the trial court provided for anequal division of the marital estate, except it provided that Husband and Wife each should receive his or her interest in Kentucky real estate which each had received from family by gift or inheritance. (Appellant's App. at 74.)

Discussion and Decision

The trial court's order includes findings of fact and conclusions of law pursuant to Indiana Trial Rule 52, therefore we must determine whether the evidence supports the findings and whether the findings support the judgment. Mayer v. BMR Props., LLC, 830 N.E.2d 971, 978 (Ind. Ct. App. 2005). Findings of fact are clearly erroneous when the record lacks any reasonable inference from the evidence to support them, and the trial court's judgment is clearly erroneous if it is unsupported by the findings and conclusions which rely upon those findings. Dallas v. Cessna, 968 N.E.2d 291, 296 (Ind. Ct. App. 2012).

In establishing whether the findings or judgment are clearly erroneous, we consider only the evidence favorable to the judgment and all reasonable inferences to be drawn therefrom. Id. We neither reweigh the evidence nor judge the credibility of witnesses, and we will affirm the trial court's decision if the record contains any supporting evidence or inferences. Id. While we defer substantially to findings of fact, we evaluate the trial court's conclusions of law de novo. Id.

Valuation of Husband's Partnership Interest in a Medical Practice

Husband raises two issues concerning the expert testimony and report of R. James Alerding ("Alerding"), which we restate as the single issue of whether the trial court failed to separate Husband's personal goodwill from the enterprise goodwill inherent in AnesthesiaConsultants of Indianapolis, LLC ("ACI") while valuing Husband's partnership interest in ACI, and thus abused its discretion.

A trial court has broad discretion in ascertaining the value of property in a dissolution action, and its valuation will not be disturbed absent an abuse of that discretion. Frazier v. Frazier, 737 N.E.2d 1220, 1225 (Ind. Ct. App. 2000). The trial court has not abused its discretion if its decision is supported by sufficient evidence and reasonable inferences therefrom. Id. We do not substitute our judgment for that of the trial court even where the circumstances would support a different award. Id.

The law regarding valuation of a business that is part of a marital estate is well settled:

[T]he trial court must consider whether goodwill included within the total value of a business enterprise is personal to one spouse. Yoon v. Yoon, 711 N.E.2d 1265, 1269 (Ind. 1999). Goodwill is the value of a business or practice that exceeds the combined value of the net assets used in the business. Id. at 1268. Enterprise goodwill is based on the intangible, but generally marketable, existence in a business of established relations with employees, customers and suppliers, and may include a business location, its name recognition and its business reputation. Id. Goodwill that is attributable to the business enterprise is divisible property, while goodwill that is personal, a surrogate for the owner's future earning capacity, is not divisible. Id. Stated alternatively, goodwill that is based on the personal attributes of the individual is excluded from the marital estate.

Id. In calculating the value of a business that is part of a marital estate, the court must separate personal goodwill from enterprise goodwill. Enterprise goodwill inheres in the business, is independent of any single individual's personal efforts, and will outlast any person's involvement in the business. Yoon, 711 N.E.2d at 1268-69. To the extent a business has goodwill, quantified as value in excess of its net assets, it is a factual issue to what extent, if any, that goodwill is personal to an individual and to what extent it isenterprise goodwill and therefore divisible property. Id. at 1270. It is possible for some of the value of enhanced gross revenue to inhere in the business, even if it was generated by an individual's personal effort. Id. at 1271. The trial court must identify the portion of the value that is attributable to the business without the professional's continued participation when calculating the value of a business that is part of a marital estate. Id. at 1272. To the extent a part of the value of the business is attributable to factors unique to an individual, such as unusually long hours, any enterprise value is only whatever value exists in the patient base, and would be transferrable to a buyer unwilling to work the same long hours. Id.

Here, Alerding testified that his method of calculating the value of Husband's interest in ACI excluded Husband's personal goodwill, and left only ACI's enterprise goodwill. He further testified that his calculated value of Husband's interest in ACI "could assume a sale of the practice, it could assume a sale of his interest, it could assume he stays or leaves[.]" He calculated that, before a discount for lack of marketability, Husband's interest in ACI was worth $337,000, and after the discount, it was worth $253,000. Furthermore, the trial court entered extensive findings of fact and conclusions of law addressing the value of Husband's interest in ACI:

43. Mr. Alerding expressed his opinion of the value of Husband's interest in ACI as $337,00[0].00, on an investment value basis, and $253,000.00, on a fair market value basis. . . . Each partner who left received $100.00 plus a "termination benefit[.]" . . . Thirty-two (32) partners have joined ACI since 2001; each has paid $100.00 to become a partner.

44. Husband is one of 68 partners in ACI. This number has not changed significantly since the date of filing.

. . .

47. The value for each member's interest in ACI, as initially established by ACI, is $100.00. ACI has never re-determined a value after the determination of the initialvalue.

48. Each partner in ACI holds an equal ownership interest; each partner's ownership interest is 100%, divided by the number of partners. However, according to ACI's Operating Agreement, each partner does not receive an equal share of ACI's income. Instead, each partner receives unequal partnership distributions pursuant to a formula.

49. Each ACI partner is required to execute a Partner Compensation Agreement ("PCA"). Each PCA is identical, except for identifying information specific to the individual member. . . .

57. ACI is a large practice. It has formalized organization structures and systems. In their PCAs, all its partners have executed covenants not to compete with ACI in the event of their dissociation from ACI. Although each partner is compensated based on the partner's production, ACI's ability to generate revenue is not heavily dependent on the personal services performed by any one partner. ACI's name does not include the name of any partner, and its identity has remained the same for a decade despite the addition and withdrawal of partners. Contracts between ACI and the facilities at which it provides services are owned by ACI and not by any individual partner. None of ACI's contracts with any facility where it provides services requires that Husband, or any individual partner, be available to provide anesthesia services. . . . ACI alone determines what partner will provide services in each operating room and at each facility; no facility controls what partners will provide services there and no partner controls where he/she will provide services. Husband's ability to provide anesthesia services at ACI facilities is not dependent on his personal relationship with any patients or with any surgeons. Even if Husband were not on the requested list of any surgeon, he would still be scheduled to work full-time so long as he is available to work full-time. If

...