Hollander v. Hollander

CATHELL, Judge. The domestic dispute between Morton and Adele Hollander did not cease with the judgment of absolute divorce from the Circuit Court for Baltimore County. Specifically, Morton Hollander appeals from the Order of Determination of Marital Property and Alimony given by Brennan, J., on March 20, 1990, and from the denial of his Motion to Alter, Amend and Revise Judgment. Alleging error in the judg ¹⁶⁰ ment as to the monetary award, alimony and counsel fees, Dr. Hollander raises these questions: 1.

Did the trial court err in making a monetary award from Husband to Wife based upon his alleged dental practice? 2. Did the trial court err in declining to recognize and enforce Husband’s non-marital property interest in certain real property? 3. Did the trial court err in making an award of alimony from Husband to Wife? 4. Did the trial court err in making an award of attorney fees from Husband to Wife?

We conclude that the trial court properly classified the dental practice and the real property in issue as marital property. We hold that the court’s reliance on the value of the practice as of 1986 to establish current value was justified under the circumstances of this case. We further hold that appellant has failed to preserve the other issue he raises with respect to the method of valuation utilized by appellee’s expert and that the trial court did not abuse its discretion in awarding alimony or counsel fees. Accordingly, we shall affirm.

We explain. FACTS The parties were married in June of 1952. During their marriage of more than thirty-seven years, they raised three children to adulthood. Dr. Hollander has been practicing dentistry since 1943.

He first established his dental practice in the home of his parents. This was also the location of the Hollanders’ first apartment. They lived in the third floor apartment for two years of their marriage. At the time of their marriage, Mrs. Hollander worked for the Baltimore City Board of Education.

However, Dr. Hollander, not wanting his wife to work, told her to leave her job because he would take care of her. Mrs. Hollander then took responsibility for raising the children, caring for the home and even assisting her husband with his dental practice. ¹⁶¹ In 1967, Dr. Hollander moved his dental office to the Hollanders’ marital residence. Dr. Hollander testified that this home was purchased in 1958 with money that he had saved prior to marrying his wife. According to his testimony, these resources were kept in a personal savings account segregated from the couple’s funds.

In addition, Dr. Hollander also testified that he later redeemed the ground rent with money from this same premarital fund. Before the purchase of their new home, the couple had moved from the apartment in the doctor’s family home into another apartment to “ ‘save money to purchase a home,’ despite the fact that he had $130,000.00 saved.” Both the house and the land were titled as tenants by the entirety. One of the children, Melissa, joined her father’s dental practice in 1980. The two shared patients, but Melissa also developed her own patients.

According to testimony, common office expenses were shared; however, they kept separate records and reported their income as sole proprietor-ships. In the fall of 1985, Dr. Hollander allegedly executed a letter giving Melissa his dental practice. Beginning in January of 1986, Dr. Hollander was to receive a limited salary of $8,000 per year. The purported consequences of the “gift” did not occur as planned, however.

Melissa took time off to give birth to a child, and Dr. Hollander continued to work full time at the practice. He filed an income tax return showing earnings close to $80,000 for the year of 1986. The parties separated in February of 1987. The circumstances that led to the estrangement are of no consequence to this appeal.

The judgment for absolute divorce was dated September 5, 1989. THE LAW I. MONETARY AWARD The primary contentions of appellant focus on the monetary award. Dr. Hollander asserts that the trial court ¹⁶² utilized an improper basis for granting the award as it contained non-marital property. We shall first briefly discuss the mechanics of granting a monetary award.

The Marital Property Act requires that, before a monetary award is granted, the following three-step process occur: (1) if an equitable adjustment over and above the distribution of the spouse’s property in accordance with its title is an issue, the court shall determine which property is marital property, Md.Fam.Law Code Ann. § 8-203 (1984 & Supp.1991); (2) the court shall then determine the value of all marital property, § 8-204; and finally, (3) the court may make a monetary award as an adjustment of the parties’ equities and rights “concerning marital property, whether or not alimony is awarded,” § 8-205(a). If an award is deemed appropriate, the court then must consider each of the ten factors enumerated in section 8-205. Harper v. Harper, 294 Md. 54, 79 , 448 A.2d 916 (1982); Wilen v. Wilen, 61 Md.App. 337, 355 , 486 A.2d 775 (1985); Ward v. Ward, 52 Md.App. 336, 339 , 449 A.2d 443 (1982). See also Quinn v. Quinn, 83 Md.App. 460, 464 , 575 A.2d 764 (1990); Melrod v. Melrod, 83 Md.App. 180, 185 , 574 A.2d 1 , cert denied, 321 Md. 67 , 580 A.2d 1077 (1990).

Dr. Hollander alleges that the court erred while executing the first step required by the Marital Property Act. He contends that neither his dental practice nor the marital home should have been characterized as marital property. As a result, the monetary award granted to his wife must be vacated. We disagree.

The determinations made by the court below were correct. A. Dental Practice Before addressing the issue of whether the dental practice is marital property, we must examine the question of ownership presented by appellant. He contends that the evidence produced at trial “unequivocally established that Husband formally gave his dental practice to his daughter----” Thus, the trial court should not have classified the practice as marital property because it was no longer ¹⁶³ the property of either party. After reviewing the doctrine of dissipation, we do not find this argument convincing.

Judge Alpert, for this Court, clearly stated the rationale of including dissipated property in a monetary award: [I]t would clearly be against the Legislature’s stated public policy to permit one spouse to squander marital property and render it impossible to make an equitable award of property. Therefore, where a chancellor finds that property was intentionally dissipated in order to avoid inclusion of that property towards consideration of a monetary award, such intentional dissipation is no more than a fraud on marital rights and the chancellor should consider the dissipated property as extant marital property ... to be valued with the other existing marital property- Sharp v. Sharp, 58 Md.App. 386, 399 , 473 A.2d 499 (1984) (citations omitted). See also Court v. Court, 67 Md.App. 676, 686 , 509 A.2d 693 (1986); Rosenberg v. Rosenberg, 64 Md.App. 487, 502 , 497 A.2d 485 , cert. denied, 305 Md. 107 , 501 A.2d 845 (1985). The court in the case sub judice found “[i]t ... quite obvious that Dr. Morton Hollander ... attempted to deceive this Court concerning his dental practice and earnings so as to affect his valuation of the marital property.” We consider the evidence sufficient to support this conclusion.

The trial court chose not to believe the appellant, his daughter, or his accountant. The court also placed emphasis on the fact that appellant continued to maintain an identical lifestyle, both professional and personal, after the alleged gift took place. During the trial, the judge had the opportunity to observe the demeanor of the parties, to judge their credibility, and to pass upon the weight to be given their testimony. Schweizer v. Schweizer, 55 Md.App. 373, 380-81 , 462 A.2d 562 (1983), aff'd and modified on other issues, 301 Md. 626 , 484 A.2d 267 (1984).

We do not find it clearly erroneous for the trial court to conclude that the dental practice was “given” to Melissa to avoid the consequences of the impending divorce. ¹⁶⁴ Relying on the recent case of Prahinski v. Prahinski, 321 Md. 227 , 582 A.2d 784 (1990), affirming this Court’s opinion, 75 Md.App. 113 , 540 A.2d 833 (1988), the appellant next seeks to attack the trial court’s ruling that the dental practice is marital property. Dr. Hollander contends the dental practice is not marital property because it consists of pure, professional goodwill. 1 When the Court of Appeals addressed the issue of whether professional goodwill is marital property in Prahinski, it concluded only that “the goodwill of a solo law practice is personal to the individual practitioner. Goodwill in such circumstances is not severable from the reputation of the sole practitioner____” Prahinski, 321 Md. at 239 , 582 A.2d 784 (emphasis added). Because the Court limited its holding to the express facts before it, we do not believe it answered the question before us. 2 Although we find Prahinski instructive, we view the question of whether the goodwill of a dental practice is marital property as one of first impression.

Before reaching their conclusions in the respective cases of Prahinski, both the Court of Appeals and Judge Bloom for this Court reviewed the decisions of the courts in other states that have addressed this issue. The majority of these jurisdictions treat professional goodwill as marital property. In re Marriage of Nichols, 43 Colo.App. 383 , 606 P.2d 1314 (1979) (solo dental practice); Wright v. Wright, 469 A.2d 803 (Del.Fam.Ct.1983) (solo dental practice); In re Marriage of White, 98 Ill.App.3d 380 , 53 Ill.Dec. 786 , 424 N.E.2d 421 (1981), appeal after remand, 151 Ill.App.3d 778 , 104 Ill.Dec. 424 , 502 N.E.2d 1084 (1986), appeal denied, 114 ¹⁶⁵ Ill.2d 546, 108 Ill.Dec. 426 , 508 N.E.2d 737 (1987) (dentist as sole shareholder in professional corporation); Hanson v. Hanson, 738 S.W.2d 429 (Mo. banc 1987) (oral surgery partnership); Poore v. Poore, 75 N.C.App. 414 , 331 S.E.2d 266 , disc. rev. denied, 314 N.C. 543 , 335 S.E.2d 316 (1985) (solo dentist in professional association); In re Marriage of Goger, 27 Or.App. 729 , 557 P.2d 46 (1976) (dentist as sole shareholder in professional corporation); Sorensen v. Sorensen, 769 P.2d 820 (Utah App.1989), cert. granted, 779 P.2d 688 (Utah 1989) (dentist as sole shareholder in professional corporation); In re Marriage of Fleege, 91 Wash.2d 324 , 588 P.2d 1136 (1979) (solo dental practice); Peerenboom v. Peerenboom, 147 Wis.2d 547 , 433 N.W.2d 282 (1988) (solo dental practice). Nevertheless, there are two other views followed by a smaller number of states.

Some of these jurisdictions take the position that professional goodwill is not marital property because it is personal to the practitioner. Powell v. Powell, 231 Kan. 456 , 648 P.2d 218 (1982); Depner v. Depner, 478 So.2d 532 (La.App. 1st Cir.1985), cert. denied, 480 So.2d 744 (La.1986); Nail v. Nail, 486 S.W.2d 761 (Tex.1972). Other courts require the question to be answered on a case by case basis. Wilson v. Wilson, 294 Ark. 194 , 741 S.W.2d 640 (1987); Antolik v. Harvey, 7 Haw.App. 313 , 761 P.2d 305 (1988); Taylor v. Taylor, 222 Neb. 721 , 386 N.W.2d 851 (1986). 3 The Court of Appeals stated that “[i]n order for goodwill to be marital property, it must be an asset having a separate value from the reputation of the practitioner.” Prahinski, 321 Md. at 239 , 582 A.2d 784 .

Goodwill cannot be based solely on the skill, experience or reputation of the practitioner if it is to be considered marital property. We hold that a dental practice can in fact have goodwill that is separate from the reputation of the dentist, and is, there ¹⁶⁶ fore, properly characterized as marital property. We explain. First, we note that the Court of Appeals went to great lengths to distinguish the goodwill of a law practice from the goodwill of other professionals.

Prahinski, 321 Md. at 239-41 , 582 A.2d 784 . 4 The Court stated that the practice of law involves special considerations which might not occur in other professional practices. Prahinski, 321 Md. at 240 , 582 A.2d 784 . For example, “[T]he sale of goodwill by a professional carries with it the obligation that he will abstain from practice in the future in the territory from which he binds himself to withdraw.” It is clear that an attorney ... may not covenant to abstain from the practice of law, and therefore, may not sell his or her goodwill. Id.

(citation omitted). On the other hand, the Court pointed out, that other professionals such as dentists and physicians have no such prohibitions against selling their goodwill. Id. See cases cited therein.

Another factor which played an equally important role in the decision of the Court was the applicability of the Rules of Professional Conduct. Rule 5.4(d) provides in part: “A lawyer shall not practice ... if: (1) a nonlaywer owns any interest therein____” The Court, in Prahinski, stated “[t]his rule clearly prohibits Leo from making Margaret a partner in his law practice.” 321 Md. at 241 , 582 A.2d 784 . The Court of Appeals, thus, did not intend for its holding to be applied broadly over all professional practices. Maryland is not the only state to differentiate between the goodwill of a law practice and the goodwill of other professional practices.

One of the states formerly cited by other courts for its stalwart language against the position of characterizing goodwill as marital property has also ¹⁶⁷ distinguished law from other professions in the same way we now distinguish Prahinski from the case sub judice. The Court of Appeals of Wisconsin in Holbrook v. Holbrook, 103 Wis.2d 327 , 309 N.W.2d 343 (1981), held that the marital estate did not include the professional goodwill of a law partnership interest. The court explained that an asset such as goodwill would not be divisible where the value can only be set by judicial determination and can never be realized by a sale or other method of liquidating value. Holbrook, 309 N.W.2d at 355 .

The Court went so far as to state, “[w]e are not persuaded that the concept of professional goodwill as a divisible marital asset should be adopted in Wisconsin.” Holbrook, 309 N.W.2d at 354 . This statement, however, must now be read in light of the decision in Peerenboom . The Peerenboom court, seven years later when analyzing the good will of a solo dental practitioner, concluded that “[i]n contrast, in this case the record shows no ethical or contractual barrier to [the dentist] disposing of his interest in his dental practice____ [T]o the extent that the evidence shows that the goodwill exists, is marketable, and that its value is something over and above the value of the practice’s assets and the professional’s skills and services, it may be included as an asset in the marital estate____” Peerenboom v. Peerenboom, 147 Wis.2d 547 , 433 N.W.2d 282, 284 (1988). Because the value of goodwill can be realized by sale, it would not be inequitable to require the professional to pay the spouse a share of this asset.

The Colorado Court of Appeals explains how goodwill derives its value: Professional practices that can be sold for more than the value of their fixtures and accounts receivables have salable goodwill. A professional, like any entrepreneur who has established a reputation for skill and expertise, can expect his patrons to return to him, to speak well of him, and upon selling his practice, can expect that many will accept the buyer and will utilize his professional expertise. These expectations are a part of goodwill, and they have a pecuniary value. While we recognize that ¹⁶⁸ professional goodwill is not an asset which has an independent market value, it can, in conjunction with the assets of the practice, be sold.

In re Marriage of Nichols, 43 Colo.App. 383 , 606 P.2d 1314, 1315 (1979) (citation omitted). See also Wright v. Wright, 469 A.2d 803 (Del.Fam.Ct.1983); Sorensen v. Sorensen, 769 P.2d 820 (Utah App.1989), cert. granted, 779 P.2d 688 (Utah 1989); In re Marriage of Fleege, 91 Wash.2d 324 , 588 P.2d 1136 (1979). In Sorensen , the Utah Court of Appeals also held that a dentist practicing alone has goodwill that should be valued as marital property. Before reaching this conclusion, the court addressed the major arguments of those states that do not recognize professional goodwill in any context.

First, some states contend goodwill is not an asset separate from the individual practitioner and is similar to a professional degree. Sorensen, 769 P.2d at 826 . The Sorensen court found that goodwill is traditionally defined as an intangible “property right” and is not merely a factor contributing to the earning capacity of the professional. Id.

It can be sold as part of the practice while the degree cannot. Id. at 827 . The second position taken by some states is that goodwill cannot be distinguished from future earning capacity and that it is only valuable to the extent it assures earnings in the future. Sorensen, 769 P.2d at 826 .

This argument has also been stated: “The practice is personal to the practitioner. When he or she dies or retires nothing remains.” Powell v. Powell, 231 Kan. 456 , 648 P.2d 218, 223 (1982). See also Depner v. Depner, 478 So.2d 532, 534 (La.App. 1st Cir.1985), cert. denied, 480 So.2d 744 (La.1986); Nail v. Nail, 486 S.W.2d 761, 764 (Tex.1972). Goodwill, however, is distinguishable from future earnings capacity: When a professional retires or dies, his earning capacity also either retires or dies.

Nevertheless, the goodwill that once attached to his practice may continue in existence in the form of established patients or clients, refer ¹⁶⁹ rals, trade name, location and associations which now attached [sic] to ... buyers of the practice---- [A] professional can transport all of his skill (earning capacity) to a new town, but patients or clients, reputation and referrals (goodwill) cannot always be transported. In re Marriage of Hall, 103 Wash.2d 236 , 692 P.2d 175, 178 (1984) (citations omitted). The final argument put forth by a few states is that goodwill is difficult to value. Sorensen, 769 P.2d at 826 .

Although assessing the value of goodwill may seem a formidable task, the intricacy of the solution should not force any court to shirk its responsibility nor ignore the basic fact that goodwill holds considerable value for the professional. Value is an evidentiary matter; it is up to the party to demonstrate adequately that goodwill has present value. Sorensen, 769 P.2d at 828 . We accept and adopt the above arguments, and we