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The value of community goodwill is not necessarily the specified amount of money that a willing buyer would pay for such goodwill. In view of exigencies that are ordinarily attendant a marriage dissolution the amount obtainable in the marketplace might well be less than the true value of the goodwill. Community goodwill is a portion of the community value of the professional practice as a going concern on the date of the dissolution of the marriage. In a matrimonial matter, the practice of the sole practitioner husband will continue, with the same intangible value as it had during the marriage. Under the principles of community property law, the wife, by virtue of her position of wife, made to that value the same contribution as does a wife to any of the husband's earnings and accumulations during marriage. She is as much entitled to be recompensed for that contribution as if it were represented by the increased value of stock in a family business.
Carol D. Watts and John D. Watts were married in 1975. In 1979, Carol filed a petition for dissolution of marriage. An interlocutory judgment was filed in 1982. Thereafter, carol brought a motion for temporary spousal support pending appeal, attorney fees and costs on appeal and an injunctive order. The trial court entered judgment, finding that John’s medical practice had no goodwill value at the date of separation of the parties. Also, the trial court concluded that it did not have the authority to require John to reimburse the community for his exclusive use of the family residence and the medical practice between the date of separation and the date of trial, even though the court found that John had the exclusive use of such community property after such separation. Both parties appealed.
The Court of Appeal affirmed in part, reversed in part, and remanded the matter. The court held that the trial court erred in finding that the husband's medical practice had no goodwill at the date of separation of the parties. Had the trial court employed the capitalized excess earnings method of valuing the goodwill of the medical practice, a monetary value would have resulted. However, the trial court by implication intended to employ such method in valuing the goodwill of the medical practice. Also, it would have been error had the trial court found that the medical practice had no goodwill simply because there was no market for the practice. In the dissolution of marriage context, the mere fact that a professional practice cannot be sold, standing alone, will not justify a finding that the practice has no goodwill nor that the community goodwill has no value. Moreover, the trial court erred in concluding that it had no authority to reimburse the community for the value of the husband's exclusive use of such community property between the date of separation and the date of trial; upon remand the trial court must determine whether the husband should be required to reimburse the community.