Depner v. Depner
478 So. 2d 532 (1985)
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Rule of Law:
The goodwill of a sole practitioner's professional corporation is not a divisible community property asset because it is personal to the practitioner, inseparable from their individual skill and reputation, and indistinguishable from their future earning capacity.
Facts:
- Stephen M. Depner, a medical doctor, incorporated his practice before his marriage, making the corporation his separate property.
- Stephen M. Depner and Susan Benton Depner were married on June 28, 1976.
- During the marriage, the value of Stephen's professional medical corporation increased as a result of community labor.
- The couple legally separated on August 2, 1979, dissolving their community property regime.
- Upon dissolution, the parties could not agree on whether the increased value of the corporation should include intangible assets like goodwill or earning capacity for the purpose of a community property settlement.
Procedural Posture:
- Stephen M. Depner brought suit against Susan Benton Depner in a Louisiana trial court to obtain a settlement of their community property.
- The trial court determined the value of the increase in Stephen's medical corporation but refused to include any value for intangible assets like goodwill.
- The trial court rendered judgment in favor of Susan Benton Depner for $16,523.52, representing half the value of the increase in the corporation's tangible assets.
- Susan Benton Depner (appellant) appealed the judgment to the Court of Appeal of Louisiana, First Circuit, arguing the court erred by not valuing goodwill.
- Stephen M. Depner (appellee) answered the appeal, asking that the judgment amount be decreased.
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Issue:
Under Louisiana law, does the goodwill of a sole practitioner's professional medical corporation constitute a community asset subject to division upon divorce when valuing the increase of the corporation (which is separate property) during the marriage?
Opinions:
Majority - Savoie, Judge
No. The goodwill of a sole practitioner's professional medical corporation does not constitute a community asset subject to division upon divorce. The court reasoned that professional goodwill is personal to the individual practitioner and cannot be attributed to the corporation itself. It is inextricably linked to the physician's personal skill, integrity, and reputation, and this personal relationship exists between the physician and patient, not the corporation and patient. The court stated that 'absent the physician it does not exist,' and therefore, it is not a corporate asset. This goodwill cannot be sold or transferred and is essentially an expectancy of future earnings, which, after the community's dissolution, are the separate property of the earning spouse. Adopting the reasoning from cases in other jurisdictions, the court found it would be inequitable to compel a professional to pay a spouse for an intangible asset that has no market value and cannot be liquidated.
Dissenting - Shortess, Judge
Yes. The goodwill of the professional medical corporation should be considered a divisible asset. The dissent argued that the majority improperly analyzed the entity as an individual medical practice rather than as a professional corporation. A corporation, by definition, possesses both tangible and intangible assets. Goodwill is a recognized intangible asset and a patrimonial right, meaning it is susceptible to pecuniary evaluation. Therefore, the case should have been remanded to the trial court to determine the value of the corporation's goodwill as a community asset.
Analysis:
This decision establishes a significant precedent in Louisiana family law by categorizing professional goodwill in a solo practice as a personal attribute rather than a divisible marital asset. It aligns Louisiana with a minority of jurisdictions that refuse to treat professional goodwill as property for the purpose of equitable distribution in a divorce. The court's distinction between transferable commercial goodwill and non-transferable personal professional goodwill creates a clear line, protecting the future earning capacity of professionals from division. This ruling significantly impacts divorce settlements involving sole owners of professional practices like doctors, lawyers, and accountants, limiting the non-professional spouse's claim to the tangible assets and accounts receivable of the business.
