May v. May
214 W. Va. 394, 589 S.E.2d 536 (2003)
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Rule of Law:
For the purposes of equitable distribution in a divorce, a distinction must be made between 'enterprise goodwill,' which is a divisible marital asset, and 'personal goodwill,' which is tied to an individual's skills and is not a divisible marital asset.
Facts:
- Hillman H. May (Dr. May) and Carol S. May (Mrs. May) were married on June 23, 1979.
- Before the marriage, Dr. May purchased property for his dental practice, which he opened in November 1978.
- Dr. May operated a solo dental practice throughout the marriage.
- From approximately 1980 to 1993, Mrs. May worked at least 20 hours per week at Dr. May’s dental office.
- In 1980, the couple built a home on property adjacent to the dental office.
Procedural Posture:
- On May 22, 2000, Mrs. May filed for divorce from Dr. May.
- The Circuit Court of Hancock County granted the divorce on September 24, 2001, but left the issue of marital property distribution unresolved.
- The property distribution issue was subsequently litigated before a family court judge.
- During the family court proceeding, Mrs. May's expert valued Dr. May's dental practice at $120,000, including a substantial amount for personal goodwill.
- Dr. May’s expert valued the practice at $55,000.
- The family court judge issued a final order adopting the valuation proffered by Mrs. May’s expert, including the value for personal goodwill.
- Dr. May, as appellant, filed an appeal of the family court's order directly to the Supreme Court of Appeals of West Virginia.
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Issue:
Is the personal goodwill of a solo professional practice considered a marital asset subject to equitable distribution?
Opinions:
Majority - Davis, Justice
No. The personal goodwill of a solo professional practice is not a marital asset subject to equitable distribution. The court adopts the majority view among jurisdictions, which distinguishes between 'enterprise goodwill' and 'personal goodwill.' Enterprise goodwill is attributable to the business itself—its location, name recognition, and customer relationships—and is a divisible marital asset. In contrast, personal goodwill is intrinsically tied to the individual's personal skill, training, and reputation, making it analogous to future earning capacity or a professional degree, which this court held in Hoak v. Hoak is not marital property. Because Mrs. May's expert explicitly testified that the goodwill value calculated for Dr. May's practice was entirely personal goodwill, the family court erred by including it in the marital estate for equitable distribution.
Concurring - Albright, Justice
No. I concur with the majority's sound reasoning and conclusion. Establishing a clear distinction between enterprise and personal goodwill provides necessary guidance for lower courts and creates a consistent foundation for determinations of both equitable distribution and alimony. This framework correctly prevents 'double dipping,' where a professional spouse's future earning capacity (personal goodwill) could be improperly counted both as a divisible asset and as a basis for calculating alimony. The majority opinion makes significant strides in clarifying this complex area of equitable distribution.
Analysis:
This decision establishes a significant precedent in West Virginia family law, aligning the state with the majority of jurisdictions on the treatment of professional goodwill. By formally adopting the distinction between divisible 'enterprise goodwill' and non-divisible 'personal goodwill,' the court has created a clearer framework for valuing professional practices in divorce proceedings. This holding directly impacts divorce litigation involving professionals and small business owners, requiring courts and valuation experts to carefully analyze the source of a business's intangible value. The ruling prevents the division of an individual's future earning capacity as a present asset, thereby avoiding potential 'double counting' when alimony is also at issue.
