In Re Marriage of Watts

Summary

The trial court found the surgeon husband's medical practice had no goodwill at separation, relying on experts who found no market for it, though its own findings showed earnings above comparable surgeon pay. It also held it lacked authority to charge him for exclusive post-separation use of the residence and practice, despite finding 10 percent a fair return. The Court of Appeal reversed both rulings and remanded for goodwill and reimbursement determinations, and affirmed the other issues.

What it means for the financial analysis

In valuation work, the absence of a market for a practice is not enough to support a zero-goodwill conclusion, and the court contemplated methods such as capitalized excess earnings, so analyses should address them and cannot rest on market-sale logic alone. For post-separation periods, the court said reimbursement for one spouse's exclusive use of community assets is within the trial court's authority and depends on the circumstances, so a rate-of-return analysis of the residence and practice may be useful, though the court did not decide the amount owed.

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