Finn v. Finn

658 S.W.2d 735, 1983 Tex. App. LEXIS 4936
CourtCourt of Appeals of Texas
DecidedSeptember 6, 1983
Docket21066
StatusPublished
Cited by67 cases

This text of 658 S.W.2d 735 (Finn v. Finn) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Finn v. Finn, 658 S.W.2d 735, 1983 Tex. App. LEXIS 4936 (Tex. Ct. App. 1983).

Opinions

VANCE, Justice.

The questions presented in this appeal concern the trial court’s division of property upon the divorce of Frank and Joellen Finn. The wife asserts fourteen points contending that various errors committed by the trial court resulted in an unfair and unjust property division. For the reasons stated below, we hold that the wife was improperly denied discovery of documents essential to prove the value of the community interest in the husband’s law practice. We therefore reverse and remand the property division for a new trial.

The Finns were married for more than twenty years. During the entire time the couple was married the husband worked for a large Dallas law firm. The law practice is structured as a partnership in which the husband has been a senior partner for over ten years. Although the wife also has a law degree, she did not practice law during the marriage, but instead devoted her time to maintaining the home and raising their four children. The parties agreed on the value of most of the community property, but the value of the husband’s law practice was hotly contested.

1. Goodwill of Law Firm.

The wife contends that the trial court erred by instructing the jury to exclude the goodwill of the law firm and its future earning capacity from the valuation of the [740]*740community interest in the husband’s law practice. Relying on the Fort Worth Court of Civil Appeals decision in Geesbreght v. Geesbreght, 570 S.W.2d 427 (Tex.Civ.App.—Fort Worth 1978, writ dism’d), the wife argues that the husband’s law firm has goodwill which is separate and apart from the husband’s professional ability. Therefore, the wife argues that the husband’s professional partnership is analogous to the professional corporation addressed by the court in Geesbreght and the goodwill attached to the law firm is property subject to division upon divorce.

The husband, relying on the supreme court opinion in Nail v. Nail, 486 S.W.2d 761 (Tex.1972) contends that the goodwill is not a vested property right which fixes a benefit in any sum at a future time. In support of his contention, the husband notes that the partnership agreement under which the law firm operates makes no provision for compensating a senior partner for the goodwill of the firm in the event of his death or withdrawal. The husband argues that the goodwill of the professional partnership is analogous to the individual professional practice addressed by the court in Nail, in that under the terms of the operating agreement any benefit conferred on the husband due to the goodwill of the firm is a mere expectancy contingent on his continued participation in the firm. Thus, he argues, the goodwill is not property in the community estate subject to division on divorce.

In Nail the supreme court noted that “goodwill has no existence as property in and of itself, as a separate and distinct entity, but only as an incident of a continuing business having locality or name.” Nail, 486 S.W.2d at 763. The court went on to state that professional goodwill attaches to the person of the professional as a result of confidence in his skill and ability. In the case of a solo practitioner the court held that goodwill did not possess value or constitute an asset separate and apart from the professional’s ability. Nail, 486 S.W.2d at 764. Accordingly, the court held that the goodwill of the professional’s practice that may have accrued during the marriage was not property in the community estate. The Nail court was particularly concerned with the fact that should a solo practitioner die or cease to practice the goodwill would cease to exist without its value having been realized in any manner other than by enhancing the practitioner’s earning capacity. Nail, 486 S.W.2d at 764. The Nail court specifically reserved the question of goodwill that exists apart from the person of an individual member in a professional partnership or corporation.

In Geesbreght the Fort Worth Court of Civil Appeals considered the question of whether goodwill was property subject to division upon divorce in the context of a professional corporation. Dr. Geesbreght and his partner incorporated their professional practice with each partner holding one-half of the corporate stock. The corporation did not do business under the names of the two stockholders and employed many professionals, in addition to the two stockholders, to provide services on behalf of the corporation under its many contracts. The court noted that the corporation had a reputation for providing services in its own name that was built in large part upon the abilities of the professional employees. To that extent, goodwill existed in the corporation separate and apart from the personal ability and reputation of Dr. Gees-breght. Geesbreght, 570 S.W.2d at 435. The court went on to hold that this corporate goodwill had a commercial value and to the extent that it enhanced the value of Dr. Geesbreght’s stock in the corporation, the goodwill was property subject to division upon divorce. Geesbreght, 570 S.W.2d at 436. The issue of whether the community estate was entitled to share in the goodwill of the corporation was not before the Gees-breght court. It was undisputed that Dr. Geesbreght’s stock in his professional corporation was community property and to the extent that the goodwill enhanced the value of the stock, it was community property subject to division upon divorce.

Read together, Nail and Geesbreght indicate a two-pronged test to determine [741]*741whether the goodwill attached to a professional practice is subject to division upon divorce. First, goodwill must be determined to exist independently of the personal ability of the professional spouse. Second, if such goodwill is found to exist, then it must be determined whether that goodwill has a commercial value in which the community estate is entitled to share.

Evidence in the present case indicates that the husband’s law firm has goodwill independent of his professional ability. Like the professional corporation in Geesbreght, the firm does not conduct business under the names of the senior partners, but rather operates under the names of two founding partners no longer practicing with the firm. The record reflects that at the time of trial the law firm consisted of twenty senior partners, twenty-two junior partners and forty-three associates. The husband has been practicing law with the firm for over twenty-five years; however, the firm has been providing legal services to the public for more than ninety years. A large part of the firm’s reputation for providing services was built upon the professional abilities of the husband’s predecessors in the firm as well as the abilities of his present partners and professional employees. Under these circumstances we recognize that the firm has goodwill independent and apart from the professional ability of the husband.

The inquiry does not stop here, as the wife contends, but must continue to determine whether his goodwill has commercial value to which the community estate is entitled. Without question the goodwill of a long established firm has commercial value. The question which confronts us is whether the community estate is entitled to share in the value of the law firm’s goodwill.

The community estate is not entitled to a greater interest than that to which the husband is entitled in the firm’s goodwill.

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Cite This Page — Counsel Stack

Bluebook (online)
658 S.W.2d 735, 1983 Tex. App. LEXIS 4936, Counsel Stack Legal Research, https://law.counselstack.com/opinion/finn-v-finn-texapp-1983.