pjc-family-2024-lib

PJC 203.2

V ALUATION OF P ROPERTY

PJC 203.2 Factors to Be Excluded for Valuation of Business “Personal goodwill” is the goodwill that is attributable to an individual’s skills, abilities, and reputation. In determining the value of SPOUSE A ’s medical practice , you are not to include the value of personal goodwill or the value of time and labor to be expended after the divorce. However, you may consider the commercial good will, if any, of the practice that is separate and apart from personal goodwill. COMMENT Source. The Supreme Court of Texas has said that, in valuing the practice of an unincorporated professional for purposes of divorce, the court cannot include the value of goodwill that has accrued to the individual and that is not separate and apart from that individual’s person or that individual’s ability to practice the profession. Nail v. Nail , 486 S.W.2d 761, 764 (Tex. 1972). Since Nail , courts of appeals have considered the question of goodwill of a professional medical corporation, Geesbreght v. Gees breght , 570 S.W.2d 427 (Tex. App.—Fort Worth 1978, writ dism’d); goodwill of a law partnership, Finn v. Finn , 658 S.W.2d 735 (Tex. App.—Dallas 1983, no writ); and pro ceeds from the sale of an accounting practice, including sums paid for goodwill, Aus tin v. Austin , 619 S.W.2d 290 (Tex. App.—Austin 1981, no writ). These and other cases suggest that goodwill that exists separate and apart from the individual profes sional is property that can be considered and divided on divorce. Some courts have applied this rationale to nonprofessionals. See Rathmell v. Morrison , 732 S.W.2d 6, 18 (Tex. App.—Houston [14th Dist.] 1987, no writ); Finch v. Finch , 825 S.W.2d 218, 224 (Tex. App.—Houston [1st Dist.] 1992, no writ). In Rathmell , the court suggested that the jury be instructed, in connection with valuing the business, to disregard the per sonal goodwill of the spouse; the time, toil, and talent of the spouse to be expended after the divorce; and the spouse’s willingness not to compete with the business. The composition of commercial goodwill varies from case to case, depending on the nature of the business entity or professional practice. When to use. The foregoing instruction should be used with the question in PJC 203.3 (value of property) in cases requiring valuation of a business or a professional firm or partnership in which one of the parties is a participant. Rewording instruction. In an appropriate case, suitably descriptive terms should be substituted for the phrase medical practice and the word practice in the foregoing instruction.

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