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05/12/97 MARTHA GAYDOS v. EDWARD A. GAYDOS

May 12, 1997

MARTHA GAYDOS
v.
EDWARD A. GAYDOS, APPELLANT; MARTHA GAYDOS, APPELLANT V. EDWARD GAYDOS



Appeal from the Order, October 6, 1994, in the Court of Common Pleas of Allegheny County, Family Division, No. FD 91-01270. Before BALDWIN, J.

Before: Cavanaugh, J., Cirillo, P.j.e., Tamilia, Kelly, Johnson, Ford Elliott, Saylor, Eakin, And Schiller, JJ. Opinion BY Ford Elliott, J. Schiller, J. files a Concurring Opinion. Kelly, J. files a Concurring & Dissenting Statement.

The opinion of the court was delivered by: Elliott

OPINION BY FORD ELLIOTT, J.

FILED: May 12, 1997

Edward Gaydos ("Husband") appeals and Martha Gaydos ("Wife") cross-appeals from the October 6, 1994, final decree of equitable distribution in this divorce action. This case was certified for en banc review to address what distinction exists between goodwill and going concern value in the context of valuing a sole proprietorship for equitable distribution purposes.

The relevant facts and procedural history of this case are as follows. The parties were married on September 7, 1957. Four children were born of their marriage: three are adults, and one is deceased. Husband and Wife are respectively 67 and 64 years old. Husband is a self-employed dentist who owns the office building in which his practice is located. In 1992, the gross receipts from Husband's dental practice totalled approximately $117,732. Wife primarily was a homemaker who also operated her own resale clothing business from 1976 through 1987. Wife closed her resale clothing business when it was no longer profitable and could not be deducted against Husband's income following separation. Wife has been unemployed since then due to health and emotional problems.

On January 25, 1991, Wife left the marital residence following years of abuse and harassment by Husband. Wife instituted this divorce and equitable distribution action which the trial court bifurcated. On March 25, 1991, a consent order was entered pursuant to which Husband paid Wife alimony pendente lite in the amount of $1,200 per month. The parties were divorced by decree entered on March 17, 1994, while alimony and equitable distribution claims were pending. Thereafter, the trial court heard four days of testimony concerning economic issues. On May 20, 1994, the trial court entered a decree nisi to which both parties filed exceptions. On October 6, 1994, the trial court dismissed the exceptions and entered the final decree. These timely cross-appeals were filed in response to the October 6, 1994 order.

On appeal, Husband raises the following enumerated issues for our review:

1. WHETHER THE GOODWILL OF A SOLE PROPRIETORSHIP DENTAL PRACTICE SHOULD BE VALUED FOR THE PURPOSE OF EQUITABLE DISTRIBUTION.

2. WHETHER THE WIFE SHOULD RECEIVE SIXTY (60%) PERCENT OF THE MARITAL ESTATE.

3. WHETHER AN ORDER FOR ALIMONY SHOULD SPECIFICALLY STATE THAT ALIMONY SHALL TERMINATE UPON THE DEATH OR REMARRIAGE OF THE WIFE OR THE DEATH OF THE HUSBAND.

Husband's brief at 1.

In her cross-appeal, Wife raises the following issues for our review:

1. WHETHER CREDIT SHOULD BE ASSIGNED FOR THE RENTAL VALUES OF THE MARITAL RESIDENCE AND JOINTLY OWNED OFFICE BUILDING, WHEN ONE SPOUSE HAS THE EXCLUSIVE POSSESSION, USE, OCCUPANCY, AND CONTROL OF THOSE PROPERTIES, WHICH ARE MORTGAGE-FREE AND REQUIRE NOMINAL MAINTENANCE EXPENSE.

2. WHETHER THE COURT ABUSED ITS DISCRETION IN NOT ACCEPTING THE VALUE FOR THE JOINTLY OWNED DENTAL OFFICE BUILDING OFFERED BY THE APPELLANT-WIFE'S REAL ESTATE APPRAISAL.

3. WHETHER THE COURT BELOW ERRED IN FIRST ACCEPTING THE VALUE OF THE CELLULOIDS AND ETCHING OFFERED BY APPELLEE-HUSBAND'S APPRAISER, AND THEN ARBITRARILY DISCOUNTING THE VALUE BY 20% WHEN NO FOUNDATION WAS LAID THAT SAID ITEMS WERE ORIGINALS, THEIR CONDITION WAS NOT ESTABLISHED, AND THE APPRAISER NEVER ACTUALLY OBSERVED THE ITEMS AT ISSUE.

Wife's brief at 2.

In Fonzi v. Fonzi, 430 Pa. Super. 95, 633 A.2d 634 (1993), we stated our standard of review in equitable distribution matters:

our scope of review in equitable distribution matters is limited. Lyons v. Lyons, 401 Pa. Super. 271, 276, 585 A.2d 42, 45 (1991). It is well established that 'absent an abuse of discretion on the part of the trial court, we will not reverse an award of equitable distribution.' Hill v. Hill, 401 Pa. Super. 183, 185, 584 A.2d 1040, 1041 (1991), citing Hovis v. Hovis, 518 Pa. 137, 541 A.2d 1378 (1988) . When reviewing the record of the proceedings, we are guided by the fact that trial courts have broad equitable powers to effectuate Justice and we will find an abuse of discretion only if the trial court has misapplied the law or failed to follow proper legal procedures. Lyons v. Lyons, supra [401 Pa. Super.] at 276, 585 A.2d at 45. The finder of fact is entitled to weigh the evidence presented and assess Its credibility. Williamson v. Williamson, 402 Pa. Super. 276, 286, 586 A.2d 967, 972 (1991). The fact finder is free to believe all, part, or none of the evidence and the Superior Court will not disturb the credibility determinations of the court below.

Id. at , 633 A.2d at 636-37, quoting Murphy v. Murphy, 410 Pa. Super. 146, 599 A.2d 647 (1991), appeal denied, 530 Pa. 633, 606 A.2d 902 (1992), cert. denied, 506 U.S. 868 (1992).

Husband first argues that the trial court erred by including a value for goodwill when it determined the worth of his dental practice, a sole proprietorship, for the purpose of equitable distribution. He argues at great length that our supreme court's decision in Solomon v. Solomon, 531 Pa. 113, 611 A.2d 686 (1992), as well as this court's opinions in Beasley v. Beasley, 359 Pa. Super. 20, 518 A.2d 545 (1986), appeal denied, 516 Pa. 631, 533 A.2d 90 (1987), and DeMASI v. DeMASI, 366 Pa. Super. 19, 530 A.2d 871 (1987), established a general rule of law that when a business entity is owned and operated by a sole proprietor, the goodwill of that entity is not a marital asset subject to equitable distribution. After a review of the relevant principles of law in this area, we reject Husband's argument.

"Goodwill" is essentially the positive reputation that a particular business enjoys. Solomon, supra at , 611 A.2d at 692. This court has defined goodwill as "the favor which the management of a business has won from the public, and probability that old customers will continue their patronage." Ullom v. Ullom, 384 Pa. Super. 514, , 559 A.2d 555, 558-59 (1989). Our supreme court has held that in determining whether goodwill should be valued for purposes of equitable distribution, the courts must look to the precise nature of the goodwill. Solomon, supra at , 611 A.2d at 692. Goodwill which is intrinsically tied to the attributes and/or skills of certain individuals is not subject to equitable distribution because the value thereof does not survive the disassociation of those individuals from the business. Id. Thus, where such goodwill is attributable solely to an ...


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