From Casetext: Smarter Legal Research

In re Marriage of Rolfe v. Rolfe

Minnesota Court of Appeals
Aug 15, 2000
No. C2-00-19 (Minn. Ct. App. Aug. 15, 2000)


No. C2-00-19.

Filed August 15, 2000.

Appeal from the District Court, Hennepin County, File No. 226137.

A. Larry Katz, Robert W. Due, Katz Manka, LTD., (for appellant)

Martin L. Swaden, (for respondent)

Considered and decided by Peterson, Presiding Judge, Halbrooks, Judge, and Poritsky, Judge.

Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (1998).


On appeal from a dissolution judgment, appellant-father William Rolfe challenges the valuation of his dental practice. He alleges the district court erred by refusing to permit him to sell two of his three clinics to determine their value. He also alleges the district court overvalued the practice by (a) using a valuation method that violated the prohibition in Rogers v. Rogers, 296 N.W.2d 849 (Minn. 1980), against capitalizing the owner's personal earnings; (b) not considering a recent decline in the practice's revenue; (c) overvaluing the good will attributable to the practice by incorrectly basing good will calculations on an assumption that father would sign a noncompete agreement; and (d) failing to distinguish between the good will attributable to the practice and that attributable to father himself. Respondent-mother Janice Rolfe alleges the district court should have awarded her attorney fees and seeks attorney fees on appeal. We affirm in part, reverse in part, remand, and deny mother's motion.


The parties tried their dissolution to a special magistrate. A district court judge signed the resulting judgment. That judgment (a) awarded mother custody of the parties' children, child support, and permanent maintenance; (b) valued father's dental practice; (c) directed father to make an initial property settlement payment to mother by November 1, 1999; (d) required father to pay mother the remaining portion of her interest in the parties' marital property over 120 months; and (e) denied mother's request for attorney fees. An amended judgment reduced mother's maintenance award. Father appeals. Mother filed a notice of review.


1. Father challenges the district court's refusal to let him sell a portion of his dental practice. If a sale of marital assets will preserve the marital estate, whether to allow a sale is discretionary with the district court. Hemingway v. Hemingway, 383 N.W.2d 697, 701-02 (Minn.App. 1986); see also Minn. Stat. § 518.58, subd. 3(a) (1998) (stating district court "may" order sale of marital assets during dissolution if necessary to preserve marital estate); Minn. Stat. § 645.44, subd. 15 (1998) (stating "`[m]ay' is permissive"). Because the sale here was not proposed to preserve the marital estate but to value part of it, two of the cases father cites to support his argument are distinguishable. The third case father cites is Nardini v Nardini, 414 N.W.2d 184 (Minn. 1987). Because Nardini does not require sale, we decline to reverse the district court's refusal to order a sale.

2. Nardini does state, however, that the district court may value an asset and award it to one party while awarding the other party other assets. Id. at 188. Nardini observes that this method of property-division is potentially unfair, "particularly" where, as here, "the asset is the major marital asset." Id. at 188-89. The crux of father's appeal is that the district court overvalued the dental practice. Asset valuations are findings of fact and are affirmed if they are "within the limits of credible estimates made by competent witnesses even if [the valuation] does not coincide exactly with the estimate of any one of them." Hertz v. Hertz, 304 Minn. 144, 145, 229 N.W.2d 42, 44 (1975).

The district court acted within its discretion in declining to accept the valuation of the practice submitted by father's expert. See Alstores Realty, Inc. v. State, 286 Minn. 343, 353, 176 N.W.2d 112, 118 (1970) (stating weight and credibility of expert testimony is for fact-finder to determine).

Father alleges that the district court overvalued his dental practice by capitalizing its revenue without excluding his earnings from the practice's total revenue. See Rogers v. Rogers, 296 N.W.2d 849, 852-53 (Minn. 1980) (stating, for valuation purposes, corporation's income should not include salaries of employees and officers, except to reflect profit distribution). The district court valued the practice by (a) adopting the valuation of the practice's tangible assets made by mother's expert; (b) adopting mother's expert's use of a percentage of the practice's 1997 revenue as an estimate of the practice's goodwill; and (c) discounting the sum of those amounts for marketability. When estimating the amount of goodwill, mother's expert did not reduce the 1997 revenue figure for father's compensation. Therefore, the calculation violates Rogers, and the valuation issue must be remanded.

Father makes two additional, related arguments. First, he alleges that the district court overvalued the amount of goodwill attributable to the practice by adopting the portion of the valuation by mother's expert indicating that the practice had substantial goodwill but improperly failed to distinguish between goodwill attributable to the practice and goodwill attributable to father. To include in the value of the practice any goodwill attributable personally to father, rather than to the practice, would overvalue the practice. See Rogers, 296 N.W.2d at 853 (improper to base valuation of husband's share of corporation on assumption that husband would remain with corporation).

Second, father alleges that the value of a covenant not to compete should have been subtracted from the value of the dental practice. In estimating the goodwill in father's practice, mother's expert multiplied the practice's 1997 revenue by a figure derived from a goodwill registry. The goodwill registry is a database that shows the value of the physical assets owned by dental practices, the practices' annual revenues, and the prices for which the practices were sold. Using the difference between the practices' physical assets and their sale prices as goodwill, the expert calculated an average amount of goodwill, as a percentage of the practices' revenue, for practices with revenues similar to that of father's practice. The expert then multiplied this figure by the revenue of father's practice to estimate its goodwill.

Mother's expert testified that it was unknown whether the sales listed in the goodwill registry involved noncompetition agreements because that information is not publicly available. Despite this testimony, however, the judgment states that the value of the practice should not be reduced for a covenant not to compete. Thus, this aspect of the judgment is inconsistent with the evidence presented.

Moreover, when a business is sold, a noncompetition agreement may be used to either preclude a former spouse from performing certain services in the future or to assure transfer the business's goodwill. See Sweere v. Gilbert-Sweere, 534 N.W.2d 294, 297-98 (Minn.App. 1995) (explaining why existence of noncompete agreement does not necessarily show restriction of future employment). The rationale of Rogers and its progeny "applies only to noncompetition agreements that actually restrict a former spouse from providing personal service after the marriage." Id. at 299. Here, it is unknown whether the sales prices in the goodwill registry involved noncompetition agreements. It is also unknown whether any noncompetition agreements involved in those sales included amounts attributable to a restriction on the seller's ability to practice dentistry. Therefore, while the record reflects a potentially useful method for addressing a problematic valuation question, we must conclude that, in this instance, the information used in applying the valuation method was not sufficiently specific to apportion the marital and nonmarital components of this practice.

On remand, the district court shall (a) value father's dental practice using a method that does not violate Rogers; (b) identify the date as of which the valuation is made and the reason(s) the practice was valued as of that date; (c) exclude any goodwill attributable to father personally; (d) identify whether the practice's value should be adjusted for a noncompetition agreement and the reasons for that decision; and (e) if a noncompetition agreement is to be used to adjust the value of the practice, exclude only that portion of its value attributable to restricting father's future ability to practice dentistry.

3. Because the amended judgment recognizes that mother's need for maintenance depends, partially, on the earnings generated by her property settlement, we grant mother's request to remand the issue of maintenance. See Minn. Stat. § 518.552, subd. 2(a) (1998) (maintenance award to be made in light of property award); Fink v. Fink, 366 N.W.2d 340, 342 (Minn.App. 1985) (noting income generated by maintenance recipient's liquid assets to be considered when determining need for maintenance). We reject as speculative, father's argument that mother can make up income lost because of a decreased property distribution by reducing her expenses or by becoming employed. See Hafner v. Hafner, 406 N.W.2d 590, 593 (Minn.App. 1987) (stating "this court cannot act on speculation").

4. Citing the portion of Minn. Stat. § 518.14, subd. 1 (1998), allowing awards of need-based attorney fees, mother challenges the district court's denial of her motion for attorney fees. See Minn. Stat. § 518.14, subd. 1 (stating court "shall" award fees if recipient needs them for a good-faith assertion of rights and payor can pay them). Whether to award need-based attorney fees is discretionary with the district court. Kahn v. Tronnier, 547 N.W.2d 425, 431 (Minn.App. 1996), review denied (Minn. July 10, 1996). Here, before accounting for taxes or mother's property-settlement, father has only a nominal monthly surplus. Under these circumstances, we cannot say that the district court abused its discretion by denying mother's fee request. See Nemmers v. Nemmers, 409 N.W.2d 225, 228 (Minn.App. 1987) (stating it is a "rare case" where an appellate court will increase a district court's attorney-fee award).

By motion, mother seeks attorney fees on appeal. Whether to award fees on appeal is discretionary with this court. Case v. Case, 516 N.W.2d 570, 574 (Minn.App. 1994). Mother's fee argument to this court is defective; she does not indicate whether she seeks need-based or conduct-based fees. See Minn. Stat. § 518.14, subd. 1 (allowing need-based and conduct-based attorney fee awards). Because father's ability to contribute to mother's fees is nominal, we decline to award need-based fees. Also, in light of our resolution of this appeal, we cannot say that father's conduct on appeal merits an award of conduct-based fees.

5. Whether to reopen the record on remand is discretionary with the district court. We express no opinion on how to resolve the remanded issues.

Affirmed in part, reversed in part, and remanded; motion denied.

Summaries of

In re Marriage of Rolfe v. Rolfe

Minnesota Court of Appeals
Aug 15, 2000
No. C2-00-19 (Minn. Ct. App. Aug. 15, 2000)
Case details for

In re Marriage of Rolfe v. Rolfe

Case Details

Full title:In Re the Marriage of: William P. Rolfe, Jr., petitioner, Appellant, vs…

Court:Minnesota Court of Appeals

Date published: Aug 15, 2000


No. C2-00-19 (Minn. Ct. App. Aug. 15, 2000)