James A. Mace v. Angela T. Mace ( 2000 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2000-CA-01283-SCT
JAMES A. MACE
v.
ANGELA T. MACE
DATE OF JUDGMENT: 7/7/2000
TRIAL JUDGE: HON. MARGARET ALFONSO
COURT FROM WHICH HARRISON COUNTY CHANCERY COURT
APPEALED:
ATTORNEYS FOR DAVID P. SULLIVAN
APPELLANT:
JESS H. DICKINSON
ATTORNEY FOR APPELLEE: JOSEPH R. MEADOWS
NATURE OF THE CASE: CIVIL - DOMESTIC RELATIONS
DISPOSITION: AFFIRMED IN PART; REVERSED AND REMAND IN PART -
05/30/2002
MOTION FOR REHEARING
FILED:
MANDATE ISSUED: 6/20/2002
EN BANC.
SMITH, PRESIDING JUSTICE, FOR THE COURT:
¶1. Dr. James A. Mace and Angela T. Mace were granted a divorce on the grounds of irreconcilable
differences. The parties agreed to joint legal custody of their fourteen-year-old daughter, Brittany, with Mrs.
Mace having paramount physical care, custody, and control. The parties were unable to reach an agreement
as to the distribution of the marital estate and petitioned the Chancery Court of the First Judicial District of
Harrison County to make the disposition, as well as a determination of child support and alimony.
¶2. Dr. Mace appeals the judgment of the chancery court, namely, the award of alimony and the inclusion
of his medical practice as a marital asset. Today, on a matter of first impression, we affirm the judgment of
the chancery court as to the inclusion of Dr. Mace's medical practice as a marital asset, but vacate the
judgment and remand this matter for an adequate valuation of the medical practice and reconsideration of
the alimony award in light of that valuation.
FACTS
¶3. The parties were married on July 24, 1981, at which time Dr. Mace was a medical student at the
University of Mississippi Medical Center in Jackson and Mrs. Mace was an Emergency Medical
Technician ("EMT") for an ambulance service. Mrs. Mace continued to work as an EMT for approximately
two years, and her income was used to support the family. When her husband completed medical school,
the couple moved to Memphis in order for Dr. Mace to complete his residency. Mrs. Mace was pregnant
at this time and worked at various day care centers until the birth of the couple's child in 1984. Since that
time, Mrs. Mace has not worked outside the home.
¶4. Dr. Mace, who is 45 years old, practices family medicine in Long Beach, Mississippi, and also works in
the emergency room at Garden Park Hospital in Gulfport, Mississippi. Mrs. Mace has only a high school
diploma and has no specialized training other than that of an EMT. Dr. Mace contends that he asked Mrs.
Mace to work in his clinic and encouraged her to further her education, but that Mrs. Mace declined to do
either.
¶5. Mrs. Mace, 46 years old, testified that she and her husband agreed that she should not work outside the
home, but, rather, that she should devote herself to raising their daughter. Mrs. Mace suffers from nodular
osteoarthritis, which has resulted in pain in her hands along with stiffness in her fingers. She testified that she
is presently unemployed because of her osteoarthritis and because of her responsibilities in raising her
daughter. However, Mrs. Mace's treating physician has stated that Mrs. Mace's prognosis is excellent and
that nodular osteoarthritis rarely results in significant disability. In order to return to work as an EMT, Mrs.
Mace would have to complete re-certification classes, which would take about a year.
¶6. The couple has been separated since September 1998, and was granted a divorce on the grounds of
irreconcilable differences on December 14, 1999. After division of the marital assets, the chancellor
awarded Mrs. Mace periodic alimony of $2,500 per month and $1,000 per month in child support. Dr.
Mace was also ordered to continue paying Brittany's tuition at parochial school as well as the reasonable
cost of her therapy.
¶7. Dr. Mace appeals the chancellor's award of alimony and disposition of marital assets, raising the
following issues:
I. WHETHER THE CHANCELLOR ERRED BY INCLUDING DR. MACE'S MEDICAL
PRACTICE AS A MARITAL ASSET.
II. WHETHER THE CHANCELLOR'S VALUATION OF THE MEDICAL PRACTICE IS
NOT SUPPORTED BY CREDIBLE EVIDENCE AND IS CLEARLY ERRONEOUS.
III. WHETHER THE AWARD OF ALIMONY IS NOT SUPPORTED BY CREDIBLE
EVIDENCE AND IS CLEARLY ERRONEOUS.
DISCUSSION
I. WHETHER THE CHANCELLOR ERRED BY INCLUDING DR. MACE'S MEDICAL
PRACTICE AS A MARITAL ASSET.
¶8. This Court has yet to determine whether a professional practice is an asset subject to the equitable
distribution of marital assets dictated by Ferguson v. Ferguson, 639 So. 2d 921, 928 (Miss. 1994).
Though the issue was recently raised in Brame v. Brame, 796 So. 2d 970 (Miss. 2001), this Court clearly
and expressly stated that it did not reach the issue of the chancery court's treatment of the husband's law
practice as a marital asset as that issue was not raised by either party on certiorari and was not necessary to
the Court's decision. Id. at 972-73. This is, therefore, an issue of first impression.
¶9. This Court first addressed the subject of professional degrees as marital property in Guy v. Guy, 736
So. 2d 1042 (Miss. 1999). There we concluded that a professional degree acquired by one spouse during a
marriage is not marital property. This Court, however, is not faced in the case sub judice with the question
of an educational degree. Rather, the question is whether a spouse may be awarded an equitable
percentage of the income-producing enterprise that was made possible by the other spouse's professional
degree. The question is entirely different, as is the answer. As the opinions of our sister jurisdictions
indicate, it is a sound rule that, although the individual right to practice is not a property right subject to
distribution, the value of the practice as a business is subject to distribution.
¶10. In Guy, this Court, relying upon the majority rule that a professional degree is not an asset subject to
equitable distribution, cited opinions from eighteen jurisdictions.(1) Of these eighteen jurisdictions which
hold, as does Mississippi, that a professional degree is not a marital asset capable of equitable distribution,
sixteen have held that a professional practice is a marital asset capable of equitable distribution.(2) The two
jurisdictions which have not yet held that a professional practice is a marital asset, Massachusetts and
Wyoming, have apparently not yet reached the question.
¶11. A practice, unlike a degree or license, can be sold. Its value is found in its facilities, equipment,
fixtures, furniture, accounts receivable, and, some courts have held, good will.(3) While this Court has
recognized that an educational degree is personal to its holder and nontransferable, Guy, 736 So. 2d at
1044, the marketability of a professional practice distinguishes it from a degree. Also, the rule that a
professional license is not marital property does not prevent the practice from being marital property as the
value of the practice does not include the seller's license.
¶12. The question posed in the case at bar is significantly controlled by the facts of the case. Where, as
here, a couple marries, the wife works to put husband through medical school, and then the wife stays home
to raise their child who at the time of the divorce was only 16 years of age, this Court has consistently
stated that such spouse is entitled to an equitable share. We find that the chancery court correctly
determined that Dr. Mace's medical practice was a marital asset subject to equitable division.
II. WHETHER THE CHANCELLOR'S VALUATION OF THE MEDICAL PRACTICE IS
NOT SUPPORTED BY CREDIBLE EVIDENCE AND IS CLEARLY ERRONEOUS.
¶13. The chancellor valued the medical clinic (the building itself) at $150,000, the equipment at $80,000,
and the medical practice at $144,000. Dr. Mace does not dispute the court's valuation of the clinic. Rather,
he disputes the value placed on the equipment as well as the practice as a whole.
¶14. The value of the equipment was apparently submitted by Dr. Mace himself. However, he testified
regarding the value of the equipment, that upon review he determined that it was "not that much." When
asked about the value of the practice, he stated that he had not placed a value on it. Mrs. Mace's attorney
then asked, "Can you place a value on it today?" Dr. Mace then stated, "I think the normal procedure is six
times the ... net monthly income, so that would be approximately six times $24,000." Later, upon
examination by his own attorney, Dr. Mace stated that he saw this formula in a medical journal and that he
was only trying to be responsive to the questions asked of him, not giving an opinion as to the value of his
practice.
¶15. It is unclear from the record the basis for the valuation of the practice. It cannot be determined exactly
what the $144,000 included- whether it included the practice as a whole, including the medical equipment,
or whether it was without any physical assets. If it included the physical assets, the chancellor erred in
valuing the equipment separately at $80,000. Also, it is abundantly clear from the testimony that the
valuation of the practice was unreliable. We note that neither party offered expert testimony as to the value
of the practice. This Court in Ferguson, in establishing the guidelines for dividing marital property,
acknowledged:
Property division should be based upon a determination of fair market value of the assets, and these
valuations should be the initial step before determining division. Therefore, expert testimony may be
essential to establish valuation sufficient to equitably divide property, particularly when the assets are
as diverse as those at issue in the instant case.
Ferguson, 639 So. 2d at 929 (emphasis added). On remand the parties themselves may establish
valuation of Dr. Mace's practice, if reliable, or they may prove valuation utilizing expert testimony. We note
also that the chancery court may appoint an independent expert if absolutely necessary and if the parties are
unable to show good cause as to why such expert should not be appointed. Miss. R. Evid. 706.
CONCLUSION
¶16. The chancery court's inclusion of Dr. Mace's medical practice as a marital asset is affirmed. The
chancery court's valuation of the practice is reversed, and this case is remanded for an adequate valuation
of the practice. Also, the award of alimony is vacated, and the chancellor instructed to revisit the issue as
alimony and equitable distribution should be considered together. Ferguson, 639 So. 2d at 929 (stating
that though alimony and equitable distribution are different concepts, they should be considered together, as
when one expands, the other must recede). Because the award of alimony is to be revisited, we need not
address the remaining issue.
¶17. AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
PITTMAN, C.J., WALLER, COBB, DIAZ AND CARLSON, JJ., CONCUR. McRAE, P.J.,
DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY EASLEY, J. GRAVES,
J., DISSENTS WITHOUT SEPARATE WRITTEN OPINION.
McRAE, PRESIDING JUSTICE, DISSENTING:
¶18. I disagree with the majority's decision that Dr. Mace's medical practice is a marital asset subject to
equitable distribution. This Court has held that a professional degree acquired by one spouse during a
marriage is not marital property. Guy v. Guy, 736 So. 2d 1042, 1047 (Miss. 1999). Our decision
regarding professional degrees has been continually upheld. However, until now we have declined to make
a decision as to a professional practice. The majority refuses to extend our previous findings about
professional degrees to professional practices. Instead, it makes a distinction between the professional
degree and the practice which that degree enables its holder to establish. I fail to see the logic in separating
the professional degree from the professional practice. The latter would not exist but for the former.
¶19. Undeniably a monetary value can be placed on the building where Dr. Mace's practice is located as
well as the fixtures, furniture, equipment and accounts receivable pertaining thereto. However, these items
should not be classified as marital assets. When considered together, these items, Dr. Mace's "tools of the
trade," are more than just assets - along with the medical degree, they form the medical practice. It is this
practice that has enabled Dr. Mace to accumulate all the marital assets obtained by the parties during their
marriage. It is these "tools" that allow for alimony and child support. To take away or diminish his ability to
practice therefore diminishes his ability to earn and provide the maximum amount for the above. There is no
way to determine accurately how much the degree or the physical components of the practice contribute to
the success of the practice as a whole and the income it generates. The two simply cannot be separated. To
properly include the medical practice as a marital asset, its total value would have to be readily discernable.
How can the practice be subject to equitable distribution when its aggregate value is unknown? To subject
only a portion of the practice to equitable distribution is not equitable at all.
¶20. I would hold that Dr. Mace's practice is not a marital asset; and therefore, the decision of the
chancellor as to this issue should be reversed.
EASLEY, J., JOINS THIS OPINION.
1. Guy, 736 So. 2d at 1043 n.1: Arizona (Pyeatte v. Pyeatte, 135 Ariz. 346, 661 P.2d 196 (Ariz. Ct.
App.1982); Wisner v. Wisner, 129 Ariz. 333, 631 P.2d 115 (Ariz. Ct. App.1981)); California (In re
Marriage of Sullivan, 134 Cal. App. 3d 634, 184 Cal. Rptr. 796 (Cal. Ct. App. 1982); In re Marriage
of Aufmuth, 89 Cal. App. 3d 446, 152 Cal. Rptr. 668 (Cal. Ct. App. 1979), overruled on other grounds,
In re Marriage of Lucas, 27 Cal. 3d 808, 614 P.2d 285, 166 Cal. Rptr. 853 (1980); Todd v. Todd, 272
Cal. App. 2d 786, 78 Cal. Rptr. 131 (Cal. Ct. App. 1969); Colorado (In re Marriage of Graham, 194
Colo. 429, 574 P.2d 75 (1978); In re Marriage of McVey, 641 P.2d 300 (Colo. Ct. App., 1981);
Connecticut (Zahler v. Zahler, Conn.Super.Ct. New Haven Dist. Aug. 5,1982), 8 Fam.L.Rptr. 2694);
Delaware (Wright v. Wright, 469 A.2d 803 (Del. Fam.Ct. 1983)); Florida (Hughes v. Hughes, 438
So. 2d 146 (Fla. Dist. Ct. App. 1983); Severs v. Severs, 426 So. 2d 992 (Fla.App. 5 Dist.,1983)); Indiana
(In re Marriage of McManama, 272 Ind. 483, 399 N.E.2d 371 (1980); Iowa (In re Marriage of
Horstmann, 263 N.W.2d 885 (Iowa, 1978); Kentucky (Inman v. Inman, 648 S.W.2d 847 (Ky. 1982)
; McGowan v. McGowan, 663 S.W.2d 219 (Ky.App., 1983); Leveck v. Leveck, 614 S.W.2d 710 (Ky.
Ct. App. 1981); New Jersey (Mahoney v. Mahoney, 91 N.J. 488, 453 A.2d 527 (1982); New
Hampshire (Ruben v. Ruben, 123 N.H. 358, 461 A.2d 733 (1983); New Mexico (Muckleroy v.
Muckleroy, 84 N.M. 14, 498 P.2d 1357 (1972); Oklahoma (Hubbard v. Hubbard, 603 P.2d 747
(Okla., 1979); Texas (Frausto v. Frausto, 611 S.W.2d 656 (Tex.Civ.App.-San Antonio, 1980);
Wisconsin (In re Marriage of Lundberg, 107 Wis. 2d 1, 318 N.W.2d 918 (1982); Wyoming
(Grosskopf v. Grosskopf, 677 P.2d 814 (Wyo., 1984).) See also Massachusetts (Drapek v. Drapek,
399 Mass. 240, 246, 503 N.E.2d 946, 950 (1987)); Pennsylvania (Hodge v. Hodge, 513 Pa. 264, 268-
69, 520 A.2d 15, 17 (1986)).
2. Arizona (Wisner v. Wisner, 631 P.2d 115 (Ariz. Ct. App. 1981) (medical practice)); California
(Watts v. Watts, 217 Cal. Rptr. 301 (Cal. Ct. App. 1985) (medical practice)); Colorado (Huff v. Huff,
834 P.2d 244 (Colo. 1992) (law practice)); Connecticut (Wolf v. Wolf, 664 A.2d 315 (Conn. App. Ct.
1995) (medical practice)); Delaware (E.E.C. v. E.J.C., 457 A.2d 688 (Del. 1983) (law practice));
Florida (Thompson v. Thompson, 576 So. 2d 267 (Fla. 1991) (law practice)); Indiana (Landau v.
Bailey, 629 N.E.2d 264 (Ind. Ct. App. 1994) (law practice)); Iowa (In re Marriage of White, 537
N.W.2d 744 (Iowa 1995) (law practice)); Kentucky (Owens v. Owens, 672 S.W.2d 67 (Ky. Ct. App.
1984) (law practice)); New Hampshire (Hillebrand v. Hillebrand, 546 A.2d 1047 (N.H. 1988) (dental
practice)); New Jersey (Dugan v. Dugan, 457 A.2d 1 (N.J. 1983) (law practice)); New Mexico
(Hurley v. Hurley, 615 P.2d 256 (N.M. 1980) (medical practice) (overruled on other grounds by
Ellsworth v. Ellsworth, 637 P.2d 564 (N.M. 1981))); Oklahoma (Ford v. Ford, 766 P.2d 950 (Okla.
1988) (law practice)); Pennsylvania (Gaydos v. Gaydos, 693 A.2d 1368 (Pa. Super. Ct. 1997)); Texas
(Eikenhorst v. Eikenhorst, 746 S.W.2d 882 (Tex. Ct. App. 1988) (medical practice)); Wisconsin
(Sharon v. Sharon, 504 N.W.2d 415 (Wis. Ct. App. 1993) (medical practice)).
3. The opinions of other jurisdictions are split regarding whether good will may be considered in valuing a
professional practice and, if so, how good will is to be calculated. Mrs. Mace makes no argument regarding
the consideration of good will in determining the value of her husband's practice and made no effort below
to submit evidence in this regard. Because the issue is not before us at this time, we decline to address it.