Chase v. Chase, 2022

On appeal, the husband asked the court to review whether the wife needed alimony given the assets she otherwise received in the equitable distribution and her earning capacity as a pharmacist, whether an award of rehabilitative alimony and alimony in futuro by the trial court is appropriate, and whether the trial court’s valuation of the husband’s medical practice was in error. The appellate court affirmed the trial court in all aspects reviewed and did not award legal fees to either party.

Deborah R. Chase, the wife, filed for divorce from Christopher Chase in 2019. The two children of the marriage were by then adults. They had been married since 1996. The husband, Christopher, is a plastic surgeon, and the wife, Deborah, has a doctorate in pharmacy but no longer works in the pharmacy area and wants to explore work in the area of the arts. She wishes to attend SCAD, a creative degree school headquartered in Savannah, Ga., or a similar school. 

On Jan. 29, 2021, the trial court entered a memorandum opinion. The husband continued to work as a plastic surgeon. He was the only surgeon in his practice. “He earned an annual income ranging from $592,748.00 to $1,090,675.00 in recent years.” The trial court deemed it appropriate to average the husband’s income for 2017 to 2020 to determine his ability to pay spousal support. The husband’s witness determined that the wife could earn $110,000 to $140,000 with her pharmacy credentials, but he had not interviewed her regarding her physical limitations. The trial court awarded the wife $1,600 per month for three years of rehabilitative alimony for her to go to school and $7,000 per month alimony in futuro. 

Standard of review.

Trail courts have broad discretion to determine whether spousal support was needed and in what nature, amount, and duration. This appellate court had determined that the valuation of a marital asset was a question of fact. Each party had the burden of bringing forward evidence.

Alimony.

The husband posited that the wife received about $2 million of marital and separate property assets. Coupled with her ability to make a substantial amount with her pharmacy credentials, the trial court should have looked at earnings from those assets as well as her earning capacity in order to determine the wife’s need for support. The General Assembly had made it clear that contributions to the marriage as either a homemaker and/or parent was equal to economic contributions to the marriage. Thus, “[t]he court may award rehabilitative alimony, alimony in futuro, also known as periodic alimony, transitional alimony, or alimony in solido, also known as lump sum alimony or a combination of these.” The two factors that were most important to consider in the determination of alimony were “the disadvantaged spouse’s need and the obligor spouse’s ability to pay.” The trial court determined the wife’s imputed income at $30,000 annually at the time of trial and that the husband’s significant earnings made him able to pay. The trial court found that a combined award of rehabilitative and alimony in futuro was appropriate.

After review of the wife’s circumstances, the appellate court agreed that the trial court’s decisions on alimony were reasonable. The wife’s reasonable monthly need was $11,460 per month in accordance with the couple’s standard of living. Evidence in this case did not “preponderate” against the $11,460 per month in expenses. The husband presented some cases supporting his claim that alimony was not appropriate in this case, but the appellate court distinguished those cases here. Thus, the wife’s need for alimony was supported by the evidence. The appellate court then examined other statutory issues regarding alimony supporting the awards the trial court gave.

Value of the husband’s medical practice.

The trial court awarded APRS, the husband’s medical practice, to the husband in the marital distribution, assigning a value of $255,000 based on the evidence presented. The husband’s expert, Shannon Farr, CPA, opined that the value of APRS was $110,000. She based her value on the adjusted net asset method (90%) and the capitalization of cash flow method (10%).

The wife’s expert, Michael Costello, CPA, valued APRS at $350,000 using a capitalized cash flow method for 100% of his analysis. He adjusted compensation in his method from the amount Farr used. His rationale was that the husband worked more than the average plastic surgeon, requiring an adjustment to the MGMA data. Costello also used an appraisal by Bullington of the value of the equipment. Even though APRS employs a nurse practitioner and an aesthetician, the husband was the primary revenue producer. This, the trial court noted, meant that factors of enterprise goodwill were less than factors of personal goodwill.

The trial court noted several factors leading to a conclusion that Costello’s value was more credible than Farr’s. “Considering the evidence presented by both parties, the Court [trial court] finds the business has a value of $255,000.00.” 

The husband argued that the trial court value included some personal goodwill that should not be included in the marital estate. The appellate court in prior cases had noted that “professional goodwill” of a proprietorship should not be included in the marital estate. The appellate court noted that, in this case, the values the experts presented consisted of two distinct values and “approaches” by the experts. 

Farr indicated she used primarily the adjusted net asset method as it was used in transactions of sales of medical practices and it, by definition, excludes goodwill “consistent with Tennessee law.” At trial, Farr explained the difference between enterprise and personal goodwill and further opined that “she did not believe another doctor could purchase APRS and thereby step in and maintain the same income level without Husband.” She also acknowledged that the husband had previously paid $100,000 for a two-thirds interest in APRS from other surgeons. She also admitted that the goodwill of APRS did not fit neatly into either enterprise or personal goodwill. Finally, she acknowledged that, had she used the Bullington (equipment appraisers) appraisal of the equipment of APRS, her valuation would have been higher by $28,000.

As noted above, the wife’s expert, Costello, valued APRS at $350,000. Costello opined that Farr should not have relied so heavily on the adjusted net asset method and should have considered the earnings of APRS and the impact of APRS’ community and customer base in helping to produce those earnings. He opined that, if the husband should leave APRS, another qualified doctor should be able to continue its success. However, he also stated that he had not prepared a report considering personal versus entity goodwill.

The value of marital property was a question of fact. The trial court’s decision on value should be given great weight on appeal. Here, the trial court placed a value of $255,000 on APRS, “which was clearly within the range of the evidence submitted.” The husband submitted that the evidence preponderates against that value because it necessarily includes some element of personal goodwill. The appellate court disagreed. Costello had a net asset value method in his report though he did not use that method in his decision. That method determined a value of $173,000. Costello believed that a buyer would look at the earnings APRS produces, and, thus, he reached a value of $350,000.

Farr, using the capitalized cash flow method, contained a value of $216,310. The appellate court noted that, given the nature of APRS, a consideration of some entity goodwill would not be inappropriate in this matter. The appellate court discussed the Witt v. Witt case, which adopted some amount of entity goodwill above the net asset value. The appellate court also noted the York v. York case, which also concluded that the trial court did not abuse its discretion by adopting a value of a professional corporation that was “substantially greater than the net asset value.” The appellate court further noted that the trial court did not adopt in total the value of Costello, but rather a value $95,000 less than his value.

Conclusion.

“For the foregoing reasons, we affirm the trial court’s spousal support award in its entirety. We also affirm the trial court’s value placed on APRS.”