Appeal from the Circuit Court of Cook County; the Hon. Michael
S. Jordan, Judge, presiding.
JUSTICE O'CONNOR DELIVERED THE OPINION OF THE COURT:
Respondent, George Kapusta, appeals from the valuation and distribution of marital property incident to the trial court's judgment dissolving his marriage with petitioner, Leslie Kapusta. Specifically he contests: (1) the valuation of his medical practice; (2) the valuation of his pension; (3) the trial court's denial of his motion to re-open the proofs; and (4) the court's order directing him to pay a portion of Leslie's attorney fees. We reverse in part, affirm in part and remand.
George and Leslie Kapusta were married on August 12, 1977. Their childless marriage lasted six years. Leslie filed a petition for dissolution of marriage on August 23, 1982. At the time the petition was filed, Leslie was 30 years old. She had a master's degree in nursing and had been employed as a nurse throughout the marriage. She had also worked part-time in her husband's medical practice.
George Kapusta is a surgeon specializing in traumatology. When he married Leslie, he was completing his medical residency in Maryland. In 1980, the Kapustas moved to Illinois. George began a surgical practice that was based solely at Christ Community Hospital in Oak Lawn, Illinois. Because apparently, hospital personnel referred patients to him for only one surgical procedure of short duration, he had few repeat patients. He stated that he regularly worked from 50 to 70 hours a week and was "on call" around the clock.
George's practice was organized as a solely owned professional corporation. For the year ending in 1981, his corporation had gross revenues of $158,835, out of which he paid himself a salary of $100,000 and made a contribution to his pension in the amount of $25,000. In his second year his corporation grossed $270,813; his salary was $170,000, his pension contribution, $42,000. For the year ending in 1983, the gross receipts were $317,171, his salary $200,000, and his pension contribution $45,470.
At trial, the parties contested the valuation and division of the marital property. George's practice constituted the major asset in a marital estate totaling $846,633. Both parties presented expert testimony concerning the value of George's medical practice. George's expert witness, Arthur Smith, testified that the market value of George's practice was $10,000. However, he did not testify about any comparable sales. His value was divided between $9,600 for good will and $400 for the corporation's tangible assets (he evidently failed to include corporate bank accounts and a company car in his valuation).
Leslie's expert, James Tomes, testified that George's corporation was worth $553,000. To arrive at the value of the practice as a going concern, he used the weighted average of three valuation approaches: (a) a multiple of gross revenues; (b) a multiple of adjusted earnings; and (c) a capitalization of excess earnings. With the first two approaches, Mr. Tomes used multipliers of 1.5 because of the youth of the corporation and its prospects for success. Under the third approach, which was given twice the weight of the others, Mr. Tomes capitalized the practice's excess earnings at a rate of 20%.
The trial court essentially accepted the methodology used by Mr. Tomes, except that the court changed the multipliers from 1.5 to 1 and valued the practice at $375,000. The court also valued George's pension at $144,934, which was the amount of money in the pension fund. The court then awarded 35% of the marital assets to Leslie and 65% to George. Leslie was given the marital home and George received all of the assets pertaining to his medical practice, including his pension. Leslie was provided with sufficient funds to compensate her for 35% of his pension fund. George was also ordered to pay $9,500 of Leslie's attorney fees.
George subsequently filed a motion for reconsideration and to re-open the proofs. By offer of proof, he presented the testimony of Mr. Krypel, a specialist in the valuation of professional practices. Mr. Krypel appraised George's corporation at $27,717 (the book value of the corporation's tangible assets) since he found the practice's good will was worth nothing. George also attempted to show that the gross receipts of his practice had declined by $65,000 for the first nine months of the fiscal year ending in 1984. The trial court denied George's motion, stating that even if the evidence offered in support of his motion had been admitted, it would not have changed his decision.
This court subsequently stayed judgment pending appeal on the condition that George post a quit-claim deed to the marital home and the stock of his medical corporation as security for an appeal bond. Leslie's motion to reconsider the order was taken with the case. We now deny that motion.
• 1 Leslie contends that George waived his right to appeal the valuation of his medical corporation. She asserts that he accepted the benefits of the trial court's valuation when he used it to justify posting the stock of his corporation as security for the appeal bond. Generally, litigants cannot attack a decree after enjoying its benefits if to do so would place the opposing party at a disadvantage upon reversal of the decision. (In re Marriage of Reib (1983), 114 Ill. App.3d 993, 1003, 449 N.E.2d 919.) In the present case, we cannot conclude that Leslie was prejudiced in any material manner by the fact that George posted the stock as security for the appeal bond.
We turn now to George's assertion that the trial court considered "good will" in valuing his practice and, therefore, its valuation is improper under In re Marriage of Wilder (1983), 122 Ill. App.3d 338, 347, 461 N.E.2d 447. As evidence that "good will" was included in the valuation, he points to testimony by Mr. Tomes that "good will" comes into play in each of the three methods of valuation used by the trial court. We find respondent's reliance on Wilder is misplaced.
Although good will defies precise definition (see Black's Law Dictionary 625 (5th ed. 1979)), reputation and the business advantages that result from it (such as referrals and established clientele) form the core of most conceptions of good will. (In re Marriage of Wisner (Ariz. App. 1981), 129 Ariz. 333, 631 P.2d 115; Dugan v. Dugan (1983), 92 N.J. 423, 457 A.2d 1; Spheeris v. Spheeris (1967), 37 Wis.2d 497, 155 N.W.2d 130; Comment, Professional Goodwill in Louisiana: An Analysis of Its Classification, Valuation, and Partition, 43 La. L. Rev. 119 n. 3 (1982) (hereinafter cited as Professional Goodwill in Louisiana).) Traditionally, good will was held to exist only in commercial and trade enterprises, and not in professional businesses whose value was said to be totally dependent on the personal skill and talent of the practitioner. (See Cook v. Lauten (1954), 1 Ill. App.2d 255, 117 N.E.2d 414; 2 J. McCahey, Valuation & Distribution of Marital Property sec. 22.05[S], at 22-84 (1984).) In recent years, the question of whether good will should be considered in valuing a professional corporation has confronted the courts with increasing frequency. The vast majority of courts have held that good will should be a factor to consider when appraising the value of a professional corporation. Annot., 52 A.L.R.3d 1344 (1973).
This question was first considered in Illinois in the case of In re Marriage of White (1981), 98 Ill. App.3d 380, 424 N.E.2d 421, appeal denied (1981), 85 Ill.2d 582. ...