H. Wayne Burnett, M.D. v. Pamela A. Burnett, M.D. ( 2012 )

Pursuant to Ind.Appellate Rule 65(D),
this Memorandum Decision shall not be
regarded as precedent or cited before
any court except for the purpose of
establishing the defense of res judicata,
collateral estoppel, or the law of the case.
ATTORNEY FOR APPELLANT: ATTORNEY FOR APPELLEE:
ROBERT E. SAINT, ESQ. DEBORAH FARMER SMITH
Emswiller, Williams, Noland Campbell Kyle Proffitt LLP
& Clarke, P.C. Carmel, Indiana
Indianapolis, Indiana
FILED
Nov 29 2012, 9:44 am
IN THE
COURT OF APPEALS OF INDIANA CLERK
of the supreme court,
court of appeals and
tax court
H. WAYNE BURNETT, M.D., )
)
Appellant-Respondent, )
)
vs. ) No. 29A02-1203-DR-180
)
PAMELA A. BURNETT, M.D., )
)
Appellee-Petitioner. )
APPEAL FROM THE HAMILTON SUPERIOR COURT
The Honorable William J. Hughes, Judge
Cause No. 29D03-0909-DR-1207
November 29, 2012
MEMORANDUM DECISION - NOT FOR PUBLICATION
BAILEY, Judge
Case Summary
The marriage of Appellant-Petitioner H. Wayne Burnett, M.D. (“Husband”) and
Appellee-Respondent-Cross-Appellant Pamela A. Burnett, M.D. (“Wife”) was dissolved on
February 7, 2012. Husband now appeals the valuation of his partnership interest in a medical
practice and the award of expert witness fees to Wife. Wife cross-appeals the division of the
marital assets. We affirm.
Issues
Husband presents three issues for our review, which we consolidate and restate as the
following two issues:
I. Whether the trial court abused its discretion in determining the value of
Husband’s partnership interest in a medical practice; and
II. Whether the trial court abused its discretion in awarding expert witness fees to
Wife.
Wife presents a single issue on cross appeal:
I. Whether the trial court abused its discretion when it deviated from the statutory
presumption of equal division of the marital estate.
Facts and Procedural History
Husband and Wife were married on June 25, 1985, and two children were born of the
marriage. Husband and Wife separated on September 28, 2009, and Wife petitioned to
dissolve the marriage on the same day. On October 6, 2011, Wife filed a request for findings
of fact and conclusions of law. On October 11 and 12, 2011, the trial court held a final
dissolution hearing. On February 7, 2012, trial court entered findings of fact and conclusions
of law, and dissolved the marriage. In its dissolution order, the trial court provided for an
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equal division of the marital estate, except it provided that Husband and Wife each should
receive his or her interest in Kentucky real estate which each had received from family by
gift or inheritance. (Appellant’s App. at 74.)
Discussion and Decision
The trial court’s order includes findings of fact and conclusions of law pursuant to
Indiana Trial Rule 52, therefore we must determine whether the evidence supports the
findings and whether the findings support the judgment. Mayer v. BMR Props., LLC, 830
N.E.2d 971, 978 (Ind. Ct. App. 2005). Findings of fact are clearly erroneous when the record
lacks any reasonable inference from the evidence to support them, and the trial court’s
judgment is clearly erroneous if it is unsupported by the findings and conclusions which rely
upon those findings. Dallas v. Cessna, 968 N.E.2d 291, 296 (Ind. Ct. App. 2012).
In establishing whether the findings or judgment are clearly erroneous, we consider
only the evidence favorable to the judgment and all reasonable inferences to be drawn
therefrom. Id. We neither reweigh the evidence nor judge the credibility of witnesses, and
we will affirm the trial court’s decision if the record contains any supporting evidence or
inferences. Id. While we defer substantially to findings of fact, we evaluate the trial court’s
conclusions of law de novo. Id.Valuation of Husband’s Partnership Interest in a Medical Practice
Husband raises two issues concerning the expert testimony and report of R. James
Alerding (“Alerding”), which we restate as the single issue of whether the trial court failed to
separate Husband’s personal goodwill from the enterprise goodwill inherent in Anesthesia
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Consultants of Indianapolis, LLC (“ACI”) while valuing Husband’s partnership interest in
ACI, and thus abused its discretion.
A trial court has broad discretion in ascertaining the value of property in a dissolution
action, and its valuation will not be disturbed absent an abuse of that discretion. Frazier v.
Frazier, 737 N.E.2d 1220, 1225 (Ind. Ct. App. 2000). The trial court has not abused its
discretion if its decision is supported by sufficient evidence and reasonable inferences
therefrom. Id. We do not substitute our judgment for that of the trial court even where the
circumstances would support a different award. Id.The law regarding valuation of a business that is part of a marital estate is well settled:
[T]he trial court must consider whether goodwill included within the total value of a
business enterprise is personal to one spouse. Yoon v. Yoon, 711 N.E.2d 1265, 1269
(Ind. 1999). Goodwill is the value of a business or practice that exceeds the combined
value of the net assets used in the business. Id. at 1268. Enterprise goodwill is based
on the intangible, but generally marketable, existence in a business of established
relations with employees, customers and suppliers, and may include a business
location, its name recognition and its business reputation. Id. Goodwill that is
attributable to the business enterprise is divisible property, while goodwill that is
personal, a surrogate for the owner’s future earning capacity, is not divisible. Id.
Stated alternatively, goodwill that is based on the personal attributes of the individual
is excluded from the marital estate.
Id. In calculating the value of a business that is part of a marital estate, the court must
separate personal goodwill from enterprise goodwill. Enterprise goodwill inheres in the
business, is independent of any single individual’s personal efforts, and will outlast any
person’s involvement in the business. Yoon, 711 N.E.2d at 1268-69. To the extent a
business has goodwill, quantified as value in excess of its net assets, it is a factual issue to
what extent, if any, that goodwill is personal to an individual and to what extent it is
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enterprise goodwill and therefore divisible property. Id. at 1270. It is possible for some of
the value of enhanced gross revenue to inhere in the business, even if it was generated by an
individual’s personal effort. Id. at 1271. The trial court must identify the portion of the
value that is attributable to the business without the professional’s continued participation
when calculating the value of a business that is part of a marital estate. Id. at 1272. To the
extent a part of the value of the business is attributable to factors unique to an individual,
such as unusually long hours, any enterprise value is only whatever value exists in the patient
base, and would be transferrable to a buyer unwilling to work the same long hours. Id.
Here, Alerding testified that his method of calculating the value of Husband’s interest
in ACI excluded Husband’s personal goodwill, and left only ACI’s enterprise goodwill. He
further testified that his calculated value of Husband’s interest in ACI “could assume a sale
of the practice, it could assume a sale of his interest, it could assume he stays or leaves[.]”
He calculated that, before a discount for lack of marketability, Husband’s interest in ACI was
worth $337,000, and after the discount, it was worth $253,000. Furthermore, the trial court
entered extensive findings of fact and conclusions of law addressing the value of Husband’s
interest in ACI:
43. Mr. Alerding expressed his opinion of the value of Husband’s interest in ACI
as $337,00[0].00, on an investment value basis, and $253,000.00, on a fair market
value basis. . . . Each partner who left received $100.00 plus a “termination benefit[.]”
. . . Thirty-two (32) partners have joined ACI since 2001; each has paid $100.00 to
become a partner.
44. Husband is one of 68 partners in ACI. This number has not changed
significantly since the date of filing.
...
47. The value for each member’s interest in ACI, as initially established by ACI, is
$100.00. ACI has never re-determined a value after the determination of the initial
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value.
48. Each partner in ACI holds an equal ownership interest; each partner’s
ownership interest is 100%, divided by the number of partners. However, according
to ACI’s Operating Agreement, each partner does not receive an equal share of ACI’s
income. Instead, each partner receives unequal partnership distributions pursuant to a
formula.
49. Each ACI partner is required to execute a Partner Compensation Agreement
(“PCA”). Each PCA is identical, except for identifying information specific to the
individual member. . . .
57. ACI is a large practice. It has formalized organization structures and systems.
In their PCAs, all its partners have executed covenants not to compete with ACI in the
event of their dissociation from ACI. Although each partner is compensated based on
the partner’s production, ACI’s ability to generate revenue is not heavily dependent
on the personal services performed by any one partner. ACI’s name does not include
the name of any partner, and its identity has remained the same for a decade despite
the addition and withdrawal of partners. Contracts between ACI and the facilities at
which it provides services are owned by ACI and not by any individual partner. None
of ACI’s contracts with any facility where it provides services requires that Husband,
or any individual partner, be available to provide anesthesia services. . . . ACI alone
determines what partner will provide services in each operating room and at each
facility; no facility controls what partners will provide services there and no partner
controls where he/she will provide services. Husband’s ability to provide anesthesia
services at ACI facilities is not dependent on his personal relationship with any
patients or with any surgeons. Even if Husband were not on the requested list of any
surgeon, he would still be scheduled to work full-time so long as he is available to
work full-time. If Husband were not a partner in a large practice, which had exclusive
contracts to provide anesthesia services at multiple facilities, Husband would have to
obtain and schedule work, bill, and collect for it. This would occupy time for which
he would not produce billable ASUs. [ASUs, also known as ASAs, are billing units
for anesthesiologists, similar to billable hours for attorneys.]
...
59. The American Society of Anesthesiologists is a trade association of
anesthesiologists. It has created and published billing standards for the provision of
anesthesia services which are widely used and generally accepted among the national
community of anesthesiologists. Pursuant to its billing standards, anesthesia services
are recorded and billed based on ASA units or ASUs. . . .
60. ACI compensates its partners based on ASUs[.] . . .
61. The Medical Group Management Association is a trade association. It
compiles and publishes data relating to the management of health care entities.
Beginning in 2009, MGMA has complied and published statistics regarding the
number of ASA units billed annually by anesthesiologists. Such statistics are
published in percentile increments, so that it is possible to discern how the number of
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ASA units billed by an individual anesthesiologist compares to the production of
other anesthesiologists. . . . For each of . . . [2009 and 2010], Husband has produced
ASA units slightly below the 90th percentile but above the 75th percentile. . . .
62. Husband’s earnings in 2009 exceeded the compensation reported by the
MGMA for anesthesiologists at the 90th percentile in the United States even though
Husband’s 2009 ASA units were slightly below the 90th percentile as reported by the
MGMA. It is this difference in actual earnings [o]f Husband when compared to
industry standards that was used as excess earnings to capitalize under the
methodology of valuation employed by Mr. Alerding.
...
5. Mr. Alerding[] . . . [is an] expert[] in the field of business valuation, and
therefore entitled to offer opinion testimony on or related to the issue of the value of
Husband’s interest in ACI. [He] has extensive experience and education in the field
of business valuation. Mr. Alerding employed reliable scientific principles in
performing his assignment. He did so using methodology commonly accepted in the
accounting field. [He] holds multiple certifications in the area of business valuation.
The testimony . . . has assisted the Court in understanding the evidence and in
determining a fact in issue.
...
8. The Court is required to identify, and to include in the marital estate subject to
division, the tangible and intangible value of Husband’s interest in ACI. The
intangible value to be included is required to include Husband’s enterprise goodwill
and to exclude Husband’s personal goodwill. . . .
13. By virtue of its existing and long-standing arrangements with multiple facilities
to provide anesthesia services, and also by virtue of the covenants not to compete
signed by all 68 partners, ACI will continue to have value even if Husband no longer
participates. This is indicative of enterprise goodwill. . . .
14. Mr. Alerding’s capitalization of Husband’s excess earnings, by calculating
only Husband’s earnings which exceed the earnings of anesthesiologists in the United
States who bill a similar number of ASUs as Husband does as reported by the
MGMA, properly eliminated Husband’s personal goodwill from the calculation. . . .
16. The Court may adopt as its value, any value which is within the range of
competent evidence presented to the Court. The range of competent evidence as to
the value of Husband’s interest in ACI, including enterprise goodwill but not personal
goodwill, is from $253,000.00 to $337,000.00. The value determined by the Court,
$253,000.00, is within this range of values.
(Appellant’s App. at 41-67.) The evidence clearly supports the trial court’s determination
that the value of Husband’s interest in ACI, excluding Husband’s personal goodwill, was
$253,000. Therefore, the trial court did not abuse its discretion in reaching its decision.
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Husband argues that this case is similar to Frazier, in which we remanded the case to
the trial court for a determination of value, excluding personal goodwill, when we were
unable to determine from the trial court’s findings and conclusions whether any portion of
the aggregate value was attributable to personal goodwill. 737 N.E.2d at 1225. However,
here we have no such problem: we are clearly able to determine from the trial court’s
findings and conclusions what portion of the aggregate value given by Alerding was
attributable to Husband’s personal goodwill, that is, none. Alerding’s method of calculating
the value of Husband’s interest in ACI excluded Husband’s personal goodwill, and left only
ACI’s enterprise goodwill.1
To the extent Husband requests that we reweigh the evidence or reassess the
credibility of a witness, we decline to do so. Frazier, 737 N.E.2d at 1223-25. We affirm as
not clearly erroneous the trial court’s determination of the value of Husband’s divisible
interest in ACI.
Expert Witness Fees
Husband contends that the trial court abused its discretion in allowing a fee award to
Alerding without evidence to support the reasonableness of the “extraordinary fee.”
(Appellant’s Reply Br. at 13.) However, failure to raise an issue before the trial court waives
that issue on appeal. Salsbery Pork Producers, Inc. v. Booth, 967 N.E.2d 1, 3 (Ind. Ct. App.
2012).
1
We recognize that Husband raises an argument alleging violation of Indiana Trial Rule 702 based on the
inclusion of an improper factor under Yoon. However, it is essentially the same as his previous argument
on this issue, which we have already addressed.
8
Here, Alerding testified as to his fees, and Husband neither objected to nor cross-
examined him regarding the amount of or basis for the fees. In addition, a review of the trial
record discloses no document or filing that could be construed as raising the issue. Having
failed to raise the issue of Wife’s expert witness fees before the trial court, Husband has
waived that issue on appeal. Id.Deviation from Presumptive Equal Distribution
Wife contends that the trial court abused its discretion in awarding more than half of
the marital estate to Husband. She does not challenge the evidence, and concedes that the
evidence supports the trial court’s findings of fact. (Appellee’s Br. at 19.) Instead, she
asserts that the findings of fact fail to support the trial court’s conclusion of law deciding to
deviate from the presumptive equal division of the marital estate. She claims that the trial
court’s findings fail to justify its conclusion that Husband and Wife are each entitled to retain
the value of the interest each received in land in Kentucky by way of gift or inheritance from
their families. The crux of her argument is that the trial court considered only the source of
the property in question,2 and failed to give equal weight to evidence of the other statutory
factors.
The law regarding deviation from an equal division of a marital estate is well settled:
The division of marital assets lies within the sound discretion of the trial court, and we
will reverse only for an abuse of discretion. When a party challenges the trial court’s
division of marital property, [s]he must overcome a strong presumption that the court
considered and complied with the applicable statute, and that presumption is one of
the strongest presumptions applicable to our consideration on appeal. We may not
reweigh the evidence or assess the credibility of the witnesses, and we will consider
2
See Ind. Code § 31-15-7-5(2)(B).
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only the evidence most favorable to the trial court’s disposition of the marital
property. Although the facts and reasonable inferences might allow for a different
conclusion, we will not substitute our judgment for that of the trial court.
Hartley v. Hartley, 862 N.E.2d 274, 285 (Ind. Ct. App. 2007) (quoting DeSalle v. Gentry, 818
N.E.2d 40, 44 (Ind. Ct. App. 2004)). Under Indiana Code Section 31-15-7-5, the court is to
“presume that an equal division of the marital property between the parties is just and
reasonable.” Ind. Code § 31-15-7-5. A party may rebut this presumption with relevant
evidence that an equal division would not be just and reasonable. Id. If the trial court
determines that a party opposing an equal division has met his or her burden under the
statute, the court must state in its findings and judgment its reasons for deviating from the
presumption of an equal division. Hartley, 862 N.E.2d at 285. The trial court must consider
all of the statutory factors, rather than focusing on just one factor, but need not explicitly
address all of the factors in every case. Eye v. Eye, 849 N.E.2d 698, 701-02 (Ind. Ct. App.
2006).
Here, the trial court entered extensive findings of fact and conclusions of law
addressing the division of the property:
21. Each party made reasonable contributions to the acquisition of assets according
to his or her talents and roles within the parties’ relationship. Husband’s income-
producing contributions exceeded Wife’s, and Wife’s non-income producing
contributions exceeded Husband’s.
22. Husband is entitled to a modest deviation from the presumptive equal division
of the marital estate based on I.C. § 31-15-17-5(2), because Husband inherited an
ownership interest in farmland in Kentucky. Wife is entitled to a[] modest deviation
from the presumptive equal division of the marital estate based on [§] 31-15-17-5-(2)
because Wife inherited a life estate, subject to her father’s life estate, in rental
property in Kentucky. The value of Husband’s inherited interest exceeds the value of
Wife’s inherited interest. Neither party’s inherited property represents a significant
percentage of the parties’ marital estate.
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23. Wife’s economic circumstances are substantially weaker than those of the
Husband as [of] the time the division of the marital estate is to become effective.
Even though her circumstances are not as good as Husband[’]s she leaves this
marriage in substantial financial health receiving a net distribution in excess of 2.2
Million dollars with very little debt. . . .
26. Each party engaged in spending which furthered that party’s interests as
opposed to the joint marital enterprise. Neither party’s spending choices were
excessive in the context of a marital net worth of over Four Million Dollars and in the
context of the parties’ annual income. Neither party has established dissipation by the
other party.
27. Wife's earnings and earning ability are not as good as Husband’s, and it is not
anticipated that Wife’s earning ability will ever equal Husband’s earning ability.
28. Considering the foregoing findings and conclusion regarding a deviation from
the equal division of the marital estate, the Court concludes that neither party is
entitled to a deviation from the presumptive equal division of the marital estate[,] . . .
except that each of the parties should retain the value of the interest he or she received
in the land in Kentucky by way of gift or inheritance from their families.
(Appellant’s App. at 68-70.) Furthermore, the trial court acknowledged in its findings of fact
and conclusions of law that it was “required to consider all factors enumerated in I.C. [§] 31-
15-7-5, and to refrain from giving special weight to any one factor.” (Appellant’s App. at
67.)
The trial court’s findings of fact and conclusions of law clearly disclose that the court
considered all of the statutory factors required by Indiana Code section 31-15-7-5, and
determined that the factors in favor of an unequal division of property outweighed the factors
supporting an equal division. “Balancing these statutory factors and the evidence related to
them is the essence of the trial court’s work in crafting a just and reasonable property
division.” Gaskell v. Gaskell, 900 N.E.2d 13, 20 (Ind. Ct. App. 2009). As such, the trial
court did not abuse its discretion, and we decline Wife’s invitation to reweigh the evidence or
substitute our discretion for that of the trial court. Id. Therefore, we affirm as not clearly
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erroneous the trial court’s unequal division of the marital estate.
Conclusion
The trial court’s determination of the value of Husband’s divisible interest in ACI and
unequal division of the marital estate were not clearly erroneous. Husband has waived his
ability to appeal the issue of the propriety of Wife’s expert witness fees.
Affirmed.
RILEY, J., and CRONE, J., concur.
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