Gaskill v. Robbins, __ S.W.3d __ (Ky. App. 2006), 2006 WL 3524380 (Ky. App.) Not final, motion for reconsideration pending.
Issues and Holdings:
1) Whether the trial court abused its discretion when it failed to allow wife to introduce a prior inconsistent statement from psychologist. The Court held yes, the lower court abused its discretion.
2) Whether the trial court’s error in making a finding of fact that relied on unsworn statements from a hearing dealing with the guardian ad litem’s motion to review temporary custody prejudiced the wife. The Court held yes, the error did prejudice the wife.
3) Whether the trial court exercised its discretion when it assigned the goodwill value to the wife’s medical practice. The Court held no, the court did not exercise discretion.
4) Whether the trial court was required to make a distinction between “personal” goodwill and “enterprise” goodwill when valuing the wife’s business. The Court held no, the lower court was not required to do so.
The parties were married in May 1992, with one child born in the marriage. Gaskill, the wife, is an oral and maxillofacial surgeon who already had a successful practice in Russellville at the time of the marriage. After the marriage, she opened up an additional office in Bowling Green. Robbins, the husband, was employed outside Gaskill’s practices, but also assisted her in opening the second office by interviewing and training staff, setting up the physical structure of the office, and assisting in clerical matters. Robbins also helped with the tax, payroll, and accounting matters of Gaskill’s business, prepared profit and loss statements, negotiated leases for the office space, and terminated employees when needed. Both parties maintained the household and cared for their child.
The parties separated in August 2003, and Gaskill filed for divorce in October 2003. The main issues in the divorce proceedings were the valuation of Gaskill’s business, how the marital property should be divided, and the custody of their child. The trial court granted sole custody to Robbins and awarded each party approximately 50 per cent of the marital property. Gaskill appealed.
On appeal, Gaskill argued that the lower court erred in refusing to allow her to introduce a prior inconsistent statement made by Dr. Fane, a psychologist, and ruling that said statement was inadmissible hearsay. At trial, Dr. Fane testified that he did not believe that either parent could be considered better than the other regarding custody. Gaskill’s counsel asked him about a statement he had made to Dr. Buchanan indicating that Gaskill was the better parent, but Dr. Fane testified that he did not recall making such a statement. Gaskill’s counsel then attempted to call Dr. Buchanan to impeach Dr. Fane, but Robbins’ counsel objected and the trial court sustained the objection to inadmissible hearsay. The evidence was then introduced by avowal. The Court held that the lower court erred in failing to allow the impeachment testimony. The statement satisfied KRE 801A (a) (1) and counsel laid the proper foundation for the testimony to be heard. In addition, the court’s findings of fact show that the court relied on Dr. Fane’s testimony in its custody determination. Therefore, omission of the impeachment testimony was error. The Court did not consider whether the error was reversible, as the Court found other reversible error.
The Court also found that the trial court erred in making findings of fact that relied on unsworn statements made at a hearing concerning the Guardian Ad Litem’s motion to review temporary custody. At the hearing Robbins’ counsel and the GAL repeated numerous hearsay statements about Gaskill’s alleged interference with the child’s schooling, including statements supposedly made by the child and the child’s school principal. The court’s findings of fact clearly show that these statements were relied upon by the court. Therefore, the court’s consideration of the statements was prejudicial, and the court’s custody determination must be reversed.
Gaskill also argued that the lower court erred in its valuation of the marital property by failing to exercise its discretion in assigning goodwill value to Gaskill’s business and by failing to distinguish between personal and enterprise goodwill. Gaskill’s expert testified that her business had no goodwill value, since any goodwill attributable to the practice was personal goodwill. He testified that the practice had a fair market value of $114,000.00. Robbins’ expert testified that the practice had a value of $669,075.00, which included its goodwill value. The Court held that the lower court erred in failing to exercise its discretion in assigning a goodwill value to the business. The lower court felt required to assign a goodwill value to the business, but was not required to do so. Thus, the Court remanded the issue for further consideration.
Regarding whether a distinction should be drawn between personal and enterprise goodwill, the Court held that the case law in Kentucky does not support such a distinction. The Court stated that it was not inclined to deviate from the precedent by creating a “wholesale change of law” holding that a distinction should be made, even given the fact that Gaskill’s business is a sole proprietorship. Such a distinction would ignore the nonprofessional spouse’s contribution to the success of the professional spouse’s business. Because Robbins made numerous contributions to Gaskill’s business, the Court stated that the goodwill of the practice should be considered in valuing the marital property on remand.
The Court reversed and remanded for further proceedings consistent with the opinion.
Judge Paisley concurred in part and dissented in part.
He would affirm the trial court’s award of sole custody to Robbins. He also stated that Gaskill made a good argument why there should be a distinction between personal and enterprise goodwill, but asserted that this was an issue that the Kentucky Supreme Court should address. He therefore agreed with the majority on this issue