Appeal from a judgment of the Circuit Court for Waukesha County: John P. Buckley, Judge.
Scott, C.j., Voss, P.j., and Brown, J.
The opinion of the court was delivered by: Scott
Sandra Lewis, the respondent in a divorce action, appeals from the trial court's valuation of her husband's partnership interest in a boarding kennel and his interest in an animal hospital. Mrs. Lewis also appeals the amount of her maintenance award. Dr. Jordan Lewis cross-appeals from that part of the divorce judgment ordering him to pay $1,000 towards Mrs. Lewis' attorney fees. The issues are whether the trial court properly applied the professional goodwill exclusion set forth by Holbrook v. Holbrook, 103 Wis. 2d 327, 309 N.W.2d 343 (Ct. App. 1981), in valuing Dr. Lewis' partnership interests and whether the trial court abused its discretion in determining maintenance or ordering a contribution towards attorney fees. Because we conclude that the trial court misapplied the Holbrook exclusion and made insufficient findings on the other matters, we reverse and remand for further proceedings not inconsistent with this opinion.
At the time of their divorce hearing, the Lewises had been married for twenty-six years. Sandra was forty-nine years old, and Jordan was fifty-five. During the marriage, Sandra raised two children, now adults, and worked some of the time as a receptionist. Throughout the marriage, Jordan worked as a veterinarian. For a substantial period, he has operated an animal clinic in partnership with his brother, also a veterinarian. Under a separate partnership, the brothers own and operate a boarding kennel.
Sandra has lived apart from Jordan since 1977. On the hearing date, she was employed as an artist's representative. Her earnings for 1981 were less than $3,000. She also received a voluntary payment of $2,400 from Jordan. Sandra submitted a monthly budget of $593. Her expenses included $300 for a heated apartment and $60 for food. She testified that she was about to undertake a two and one-half year course of study that would prepare her to work with children who have learning disabilities.
Jordan has continued to occupy the marital homestead. His gross income for 1981 was approximately $49,400. He submitted a monthly budget of $2,919.75. His expenses included $408 for housing costs, $150 for food and $555.25 for insurance on his car, his life and the life of his brother.
The Lewis Boarding Kennel houses the pets of vacationers. The Lewis brothers own the business as equal partners and do all of the work necessary for its operation. Partnership assets include an eighty-foot kennel building and the one-half acre lot on which the building is situated. Jordan stated that a recent appraisal fixed the value of the lot at $28,000. The assessor for the Village of Menomonee Falls testified that the fair market value of the real estate and kennel was $56,200.
Joseph Tierney, an accountant and attorney, testified that the value of Jordan's interest in the kennel operation was approximately $2,438. Tierney based his valuation, in part, on the $5,752 book value of the business (an amount that included the cost of the kennel building, less accumulated depreciation). Tierney stated that the book value had no relationship to the market value of physical assets belonging to the business. Tierney also based his valuation on an analysis of the kennel's earnings. The net income from the kennel in 1981 was $12,180. Tierney calculated, however, that only $920 of the $6,090 that Jordan received from the kennel business in 1981 was properly attributable to Jordan's partnership interest in the business. *fn1 Averaging book value with the value of partnership earnings, Tierney concluded that the entire kennel partnership was worth $4,876.
The Lewis brothers are equal partners in the Lewis Animal Hospital, a veterinary clinic consisting of a waiting room, two examining rooms, a patient ward and an X-ray room. The clinic building is connected to a residence owned and occupied by Jordan's brother. The brother also owns the land on which the clinic is situated.
The partnership agreement for the Lewis Animal Hospital includes a cross-purchase agreement stating that:
Upon the death, disability, or retirement after age sixty (60) of a Partner, such Partner or his estate . . . shall sell, and the remaining Partner shall purchase, all of the Selling Partner's interest in the Partnership at a purchase price equal to one-half (1/2) of the Net Going-Concern Value of the Partnership . . . .
The agreement defines "Net Going-Concern Value" as "an amount equal to the net book value of the Partnership . . . plus an amount equal to the gross receipts of the Partnership . . . for the taxable year immediately preceding the year in which the event giving rise to the determination of Net Going-Concern Value occurs." The partnership agreement requires each brother to maintain sufficient insurance on the life of the other so that either would be able to purchase one-half of the partnership from the other's estate. The gross receipts for the Lewis Animal Hospital in 1981 were $126,786.
Accountant Tierney testified that the total value of Jordan's partnership interest in the clinic was $750. As in the case of the kennel partnership, Tierney based his valuation on the book value of the clinic partnership's assets, $3,000, and on an analysis of the clinic's earnings. The clinic's net income in 1981 amounted to $85,490. Tierney calculated, however, that partnership earnings for the year were zero. *fn2 Averaging book value with partnership earnings, Tierney concluded that the value of the whole clinic partnership was $1,500.
The trial court treated both the kennel and the animal clinic as belonging to a single professional partnership. The court made no comment on the value of partnership real and personal assets. It stated that the formula set out in the cross-purchase agreement for fixing the purchase price of one partner's interest in the animal clinic "may be a formula freely and voluntarily arrived at between partners for determining the dissolution of the partnership." The court viewed the formula, however, as a means of placing a value on the clinic's goodwill and concluded that under Holbrook, it was required to exclude Jordan's professional goodwill from the marital property. The court then determined that Jordan's share of the kennel partnership was worth $2,438 and his share of the clinic was worth $750. The court found that the total marital estate was worth $163,761 and awarded $81,880 to Sandra. Without ...