No. 24856-9-III.The Court of Appeals of Washington, Division Three.
June 21, 2007.
Appeal from a judgment of the Superior Court for Spokane County, No. 03-3-02071-9, Maryann C. Moreno, J., entered December 5, 2005.
Affirmed
by unpublished opinion per Sweeney, C.J., concurred in by Brown and Kulik, JJ.
SWEENEY, C.J.
We will defer to the trial judge’s findings of fact if they are supported by the evidence. And we will affirm the court’s conclusions of law if they are supported by the findings. Here, the court concluded that the husband’s medical practice remained his separate property. That conclusion is supported by the findings of fact. We therefore affirm the court’s award of the property.
FACTS
William Werschler graduated from medical school in 1985. He completed his medical internship in 1986. A dermatology fellowship followed. He began a private medical practice in dermatology in Spokane in 1989. His practice included speaking and consulting. William and Kara Werschler married on June 4, 1994. They had three children.
Dr. Werschler incorporated his private medical practice as Spokane Dermatology Clinic in 1999. The corporation issued shares to William Werschler, M.D., “a married individual as his sole and separate property.” Report of Proceedings (RP) at 1051. The stock ledger and stock certificate showed all of the shares issued to Dr. Werschler. But tax returns filed by the couple reflected that the corporation was jointly owned by Dr. Werschler and his wife.
The Werschlers separated on August 9, 2003, and later filed for dissolution on September 18.
Experts for both parties valued the medical practice and associated speaking/consulting business. Ms. Werschler’s expert testified that the medical practice and associated speaking/consulting business had a value of $1,813,000. This included goodwill in the amount of $1,196,000 and tangible assets for $617,000. Dr. Werschler’s expert valued his professional goodwill in June of 1994 at $300,000. His expert concluded the professional practice, consulting work, and goodwill totaled $410,000.
The court concluded that the medical practice plus the speaking and consulting business was separate property and valued at $410,000. The judge found that Dr. Werschler had a thriving and growing dermatology practice at the time of marriage.
The trial court determined that the business remained separate property because the community had been reasonably compensated during the marriage. The trial court found that the husband’s net income at the time of trial to be approximately $44,667 per month. The husband earned $652,000, or $54,000 per month, in 2003 alone.
DISCUSSION
Medical Practice Remains Separate Property Ms. Werschler assigns error to the court’s conclusion of law that the dermatology practice was separate property (conclusion of law 3.6(1)). She also assigns error to the finding that the community was reasonably compensated by the business (finding of fact 2.20(11)). Ms. Werschler argues that the trial court incorrectly characterized property as a finding of fact. She maintains that it should have been a conclusion of law. And Ms. Werschler contends that a professional medical corporation established during the marriage should be presumed to be community property. She argues that this is especially true if there is no showing of a separate source of funding, and where, as here, the property is reported to the Internal Revenue Service as jointly held.
The classification of property as separate or community is a mixed question of law and fact. In re Marriage of Martin, 32 Wn. App. 92, 94, 645 P.2d 1148 (1982). We review findings of fact for substantial evidence. In re Marriage of Skarbek, 100 Wn. App. 444, 447, 997 P.2d 447 (2000). We review the court’s classification of property (as separate or community) de novo. Martin, 32 Wn. App. at 94. The finding that the professional practice was separate property is a conclusion of law. Id. at 94-95. But time of acquisition, method of acquisition, and intent are questions of fact. Id. And, whether the facts support the character of property as separate or community is again “for the court to determine as a matter of law.” Id. at 94.
Dr. Werschler was a successful physician who came into the marriage with an established and thriving medical practice. Clerk’s Papers (CP) at 110 (finding of fact 2.20). This supported the trial court’s conclusion of law that the medical practice including the associated consulting work was his separate property. CP at 113 (conclusion of law 3.6(1)).
The character of property as separate or community is established at the date of acquisition. In re Marriage of Hurd, 69 Wn. App. 38, 50, 848 P.2d 185 (1993). Property acquired by the husband before marriage is his separate property. Id. Once established, separate property retains its separate character unless changed by deed, agreement of the parties, or operation of law. Skarbek, 100 Wn. App. at 447. If the property was separate property at the time of acquisition, it will retain that character as long as it can be traced and identified. In re Marriage of Pearson-Maines, 70 Wn. App. 860, 865, 855 P.2d 1210 (1993).
The burden is on the spouse asserting that separate property has transferred to the community to prove the transfer usually by a writing evidencing mutual intent. Skarbek, 100 Wn. App. at 448.
Dr. Werschler owned the shares of the professional services corporation. The corporation issued shares to William Werschler, M.D., “a married individual as his sole and separate property.” RP at 1051. Dr. Werschler was a successful dermatologist who had established a medical practice along with a speaking and consulting business before his marriage. RP at 1046-49; CP at 110 (finding of fact 2.20(1)-(3)).
Dr. Werschler did not acquire new or different assets when his sole proprietorship was incorporated. He established the sole proprietorship — the business — prior to his marriage. At the time of marriage, Dr. Werschler’s practice was already established. CP at 110 (finding of fact 2.20(2)). He had a “thriving and growing dermatology practice” at the time of marriage. CP at 110 (finding of fact 2.20(3)). He merely incorporated a business that had already been established. CP at 110 (finding of fact 2.20(2)). He did not buy into a new or independent medical practice. The character of the property did not then change merely because he incorporated his separate property. See Hurd, 69 Wn. App. at 50.
And the community was adequately compensated for his services. CP at 111 (finding of fact 2.20(11)). Experts for both parties testified that the community received reasonable compensation. CP at 110 (finding of fact 2.20(5)). The court’s characterization of Dr. Werschler’s medical practice as his separate property is supported by the findings here. And those findings support the judge’s conclusion that the practice remained his separate property. Valuation of the Practice Ms. Werschler also assigns error to the court’s finding that Dr. Werschler’s professional practice and speaking/consulting business should be valued together at $410,000. The court’s finding is based on the testimony of Dr. Werschler’s expert. Ms. Werschler argues that his expert used methods not accepted within the accounting community. She argues that the actual value of the professional practice is $1,813,000.
The value of assets in a dissolution case is a question of fact. In re Marriage of Luckey, 73 Wn. App. 201, 868 P.2d 189 (1994). Again, we review the trial court’s findings of fact for substantial evidence. Miles v. Miles, 128 Wn. App. 64, 69, 114 P.3d 671 (2005). And we view the evidence in the light most favorable to the party in whose favor the findings were entered. In re Marriage of Gillespie, 89 Wn. App. 390, 404, 948 P.2d 1338 (1997).
Ms. Werschler argues that the methods used reduced Dr. Werschler’s goodwill and therefore the value of the practice as a whole. Goodwill in a professional practice is valued as property. See In re Marriage of Hall, 103 Wn.2d 236, 239, 692 P.2d 175 (1984). But the value of goodwill is a question of fact. Id. at 246.
Dr. Werschler’s expert testified that he determined the value of the medical practice as of three different dates. The most recent date was December 31, 2004. He concluded the value of the ownership interest in the practice to be $410,000. This included $300,000 for goodwill.
The expert concluded that the core of Dr. Werschler’s practice had not significantly changed since June 1994, the date of the marriage: “the core practice, the practice of dermatology for Dr. Werschler did not change. It has grown, but the practice is still a practice of dermatology.” RP at 292.
Dr. Werschler’s expert used a capitalization multiple of 3 when he valued the practice. RP at 326. He got this value by adding a specific risk-component in the CAPM (capital asset pricing model) method for Dr. Werschler’s practice. Ms. Werschler’s expert did not add a specific risk-component and arrived at a different capitalization rate.
The expert for Dr. Werschler added the specific risk-omponent because of the risk factors associated with Dr. Werschler’s practice. First, the practice is totally dependent on Dr. Werschler. He is the source that drives the practice. So his disability or an adverse malpractice judgment would affect the value. Other businesses have management succession plans that spread the risk if something happens to one person. Also, the practice is concentrated in Spokane so it is dependent on the economy here. In short, the opinions relied upon by the court support the court’s findings.
We affirm the judgment of the trial court.
A majority of the panel has determined that this opinion will not be printed in the Washington Appellate Reports but it will be filed for public record pursuant to RCW 2.06.040.
BROWN, J. and KULIK, J., Concur.