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In the Matter of Carolyn P. Cottrell

June 29, 2012

IN THE MATTER OF CAROLYN P. COTTRELL, DDS AND MOSTAFA EL-SHERIF, DMD


The opinion of the court was delivered by: Lynn, J.

Manchester Family Division

Argued: March 8, 2012

The respondent, Mostafa El-Sherif, DMD, appeals a divorce decree of the Manchester Family Division (Emery, J.), recommended by the Marital Master (Lemire, M.). He argues that the trial court erred when it adopted an appraisal valuing his business at $1,274,000 for the purposes of the final distribution of property. We affirm.

I

The trial court found, or the record supports, the following facts. After a twenty-three year marriage, the parties separated in February 2009 and divorced in February 2011. The petitioner, Carolyn P. Cottrell, DDS, was a practicing dentist until 1994 and, at the time of the divorce, worked as a clinical associate professor of dentistry at Tufts University. The respondent is also a dentist and operates a successful dental practice in Concord.

The divorce trial required the court to determine the fair market value of the respondent's dental practice. The company hired by the petitioner, Brayman, Houle, Keating, and Albright, PLLC, rendered a report opining that the fair market value was $1,274,000 as of December 31, 2009. Anthony Albright testified in support of that report, which was based upon a formula that seeks to determine the present value of the business by estimating its ability to generate future earnings - the "capitalization of earnings" approach.

The respondent's expert, Dr. Stanley L. Pollock, estimated the business's value to be $156,000. To arrive at this figure, Pollock acknowledged at trial that he did not value the business based upon its transferable value because he knew that the respondent did not intend to sell the business. Thus, his estimate reflected only the business's net tangible asset value, including the value of the equipment and furniture used in the dental practice.

The trial court adopted the petitioner's estimate. Among other reasons for doing so, the court was "incredulous" of the testimony that the business was worth only $156,000 because the respondent paid $410,000 for it in 1996 and it had generated substantial income for him ever since. The court also noted that Albright's appraisal disregarded the respondent's highest earning years (tending to lower the value) and, unlike Pollock's appraisal, accounted for the "substantial goodwill as a business entity." The respondent appeals.

II

RSA 458:16-a, I (2004) defines the property subject to division in a divorce as "all tangible and intangible property and assets, real or personal, belonging to either or both parties, whether title to the property is held in the name of either or both parties." We have previously defined the fair market value of property as "the price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts." In the Matter of Watterworth & Watterworth, 149 N.H. 442, 447 (2003) (quotations omitted). The valuation of a professional practice is a question of fact to be determined by the trial court based upon the particular facts and circumstances. Id. at 450; see In the Matter of Chamberlin & Chamberlin, 155 N.H. 13, 16 (2007) ("[D]etermining the value of any given asset is left to the sound discretion of the trial court."). Also a question of fact is the determination of the existence and value of goodwill. Watterworth, 149 N.H. at 450. We will not disturb the trial court's findings in this regard unless they are unsustainable on the record. Id.

The respondent argues that the trial court erred by attributing a value to his practice that included "professional goodwill" - the intangible value of the dental practice that he asserts would not be transferable upon sale because it is attached to the respondent's own education and reputation. He concedes that the court was free to consider the value of the "practice goodwill" - the goodwill that is severable from the professional reputation of the respondent and therefore transferable to a willing buyer.

On the record before us, we conclude that the trial court sustainably exercised its discretion in adopting the petitioner's valuation of the business. The trial court was presented with two expert opinions to aid in its determination of the business's value. The court found that the respondent's expert, Pollock, vastly underestimated the fair market value of the business, especially in light of his concession that he limited his analysis to its net tangible assets only. When pressed on the value of the business were the respondent to sell it, Pollock stated that he would receive no more than $400,000, but did not arrive at a precise figure. Thus, it was clear that Pollock made no calculation of goodwill in his appraisal. Both Pollock's estimate of $156,000 and his alternative estimate of $400,000 were further undermined by the fact that the respondent paid $410,000 for the business in 1996 and had run an unusually successful dental practice ever since.

In contrast, the court found that the petitioner's expert, Albright,

accurately assessed the business's fair market value. Instead of considering only the business assets, Albright employed an appraisal method based upon how the business assets are used to generate income over time. Albright's method discounted for the business's lack of marketability given its "liquidity issue" and disregarded the respondent's highest earning years, but accounted for the practice's "substantial goodwill as a business entity." The court noted that Albright believed the practice was "completely transferable despite ...


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