¶ 9. I respectfully dissent from the majority's holding that goodwill may never be used as a factor in evaluating a business interest. I further note that this Court should decline to limit the discretion of the trial court regarding the appointment of a special master where, as here, the issue is not before this Court and the opinion of the Court of Appeals provides sufficient direction to the chancellor upon remand. Because the Court of Appeals did not err, its decision should be affirmed with respect to all issues.
¶ 10. The case law of this state has dealt with goodwill mainly in the context of valuing a professional practice and not a business enterprise jointly held by husband and wife.Singley v. Singley, 846 So.2d 1004 (Miss. 2002), and its progeny are not applicable to the case at hand. Whilestare decisis likely bars reconsideration of whether goodwill may be used to value a professional practice in the property division phase of a divorce, it would be inequitable to hold that goodwill should not be taken into consideration where the marital asset is a business enterprise that either does not depend on the personal and irreplaceable efforts of one spouse or where the enterprise is jointly held by the spouses either as a partnership or as an incorporated entity. Furthermore, any distribution of the marital estate involving the business assets necessarily should take into account the personal goodwill attributable to each of the spouses to whatever extent, if any, that each participated in the operation of the enterprise and in the proportion to which value accrued to the enterprise as the result of their respective efforts. To say categorically that an evaluation of goodwill is prohibited could create a result that is inequitable to one of the parties.
¶ 11. The business asset in dispute is an enterprise founded by Drake and Tonia Lewis during the course of their marriage *Page 220 to develop residential real estate.3 Lewis v.Leivis, 54 So.3d at 236-37, ¶ 9 (Miss.Ct. App. Dec.8, 2009). The parties held the incorporated entity in equal shares and bought and sold numerous tracts of real property, with some of the parcels held by separate legal title by one or the other of the parties. Id. Tonia filed a complaint for divorce in 2006; Drake never filed a responsive pleading.Id. at 235, ¶ 4.
¶ 12. After the parties separated, Drake engaged in a course of conduct that included the diversion of corporate assets for his own use. Drake eventually set up Legacy Builders as a sole proprietorship during the litigation and operated that business using corporate assets. Drake failed to respond fully to Tonia's demands for discovery with respect to the value of the various assets. Ultimately, the trial court made its ruling largely on the basis of documentation that Tonia had submitted and which she acknowledged was necessarily incomplete and out of date. Id. at 238-39, ¶ 18. Drake's only submission on the record regarding Legacy's value was his testimony that it was essentially worthless. The chancellor assigned Legacy a value of $1, 148, 270 and awarded it entirely to Drake as part of a judgment that awarded Tonia assets with a net value of $855, 747 and awarded Drake assets with a net value of $1, 807, 882. Drake appealed, and we assigned the case to the Court of Appeals, which affirmed in part and reversed in part, ruling, inter alia, that Legacy should be revalued using all relevant data, including all real and movable property owned by Legacy, any goodwill equity attributable to Legacy and any improvements made by Legacy to property owned by other persons. Id. at 240, ¶ 23. Tonia filed her petition for certiorari to this Court, which we granted.
¶ 13. Goodwill, or the value of a business that exceeds the combined physical assets of the business, is defined as:
Dodson v. McElreath, 210 Miss. 160, 48 So.2d 861, 864 (1950) (citing In re Brown, 242 N.Y. 1, 150 N.E. 581 (1926)).the advantage or benefit which is acquired by an establishment beyond the mere value of the capital stock, funds, or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers on account of its local position, or common celebrity, or reputation for skill, or affluence, or punctuality, or from other accidental circumstances or necessities, or even from ancient partialities or prejudices.
¶ 14. Goodwill, along with other intangibles, can be considered as a factor in valuing a business enterprise according to generally accepted accounting principles. Financial Standards Accounting Board, Summary of StatementNo. 142: Goodwill and Other Intangible Assets (Issued June 2001), http://www.fasb.org/summary/stsum 142.shtml (last visited January 28, 2011). Furthermore, goodwill is treated alongside other intangible assets such as patents, customer lists, or licenses under the Internal Revenue Code as a depreciable asset subject to taxation or as a deductible and amortizable cost. See 26 U.S.C.A. § 197 (2010). Goodwill, at its core, represents the excess value of a business enterprise after subtraction of the value of all other assets from its fair market value, and despite its seeming nebulousness as a term *Page 221 of art, is well recognized as an intangible business asset.
¶ 15. Goodwill may be differentiated as personal or professional goodwill, which, as the term implies, derives from the performance of the individual stakeholder in the business enterprise; or enterprise goodwill, which is considered an asset of the business, it "is based on the intangible, but generally marketable, existence in a business of established relations with employees, customers, and suppliers." Watsonv. Watson, 882 So.2d 95, 105 (Miss. 2004) (quotingYoon v. Yoon, 711 N.E.2d 1265, 1268 (Ind. 1999) (internal citation omitted)). Enterprise goodwill attaches to a business entity and is separate from the reputation of the owners. It is "divisible in a dissolution to the extent that it inheres in the business, independent of any single individual's personal efforts and will outlast any person's involvement in the business." Yoon, 711 N.E.2d at 1269. "It is not necessarily marketable in the sense that there is a ready and easily priced market for it, but it is in general transferable to others and has a value to others." Id. In the context of a professional practice, however, the goodwill that properly belongs to the enterprise may be so bound to the performance and identity of the professional that it is, for practical purposes, personal in nature. Watson,882 So.2d at 101.
¶ 16. This Court dealt with the issue of goodwill in the context of distribution of marital assets as a matter of first impression in Singley v. Singley, 846 So.2d 1004 (Miss. 2002). In that case, the asset in dispute was the husband's dental practice, held as a solo professional practice. Id. at 1009. After examining decisions from several states dealing with professional goodwill, including Indiana's decision in Yoon, the Court concluded that goodwill should not be considered in any dissolution action.Id. While the Court noted the distinction between professional goodwill and enterprise goodwill, it declined to make a distinction between the two. Contrary to generally accepted accounting principles, the Court held: "Goodwill within a business depends on the continued presence of the particular professional individual as a personal asset and any value that may attach to that business as a result of that person's presence." Id. at 1011. Singley thereby put this Court "in the company of only four other jurisdictions [that] take the position that neither personal nor enterprise goodwill in a professional practice constitutes marital property." Watson v. Watson, 882 So.2d 95, 112 (Miss. 2004) (Randolph, J., dissenting).
¶ 17. The Court revisited this issue in Watson v.Watson, 882 So.2d 95 (Miss. 2004). Clarifying its holding in Singley, the Court held that, while it recognized a distinction between personal goodwill and business enterprise goodwill, neither should be used in evaluating a solo professional practice in the context of marital dissolution.Watson, 882 So.2d at 105-106. In Watson, the business asset in dispute was a veterinary practice owned and operated by the husband. Id. at 98. Treating the veterinary practice as a solo professional practice, the Court ruled that, as enterprise and professional goodwill were inextricably tied to the performance of the professional, neither would be appropriately considered in evaluating the practice as a marital asset. Id. at 105. However, the Court carefully noted that enterprise goodwill may be treated as property of the business, divisible on dissolution:
Id. at 105 (citing Yoon,711 N.E.2d at 1268-69).to the extent that it inheres in the business, independent of any single individual's personal efforts and will outlast any person's involvement in the business. It is not readily marketable in the sense that there is a ready and easily priced *Page 222 market for it, but it is in general transferable to others and has a value to others.
¶ 18. Watson therefore should be read to limit the blanket rule promulgated in Singley to those cases either involving a solo professional practice or those cases that are closely analogous. This rule is in line with the principle that a professional license held by a spouse is not itself marital property, even where the practice dependent on that license may be, depending on the particular facts of the case, a marital asset subject to equitable distribution. SeeMace v. Mace, 818 So.2d 1130, 1133 (Miss. 2002);Guy v. Guy, 736 So.2d 1042 (Miss. 1999).
¶ 19. Finally, in Yelverton v. Yelverton,961 So.2d 19, 29 (Miss. 2007), this Court expanded its rule to hold that goodwill should not be applied as a factor when the asset in dispute is an interest in an automobile dealership and the shareholder is the managing partner. Citing Watson,882 So.2d at 105, and Stngley, 846, So.2d at 1011, the Court stated that, where the asset in dispute was the sole means of income for the purposes of calculating child and spousal support, goodwill could not be used in determining the value of the business asset. Yelverton,961 So.2d at 29. The common thread in these cases is that the business interest at issue was either professional in nature, or at least proprietorial in the case of Yelverton. The relevance of Yelverton to the issue before us is dubious at best, in that it dealt with the income produced by an asset and not the value of the asset itself as it pertained to the marital estate. Id.
¶ 20. In this case, however, the business interest is a common business enterprise between the husband and wife, subject to their joint control and operation, at least up to the point of their separation, when Drake began using corporate assets to operate his separate business. Applying the rule fromStngley and its progeny inappropriately restricts the chancellor's discretion in assigning a fair value to the parties' actual assets in this case, where the enterprise in question is not a professional practice and is not dependent solely on the efforts of one or the other of the disputants.
¶ 21. For the foregoing reasons, the decision of the Court of Appeals should be affirmed on all issues. Upon remand, the trial court should make a full determination of the market value of Legacy, including an evaluation of Legacy's enterprise goodwill, as well as whatever personal goodwill, if any, is attributable to either or both of the parties.