Nonowner Spouse Fails to Prove Appreciation of Chiropractic Practice

Cutsinger v. Cutsinger,  917 S.W.2d 238 (Tenn. Ct. App. 1995).

Nonowner Spouse Fails to Prove Appreciation of Chiropractic Practice

Mr. Cutsinger owned a chiropractic practice as a sole proprietorship.   He began the practice two years before he married.  Days after the marriage, Mrs. Cutsinger began working at the practice as a licensed nurse.  Mr. Cutsinger later became seriously ill with skin cancer and was forced to leave his practice for a year.   During Mr. Cutsinger’s absence, Mrs. Cutsinger kept the business open by doing bookkeeping and obtaining other chiropractors to serve the practice’s clients.   About two years after Mr. Cutsinger became ill, the parties separated, and Mr. Cutsinger sold the practice for $130,000.  The purchase price reflected $62,000 for equipment, $13,000 for the trade name and goodwill, $13,000 for a covenant not to compete, $18,000 for accounts receivable, and a $24,000 consultation fee.   When the parties divorced, the trial court divided the value of the practice as marital property, but excluded from this value the amounts paid for the trade name and goodwill and the covenant not to compete.   The trial court held that the value of the practice was $104,000 and awarded Mrs. Cutsinger a 30% interest in the purchase price of the chiropractic practice.  The $31,200 award included the value of the appreciation of the practice.   Mr. Cutsinger appealed the trial court’s decision to divide the practice as marital property and argued that Mrs. Cutsinger presented no evidence that the value of the practice appreciated during the marriage.

The Tennessee Court of Appeals agreed with Mr. Cutsinger and held that the appreciation value of the chiropractic practice was Mr. Cutsinger’s separate property.  Although Mrs. Cutsinger successfully proved that she made a valuable contribution to the practice, she failed to present evidence that detailed the value of the business prior to the marriage.  Mrs. Cutsinger’s testimony that the practice increased from around five patients per day at the beginning of the marriage to around forty per day at the end of the marriage was not sufficient to prove an increase in the value of the practice.  The court found that it could not be “conclusively inferred” that the business appreciated in value just because it serviced more clients.  The appeal, though, was not a complete loss for Mrs. Cutsinger.  The court held that 47.73% of the practice’s $62,000 worth of equipment was marital property because it was purchased jointly by Mr. and Mrs. Cutsinger during the marriage.  While Mrs. Cutsinger did not receive any of the appreciation value of the practice, she was ultimately awarded half of the value of the equipment purchased during the marriage, which totaled $15,106.30.

This post is part of a series, Appreciation of Separate Property: The Forensic Accountant’s Full Employment Act.

To learn more, visit When Professionals Divorce in Tennessee: Valuing Professional Practices.