Stewart v. Stewart

James Stewart (plaintiff) obtained his medical license and started his dermatology practice, Dermatology Clinic of Idaho, P.A. (DCI), during his marriage to Sarah Stewart (defendant). DCI was co-owned by James and his business partner, Gerard Overly. After approximately 22 years of marriage, James filed for divorce. The community property accumulated at the time of the divorce included James’s interest in DCI along with other financial and physical assets. The magistrate valued both James’s interest in DCI itself and his interest in DCI’s professional goodwill, finding that DCI’s professional goodwill was community property to the extent that DCI’s goodwill exceeded James’s personal knowledge, skills, and reputation. In broad strokes, the community-property portion of DCI’s goodwill was calculated by comparing James’s higher-than-average income to the average income of other dermatologists in James’s geographic region. The magistrate divided the Stewarts’ community property based on that valuation. James appealed, arguing that DCI’s professional goodwill was mischaracterized as a community asset. Alternatively, James argued that the magistrate erred by failing to distinguish between James’s personal goodwill and DCI’s business goodwill in valuing the community’s interest in DCI’s goodwill. The district court affirmed the magistrate’s ruling. James appealed to the Idaho Supreme Court.