In South Carolina divorce matters, enterprise goodwill is marital property subject to equitable division, but personal goodwill is not. Also, the goodwill of a service business is recognized as largely personal. An appellate court went against precedent, but the state’s Supreme Court has reversed the appellate court’s decision.

Dental practice: The original decision, from a family court, involved the husband’s dental practice. He was retiring and sold the practice to his son. The sale was done after the couple had separated but prior to the equitable division of the marital estate. The sales contract designated $424,140 as goodwill and included a covenant not to compete. The wife presented no evidence to show that the goodwill was enterprise versus personal. The family court ruled that all goodwill was personal goodwill and not part of the marital estate.

The wife appealed, and the appellate court reversed the family court, noting that, since the practice was not an “ongoing concern,” the goodwill was enterprise, not personal, and thus should be included as marital property.

Reverse reversed: The state’s Supreme Court has reversed the appellate court and reinstated the judgment of the family court. The appellate court was wrong in casting aside the case precedent (which is Moore) because the dental practice was not an “ongoing concern,” the court said. Nothing in the Moore case suggests that the classification of goodwill depended on whether one spouse would remain as the sole owner of the business after the divorce, the court noted. Also, the wife had the burden to prove the goodwill was marital property, but she failed to do that.

The case is Bostick v. Bostick, 2024 S.C. LEXIS 123; 2024 WL 3591647, and a case analysis and full court opinion are on the BVLaw platform.

Extra: This case will be covered in the BVLaw Case Update webinar on August 28.