## Facts

- James B. Nail, Jr. and Alice J. Nail married in 1945; during the marriage, James completed medical training and established an ophthalmology practice in Wichita Falls in 1956.
- Alice sued for divorce; the marriage was dissolved by judgment on August 12, 1971.
- Texas law required the divorce court to divide the parties’ marital estate in a “just and right” manner.
- The trial court treated James’s medical practice as community property and found that goodwill had accrued to the practice.
- The trial court valued Alice’s “community interest” in the practice, including goodwill, at $40,000 and ordered James to pay it in monthly installments, with the obligation ending if he ceased practicing medicine.
- A divided intermediate appellate court affirmed the inclusion and division of professional goodwill.
- The Supreme Court of Texas granted review to decide whether this type of goodwill is property subject to division.

## Issues

1. Whether goodwill of a professional medical practice that depends on the physician’s personal skill, experience, reputation, and continued practice constitutes community “property” divisible upon divorce under Texas law.

## Decision

- The Supreme Court of Texas reversed the judgment to the extent it treated the medical practice’s goodwill as divisible community property.
- The court held that the goodwill at issue—tied to the physician’s personal attributes and continued work—was not “property” within the divisible marital estate.
- The court remanded for further proceedings requiring a property division that excludes this form of professional goodwill.

## Legal Principles

- A divorce court’s authority to divide the “estate of the parties” extends to existing property interests, not to expectations of future earnings.
- Personal professional goodwill in a solo practice, when inseparable from the professional’s reputation, skill, and continued services and lacking marketable value independent of the professional, is not divisible community property.
- Valuing and awarding professional goodwill based on continued practice and future income functions as an improper allocation of post-divorce earning capacity rather than a division of present property.

## Conclusion

The Texas Supreme Court held that personal professional goodwill in a physician’s solo practice—dependent on the doctor’s ongoing services and reputation—is not a divisible community asset, and it directed reconsideration of the marital property division without treating such goodwill as property.


Nail v. Nail, 486 S.W.2d 761 (Tex. 1972)