Baum v. Baum
| Decision Date | 20 July 1978 |
| Docket Number | No. 2,CA-CIV,2 |
| Parties | Jeanne C. BAUM, Appellant, v. James R. BAUM, Appellee. 2658. |
| Court | Arizona Court of Appeals |
Wolfe & Ostapuk, David K. Wolfe, Tucson, for appellant.
Bilby, Shoenhair, Warnock, & Dolph, P. C., Richard M. Bilby, Mary Mangotich, Tucson, for appellee.
The major issue raised in this appeal is whether the trial court in a dissolution proceeding erred in making a distribution of the marital property.
On November 10, 1976, the 25-year marriage of appellant Jeanne C. Baum (wife) and appellee James R. Baum (husband) was dissolved. The decree awarded the wife custody of the minor children, $300 per month per child for child support, and $500 per month as spousal maintenance. Also, the trial court found that the wife owned separate property worth $38,471.12, while the husband's separate assets were valued at $270,818.59, and it distributed the community property so that the wife would receive assets valued at $267,509.44 while the husband would receive assets of $157,434.36. The husband's portion of the community distribution included all of the parties' stock in Baum & Adamson Tire & Automotive Service Co. (B&A), a corporation managed by the husband. Additionally, the husband was ordered to pay $10,000 toward the wife's attorney fees, $1,000 toward her accountant fee and $36,560 for community debts. The wife now challenges this award.
The wife's major contention is that the trial court failed to comply with Provinzano v. Provinzano, 116 Ariz. 571, 570 P.2d 513 (Ct.App.1977), which requires the community property to be distributed substantially equally. The major thrust of the wife's argument is that the trial court erred in computing the value of the community property and, as a result, awarded the husband property worth substantially more than that awarded the wife. In considering this position, this court must adhere to the rule that the distribution of marital property is left to the sound discretion of the trial court and will not be disturbed unless clearly erroneous. Nesmith v. Nesmith, 112 Ariz. 248, 540 P.2d 1229 (1975); Wick v. Wick, 107 Ariz. 382, 489 P.2d 19 (1971). With that rule in mind we now consider the challenged values.
The wife's primary argument that the distribution of community property was disproportionate is that the trial court failed to apportion to the community the value of certain shares of B&A stock which were a community asset. It is uncontroverted that part of B&A shares were community and part were the husband's separate property. The number of shares attributable to each is disputed, making necessary a discussion of how the shares were acquired.
Initially, the husband received a gift from his father of 80 shares of B&A stock. The husband also owned 5 shares as custodian for the parties' children. The remaining 115 shares of B&A were originally owned by four other members of the Baum and Adamson families. In December, 1967, the husband negotiated a deal, to take effect on March 15, 1968, for the total 200 shares of B&A to be sold to the B. F. Goodrich Co. (Goodrich). For tax purposes the husband did not transfer his 85 shares to Goodrich when the other shareholders did. Then by a separate agreement the husband acquired an option from Goodrich to buy the other 115 shares at a price of $215,017.59. This sale was conditioned upon the continued good business relationship between B&A and Goodrich and upon the husband serving as manager at a salary of $18,000 per year plus a bonus.
The husband transferred this option to purchase B&A stock to the B&A Co. for no consideration. In 1969, the corporation exercised the option and repurchased the stock which was shown as treasury stock in the company books. At the time of the dissolution proceeding the corporation had paid $190,017.59 toward the purchase price. This money was paid out of the corporation's retained earnings.
At the same time B&A was repurchasing the stock, the husband cancelled a $32,500 note from B&A in return for 33 shares of stock. The note had been issued for a loan made by the husband to the corporation with funds paid out of a bank account which contained both the husband's separate and community funds.
The trial court held that since the loan for which the 33 shares were issued was paid out of a commingled account, those shares were a community asset. This stock, however, was awarded to the husband as part of his portion of the community property and was offset against community assets awarded to the wife. The court also ruled that the treasury stock had no independent value and thus it did not dispose of it as an asset in the distribution of property.
It is the wife's position that the option for the 115 shares of treasury stock did have a value and that the trial court erred in not including this value as a community asset. She argues that 1) the option to purchase was a property right and since it was offered to the husband during the marriage, it is presumed to be a community asset. ARS § 25-211; Blaine v. Blaine, 63 Ariz. 100, 159 P.2d 786 (1945); 2) the transfer of the option to B&A, the husband's alter ego, did not change the characterization of the property right as community nor deprive the community of its rights in the value of the option; 3) when the corporation exercised the option and purchased the treasury stock, the community's rights in the value of the option were transferred into rights in the value of the treasury stock; 4) this value is the sum which the corporation paid for the stock, $190,017; and 5) since the husband owned 80 shares of B&A as his separate property and was awarded 33 shares in the property distribution, he then owned all the outstanding B&A stock and was in effect awarded the value of the treasury shares; a value which was a community asset.
We first must reject the wife's contention that the transfer of the option to the corporation deprived the community of an asset worth $190,017. Even if we assume that the option was a community asset at the time it was offered to the husband, its value certainly was not the same as the total purchase price of the stock. The wife has not offered any evidence establishing that the option price was less than the actual value of the stock or that it had any particular value of its own. The wife, therefore, has failed to establish the value of the option as a community asset.
Moreover, regardless of what the value of the option was when it was offered to the husband, the community lost any rights to it when he transferred the unexercised option to B&A. The community had not paid anything for the option. Nor does the record support the allegation that the husband acted improperly to benefit his separate property at the expense of the community. There has been no evidence presented establishing that the community was interested in exercising the option nor that it was in the position to do so. The record also does not support an allegation that the husband was engaging in secret maneuvers to build his separate property in preparation for the dissolution. The repurchase transaction occurred in 1969, some five years before the commencement of the dissolution proceeding. Under the circumstances presented, since the community did not expend any money on the option, and the option had no inherent value, we hold that it did not retain rights in the option when it was transferred.
We also reject the allegation that the trial court's failure to dispose of the treasury shares was in essence an award to the husband of an extra $190,017.
Absent special circumstances, property takes on its character as separate or community at the time of its acquisition. Myrland v. Myrland,19 Ariz.App. 498, 508 P.2d 757 (1973). Here, the treasury shares were purchased with the retained earnings of B&A and thus belonged to the corporation. At the time of the dissolution proceedings the husband owned 80 of the outstanding shares of B&A as his separate property and 5 as custodian for the children, while the community owned 33 shares. The community, therefore, owned a 33/118 percent interest in the value of the corporation, including the $190,017. The trial court held that following the repurchase transaction the treasury stock had no value; consequently, the outstanding shares including those which were community property represented a greater portion of the corporation's value. In awarding the 33 B&A shares to the husband as community property, the trial court necessarily apportioned to the community its right in the $190,017.
The wife's position is that following the repurchase transaction, treasury shares retained their value of $190,017 instead of the remaining outstanding shares increasing in value. She concludes that by holding that the treasury shares had no value, the court failed to consider the $190,017 in the property distribution and deprived the community of its rights in that asset.
The record does not support the contention that the trial court failed to consider the total value of the corporation in making the distribution of property. The B&A balance sheet used by the court makes specific reference to the treasury shares transaction. Whether the $190,017 is represented in the retired treasury shares or the outstanding stock is irrelevant as the community in either case is entitled to the same percentage of the value of the corporation, 33/118 percent. The crucial question for this court's determination is whether the property awarded to the wife in the distribution of community property is adequate to offset the value of the community asset awarded to the husband.
The property distribution lists the wife as having received $267,509.44 of the community property and the husband $157,436.36. In...
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