Burton v. Burton
| Decision Date | 23 June 1958 |
| Citation | 161 Cal.App.2d 572,326 P.2d 855 |
| Parties | Katherine C. BURTON, Plaintiff, Cross-Defendant and Respondent, v. Henry J. BURTON, Defendant, Cross-Complainant and Appellant. Civ. 5814. |
| Court | California Court of Appeals Court of Appeals |
Swing, Scharnikow & Staniforth, by Robert O. Staniforth, San Diego, for appellant.
Clifford K. Fitzgerald, San Diego, for respondent.
In an action for divorce instituted by plaintiff-respondent against defendant-appellant, the court found that the parties owned, as community property, a one-half interest in a certain named corporation, its stock, tools, equipment and good will. There was also a claimed community interest in certain rental units. The court found the total value of said business, good will, etc. to be $50,000. Assets and accounts receivable were fixed at $45,112, and good will at $4,888. It held that plaintiff was entitled to one-fourth of said valuation or the sum of $12,500, as her share of the community property. It found the rental units to be defendant's separate property. The main contention of defendant is that the findings of valuation of the community property interests in said business are contrary to the evidence. It was stipulated at the trial that the valuation was to be fixed as of the date of the separation, January 31, 1956, and that the community property be equally divided.
The evidence shows Burton Enterprises was incorporated for $75,000 in 1956. It was owned and operated by defendant and his brother, who held the corporate stock. Each had a drawing account of $10,000 per year and shared equally in its profits. The business is the outgrowth of a family partnership and has, over the years, been quite successful from a financial standpoint. The gross sales for 1955 was $190,179.49, with a net profit of $28,195, after paying the drawing accounts. The gross sales for 1956 between January and September was $235,616.19, with an estimate of $300,000 for that year. It was claimed by defendant that the business had no good will value as a going concern. It would appear that this testimony refutes that claim. The value of 13 items of rolling stock consisting of cars and trucks, was carried on the corporate books. Depreciation was allowed on a three-year basis. In all probability it did not reflect their actual value. Some cars and trucks were still in use after the three-year depreciation period although carried on the books as of 'no value'. Some were not completely paid for by the company. Many of the trucks were improved with equipment for this line of business and had two-way radio equipment. To accommodate this service a transmitter station was erected costing about $5,000. The court disregarded the Blue Book value and placed a higher valuation thereon.
Defendant and his witnesses testified the real property valuation was not more than $20,000, plus $6,000 cost of model home built upon it. Pictures of the building were received in evidence. There is evidence that the plaintiff employed investigators who called at defendant's office with a public accountant to go over defendant's books and they were ordered off of the property. Later, by agreement, the accountant went there again and did see the books and looked over the property in general and took photographs of it. It consisted of a new office building, a 2-bedroon home, three warehouses, stock consisting of electrical fittings and equipment and stock. Defendant said he would not give the auditor an inventory of the property other than that reflected on the books. The investigator testified that he said he was going to the vaious creditors and determine the status of their account with the defendant's company, but was told by defendant's brother, in defendant's presence, that if he did he would 'get a bad case of lead poisoning'. Defendant testified he had made a current inventory of stock and equipment but had not carried out the values, as yet; but he said his estimate of its value was about $5,000; and that the believed the company owed about $69,000 in outstanding obligations.
Plaintiff produced a certified public accountant who testified he examined the books of the company and they were kept on a 'going concern' basis; that his investigation definitely showed the market value would be substantially higher than the actual book value; that the model home, constructed on the property at an approximate cost of $6,500, was not carried on the books as a capital asset but was charged off as expenses; that according to book value there was a capital equity of $20,000 between the brothers. A verified statement as to what the books reflected was received in evidence. He testified that as of January 31, 1956, the total capital assets as reflected by the books were $30,662.20, i. e., a valuation account arrived at by subtracting the accounts payable from the unrealized accounts receivable; and that there was a plastic cabin cruiser valued at $2,600, which was listed as a business deduction. The difference between accounts payable and accounts receivable showed a figure of $23,430.99 in the black.
There was testimony, in detail, by an appraiser, that the Blue Book value of many of the articles of machinery and rolling stock was in excess of the values carried on the company's books. Plaintiff testified defendant told her at the time the business was incorporated in 1956 that defendant and his brother were going to incorporate for $75,000 but that the business was actually worth between $80,000 and $100,000, and they had the books set up so that should plaintiff ever leave him, he had it fixed so she would never be able to obtain anything out of it; that thereafter, when he was drinking, he bragged about being worth anywhere between $80,000 and $150,000.
After the reception of the corporation's books in evidence defendant's bookkeeper testified from summaries taken therefrom and said that the books, as of December 31, 1955, after subtracting the accounts payable from the accounts receivable, showed current assets of $38,861.32; that under this system (cash basis) of keeping books, they did not carry a bad debt account; and that usually on such accounts, two per cent is allowable for bad debts. She explained several items reflected in the books as to valuations and how they were obtained, and said the total assets fixed and current, were $66,876.31 at the end of the year 1955, and against that were accounts payable totaling $35,475.74, showing a net worth of $31,400.57. A...
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