Haldeman v. Haldeman

• Decision Date: 17 April 1962
• Court: California Court of Appeals Court of Appeals
• Parties: Mary HALDEMAN, Plaintiff and Appellant, v. Thomas HALDEMAN, Defendant and Respondent. Civ. 10255.

Page 75

21 Cal.Rptr. 75

202 Cal.App.2d 498

Mary HALDEMAN, Plaintiff and Appellant, v. Thomas HALDEMAN, Defendant and Respondent.

Civ. 10255.

District Court of Appeal, Third District, California.

April 17, 1962.

James G. Changaris, Yuba City, and Sullivan, Roche, Johnson & Farraher, San Francisco, for appellant.

Arthur S. Powell, Marysville, and Wilke, Fleury & Sapunor, Sacramento, for respondent.

PIERCE, Justice.

Mary Haldeman was awarded an interlocutory decree of divorce from Thomas Haldeman on the ground of extreme cruelty. Although appellant-wife appeals from the whole judgment, she assigns as error: (1) The trial court's finding that a pharmacy business is solely the respondent's separate property, (2) Its failure to make a finding on the issue of alimony, and, (3) Its failure to award her alimony.

The parties were married on May 3, 1937, and separated on November 25, 1959, because of respondent's involvement with another woman. They have one child, a daughter, who at the time of the trial was 16 years of age. Respondent is a pharmacist. At the time of the divorce he was the proprietor of a successful pharmacy business which in 1959 grossed over $170,000 and which returned a net profit of over $41,000 before taxes.

The presumption is that this property is community and the burden of proof was upon respondent to prove by a preponderance of the evidence that the business was his separate property. (Estate of Duncan, 9 Cal.2d 207, 217, 70 P.2d 174; Estate of McCarthy, 127 Cal.App. 80, 88, 15 P.2d 223; Estate of Fellows, 106 Cal.App. 681, 289 P. 887; Pereira v. Pereira, 156 Cal. 1, 11, 12, 103 P. 488, 23 L.R.A.,N.S., 880.) This presumption is fundamental to the community property system and has greater force where the marriage has been of long duration. (Estate of Duncan, supra.) It is stated in Estate of Jolly, 196 Cal. 547, at page 555, 238 P. 353, 356:

'* * * The property in the possession of one of the spouses at the close of a long marital relation must be presumed to be community, unless a better right can be established by the spouse claiming it to be his or her separate property.'

Respondent concedes the foregoing rules, but asserts that the burden of proof was satisfied and the presumption overcome by proof that at the time of the marriage respondent had already acquired a one-third interest in a pharmacy business partnership which was the nucleus of the present business and was acquiring, and had almost completed the purchase of, the other two-thirds. He further contends that the finding of the trial court here that the business was the separate property of the husband settles the issue.

Where the husband at the time of marriage is operating a business which is his separate property, income from such business is distributed to community or separate in accordance with the extent to which it is allocable to the husband's efforts or his capital investment. The capital which a husband brings to the marriage partnership is his separate property, but that portion of the income due to his skill and energy after the marriage is community. This is well settled. (Brown v. Harper, 116 Cal.App.2d 48, 52, 53, 253 P.2d 95.)

It is also well settled, following the general rule that the sufficiency of the evidence is generally a matter for the trial court or jury, that 'a finding of a trial court that property is either separate or community in character is binding and conclusive upon the appellate court, if it is supported by sufficient evidence, or if it is based on conflicting evidence or upon evidence that is subject to different inferences. * * * Further, a finding against a presumption is binding upon the appellate court * * * unless the evidence to rebut it is so weak and improbable that the finding is without substantial support.' (Estate of Trelut, 26 Cal.App.2d 717, 723, 80 P.2d 147, 450.)

On the other hand, where it appears that a trial court has arbitrarily drawn a conclusion that a business is the separate property of a husband without giving heed to the rule that it 'was respondents' duty to clarify the history of the property and to show by a preponderance of the evidence what part of the same was separate property,' its judgment will be reversed. (Estate of McCarthy, 127 Cal.App. 80, 88, 15 P.2d 223, 226; see also Estate of Fellows, 106 Cal.App. 681, 289 P. 887.)

The fact that a substantial business owned at the termination of a long marriage had had its origin in a small business acquired by the husband before the marriage does not mean that it is all the separate property of the husband. (Mueller v. Mueller, 144 Cal.App.2d 245, 250, 301 P.2d 90.)

A business is a type of property which is a composite of tangible and intangible properties. Its tangibles will be its fixtures, inventory of supplies and stock in trade, perhaps a building or leasehold, cash on hand, cash in bank, accounts receivable and other personal property. Its intangibles include principally its good will as a going business.

So considered, it will be obvious from the review of the evidence below that not all of the small pharmacy business the husband acquired in the period from 1931-1936 can be traced to, and is extant in, the substantial business of today.

Here the evidence is substantially without conflict, and is not fairly susceptible to different inferences. Also, in the absence of any finding to the contrary, it must be assumed that the uncontradicted testimony was given credence. (Mears v. Mears, 180 Cal.App.2d 484, 502, 4 Cal.Rptr. 618.) From our study of this record, we have concluded that it does not support the finding that the entire pharmacy is the husband's separate property. A substantial part must be community.

Respondent had, in 1931, by applying a part of his wages towards payment thereof, acquired a one-third interest in a pharmacy known as Yuba City Pharmacy, located at Second and Bridge Streets in that city. His partners, not active in the business, were Kleinsorge and Halkyard. In 1934 he entered into an agreement to buy out these partners. He testified that he could not remember the purchase price. Whatever it was, he started to purchase at the rate of $50 per month (a rate later increased somewhat). The exact total value of the business at this time could not be recalled either by respondent or Halkyard, who testified he thought it was about $6,8000. Respondent thought it was around $10,000-$12,000. The gross volume of the business then was $18,000 a year (only approximately $1,5000 a month). As stated above, it now grosses annually over $170,000. In 1936 respondent moved the business to Plumas Street, its present location. The parties were married in 1937. At that time respondent owed a small balance on the purchase price, approximately $1,500, but testified there was enough in the store account to have paid it off. His only other assets were two bank accounts of several hundred dollars each, and a used automobile. He owed approximately $500 borrowed on a life insurance policy. Respondent testified that there was a recession in 1938 which reduced his volume of business. During this period, Mrs. Haldeman, who had been a registered nurse at the time of the marriage, went out on four of five private nursing cases to help the family income, but her husband did not like her to work so she discontinued nursing. In 1939 the drugstore at the new location commenced to increase its volume. Respondent applied himself diligently to the business, working no regular hours and frequently at night. This was his continued practice all throughout the marriage until the last two years, when, as respondent expressed it, 'after the years I feel that I am entitled to the time off.' Until these last two years he was the sole pharmacist in the store except for part-time help. (There are now two full-time pharmacists.) During World War II, when it was thought there was a possibility respondent would be drafted, appellant wife worked at the store, learning to do bookkeeping, and helping to wait on the trade. With the arrival of their daughter, appellant devoted her time to the care of the child and the home. Respondent continued to run the business.

The family lived modestly. They were thrifty. Respondent acknowledged his wife was not a spender. Their sole source of income was the business and from it the parties accumulated a fortune of $220,000, in in addition to the value of the business.

Income from the business throughout the years was not kept separate. All expenses both business and household, except small items, were paid out of the business account. All investments and other properties acquired were also paid from this account. All properties were acquired in the joint names of the parties and it was stipulated that all these properties were community. Income tax payments (made on joint returns) were also paid out of the business account.

As to the value of the business at the time of the divorce, although the record is far from illuminating, it is clear that it had grown into a very substantial enterprise. Respondent who had the burden of overcoming the presumption that the business was community, produced no evidence of its value, refused to express any opinion thereof excepting to state on cross-examination he would reject an offer of $100,000 (because he did not want to be deprived of an occupation). It was shown that in 1959 the business earned a net profit of over $41,000 before taxes and it was not shown this was disproportionate to other years. Income from a business is an aid in determining value. (Proctor v. Arakelian, 208 Cal. 82, 87, 280 P. 368.) The Income and Federal Estate Tax services digest many cases illustrating the use of income under various formulas to determine the value of a business. It is to be noted, however, that these cases are concerned with values where a partner or proprietor had died or is withdrawing from a business; not where he is continuing in...