Harrold v. Harrold

• Citation: 271 P.2d 489,43 Cal.2d 77
• Court: United States State Supreme Court (California)
• Decision Date: 15 June 1954
• Parties: HARROLD v. HARROLD. Sac. 6317.

Page 489

271 P.2d 489

43 Cal.2d 77

HARROLD v. HARROLD.

Sac. 6317.

Supreme Court of California, In Bank.

June 15, 1954.

David Livingston and Louis F. DiResta, San Francisco, for plaintiff and appellant.

Devlin, Diepenbrock & Wulff and A. I. Diepenbrock, Sacramento, for defendant and appellant.

SHENK, Presiding Justice.

In this action for divorce a decree was entered of date November 1, 1951, purporting to conform to the direction of the District Court of Appeal on a former appeal by the plaintiff from certain financial provisions of the interlocutory decree.

Plaintiff and defendant were married on November 26, 1936. They separated for the first time in the fall of 1944. In June, 1945, they entered into a separation agreement which purported to settle all present and future property rights arising out of the marital relationship. In September, 1945, they became reconciled but in March, 1948, again separated. Thereafter the plaintiff commenced the present action for divorce, charging extreme cruelty. The interlocutory decree was entered on February 15, 1949. By that decree the trial court found and concluded that by reason of their reconciliation, the parties had abandoned the executory provisions of the separation agreement. It made an award of $400 a month for five years for the support and maintenance of the plaintiff. It divided the community property equally between the parties. The plaintiff appealed from the financial provisions of the judgment and only from that portion thereof denying her the full relief demanded. The defendant did not appeal. The District Court of Appeal held that in an action for divorce on the ground of extreme cruelty the non-offending party is entitled to more than one-half of the community property, citing Tipton v. Tipton, 209 Cal. 443, 288 P. 65, and that the trial court should have considered the earnings of the defendant accruing prior to the entry of the final decree in determining the community estate. Harrold v. Harrold, 100 Cal.App.2d 601, 224 P.2d 66. The pertinent portions of the judgment of the District Court of Appeal are on page 609 of 100 Cal.App.2d, on page 71 of 224 P.2d and are as follows: '* * * the interlocutory judgment is affirmed, except * * * as to that portion relating to a division of the community estate, which is remanded to the trial court with instructions to determine the division of the amount of the community estate as indicated herein * * *.'

Before retrial the parties stipulated that the accounting should cover a period from July 31, 1948, to three months prior to the date of the final decree. From findings made following the retrial the court concluded and ordered that the final decree be entered on November 1, 1951, and that the accounting period should terminate on August 1, 1951. It found that during this period the sum of $89,904 accrued to the community; that $88,224 remained in the community estate, and ordered that the defendant pay to the plaintiff $45,112 as her share. By this division she was awarded 51.13% of the total estate in full settlement of her community property interest.

The plaintiff's appeal is from that part of the judgment 'which specified that the plaintiff shall have and receive from the defendant the sum of $45,112.00.' She makes ten contentions. Six relate to the court's determination of the amount allocable to community earnings out of the defendant's total income. These contentions will be disposed of before consideration of the others.

The community estate is made up of the defendant's earnings from two automobile enterprises which were the defendant's separate property. Other income from these businesses was determined to be a return on the investment of his separate capital. Numerous exhibits consisting of the defendant's books, records and income tax returns were introduced in evidence, and it is apparent that the court's findings were based to a large extent upon these exhibits. The plaintiff seeks to show that the defendant's earnings as contrasted with the return from his investment in these businesses were far greater than found by the court.

The rule of law applicable to the allocation to the community estate under these circumstances is stated in Huber v. Huber, 27 Cal.2d 784, at page 792, 167 P.2d 708, at page 713, as follows: 'In regard to earnings, the rule is that where the husband is operating a business which is his separate property, income from such business is allocated to community or separate property in accordance with the extent to which it is allocable to the husband's efforts or his capital investment. In re Estate of Gold, 170 Cal. 621, 151 P. 12; Witaschek v. Witaschek, 56 Cal.App.2d 277, 132 P.2d 600; 3 Cal.Jur. 10 Yr. Supp., Community Property, § 46.'

During the accounting period the defendant received from one of his enterprises, the Northern Motor Company, a salary of $1,000 per month for a period of nine months, after which the company ceased doing business and was dissolved. The defendant received from his other business, the Ellsworth Harrold Co., a salary of $2,000 a month until June 15, 1950, and thereafter until the end of the accounting period $2,200 a month. In addition he received a bonus of $11,374 for 1950 and $1,430 for attendance at various corporate directors' meetings. There earnings totaled $89,904, all of which the court found to be community property.

The profits of the Ellsworth Harrold Co. varied from approximately $100,000 to $135,000 during the accounting period. It produced practically all of the defendant's income other than his community earnings. There is substantial evidence to the effect that the company owes its prosperity in a large part to a Ford dealer's franchise; that this business is staffed with competent administrative personnel; that the defendant does not take an active part in its routine operations; that he frequently absents himself on personal matters, and that he is primarily concerned with policy matters in the operation of the business. The defendant is virtually the also owner of the company, and is in a position where he can allocate a greater salary to himself if he chooses to do so. The plaintiff contends that 'the court cannot accept as conclusive the arbitrary determination by Harrold as to the amount of his salary.' She urges the consideration of evidence at variance with that above indicated. But it is sufficient if the trial court has duly considered the divergent factual situations and has been impressed by the evidence more favorable to the defendant. This evidence is substantial and the finding based thereon that $89,904 is allocable to personal earnings by virtue of the defendant's offorts should not be disturbed on appeal. In re Estate of Bristol, 23 Cal.2d 221, 143 P.2d 689; Crawford v. Southern Pacific Co., 3 Cal.2d 427, 45 P.2d 183.

On the prior appeal the District Court of Appeal held that the defendant's salaries fairly represented his contribution to income of his businesses. It stated at pages 607 and 608 of 100 Cal.App.2d, at page 70 of 224 P.2d: 'We are convinced from our examination of the record that the trial court conscientiously endeavored to follow the rule as enunciated in the Huber case and to make an equitable allocation of personal income and community earnings as was warranted under the particular facts and circumstances disclosed in the present case.' The quoted language served as a guide to the trial court in the present proceedings. The allocation to average annual community earnings, including bounses, during the present accounting period is greater than in the prior proceedings, although the overall average income of the defendant's businesses had decreased. In these circumstances, the above quoted language is equally applicable to this appeal.

The plaintiff's seventh contention is that she is entitled to interest on her share of the community property accumulating during the accounting period. By this contention she does not seek to recover her share of interest earned from an investment of community property. See Civ.Code, §§ 164, 687. It does not appear that the community funds here involved were invested or earned any interest or increment. The recovery sought is based upon the defendant's control and use of the plaintiff's 'bresent, existing and equal' interest in the community property as it is accumulated. See Civ.Code § 161a. While the defendant had the community funds in his possession he did so by virtue of the power given him to manage and control such property for the benefit of the community. Civ.Code, §§ 161a, 172 and 172a. When a divorce is pending the power of a husband over the community property exists until the entry of a final decree. Lord v. Hough, 43 Cal. 581; Chance v. Kobsted, 66 Cal.App. 434, 437, 226 P. 632; In re Cummings, D.C., 84 F.Supp. 65, 69. Interest is defined in Section 1915 of the Civil Code as 'the compensation allowed by law or fixed by the parties for the use, or forbearance, or detention of money.' It is apparent that the defendant was not using the money of the plaintiff within the meaning of that section and she is not entitled to interest thereon.

The plaintiff's eighth contention is that since she was awarded the divorce on ground of extreme cruelty she should be awarded substantially more than one-half of the community property under the mandate of the decision in the prior appeal. Civil Code Section 146 provides in part: '* * * One. If the decree is rendered on the ground of adultery, incurable insanity or extreme cruelty, the community property shall be assigned to the respective parties in such proportions as the court, from all the facts of the case, and the condition of the parties, may deem just.' In all other cases the community property must be divided equally between the parties. Civ.Code, supra, § 146, subd. Two. It is stated in the opinion of the court on the prior appeal, 100 Cal.App.2d at page 608, 224 P.2d at page 70: ...