Hoffmann v. Hoffmann

Citation676 S.W.2d 817
Decision Date11 September 1984
Docket NumberNo. 65457,65457
PartiesIn Re The Marriage: Sybil June HOFFMANN, Petitioner-Appellant, v. Paul Rupert HOFFMANN, Respondent.
CourtUnited States State Supreme Court of Missouri

Richard H. Edwards, Lynn E. Morgenstern, Clayton, for petitioner-appellant.

John A. Turcotte, Jr., Clayton, for respondent.

GUNN, Judge.

Petitioner Sybil Hoffmann (wife) appeals the trial court's decree of dissolution which set aside certain property to respondent Paul Hoffmann (husband) on the determination it was separate, not marital property according to § 452.330, RSMo Cum.Supp.1983. 1

The trial court's decree was entered from the adoption of findings of fact and conclusions of law of a special master appointed upon application and consent of the parties. A sharply divided division of the Eastern District affirmed the trial court. Upon application of the wife, transfer to this Court was granted. The case is thus decided as if on original appeal. Rule 83.09. The judgment is affirmed.

The predominant issue on appeal pertains to the status of closely held corporate stock in the husband's name. The wife contends that it is marital property. The husband argues otherwise, viz, it is his separate property, having been in his name prior to the marriage. In treating this aspect, consideration is given to the so-called "inception of title" and "source of funds" rules relating to the question of the status of property rights.

Other points raised by the wife on appeal concern: 1) the trial court's limitations on discovery of financial records of the husband and the family corporation; 2) an alleged miscalculation of the gross maintenance award; 3) failure of the trial court to give consideration to assets alleged to have been squandered by the husband; 4) the determination of attorney's fees and suit monies.

The parties were married in 1963; they separated in 1979. They stipulated to a division of certain marital and separate personal property of a tangible nature. The trial court also made determination and division of other marital property and an award of periodic maintenance.

The major dispute centers on the trial court's award to the husband as his separate property of 223 shares of stock in Lilie-Hoffmann Cooling Towers, Inc. (Lilie-Hoffmann), a closely held corporation in which the husband had worked since 1930. The trial court also assigned a value of $962,662 to the stock.

Lilie-Hoffmann is a family owned corporation, founded by the husband's father and another person who the father eventually bought out. Prior to his marriage to the wife, the husband had acquired 256 shares of the company stock representing 16.17 percent of the shares outstanding. After the marriage, in 1964, the corporation purchased and retired 858 shares owned by the husband's father. 2 The decrease in the total number of outstanding shares caused the husband's interest in the corporation to increase to 35.3 percent. In 1976, the husband gave 32 shares of the stock to his son. He also had given one share of stock to a newly hired corporate officer in 1966. This reduced the husband's stockholdings to 223 shares, leaving him with a 29.5 percent interest in the corporation.

The husband serves as chief executive officer, president and board director of the corporation. His two brothers and another corporation officer are the only other members of the board of directors.

After the husband's father retired, the corporation prospered due to an increased demand for cooling towers brought about by the Clean Water Act of 1972, 33 U.S.C. § 1251 et seq. The husband's salary as a corporate officer increased steadily between 1964 and 1980. The dividend rate and bonuses to all corporate officers also increased during that period.

The wife worked sporadically after her marriage to respondent, mostly in clerical positions, until 1975. She was a satisfactory homemaker and hostess and traveled on occasion with the husband on business trips.

In dividing the marital and separate property, the trial court awarded the wife the marital residence valued at $110,000 less encumbrances of $26,000 on the basis that the husband possessed a more favorable economic situation and had been guilty of marital misconduct. The trial court also considered the husband's separate property of corporate stock, valued at $926,662, which was set aside to him. Other marital assets, including husband's IRA, two bank accounts and two life insurance policies, were awarded to him as he was the primary contributor.

The wife was awarded attorney's fees of $13,000, $7,024.64 in costs and periodic maintenance of $4,250 per month, as she was found incapable of supporting herself through appropriate employment.

Initially we indite the standard of review governing this appeal: we must sustain the trial court's decree unless there is no substantial evidence to support it, unless it is against the weight of evidence, unless it erroneously declares the law or unless it erroneously applies the law. Sturgis v. Sturgis, 663 S.W.2d 375, 379 (Mo.App.1983).

I.

The wife first contends that the husband's increase in percentage ownership and value of corporation stock is marital property and must be shared with her. Her argument in this regard is threefold: a) redemption of the father's stock transformed the husband's newly increased percentage interest into marital property; b) marital funds and efforts were expended to redeem the stock; c) the increase in value of the stock was due in part to her efforts.

a.

The trial court adopting the master's findings and conclusions of law found that the husband's stock remained his separate property despite the corporation's purchase and retirement of the father's shares. The guidepost of § 452.330.2 pertaining to this case does not direct otherwise.

It is undisputed that the husband held 256 shares of the corporation stock prior to his marriage. That was his separate property. § 452.330.2; Busby v. Busby, 669 S.W.2d 597, 599 (Mo.App.1984). The wife asserts, however, that the retirement of the father's stock created a new property interest during the course of the marriage. Hence, she argues, all or a portion of the stock was transformed from separate to marital property. She rests her case on § 452.330.3 and the preposition that all property acquired during the marriage is presumed to be marital property. McDowell v. McDowell, 670 S.W.2d 518 (Mo.App.1984). On the other hand, the converse proposition exists that all property not included within the definitive terms of § 452.330.2 and .3 is presumptively separate property. Busby v. Busby, 669 S.W.2d at 599. Therefore, unless there is evidence of record to indicate an intent to change the status of the stock from being the husband's separate property, it should not be considered marital property. Davis v. Davis, 544 S.W.2d 259, 263 (Mo.App.1976).

We have not been provided any authority for the wife's postulation that the increased percentage of ownership of a corporation by a stockholder due to retirement of stock converts the stock from separate to marital property. Instead, it is more logical to conclude that the increased equitable interest of the husband would remain as a statutory exemption to marital property. Section 452.330.2(2) provides that any property acquired during marriage in exchange for property acquired prior to marriage is separate property. The husband's new ownership interest at least may be viewed as such an exchange for a former interest.

The exchange analogy is appropriate because the husband received no additional value as a result of the retirement of certain stocks. Although redemption of the corporate stock from Mr. Hoffmann, Sr. decreased the number of outstanding shares from 1,583 to 725, thereby increasing the husband's respective ownership in the corporation from 16 to 35 percent, the book value and number of shares in his possession did not deviate. This is because the worth of the corporation was diminished by the amount paid from the corporate treasury to repurchase the father's stock. Therefore, the 16 percent ownership interest acquired prior to the husband's marriage was merely exchanged for a larger ownership percentage of a corporation that was worth less.

A similar analogy regarding the absence of effect on separate property status of stock is found in stock splits--a circumstance somewhat akin to that at hand. The additional shares acquired by a split constitute an exchange under § 452.330.2(2); In re Marriage of Bruske, 656 S.W.2d 288, 295 (Mo.App.1983).

We therefore reject the wife's contention that the increase of percentage of ownership of the corporation transformed a portion or all of the husband's stock to marital property.

b.

The wife also lays claim to the increased equitable ownership of the corporation as marital property, as she alleges that marital funds and efforts were expended to redeem the stock.

Although a copy of the repurchase agreement was not produced for evidence, the financial audit of the company for 1964 indicated that salary restrictions on corporate officers as provided in the repurchase agreement were followed. The wife alleges that during the year of repurchase, the corporation operated at a loss and that funds used for the repurchase must have come from what would have otherwise been paid as salary to her husband as a corporate officer. She states that the money denied him as salary and used to repurchase stock amounted to marital funds. She argues that a lien should have been imposed on the husband's newly acquired 19 percent ownership in the corporation to the extent marital funds were spent on its acquisition.

Although our appellate courts recognize liens in favor of the marital unit against separate property when marital funds are expended to reduce a debt or enhance the value of the asset in question, Busby v. Busby, 669 S.W.2d at 599; Bishop v. Bishop, 658 S.W.2d 512, 515 (Mo.App.1983); Rickelman v. Rickelman, 625...

To continue reading

Request your trial
170 cases
  • Whiting v. Whiting
    • United States
    • West Virginia Supreme Court
    • July 17, 1990
    ...617 S.W.2d 871 (Ky.App.1981); Hall v. Hall, 462 A.2d 1179 (Me.1983); Tibbetts v. Tibbetts, 406 A.2d 70 (Me.1979); Hoffmann v. Hoffmann, 676 S.W.2d 817 (Mo.1984); Wade v. Wade, 72 N.C.App. 372, 325 S.E.2d 260, disc. review denied, 313 N.C. 612, 330 S.E.2d 616 (1985). See generally 27B C.J.S.......
  • Mistler v. Mistler
    • United States
    • Missouri Court of Appeals
    • August 29, 1991
    ...analysis in applying § 452.330. See, e.g., Sherman, 740 S.W.2d 203, Medlock, 749 S.W.2d 437, Kuchta, 636 S.W.2d 663, and Hoffmann v. Hoffmann, 676 S.W.2d 817 (Mo.banc 1984). In Hoffmann, the supreme court addressed the issue of whether certain corporate stock "was wholly 'acquired' prior to......
  • Koontz v. Koontz
    • United States
    • West Virginia Supreme Court
    • July 20, 1990
    ...analogous to a business partnership.") Cases in other jurisdictions that have adopted a source-of-funds rule include: Hoffmann v. Hoffmann, 676 S.W.2d 817 (Mo.1984); Harper v. Harper, 294 Md. 54, 448 A.2d 916 (1982); Tibbetts v. Tibbetts, 406 A.2d 70 (Me.1979); In re Marriage of Moore, 28 C......
  • Anthony v. Tompkins
    • United States
    • Pennsylvania Supreme Court
    • August 7, 1986
    ...in value attributable to the work effort of the community. Potthoff v. Potthoff, 128 Ariz. 557, 627 P.2d 708 (Ct.App. 1981). 9. Hoffman v. Hoffman, 676 S.W.2d 817 (Mo.banc 1984), adopts the source of funds rule that property is "acquired" by determining the source of the funds financing the......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT