Hybarger v. Hybarger

• Decision Date: 29 May 1987
• Docket Number: No. 16303,16303
• Citation: 103 Nev. 255,737 P.2d 889
• Parties: Wilma Jean HYBARGER, Appellant, v. David Crocket HYBARGER, Respondent.
• Court: Nevada Supreme Court

Page 889

737 P.2d 889

103 Nev. 255

Wilma Jean HYBARGER, Appellant, v. David Crocket HYBARGER, Respondent.

No. 16303.

Supreme Court of Nevada.

May 29, 1987.

Beasley, Hamilton & Holden, Reno, for appellant.

Ronald J. Logar and Gary L. Manson, Reno, for respondent.

OPINION

PER CURIAM:

This appeal raises issues relative to the correct computation of the parties' community property interest in a business owned by the husband prior to marriage. Although the court below used an appropriate method of valuation, we find that the court erred in determining the amount of the husband's initial capital investment in his business and in failing to deduct from the value of the husband's separate property interest amounts withdrawn from the business as the husband's separate property. We therefore reverse and remand for recalculation of the community property interest in the business.

INTRODUCTION

David and Wilma Hybarger were married on June 16, 1972. Each party had substantial separate property interests at the time of marriage. The parties each had children from prior marriages. The parties commenced an action for divorce in January of 1984. The character and value of much of the property owned by the parties was established by agreement. The remainder was apportioned by the district court. The appellant, Wilma Hybarger, contends that the court erred in (1) misapprehending the amount of David Hybarger's initial (separate property) investment into Hybarger and Son Drywall; (2) failing to reduce the amount of David's separate property interest in Hybarger and Son Drywall by the amount withdrawn by David from the business for the purchase of certain ranch property in Fallon, Nevada; and (3) refusing to award attorneys' fees to Wilma Hybarger in lieu of reimbursing the community for David Hybarger's expenditures of community property income during the parties' separation.

INITIAL CAPITAL CONTRIBUTION

The major issue in dispute concerns the extent of the community interest in Hybarger and Son Drywall. The court determined that, since the value of the business resulted from a combination of David's initial capital contribution of separate property and David's efforts during the marriage, the value of the respective separate and community property interests was fairly determinable under the "Pereira " formula. ¹ This method of valuation provides that the court should determine the value of the separate property contribution, plus a "fair return" on the separate property investment, in order to ascertain the total separate property interest in the asset. The parties do not dispute the propriety of the district court's use of the Pereira formula in this case, and do not challenge the method of calculating a "fair return" on David's capital investment. ²

The partnership in question, Hybarger and Son Drywall, was created on January 1, 1976. Prior to that time, David Hybarger owned a sole proprietorship engaged in the drywall and painting business. In order to finance the partnership, David contributed the capital of the sole proprietorship, being the amount of $31,490. David took an 80% interest in the capital, profit and loss of the business, and David's son, Gordon, took a 20% interest in the capital, profit and loss of the business. Thus, David's initial capital contribution in the partnership was $25,192. The district court, in calculating the amount of David's separate property interest in the partnership, erroneously failed to take into account

the undisputed fact that 20% of the capital contribution was allocated to Gordon Hybarger. The Pereira formula should therefore be recalculated by the trial court, using 80%, rather than 100%, of the $31,490 figure as the amount of David's initial separate property capital contribution.

PURCHASE OF FALLON RANCH

In 1982 the parties agreed to purchase a ranch in Fallon, Nevada. It was agreed that the down payment of $100,452.90 would be made from equal contributions of separate property funds by each of the parties. Wilma Hybarger withdrew $50,226.45 from an account containing her separate property funds. David Hybarger withdrew $50,226.45 from his capital account in Hybarger and Son Drywall. The ranch was purchased as a community property asset. Wilma subsequently argued that, since the amount of David's contribution to the purchase of the ranch was community property, she was entitled to a 75% interest in the ranch. The trial court found (and David has maintained) that the money withdrawn from Hybarger and Son Drywall for the purchase of the ranch was David's separate property, in accordance with the agreement and understanding of the parties. The court did not err in making this initial determination, and therefore did not err in finding Wilma's interest in the ranch to be 50%. However, having determined that David withdrew over fifty thousand dollars in separate property from Hybarger and Son Drywall, the court did commit error in failing to reduce the amount of David's remaining separate property interest in the business by the amount withdrawn as separate funds. For purposes of determining David's separate property interest in Hybarger and Son Drywall under Pereira, it is necessary to subtract from the...