Marriage of Vanderbeek, In re

• Decision Date: 05 February 1986
• Citation: 222 Cal.Rptr. 832,177 Cal.App.3d 224
• Court: California Court of Appeals Court of Appeals
• Parties: In re the MARRIAGE OF Bonnie and Carlton VANDERBEEK. Bonnie J. VANDERBEEK, Appellant, v. Carlton E. VANDERBEEK, Respondent. Civ. B009574.

Page 832

222 Cal.Rptr. 832

177 Cal.App.3d 224

In re the MARRIAGE OF Bonnie and Carlton VANDERBEEK Bonnie J. VANDERBEEK, Appellant, v. Carlton E. VANDERBEEK, Respondent.

Civ. B009574.

Court of Appeal, Second District, Division 5, California.

Feb. 5, 1986.

Ross & Saunders and Anne-Marie Saunders, Los Angeles for appellant

Jaffe & Clemens, Bruce A. Clemens, Beverly Hills, Maiden, Rosenbloom, Wintroub, Vogel & Fridkis and Mariam Tigerman Vogel, Los Angeles, for respondent.

WEISZ, Associate Justice. ^*

On this appeal from an interlocutory judgment of divorce, we are called upon to examine the postmarital litigation of the parties to determine whether a proper division of the assets and debits of the community has been decreed. This case presents a variant on a recent area of interest--the community interest in arrangements between a key employee and the corporation with which he is associated which relate to future benefits. In a situation where the problem relates not to the present valuation of a future benefit, but rather the allocation inter partes of one that has become a detriment, we hold that great discretion must be given a trial court in devising an equitable allocation of debts to be paid as well as benefits to be enjoyed in future, and affirm the judgment below.

FACTUAL BACKGROUND

Respondent Carlton E. Vanderbeek (hereinafter husband), while married to a previous spouse, co-founded a company known as Computer Communications, Inc. (CCI), a business that produces systems which interface small, remote computers with a large mainframe computer. In the mid-1960's, he acquired 4,000 of the original shares of CCI, and over a period of time he became a director of the corporation and its executive vice-president. At the time of the previous divorce, that community holding had grown to 15,700 shares valued at $38 per share, in addition to which it held an option to buy 2,000 shares at $1.25. In the property settlement agreement with the previous wife, a division was made in which she received 2,500 shares of CCI, while he retained the options as well as 13,200 shares. To equalize the division of property in the earlier community a payment of $125,000 to the former wife was required. These monies came by way of a 6 percent interest-bearing loan in the sum of $125,000 from CCI to husband, at one time secured by 8,000 shares of CCI stock.

The present marriage followed in short order in 1969. According to husband, they agreed beforehand that each would have no separate property but would "share and share alike," a very inviting proposal for the present wife at that time. Indeed, by 1970, the 2,000 shares stock option was converted into a $21,500 payment to CCI by husband (in that its options were bought back at the then-bid price of $12 per share, less the $1.25 option price and applied on the loan). Payment of the rest of the $125,000 loan was to be accomplished by way of extra compensation sufficient to retire the note and pay interest thereon, in the form of a consulting agreement entered into between CCI and husband in 1974. In 1978, husband purchased 20,000 shares of CCI stock under a very similar arrangement, in that the purchase price (in form of a note at 6 percent interest) of $138,800 was to be paid via a consulting agreement.

In form, the parties executed an amendment to the 1974 consulting agreement, increasing the term and the compensation so that, over a period of 20 years, the amounts due thereunder would amortize and retire the two notes. As described in the annual reports to the Securities and Exchange Commission (SEC):

"Such agreements in effect require, among other things, that such officers be available to provide, at the request of the Company, up to 20 hours per month of consulting services from the time they leave the employment of the Company until the termination of such agreements. Such agreements provide for annual payments which continue notwithstanding the inability of the officers to perform consulting services because of their death or incapacity. However, the Company would not be obligated to make the payments if the officer did not provide consulting service when called upon to do so, other than by reason of his death or incapacity, or if he breached the other material covenants in his agreement.

"Prior to leaving the employment of the Company, the officers are not required by the consulting agreement to take on duties other than those imposed by reason of their employment as officers, although certain other consulting agreement covenants described below are in effect during employment. The annual consulting payments are in addition to the normal compensation of such officers while employed by the Company. These payments are equal to the annual payments on the respective notes and, in accordance with the agreements, will be automatically credited to the principal and interest owed to the Company under such notes. If each officer satisfies the obligations imposed on him by his consulting agreement, and if his annual payments under such agreement are made over the 20-year term of such agreement, such payments will be sufficient to discharge his obligations under his note to the Company. Each of the notes is secured by the payments due under the relevant consulting agreement.

"Taken as a whole, these stock purchase and consulting arrangements resemble stock bonuses in terms of the intention of management to reward and motivate key personnel. In addition, however, the Company has obtained certain covenants from the officers, as well as the right to obtain consulting services if they are no longer employed by the Company. Each officer's consulting agreement provides, among other things, (i) that such officer will be available to provide consulting services to the Company (the practical effect of this provision is to require such availability only after employment with the Company ceases), (ii) that such officer will devote his best efforts to the affairs of the Company, (iii) that such officer will not disclose to third parties certain information concerning the operations of the Company, (iv) that any inventions or discoveries made by such officers during the term of the agreement belong to the Company, and (v) that the minimum payments are subject to increase if more than 20 hours per month are devoted to consulting services.

"Because the transactions were structured as stock purchases, with consulting payments designed to permit payment for the stock, the officers did not recognize taxable income upon purchase of the stock. Instead, amounts paid or credited to the officers under the consulting agreements will constitute taxable income to them, and the Company will be entitled to income tax deductions as and when such payments or credits are made to the officers over the 20-year period. If any officer fails to perform his obligations under his consulting agreement, the Company could cease to make the consulting payments to such officer, and such officer would be obligated to repay his note to the Company from other sources."

The fearsome fly in the ointment is, that the value per share of CCI stock has been downward. From $37 per share in the late 1960's, to $12 in 1970, to just under $7 in 1978, and then to less than $1 per share. The company was at the time of trial and has been since 1980 in a Chapter XI Reorganization Thus, at the time of trial, the present community had 20,400 shares, which were held below to have a value of $30,000. These were assigned to the husband, along with the debts on the two notes payable to CCI, totalling $204,167. As against this negative amount, the 1974 consulting agreement was found to be a community asset worth $85,000, thus reducing the stock purchase and payment equity at time of trial to a minus $89,167 figure.

proceeding, and unrestricted shares were selling at approximately $2- 1/2 per share at trial time.

The marital community had valuable assets which were overweighed by debts. The largest was a tax liability assessed on priorly filed joint returns in the sum of $120,000; attorney's fees of almost $40,000, and debts to banks and individuals amounting to $25,000. Thus, against the approximate $275,000 in debts heretofore mentioned, the only items of value (apart from automobiles and household furniture and furnishings which were to be fairly evenly divided, valuewise), were a home valued at $215,000 and a 1/3 interest in Indio real property valued at $60,000. With credits of some $29,000 credited to husband for payments made after separation, we are left with what has been labeled as the "negative property" problem. Before we come to grips with that particular aspect of the case, the state of the evidence with respect to the community property and liabilities must be discussed.

SUFFICIENCY OF THE EVIDENCE

Appellant wife makes a series of attacks on the judgment herein, but the essential pivot upon which the battle must turn is the validity of the characterization of the property and debts in the judgment. Thus, we must look to the sufficiency of the evidence to support the judgment.

On the state of this record, it is only fair to state that almost any finding can be said to be supported by substantial evidence. The parties testified, as often they do in many respects diametrically opposed to each other; the experts differed; the inferences flew about in every direction. There is support for a finding that the parties discussed a nonseparate property agreement prior to marriage and there is an abundance of testimony that all their behavior postmarriage was in accordance therewith. (Estate of Cummins (1955) 130 Cal.App.2d 821, 827-828, 280 P.2d 128; Durker v. Zimmerman (1964) 229 Cal.App.2d 203, 207, 40 Cal.Rptr. 227; In re Marriage of Dawley (1976) 17 Cal.3d 342, 356, 131 Cal.Rptr. 3, 551 P.2d 323.) Far more compelling is the fact that the first stock involved was worth $37 per share at the time of the marriage;...