Pangburn v. Pangburn, 2

Decision Date04 December 1986
Docket NumberCA-CIV,No. 2,2
Citation731 P.2d 122,152 Ariz. 227
Parties, 55 USLW 2383 Julie H. PANGBURN, Petitioner/Appellee, v. Craig A. PANGBURN, Respondent/Appellant. 5410.
CourtArizona Court of Appeals

HATHAWAY, Chief Judge.

Appellant contests the distribution of property ordered in the decree of dissolution. The parties were married on July 15, 1973. Since 1966, seven years prior to his marriage to appellee on July 15, 1973, appellant had worked and still works for Allstate Insurance Company in Casa Grande as an insurance agent. Appellant's relationship with Allstate is that of an employee. He does not own the business nor may he convey the business. He does not even have enforceable territorial rights. Appellant, however, does have a right to commissions on renewals of policies he procures. The renewal value of existing policies is termed in the insurance industry as the "Book of Business."

At trial, appellee sought to have included in the community estate appellant's Book of Business. Appellee called an expert witness, Dr. Ronald J. Kudla, to testify as to the current value of appellant's Book of Business. As part of his testimony, Dr. Kudla assumed appellant was going to stay in business and excluded from his calculations insurance contracts that would appear in the Book of Business after dissolution. He valued the renewal income on existing contracts earned during marriage, assuming that the Book of Business was not marketable. He also assumed an attrition rate of 13% per year and he took into account appellant's business expenses. At the 13% attrition rate, he assumed that all renewal business on present contracts in the Book of Business would cease in 7.61 years. He also reduced the Book of Business by any contracts then existing that had been sold by appellant prior to marriage.

On the basis of Dr. Kudla's testimony, the trial court found the community equity in the Allstate Book of Business to be $80,000. It then distributed the marital property as follows: To appellee it awarded the community house, valued at $63,000 and encumbered by a $34,700 lien; a 1983 Lincoln Continental, valued at $12,700 with an $8,200 lien; a catamaran, value negligible; appellee's pension of $5,800; a $10,000 term life insurance policy with no cash value; appellee's bank accounts worth $200; household appliances and furnishings valued at $3,000; jewelry (appellee's separate property) valued at $10,000; $11,000 for appellee's attorney's fees; and $30,000 for equalization of community funds expended by appellant not in furtherance of the community and for community property dissipated by appellant in violation of the court's preliminary injunction.

The court awarded property to appellant as follows: Community equity in the Allstate Book of Business valued at $80,000; pension of $8,872 ( 7/19 separate property, 12/19 community property); stocks; profit sharing $22,048 ( 7/19 separate and 12/19 community); 1982 Chevrolet Citation valued at $4,300 with a $4,100 lien; SeaSnark, value negligible; life insurance 0; bank accounts negligible; liability for federal and state income taxes ($18,000 for federal and $2,000 for state)

Appellant presents three arguments on appeal: (1) the trial court erred when it assigned an $80,000 value to appellant's Book of Business in reliance on a "going concern" valuation method; (2) if the court correctly established the value of appellant's Book of Business, it incorrectly held that the Book of Business is a community property right subject to division in a dissolution proceeding since the community was adequately compensated during the marriage by appellant's salary, making the profit of appellant's separate business a separate property; (3) the trial court incorrectly characterized the appellant's Book of Business as community property with a division so inadequate as to warrant reversal.


Appellant's first two arguments address the same issue. He contends that the Book of Business, i.e., the renewal value of current contracts, is not a current asset of the community but rather a mere expectancy. This is an issue of first impression in Arizona. Surprisingly, it is an issue that is sparsely reported in other jurisdictions.

In Vibrock v. Vibrock, 549 S.W.2d 775 (Tex.App.1977), the Texas Court of Appeals refused to include the Book of Business in the community and held, under circumstances similar to the current situation, that the renewal value of the contracts was simply an anticipatory right and was not an ascertainable or vested or divisible interest because the express contractual provisions for commissions on future renewals might never come into existence. Affirming that decision, however, the Texas Supreme Court in Vibrock v. Vibrock, 561 S.W.2d 776 (1977), stated it was undecided on whether the renewal value of contracts could be included in the community:

The disposition of this case by this court indicates neither approval nor disapproval of the language contained in the opinion of the court of appeals [citation omitted] which suggests that these renewal commisions are not community property.

561 S.W.2d at 777.

Another division of the Texas Court of Appeals has criticized that part of the decision in Vibrock which denied inclusion of the Book of Business in the community property. See Bray v. Bray, 576 S.W.2d 664 (Tex.App.1978).

In Re Marriage of Skaden, 19 Cal.3d 679, 139 Cal.Rptr. 615, 566 P.2d 249 (1977), the California Supreme Court declined to decide the issue because it was not properly raised on appeal. However, in Skaden, the California Supreme Court did decide that a State Farm agent's agreement which contained a termination benefit clause, was subject to valuation and inclusion in the...

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    • California Court of Appeals Court of Appeals
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    ...sold during marriage “are type of property interest encompassed within the definition of marital property”]; Pangburn v. Pangburn (Ariz.Ct.App.1986) 152 Ariz. 227, 230, 731 P.2d 122 [citing Brown, insurance agent's “contractual right to commissions for future renewals ... earned during cove......
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