Somps v. Somps

• Decision Date: 24 April 1967
• Citation: 250 Cal.App.2d 328,58 Cal.Rptr. 304
• Court: California Court of Appeals Court of Appeals
• Parties: Judy Collins SOMPS, Plaintiff, Cross-Defendant, Appellant, v. George Edward SOMPS, Defendant, Cross-Complainant, Respondent. Civ. 23216.

Page 304

58 Cal.Rptr. 304

250 Cal.App.2d 328

Judy Collins SOMPS, Plaintiff, Cross-Defendant, Appellant, v. George Edward SOMPS, Defendant, Cross-Complainant, Respondent.

Civ. 23216.

Court of Appeal, First District, Division 3, California.

April 24, 1967.

Rehearing Denied May 24, 1967.

Hearing Denied June 21, 1967.

Walter T. Winter, San Francisco, for appellant.

J. A. London, Mountain View, William G. Filice, San Jose, for respondent.

HAROLD C. BROWN, Associate Justice. Justice.

The plaintiff Judy Somps appeals from certain portions of an interlocutory judgment of divorce which awards the stock in MacKay & Somps, a corporation, and other assets, to defendant George Somps as his separate property.

Judy Somps (hereinafter referred to as wife) and George Somps (hereinafter referred to as husband) were married on April 28, 1954, and lived together until April of 1963, the date of commencement of this divorce proceeding. Wife had three children by a prior marriage who were subsequently adopted by husband. The parties had three children by this marriage. Prior to marriage wife had no financial assets. Husband had a 50% Partnership interest with one Donald MacKay in an engineering business which had been in existence of a period of one year. Husband also had some cash and stocks.

On November 13, 1964, an interlocutory judgment of divorce was entered granting both parties a divorce on the grounds of extreme cruelty. The decree awarded the business and certain other assets to husband as his separate property. It declared a $15,000 indebtedness to First Valley Bank to be a community indebtedness. An accumulation of cash from husband's earnings from the business was allocated as 60% Separate property of husband and 40% Community property.

Other joint tenancy and community assets possessed by husband and wife at the time of divorce consisted of two residences, household furniture, real property, cash in bank, and automobile, all of which were evaluated at approximately $463,000. This property was awarded one-half to husband and one-half to wife. Wife's total award amounted to approximately $250,000.

Husband and wife were awarded the joint custody of the minor children with physical custody to the wife. Husband was ordered to pay $750 per month for the support of the minor children, and alimony for 36 months at $750 per month. Husband was further ordered to pay wife's attorney the sum of $7,500.

Husband also appealed from those portions of the judgment that awarded alimony of wife and the award to wife of a one-half interest of the proceeds of the parcel of real property known as the Pleasanton property. Husband has abandoned his appeal. The wife has, in her opening brief, abandoned those portions of the appeal referring to the Volk property, failure to grant a divorce on the ground of adultery, that she pay her own court costs and that her alimony terminate after 36 months.

Wife claims that the trial court erred in holding (1) that the business (MacKay & Somps) was the separate property of husband; (2) that the Binkley property was purchased with separate funds of husband and therefore the profit realized from the sale was his separate property; (3) that certain income and salaries of husband be allocated 60% To husband as his separate property and 40% To the community; (4) that the indebtedness to First Valley Bank in the sum of $15,000 was a community obligation; and (5) that wife was not entitled to a longer continuance to prepare for trial.

(1) Did the trial court err in holding that the business of MacKay & Somps was husband's separate property?

Husband and a Donald MacKay as equal partners commenced a civil engineering business in 1953. Each of the parties contributed $5,000, tools, and his personal automobile to the original capital. The firm specialized in single-family residences. When husband and wife married in 1954, husband's equity in the business was approximately $16,000. At the time of divorce the net worth of husband's one-half was $222,433. In 1959 the assets of the partnership were transferred to two corporations formed by husband and MacKay in exchange for stock. MacKay and husband each received 50% Of the stock in the new corporations. It was conceded that the two corporations were a continuation and reorganization of the original partnership formed in 1953.

Wife contends that the large increment to the business accruing after marriage should be declared community property because husband's education, abilities and labors contributed substantially to its growth and success. Husband had a degree in engineering from Utah State University and a master's degree in business administration from Stanford. She testified that the business was in existence only one year prior to marriage, that they did not go on a honeymoon and rarely took a vacation and that husband worked overtime in the early part of their marriage. Husband admitted that he occasionally worked nights and on week ends.

The general rule is that 'The time, efforts, and skill of the husband are assets of the community and when they are used for the enrichment of the separate property of the husband, the community must be compensated.' (Strohm v. Strohm, 182 Cal.App.2d 53, 62, 5 Cal.Rptr. 884, 889.)

Wife introduced evidence to show that husband treated the business as community property. This evidence disclosed that husband and his partner MacKay used business assets to purchase several investment properties, particularly those parcels known as (1) the Cook ranch, (2) the Wisner property, consisting of two parcels of land (which had not been sold at time of divorce, one parcel was adjudged to be community property and the other joint tenancy property of husband and wife), and, (3) the Goldhammer property. Title to all these properties, with the exception of one portion of the Wisner property which was in husband's and Donald MacKay's name only, was taken in the names of Mr. and Mrs. MacKay as to an undivided one-half interest and to husband and wife as joint tenants as to an undivided one-half interest. The properties were carried on the books of the business as assets and the balances due on the purchase prices were listed as liabilities. All installments due on the balance were paid by the business. The Cook ranch was sold at a substantial profit. The Goldhammer property was sold at a profit to a joint venture owned by the corporation MacKay & Somps. The proceeds of the sale of these properties was apparently deposited to the account of the business. Wife and husband jointly paid capital gains taxes on these transactions. Wife claims that this commingling of community assets with the property of the business made segregation impossible, and was evidence that husband himself considered the business to be community property.

The reason MacKay and husband had title to the Cook, Wisner and Goldhammer properties, deeded to themselves jointly with their wives and thereafter listed the properties as assets of the business, is not clear. It is clear, however, that the purchase price of the properties and all installments were paid by the business and the risk of loss was borne by the business. No community funds were used to purchase these properties. The trial court was not persuaded that community funds were so commingled with business assets so as to evidence an intent by husband to make the business community property.

Husband produced expert testimony to the effect that the growth of the business was due to the tremendous demand for single-family residences, to the phenomenal population growth in Santa Clara County, to his partner MacKay's ability and to the efforts of the loyal staff of employees. An expert witness (another civil engineer from that locality) testified that MacKay and husband could not have picked a better time to commence the business. Two employees stated the business would have operated just as well without husband so great was the market for single-family homes. Husband and MacKay testified that one-half of the first year of business was spent for promotional activities. Husband testified that 60% Of the money earned by the firm between 1954 and 1964 could be traced to husband's and MacKay's efforts in soliciting clients during the year prior to the Somps' marriage.

The court's opinion that the business was the separate property of husband was fortified by testimony that husband and wife had orally agreed that it should remain his separate property and the court so found. This finding was based on the testimony of husband. It was denied by wife. Husband and wife may alter the character of their property by oral agreement. A transmutation from community to separate property occurs when the spouses agree to change the character of the property. Originally only a written agreement would suffice but more recently oral transmutations have been upheld. (Civil Code, §§ 158, 159; see Lawatch v. Lawatch, 161 Cal.App.2d 780, 789, 327 P.2d 603; In re Estate of Raphael, 91 Cal.App.2d 931, 206 P.2d 391; Woods v. Security-First Nat. Bank, 46 Cal.2d 697, 701, 299 P.2d 657; Recent Developments, Community Property: Commingled Accounts and the Family-Expense Presumption (1967) 19 Stan.L.Rev. 661, 663.) It is unnecessary to consider the propriety of this finding, however, as there was substantial evidence for the trial court's holding that the increase in the partnership assets or in the value of the stock after the business was incorporated was attributed to a reasonable return upon the separate property of husband invested by him before marriage, and the faithful, loyal and effective services of his partner MacKay and the employees, together with the unprecedented population growth in Santa Clara County, causing an abnormal demand for residential subdivisions and other favorable business factors not related to husband's abilities or labors.

Although the court found that the business was the separate property of...