Sumners v. Sumners

• Decision Date: 17 December 1985
• Docket Number: No. 67028,67028
• Citation: 701 S.W.2d 720
• Parties: Sharon Y. SUMNERS, Appellant, v. Jerry L. SUMNERS, Respondent.
• Court: Missouri Supreme Court

Page 720

701 S.W.2d 720

Sharon Y. SUMNERS, Appellant, v. Jerry L. SUMNERS, Respondent.

No. 67028.

Supreme Court of Missouri,

En Banc.

Dec. 17, 1985.

Donald R. Duncan, Springfield, for appellant.

Jerry L. Reynolds, Larry B. Moore, Springfield, for respondent.

ROBERTSON, Judge.

This is an appeal of a decree of dissolution which, inter alia, set aside as the husband's separate property certain stock acquired in exchange for partnership assets. The Southern District reversed this portion of the judgment, based on the "source of funds rule" adopted by this Court in Hoffmann v. Hoffmann, 676 S.W.2d 817 (Mo. banc 1984). While considering the husband's motion for rehearing, however, that court noted a decision of the Eastern District to the effect that Hoffmann was not to be applied retrospectively to cases tried prior to its advent. See Winter v. Winter, --- S.W.2d --- (Mo.App.E.D., Nos. 48186, 48575) (cause retransferred by order of Supreme Court, Mo. banc No. 67054, 1985.) The Southern District therefore ordered the case transferred to this Court for resolution of that conflict. Treating this case as on original appeal, Mo. Const. art. V, § 10, we conclude that the rule in Hoffmann is to be applied retrospectively. The judgment of the trial court is reversed except insofar as it declares the marriage dissolved and provides for custody and visitation of the children of that marriage. The cause is remanded for retrial of the issues of property classification and division, maintenance, attorneys fees, and costs.

The parties were married on January 31, 1964. On September 30, 1963, the husband entered into a partnership agreement with Leonard Pollreis under which the partners agreed to purchase and own equal interests in vending machines. In a later agreement, on January 6, 1964, Pollreis agreed to sell the husband a one-half interest in 140 vending machines already owned by Pollreis. The purchase price for this interest was $2200, to be paid in monthly installments of at least $100. By the time of the marriage, the partnership owned 190 machines. The record does not disclose evidence of the portion of the purchase price paid during the marriage, nor of the source of funds for any such payments.

The partnership was incorporated in Nebraska on May 1, 1967. On that date, the partnership assets were transferred to the new corporation, which in turn issued equal quantities of stock to the two partners. The extent of property held as partnership assets at the time of the incorporation is not clear; however, the evidence includes the report of an audit conducted in 1965 which indicates that the partners then owned 2,600 machines and various inventory and equipment. The trial court evaluated the husband's interest in the corporation at $275,000 and declared it to be his separate property. However, prior to dividing the marital property equally between the spouses, the trial court added to the net value of the marital property $154,000 "representing just consideration of the value" of the stock. In this way, the stock was treated as if it were marital property worth $154,000 which was then distributed to the husband.

I.

Among the grounds asserted in her motion for new trial, the wife urged that the trial court erroneously declared the stock to be the husband's separate property. She renews that argument here, relying now on Hoffmann. We agree that in declaring the stock to be separate property, the trial court's judgment either erroneously applied the law or was not supported by substantial evidence, and must therefore be reversed. Dardick v. Dardick, 670 S.W.2d 865, 868 (Mo. banc 1984); Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976).

The question of the characterization of property as either marital or separate for the purpose of dissolution is governed by Section 452.330, RSMo Cum.Supp.1984. That section states, in pertinent part:

2. For purposes of sections 452.300 to 452.415 only, "marital property" means all property acquired by either spouse subsequent to the marriage except:

(1) Property acquired by gift, bequest, devise, or descent;

(2) Property acquired in exchange for property acquired prior to the marriage or in exchange for property acquired by gift, bequest, devise, or descent;

(3) Property acquired by a spouse after a decree of legal separation;

(4) Property excluded by valid agreement of the parties; and

(5) The increase in value of property acquired prior to the marriage; ...

Id. Prior to the decision in Hoffmann, the courts of this state followed the general rule, known as the "inception of title doctrine," that property is classified as marital or separate the moment title is taken, irrespective of when and how payment for the property is made. Hoffmann, 676 S.W.2d at 823-24; Cain v. Cain, 536 S.W.2d 866, 871 (Mo.App.1976). Nevertheless, in an attempt to ameliorate the unfairness resulting from a rigid application of this rule, courts imposed an obligation on the owner of separate property to reimburse the marital community for its contribution to the purchase of the separate asset. Hoffmann at 824.

In the present case, the husband took title to those partnership assets owned at the time of the marriage when he entered into the January 6 sales agreement, notwithstanding that the purchase price had not yet been paid. § 400.2-401, RSMo 1978; Olson v. Penrod, 493 S.W.2d 673, 676 (Mo.App.1973). Under the now disfavored inception of title doctrine, those assets would have remained the husband's separate property, and any property "acquired in exchange for" those assets would have retained its separate characterization, § 452.330.2(2). ¹

Under Hoffmann, however, "the character of the property is determined by the source of funds financing the purchase. The property is considered to be acquired as it is paid for...." Hoffmann at 824. Thus, partnership assets paid for with marital funds--for example, salary earned by a spouse during the marriage--would be characterized as marital, with the result that stock acquired in exchange for these assets would retain the marital classification.

In this case, there was no evidence either that the purchase price for the assets in question was paid before it was due or that the husband's separate funds were used to purchase it. The only evidence is that the purchase price for the assets was due, for the most part, during the marriage. Thus, there was no substantial evidence for any conclusion other than that most of the partnership assets were paid for during the marriage. Under the source of funds rule, these assets were acquired during the marriage. According to § 452.330 it must therefore be presumed that the assets were marital. To the extent it was purchased with marital assets, the stock must also be considered marital. Thus, the trial court's judgment either erroneously applied the law or was not supported by substantial evidence.

Even if this Court were to consider the trial court's judgment as having, in effect, characterized the stock as marital property to the extent of $154,000, reversal would nevertheless be required. There is no substantial evidence to support such a pro tanto division either under a theory that marital funds were used to purchase the partnership assets or a theory that partnership assets acquired during the marriage were used to purchase a portion of the stock, since there is no evidence of the extent to which marital funds were used to purchase the partnership assets or of the relative value of partnership assets acquired during the marriage.

The same factor which accounts for the dearth of evidence relative to the source of funds rule--that Hoffmann had yet to be decided at the time of trial--also provides the basis for remanding this cause for a new trial. This court, when previously confronted with a similar situation, stated that:

[W]e are of the opinion that it would be improper and unfair to the parties, to decide this case on the record made when all the parties, in the presentation of their evidence, and the trial court, in entering its findings and conclusions of law, were operating pursuant to the rule announced in the [overruled] cases.

Dietz v. Humphreys, 507 S.W.2d 389, 392 (Mo.1974). Accordingly, this Court ordered the judgment reversed and remanded the case for further proceedings. See also Roth v. Roth, 571 S.W.2d 659, 672 (Mo.App.1978) (remand to apply intervening decision in Missouri Pacific Railroad Co. v. Whitehead & Kales Co., 566 S.W.2d 466 (Mo. banc 1978)).

II.

Having concluded that the application of the Hoffmann rule in the present case would require remand, it is necessary to determine whether that decision operates retrospectively to govern the division of property in this case. We conclude that it does.

"At common law there was no authority for the proposition that judicial decisions made law only for the future. Blackstone stated the rule that the duty of the court was not to 'pronounce a new law, but to maintain and expound the old one.' " Linkletter v. Walker, 381 U.S. 618, 622-23, 85 S.Ct. 1731, 1733-34, 14 L.Ed.2d 601 (1965) (footnote and citation omitted). Thus, a change in the law by judicial decision related back to past transactions and occurrences within its ambit as well as to future events. Id.; Traynor, "Quo Vadis, Prospective Overruling: A Question of Judicial Responsibility," 28 Hastings L.J. 533, 535 (1977) [hereinafter Traynor].

In the specific context of changes in the pertinent law while a case is on appeal, Chief Justice Marshall stated:

It is in the general true that the province of an appellate court is only to inquire whether a judgment when rendered was erroneous or not. But if, subsequent to the judgment, and before the decision of the appellate court, a law intervenes and positively changes the rule which governs, the law must be obeyed, or its obligation denied.

United States v. The Schooner Peggy, 5 U.S. (1 Cranch) 103, 110, 2 L.Ed. 49 (1801). While this...