Trawick v. Trawick, 08-83-00131-CV

• Decision Date: 11 April 1984
• Docket Number: No. 08-83-00131-CV,08-83-00131-CV
• Citation: 671 S.W.2d 105
• Parties: Ida E. TRAWICK, Appellant, v. Laura Jean TRAWICK, et al., Appellees.
• Court: Texas Court of Appeals

Page 105

671 S.W.2d 105

Ida E. TRAWICK, Appellant, v. Laura Jean TRAWICK, et al., Appellees.

No. 08-83-00131-CV.

Court of Appeals of Texas,

El Paso.

April 11, 1984.

Tom C. Ingram, Jr., Dallas, for appellant.

John B. Kyle, Henderson, Bryant & Wolfe, Sherman, for appellees.

Before STEPHEN F. PRESLAR, C.J., and OSBORN and SCHULTE, JJ.

OPINION

STEPHEN F. PRESLAR, Chief Justice.

This is an appeal from a judgment non obstante veredicto and from a directed verdict granted to the defendants below. Appellant sought a declaratory judgment awarding her an interest in the increased value of stock in a closely held corporation which was the separate property of her deceased husband, Stewart Trawick. She also asserted a community claim to other assets which defendant-executrix inventoried as separate property of the deceased. The court directed a verdict in favor of the separate estate with regard to the latter property. The issue of interest in the stock was submitted to the jury, which returned findings that the deceased had been undercompensated for his efforts in increasing the value of the stock and that the fifty-five percent of the increase in value was attributable to his efforts. Appellees' motion for judgment non obstante veredicto was granted and Appellant was deprived of any interest in the stock's value. We affirm in part and reverse and remand in part.

Sabine Machinery Company was founded by the deceased in 1968. It began operating as a corporation on January 1, 1976. Appellant and deceased married on November 12, 1976, and remained married until his death on October 26, 1980. At the time of his death, Stewart Trawick owned 750,000 shares of stock (three-fourths of all issued stock) in the corporation. Throughout the period in question, he was the president and chief operations officer of the business. He devoted his full business life to the corporation, was its actual day-to-day leader and was primarily responsible for its profit and growth. The parties stipulated that during the marriage the value of the corporation increased by $505,901.30.

Expert testimony from a certified public accountant indicated that just over one-half of the increase in value was solely attributable to Stewart Trawick's efforts. Consistent with the expert testimony and other direct evidence of his efforts, the jury found that fifty-five percent of the increase was the result of his work. When Stewart died, his will left none of the stock to the Appellant. She did receive $105,000.00 in insurance proceeds and her interest in uncontested community property. Community cash and checking accounts totalled $46,693.83. As executrix, Stewart's sister, an Appellee herein, listed as separate property certificates of deposit, checking accounts and other cash totalling $356,767.05, as shown by the amended inventory.

In Ground of Error No. One, Appellant contends that the court erred in depriving her of an interest in the increased value of the corporate stock by granting judgment non obstante veredicto. The case was tried in January, 1982, prior to the three Supreme Court opinions in Jensen v. Jensen, 26 Tex.Sup.Ct.J. 480 (July 9, 1983), 27 Tex.Sup.Ct.J. 68 (November 9, 1983); 665 S.W.2d 107 (1984). At the time the case was tried, it was clear that one spouse could impose some form of community interest on the increased value of the other spouse's separate property where the increase was due to a manipulation of what would have been a reasonable flow of community income derived from the separate property. It was unclear what characterization should be attached to that interest and hence, the proper allocation of burden of pleading and proof was still in doubt. See: Jensen I and Vallone v. Vallone, 644 S.W.2d 455 (Tex.1982). Appellant's pleadings were sufficient to encompass the community ownership theory as well as the reimbursement theory subsequently adopted in Jensen II and Jensen III. Under the community ownership theory, the ultimate burden of proof would have rested primarily on the advocate of the separate estate. Under the present theory of recovery, the burden of establishing the various mathematical factors for reimbursement rests with the surviving spouse.

We do find that the Jensen opinions should be applied to the issues in this case. The fact that Jensen dealt with a distribution following divorce, as opposed to death, enhances the application of that case's theory of recovery here because some considerations which arise in the divorce context are not present and do not contribute further uncertainties to the values which are to be credited or debited to either estate (e.g. relative earning capacity).

While the reanalysis by the Supreme Court has helped to solidify the theory of recovery in this type of situation, we are still without a simple mathematical formula for resolution of this or any other such case. The facts of this case clearly pinpoint the factors which remain in shadow. Jensen III states:

[T]he community will be reimbursed for the value of time and effort expended by either or both spouses to enhance the separate estate of either, other than that reasonably necessary to manage and preserve the separate estate, less the remuneration received for that time and effort in the form of salary, bonus, dividends and other fringe benefits, those items being community property when received.

In such a situation, we are confronted with two primary factors--1) increase in the value of separate property attributable to community effort and 2) undercompensation of the community for that effort. Appellant's pre-Jensen pleadings, proof, special issues and jury findings supported both elements. Because that is the case and because of the state of legal uncertainty at the time of trial, the degree to which those elements were satisfied leads us to reverse and remand in the interest of justice under Tex.R.Civ.P. Rule 434, as opposed to following the course taken in Duncan v. Cessna Aircraft Co., 665 S.W.2d 414 (1984).

The remaining difficulty arises from the fact that the undercompensation elements consist of two sub-factors--1) what the reasonable value of the effort was and 2) what actual remuneration was received. A simple formulation of the reimbursement could be shown as:

Attributable increase in value

- Actual remuneration

= Reimbursement

This would be neither realistic nor equitable. Such a formula would automatically equate the sum total of the increased value with the "value of time and effort expended by the community." Under Jensen III the enhanced value of the stock is one of the factors to be considered by the fact finder in determining the value of the community time and effort. Consequently, the appropriate computation is to determine the discrepancy between the reasonable value of the effort expended and the actual compensation received and then look to the enhanced value of the separate estate to satisfy that discrepancy. This approach was followed in Faulkner v. Faulkner, 582 S.W.2d 639 (Tex.Civ.App.--Dallas 1979, no writ). It is consistent with Jensen III and we find it most equitable in terms of the interests of the community and the separate estate of the deceased.

The pleadings and evidence addressed all factors comprising the more detailed formula. The stipulated enhancement in value was $505,901.30. The deceased owned seventy-five percent of the stock. The jury found, consistent with the lay and expert testimony, that fifty-five percent of the enhanced value was attributable to Stewart Trawick's work. Consequently, $208,684.29 was available to satisfy any claim by the community for undercompensation.

In given cases, the total enhanced value may equal or exceed the demonstrated right to reimbursement. We are not yet confronted with a question of right to reimbursement exceeding the enhanced value of a specific separate property asset and will not attempt to suggest the outcome of such a conflict.

Here, Stewart Trawick received a salary of $2,000.00 per month. The marital state existed during forty-eight months, resulting in $96,000.00 in salary. The corporation paid $17,000.00 in life insurance premiums, proceeds from which went to Appellant. Club membership dues for Appellant and the deceased amounted to $5,432.66. The deceased had the use of a new automobile, with no specific value appearing in the record. Appellant received $5,000.00 in company death benefits.

For purposes of retrial guidance, contrary to Appellees' position, several items should not be included in the actual compensation figure. These include the $96,000.00 in rental income which Stewart Trawick received by renting his separate real property to the corporation during three years of the period in question. That income was community property not by virtue of his labor and efforts on behalf of the corporation, but as income from a distinct, non-labor separate asset. While it may present an estate question, it is not part of the problem before us. The salary, vehicle and expense account provided Appellant for her labor should also be excluded from the calculation. Absent a showing that her employment was an absolute sham, this compensation is attributable to her toil and effort and not that of her deceased husband. In addition, the deceased's $8,000.00 expense account should not be included absent proof that his draws upon the account exceeded actual expenditures in his day-to-day conduct of company affairs. Absent such a showing this amounts to reimbursement of his out-of-pocket expenses and not compensation for his labor.

From the present record, the amount of actual remuneration which flowed to the community estate, through various forms of compensation, totalled $126,432.66 plus the value of an automobile during the forty-eight month period from November, 1976, through October, 1980.

The final factor to be determined in order to compute the degree of undercompensation, and hence reimbursement due, is the...