Worzala v. Worzala
| Decision Date | 26 March 1996 |
| Docket Number | No. 20661,20661 |
| Citation | 913 P.2d 1178,128 Idaho 408 |
| Parties | Edward WORZALA, Plaintiff-Appellant, v. Bonnie Rene WORZALA, Defendant-Respondent. Coeur d'Alene, October 1994 Term |
| Court | Idaho Supreme Court |
Stephen B. McCrea, Coeur d'Alene, for appellant.
Sims, Liesche, Newell, Kelso, Wallace & Wallace, P.A., Coeur d'Alene, for respondent. Ramona R. Leische argued.
Edward and Bonnie Worzala were married on June 10, 1977, in the State of Wisconsin. Six years earlier, Edward and John MacKenzie (Mackenzie) established a welding supply business that was eventually incorporated in Wisconsin under the name Welding Alloys, Inc. (Welding Alloys). Welding Alloys established a trademark for its line of welding supplies under the name Repair Alloy. In 1977 Edward and MacKenzie had a falling out, which resulted in a lawsuit. After the lawsuit, in which MacKenzie unsuccessfully alleged that Edward was misappropriating corporate assets, Edward and MacKenzie agreed that Edward or Welding Alloys would buy out MacKenzie's shares in the company. The record is not clear as to what assets were used to purchase MacKenzie's shares in Welding Alloys.
Shortly after Edward and Bonnie were married, Edward began winding Welding Alloys down and started a new corporation under the name Repair Alloy, Inc. (Repair Alloy). Edward and Edward's accountant testified that Repair Alloy was started with assets "appropriated" from Welding Alloys, and commissions Edward was earning at Welding Alloys. Repair Alloy was incorporated in Wisconsin in September 1977. The Wisconsin Department of Employment considered Repair Alloy to be the successor in interest to Welding Alloys. Welding Alloys continued to exist, although its operations appear to have been limited to collecting accounts receivable and using those funds to buy out MacKenzie's shares.
From the time of the marriage until they moved to Idaho in 1984, Edward and Bonnie lived in a house purchased by Edward prior to the marriage in Onomowoc, Wisconsin (the Onomowoc property). Edward and Bonnie moved to Idaho in early June 1984. In 1985, Edward sold the Onomowoc property for $150,000, using a portion of the proceeds to pay off the $51,000 balance remaining on the mortgage.
After moving to Idaho, Edward sold Repair Alloy to Gene Kasprasak (Kasprasak), one of Edward's employees at Welding Alloys and Repair Alloy. Under the contract for sale, Kasprasak paid $350,033 for the business. Kasprasak paid $34,158 down, and later paid a balance of $181,748 for the business' accounts receivable and good will. Kasprasak sold the inventory on consignment, and eventually paid Edward $124,387 for that inventory. Kasprasak and Edward agreed that Kasprasak would hold back $10,000 to cover potential bad debts in the accounts receivable. Of that amount, $9,700 was eventually paid to Edward. Although the amount paid is not clear from the record, Edward used a portion of the proceeds from the sale of the business to pay off a line of credit Valley Bank of Hartford had extended to Repair Alloy. The credit line was apparently used to buy a Ford Bronco that was registered in the corporation's name. Although Repair Alloy listed the Bronco as an asset, it was not included in sale of the business. Bonnie testified that the car was primarily used by her for family and personal matters.
Edward created an Idaho Corporation, Ex-Repair Alloy, Inc., a/k/a Ex-RA (Ex-RA), which was used to wind down the Repair Alloy sale. Repair Alloy and Ex-RA had the same I.R.S. employer identification number. The parties agree that $60,299 of the money paid for Repair Alloy was used to pay off the mortgage on the building where Repair Alloy was located (the Ellis Street property). This building, which Edward and Bonnie purchased in 1980, was later sold for $120,000. Prior to this sale, and after Repair Alloy was sold, the Worzalas received $1,800 per month rental income from the property.
Another item of significant value and controversy in this appeal is 300 troy ounces of gold wire that was purchased by either the Worzalas or Repair Alloy during the marriage. The gold wire was later sold for $127,000. At trial Edward testified that he purchased the gold wire before the marriage. Bonnie testified that she and Edward discussed the purchase prior to making it, and that the wire was purchased by the Worzalas', not Repair Alloy. Bonnie further testified that, after they purchased the wire, Edward stored it in their house.
Edward filed a complaint seeking a decree of divorce on the grounds of irreconcilable differences on October 17, 1989. Bonnie answered the complaint and counterclaimed, seeking support for the couple's three minor children, as well as various items of personal and real property and half of the value of the investments made during marriage. The trial was bifurcated, and only issues involving the division of property and debts and child support were presented in this case. Following three days of testimony, the magistrate issued findings of fact and conclusions of law, disposing of the assets relevant to this appeal.
The magistrate found that Repair Alloy was essentially a "lock step" continuation of Welding Alloys, which was created through an appropriation of Welding Alloys' assets, and which distributed the same inventory to the same customers with the same employees. As a result, the magistrate concluded that the proceeds from the sale of Repair Alloy were Edward's separate property. The magistrate traced the assets from the sale of Repair Alloy to several securities presently held by Edward and Bonnie.
The magistrate also found that the Worzala's 1978, 1979, 1985 and 1986 income taxes were paid out of Edward's separate property. The court further concluded that the community was adequately compensated for its contribution during the operation of Repair Alloy, except to the extent of the payment of community income taxes out of Edward's separate property, for which Edward would not be reimbursed by the community.
The magistrate found that the Onomowoc property, part of Edward's separate property, had been enhanced in value by $20,000 through community contributions. The Ellis street property was acquired as a community asset, although the magistrate concluded that Edward paid $60,000 of the purchase price out of his separate funds.
The magistrate also found that Edward was unable to establish that the gold wire was not acquired by the community with community funds. The proceeds from the sale of the gold were included in the community estate. The Ford Bronco was neither purchased by the community nor sold with the business, and the magistrate concluded that it was therefore a gift to the community.
On March 6, 1992, the magistrate issued an amended decree of divorce, which combined the findings of fact and conclusions of law entered in both parts of the bifurcated proceedings. Edward filed a notice of appeal from the magistrate division to the district court, alleging that the magistrate erred in determining that the gold wire was community property, in holding that Edward's separate estate should not be reimbursed for its payment of community debts, and in its division of other specific items of personal property. Bonnie cross-appealed.
The district court affirmed the magistrate in part, reversed the magistrate in part, and remanded the case for the magistrate to reconsider the determination that Repair Alloy was Edward's separate property. The district court concluded that "[t]he trial court's conclusion that 'the acquisition of Repair Alloy was plaintiff's sole and separate property' is not supported by its finding that 'the new corporation was created by appropriating the assets of Welding Alloys.' " C.R. 230. As a result of this holding, many of the other issues raised on appeal (whether the proceeds from the sale of Repair Alloy were properly characterized, whether Edward is entitled to reimbursement for separate tax contributions, and whether the Ford Bronco was properly characterized) were not resolved by the district court.
The district court affirmed the balance of the magistrate's holdings. Specifically, that court held that the magistrate's findings that the value of the Onomowoc house was enhanced by $20,000 through community contributions and that the gold wire was community property were not clearly erroneous. The district court...
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