Case Name: Gayla SMITH, Plaintiff-Appellee, v. James David SMITH, Defendant-Appellant
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 1974-10-30
Citations: 311 So. 2d 514
Docket Number: No. 4634
Parties: Gayla SMITH, Plaintiff-Appellee, v. James David SMITH, Defendant-Appellant.
Judges: Before HOOD, CULPEPPER, MILLER, WATSON and DOMENGEAUX, JJ.
Reporter: Southern Reporter, Second Series
Volume: 311
Pages: 514–534

Head Matter:
Gayla SMITH, Plaintiff-Appellee, v. James David SMITH, Defendant-Appellant.
No. 4634.
Court of Appeal of Louisiana, Third Circuit.
Oct. 30, 1974.
On Rehearing April 9, 1975.
Rehearing Denied May 1, 1975.
Writ Refused June 20, 1975.
John A. Boatner, Jr., Bunkie, Gravel, Roy and Burnes, by T. Gerald Henderson, Alexandria, for defendant-appellant.
J. Minos Simon jmd Louis Corne, Lafayette, for plaintiff-appellee.
Before HOOD, CULPEPPER, MILLER, WATSON and DOMENGEAUX, JJ.

Opinion:
HOOD, Judge.
Mrs. Gayla Smith instituted this action against her former husband, James David Smith, to partition the community of acquets and gains which formerly existed between them. Judgment was rendered by the trial court determining the items of property which constituted assets of the community, and ordering that they be partitioned. Defendant David Smith appealed, contending that some of the items decreed to be community property belong to his separate estate.
The issue presented is whether the trial judge erred in decreeing that the following items of property belonged to the community: (1) 20 shares of stock in Piggly-Wiggly Leesville Co., Inc.; (2) 260 shares of stock in Piggly-Wiggly Bunkie Co., Inc.; (3) 40 shares of stock in Piggly-Wiggly Kaplan Co., Inc.; (4) a $5,000.00 Certificate of Deposit, dated August 17, 1971, issued by Avoyelles Trust and Savings Bank in the name of J. D. Smith; and (5) a 1971 Ford pickup truck.
Plaintiff and defendant were married in 1957. Both of them were employed to work in a Piggly-Wiggly grocery store in Leesville, Louisiana, in 1959, and they worked there for a period of about one year. They left Leesville in 1960, but they returned in 1962, and worked for the same business establishment for one year thereafter.
The parties moved to Bunkie, Louisiana, in 1963, for the purpose of opening and operating a Piggly-Wiggly store there. The defendant husband managed the store in Bunkie, and plaintiff, worked in the store with him, for a period of about seven years, until November, 1970, when Mrs. Smith left her husband and returned to live with her parents in Nacogdoches, Texas.
In January, 1971, the parties became reconciled, and they moved to Kaplan, Louisiana, where defendant became the manager of a third family-owned Piggly-Wiggly store located in that city. His wife also worked in that store, performing such duties as bookkeeping, taking inventories and ordering merchandise. The parties lived together in Kaplan and both of them worked in the above mentioned store until they separated finally in February, 1972.
When plaintiff and defendant began to work in the Leesville Piggly-Wiggly store in 1959, that store was owned by a partnership comprised of defendant's father, Elson O. Smith, and E. Searcy Gothard. The partnership continued to own that store until September 19, 1964, when Elson O. Smith purchased Gothard's interest in the partnership.
On October 1, 1964, two separate corporations were formed, one of which was Piggly-Wiggly Leesville Co., Inc., and the other was Piggly-Wiggly Bunkie Co., Inc. Another corporation was formed on December 19, 1967, named Piggly-Wiggly Kaplan Co., Inc.
The original incorporators of Piggly-Wiggly Leesville Co., Inc., were three employees of the attorney who was engaged to assist in forming the corporation. The incorporators paid no consideration for the 100 shares of stock which were issued to them, and they admittedly had no interest in the corporation. The certificates of stock issued to the incorporators were endorsed and cancelled immediately after the corporation was formed, and the shares of stock represented by those certificates were re-issued in varying amounts to Elson O. Smith, to his wife, and to one of his three sons, David Smith. Defendant David Smith acquired ten of the re-issued shares of stock in this corporation, and he also acquired ten additional shares stated to be an original issue of stock. At the time defendant finally separated from his wife, he was the registered owner of 20 shares of stock in the Leesville corporation. Certificates evidencing ownership of these 20 shares of stock were issued in the name of defendant, but those certificates remained with other corporate records and were never delivered to David Smith.
Piggly-Wiggly Bunkie Co., Inc., was incorporated in the same manner as was the Leesville corporation. Certificates of stock were issued to the incorporators, who had no interest in the corporation, and those certificates were promptly endorsed and cancelled, and the stock was re-issued. Defendant David Smith acquired one share by transfer from an original incorporator, one share as an original issue of stock, and two shares from Elson O. Smith. He later acquired 256 additional shares, by means of a 50 to 1 stock split and 30 shares transferred from Elson O. Smith and 30 shares transferred from defendant's brother, John Smith. These additional 256 shares, plus the four shares he already owned, gave defendant David Smith a total of 260 shares of stock in the Bunkie corporation. Certificates of stock for 260 shares were issued to defendant, but these certificates remained with other corporate records and were never delivered to defendant.
Piggly-Wiggly Kaplan Co., Inc., was incorporated in the same manner as were the other two corporations, except that the stock was issued directly to Elson O. Smith and to members of his family. Defendant David Smith acquired 120 shares as original issue of stock in that corporation, but he subsequently transferred 80 shares to his brother, John Smith, leaving defendant as the registered owner of 40 shares of stock in that corporation when the community eventually was dissolved. Certificates evidencing defendant's ownership of these 40 shares were issued in his name but were never delivered to him.
Both parties to this suit agree that at the time the community was dissolved defendant David Smith owned 20 shares of stock in the Leesville corporation, 260 shares in the Bunkie company, and 40 shares of stock in Piggly-Wiggly Kaplan Co., Inc. Stock certificates evidencing ownership of those shares of stock had been issued in the name of defendant David Smith, but those certificates had never been delivered to him. Since the parties judicially assert, and the evidence shows, that David Smith owned the shares of stock which are at issue here, we hold that valid title to those shares was registered and vested in defendant's name. The important issue presented, however, is whether the stock represented by those certificates became assets of David Smith's separate estate or assets of the community which formerly existed between the parties.
In addition to the above mentioned shares of stock which were held by David Smith at the time the parties finally separated, defendant also held a time Certificate of Deposit in the amottnt of $5,000.00, dated August 17, 1971, issued by Avoyelles Trust & Savings Bank to J. D. Smith. He also had in his possession at that time a 1971 Ford pickup truck which had been purchased on October 8, 1970, the title to which was registered in the name of J. David Smith.
Mrs. Smith instituted a suit for separation against her husband in March, 1972, .and he reconvened for a judgment of separation in his favor. Judgment was rendered on June 8, 1972, in favor of the husband on his reconventional demand, decreeing a separation from bed and board between them. A judgment of final divorce was rendered a little more than a year later.
On October 3, 1972, after the judgment of separation had been rendered, Mrs. Smith filed a petition demanding that the community property be partitioned. In that pleading she alleged that the above described shares of stock in the various Piggly-Wiggly corporations, the Certificate of Deposit, and the 1971 pickup truck, in addition to other assets, belonged to the community. The issues presented by those pleadings were tried, and a judgment was rendered by the trial judge on September 4, 1973, decreeing that several items of property, including all of those above listed, were assets of the community, and ordering that they be partitioned. It is from that judgment that the appeal which is before us now was taken.
Defendant contends that the shares of stock in the Piggly-Wiggly corporations, presently owned by him, belong to his separate estate. He takes the position that all of those shares were donated to him by his father and mother, or by his brother or by an original incorporator of two of those corporations. He argues that his father was the sole investor in all three of the corporations, that his father thus owned all of the stock, that all of the shares which were conveyed to defendant were conveyed as donations, and that those shares became a part of defendant's separate estate under Article 2334 of the Louisiana Civil Code. He contends that the shares of stock in the Bunkie corporation which he received as the result of a stock split retained the identity of the stock held prior to the split, and that the new shares of stock issued to him at that time continued to constitute a part of his separate estate. See Daigre v. Daigre, 228 La. 682, 83 So.2d 900 (1955).
Plaintiff contends that the three corporations were family corporations, and that they were built on the joint efforts of all members of the family. She argues that the above mentioned shares of stock were issued to her husband as extra compensation for the work he performed in helping to build the corporations, and that they became a part of the community estate. Plaintiff also contends that, regardless of who may have owned the stock prior to the time certificates were issued to defendant, there was never a valid donation to defendant of any of the shares of stock which are at issue here, because no "delivery" of the stock certificates was ever made to him and the alleged donations were not evidenced by authentic acts. Plaintiff argues that the evidence fails to overcome the legal presumption that the shares of stock acquired by her husband during the marriage became assets of the community of acquets and gains which existed between them.
Shares of stock in corporations are classified as "incorporeal things." Succession of McGuire, 151 La. 514, 92 So. 40 (1922).
Article 1536 of the Louisiana Civil Code provides that "an act shall be passed before a notary public and two witnesses of every donation inter vivos of . incorporeal things . . . under the penalty of nullity."
It logically follows that a donation of stock must be accomplished by notarial act. Our jurisprudence, however, has created a limited exception to Article 1536, insofar as stock is concerned, by applying the provisions of the Uniform Stock Transfer Act (LSA-R.S. 12:624, formerly R.S. 12:524). LSA-R.S. 12:624 provides two means by which the owner of stock may transfer his shares and, according to our jurisprudence, if the stock certificates are transferred in accordance with the Act, a donation is deemed to have taken place, without an accompanying authentic act. Feldheim v. Plaquemines Oil & Development Co., 282 So.2d 469 (La.1973); Succession of McGuire, supra.
Under. LSA-R.S. 12:624 title to the certificate of stock, and to the shares represented thereby, can be transferred only by delivery (to the intended owner) of the stock certificate which (1) has previously been endorsed by the former owner either in blank or to a specified person (the intended owner). See Feldheim v. Plaquemines Oil & Development Co., supra; Succession of Hall, 198 So.2d 511 (La.App. 2 Cir. 1967); or (2) is accompanied by a separate document containing a written assignment of that certificate or the power of attorney to sell, assign or transfer it, signed by the person appearing in the certificate to be the owner of those shares. See Succession of McGuire, supra.
As we have already noted, the defendant herein became owner of the stock in question through three separate methods.
Some of the shares received by the defendant were shown to be original issues of stock by the corporations in his name. The provisions of LSA-R.S. 12:624 obviously do not apply to these shares. We base this conclusion on the fact that there was simply no transfer as envisioned in the provisions of the Uniform Stock Transfer Act. Under the language of the Act there can be no "delivery" of an endorsed certificate, and no "person appearing by the certificate to be the owner of the shares represented thereby," if the shares had never been previously issued. This was merely an original issuance of stock and, in our opinion, an authentic act was necessary to classify such issuance as a donation.
As aforementioned, in no instance was the issue or transfer to the defendant of any of the stock in the three corporations accompanied or evidenced by an authentic act.
David Smith also received a number of shares in the Bunkie corporation from certain members of his family. This was accomplished, however, merely by stock ownership changes being made in the corporate records and resulting issuance of new stock certificates. Specifically, on November 12, 1971, as the result of a stock split, 60 shares (a portion of that acquired by defendant's father and brother by reason of the split — 30 shares each) were transferred to the defendant hy issuance of a new stock certificate in his name representing the 60 shares, the stock formerly in his name, plus the latter's increase due to the stock split. Likewise, defendant's father and brother were issued new stock certificates representing their stock holdings, less those shares transferred to the defendant.
Again it is clear that the provisions of the Uniform Stock Transfer Act do not come into play. For it is evident that no transfer took place according to the provisions in the Act, i. e., delivery of an (1) endorsed certificate, or (2) certificate with accompanying written assignment of power of attorney. There was merely a reissuance of stock certificates in defendant's name without an accompanying authentic act, the latter being required, in our opinion, to make such a donation.
The third and last means by which defendant obtained stock was through former owners who endorsed the stock certificates in blank, the same being thereafter cancelled and reissued in the name of the defendant.
This is the only situation herein where the provisions of the Uniform Stock Transfer Act could apply. If the parties who owned the stock had endorsed the certificates in blank (as was done) or endorsed same over to the defendant, and had subsequently delivered them to David Smith, we would presume that a donation had taken place. We have, however, already noted, as did the trial judge, that there was no evidence to the effect that the defendant ever received delivery of these or any of the stock certificates and that instead they remained with the other corporate records. The defendant, in fact, did not know until after the community was dissolved how many shares he owned. David Smith testified that he "didn't know anything about how the stock was or anything;" that he knew that his father and mother "were both giving me stock" but he stated that "insofar as seeing any stock, no sir, I don't remember seeing any;" and that no one ever delivered a stock certificate to him.
A strong presumption exists that property acquired by either spouse during the existence of the marriage becomes an asset of the community of acquets and gains which exists between them. When it is contended that property so acquired is the separate property of one of the spouses, the burden of overcoming the presumption that such property is an asset of the community rests upon the party alleging its separate character. LSA-C.C. Arts. 2334, 2402 and 2405; R. D. M. Corporation v. Patterson, 255 La. 301, 230 So.2d 820 (1970).
All of the stock in the above mentioned corporations which was issued to David Smith was acquired by him during his marriage to plaintiff. There is a strong presumption, therefore, that all of that stock belonged to the community which existed between them. The burden of proof rests on defendant to overcome that strong presumption that the shares of stock became assets of the community.
We conclude that the evidence presented fails to overcome this legal presumption and we thus affirm that part of the judgment appealed from which decrees the shares of stock in three Piggly-Wiggly corporations to be assets of the community.
We turn now to the question of whether the $5,000.00 Certificate of Deposit issued by Avoyelles Trust & Savings Bank, dated August 17, 1971, belonged to defendant's separate estate or to the community.
Defendant admits that the above mentioned Certificate of Deposit, issued by Avoyelles Trust & Savings Bank, was purchased with funds taken from a savings account in his name, but he contends that that savings account had been built up solely by deposits from corporate funds. Defendant contends that the Certificate of Deposit actually was owned by the Bunkie corporation, that he had set aside funds of that corporation to be used as a "building fund," and that he had placed the funds in a savings account in his name merely as a convenience to the corporation, since he had been advised that a corporation could not maintain a savings account.
The evidence establishes that these three corporations were family-owned, and that defendant David Smith contributed substantially toward the organization, managing and building up of two of them. At the time of the trial defendant was receiving salaries from two of the corporations. He was actively managing the store in Kap-lan and was supervising the one in Bun-kie. He was entitled to a bonus each year, but he stated that he had not drawn his bonuses, that he "didn't need it" and that he just left them in the corporation.
Defendant exercised complete control over the assets of at least two of the corporations. He determined how the earnings of the businesses were to be spent, and he obviously was not accountable to anyone for those expenditures. He purchased a $7,000.00 Thunderbird automobile for his wife, for instance, and does not recall from which corporation account he withdrew the funds for it. He paid $4,249.12 from funds belonging to the Bun-kie store to purchase a pickup truck, the title to which was registered in his own name, and the truck was used by him. No authority was obtained for the purchase of that truck. He paid his younger brother $100.00 per week from corporate funds, while his brother was in college and was performing no services for any of the corporations. He employed his wife to work in the stores he managed, and he either paid her in cash or she paid herself from the cash register. From time to time he borrowed amounts up to $5,000.00 from the petty cash fund of a store, without the need of any other authority. When he borrowed from a store in that manner, he stated that "I just show a cash ticket as $4,000.00 or $3,000.00 or $2,000.00 or $1,-000.00, whatever it is," and that he simply held the ticket himself and did not show it to the CPA. He explained "I can keep any amount of cash in the store I want to. I am the president of the corporation."
Defendant also took from the store the groceries and drugs which he and his family used, without paying for them, and he took at least some of the gasoline he used in operating his cars from the store. His doctor and hospital bills were paid from store funds. He transferred substantial sums of money from the accounts of at least two of the corporations to savings accounts in his own name, without the need of any authority other than his own instructions.
The evidence shows that defendant retained the interest which was paid on the savings account which was used to purchase the Certificate of Deposit which is at issue here, and he reported that interest as his personal income on his 1971 income tax return. He explained that he did that to avoid the trouble of having to explain that the interest payments belonged to the corporation, and that "it wasn't worth messing with."
We find, as did the trial judge, that the evidence fails to offset the legal presumption that the funds which accumulated in defendant's savings account during his marriage, and which were used to purchase the Certificate of Deposit, became assets of the community.
The 1971 Ford pickup truck which defendant had in his possession at the time the community was dissolved was purchased with funds which belonged to the Bunkie corporation. The title to the truck was placed in defendant's name, however, and he used it as his personal vehicle. In answers to interrogatories which were propounded to him, defendant listed the truck was being owned by him, but he explained later that he did that only because the title to the truck was in his name. He testified that the truck actually belonged to the Bunkie store, and that the title was placed in his name solely because he negotiated with the dealer when it was purchased. The evidence shows that defendant took the truck with him when he moved from Bunkie to Kaplan, and plaintiff testified that he referred to the vehicle as "my truck."
It appears to us that the truck was purchased substantially in the same way as the Thunderbird was purchased for defendant's wife. The evidence indicates to us that defendant intended to acquire ownership of the truck. We agree with the trial judge, therefore, that the truck became an asset of the community.
The judgment appealed from decrees that the assets of the community, among other items, consists of "500 shares of Kaplan State Bank stock." The pleadings, the evidence and the reasons assigned by the trial judge show that the community actually owned only five shares of stock in that bank. The judgment must be amended, therefore, to show the correct number of shares of stock in the Kaplan State Bank, which belonged to the community.
No question is raised here as to whether any of the Piggly-Wiggly corporations might have a claim against the community, and we express no opinion as to that issue.
For the reasons herein set out, the judgment appealed from is amended by showing that the assets of the community included five shares of Kaplan State Bank stock instead of 500 shares of stock in that bank. In all other respects the judgment appealed from is affirmed. The costs of this appeal are assessed to defendant-appellant.
Amended and affirmed.
. These include the 120 shares in the Kaplan corporation issued to defendant at the inception of its incorporation as well as the 10 shares in the Leesville corporation and one share in the Bunkie corporation issued to the defendant on October 1, 1964, (termed original issue, actually being an increase in the number of shares of initial stock which were issued in the corporation).
. These include the 10 shares in the Leesville corporation and one share in the Bunkie corporation originally issued in the name of one of the incorporators and two shares in the Bunkie corporation (placed in the defendant's name on October 1, 1965) from his father and/or mother.