Court Opinion

ID: 9863731
Source: CourtListenerOpinion
Date Created: 2023-09-25 05:53:25.603283+00
Date Added: 2024-06-11T12:04:13.522321
License: Public Domain

SHEPARD, Chief Justice
(dissenting).
I concur in the holding of the majority that appellant is not entitled to a part of “the retained earnings” of J. R. Simplot Company. There is no question but that the actual stock is the separate property of the respondent. The only question is whether there were rents and profits (defined in I.C. § 32-906 as income) which constitute community property. Although there may be retained earnings of the corporation, such appears to me to be academic since in the present case no dividends have been declared and therefore neither appellant nor respondent have any interest (except in futuro) in any retained earnings. It is stated in Fletcher’s Cyclopedia of Corporation, Sec. 5321, p. 613 “ * * * the cases are in entire harmony on the point, that the earnings and profits of a corporation remain the property of the corporation until severed from corporate assets and distributed as dividends. Until that time stockholders have no property interest therein.”
Although the corporation appears to be largely controlled by respondent’s father there is nothing to show that respondent himself had any more control over the distribution of earnings or any other company policy than would a small stockholder in a large publicly held General Motors type of corporation. Thus there would appear no basis for a piercing of the corporate veil on the basis that it was only the alter ego of the respondent or that fraud was committed.
It was stated in Hiatt v. Hiatt, 94 Idaho 367, 487 P.2d 1121, that to the extent that the labor industry or efforts of the parties contribute to the value of separate property of one of the parties the community is entitled to be reimbursed from the separate estate. In Hiatt the trial court found that a separate business of the husband was enhanced by the application of profits to reduce indebtedness and therefore that the wife had gained an interest in the separate estate. That finding and result was sustained on appeal. The case at bar is the converse of Hiatt.
There is nothing in the evidence to indicate that the labor industry or effort of the parties hereto contributed to any enhanced value of the stock in the corporation or that the labor industry or efforts of the parties hereto contributed to the accumulation of corporate retained earnings. All the evidence is to the contrary and justifies the finding of the trial court.
I continue to disagree with the majority’s reliance on Malone v. Malone, 64 Idaho 252, 130 P.2d 674. In Malone the court said:
“On dissolution of the marriage, by divorce, the community estate was entitled to be credited, and the estate of the husband charged, with expenditures made from community funds in improvement of his separate property, . . . ” 64 Idaho at 253, 130 P.2d at 677.
I further disagree with the majority’s interpretation of Gapsch v. Gapsch, 76 Idaho 44, 277 P.2d 278. The actual language of that case states:
“As a general rule, the natural enhancement in value of separate property during coverture does not constitute community property; however, to the extent an enhancement in value is due to community efforts, labor, industry or funds, it *248falls into the community. * * * Again, as a general rule, though not absolute, a so-called profit or gain from the sale of separate property occasioned by a natural enhancement in the value of such property, constitutes a part of the separate estate.” 76 Idaho at 52, 277 P.2d at 282.
In Gapsch the court held that most of the separate property of the husband had been enhanced by community effort and awarded the wife an interest in the husband’s separate property. See also Hiatt v. Hiatt, supra.
The trial court found that certain property in Ketchum, Idaho was the separate property of the respondent and awarded it to him. The majority suggests that the trial court “apparently found the transaction to be a gift transfer.” The trial court found only that it was the respondent’s separate property. The only testimony regarding that transaction indicates that a wholly owned subsidiary of J. R. Simplot Company carried such property on its books at a zero valuation and transferred it to the respondent who was a vice-president, director and full-time employee of J. R. Simplot Company.
The Ketchum property was acquired during marriage and is presumed to be community property. The burden of proving otherwise was on the respondent. In my judgment the testimony is not persuasive of a “gift” by the corporation. Such must be established by “clear and convincing” evidence. Idaho First National Bank v. First National Bank of Caldwell, 81 Idaho 285, 340 P.2d 1094. The majority herein finesses the question by holding that the appellant has no standing to contest the gift since she is not a stockholder of Simplot Realty [which she is not] which corporation is a wholly owned subsidiary of J. R. Simplot Company [of which she is a stockholder], I believe the holding of the majority begs the question of whether the respondent established the status of the Ketchum property as a part of his separate estate. I would hold that the Ketchum property is community.
The majority opinion approves the trial court’s finding that a debt of $98,720 to Idaho Bank and Trust Company was a community debt and affirms the trial court’s action in assigning said debt to the respondent. That alleged community indebtedness was of course considered by the trial court in its allocation of community assets and community indebtedness. I disagree with the opinion of the majority to the extent that it affirms the trial court’s finding of a community indebtedness. That indebtedness allegedly represents moneys which were used in the operation of a business known as Todd’s Haufbrau. The testimony indicates that J. R. Simplot Company advanced approximately $75,000 for the operation of that business. When the business was liquidated and sold the proceeds thereof went to Inland Terminal, a corporation owned by the Simplot family. The testimony is also clear that the appellant had no knowledge of such financing operation and that she joined in no instrument evidencing indebtedness to the Idaho Bank and Trust. One must be credulous in the extreme to assume that the community credit was the basis for the respondent borrowing nearly $100,000 from a bank on an unsecured personal note. I would suggest rather that the above noted evidence taken together with the nearly $4,000,000 separate property estate of the respondent suggests clearly and pointedly that the moneys were extended upon the separate credit of the respondent and that the debt should be found to be the separate debt of the respondent.