Marriage Of Micalizio

199 Cal. App. 3d 662 (1988)

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Nature of the Case

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Facts

H has been employed since 1960 for the J. R. Norton Company (Norton). In June 1963, H purchased stock in Norton for $100,000 and financed the purchase by executing two promissory notes which called for 19 annual principal payments of $2,500 with balloon payments in the 20th year. The share certificates, which were issued in his name alone. Norton pays dividends only on its preferred stock, all of which is owned by J. R. Norton. In March 1971, Robert executed a first right of refusal in favor of Norton; H must offer to sell to Norton for the lower of the book value of the stock adjusted annually on the basis of standard accounting principles, or the amount offered by any third person. H and W were married in June 1971. H and W separated and maintained separate households at least four times for periods of six months to three years. W wrote checks from a community account to make the principal payments on H's promissory notes. In 1974, the buy-sell agreement was modified to change the formula for determining the price of the stock in the event of a sale to the corporation. H filed for dissolution in May 1981. The evidence showed that the value of the stock under the buy-sell agreement was approximately $13 per share. The 1971 buy-sell agreement and the 1974 modification were introduced as exhibits. The secretary-treasurer of Norton testified that if Norton were to liquidate all of its assets, its stock would be worth $25 per share. The court ruled that the stock should be valued 'on the pro-tanto basis, allocating a portion of the value at the date of trial to the community.' The court found that nine annual principal installments of $2,500 had been made by the community, for a total contribution of 22.5 percent of the purchase price of the stock, or the equivalent of 33,750 shares. The court assigned a value of $ 13.667 per share to the stock, but directed division of the community shares in kind. In June 1984, the buy-sell agreement was again amended to provide, among other things, that Norton must consent to all stock transfers, assignments, or conveyances. H did not advise the court of the amendment during the trial. W claimed that the newly discovered amendment was oppressive to her and made her shares of Norton stock unsalable. She, therefore, requested the court to order H to pay her the value of the shares of stock. H submitted declarations of Norton officials stating that: (1) Norton would issue shares of stock to W without the restrictions of the June 1984 agreement, and (2) as of September 30, 1984, the book value of the stock had declined to $12.04 per share because of losses incurred in the lettuce crop. The court concluded that its 'real value' was $25 per share. The court ordered H to execute a promissory note for $421,875, amortized over 10 years, at 10 percent interest to compensate W. H eventually appealed.