Don J. Simplot v. Sharidon L. Simplot, 96 Idaho 239 (1974)

CASE: Wife of executive of the J.R. Simplot company appeals trial court's determination of separate property.

FACTS: Simplots were married in 1953, when Don owned 610 shares in a holding corportation for the J.R. Simplot Company, an agribusiness enterprise located in Boise, Idaho. At the time of their marriage in 1953, the shares in the holding company and Don's subsequent ownership interest in the J.R. Simplot company were worth $235,269. When the couple divorced in 1971, the 610 shares had increased 88 percent in value to $3,789,090. It was established at the trial that, because the board of directors of the Simplot, a privately held company, decided to reinvest their profits back into the growth of the company, they decided against paying a dividend. Therefore, Don had no means of obtaining the use or control over his proportionate share of the retained earnings.

QUESTION: Did the trial court err in not classifying as community property the respondent's proportionate share of the J.R. Simplot Company's retained earnings that were accumulated during the marriage?

SHARIDON ARGUES: The trial court erred in not classifying as community property the respondent's proportionate share of the J.R. Dimplot Company's retained earnings that were accumulated during the marriage. While the Idaho Code provides that the separate property of each spouse should remain separate upon dissolution, it also provides that all other property, including the rent and profits of the separate property of the husband and wife, is community property. Therefore, Sharidon argues, Don's share of the increase in retained earnings during the marriage is rent and profit of his separate property and in accordance with Idaho law is therrerfore community property.

Further, holding that Sharidon receives nothing from the increase in the defendant's share of the corporation will encourage husbands to hide their assents in a corporation so that they might be exempt from division as community property on dissolution.

COURT SAYS: Affirms the lower court ruling, finding for the husband (and the J.R. Simplot Company).

HOLDING: Trial court did not err in classifying as separate property for the purposes of distribution of property upon dissolution a husband's proportionate share of a private corporation's retained earnings that were accumulated during marriage where the huband had not means of obtaining the use or control over his proportionate share (so that the increase did not represent net income) and where there was no evidence that the husband used the corporate structure to deprive the community of earnings.

RATIONALE:

• Rents and profits mean net rents and profits, and the Idaho code was amended to state that rents and profits mean income only.
• The natural enhancement in value of separate property remains the separate property of the spouse.
• Defendant has a right to preserve his separate property. If the increase in retained earnings allowable to the 610 shares of Apex stock is held to be community property, the result will be to divide and distribute part of the respondent's stock owned as separate property.
• For the court to declare that the respondent is entitled to a portion of the retained earnings would be in effect to require the J.R. Simplot Co. to declare a dividend and then require Apex corporation to declare a dividend and thus, substitute its judgment for the business judgment of the directors of both the Simplot and Apex Corporations.

T O P