Phillips v. Wagner

470 So. 2d 262
CourtLouisiana Court of Appeal
DecidedMay 13, 1985
Docket84-CA-664
StatusPublished
Cited by15 cases

This text of 470 So. 2d 262 (Phillips v. Wagner) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Phillips v. Wagner, 470 So. 2d 262 (La. Ct. App. 1985).

Opinion

470 So.2d 262 (1985)

Patricia PHILLIPS, Wife of Reginald C. Wagner, Jr.
v.
Reginald C. WAGNER, Jr.

No. 84-CA-664.

Court of Appeal of Louisiana, Fifth Circuit.

May 13, 1985.

*265 Baldwin & Haspel, William E. Wright, Jr., David P. Banowetz, Jr., New Orleans, for defendant-appellant.

Cabral & Cabral, Harry R. Cabral, Jr., H. Craig Cabral, Metairie, for plaintiff-appellee, cross-appellant.

Before BOUTALL, CHEHARDY and GRISBAUM, JJ.

CHEHARDY, Judge.

We are concerned here with a partition of community property of Reginald C. Wagner, Jr., and his former wife, Patricia Phillips.

Mr. and Mrs. Wagner were married on November 23, 1962. Three children were born of the marriage, Michelle, Greer, and Cadence. Only one child is still a minor. On November 9, 1982 Mrs. Wagner filed a petition for separation from bed and board. Judgment was rendered in her favor on February 23, 1983 and on February 24, 1984 the parties were divorced.

In connection with the separation proceeding Mr. Wagner filed a petition for partition of the community property and a sworn descriptive list of assets and liabilities as of June 14, 1983. The list included stocks, securities, business interests and immovable property. Most of the assets were liquidated thereafter, and the proceeds were deposited in a joint bank account in the names of both parties. These actions were reflected in an amended list submitted on February 23, 1984 and the parties were divorced the following day.

At the trial of the partition the couple agreed that the court would decide the legal and factual issues (i.e., to classify certain property and obligations as chargeable to the community or separate estates), and the accounting aspects would be resolved by the parties.

On April 24, 1984, the trial court issued two judgments which form the basis for this appeal. The first judgment provides that the enhanced value of 52 shares of stock of Wagner & Truax (Realty) Company, Inc., which was owned by Mr. Wagner prior to his marriage, enured to the benefit of the community. The court placed a value of $15,000 on the stock at the inception of the community (1962), and this sum was subtracted from the sale price. Wagner was ordered to account to the community for the enhanced value of $355,821, plus interest.

In the same judgment the court held that the enhanced value of 101 shares of Wagner & Truax Insurance Agency, Inc., stock enured to the benefit of the community. A 1962 value of $5,000 was assigned to this stock, and Wagner was ordered to account to the community for the enhanced value of $57,500, with interest.

We shall discuss the other judgment later in this opinion. Mr. and Mrs. Wagner have appealed from both judgments.

The first question for our determination is whether or not the trial court correctly apportioned the proceeds of the original 52 shares of stock of Wagner & Truax, Company, Inc., to the community.

It is Mr. Wagner's position that this stock at its inception, and at all times thereafter, was his separate property and always remained under his administration and control.

It is Mrs. Wagner's position that although the trial court was correct in recognizing the enhancement in value as a community asset, nevertheless the court erred in allowing Mr. Wagner a $15,000 credit against the enhanced value.

In addressing these issues we examine the transactions of the realty corporation in chronological order from its inception until the sale:

On or about November 21, 1960, two years prior to his marriage, Mr. Wagner formed a corporation known as Wagner Company, Inc., to engage in the business of selling real estate. As principal owner he held 100 shares of the 104 shares issued. The work force consisted of Mr. Wagner and five or six sales people.

On January 5, 1961, Dalton Truax became a 50% owner, and the name of the *266 corporation was changed to Wagner & Truax Company, Inc. The stock ownership was realigned and Mr. Wagner and Mr. Truax each became owners of 52 shares. These are the shares which are in question here. The company prospered.

On November 23, 1962 the Wagners were married, and the community came into existence. At that time the company had about 30 sales people and was generating $700,000 to $1,200,000 in sales per month and grossed $250,000 to $300,000 that year.

Wagner and his partner Truax had other investments and enterprises. One of these joint projects was Causeway Enterprises, Inc., which was founded on December 31, 1964. The principal purpose of this corporation was to construct, own, lease and operate an office building on Causeway Boulevard in Metairie, Louisiana, to be occupied principally by the realty company. When Causeway Enterprises was formed, Mr. Wagner and Mr. Truax each received 50 shares of stock in that corporation.

On December 30, 1971, seven years after its inception, Causeway Enterprises merged with Wagner & Truax Company. In connection with the merger Wagner and Truax each surrendered their 50 shares of Causeway Enterprises stock and received in return an additional 50 shares of stock in Wagner & Truax Company, Inc., and Causeway Enterprises went out of existence.

Thus Mr. Wagner now had 102 shares of the realty company stock—the 52 shares he held prior to the marriage, plus the 50 shares acquired following the merger. These 50 shares are admittedly community property and when they were sold the community received full payment. They are not an issue here.

Wagner contends the community was fully compensated for its interest in Causeway Enterprises by the issuance of the additional 50 shares of Wagner & Truax Company stock, and the community received substantial tax benefits from the merger.

In connection with the circumstances which give rise to the merger, Mr. Wagner testified:

"* * * Causeway Enterprises, Inc. was an ordinary corporation. It could not elect Subchapter S, because basically all its income was passive income.
"We were creating a loss in that corporation that was just staying in the corporation and wasn't helping myself or my partner at all.
"We consulted Arthur Andersen & Co. and there were several alternatives, one we could liquidate that corporation then put the property in our own names, but if we would have done that, we would have had a big capital gain.
"The more preferred method was to merge that corporation into Wagner-Truax Company, Inc. which in fact was a Subchapter S corporation. Then the losses generated by that real estate would be a very distinct advantage to offset the income that my partner and I received from Wagner-Truax Company, Inc." (Tr. Vol. 2, pp. 106-107.)

On or about May 11, 1983 Mr. Wagner sold the 52 shares of Wagner & Truax Company stock to Dalton Truax for $370,821. Mrs. Wagner was unaware of this transaction.

Shortly thereafter Mr. and Mrs. Wagner sold the 50 community shares of Wagner & Truax Company to Mr. Truax for $357,564. These were the shares received from the merger of Causeway Enterprises in 1971.

The 52 shares of stock in Wagner & Truax Company which were Wagner's prior to his marriage are clearly his separate property under LSA-C.C. art. 2341, which provides in pertinent part:

"The separate property of a spouse is his exclusively.

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Bluebook (online)
470 So. 2d 262, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phillips-v-wagner-lactapp-1985.