Court of Appeals of California
73 Cal. App. 4th 1032 (1999)
Frederick Koester (defendant) owned a sole proprietorship prior to his marriage to Jeanne Koester (plaintiff) in November 1986. At the time of the Koesters’ marriage, Frederick’s business was worth $337,500. In 1989, the sole proprietorship was incorporated. Subsequently, Jeanne and Frederick went through a divorce. At the time of the divorce, Frederick’s business was worth $622,000. Frederick presented evidence that the rate of return on his $337,500 separate-property investment was 10 percent. According to evidence presented by Frederick, the value of Frederick’s investment and the return on his investment at the time of divorce would have been $558,000. The trial court did not take Frederick’s return on investment into account in dividing the community property. The trial court ruled that incorporating Frederick’s business rendered it an acquisition of the community. The court held that the business, as an acquisition during marriage, was subject to California Family Code § 2640. Section 2640 provides that a spouse recovers his or her separate-property contribution to a community acquisition but no return on the contribution made. The trial court ruled that Frederick was entitled to recover only his initial investment in the business: $337,500. Frederick appealed the trial court’s ruling.
Rule of Law
Holding and Reasoning (Sills, J.)
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