FOX VS. FOX (DIVORCE PROPERTY & ALIMONY)

Statutes cited

Key holdings

Practitioner summary

Badt, J. In valuing a community business on divorce, the husband, as statutory manager of the community property (NRS 123.230), bears the burden of explaining and proving the source of funds deposited in the community business account. Where he intermingled funds and could not show that large unidentified deposits ($123,706.37) came from sources other than the community restaurant, those deposits had to be treated as receipts of the business for purposes of valuing goodwill; the master and trial court erred in excluding them. The court analogized Ormachea v. Ormachea, 67 Nev. 273, 217 P.2d 355 (1950), and treated the managing husband as a trustee for the wife's share. Division of community property and the awards of alimony and attorney fees under NRS 125.150(1)-(2) rest in the trial court's discretion, which was not abused as to the remaining provisions; litigation costs were properly ordered paid from the community before division. Reversed and remanded for a limited new trial on goodwill valuation; affirmed in all other respects. See Weeks v. Weeks, 72 Nev. 268, 302 P.2d 750 (1956).

In plain language

The Foxes built a successful Las Vegas restaurant and delicatessen, Foxy's, run through a company they wholly owned. All of the company's property was community property. When they divorced after 29 years of marriage, the hardest question was how much the business was worth, especially its goodwill. The wife appealed the parts of the decree dividing the community property and setting alimony and attorney fees. The husband had run all of his personal and business money - restaurant profits, real estate deals, and loans - through one company bank account, and he could not identify the source of about $123,706 in deposits because the deposit slips had been lost. If that money came from restaurant profits, it would substantially raise the value of the business's goodwill. The trial court and its accounting master left that unidentified sum out of the goodwill calculation. The Nevada Supreme Court held that was error. Because the husband, as manager of the community, intermingled the funds and could not prove the unidentified deposits came from somewhere other than the restaurant, the burden fell on him, and the deposits had to be treated as restaurant receipts. The court sent the case back for a limited new trial to recompute the goodwill including that sum. It affirmed the rest of the decree, including the modest alimony, the attorney fees, and the costs paid out of the community, finding no abuse of discretion in those rulings.