## Facts

- Before marriage, the husband bought shares in a closely held agricultural corporation, financing the purchase with promissory notes secured by the stock.
- The corporation’s minority shareholders (including the husband) were subject to a buy-sell agreement limiting transfer and requiring shares be offered to the corporation under a contract price formula.
- The parties married after the husband acquired the stock; during marriage, community funds were used to make principal payments on the stock-purchase notes.
- The husband filed for dissolution; marital status was terminated while the court reserved jurisdiction to decide property issues.
- In June 1984, the corporation amended the buy-sell agreement in a way that further restricted stock transfer; this amendment was not disclosed to the wife or the court at the time of the initial property ruling.
- After a short trial on property issues, the court initially valued the shares at approximately $13.667 per share (consistent with the buy-sell formula evidence) and divided the community interest by awarding shares.
- After learning of the amendment, the wife sought a new trial, arguing stock awarded to her was effectively unmarketable; the trial court reopened proceedings and entered a later judgment valuing shares at $25 per share based largely on testimony about possible liquidation value, and awarded the wife a monetary offset via a promissory note from the husband.
- The husband appealed, challenging the trial court’s power to enter the later judgment and the evidentiary basis for the $25 valuation, among related property-division points.

## Issues

1. Whether the trial court lacked jurisdiction to reopen the property proceedings and enter a later property judgment, rendering that judgment void.
2. Whether the $25-per-share valuation of a minority interest in a closely held corporation was supported by substantial evidence where it relied heavily on hypothetical liquidation value and did not properly account for transfer restrictions.
3. How separate-property stock acquired before marriage should be treated when community funds are used during marriage to pay down the purchase debt, and how that affects division upon dissolution.

## Decision

- The court held the trial court retained authority to reopen the proceedings because property issues remained under reserved jurisdiction and no final property judgment had been properly entered.
- The court ruled the $25-per-share valuation was not supported by substantial evidence because it rested primarily on speculative liquidation testimony and did not adequately weigh minority status and contractual transfer limits.
- The court reversed the valuation component of the judgment and remanded for a new valuation consistent with proper closely held stock valuation factors.
- To the extent an appeal was taken from an ineffective or void procedural posture, the appellate court dismissed that portion while addressing the merits through the operative judgment.

## Legal Principles

- In dissolution cases, when property division remains under reserved jurisdiction and no final judgment on property has been properly entered, the trial court may reopen proceedings and take additional evidence without acting beyond its jurisdiction.
- Valuation of a spouse’s minority interest in a closely held corporation must be supported by substantial evidence and should consider multiple relevant factors, including:
  - the company’s nature and history, financial condition, earning capacity, and dividend history;
  - general economic and industry conditions;
  - contractual transfer restrictions (including buy-sell agreements) and their effect on marketability; and
  - the practical limits of a minority shareholder’s control.
- Speculative testimony about what shares might be worth upon liquidation of a going concern, standing alone, does not constitute substantial evidence of present fair value for a minority interest.
- Stock acquired before marriage generally remains separate property, but community payments reducing acquisition debt may create a community interest or reimbursement/apportionment claim to be recognized in the property division.

## Conclusion

The appellate court upheld the trial court’s ability to reopen unresolved property proceedings but reversed the enhanced stock valuation because it lacked substantial evidentiary support and improperly relied on hypothetical liquidation value without adequate consideration of minority-interest and transfer-restriction effects; the matter was remanded for proper valuation and related property determinations.


In re Marriage of Micalizio, 199 Cal. App. 3d 662 (Ct. App. 1988)