In March of 1916, when Frank Van Camp married Euphrasia, he was the president and general manager of the Van Camp Seafood Company. The court determined that he organized this company, which was capitalized with 2,000 shares of stock at a par value of $100 each. The court also determined that he was a man of large means, which included cash, notes, real estate and corporate stock, and that during his marriage he devoted his exclusive attention to the management of a corporation from which he received a large salary. It appears from this statement that the court implied large salary to mean adequate compensation. The question here is: Was the community adequately compensated for his efforts?
- Step 1: Determine compensation of owner spouse paid from separate property business.
- Step 2: Evaluate standard or reasonable compensation of other individuals in the same or a similar line of business.
- Step 3: Subtract Step 2 from Step 1 to determine the community interest in the business.
What is reasonable compensation? In Harrold v. Harrold (1954) 43Cal.2d. 77, the trial court adopted husband’s salary as value of community property. Wife objected, stating the amount was too low and asked for a Pereira calculation. The Court of Appeals disagreed with wife and affirmed the trial court. The Court of Appeals stated, “No fixed rule can be laid down which would be equitable in all cases.”
When using the Van Camp method, community living expenses must be deducted from community income to determine community interest.
The Van Camp court explicitly stated, “In the absence of any evidence showing a different practice, … the rule is that the community earnings of husband and wife are chargeable with the family support. Hence, any amounts of money expended for such purpose by either spouse during the existence of the marital relation are presumed to have been paid out of the community estate.”