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Spouse Entitled to Business Records in a Divorce : Jurisprudence: In an Orange County case, the state Supreme Court ruled the businessman must give his wife detailed financial data on his corporation.

July 24, 1993|From Associated Press

SAN FRANCISCO — The spouses of business owners have the right to extensive company financial records during divorce proceedings, the California Supreme Court has ruled.

The court ruled unanimously that an Orange County businessman must give his wife detailed financial records of the corporation of which he was one of two shareholders.

The justices, affirming lower court rulings, cited California's "strong public policy in favor of full disclosure" in determining community property. The wife "has at least as great a right of discovery from the corporation as any shareholder," the court said in Thursday's ruling.

The case before the court involved a Tustin couple, Terry and Marilyn Schnabel, who separated in 1991 after 25 years of marriage. Terry Schnabel owned about 30% of Orange Container Inc. and had gross income of about $6,600 a month. Marilyn Schnabel was a department store sales clerk who earned abut $2,200 a month.

Marilyn Schnabel, trying to sort out the couple's community property, asked to see business and tax records from Orange Container. The company turned over general financial documents and all records concerning her husband but refused to give her any other information.

A trial judge and an appeals court ruled in Marilyn Schnabel's favor and ordered the company to turn over such records as bank statements, lists of accounts receivable and payable and payroll tax returns.

The Supreme Court, in its ruling, noted that Marilyn Schnabel had an equal interest in her husband's stock and was entitled to the same information.

Earlier state decisions protected tax returns in lawsuits, but the court created an exception in the Orange County case because the marital property and corporation were closely related and because the company was privately held, making it more difficult to determine its market value.

The court, however, found that, while Marilyn Schnabel had the right to her husband's payroll tax information, she had no right to the payroll tax records of other employees.

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