Question: When I first married 25 years ago, my parents invested $65,000 in a business my husband started in order to keep us from going into debt. My husband agreed in writing to issue 25 percent of the stock to my parents and told them -- and me -- that the stock was in the safety deposit box. Because he was taking care of me and my children and because they trusted him, my parents never asked that their stock be delivered to them, and I never gave it a second thought.
Over the years, as the business grew and my husband raised money from different investors who became stockholders in the company, our lifestyle increased greatly. Then, after 18 years, my husband moved out of our home and into an apartment with his secretary. When I sought out legal advice, I learned for the first time that my husband owned 55 percent of the stock, other investors owned 45 percent among them, and my parents are own nothing. In fact, my accountant says that the corporate books don't even show any contribution by my parents who have the check and the agreement. Now that my lawyer is preparing to bring a divorce suit on my behalf, should I make a claim for my parents' interest or should they make their own claim? They are in their mid-60's and don't relish the idea of going to court.
Answer: While parents and relatives often make investments, loans, contributions, or gifts which allow young couples to go into business without bank debt, unfortunately, because of the family relationships involved, most do not protect their investments or loans. Your folks are a prime example.
Generally speaking, family courts have the authority to allow third persons to become parties to marital litigation in order to afford a complete adjudication of all issues and to avoid multiplicity of suits to accomplish the same end results.
Assuming your parents have a written commitment by your husband that 25 percent of the stock would be issued to them, we believe that your husband and the corporation have some serious problems, not the least of which being that he sold securities to others without disclosing the ownership interest of your parents.
And assuming your parents can prove their entitlement to 25 percent of the initial stock, they just may have significant ownership in the company as it is currently structured. Since the more they prove they own, the less there is to divide between you and your husband, your parents' interests are technically adverse to yours. However, since they are "friendly adversaries," in the long run, your interest in the company may be more than had you and your just husband divided his 55 percent.
Under these circumstances, we believe that (1) your attorney should consider making your parents parties to the lawsuit in order to make sure that all issues are tried together; and (2) your parents should retain their own lawyer to represent their interests. As the valuation and corporate issues involved will be rather complex, a certified public accountant, a securities lawyer, and a corporate attorney are probably "musts."
SoloFact: Oftentimes medical, employment, psychological, and psychiatric records -- not to mention tape recorded interviews -- contain fertile information about a party or a witness that can be used to impeach or discredit that person's testimony. What people tell their family doctors, OB-GYN's, urologists, counselors, and others as medical history is truly amazing. It's always a good idea to learn from those with whom you counsel how they keep records. And find out which professionals in your state are entitled to keep their records confidential.
Jan Collins Stucker is an award-winning writer and editor. Jan Warner is a matrimonial, tax, and elder law attorney. Both are based in Columbia, South Carolina.
Please send your questions by e-mail to janwarner@flyingsolo.com or by mail to P.O.Box 11704, Columbia, S.C. 29211.
