Marriage of Czapar
Court of Appeal of California
285 Cal. Rptr. 479 (1991)
William (plaintiff) and Phyllis Czapar (defendant) together started plastic-extruding company Anaheim Custom Extruders (ACE); William filed for divorce in 1984 and the parties agreed ACE was community property but disputed its value. The trial court awarded ACE to William and calculated its cash value at $494,058, based on a $644,058 market value reduced by $150,000 representing the theoretical value of a covenant not to compete William would likely have to enter into if he ever sold ACE for cash value — despite no evidence he actually planned to sell ACE anytime in the foreseeable future. Phyllis appealed.
Whether the worth of a theoretical covenant not to compete should be considered as a factor in determining the valuation of a community-property business interest.