Marriage of Koester

Frederick Koester (defendant) owned a sole proprietorship worth $337,500 before marrying Jeanne Koester (plaintiff) in November 1986; in 1989, the sole proprietorship was incorporated, and by the time of the couple's later divorce, the business was worth $622,000. Frederick presented evidence that his $337,500 separate-property investment would have earned a 10 percent return, meaning his investment plus its own return would have been worth $558,000 by the time of divorce. The trial court declined to credit Frederick with this return on investment, instead ruling that incorporating the business rendered it a community acquisition subject to Family Code § 2640 — which lets a spouse recover only his separate-property contribution to a community acquisition, without any return on that contribution — limiting Frederick's recovery to his original $337,500 investment. Frederick appealed.