Under Community Property Principles, Impending Divorce Could Threaten Chief Executive's Control of Billion Dollar Oil Company

April 4, 2013
By Thomas M. Huguenor on April 4, 2013 4:09 PM |

1388612_market_movements_2.jpgCalifornia is a "community property" state. This means that in the eyes of the law, a marriage makes two people one legal "community." In effect, when couples marry in San Diego, the wealth (and debts) they accumulate become community property, which entitles each spouse to one-half of the total amount. In the event of a divorce, community property and debts are typically divided equally. It is a widely accepted principle throughout the country; in some states it is referred to as "marital property."

A recent Reuters article describes the looming divorce between Harold Hamm, chief executive of Continental Resources, described as America's fastest growing oil company, and his estranged wife, Sue Ann Hamm, who has held "key posts" at the company over the years. The article focuses a great deal on the eventual division of marital property and how that will affect Harold Hamm's current controlling stake in Continental Resources, worth approximately $11.2 billion. It is unclear whether the couple had previously signed a pre-nup agreement and without one, the divorce settlement could split up Harold Hamm's 68% ownership of the company.

In this case, the company experienced a massive financial growth that took place during the course of the couple's marriage. According to the article, the stock share price increased virtually 500 percent during the five years following the initial public offering. The increase in the value of an asset during a marriage is typically deemed part of the marital property. And while this marriage falls under the laws of Oklahoma, many of the same legal principles apply as in California. In Oklahoma, just like in California, wealth that accrues during the marriage by the efforts of either spouse would usually be subject to equal distribution between the couple.

The court is expected to take a close look at what each spouse contributed to the increase in the business' financial worth. An interesting factor here is that Sue Ann Hamm was also working at the company during the marriage. In situations like these, when the issue of company control comes up in a divorce proceeding, it is reported that a spouse will likely get paid the value of the shares to which he or she is entitled.

Separate property, not subject to division between divorcing spouses, is anything that one owns before the marriage. For example, inheritances and gifts to one spouse even during the marriage are separate property. Further, rents, profits, or other money earned from one's separate property, and items one purchases with separate property are also deemed separate property.

For clarification, property is anything that can be bought or sold, such as a home, cars, clothing, or furniture. Property also includes other items that have measurable value, such as a business (as in the case here), bank accounts and cash, pension and 401(k) plans, stocks, security deposits on an apartment, life insurance with cash value, or a patent.

Determining what is marital or community property versus separate property can be complicated and typically has its roots in established local laws. Divorcing spouses are encouraged to contact an experienced Family Law attorney who practices in the San Diego area.

Thomas Huguenor, a divorce attorney certified in family law by the State Bar of California’s Board of Legal Specialization, has 35 years of experience guiding the people of San Diego through the family law process. If you have questions concerning the division of property, contact us either online or at (858) 458-9500 for a free and confidential consultation.

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