August 22, 2006
COMMUNITY PROPERTY – FALL 2006 – WENDEL
1. PARTIES
A. Married/Registered Domestic Partners (retroactivity)
B. Putative Spouse: a spouse who has a good faith that there is a valid marriage.
• Death: judicially and codified in the statute Family Law Act. Is there another spouse? If there is no other spouse, then the putative spouse gets the same rights. If there is a spouse then you evaluate the property from the prospective spouses.
o Community Property
o Separate Property( If spouse dies intestate, the court divides the property equally between real spouse and putative spouse
• Divorce (treated the same as a validly married couple).
o quasi-marital property
o Support is also available
C. Co-habitants
• K( express (written or oral) OR implied although courts use a higher threshold
Cohabitants generally
Cohabitants do not qualify as putative spouses but may have a contractual claim, an implied contract or can use quantum meruit to recover.
• When there is an asset with a written title, there is a need for clear and convincing evidence to overcome the written instrument.
• Where there is an implied k claim, the parties have to be cohabitating because otherwise any dating relationship could make claims and this would create possibility of fraudulent claims.
Equitable Remedies
Domestic Partnership Act 1999 & 2002
• 1999 – Registration for domestic partnership and some rights are available to them but not community property rights
2097.5 (adopted 2003, operative as of 1/1/2005)
• This law is retroactive to the Domestic Partnership Act (1999). This is takings.
• The registered domestic partners had an opt out provision for domestic partners to opt out between 2003- 12/31/2004.
• You must be registered domestic partners.
• (a) Registered domestic partners shall have the same rights, duties, and benefits, as spouses ( infer that domestic partners have community property rights
Heterosexual Couples
Domestic Partner legislation enacted in 1999
• Did not recognize CP rights…
• However, CA legislature enacted Section 297.5 (operative as of Jan. 2005) allowing same rights imposed upon spouses.
o Can be applied retroactive to the date domestic partners were registered.
o “Taking” as issue when retroactively applied? Unconstitutional? Violative of due process rights?
Coats v. Coats (1911) Quasi- Marital Property
Facts: H&W, married for 19 years, and H wants to annul the marriage for physical incapacity of the W.
H’s: Because of the annulment of the marriage, all the property acquired should be separate property.
W’s: Equitable argument that she thought the marriage was valid at the time, “this is not fair.”
Holding: This is not fair. Technically even though there is no marriage, the court will recognize equitable community property. W is entitled to half.
Family Law Act of 1969: Codifies equitable community property( Calling this quasi-marital property, and treating this like community property. Under the act, W can receive spousal support. There is no difference between a void or voidable marriage.
• (1) Must qualify as a putative spouse.
• (2) This statute only covers until the termination of the marriage based on divorce.
Rule for Equitable community property/ quasi-marital property: a good faith belief in the validity of the marriage relationship is a requisite to the operation of the quasi-marital property system.
• CA Legislature Section 2251 – codifies Quasi-Marital Community.
• Putative Spouses qualify for spousal support – Section 2254.
• Spouse has to qualify as “putative”… death or divorce? See Estate of Leslie.
• Tests in defining “good faith.” –
o Subjective – examine particular person;
o Objective – reasonable person.
o CA analyzes with Objective Test.
Note for Void or Voidable Marriage: Void if it is bigamy or incest. Voidable for physical incapacity, mental incapacity, fraud, or force.
Estate of Leslie (1984) Putative spouse relief for death.
Facts: H and W married in Mexico and W dies intestate. This was W’s second marriage. They did not record the marriage but they had a good faith belief that they were married. H assumes that he will get all of her CP. W has children from previous marriage. However, the children do not like H, and so they take him to court.
Children’s: the marriage was invalid and so H has no property rights to inherit.
Putative spouse requirement: Either one or both spouse has a good faith belief that they are in a valid marriage. Good faith analysis:
• (1) Objective: What a reasonable person would believe (CA uses this standard). The “major factor” is the solemnization ceremony in determining that there was a good faith belief that there was a marriage.
• (2) Subjective: the party whose mentality we are examine
Issue: Whether the putative spouse is entitled to death benefits?
Holding: The court holds that a putative spouse is entitled to succeed to a share of the decedent’s separate property.
Rationale: Inherently fair result would be to allow a surviving putative spouse to succeed to a share of his or her decedent’s separate property.
Rule: A putative spouse is treated like a legal spouse.
Note: Probate property, intestate property, the surviving spouse’s take depends on if it is community property or separate property. If community property, the spouse gets 100% of decedent’s half. If separate, then 100%, if no issue. , 33% if there is no child.
Estate of Hafner (1986) (Quasi-marital property and putative spouse)
Facts: The underlying previous marriage was still valid. H & W1 were married during ’54. W1 doesn’t move to CA with him. Neither of them seek a divorce. H meets the bar maid, and H says that he was divorced. H marries W2 (Helen). H was in an accident and received $600k from this. W2 takes care of him for 9 years when he is unable to work. H dies with $400k left, and he dies intestate. W1 pops up after H dies.
Holding: Half of the property should be given to W1 and his surviving children and the other half of the property should be give to W2.
Rationale: the court views the character of the property in H’s intestate estate from the perspectives of the surviving wife and the surviving putative spouse. The court bases it’s decision on equity.
Vallera v. Vallera (1943) Cohabitants
Facts: Cohabitants.
DB: Where the joint contributions to joint acquisitions, the parties own a proportion to their contribution, and the trial court therefore awarded them property as tenant in common, or she could use under k.
Holding: Girlfriend is not entitled to .5 boyfriend’s personal property because of cohabitation alone. However, she only contributed services and no funds so she is not entitled to half of the property interest. You cannot award property based on services.
Rule: A woman who lives with a man as his wife but with no genuine belief that she is legally married to him acquires by reason of cohabitation alone no rights of a co-tenant in his earnings and accumulations during the period of their relationship.
Rationale: The woman did not have a good faith belief in the existence of a valid marriage.
Rationale for marriage or registering for domestic partnership: The paper gives notice and good for public policy purposes.
K-based argument: In Vallera, the court required an express k. This could be an oral agreement or written agreement.
Marvin v. Marvin (1976) Cohabitants
Facts: Non-marital cohabitants. P and D lived together for 7 years. They had an agreement she would take care of the home and provide services and that that P receive ½ personal property accumulated during the relationship and support payments. P argues that she contributed to the relationship.
DB: trial court held that the P gets nothing
D’s: This agreement would be bad public policy because it is related to sexual relations as part of considerations.
Holding: Courts should enforce express k between non-marital partners except to the extent that the contract is explicitly founded on the consideration of meretricious sexual services. Cohabitants have the right to contract. The contract can be oral or written and the court will also imply this based on the conduct of the parties. Even in the absence of an express agreement or an implied agreement, under quantum meruit for services rendered is available.
Rule: The courts should enforce express and implied contracts between non-marital partners except to the extent that they are explicitly founded on the consideration of meretricious sexual services and should also employ the doctrine of quantum meruit, or equitable remedies such as constructive or resulting trusts, in distributing property acquired during a non-marital relationship, when warranted by the focus of the case.
D on A: Reversed
On remand: the court found no express agreement, nor an implied agreement. The court awarded the money for rehabilitation purposes and to have economic means to re-educate herself.
Note: The court imposes a high threshold for implied contract. This is in contrast to the pre-1985 transmutation standard, with a low threshold.
2. PROPERTY
Characterization
Degrees, licenses are not property. If you have a license and start a company with that license it can be property. Goodwill is usually community property. Insurance:
• Whole life (a) cash surrender value( community property; (b) coverage/death benefits ( community property, so upon death the proceeds were community
o Above assuming that payment is made with community property. If paid with separate property and community property, you would apportion the amount)
• Term insurance: there is no cash value and you are only buying coverage. Can be community property if purchased with community property. If the payments were made with separate property and community property then it is apportioned. If this is employer benefit, this would be community property and the proceeds would be community property.
• Term life insurance policy with no community property payments toward that period of coverage. ( The courts are split
o (1) Lorenzo: No community property payments then it is separate.
o (2) Gonzales: for a long-term policy that is being renewed, the ability for the low renewal rates, if you are an ongoing insured, your premiums are lower. The discount is based on the past relationship, including period of marriage, and some of that discount should be classified as community property. If you get a discount on your premiums based on past community property payments, then a part of the policy is a community property.
o (3) Logan: Term life insurance includes a right to renew – a right to renew. Is the person insurable?
▪ If the insured becomes uninsurable during a community property coverage period (period of coverage that was paid for with community funds or was provided for with work) this right to renew becomes a valuable asset, that kicked in under community property and so the right to renew becomes a community property asset. Even if direct payment after divorce were made with separate property, there is still a community property component.
o (4) Spengler: Whether the person is insurable? If yes, then after termination of marriage it will be all separate property. If the person becomes uninsurable during the marriage, and the insured has to have a contractual right to continue coverage, in order to classify as community property.
▪ In this case, the employer was providing the coverage and could drop the coverage at any time, and that the right to renew is not enough. However, if you have an individually purchased plan then you have a contractual right to continue coverage, and this test looks similar to the Logan case.
Todd v. Todd Community Property Characterization
Facts: H and W married in 1/25/47. W paid for H while he went to school. They separate in 12/26/64. W wants her interest in his education.
Issue: Whether education is considered property?
Holding: A degree is not community property.
Rationale: If a degree were community property, you are assuming that the party would continue to work ad you would be factoring post divorce work which violates the principle of separate property.
Rule: (1) Education is an intangible property right, the value of which, because of its character, cannot have a monetary value placed upon it for division between spouses. (2) The value of a practice at the time of dissolution of the community is community property.
Note: Goodwill is considered community property. How do you distinguish goodwill?
Note: Loans would be classified as community debt and they would be assigned to the spouse who received the education.
In 1984, the legislature decided to give the non-student spouse recognition.
• §2641. Community contributions to educations or training ( special rule for community property contributed to education/training or repayment of loans which substantially enhance the earnings of the student spouse.
o 1) Community substantially benefits from enhanced capacity
▪ a) 10 years – Reimbursed
o 2) The other spouse has received education/training with community support
o 3) Education leads to gainful employment ( decrease support
In re Marriage of Watt (1989) Community Property Characterization
Facts: Married for 9.5 yr. H is student for entire time married, and W’s earnings cover 2/3 of her expenses. His educational expenses are covered by loans. Divorce. W wants a property interest in his degree and reimbursement to the community of contributions made to H’s education.
Holding: Cannot assert a community property interest in his degree. Reimbursement is only for money from community. However, look to all of contributions of the non-student spouse when considering the appropriate level of support. For support, you can look at the increased burden on living expenses but not for reimbursement. For reimbursement statute, it must be related to educational process. The non-educational expenses can be used to argue for increased support.
Rationale: The court noted that a married couple would incur ordinary living expenses regardless of whether one spouse was attending school, staying home, or working. There is no constitutionally recognized property interest in the form of a right to reimbursement for community property earnings, which a spouse voluntarily spends for the couple’s living expenses during marriage.
Rule: When awarding spousal support, a court must consider the totality of one spouse’s contribution to the other spouse’s attainment of a degree, including contributions for ordinary living expenses.
In Re Marriage of Lopez (1974) modified Community Property characterization
Facts: Practice started before marriage. Got married, and then divorced.
Issue 1: Does a spouse maintain a community property interest in the value of the practice of the other spouse?
Issue 2: Good will as a community property asset?
Holding 1: Yes, although the value is complicated. There are four variables: (1) fixed assets, (2) accounts receivable, (3) the good will of the practitioner, (4) the liabilities would be subtracted. Starting the practice before marriage, still creates a community property asset.
Holding 2: Yes, there is a community property interest for goodwill. H has to buy his spouses equity. The court awards the property H, but awards the property to the spouse.
Rationale: to protect the W. The practice acquired most of it’s value during the marriage, and the increase was due to his skill and effort.
Rule: “Professional goodwill” may be deemed a community asset.
In re Marriage of Spengler (1992) Community Property Characterization
Facts: Insurance is purchased during the marriage 1, but death occurs post-divorce, during marriage 2. Whole life (investment portion and death benefits) and term insurance (bare bones – death benefit plus a renewal right). Whole life insurance is usually community property. H had term life insurance and H dies. H switched the beneficiary to W2 before he died. The policy was through the employer. Coverage was purchased with CP.
Issue: Is the renewal right aspect of an employment-related group term life insurance policy “property” subject to division in marital dissolution, where the employee has no enforceable right to renewal?
Holding: As long as insurance was purchased with community funds, the death benefits are community properties.
Four approaches:
1) Lorenz: held that although the benefits of term life insurance have a value, until those benefits become payable, the policy itself is worthless and is not divisible as community property. (No CP rights)
2) Gonzalez: if working for a long time, you get a cheaper premium. The differential in the premium is the result of work during marriage. The differential is a part of community property. (CP value)
3) Logan: Renewal right. If at divorce he is healthy, the renewal right is not worth anything because insurance could be bought anywhere else. (No CP rights)
4) Spengler: H was uninsurable, and so the renewal right is vital. This insurance started during the marriage and therefore is community property. (Narrow exception) Generally, no community property for term insurance, unless spouse becomes insurable there should be a property right, but you have to distinguish a property right and contingency that it is not merely an expectancy. You must be uninsurable and have to have a for sure property right to enforce the interest. (No CP rights)
Rationale: A benefit contingent on continued employment may or may not be property subject to CP laws, depending on whether it is a mere expectancy or a contract right. Daniel’s renewal right depended on his continued employment and also on the continued offering of the plan by his employer, who could have terminated the policy at any time with 30 days’ notice. Thus, although there was a contingent k right to policy proceeds in the event of his death during the term, Daniel had no right to compel his employer to renew the coverage at the end of the term.
Rule: The renewal right aspect of an employment-related group term life insurance policy is not “property” subject to division in a marital dissolution, where the employee has no enforceable right to renewal.
Rozan v. Rozan (1957) (Parties and Property) Domicile requirement; governing law
Facts: There was real property in North Dakota. The couple is domiciled in CA.
Issue: Can W make claim of community property?
Holding: Generally, the controlling law is the situs of the land. However, where there are marital issues, domicile location is where the applicable law applies. The property is considered community property.
Rationale: Since this is a marital issue with respect to the land, the court held that the law of the state where the couple is domiciled will control with respect to the applicable law. The court uses tracing to see what kind of funds were used to purchase the property. The property was purchased with assets from movables, and the characterization of movables is based on the law of domicile at the time of acquisition. The funds were acquired after they had established in California.
Rule: Property acquired while domiciled in CA as the result of a spouse’s work, efforts, ability, and skills is CP.
Under the statute: First preferred option is divide the property without changing the title. (e.g. Allocate the property worth $200k to the spouse who holds title and allocate to the other spouse the stocks that are worth $200k).
Grappo v. Coventry Financial Corporation (1991) Domicile Requirement; governing law
Facts: During marriage, H and W lived in CA, both acquiring property in their own names and agreeing to keep their separate property separate and not to commingle it with or transmute it to CP. They also agreed that any increase in value to each party’s separate property attributable to their personal time and effort would also be their separate property. Through a bank loan in her name, W acquired 3 unimproved lots on the Nevada side of Lake Tahoe as separate property in 1977. H supplied money for construction of the house through loans of his own funds. Separated in 1979. H filed for dissolution in 1983, but did not seek recovery for the loan, but instead claimed a property interest in the Nevada property.
Issue: Do the laws of the domicile of the parties at the time property was acquired govern in determining the characterization of the property as separate or community?
Holding: The parties resided in CA when W purchased the property. CA has the most significant relationship with these parties. TC correctly applied CA law.
Rule: The laws of the domicile of the parties at the time property was acquired govern in determining the characterization of the property as separate or community.
Addison v. Addison (1965) Domicile Requirement
Facts: W filed for divorce in CA and requested an equitable division of personal property acquired in IL on quasi-community property theory. He orally agreed that they would transmute this into community property.
Holding: Application of the legislation is determined at the time of action (divisible after legislation passed) and quasi-community property is not unconstitutional. State has valid reason to discriminate vs. citizens from other states in this situation.
Rationale: Crossing the state boundaries does not change the characterization of the movables because this is unconstitutional. However, once the couple establishes domicile and a party has filed for divorce the state has a different level of interest and the state can re-characterize the property when there is a change in the marital status. Therefore the privileges and immunities argument doesn’t apply. With the due process issue, there is a stronger public policy concern when divorce arises. For purposes of divorce proceedings, it is not unconstitutional to apply quasi-community property in other states outside of California.
Rule: The concept of quasi—community property, which is applicable only if a divorce or separate maintenance action is filed after the parties have become domiciled in CA, does not abridge privileges and immunities of national citizenship because valid independent reasons bearing a close relation to the resultant discrimination exist in its support.
Note: Quasi-community property is property that would be considered community property if it had been acquired in a community property state (such as California).
Paley v. Bank of America (1958) (Death and quasi-community property) Domicile req’t
Facts: Marriage outside of CA and H acquires $8mil as separate property, and she has $1.75mil. She dies.
Issue: What is the scope of her right to devise her property? Based on quasi-community property, can W devise $4mil of his property?
Holding: No, W cannot devise the $4mil. The dead spouse cannot invoke quasi-community property because they don’t need the protection. For death purposes, quasi-community property can only be invoked by the living spouse in the assets of the deceased spouse.
Note: For purposes of divorce, it works both ways, but quasi-community property can only be invoked by the living spouse in the separate property of the deceased spouse.
Migrating Spouses and Quasi-CP Hypos
H and W married in Missouri. W stays at home making the house but receiving no financial recognition. At the end of the careers, H has $100k in his name alone. This is separate property. Decision based on the time it is acquired, based on where they are domiciled. They move to AZ, H falls in love with Lulu, and he executed a will devising all his property to Lulu. AZ is community property state. Spousal protection scheme depends on the domicile of parties at the time of death. Therefore the spousal protection is community property and W gets community property. Problem is that there is no community property. Crossing the border does not change the characterization of the property because this would be unconstitutional and violate the takings principle.
• Created quasi-community property. This is property would otherwise be considered community property had it been acquired in a community property state.
• Courts will examine the separate property of both the H and W, for a divorce proceeding.
• For purposes of death, we only apply quasi-community property to the deceased spouse’s separate property. Only the living spouse has the ability to invoke this.
H and W grew up in CA and he saved $100k and then moved to Missouri and H died there. When they moved to Missouri, it didn’t change from community property. W gets half, and the remainder goes to probate, and W can get the elective share and receive half of the probate property, and therefore W receives a total of ¾ of the property.
• To resolve the problem, the Uniform Disposition of Marital Property Adept Act: you cannot claim an elective share in any community property asset.
3. PRESUMPTIONS
General: All property acquired during marriage is community property
General: All property acquired before marriage is separate property
There are two standards of evidence: preponderance and clear and convincing. This is a flexible presumption. If there is no contradictory evidence, the court must uphold this presumption because it is a “true presumption.”
B of P to persuade an unprejudiced mind if evidence is sufficient to defeat the naked presumption.
California: Community Property
Think when and how; if it is acquired and not earned then use the tracing method.
§760 Community property defined: except as otherwise provided by statue, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.
• Quasi property is property acquired outside of CA, and then they moved to CA.
§770: Exclusions: property from pre-marriage, property acquired by gift, bequest, devise, or descent.
• Gift is made during the marriage. Bequest is personal property given to somebody through a will (a time of death gift of personal property). Devise is gift of land under a will. Descent: if you die without a will then your heirs get your property ( These are not community property because community property is derived from property that comes from labor. For gifts there has to be intent, delivery and acceptance. Post 1985 it is more difficult to make a gift to a spouse than it is to give a gift to a third party. In community property, if a spouse is giving a property to a spouse it is called transmutation.
• Rents, issues, and profits of the property
§771 Earnings and accumulations during period of separation
• The earnings and accumulations of a spouse and the minor children living with, or in the custody of, the spouse, while living separate and apart from the other spouse, are the separate property of the spouse ( This is an exception.
Everything is community property except (1) pre-marriage, (2) gifts, and (3) living apart and separate.
Community Property – property acquired by either spouse (or domestic partners) during marriage (or domestic partnership). Referred to as general presumption.
Exceptions:
• Gifts acquired by either spouse during the marriage
• Property acquired by either spouse before the marriage
• Property acquired by either spouse during periods of separation
Why do we recognize community property?
Partnership/k model
Presumed intent
Spousal protection
Non Community Property Hypo
Prof acquires nest egg $100k in his name and his separate property. When he dies and he gives all his property to Lulu. Every state gives the spouse an elective share. Gerri can get ½ to 1/3 of the property despite what is written in the will.
Presumption that prenuptials are valid and we are taking an in tempe approach rather than a spousal protection.
4. REBUTTABLE?
Rebuttable – burden is preponderance
(a) Transmutation (subsequent events make you think that the property has changed)
• Pre-1985 (Low threshold) (valid unless involuntary and unconscionable)
o Pre Marriage
o During Marriage
• 1985+ (high threshold) (writing, signed, and expressed declaration- stricter)
o Pre Marriage
o During Marriage
(b) Tracing (probability) (look backwards to determine property)
(c) Separate Property Exceptions (all statutory)/Presumption
o Property acquired before marriage
o Property acquired after the parties have been legally separated.
o Property acquired after separation and living apart
o Gifts, including inheritance, bequest, devise, descent (most relevant during the marriage)
(d) Special Property Title Exception/Presumption (based on express language in a written instrument)
• Married Women’s Property Acquisition Statute
o Rebuttable
▪ No tracing
▪ Married woman
← H( W
← Third party ( W
← W ( W (courts are less likely to recognize because the underlying rationale for this special presumption is not relevant)
• Concurrent Estates
o (1) Joint tenancy – evidence in a writing
▪ Right to survivorship.
▪ No probate.
▪ At the time of death, the dead person’s interest is extinguished.
▪ Between H and W ( technically this is separate property between the spouses
▪ Single stepped up basis – the share of the joint tenant died is stepped up to his share of the FMV on the date of death.
▪ (a) Death
▪ Presume JT
▪ Cannot use secret intent to rebut the JT
▪ Pre 1/1/85
← Agreement (oral or written)
← Understanding (can be inferred from conduct of the parties)
← And to rebut JT(
← (1) purchased with community property, AND
← (2) treat as marital property, AND
← (3) they were not aware of the consequences of JT
▪ Post 1/1/85
← Transmutation using an express signed declaration. Signed deed is valid evidence of this.
▪ (b) Divorce
← Presume Community Property (cannot use tracing)
• Under 1984 statute ( Rebut only by
o 1) clear statement in deed
o 2) written agreement
• Except if one spouse claims there is an agreement or understanding showing that it was her separate property, and the agreement is pre 1/1/84 (Boule) ( It must be a Single Family Residence
o Then apply the 1965 SFR statute that there is a single family residence, acquired during the marriage, for purposes of divorce, presume it is community property
▪ Except when there is an overlap between divorce proceedings and death, the divorce proceedings end and the property is governed under the death presumption applies. (Blair)
• CP – but if > 4 years passes and 1 party dies §802: CP presumption does not apply and JT applies
o (2) Tenancy in common
▪ No right of survivorship
▪ Probate
▪ Separate property
o (3) Community Property
▪ No right of survivorship
▪ Owned by H and W.
▪ Double stepped up basis - the share of the H who died is stepped up to the entire FMV on the date of the death.
o (4) Community Property with a Right of Survivorship
Tracing ( If you acquire something during marriage with funds from pre-marriage then it is considered separate property and NOT community property. Property acquired with separate property is separate property. If community property is used to acquire property it is traced back and will be community property. However, our general presumption is community property.
• E.g. She inherited $50k from dad before marriage, and then she bought a car with it during marriage.
Opting out through pre-nuptial agreement
You can opt out with a pre-nuptial agreement or during marriage. If community property is about spousal protection then it should be tougher to get out of the developed scheme. However, if marriage is viewed as simply a k, then it should be easy to get out of this developed scheme.
• Previously, marriage was viewed as the wife being subservient to the husband. However, even after reforms, family became a central theme and is therefore not a typical contract.
Marriage of Bonds Enforcement of pre-nuptial agreement
Facts: Bonds had his wife to sign a prenuptial agreement a day before the marriage. She wasn’t represented and he was. Ultimately, they get divorced. General presumption and dissolution would result in 50/50, but Bonds is claiming separate property.
issue: Did they validly opt out of the general presumption?’
W: The signing of the prenuptial was involuntary. She had no independent counsel and the ct should analyze with strict scrutiny and places the burden on Barry Bonds. A fiduciary duty should exist from the confidential relationship that pre-dates the marriage.
Related Law: Uniform Pre-Marital Act discussed when to enforce pre-nuptial agreements. There were debates of what public policy to enforce. Some argued that they should be subject to a substantive fairness standard at time of enforcement (when the marriage is ending). This is spousal protection rather than intent of parties. Others argue the creation of uniform law to promote certainty. Certainty is trying to eliminating litigation, and this is more consistent with the contractual approach, leaving little room for the courts to step in.
Rule: The certainty principle won because California adopted this law. However, there is some protection. The threshold to invalidate a marriage will be high with a contractual approach unless (1) did not enter the k voluntarily OR (2) the k is initially unconscionable at the time it was entered into (sounds like substantive unfairness) AND no full disclosure, no waiver in writing of the full disclosure, and no actual or constructive knowledge of the extent of the other party’s property and obligation.
General Rule: Premarital agreements, where the less sophisticated party does not have independent counsel and has not waived counsel, should not be subject to strict scrutiny for voluntariness because the parties were not in a fiduciary relationship to one another.
Holding: The court upholds the prenuptial agreement.
Rationale: Sun had constructive knowledge of his assets. There was no coercion or undue influence to make her act involuntarily. The statute clearly puts the burden on the party seeking to invalidate the prenuptial agreement. The fiduciary duty does not exist currently because it only applies to married individuals to act in good faith.
Note: §1615 Legislature added section C to describe voluntary. You must prove 3 things: (1) 7 days between notice and execution; AND (2) represented by independent legal counsel or expressly waived in writing; AND (3) if not represented, the individual fully informed of the terms and basic effect of the agreement as well as the rights and obligations were given up and proficient in the language of the explanation.
• The party seeking enforcement will have to prove these three elements
Note: Unconscionable: No full disclosure, no waiver in writing, and no constructive knowledge( Court maintains that the party seeking enforcement bears the burden
Note/Hypo: Gerri and Prof are married and have no prenuptial. Prof hits Mike with is car and Mike sues him. The judgment can be enforced on Prof’s half of the community property. You cannot transmutate property in order to avoid a claim because otherwise this is fraud.
Transmutation
Prof can change the property through transmutation. This is shifting the interest of the status of property between two spouses. Separate to community property, separate property to separate property, community property to separate. Transmutating the property is like gifting the property.
Previously, thresholds between spouses are very low for gifting separate property into community property
If this is real property you have to deal with statute of frauds
• (1) writing; (2) signed by party to be charged (enforcement against); (3) material provisions
Personal property, inter-vivos
• (1) intent (2) delivery (a) actual (b) constructive (c) symbolic; (3) symbolic
§852 Validity to transmutate: Similar to the statute of frauds ( (1) writing; (2) signed; (3) express declaration. However, transmutations not only to real property but also to personal property EXCEPT gifts of clothing, jewelry, and other tangible articles of personal nature that is solely or principally by the spouse to whom the gift was made, and that is not substantial in value taking into account the circumstances of the marriage (relative value).
Summary: Transmutation is higher standard than statute of frauds. Intent is not applicable. Cannot use gifts unless it is low value, based on statute and not on traditional view of gifts.
MacDonald Post 1985 Transmutation
Facts: H and W decide to separate property when wife finds out that she is ill. They split the property. On his pension plan, he has a beneficiary designation that was originally to his children but the wife has half of the interest. He retires and the company disburses the pension and he puts it into an IRA account. ARISA regulates pension benefits and spouse has a right to benefits and if spouse is not named beneficiary then the spouse waives that right. The IRA account says that the spouse has to waive the right and the wife signs this. Pension benefits are from an employer, and it is presumed as community property. The money is put into an IRA account, under his name. Under one name does not control that it is separate property. Under ARISA, each spouse has rights in the other spouses pension plan. In order to designate somebody else the spouse must approve. W signs a consent form that the benefits goes to the beneficiary. W dies and she has a right to dispose of her property at her death.
P: Wife’s kid sues saying that the pension fund is community property
D: Wife transmutated from her community property to his property.
Requirements § 852: (1) writing (done) ; (2) signed (done) ; (3) express declaration
Issue: whether there is anything in the writing that satisfies the express declaration?
Rationale: Consider legislative purpose of trying to raise the bar above the statute of frauds.
Holding: There is no express declaration to transmutate her community property to his separate property, and therefore it is community property.
Rationale: The consent form is not enough because it must we want to use a higher threshold. No extrinsic evidence can be admitted. The court said that it was not clear that the wife knew what was going on. Under ARISA, each spouse has rights in the other spouses rights, and she may have been giving up her claim to his half. There needs to be a clear writing.
Rule: The statute was created to end this mess. There has to be language that expressly shows that the ownership is being expressly changed.
History: Before this law, transmutating property between spouses was easier and this was a problem because a lot of people were lying.
Barneson Transmutation
Overview: Barneson wants to gift his separate property stocks to his wife’s separate property. He meets the criteria of Securities and exchanges but he does not satisfy the transmutation statute. Barneson requests the transfer of his stocks to his wife. He had a stroke before this transfer and the woman is 36 and he is 64. Some of the papers were sent without a signature. H could have been transferring the management of the stock since it was in the name of.
Three req’t: (1) writing; (2) signed; (3) with express declaration.
W’s: Evidence Code Presumption.
Rationale: The court seems to be suspicious of the wife and the standard gets tighter. The word transfer is ambiguous and no extrinsic evidence is admitted. Therefore she does not satisfy the three requirements. H was still taxed on the stock dividends. The transmutation statute itself creates a presumption that if it is not explicit to change the characterization of the property, then that original party did not mean to.
Rule: The transmutation presumption trumps the evidence presumption because the special presumption trumps the general presumption.
Holding: The gift was invalid.
Benson Transmutation
Overview: Father initially owned the house and then conveyed it to the couple. Then, the father suggested that the convey house back to the trust that was just for W. This would transmutate the property into separate property. He agreed to convey the house in exchange for her to give up property rights to her retirement accounts. He conveyed the property but never signed anything about the waiver for the retirement rights.
H’s: Contractual argument of partial performance. There was an oral agreement for him to waive his rights in the house in exchange for her waiving her rights in his retirement. Transmutation is just like the statute of frauds; partial performance or equitable estoppel. He wants the Hall ruling to be applied (a premarital oral agreement was enforced).
DB: The trial court affirms H’s argument.
Holding: There is no writing in this case and therefore cannot satisfy the first element of the transmutation requirement. There are different standards pre and post marriage.
Rationale: He does not satisfy the bright line rule that had been created to minimize fraudulent lawsuits. More protection post marriage, and less spousal protection prenuptial.
Marriage of Steinberger (2001) Transmutation
Overview: The couple buys a diamond and he gives it to her. Gift because there was (1) intent; (2) delivery; and (3) acceptance. He bought the ring with community property.
W’s: This was a gift.
H’s: This was a classic gift.
Rule: Goods are community property except for jewelry unless that gift is large and substantial in value relative to the circumstances of the marriage. (The exception to the exception rule.)
Holding: Because no valid written transmutation was made in this case, the trial court erred in holding that the diamond ring was Buff’s separate property. Pursuant to section 852, the ring should be considered community property.
Rationale: the intent of the parties is not important, rather it is the court’s ability to reduce litigation.
Rule: When a gift is given to one spouse from the other and its value is substantial, taking into account the circumstances of the marriage, the property will not be considered that gifted spouse’s separate property if there is not a written expressed declaration transmuting the property from community to separate.
Estate of Bibb (2001) Transmutation
Overview: H initially acquired Rolls Royce prior to marriage. The registration was changed from Everett or Evelyn. There was no indication of who made the changed.
Issue: Was there a valid transmutation?
Req’t: (1) writing; (2) signature; (3) express declaration.
Holding: The transmutation statute creates a valid presumption against the transmutation. There is a tenancy presumption that if there are two names listed then the car will be owned by joint tenancy. However, the transmutation presumption is more specific and trumps this.
Rule: (1) A grant deed signed by a H transferring his separate property interest in real property to himself and his wife as joint tenants satisfies the express declaration requirement of the Family Code. (2) An unsigned computer printout, entitled DMV Vehicle Registration Information, reflecting that an automobile, which was previously registered in the names of the H or the W, does not satisfy the requirements for a valid transmutation under the family code.
Fidelity & Casualty Co. of NY v. Mahoney Tracing
Facts: H bought insurance for $1. He dies and the payout is $5k. H designated his son as the beneficiary. W wants half the money.
Rule: There is a presumption that property acquired after marriage, other than by gift, devise, or descent, is community property. Where the marriage relation has existed a short period of time the presumption that property acquired after marriage is community property is of less weight than in the case of a long-continued marriage relation.
Note: This case was bad because they put the wrong presumption on the W instead of the kid.
Wilson v. Wilson (1946) Tracing
Facts: Married for 7 years and they buy a house in CA, 9 yrs after marriage they get divorced.
H’s: Under tracing, the property is H’s because it was bought with money from his separate money.
W’s: Only has to show is that the property acquired during marriage is community property.
Holding: The property is community property.
Rationale: There is a rebuttable presumption. H bears the burden. Presumption that community expenses are paid with community assets.
Rule: Can rebut presumption with any type of evidence. The presumption itself can trump contradictory evidence. This is a question for the judge.
General rule: Notwithstanding controverting testimony, a presumption alone will support a finding in accordance with it.
Estate of Jolly (1925) Tracing
Facts: H’s dies and then ten years later W dies. If it is community property then half of the estate will go to his heirs. There is no direct evidence of how or when the property was acquired.
Rationale: All property acquired during marriage is community property. Instead of using the date of when the property was acquired, the court uses evidence of possession. Evidence of possession is used only when it there was a long and happy marriage.
Holding: The property is community property. Although there is no direct evidence of when the property was acquired.
Rule: All property acquired after marriage by either H or W or both is presumed to be CP and this presumption can be overcome only be clear and satisfactory proof that the property in question is separate property – even in cases where only possession as opposed to acquisition of such property after marriage can be established.
Note: this case is the opposite of Fidelity.
Freese v. Hibernia Savings & Loan Society (1903) Tracing
Facts: Married couple. W owned two parcels of real estate when they got married in 1862. W conveys the Shipley lot for $2k, in 1884. The $2k is still separate property. There is no transmutation claim. $1800 was deposited five days later into a joint account. They take the money out of the account and deposit it into new account on July 6, 1886. Sold Bryant for $6750. On the 27th of the same month, they deposit $1300 into the same account. The account generated interest and there doesn’t appear to have any additional money added into the account. W dies and H argues that it is community property.
H’s: Bank accounts were bought during marriage.
W’s heirs want to rebut the presumption using tracing.
Rationale: Adequate tracing. It is probable that the money deposited in the account was traceable to a separate property source.
Holding: The b of p is shifted to the party seeking a separate property characterization.
Rule: There was no rule requiring demonstration of such a degree of proof as to exclude the possibility of error
or absolute certainty. There has to be high enough probability that will convince the tier of fact.
General Rule: The clear and satisfactory evidence standard for overcoming the statutory presumption of CP requires nothing more than a preponderance of the testimony under all the facts and circumstances and, as such, whenever a preponderance of evidence would permit the inference that certain marital property is traceable to one spouse’s separate property, the presumption is overcome.
Estate of Clark (1928) Tracing
Facts: Son dies before marriage. However, Dad receives settlement payment after marriage. The general presumption applies because the property was acquired during marriage. While the son was alive, the father merely held an expectancy interest, which is not a property interest. Once the son dies, the property right becomes vested and this becomes a property interest. Rebuttal: (1) Tracing: $150k came from before the marriage
Rationale: Presumption arises. Father tries to rebut this with tracing. Father had the ability to challenge the son’s will prior to son’s remarriage. We trace back to the property interest( the right to contest the will. Asserting a claim does not always assert a property interest. Clark had a vested interest in his son’s estate once he died. This right was separate property. The compromise of a right which is a separate property interest yields separate property.
Rule: as long as it is a claim of right, asserted correctly, it is a property interest.
General rule: Property acquired by compromise is separate property if the right compromised was separate proprety.
Downer v. Bramet (1984) Tracing
Facts: H worked for a company for more than 30 years, during the marriage. The company does not have an official pension plan. After working for many years, H and W split and they agree to a property agreement. His employer gives him a 1/3rd interest in a ranch. Agreement said that all of the community property was disclosed but this ranch was not.
H: This is a separate property. He would argue that it was acquired after the separation, and this was a gift.
W: This is community property. The acquisition occurred during his marriage and occurred because of his work.
Issue: How to characterize the property?
Holding: This property was a gift that was in recognition of his services. The timing of the payment does not matter but the consideration of the services rendered during the marriage leads to the categorization of community property.
Rationale: The couple never engaged in social activities with the boss. They only had a working relationship.
Test for what constitutes a gift: IRS approach to what is a gift and what is not (model of tips). If it is a gift in form but in recognition of services then it is community property.
Rule: Earnings of property attributable to or acquired as a result of labor, skill, and effort of a spouse during marriage are community property.
In re Baragry
Facts: The husband and wife ultimately get divorce. He moved out, and for four years lived on his boat house with his girlfriend. However, he still went to his house and ate meals, and took trips with the family. They are living separate and apart (statutory language).
Issue: When is the real break in the relationship?
Holding: H was still receiving benefits of her domestic efforts on his behalf and so all property acquired is community property until he filed for formal separation. This is a soft standard.
Elements
(1) Living physically apart and separate.
(2) Subjectively, the parties have a complete and final break with no present intent to resume marital relations (not including the roller coaster).
(3) The conduct has to clearly convey to your spouse your intent of final break.
Married Women’s Property Acquisition Statute
Any property acquired by (1) a married woman (2) in her name alone (in a title), is presumed to be separate property, (3) if applied pre-1975.
Rationale: pre 1975, husbands were the managers of the property.
This is a rebuttable presumption.
• Can use transmutation, tracing.
Enacted in 1872.
Donze v. Donze Special presumption
Facts: Married in 1909, buy a lot from the father-in-law and H said put the name in W’s name. The deed conveyed to her name alone, as her separate property.
Holding: the language was explicit and so they will not admit parol evidence. Can only rebut the presumption with wrongful conduct or mistake (with the mistake construed very narrowly).
Rationale: the court assumes that title being taking in W’s name alone is like an early concept of transmutation. We should make it harder for her to rebut that presumption because the instrument is clear.
Horsman v. Maden (1941) Special Presumption
Facts: Married in 1914. Acquired lots of property during the marriage. 1933, marital problems arise. H is voluntarily giving her money. W gets nervous about the stream of income and she said transfer the property or she will go public with his infidelity. He signs over securities, and he executes the deed that purports to transfer the house to her.
W: Married Women’s Property Acquisition Statute that creates a new rebuttable presumption. There is no recital that it is her separate property.
H: He argues that he did not have the intent to give her the property.
Rationale: start with the language in the instrument. If there is precise language in instrument it will be a tough to rebut. However, if the deed says “to the wife” this is a simple presumption and evidence of his non-intent to transfer interest to her.
Holding: The evidence of his intent is enough to rebut this weak presumption. The burden of proof that the court applies the presumption is based on the language of the instrument. There is a low threshold to rebut this presumption.
Rule: When determining the intent of the donor, declarations, by an alleged donor made either before or after the transfer of the property, are admissible and such declarations need not have been made in the presence of the adverse party.
In re Marriage of Ashodian (1979) Special Presumption
Note: The protective statute was eliminated because the woman has equal control of the community property.
Facts: They were married during 1943. He is a truck driver and she is real estate. She buys some real estate and she is flipping real estate. H has no handlings with the real estate business. H executes grant deeds giving the property to somebody else. W took property in only her name. W was using community funds to purchase the houses.
H’s: Community property
W: Rebut the presumption of community property. (1) Married Women’s Property Acquisition Statute (deals with the title) ( she acquired the property in her own name as separate, with H’s knowledge and consent.
Rationale: Title is a stronger expression of intent. W took title just in her name.
Holding: Based on the evidence, the husband intended a gift by abandoning the wife’s real estate practice.
Note: In contrast to the holding in this case, courts are reluctant to protect a conveyance from W’s community property to W as separate property because the rationale does not support this.
Rule: A separate property presumption applies to property acquired by a married woman prior to 1975 by an instrument in writing, but it is rebuttable (as to all except bona fide purchasers) by clear and convincing evidence.
§803 Property acquired by married woman before January 1, 1975
(c) If acquired by husband and wife by an instrument in which they are described as husband and wife, the presumption is that the property is the community of the husband and wife, unless a different intention is expressed in the instruments.
• (c) will trump so long that the instrument describes them as H and W.
• Otherwise, the wife will argue that it is her separate and the husband’s property is community property.
Post 1975
Post 1975, the statutory presumption is abolished. However, the transference of property to W as separate property could still be important for intent. Between 1975 and 1985, this could still be used for transmutation because the standard was easier. In 1985, there is now a higher standard for transmutation.
Concurrent estates
History: CA title is irrebuttable. However, they changed this to say that title creates a presumption of joint tenancy. The legislative is concerned about (1) death and (2) divorce.
Importance: Title of the house can be critical because if it is separate property then the W and kids cannot get it and they have to find new housing. If it is community property, the ct can give it to them.
Lovetro v. Steers (1965) Death- Concurrent Estate
Facts: Promissory note as joint tenants. H executed a release, and H dies.
W’s: This is JT and they did not give me consideration so D is not entitled to benefits.
D: The note was a community property despite what is written on the paper.
Holding: Can rebut the JT with transmutation because this is in 1965 (pre 1985 transmutation was easy). Transmutation requires an agreement or understanding and was easy to show, and therefore the not was community property.
Rationale: the property was treated the same as their community property. Payments were made with community property.
Transmutation pre-1985: Any agreement express, oral, tracing coupled with not knowing what you did when you took it in JT, can evidence that there was transmutation.
Estate of Levine (1981) Death- Concurrent Estate
Facts: H and W buy a house in JT, after marriage. H dies. H had a will devising his share.
H’s: He wants to rebut this and make it community property. He had a secret intent of community property.
Holding: Presumption cannot be overcome by hidden intention of one spouse, undisclosed to the other spouse at the time of conveyance. The statutory presumption that a single family residence acquired during marriage and held in JT is presumed to CP is of no help either, since it applies only in marriage dissolution or separation.
Rule: For the purpose of determining the character of real property upon the death of a spouse, there is a rebuttable presumption that the character of the property is as set forth in the deed. The presumption still applies where the property was purchased with the separate funds of one spouse. The hidden intent of one spouse does not constitute an agreement and does not rebut a presumption.
General rule: The presumption that the character of property held by spouses is as set forth in the deed thereto can be rebutted by showing an agreement or common understanding between spouses to the contrary but not simply by showing the hidden intent of one spouse, undisclosed to the other spouse at the time of the conveyance.
Estate of Bibb (2001) Death- Concurrent Estate
Facts: H is married once, takes property with W1 as JT, and she dies. H marries W2. H executes a deed granting the property from H as sole owner to H and W2 as JT.
Issue: Is this an express declaration? Was this a valid transmutation?
Holding: The standard language in a deed is sufficient to constitute a transmutation. This is rebuttable, but not through tracing.
• Use the date of the agreement to determine which transmutation standard to use.
Rule: (1) A grant deed signed by a H transferring his separate property interest in real property to himself and his wife as joint tenants satisfies the express declaration requirement of the Family Code. (2) An unsigned computer printout, entitled DMV Vehicle Registration Information, reflecting that an automobile, which was previously registered in the names of the H or the W, does not satisfy the requirements for a valid transmutation under the family code.
Concurrent estate ( Divorce
Tomias JT=JT, Rebuttable presumption that the title is how it was taken
SFR Rule (1965): Single family residence it is presumed to be a community property
Estate of Lucas (1980) Divorce- Concurrent Estate
Facts: W puts up most of the money for the house. They purchased the house while they were married, and title as H and W as JT. They file for divorce.
Holding: Tracing funds used to purchase the property source is not sufficient to overcome the special statutory presumption.
Rationale: (1) The general presumption of community property; (2) special presumption; (3) (1965) (a) SFR and (b) divorce then it is presumed as community property( This is rebuttable but you must show intent to show an agreement between the parties (can be oral or written). Pre-1985, use the easy transmutation rule.
General rule: For the purposes of the division of property upon divorce or separate maintenance only, there is a statutory presumption that single family residence acquired by a couple during marriage as JT is community and it is overcome only by showing they had an agreement or understanding to the contrary.
* Post-1984 Statute §2581: In any all property taken jointly, for purposes of divorce, will be presumed to be community property despite what the instrument says. This is retroactive to when all property is acquired( This now the general rule
• Rebut by (a) clear statement in the written instrument (e.g. as separate property/JTand not community property); OR (b) by proof of a written agreement.
Buol (1963) Divorce - Concurrent Estate
Facts: Bought house in ’63 as JT, and they separate in ’77, and divorce post-1984. W claimed that house was separate property because H was a drunk loser. H agreed that her earnings were her separate property.
Rationale: (1) Community property; (2) valid transmutation through the oral agreement that it is her separate property; (3) 1984 statute, which is retroactivity and needs a written agreement to rebut.
Rule: Where one spouse is claiming that there is a pre-1984 agreement that the property is separate, applying the §2581 retroactively, use the 1965 presumption of SFR (1965) and to use the easy standard to rebut these presumptions.
Blair Case Joint tenancy
Facts: Blair H and W married, buy house as JT, separate in ’85 and then filed for divorce. W dies. The divorce proceedings had begun but the marriage had not been dissolved.
Holding: The action of divorce is a personal action that does not follow death. The death scenario will presume the JT.
Rule: when there is an overlap between divorce proceedings and death, the divorce proceedings end and the property is governed under the death presumption, which applies.
Hilke Joint Tenancy
Facts: Buy house in ‘69 and divorce in ’89. The court had ruled on the dissolution but the court was only waiting to proceed with the distribution of the property.
H: bought house in ’69 and cannot apply the 1984 statute retroactively.
Holding: Where the marriage has dissolved, the divorce presumption still applies, and therefore the presumption is that it is community property. The court will still apply retroactively the 1984 statute except if there was a vested interest that arose before 1/1/1984.
Hypo Joint tenancy
Prof and Geri are married and buy a house. Geri divorces Prof. but court does not adjudicate property disbursement. 5 years pass and Prof dies. The house is still in JT. Prof gave all of his property to Lulu. Therefore the property would belong to Lulu.
§802 Property acquired during marriage terminated by dissolution more than four years prior to death.
5. APPORTIONMENT\REIMBURSEMENT
(a) Commingled bank accounts
Co-mingled bank accounts, and spouse purchased asset.
• Presume CP
• Rebuttable presumption using tracing
o (1) Direct: you must do this transaction by transaction.
o (2) Indirect (exhaustion method): separate property was used because there was no cp was available because cp expenses were paid with community funds.
▪ You have to do analysis transaction by transaction.
(b) Business profits
• Started business before marriage, then the business is separate OR Business that started during marriage and continues after separation.
o If continued operation of the business during the marriage they are investing their labor and this is community asset so this is a commingling ( must apportion the asset.
▪ (1) Van Camp approach: look to community contribution, with contribution of labor so community is entitled to fair market return to the community
▪ (2) Periera approach: separate property contribution ( separate property is entitled to a fair return
▪ Courts examine the primary factors of the appreciation of the business
(c) separate property contributions to a community property asset
• Death (Lucas) Presume CP absent agreement
o Pre 1/1/84 oral agreement is okay
o Post 1/1/84 post written agreement
• Divorce
o Pre 1/1/84 Lucas
o Post 1/1/84: §2640 (Anti-Lucas Statute)
▪ Right to reimbursement, but if agreement can receive reimbursement or for apportionment. If apportionment, should be separate property contribution towards purchase price.
(d) CP to contribution to acquisition of separate property asset
• Absent an agreement there is a right to apportionment, not right to reimbursement. Only payment on principle counts, NOT interest, taxes, or insurance. To determine apportionment use ration of separate contribution towards purchase price. The agreement would be governed by the transmutation date.
(e) CP contribution to improvements on separate property
• Entitled only to reimbursement.
(f) Acquisitions on credit
(g) Separate to separate property
• Cross ( Presume a gift absent an agreement
• §2640(c) presume reimbursement absent written waiver. (7/84) (Only applicable to divorce)
(h) Personal Injury Award: (1) When did the cause of action accrue?; (2) from whom
• Pre marriage: separate
• During marriage
o Who caused the injury
▪ Third party caused injury: community property
▪ Spouse cause injury: separate property
• Post Marriage:
o Dissolution: if the community property from recovery from the third party has not been commingled there is a presumption that all of the money should be rewarded the person injured unless court views this to be inappropriate. Otherwise injured person will receive at least half
o Death: community property
(i) Employment related benefits
• Pension (very messy because varied pension plans): (1) when and (2) why?
o Defined contributions - mandatory savings account and employee has some control over how much goes in
▪ Before marriage: Separate
▪ During marriage: Community property
▪ Post marriage (divorce and death): Apportionment
o Defined benefit plans – you are guaranteed a certain portion of your salary based on the time that you have worked (difficult to value)
▪ Vested (even if you leave the company you keep the rights)
← Matured: eligible to draw the benefit. The court may retain jurisdiction and decide once the pension has matured.
• The moment it has matured, the spouse can demand their share immediately, whether or not the working spouse still is working.
▪ Not vested (if you leave you do not keep the rights) -Even if not vested it is still a property right that is contingent.
← (1) Can cash out and pay the spouse their half.
← (2) Ct will resolve all issues except pension and ct retains jurisdiction until the pension is fully vested.
o Enhanced Retirement Package (1) ask why they are receiving retirement benefits; (2) ask when it is offered
▪ Post marriage – generally separate (
← If it is derived years of hard work then a portion of community property – question of fact for the court
← If it is in lieu of future earnings and post-separation then it is separate property.
o Stock options – (1) ask why is the benefit being offered and (2) when is being offered
▪ Rationales for giving stock options: For additional compensation, use as recruitment, to retain an employee.
(j) Disability benefits - (1) ask why is the benefit being offered and (2) when is being offered
• Classified like a personal injury benefit
o EXCEPT (1) if purchased with CP funds during the marriage AND (2) purchased by the spouses with the intent of providing for a retirement fund, then post dissolution will be CP.
o Otherwise there is a strong rationale to categorize as separate property.
(k) Termination benefits
• (1) When and (2) Why - Did you earn the termination benefit?
o Straight out termination benefits
o Enhanced benefits
(a) Commingling
See v. See (1966) Commingling
Facts: He made $1mil, in Account 13 (primarily CP). Security Account (primarily SP). However, H mixes the accounts. H bought assets with the commingled funds. H paid community expenses from commingled account.
H: Recapitulation under the exhaustion method. There were more family expenses than community funds so he wants the court to assume that all community dollars earned went to family expenses.
Holding: Recapitulation is wrong under the exhaustion method. Because commingled, H did not overcome the presumption that commingled funds This is community property. Must look at transaction-to-transaction approach, and not the exhaustive method. The person rebutting the general presumption bears the burden.
Rationale: In classifying an asset, at the time of acquisition, in applying tracing method to rebut the presumption, you must show that at the time of acquisition of that asset, either the direct method or the exhaustion method. We must engage in tracing: (1) Direct tracing: (a) availability and (b) intent (there can be some CP, but must show that there were sufficient SP funds and that you intended to use SP); (2) Indirect tracing: (exhaustion method of tracing) determining whether there are any assets left after paid community expenses from community funds. Under recapitulation, we examine expenditures in an aggregate form.
Rule: In order to overcome the presumption that all property acquired during marriage is community property, a spouse must prove that each and every item he claims as separate property was acquired for separate property and (absent concrete proof of such) in order to be able to implicitly trace any such item to separate property, such spouse must prove that community expenses exceeded community income at the time of acquisition of that particular item.
Paul is in construction Commingling - divorce
P has invested $2million in construction, separate property pre-marriage. He got married and stayed in construction. After he gets married, the property generated from labor and effort is a community property. Post-marriage, the business return creates a commingling. H and W get divorced. The business is now worth $12mil. The business has grown by $10mil. How do we classify the growth? Two approaches.
• (1) Pereira: Fair return to separate property. Examines separate property at the beginning, and then calculate what would be a fair return on that. This is a question for accountants. Use an interest rate to determine a fair return (this is the allocation of the business growth).
• (2) Van Camp: Focus on the services provided by the spouse running the business. Reasonable value of those services. Compare to someone who is in a similar position.
• Court is split: create justice and equity between the parties. This is a fact sensitive approach. Many courts run the numbers for both approaches and then adopts the more fair.
Pereira (1909) Commingling
Facts: M in 1900. At the time of marriage, H owned as separate property a saloon and cigar business worth about $15k and producing an annual income of $5k. His principal occupation was management of this business. In 1902, he bought the business property for $40k with business money. 1909 filed for divorce.
Holding: This should be apportioned. The separate property component should be given a fair return.
Rule: Where one spouse during marriage renders substantial community services to his separate property, the amount of the income, profits, etc. generated thereby which he will be entitled to retain as his separate property is equal to the amount of his original capital outlay for such separate property times a reasonable rate of return (7% in absence of evidence establishing some other figure).
Van camp?
In re Marriage of Mix (1975) Commingling
Facts: W has separate property generating separating income, and she also makes money as an attorney. The attorney income is community. She commingles all of this money.
W’s: She uses direct tracing approach, and presented an individualized schedule that showed when she deposited money and when she took it out. However, she doesn’t have the bank records to back all of this and she focused on the purchase of the property, and not which account comes from or any other expenses paid from those accounts. This is a modified recapitulation as applied to direct tracing by showing (a) availability of separate property funds, and (2) intent. She said that there was always enough on the separate property side to cover her expenses but you cannot see this in the report that she provided.
Holding: W bears the burden to rebut the presumption of community property. The court held that her records of the accounts was not enough, but the ct did allow her to testify as to the her intent. Recapitulation is allowable for direct tracing.
Rule: A spouse may trace the source of funds withdrawn from a commingled account where separate property deposits exceed separate property withdrawals.
In re Marriage of Frick (1986) Commingling
Facts: H had a rental property that was separate and the income from this property is classified as separate. He also includes his paycheck in the same account, which is community funds. Therefore, it is a commingled account. Out of this account, he is making his monthly mortgage payments on his separate property.
H’s: The mortgage payments were separate property payments. He uses direct tracing: (a) availability of separate property funds; (b) intent of the party to use the separate property. H showed his monthly deposits and his payments.
W’s: The payments had a community property component.
Holding: The amounts in commingled account were held to be community property because H did not meet the burden of proof establishing the separate property character by tracing. Recapitulation for direct tracing is inadequate here, unless it shows very detailed account information, transaction by transaction.
Rule: Where funds are paid from a commingled account, the presumption is that the funds are community funds.
Note: Analysis for death is the same.
(b) Business Profits (divorce and death is the same)
Tassi v. Tassi (1958) Commingling
Facts: H had meat packing business and had this before he got married. He gets married, the business booms and he withdraws $400k over the course of the marriage and paid $49k toward community expenses.
Holding: The money is commingled funds. The apportionment should be based on services of a person in the meat packing business. This amount becomes the community property component, and the remaining will be categorized as separate property. The bulk of the appreciation was categorized as separate. However, the growth of the business was not a result of his personal efforts because the whole industry jumped up.
Rule: Two approaches are available to a court for the allocation of earnings from a separate property business between separate and community property: (1) to compute interest on the capital investment in such business and allocate that amount to separate property; (2) to compute the reasonable value of the spouse’s services to his separate property and allocate that amount to community property, and the court is free to choose whichever formula will achieve substantial justice between the parties.
In re Marriage of Imperato (1975) Business (when to value assets)
Facts: The business is created during the marriage and is therefore community property. They separated and the business grew 10-fold between the separation date and the time of the trial.
H’s: Post separation, each spouses earnings are his/her separate property for purposes of valuating the business.
Holding: The court does not use the date of separation.
Rationale: Periera case indicates that the commingled investment, both components are entitled to a return on the investment. You cannot allocate all of the appreciate to the CP component. In this case, the community needs to get a fair return.
Rule: Generally, with commingling in a business, use the date of trial for purposes for valuing the assets.
Rule: In a marital dissolution action, asset values and liabilities should be determined as near to the date of trial as reasonably practicable, with the increase in value of a community property business being apportioned between the CP interest that arises from the inherent increase in valued due to the devotion of time and effort to the business by one of the spouses.
Duncan case Business (exception to when to value assets)
Facts: H manages stock portfolio. The business was created during the marriage, so initially CP. They divorce. He continues to manage the company and it grows substantially.
H’s: post separation, it is his separate property.
Exception: If sole proprietorship, split money at date of separation and money should be given to spouse who is working.
Holding: Use date of separation, where appreciation is largely the result of the operating spouses’ skill, labor, and effort, rather than the business’ capital assets. (Largely? Extremely high percentage).
(c) Separate Property Contributions to Community Property
In re Marriage of Lucas (1980) still valid law for death
Facts: Family dwelling was purchased with W’s separate property and loans are taken out and were to be paid off with community funds. W also paid to fix up the house. H and W divorce.
Issue: Whether W can get money back?
Holding: Although the assumption of CP, they took title as JT, but since this is after ’65 statute that said that single family home is presumed to be CP, so we are back to presumption of CP. Her separate property contributions were gifted to the community property. There is no separate property asset. Even if agreement for down payment she should receive no recognition for improvements.
Rule: Absent an agreement, the general rule is that separate contributions to community property asset is deemed a gift. Must be a written agreement after 1985 because of the transmutation statute requirement.
General rule: For the purpose of division of property upon divorce or separate maintenance only, there is a statutory presumption that a single family residence acquired by a couple during marriage as JT is community and it is overcome only by showing they had an agreement or understanding to the contrary.
Note: the legislature did not like this case. They reaffirmed and expanded the CP presumption. Statutes only apply for divorce or separation
• §2581: All assets of any time, held in any type of concurrent ownership are presumed as CP. There are two ways of opting out.
o (1) clear statement in deed or other evidence
o (2) written agreement
• §2640: Presume reimbursement for contribution of separate property.
o If you are only entitled to reimbursement you do not get to share in appreciation, without interest, taxes, or insurance. You do not receive apportionment of the appreciation.
(Anti-Lucas statute): They did not like the case and wrote §2640 absent a written waiver, you are entitled to reimbursement for a separate contribution to the acquisition of a community property asset. Acquisition includes improvements, down payments (NOT interest, taxes or insurance). The court used this retroactively.
Buol
Rule: Should not permit the legislation after Lucas to not be retroactive.
In re Marriage of Heikes (1995) (Retroactivity of §2640)
Facts: Started out as separate property, and he transmutated his two lots into CP. Parcel one was a dwelling and parcel two was a lot. The single family dwelling was CP despite the JT title because of the 65 statute. For the separate lot, this is a JT, and she doesn’t have a vested interest until she dies and so you can apply this retroactively and make both assets community property. (Like the Hilkes case).
H’s: apply ’84 statute retroactively to recognize separate property contribution entitled to reimbursement. There was a window of opportunity for W to opt out of the right of reimbursement by asking H to waive right of reimbursement under the new statute (similar to the retroactivity of the new domestic partner)
Holding: Anti Lucas statute cannot be applied retroactively because it would be taking a vested property right. Focus on 1/1/1984 for date of application. Pre 1/1/84, Lucas applies, post 1/1/84 Anti-Lucas statute applies. If acquired pre-1/1/84 but separate property contributions were made, the court looks to when the property is acquired and Lucas would apply. Look to when the property is acquired to determine which approach to take.
General rule: Retroactive application of the requirement that separate property contributions to CP in dissolution proceedings commenced after 1/1/84 be reimbursed would unconstitutionally deprive the noncontributing spouse of vested property interests.
Note: §2640 only applies in divorce cases. For death cases, Lucas always applies, so we presume gift absent an agreement. Pre 1/1/84 agreement can be oral, post 1/1/85 agreement must be in writing.
(d) Installment and credit acquisitions
Acquisitions on credit
Single Sarah purchases a BMW on credit. Cost is $40k. She puts $10k down and buys the rest with credit. This credit is her separate property.
Prof buys same BMW. Puts $10k down and will buy the rest on credit. Credit is community property, because it is primarily based on his salary.
• Credit extended to a married individual will be presumed to be community property, whereas credit for a single one is presumed to be separate property.
Gudelj v. Gudelj (1953) (Credit)
Facts: H is in and out of the cleaning business. During the marriage he decides to purchase a cleaning business. H purchased this for $11500, with a down payment of $1500 of separate funds. H signs a promissory note for credit for the remaining $10k. H withdrew $4k from the business as investment.
H’s: I was such a bad business man so could not have relied on community property to determine line of credit.
Rationale: Usually you would assume that this is community property but you can use tracing to rebut the presumption. Also, can rebut with evidence of what the party extending the credit relied primarily on separate property assets of the individual to get the credit re-characterized as separate property. Court does not agree with H’s argument.
Holding: the $4k would be apportioned consistent with the separate property and community property contributions. 3/23 is his separate property ($1500). 20/23 (1000/11500) is community property.
Note: some lower courts believe that you have to solely rely on the separate property in order to characterize the credit as separate property.
Rule: Presume that it is community property, rebut with the party extending the credit to say that they relied on the separate property. The apportionment will be the percentage of the separate property toward the purchase price. Additionally, this is applicable to real property. For assets that appreciate, receive the portion that is appreciating.
General rule: Unless evidence can be adduced that a loan was granted or property was sold on the sole basis of a spouse’s separate property or credit, the property is presumed to be a community asset.
Bank of California v. Connolly (1973) (Credit)
Facts: One spouse, Ladimer, buys two parcel, both on credit: (1) 7th and Mountain, an (2) 64 acres. 7th and Mountain was purchased with an unsecured note. The second property was secured on H’s separate property.
H’s: credit was extended primarily on the separate property so all of the interest on the 64 acres should be separate property.
Holding: The evidence showed that the loan was given on the general credit of the H and W and not the mortgage of the separate property. Therefore, the husband did not successfully rebut the presumption.
Rule: A spouse may dispose of community assets for valuable consideration without the consent of the other spouse.
Note: For unsecured note you are not first in line to recover assets. The lender relies primarily on income, so the credit should be characterized as community property.
Note: An institutional lender must look at the income of the party.
(e) Classification of Improvements
In re Marriage of Moore (1980)
Facts: W buys house prior to the marriage, and she pays for the down payment.
Holding: you do not presume a gift. Absent an agreement there is a right to apportionment, not right to reimbursement.
Rule: Amounts paid by the community for interest, taxes, and insurance are not figured in when calculating the community’s interest in property that was purchased by one of the spouse’s prior to marriage but as to which the community made payments.
Marriage of Wolfe (2001)
Facts: H has separate property adjacent to community property, and the improvements came from community funds. Community contributions to improvement of separate property.
Rule: Absent an agreement to the contrary, the use of community funds to improve the separate property of one spouse does not alter the character of the separate property.
General rule: When a spouse contributes community funds to improvements on their spouse’s separate land, the contributing spouse is entitled to reimbursement.
Cross case (Claranet) Separate to separate
Facts: W owned the house before. H contributed $70k improvements to her separate house. Holding: This is not addressed in §2640, this is a gift, and won’t disrupt the Lucas rule.
Legislative response: Created Section C to say if separate to separate then reimbursement absent a waiver.
Marriage of Walrath (Reimbursement of separate contributed funds)
Facts: H made a separate property contribution, and W paid debt with her separate funds. The house appreciated. But couple refinanced asset and bought 3 or 4 other assets. Post 1/1/84, separate contribution to real property then right to reimbursement.
Holding: The right to reimbursement follows the investments in proportion to the funds that they are taken out of. Ratio of the separate property contribution to the equity of the asset. Move asset by asset and not collectively. If the asset depreciates in value, you do get reimbursed from other assets.
Rule: A party’s entitlement to a separate property contribution reimbursement is not limited to the original CP to which the contribution was made and, when that original property is refinanced and the proceeds used in party to purchase or pay down the indebtness on the original and other assets, the contributing spouse can trace the contribution to, and be reimbursed from, those assets.
Koerster
Facts: Asset was Koerster electric company. It was H’s separate business. When he got married he incorporated the business.
W’s: Incorporation constitutes an acquisition, and so H is only entitled to reimbursement. It is not an ongoing business.
Holding: The incorporation is not an acquisition, and the business is continuing. Reimbursement principle does not apply. Use Peirera or Van Kamp.
Rule: The Pereira analysis, which awards the value of separate property at the time of marriage plus a reasonable return to represent the appreciation of separate capital with the balance going to the community, applies when business property is at issue in a dissolution proceeding because the reimbursement statute was never designed to apply to separate property businesses, and is inherently not applicable to businesses when the requirements for transmutation have not been met, and because the mere incorporation of a business is not a change in its charter.
6. MANAGEMENT RIGHTS
(1) Separate property – spouse has sole and exclusive management.
(2) Community property
• Pre-1975: male manages
• Post-1975: each spouse has equal management rights
o Exceptions
o (a): Earnings in separate bank accounts
▪ E.g. If W is a separate account, with community funds from earnings in it, the H does not have management access to the separate account unless he files for dissolution.
o (b): Gifts
▪ E.g. Wendel has equal control of CP, but he cannot gift $1000 of his CP to Lula intervivos. Wendel cannot make the gift without permission. However, Wendel can make the gift post death and Geri can only recover half.
o (c): Business ran by one of the spouses
▪ E.g. Geri started art business during marriage and she essentially runs the business. For ease of administration, spending money is okay even without H’s consent and H cannot invalidate with respect to third parties.
o (d): Household Community Personal Property
▪ E.g. W cannot use personal property of home to get a loan, without the consent of H. Both spouses need to consent on the transfers, even if this is for collateral. If permission was not received from H, H can block recovery against creditors.
7. CREDITORS RIGHTS
(1) During marriage, CP liable for debts of either spouse which arose during or before the marriage.
• Exceptions
• (a) W’s separate property subject to the H’s debts if they are necessities of life. Rationale: during marriage there is a legal responsibility to take care of spouse.
o During marriage, necessities of marriage are tied to standard of living.
o Post-separation, only the basic necessities (food, medical, housing).
o Divorce ( no longer liable.
(2) H’s Separate property is only subject to H’s separate debts.
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