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Facts for Question One and TwoIn 2000, Hank and Wanda married. Their marriage is valid. They do not have a Premarital Agreement. Both were practicing attorneys when they met. After their marriage, Hank became a law professor at UCLA. In 2006 Wanda attended USC for a year and obtained an advanced law degree (L.L.M.) in tax. She then opened a law practice. After the marriage, Hank and Wanda opened a joint checking account. They deposited their earnings into this joint account, from which they paid $28,000 in tuition payments to USC.Prior to the marriage, Hank had purchased a home in Ventura for $300,000. His sister lived in this home and paid no rent. During the marriage, Hank and Wanda paid the monthly mortgage payments, taxes, and insurance for the Ventura property from the joint checking account. In 2003, Hank and Wanda purchased a home in Oxnard (the family home) and moved into it. They took title in both of their names, specifying they were “joint tenants, with right of survivorship.” Wanda paid the down payment from money she inherited from a rich Uncle. Hank and Wanda orally agreed the Oxnard home belonged to Wanda. During the marriage, Hank and Wanda acquired a Martin guitar which is worth $600, and a set of earrings which are worth $15,000. Hank and Wanda orally agreed the guitar belonged to Hank and the earrings belonged to Wanda. In 2005, on their 5th wedding anniversary, Wanda gave Hank an anniversary card signed by her which said “to my love, I give you the Martin guitar.”On their 6th anniversary, Hank and Wanda purchased an Oxnard Burger King restaurant with community funds for $300,000. Although the rate at which Oxnard restaurants appreciate is unpredictable and not reliable, managers of Burger King earn over $200,000 a year, so Hank quit his professor position at UCLA in mid-semester to manage the Burger King. Though Wanda has not worked at the Burger King, Hank has managed it since it was acquired. UCLA sued Hank for breach of contract and won a $50,000 judgment against him. When Hank lost the trial with UCLA, Wanda told him to leave the house and not to come back. Hank then moved-out into an apartment, and continued to work as the manager of the Burger King.Hank and Wanda are living separately and they have filed for divorce. Hank hired an attorney to represent Hank in the divorce. Hank signed a promissory note containing Hank's promise to pay the attorney $10,000 in fees. Hank also signed and recorded for the attorney a deed of trust lien, securing the note, which if valid would create a lien on the family home, for the attorney fees. Wanda’s law practice was appraised when the parties separated at $200,000 and its value has not changed since. There is $100,000 in the joint checking account. The Ventura house has increased in value each year since it was purchased, as has the Oxnard house. The Burger King has increased in value each year since it was opened, and it increased in value since Hank and Wanda separated chiefly because Hank is a great manager. Answer according to California LawQuestion #1(i)At trial, how should the court rule on Hank and Wanda's respective rights and liabilities in:Wanda's LLM degree?the law practice?(c)the checking account?(d) the Ventura home?Discuss and decide each requested and required ruling as if you are the judge.Question #2Assume the same set of facts for the following questions: (ii) At trial, how should the court rule on Hank and Wanda's respective rights and liabilities in:the Oxnard Home?the guitar and earrings?the Burger King restaurant?To what extent is the community or either spouse entitled to any reimbursements?What property can UCLA reach to satisfy its judgment against Hank?Is the lien filed against the family residence valid? Are Hank and/or Wanda's interest in the family home subject to the lawyer's claim for attorney fees on the note and lien?Discuss and decide each required and requested ruling as if you are the judge.Answer to Question 1In California, property acquired by either spouse during marriage is presumed community property (CP) along with the property's rents issues and profits. This classification is important because courts are required to divide community property (CP) between spouses equally. The CP presumption is conclusive unless it is rebutted by tracing the property acquired to a separate property source such as a gift or inheritance, or upon proof of a Premarital or Transmutation agreement.Educational degrees are too speculative to value or to be considered a divisible CP asset, but the value of Wanda's law practice will be divided by the court including its good will (reputation, expectation of continued patronage) and book value, as it was acquired during marriage. The earnings of each spouse during marriage are CP so the funds on deposit in the joint checking account at separation are CP to be divided equally. Acquired before marriage, the Ventura home is presumed Hank's SP, and there is no spousal agreement which rebuts this presumption. As to the community funds used to pay the mortgage payments: instead of reimbursement, the community acquires a 'pro tanto' interest in the increased value of the Ventura property. The "Moore/Marsden" formula does not provide for reimbursement of interest, taxes, or insurance; but it gives the community an interest in the amount the property appreciated during marriage equal to this fraction: CP payments which reduced the loan balance, divided by the purchase price. Hank will be awarded the Ventura home as his SP, along with the property's appreciation, except for the community's 'pro tanto' interest in the appreciation during the marriage.Answer to Question 2As the Oxnard Home was acquired during marriage in concurrent "joint" title, a special presumption of community property applies. This presumption is conclusive, it cannot be rebutted by tracing. There was no deed or transmutation regarding the Oxnard Home so it is CP. The character of property can be changed by spousal agreement. The general rule is to be valid, a transmutation agreement requires a written agreement containing an express declaration describing the interest transmuted, signed by the spouse adversely affected (such as a deed for real property). The anniversary card Wanda signed and gave to Hank described the guitar and gave it to Hank. It was a valid transmutation agreement as to the guitar, which by agreement becomes Hank's SP. An exception to the writing requirement are items used principally by one spouse not substantial in value given marital circumstances. Here the earrings were of significant value given the marital circumstances, so the oral agreement purporting to transmute the earrings is not effective; the earrings remain CP. Each party receives a one-half interest in this asset. The Burger King restaurant was acquired during the marriage so it is presumed CP. Its value at separation including appreciation during the marriage is CP. To the extent the BK increased in value between the date of separation and the date of trial, that appreciation must be apportioned between SP and CP. Assets must be valued as close to the time of trial as possible.A spouse's labor and efforts after separation are that spouse's separate property, so the post-separation appreciation attributable to Hank's post-separation efforts as manager are his SP. The portion of the BK's appreciation after separation attributable to its expected growth, sometimes called expected return on investment, is community property. The 'Pereira' formula finds for a normal rate of return on an asset, which here would be CP, and the remainder of the appreciation would be SP. The 'Van Camp' formula asks that we identify the value of Hank's post-separation labor, which would be his as SP; the remainder of the appreciation would be CP. Selecting either formula depends on the evidence. Here, it is stated that the rate of asset growth is not known, the post-separation appreciation was due chiefly to Hank's efforts, and the value of Hank's efforts as manager is discernible. So the Van Camp formula should be used to formulate the portion of the post-separation appreciation which is Hank's SP; the balance is CP as it reflects the normal growth of this CP asset.Reimbursements: Though the Oxnard home is presumed CP, Wanda contributed her SP towards its acquisition after 1/1/84, so by statute she is entitled to a reimbursement of her SP contribution. The community is also entitled to reimbursement for its contribution to the LLM tuition, as Wanda's earning capacity was substantially enhanced by the LLM degree. As Wanda attended school less than 10 years prior to the divorce commencement, there is a rebuttable presumption the community has not yet substantially benefited from the education. As there is no evidence of substantial benefit or spousal agreement, the community should be reimbursed the tuition amount plus interest at the legal rate from the end of the calendar year of payment. UCLA has a judgment against Hank only, so UCLA may reach Hank's SP. A judgment creditor can reach CP for a debt incurred by a spouse prior to or during marriage. Here there is no evidence of a spousal agreement or the sheltering of earnings, so UCLA can reach CP. By statute both spouses must join in executing any instrument by which any interest in CP is sold, conveyed, or encumbered. An exception is the FLARPL statute, which permits one spouse to create a valid "Family Law Attorney Real Property Lien" for attorney fees in a divorce. This statute provides that though the note for fees was made by Hank after separation and only Hank signed the note and lien, Hank's attorney may reach the family home to collect his fees if Hank does not pay the attorney, but can only reach Hank's one-half interest in the family home. ................
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