Community Property Flashcards
Pre-19th Century
Single unified property interest; women did not own any property rights; all her property and earnings after marriage belonged to husband.
Equitable Distribution
Fair (not equal) distribution of assets and debts at divorce. Used by most states when dividing property during divorce. Property acquired belongs to spouse who earned it. Court considers relative earning contributions, value of staying at home, raising children, earning potential - can receive 1/3 to 2/3 of property.
Wirth (constructive trust)
Wirth v. Wirth: 38 A.D. 2d 611, 326 N.Y.S. 2d 308 (1971) This case was decided before NY’s 1980 adoption of equitable distribution.
Common law title system.
Wife appealed trial court’s property judgment. Sought judgment for half of H’s real and personal property purchased with his money in his name. W claimed she helped pay bills and save money under “constructive trust”. However, this was prior to ED, CP, or new CL and court held that a CT is only for rectifying fraud and did not award her anything.
Painter (equitable distribution)
Painter v. Painter, 65 N.J. 196, 320 A.2d 484 (1974):
Is Equitable Distribution void for vagueness or unconstitutional?
No, allows judge to apportion marital assets in manner appropriate for circumstances; all property is eligible for distribution.
The TC excluded assets acquired by gift or inheritance during the marriage in determining the assets available for distribution. (Similar to the current Community Property law). The appeals court interrupted new legislation and rejected the court’s exclusion of gifts/inheritance during the marriage. The court loosely termed “acquired’ during the marriage.
Property Distribution, Spousal Support, Child Support
Traditional Common Law: The trade off for husband’s control of wife’s property was the obligation for him to support her even after the termination of the marriage.
Modern Common Law: 1986, NY created “standard of living of the parties established during the marriage” as the starting point for a spousal support award.
Community Property: 1988, CA required divorce courts to make findings about the parties’ “standard of living” during their marriage and to consider the earning capacity of both parties to sustain the marital standard of living.
“Guideline” Spousal Support: Some jurisdictions also use guideline formulas for spousal support like the child support calculations.
What system to do you prefer?
Under federal law, ALL states must have child support guidelines to determine “guideline” child support.
Most guidelines are based on the income of the parties, ”timeshare,” and other varying factors.
California Family Code sections 4050-4073 covers California’s “guideline” formula.
Most jurisdictions in California use software to assist with calculating the guideline formula, such as “Dissomaster” or others.
Marital Property
California Ownership System: Allows divorcing parties to take community property as a legal right without any legal justifications.
Partnership View of Marriage: “Equitable Distribution Principles.” Because both spouses contribute to the marriage, both parties are entitled to the assets acquired by either party during the marriage.
Family Wealth Redistribution: The demise of a marriage, requires the redistribution of financial resources.
Marital Property to Adjust Sex-Related Economic Inequality: Legal rules must be articulated in sex-neutral form, even though marriage and divorce present different and unequal risks/problems for men and women and the higher/lower earner.
Married Women’s Property Acts / Common Law
During the 19th century, the common law system was reformed to treat married women equal to men.
Unlike the prior laws, married women now owned all property which she brought into the marriage and all property she acquired or earned during the marriage.
With the changes to the common law system, property belongs to either the husband or wife.
The parties only jointly hold property IF one or both spouses elect to take title jointly.
In theory, the enactment and acceptance of the Married Women’s Property Acts (1882), was a big win for women, and allowed married women to own and control property in their own right.
However, the likelihood that women held the same financial resources as their husbands was unlikely.
Challenges presented:
If women did not own property, she was clearly heavily dependent on her husband.
Husband solely decided to make his property or property acquired during marriage “joint.”
What other challenges do you see?
CA CP Law Timeline
1849 Separate Property to married women
1850 Separate and Community Property established
1951 Legislature grants a wife power to manage her own earnings
1970 No Fault divorce (2010 for New York)
1975 Equal management of Community Property by husband and wife
2003 Spousal rights extended to domestic partners
2008 Same-sex couples right to marry in California
2013 Same-sex couples right to marry under US Constitution
Community Property (FC Sec 760)
Property (real or personal) acquired by either spouse during marriage, while domiciled in a CP state. This includes salary and wages earned (prize money, bonus), income from community assets, and all assets/liabilities must be divided equally at divorce.
Community Presumption
There is a presumption that all assets acquired during marriage are community property. A party may rebut presumption by showing there was an agreement between the parties or that title was taken in a form that overcomes the presumption.
Common Law vs Community Property
Common Law: Redistribution Mechanisms
Elective Share: Surviving spouse receives a substantial portion of the decedent’s estate, which is approximately one-third.
*Equitable Distribution: Grants the divorce court the power to distribute property disregarding legal ownership. (Most common even today).
What are some of the challenges with allowing the court to make such decisions?
Title Jurisdiction: In same states, courts did not have the authority to distribute property.
Modern Law / Common Law
Joint ownership is possible only by explicit choice. Spouses are treated as “unmarried” for property ownership.
At divorce, the parties are entitled to a portion of the marital property and possible a portion of the other spouse’s separate property as well.
“Elective Share” of decedent’s estate
Community Property
Joint ownership, unless either spouse can demonstrate otherwise, either by showing that the property is ”separate” or or there is an agreement between the parties.
At divorce, the parties are entitled to a portion of the community property.
Traditionalist v Modern View
“Traditionalist View:”
Should men and women continue to perform “traditional” roles during the marriage?
Should women continue to devote their time to childrearing and homemaking with financial support? What happens if the women is the breadwinner? Should H continue to fulfill the homemaking role?
Are women less attractive after a certain age?
“Modern View:”
Should either spouse be compensated for “lost career opportunities?”
Should either spouse receive “restitution?”
Do you believe that, “the greater value women place on children is the source of women’s lack of power?”
Should the divorce approach be more “child centered?”
Separate Property (FC Sec 770)
Property 1) owned by either spouse before marriage (including royalties received during marriage for something done prior to marriage), 2) acquired during marriage by gift, will, or inheritance, 3) acquired during marriage with expenditure of separate funds (source rule/tracing), 4) rent, issue, profits derived from separate property.
May convey SP w/o consent of other spouse.
Sec 771: Earnings and accumulations of spouse and minor children living with the spouse while separated from other spouse are SP.
** Study Tip: Even if property is deemed FC Sec 771 separate property, always consider if “marital labor” is involved which will shift the property to community property.
Clark (tracing)
The Clark case explains that Family Code Section 770 allows parties to “trace” to the source of acquisition in order to demonstrate that the asset, although acquired during the marriage, is partially or wholly community property.
Estate of Clark, 94 Cal. App. 453, 271 p. 542 (1928)
W alleged that a large part of the estate of H’s dead son belonged to the community and she was entitled to ½ of community property.
H and W married in 1926 (2 weeks after the death of his first wife).
H conveyed his mineral rights and land to his children. After the conveyance, one of his children passed away. H’s son did not leave the original rights back to his father in his alleged will.
Issue: Does H have any interest in his son’s estate and is such interest SP? The court held that, H had a property right PRIOR to marriage, such right was vested prior to marriage, and therefore separate property. The court further held as follows:
Property in litigation was acquired by H during marriage (which presumptively is what?)
Property was acquired by compromise of a statutory right (will)
Property which he owned prior to marriage SP
Andrews
Contract v Gift
Andrews v. Andrews, 116 Wash. 513, 199, p. 981 (1921)
Son wanted to enforce an oral agreement with his Father to give Son all property owned by him. The TC dismissed Son’s claim and Son appealed.
W1 and H lived with Son and his family. W created a will leaving all of her assets to H and in the event of H’s death, all such proceeds to go to Son. H remarries and drafted a new will (which was held invalid). H did attach a codicil to the original will granting W2 $500 in cash, furniture, and the use of the homestead for 5 years. The original will which granted Son all property was valid (codicil also invalid).
Questions Considered by the Court:
Would the property by SP or CP of the appellant if he was successful in showing an agreement, contract or transfer? The court held it would have been CP b/c it would have been awarded by contract and NOT before marriage or acquired by gift, bequest, devise or decent.
Does Son have an interest in the property? NO, and why?
• Andrews Principles:
Did Father and Son have a valid contract absent the statute of frauds?
If Son was able to show a valid contact, would the proceeds/property received by considered SP or CP?
Downer v Bramet
Labor as CP
• Downer v. Bramet, 152 Cal. App. 3d 837
Prior to separation, W alleged that H told her that H’s employer planned to transfer a ranch to H as “retirement.” H rejects this claim and alleges that the ranch was a gift from his employer. The TC held for H.
Questions the court considered:
Was the conveyance a gift?
• Yes. The conveyance of the ranch was a gift: 1. No legal obligation to do so 2. No detrimental reliance
Is the ranch CP or SP? The Ranch is CP, b/c the gift was made by former H’s employer for his devoted services of his employment. Earnings or property which can be attributed to or acquired as a result of labor, skill and effort of a spouse during marriage is CP.
• ANALYSIS
Is the property in question acquired during the marriage?
Is the property in question a gift to the receiving party?
If the property in question is deemed a gift or SP, does the gift or SP have any CP attributes?
Tracing
Clark allows tracing to find out the source of the funds to determine if fully or partially CP.
Funds acquired through community or marital labor is considered community property.
Presumption (FC Sec 600, 601)
CA Evidence Code 600 defines presumption as follows:
(a) a presumption is an assumption of fact that the law requires to be made from another fact or group of facts found or otherwise established in the action. A presumption is not evidence. (b) An inference is a deduction of fact that may logically and reasonably be drawn from another fact or group of facts found or otherwise established in the action. A presumption is either conclusive or rebuttable. Conclusive: The court or jury is required to find the existence of the presumed fact regardless of the strength of the opposing evidence. • Community Property Presumption Family Code Section 760 establishes the Community Property Presumption that property acquired during the marriage is community property. Is this presumption conclusive or rebuttable? Who has the burden of proof to show that the property in question is not community property?
Lynam v Vorwerk
• Lynam v. Vorwerk, 13 Cal. App. 507, 110 P. 355 (1910)
H and W deposited money in their bank (presumed to be community property). H died in 1903, W withdrew the money and later died in 1907.
Issue: Is the deposited money Community or Separate Property?
What is the Community Property Presumption in this case
Was this presumption rebutted?
It has been held that the presumption of money be either or both H and W after marriage, in the absence of other evidence, raises a presumption that it is community property.
Fidelity v Mahoney
• Fidelity & Casualty Company v. Mahoney, 71 Cal. App 2d 65, 161
Facts: H purchased an insurance policy and named his son from a previous marriage as the beneficiary. W and H were married 2 months before the accident. W wanted ½ of the proceeds as she claimed the policy was purchased during the marriage.
Issue: Was the policy CP b/c W alleges it was purchased during the marriage? Or SP based on son’s arguments?
Rule/Presumption: Property purchased during the marriage is CP. W had the burden to first prove CP, at which point the burden would shift to H’s son to prove otherwise. W could not provide proof that the policy was purchased during the marriage to trigger the CP presumption.
Married Women’s Presumption (FC Sec 803)
If property is acquired prior to 1975 by a married woman and her husband, the presumption is that the property is CP unless expressed otherwise.
• Married Women’s Presumption/Family Code Section 803 (before 1975)
(a) If acquired by the married woman, the presumption is that the property is the married woman’s separate property.
(b) If acquired by the married woman and any other person, the presumption is that the married woman takes the part acquired by her as tenant in common, unless expressed otherwise.
(c) If acquired by H and W, the presumption is that the property is CP unless expressed otherwise.
Holmes
• Holmes v. Holmes, 27 Cal. App. 546, 150 P. 763 (1915):
Facts: Title to the property was vested in W, and under 803, her SP. No evidence to rebut the presumption. The only evidence suggest that the purchase price was paid from joint earnings. H states b/c of community payments, the property was CP.
Issue: Does the characterization of the purchase funds change the 803 presumption? NO
Rule: Evidence Code 803
Analysis: the CP funds used to purchase the property is not sufficient “enough” to rebut the 803 presumption that the property was W’s SP. CP may be a gift from H to W. Because H is aware of 803, essentially he gifted the property to W.
Louknitsky
• Louknitsky v. Louknitsky, 123 Cal. App. 2d 406, (1954)
Issue: Is the SF property CP or SP ?
Facts: W purchased SF property in her name only. H routinely sent W $70 a month while still residing in China.
Rule: Rebuttable presumption that the property is SP.
Analysis: The purchase occurred prior to H’s arrival to CA, H “lacked knowledge” of the circumstances surrounding the deed.
Conclusion: The home is CP.
Baer
• Estate of Baer, 81 Cal. App 2d 830 (1947)
Issue: Is the corporate stock CP?
Facts: W had her own separate account and won $5,800 as prize money which were deposited into her separate bank account. Shortly thereafter she opened a brokerage account. H testified that he did the buying and trading. H testified that he believed the property to be CP and if he died, she would have the money. In a nutshell, he wished to avoid probate proceedings.
Rule: Rebuttable presumption that the property in W’s name is SP (803)
Analysis: The testimony provided to the H as to his intent was enough here to overcome the 803 presumption. H wished to create survivor benefits NOT W’s SP.
Conclusion: Stock is CP.
Dunn v Mullan
• Estate of Baer, 81 Cal. App 2d 830 (1947)
Issue: Is the corporate stock CP?
Facts: W had her own separate account and won $5,800 as prize money which were deposited into her separate bank account. Shortly thereafter she opened a brokerage account. H testified that he did the buying and trading. H testified that he believed the property to be CP and if he died, she would have the money. In a nutshell, he wished to avoid probate proceedings.
Rule: Rebuttable presumption that the property in W’s name is SP (803)
Analysis: The testimony provided to the H as to his intent was enough here to overcome the 803 presumption. H wished to create survivor benefits NOT W’s SP.
Conclusion: Stock is CP.
Title Presumption
CP v Title
The CP presumption (property acquired during marriage is community property) may be trumped by the Title Presumption, if the parties held property in Joint Title.
• What is the difference between a CP right and the Title Presumption?
Schindler
The CP presumption (property acquired during marriage is community property) may be trumped by the Title Presumption, if the parties held property in Joint Title.
• What is the difference between a CP right and the Title Presumption?
Bowman
• Bowman v. Bowman, 149 Cal. App. 2d 773 (1957).
Facts: TC characterized the house as CP.
Issue: Is the house CP or JT?
Rule: JP is a rebuttable presumption that the property was in fact held in joint tenancy and the party claiming CP has the burden of overcoming the presumption.
Analysis: While the presumption cannot be rebutted by an understanding of one party uncommunicated to the other, an understanding to hold as community property regardless of title may be shown by the conduct of the parties. Here, W testified that she did not know how about JT/CP, there was no discussion with H and she believed the house was CP. H contends that there was a discussion about the “right of survivorship” aspect of JT. Payment is not enough to rebut the presumption. The court concluded that there was enough evidence to overcome the presumption, as the parties intended the JT to avoid probate and the intent to avoid probate was not inconsistent with the intent to have the property characterized as CP.
Conclusion: Judgment affirmed.
Lucas
• Marriage of Lucas, 27 CAL. 3D 808, 614 (1980)**
Facts: Parties purchased a house for $23,300 and W used her trust money, $6,351, for the down payment and the parties jointly took out a loan for $16,948.43 for the remaining purchase place. Title was taken as ”JT.” W also paid $2,962 from her SP trust funds for improvements
Issue: Is the property in question CP or SP?
Rule: Property purchased during the marriage, even in JT, will be considered CP absent an agreement of the parties.
Analysis: Prior to 1965, property followed title. The JT presumption could be overcome by evidence of an agreement or understanding otherwise. Purchase funds not enough and “hidden” intentions also not enough. 1965 the Legislature added CC Section 164 which attempted to take away the ”title presumption” and stated Property acquired during marriage even as JT, the property will be CP. Why?
Conclusion: Court Reversed.
Lucas (now)
• Marriage of Lucas, 27 CAL. 3D 808, 614 (1980)
Where are we now in 1980?
Pre 1965: Rebuttable Presumption that the ownership interest in property was found in title.
1965: Civil Code 164 (Civil Code section 5110) à Real Property acquired as JT during a marriage will be CP unless there is an agreement (written or oral) or evidence to show otherwise (Lucas).
Lucas: Party who uses SP for CP is entitled to reimbursement from the CP or SP of the other party ONLY if there is an agreement between the parties to do so. What happens if there is an agreement? “Pro Rata Interest”
Lucas: Title presumption could be overcome by evidence of an agreement or understanding that interest would be otherwise.
CA Civil Code 4800.1 (FC Sec 2581)
• California Civil Code 4800.1 (FC 2581)
For the purpose of division of property upon (divorce or legal separation), property acquired by the parties during marriage in joint tenancy (JT) form is presumed Community Property (CP).
This presumption is a presumption affecting the burden of proof and may be rebutted by either of the following:
A clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is Separate Property (SP) and not Community Property.
Proof that the the parties have made a written agreement that the property is SP.
CA Civil Code 4800.2 (FC Sec 2640)
• California Civil Code 4800.2 (FC 2640)
Unless the party has made a written waiver of the right to reimbursement or signed a writing that has the effect of a waiver, the party shall be reimbursed for his or her contributions to the acquisition of the property to the extent the party traces the contributions to a Separate Property source.
No Interest or Inflation
Downpayments, Payments for Improvements and Payments to reduce the principal of a loan used to finance the purchase or improvement of the property.
Excludes: Payments on interest on the loan or payments made for maintenance, insurance, or taxation?
Why?
(a) “Contributions to the acquisition of property,” as used in this section, include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property.
(b) In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division.
(c) A party shall be reimbursed for the party’s separate property contributions to the acquisition of property of the other spouse’s separate property estate during the marriage, unless there has been a transmutation in writing pursuant to Chapter 5 (commencing with Section 850) of Part 2 of Division 4, or a written waiver of the right to reimbursement. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division.
Anti-Lucas
4800.1: The goal was to make JT title more “inescapable” form of CP.
What about property held in other forms? (CP or Tenancy in Common)
Under Lucas an oral agreement or understanding would suffice to establish a separate property ownership interest.
4800.2: Modified Lucas as follows:
Reversed the Lucas gift presumption, now the separate estate preserves the separate claim.
The separate property claim was now limited to reimbursement and not pro rata ownership.
What are some of the problems you see?
Buol
• In Marriage of Buol, 39 Cal. 3d 751, 705 (1985): TC applied Lucas and found that an oral agreement between the parties that the residence was W’s SP although titled in JT. TC awarded the house to W. Court of Appeal (after the effective date of Lucas 1-1-84) reversed.
Fabian
- In Marriage of Fabian, 41 Cal. 3d 440, 715 (1986): Parties held property in CP. H then used his SP for improvements. While in appeal, section 4800.2 became effective and H received his reimbursement.
- BOTH addressed retroactivity: The court did not want o constitutionally apply the new law to cases still pending on its effective date when those cases had earlier been decided by the TC. To do so would “violate the due process clause b/c it would infringe vested property rights while not serving any important state interest.”
Amendment of 4800.1
• Because of the holdings in Buol and Fabian, Section 4800.1 was amended in1987.
To address the inconsistency in the law the court held as follows:
(The most important amendment)
4800.1(3): The current modifications apply to ALL property held in joint title regardless of the date of acquisition of the property or the date of any agreement affecting the character of the property.
4800.1 (3)(b) For the purpose of division of property upon dissolution of marriage or legal separation, property acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, tenancy by entirety, or as community property, is presumed to be CP.
May be rebutted as follows:
• A clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is SP and not CP.
• Proof that the parties have made a written agreement that the property is SP.
Heikes (Reimbursement)
Vested Property Right
• Marriage of Heikes, 10 Cal. 4th 1211, 899 (1995): **
Issue: Does the Constitution permit the statutorily authorized reimbursement of H for SP contributions he made in 1976 to the property divided as CP in 1992?
Facts: H owned a home and lot in CA as his SP. H later conveyed both parcels to W and himself as JT. Dissolution proceedings commenced in 1990 and finalized in 1992. Marriage of Hilke applied the presumption retroactively. So H runs in for a new trial for retroactive application and the TC agreed.
Rule: Fabian held that 4800.2 retroactivity would deprive the other spouse of a vested property right without due process of law.
Analysis: Allowing the reimbursement requests by H would unconstitutionally deprive the W of a “vested property right” without due process of law.
Conclusion: Retroactivity does not apply in this case.
• Marriage of Heikes, 10 Cal. 4th 1211, 899 (1995): **
What is the basis for Community Property:
Prior to 1965, title controlled (rebuttable presumption) Lucass
Civil Code 164/5110: Community Property presumption, property (real property) acquired as JT during marriage is CP. (1965-1983)
Civil Code 4800.1: The presumption that JT property acquired during marriage is CP was extended to all property, not just real property. A writing was required to rebut the presumption.
Buol limited retroactivity b/c of the vested property right. (1984)
Civil Code 4800.1Amendment: Included all property forms and allowed retroactivity. (1986).
• Marriage of Heikes, 10 Cal. 4th 1211, 899 (1995): **
When H conveyed the property, what was the current law at that time? (1976)
Buol does not preclude retroactive application of section 4800.1 presumption that the unimproved parcel conveyed by H to himself and wife in JT is CP, b/c H held no vested property right, as a JT of the parcel, that he would not also have held as owner of CP while both spouses were alive. (Retroactive OK when there is not a vested property interest)
Right of Reimbursement: H seeks reimbursement under 4800.2. Should the court allow reimbursement of pre-1984 separate property contributions to CP under the post-Fabian modifications of section 4800.2?
Uniform Premarital Agrmt Act 1983
• 1983 Uniform Premarital Agreement Act “UPAA”
UPAA was designed to remedy “substantial uncertainty as to the enforceability and uniformity among the states.”
CA created a modified version of the UPAA in 1985.
• California Premarital Agreement Act (FC 1610 – 1617)
• Important Provisions
FC 1611: A prenuptial agreement shall be in writing and signed by both parties. It is enforceable without consideration.
FC 1612: Parties may contract to just about anything with the exception of child support. Exception: Public Policy (promote divorce) or imposing criminal activity.
FC 1613: Prenup is effective upon marriage (Executed at signing)
FC 1614: Parties can amend the Prenup after marriage IN WRITING
FC 1615: Enforcement
• The Prenup must be entered into voluntarily, and may not unconscionable
• The Prenup must have a “fair and reasonable” disclosure of property or financial obligations of the other party.
• If there is no disclosure there must be a written waiver
• Pre UPA/CPA Enactment: Does the PreNup promote divorce?
Dawlyey
Marriage of Dawlyey, 17 Cal. 3d 242 (1946): The parties shall review the “objective” language of the PreNup to determine the validity of the agreement. Betty was concerned that her nonmarital pregnancy would result in termination from her employer and the parties agreed to a temporary marriage. James demanded that the parties sign a PreNup, Betty demanded that James take care of her and her daughter from a previous relationship until she could return to work. The agreement was signed two days prior to their marriage.
Marriage of Dawlyey, 17 Cal. 3d 242 (1946): Parties married in June of 1964 and James filed for divorce in April of 1973.
The Court held, “Enforcement of the state policy to foster and protect marriage, does not require the invalidation of the entire agreements based upon the subjective contemplation of the parties. State Policy requires only that the courts refuse to enforce contractual provisions which by their terms seek to promote the dissolution of marriage.”
Noghrey
- Marriage of Noghrey, 169 Cal. App. 3d 326 (1985): Right before the wedding on the reverse side of the ceremonial wedding certificate, Wife insisted that Husband sign an agreement awarding her over $500,000 and ½ of H’s assets, in the event of a divorce.
- The court held that, ”It constitutes a promise by the husband to give wife a very substantial amount of money and property, but only upon the occurrence of a divorce.”
Wilson
• Estate of Wilson, 211 Cal. App. 4th, 1284 (2012): Domestic Partnership agreements that satisfy the FC Sections 1600-1617 and after the same rights of married persons were granted to domestic partnerships, are not automatically invalidated by the partner’s subsequent same-sex marriage.
Pendleton and Fireman
- Marriage of Pendleton & Fireman, 24 Cal. 4th 39 (2000): Held that “premarital spousal support waivers are not per se unenforceable.” This court disagreed with the long standing public policy view that CA enactment of section 1612 expressed legislative intent to disallow spousal support waivers.
- The Parties must ensure that the agreement is Voluntarily executed.
Bonds
Marriage of Bonds, 24 Cal. 4th 1 (2000): The question here is whether wife’s consent to the Prenup was voluntary. When Bonds met his wife, a 23 year old Swedish immigrant, he was earning $106,000. Just before the parties were set to board a plane, Barry’s attorneys presented Sun and Barry with copies of the agreement and neither party reviewed the terms. Sun signed the agreement. Sun was not represented by counsel. In reviewing the totality of the circumstances, the court held that that the PreNup was voluntarily. executed
• Marriage of Bonds, 24 Cal. 4th 1 (2000): “When a party challenging a premarital agreement establishes that he or she did not have legal counsel while the other party had such assistance, and the unrepresented party did not have the opportunity to obtain legal counsel or did not knowingly refuse legal counsel, the court must strictly scrutinize the totality of the circumstances involved in the execution of the contract.”
• The court found that Sun understood what she was giving up and her consent was not coerced.
Spousal Support Enforcement
• 1612(C): Addition of Spousal Support Waiver: Marriage of Pendleton & Fireman
A spousal support will only be enforceable IF
• The party against whom the enforcement of the provision is sought has independent counsel. At the time of execution.
• The provision can not be “unconscionable” at the time of enforcement
• The only provisions will not make the spousal support waiver enforceable
• 1615 (C): Was the Prenup executed voluntarily? (Bonds)
Was the party represented by independent counsel at the time of the signing?
Was the advice to forego counsel expressly waived in a separate writing?
Did the party whom enforcement is sought have at least 7 calendar days to review the agreement? AND advised to seek independent counsel?
Was there full disclosures and full explanation of rights?
Did the party whom enforcement is sought execute a document declaring he or she received the information required?
• Family Code Section 4(c) states to use the operative date of the law in question regardless of the circumstances before, on, or after the operative date.
• Family Code Section (4)(b) Otherwise, look to the new law for the operative date.
• Prior to 1985 there were no formal requirements for property agreements DURING marriage, as opposed to PreNups.
Raphael
• Estate of Raphael, 91 Cal. App. 2d 931 (1949): This case fell on the filed tax returns, which the court heavily relied to find a transmutation.
Jafeman (Transmutation)
• Marriage of Jafeman, 29 Cal. App. 3d 244 (1972): H and W lived in the home during the marriage, the court defined what did not rise to the level of transmutation:
Mere use was not enough, use of CP funds for improvement was not enough, possession and management was not enough. Ultimately the “undisclosed belief” was also not enough.
• Now, (1984), transmutations must be 1. Writing 2. Signed or accepted 3. by the spouse whose ownership interest in the property is adversely affected.
• FC 850:
Transmute CP à SP of either spouse
Transmute SP of either spouse à CP
Transmute SP of one spouse à SP of the other spouse
• Family Code Section 852**
• A transmutation of real or personal property is not valid UNLESS:
Made in writing
By an express declaration
That is made, joined in, consented to or accepted by the spouse whose interest in the property is adversely affected.
• Family Code 852
Transmutation of real property is not effective as to 3rd parties w/o notice thereof unless recorded.
Does not apply to gifts that are not “substantial in value taking into account the circumstances of the marriage.”
Effective Date: January 1, 1985
A statement in a will of the character of property is not admissible as evidence of transmutation of the property in a proceeding commenced before the death of the person who made the will.
Benson
- Marriage of Benson, 36 Cal. 4th 1096 (2005): Transmutation MUST be 1. In writing AND there must be 2. An express declaration. 3. Approved by the adversely affected spouse. FC 852.
- “Express Declaration” : Only if it states on its face that a change in the character or ownership of the subject property is being made. Marriage of MacDonald.
- Here, H claims he conveyed his CP interest in their home after she orally promised to waive, in writing, her community property interest in H’s retirement accounts. Despite MacDonld and FC 852, the TC ruled that H’s performance on part of the bargain…
- Marriage of Benson, 36 Cal. 4th 1096 (2005): “served as an adequate substitute for W’s express written statement changing the retirement accounts into H’s SP. “
- This court said NO. ”Part Performance” does not apply here. The court did not intend for any additional exceptions to FC 852. The strict standards provided by the legistlature must be followed.
Valli
• Marriage of Valli** 58 Cal. 4th 1396 (2014): During the marriage H used CP funds to purchase an insurance policy on his life, naming his W as the policy’s only owner and beneficiary. H said the insurance policy was CP. W argued that the transmutation requirements apply only to transactions between spouses and not 3rd parties. Because there is not interspousal transaction, in her view the transmutation requirements do not apply.
Community Property Presumption v. Title Presumption
The court said that although other cases reference “interspousal transactions,” these cases did not provide a 3rd party exemption to the transmutation rule.
Books & Robinson
• In Re Marriage of Brooks and Robinson (2008): H and W purchased property during the marriage in W’s name only. The H argued on appeal that this was a botched transmutation b/c the transmutation requirements did not exist. The Court of Appeal stated the property was purchased in W’s name in a transaction with a 3rd person, not through an interspousal transaction.
Spousal Purchases from Third Parties v Valli
The Court in Valli was still not persuaded by the findings in the earlier cases.
• Spousal Purchases from 3rd parties v. Valli
W did not argue in Valli that the purchase of the insurance policy was a valid transmutation but instead invoked the “title presumption.”
• The Court is very clear: Family Code (852/2581/2640) trump title presumption, Evidence Code (662).
Because the Court rejected the Title Presumption argument, the court held that ”Husband never expressly declared in writing that he gave up his community interest in the policy bought with community funds”
The court felt as though the 3rd party exception was unnecessary considering the gift exception already in existence, 852(c). Most gifts are purchased by 3rd parties and do meet the transmutation standard.
Lucas JT v Transmutation
• Lucas: H made a gift to W when title taken in her name. H made a ”gift” to W. With the introduction of transmutation laws, why does this no longer fly?
• Concurring Opinion in Valli:
FC 760 à Property purchased during marriage is CP
FC 802 à PRESUMPTION of property purchased during the marriage is CP.
• Standard of Proof: Preponderance of the evidence
EC 662 à Title Presumption
What happens when there’s a conflict between EC 662 and FC 760/802 and FC 852?
• “Section 662 has no place in the characterization of property in actions between spouses. Applying section EC 662 to disputes between spouses would subvert basic tenets of California family law.”
• Haines: EC 662 must yield to another presumption within CA’s community property law.
Why is this?
Lafkas
• Marriage of Lafkas, 237 Cal. App. 4th 921 (2015): H contends the partnership interest is his SP b/c the new partnership agreement lack the requisite ”express declaration” to transmute the property interest. Wife contends that the interest is CP under FC 2581, joint title presumption.
“We hold that when a spouse places Separate Property in Joint Tenancy, the transmutation requirements of FC 852 must be satisfied before the JT presumption of FC 2581 applies.”*
• Marriage of Lafkas, 237 Cal. App. 4th 921 (2015): H formed a investment group in 1971 with friends and married his W in 1990. After marriage, H and W signed an updated partnership agreement. H testified that he thought it was required for his W for the loan application and W testified that H needed her credit. H stated the modified agreement lacked the “express intent” required in 852.
TC: The modification resulted in a new partnership agreement and the Riverside properties were purchased during the marriage. H used Ws name and credit and the parties were both substituted for H’s previous 1/3 interest. The TC held that the change in the agreement satisfied the expressed declaration standard.
• Marriage of Lafkas, 37 Cal. App. 4th 921 (2015)
COA: Is there a valid transmutation under FC 852, if so 2. Does FC 2581 or any other Family Law presumption apply, if not does EC 662 apply?
The statute does not require any magic term, but it must be clear on its face. The express declaration must unambiguously indicate a change in character or ownership of property, as a party does not “slip into a transmutation by accident” Marriage of Starkman
The COA further held that this agreement did not satisfy FC 852 as it did not “contain any express declaration that the characterization or ownership of the property is being changed.” As we learned in Valli, ownership is not enough.
• What would make this a valid transmutation?
Division of Property - Joint
- Div 7. Division of Property Part 3. Presumption Concerning Property Held In Joint Form
- § 2581. For the purpose of division of property on dissolution of marriage or legal separation of the parties, property acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, is presumed to be community property. This presumption is a presumption affecting the burden of proof and may be rebutted by either of the following:
- (a) A clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property.
- (b) Proof that the parties have made a written agreement that the property is separate property.
- (Added by Stats. 1993, Ch. 219, Sec. 111.7. Effective January 1, 1994.)
See
- See v. See, 64 Cal.2d 778: Parties married on 10/17/41 and separated 05/10/62. Husband was employed by THE “See’s Candies..” Husband also served as the president. During the marriage he earned over 1 million in salaries.
- Account 13: $60k annual salary and family expenses paid by this account. Sometimes funds from his Security Account were transferred to Account 13.
- Security Account: Separate Property and sometimes $15k.
- Husband commingled in both accounts.
- TC: if excess of community expenses over community income –> No acquisition of CP
- See Continued: What is wrong with this theory?
- Would essentially circumvent CP and only award CP if community income exceeded community expenses.
- Supreme Court: FC 760 applies unless adequate tracing is done. The presumption may be overcome “with evidence that community expenses exceeded community income at the time of acquisition” à “Exhaustion” Method
- When assets are commingled, the party asserting the defense must keep proper records and provide appropriate tracing.
Mix
- Marriage of Mix, 14 Cal.3d 604: Parties married on 09/04/58 and separated on 12/14/68. At the time of separation W earned $25,000 annually and 40% partner in her firm. The parties commingled all of their earnings, even W’s separate property investment property.
- Exception to Married Women’s Presumption: After W requires joint management of all CP the presumption does not apply or when she has “management and control” of the bank account.
- Marriage of Mix Contd. Two Forms of Tracing:
- Direct Tracing: Whether separate funds so deposited continued to be on deposit when a withdrawal is made when property is purchased and whether there was an intention to withdraw such funds. “2 Step Process”
- Family Expenses: Family Expenses are paid from community funds. If at the time of the acquisition of property, it can be shown that all community income has been exhausted by family expenses, then all funds remaining in the account at the time the property was purchased will be separate funds.
- Here like See, W did not keep good records. But she actually tried to present evidence of proposed record keeping.
Murphy
- Estate of Murphy, 15 Cal.3d 907: The fact that H received substantial separate income with community income does not overcome the CP presumption. H must trace. The court held here that there was not enough evidence to trace and H should have essentially opened a separate account.
- Lets review pg. 248 problem.
- See –> exhaustion
- Mix à Direct Tracing v. Family Expenses
- P. 248 problem
- 20012 the SP was decreased by $3000 in CP all paid by the $20,000 inheritance. Now H has $17k.
- 2013 $6000 of CP was deposited
- 2014 CP deducts $3000 for Suit
- Acquisition #1 There is $3000 from CP and $17,000 of Inheritance (*)
- 2014 $2000 in salary ($1,000 for trip)
- 2015 $2000 in salary
- Acquisition #2 There is $6000 from CP and $17,000 of Inheritance (*)
Fick
- Marriage of Fick, 181 Cal.App.3d 997: During the marriage H used community funds to decrease the principal balance of debt. Here H used separate property funds and commingled with CP funds. Unlike the Mix case where W attempted to trace the funds, the H here did nothing. The court here said, “We are left in the dark as to the precise status and amount of SP in H’s personal account at the time of these payments.”
- What happens when either spouse has a SP business and continues to work in the business during the marriage?
- Pereira: Marital labor should be treated as CP to the business and growth in value of the business during marriage should be apportioned between the community and separate estates.
- Van Camp: Community income is determined by designating a reasonable value to the services performed by the property owner in connection with the separate property business.
Beam v BofA (Pereira / Van Camp)
- Beam v. Bank of America, 6 Cal. 3d 12: Parties married on 01/31/39 and divorced in 1968. Prior to and during marriage, H inherited over a million dollars. During the marriage H was not employed but devoted his time to managing his separate estate. During the marriage W did not work.
- Using Pereira the the TC assigned a legal rate of 7% as a reasonable rate of return on H’s separate property. Under this approach the entire increase would be assigned to H. Meaning the increase would not be attributed to H’s efforts, time or skill, but the normal growth factor and there would be no CP.
- Van Camp: Assign an annual fee of 1% and that fee would be $17k a year. What is wrong with this theory? * “Family Expenses”
Gilmore
- Gilmore v. Gilmore, 45 Cal.2d 142: What happens if spouse is paid a “reasonable salary?” The apportionment rules are to be applied only “In the absence of circumstances showing a different result.”
- Here the business owner introduced substantial evidence that the salary received was a proper measure of the community interest in the earnings of the business, and the TC is affirmed.
Tassi
- Tassi v. Tassi. 160 Cal.App.2d 680, Very similar to Gilmore, is the salary assigned, “reasonable?” Which formula will achieve substantial justice?
- Van Camp: Value employment in the business during the marriage. Any additional value is the separate property of the business owner. Also consider *Beam, family expenses presumption. Is the personal activity, ability and capacity the chief contributing factor?
- Pereira: The business is assigned a fair rate of return for the life of the marriage. If the current value of the business exceeds the original value + interest, the excess is attributed to community labor and belongs to the community. Beam is also considered here.
Pereira / Van Camp
.
Gudelj
- Gudelj v. Gudelj, 41 Cal. 2d 202: Parties married in 1938, prior to marriage H owned a Pacific Cleaners. He later owned Owl Cleaners and he later purchased a ½ interest in Helen French Cleaners. W said under FC 760 Owl Cleaners was acquired during marriage. H said the Owl was purchased with SP from sale of Pacific Cleaners property.
- The court says, one second, payment was also secured by a note and we must consider the “intent of the seller” to rely upon the separate property of the purchaser or the community asset. There was no evidence concerning the intent of the seller in extending the credit and H did not overcome FC 760 presumption.
