Contributions and Improvements

Question 1

CP contributes to SP for Businesses

Answer 1

California courts use either the Periera approach or the Van Camp Approach

Question 2

Pereira Approach

Answer 2

favors the CP estate and is used by courts when the spouses management skills are the primary reason for business growth
SP interest = initial capital to SP business + [initial capital contribution of SP business * reasonable rate of return (10%) * # yrs married with business]
CP interest = value of business - SP interest

Question 3

Van Camp Approach

Answer 3

favors the SP estate and is used by courts when the character of the business is the primary reason for business growth
CP interest: (Value of mgr spouse’s services * # years married) - (actual compensation) - (family expenses paid from business earnings * # yrs married) - CP interest; the remainder of the business value is SP
SP interest = value of the business - CP interest

Question 4

CP used to improve the other spouse’s SP

Answer 4

Majority rule: A gift is presumed. unless there is an agreement to reimburse
Minority rule: A gift is not presumed and reimbursement is granted

Question 5

CP is used to improve spouse’s own SP

Answer 5

When a spouse uses CP to improve that spouse’s own SP, the CP is reimbursed for the amount spent on the improvement or the increase in the value to the SP, whichever is greater.

Question 6

CP used to pay off the purchase price of SP (Marriage of Moore)

Answer 6

CP interest = the amount the CP contributed to the principle / total amount of loan/balance
CP share = the CP interest is multiplied by the amount of capital appreciation
Excluded costs: Payments for interest, taxes, and insurance are excluded in calculations

Question 7

SP contributions to the other spouse’s SP

Answer 7

Reimbursement: A party will be reimbursed, without interest, for contributions/improvements that can be traced from their SP to the other spouse’s SP and that is used for down payments, improvements, and reducing the principal of a loan, unless there is a written waiver of the right to reimbursement or a written transmutation.
{DIP}

Question 8

SP contributions to CP

Answer 8

Reimbursement: A party will be reimbursed, without interest, for contributions/improvements that can be traced from their SP to CP and that is used for down payments, improvements, and reducing the principal of a loan, unless there is a written waiver of the right to reimbursement or a written transmutation.

Question 9

Community Debt

Answer 9

There is a rebuttable presumption that property acquired on credit during marriage is community property debt.
Rebut by “intent of the lender test”: A showing that the lender relied exclusively on SP when extending credit may rebut the presumption
Earning capacity: If the credit is based on earning capacity, it is community debt.

Question 10

Timing of Debt Considerations

Answer 10

1. Contract debt is incurred at the time the contract is made.
2. Tort debt is incurred at the time the tort occurs.
3. Child or spousal support debt that doesn’t arise out of the marriage is treated as a debt incurred before marriage regardless of when the court order is made or modified.
   Other debts: All other debts are incurred at the time the obligation arises.

Question 11

Liability of debts

Answer 11

Community property is liable for all debts incurred before and during a marriage by either spouse, regardless of which spouse has the management and control of the property and which spouse incurred the debt.

Question 12

Exception for Community Property Liability of Debts

Answer 12

The earnings of the non-debtor spouse are not liable for premarital debts of the other spouse if these earnings are held in separate deposit account over which the debtor spouse has no right to withdraw and funds are not commingled with other community funds (This exception allows the nondebtor spouse to shield his earnings, but not other sources of money.)

Question 13

Spouse’s SP liability under CP Rules

Answer 13

A spouse’s SP is liable for his own debts, but not for debts of the other spouses, unless the debt was incurred during marriage and was for necessities of life for the spouse or child.

Question 14

Injury/Damage rules for Community Property

Answer 14

A married person is not liable for injury or damage caused by the other spouse, unless the other spouse would be liable if not married.

Question 15

Benefit to the Community Rule

Answer 15

If the act or omission leading to injury or damage occurred during marriage for the benefit of the community, the liability should be satisfied from the community estate first and then the SP of the debtor spouse

Question 16

Not for the Benefit of the Community Corollary

Answer 16

If the act or omission leading to injury or damage occurred during marriage and was NOT for the benefit of the community, the liability should be satisfied from the SP of the debtor spouse first and then the CP second.