CP Outline

Lois Schwartz

CP Outline

Fall 2006

Important Dates:
January 1, 1975: Married Womans Special Presumption; Equal Management and
control for spouses
January 1, 1984: Family Code 2640:Anti-Lucas legislation (reimbursement scheme)
January 1, 1984: Reimbursement to the community who contributes to SP education
January 1, 1985: need express written declaration by spouse whose interests are
adversely affected to transmute property from CP to SP
January 1, 1986: Premarital Agreement Actprenups must be in writing and signed by
both parties
Prior to January 1, 2000: unmarried same-sex couples=unmarried cohabitants
January 1, 2000-July 1, 2003: could register as domestic partners
January 1, 2001 or 2002: Anti-Bonds legislationFamily Code 11615(c)
January 1, 2005: CA Domestic Partner Rights and Responsibilities Act of 2003 is
passedCP laws now apply to Domestic Partners
I. (Into to CP) Chapter 1Development of the CA CP system
A. Intro
1. Unless the couple makes an agreement to the contrary, all property acquired
during marriage by the labor, skills, or efforts (LSE) of either spouse is CP that is
owned equally by both spouses.
2. Characterization (CP or SP) is the heart of the CP question. (No property can be
both.)
3. 8 statutory CP scheme states (CA is different though); rest are CL states who
often use equitable distribution schemes to rectify some of the harsh results of a nonCP scheme.
a) CP: Louisiana, Texas, New Mexico, Arizona, CA, Washington, Idaho, and
Nevada
b) CL: each spouse owns whatever he/she earns.
c) Wisconsin has a modified system that amounts to a CP scheme.
4. CP is specified in the CA Family Code and has origins in the CA constitution
(1849), art. 11, 14
B. CP Defined
1. Property held in common by an H and W, each having an undivided one-half
interest in this property by virtue of their marital status. (Applies only to H/Ws or
domestic partners who are legally married and only to income and assets acquired
during the marriage.)
C. The Meaning of Marriage
1. Maynard v. Hill [USSC; 1888]
a) Facts: H left W in Ohio and didnt support her and the kids financially.
Claim by the Ws heirs as to a parcel of real property acquired by the H. If her
challenge to the ex parte divorce was found valid, shed be entitled to a
significant amount of property under the land grant to her former Hs name.
b) Rule: Marriage is a social institution rather than a private K allowing the
parties to set their own terms and thus is subject to legal constraints beyond
the terms of the marriage K.
(1) CP law automatically applies to CA marriages, regardless of what
the parties intend or understand.
D. Development of the Tracing Principle
1. Tracing Principle: SP produces SP and CP produces CP
2. CP includes all the property acquired by a married person through the use of his
or her Labor, Skills, or Efforts (LSE)
a) When CP is used to buy other acquisitions, the new asset is CP. Similarly,
when property classified as CP produces rents, profits, income, and increases
in value, these products are CP.
3. George v. Ransom [CA SC; 1860] (intro to tracing)

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a) Facts: A creditor of H, sought Ws separate funds in payment for her Hs
debt.
b) Rule: The creditor of the H cannot subject the proceeds or dividends of the
SP estate of his W to his claim. (Rents/profits from Ws SP remains SP.)
c) Held: Court held that the Hs creditors could reach CP for his debts, but
they could not reach the Ws SP or the proceeds or dividends of that property.
E. Development of the Equality Principle
1. Equality Principle: spouses have equal ownership interests in the CP
2. Stewart v. Stewart [CA SC; 1926] (no longer good law; discusses the equality
principle but elects against applying it)
a) Rule: The W does not have a present vested interest in the CP during the
continuance of the marriage relation. She merely has a protected expectancy
in the Stewarts CP.
b) *Note: a year or so later, the Legislature did enact legislation stating that
the interests of both spouses in the CP are present, existing, and equal.
F. The Principles of Contractual Modification
1. Parties may entirely or partially avoid the CA CP system by agreement. [CA Family
Code 1500] (premarital or antenuptial agreements)
a) Premarital agreements made on or before January 1, 1986 are regulated by
CAs modified version of the Uniform Premarital Agreement Act. [CA Family Code
1600-1617]
(1) Good faith required
(2) No consideration required
(3) Statute of Frauds requirement: there must be a writing signed by both
parties. [CA Family Code 1611]
(a) BUT, an oral premarital agreement may be enforced when :
(i) the executory promise was fully executed by the promisor
(an executory promise is one that not yet been performed,
when it is performed , the promise is executed)
(ii) the promisor is estopped to assert the SOF because the
other party relied to his/her detriment on the oral premarital
agreement (getting married or staying married is not grounds
for estoppel though), or
(iii) adoption or ratification during the marriage (pre 1985)
(4) Agreement is unenforceable if:
(a) Agreement limits support duties
(b) Agreement promotes divorce (In re Marriage of Noghrey)
(c) Unconscionable and non-disclosure
(i) If the party against whom enforcement is sought proves
that: (i) it was unconscionable when executed; and (ii) the
party did not and could not have had adequate knowledge of
the wealth of the other party, and did not waive her right to
disclosure of such wealth [CA Family Code 1615(a)(2)]
(d) Involuntarily executed
(e) *See new requirements in Family Code 1615 (c), subsection
(c) which were added in 2001 in response to Marriage of Bonds
(*very important)
(i) This provides that an agreement was not executed
voluntarily unless the court finds all of the following:
(a) The party against whom enforcement is sought was
represented by independent counsel when she
signed the agreement or, after being advised to seek
independent counsel, expressly waived such
representation in a separate writing;
(b) At least seven days before it was signed, the
agreement was presented to the party against whom

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enforcement is sought and that party was advised to
seek independent legal counsel;
(c) If unrepresented by legal counsel, the party against
whom enforcement is sought was fully informed, in
writing prior to the signing of the agreement, of the
terms of the agreement and the rights she was giving up
by signing the agreement, and was proficient in the
language of the explanation and the agreement;
(d) The agreement and the other required writings were
not executed under duress, fraud, or undue
influence; and
(e) Any other factors the court deems relevant.
2. Policy Considerations (prenups)
a) In re Marriage of Noghrey [1985]
(1) Facts: There was an agreement that said if divorce, H gives of his
assets and $500,000 or whichever is greater to the W.
(2) Rule: An antenuptial agreement, the terms of which encourage or
promote divorce, is against PP and is unenforceable.
(a) *A promise to give a substantial amount of $ or property
only in the event of divorce, facilitates such an event and would
be in violation of PP; whereas agreements that define the legal
rights of the spouses with respect to property acquired before
or after doesnt violate the PP.
(3) *Consideration is not required for a prenup and there cannot be
illusory consideration in the form of a K for preexisting marital duty.
b) Marriage of Bonds [CA SC; 2000]
(1) Issue: Did Sun enter the agreement voluntarily?
(2) Rule according to the Bonds Court: In premarital agreement
situations, the parties are not in a confidential or fiduciary relationships
and the burden is on the party challenging the agreement to show a
lack of voluntariness in entering the agreement.
(3) Sun had the burden of showing that she didnt enter the agreement
voluntarily and the Court found she didnt meet that burden.
(4) *Legislature went ballistic and added (c) to 1615 added the
requirements stated above in 2001. This is not retroactive.
3. FormalitiesTransmutation
a) Pre-1985, Oral and implied agreements are enforceable
b) After January 1, 1985, a signed writing is required which expressly
declares that a change in ownership of the property is being made [Family
Code 852: signed by person who is adversely affected] (Estate of
MacDonald)
(1) Exception: A writing is not required of personal gifts (like jewelry,
clothes, stocks) between spouses which are relatively insubstantial in
value in light of their circumstances. (Marriage of Steinberger) [Family
Code 852(c)]
(2) A declaration of character of property in a will is not admissible
evidence of a transmutation before the death of the testator (compare
with a characterization of property in an inter vivos trust which is
admissible to show transmutation)
c) Estate of Bibb [2001]
(1) Facts: The son, Dozier, from the first marriage, filed a petition to
establish the estates ownership of the property lot, apartment
building, and Rolls Royce. He contended that the property had not
been validly transmuted from his dads SP to CP because the DMV
records and grant deed didnt clearly state the change.

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(2) Rule: Need a writing that satisfies the SOF, clear and
unambiguously states the change of status of the property
independent of extrinsic evidence, and is consented to by the party
who rights are adversely affected. [Family Code 852(a)]
(3) Held: Yes, the grant deed signed by the H transferring his SP
interest in real property to himself and his W as joint tenants satisfies
the express declaration requirement of the Family Code. BUT, no, an
unsigned computer printout of DMV registration, indicating that the
Rolls Royce was reregistered in the names of the H or the W (needs to
be more specific than A or B) does not satisfy the requirements for a
valid transmutation under the Family Code.
(a) *Extrinsic evidence is not allowed here
d) Marriage of Steinberger [2001] *Important exception to the 852 (a)
writing requirement
(1) Facts: James gave Buff a diamond ring in celebration of their fifth
wedding anniversary. When the couple filed for divorce, Buff claimed
that it was her SP.
(2) Rule: Under Family Code 852, gifts of personal property that are
substantial in value, taking into account the circumstances of the
marriage, will not be considered converted to SP without the writing
required by 852.
(3) *cards accompanying the gift doesnt count as the writing
(4) *must know the financial worth of the couple to determine this
issue
II. Chap. 2Classification of property as CP or SP
A. General Presumption of CP (Presumption that Acquisition During Marriage is CP)
1. Basic presumption is that all earnings during marriage are CP, but a competing
presumption is that if anything can be traced to SP prior to the marriage, it will
remain SP.
2. Family Code 760: CP Defined
a) All property, real or personal, wherever situated, acquired by a
married person during the marriage while domiciled in this state is
CP.
3. Family Code 770: SP of a Married Person
a) SP of a married person includes all of the following:
(1) All property owned by the person before marriage
(2) All property acquired by the person after marriage by gift, bequest,
devise, or descent.
(3) The rents, issues, and profits of the property described in this
section. [This is different than the original Spanish-Mexican system
where these were CP.]
(4) A married person may, without consent of the persons spouse,
convey the persons SP.
4. How to determine the present character of property:
a) Determine the character of the source property
b) Exchange Rule: A change in form doesnt the change the character of the
asset
c) Tracing
5. Raising the General Presumption of CP
a) The general presumption comes into play when the fact of acquisition
during marriage is established.
b) Wilson v. Wilson [1946]
(1) Facts: H and Ws house was purchased in 1938 (7 years into the
marriage), title was taken and remains in the Hs name. H paid for the
house in cash and used funds that were accumulations of dividends
from property owned by him before marriage. H argued that because

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the community funds were exhausted in paying for the living expenses,
the house must have been purchased with his separate funds. (This is
rebuttal evidence to the CP presumption.)
(2) Court held that because the house was purchased during the
marriage, the CP presumption is strongly invoked. [Here, just by
looking at the date of acquisition, the burden shifted to the party
asserting the SP nature.]
(3) To overcome the CP presumption, H would have needed to trace
clearly back to his SP funds (like a trust fund, etc); using process of
elimination like he did doesnt cut it.
c) Estate of Jolly [CA SC; 1925]
(1) Facts: The probate judge ordered that distribution of the whole
estate of W (who died 10 years after H) to be made to her heirs to the
exclusion of Hs heirs. They argue just because H died, doesnt make
the property SP, it remains CP. They supported their argument by
showing that she never did anything to enhance her estate by labor,
skills, and efforts.
(2) 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 by
clear and satisfactory proof that the property in question is SPeven in
cases where only possession (as opposed to acquisition) of such
property after marriage can be established.
(3) *Note: Court relied on the basic presumption that all property
acquired after marriage starts is CP (acquisition approach). There is
nothing here to show that anything has changed that CP status; her
heirs could have rebutted by showing it was hers via gift, etc. or her
LSE, but they just didnt have any evidence to do that.
(4) *Note: CA Probate Code 640.5 which preserves CP says when the
second spouse dies, a determination is required that shows what CP is
traceable to CP and then CP rule will apply. The court will split the
property between the relatives. (Peculiarity to CA law.)
6. Rebuttal of the General CP Presumption by Tracing
a) The usual method of rebutting the general CP presumption is to trace the
asset back to a SP source. Difficult to do with bank records that are not
clearly earmarked describing their source (Freese highlights this).
b) Freese v. Hibernia Savings and Loan [CA SC; 1903]
(1) Facts: W owned two parcels of land and sold them both. She had
opened a bank account in the name of Frank or Ellen Denigan. The
account was closed 3 months after her death and $1K of it was paid to
a third party. Her heirs argue that it was SP and so H cant give it
away. But, he argues that she transmuted the property by the title.
(2) Rule: The clear and satisfactory evidence standard for
overcoming the general CP presumption requires only a preponderance
of the testimony under all the facts and circumstances. If property can
be traced back to SP, the presumption is overcome.
(a) Clear and satisfactory standard: little higher than a
preponderance of the evidence, but is a little lower than clear
and convincing evidence.
(3) Held: established beyond doubt that the two properties were Ellens
SP and the profits therefore should have remained her SP.
B. Common Statutory Presumptions Regarding SP
1. Assets falling within one of these statutory categories are presumed to be SP:
a) Family Code 770: SP of a married person
b) Family Code 771: Earnings and accumulations during period of separation
c) Family Code 772: Earnings or accumulations after entry of judgment of
legal separation

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2. Estate of Clark [1928]
a) Issue: Is the $150K his SP because the right to get that $ was his right
prior to the marriage and therefore his SP or should the receipt of the $150K
be treated like income? (inception of right doctrine)
b) Rule: Property acquired by compromise is SP if the right compromised is
SP.
3. Downer v. Bramet [1984]
a) Facts: H was given the W-4 ranch in Oregon along with two other
employees by his boss. He didnt mention this during the settlement talks.
W argues this isnt post-separation income, but deferred payment for LSE of
the H during the marriage
b) Held: Even though the transfer of the ranch interest was legally a gift,
there is substantial evidence the gift was made by former Hs employer in
recognition of Hs devoted and skillful services during his lifelong
employment.
c) *Note: Property acquired after the date of separation is SP, but the court
makes an exception here because the H had been working all these years
during the marriage and cant just postpone his receipt and keep as SP.
4. In re Marriage of Hardin [1995]
a) Facts: H and W were married in 1961 and in 1969, H walked out of the apt.
But, H and W continued their economic relationship and saw each other often.
In 1991, they asked the court to judicially find when the date of their
separation was. W argues it was in 1982 when Victor wanted to remarry, but
H says it was in 1969 when he moved out.
b) Rule: The date of separation occurs when either of the parties
does not intend to resume the marriage and his/ her actions bespeak
the finality of the marital relationship.
c) *Note: there is both an objective and subjective component to this
rulethe court will look, when theres no agreement on the date of
separation, at the subjective perception of one or both parties
(1) Objective look at objective factors like the date when there was
no present intention of continuing the marriage combined with a
complete and final break
d) *Note: date of separation requires more than just living separate
and apart, factors relevant but not determinative are:
(1) the date the spouse moves out;
(2) the fact that the spouse never moves back;
(3) whether the move follows a heated argument;
(4) whether there are frequent arguments between the spouses;
(5) whether the spouse ever spent the night again; whether the spouse
dated other people;
(6) whether the spouses cease to attend business, social, and family
events together;
(7) whether the spouse has filed previous divorce papers
e) Factors indicating they havent legally separated:
(1) Continuing close personal relationship
(2) Economic togetherness (purchasing property, keeping a joint bank
account)
C. Special Presumptions within the CP System
1. Special presumptions based on form of title
a) Married Womans Special Presumption:
(1) Despite the general presumption that property acquired by a
married person is CP, when written title to property was placed in a
married womans name alone before 1975, that property is
presumptively the married womans SP. [Family Code 803]

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(a) However, under Horsman, the court must allow rebuttal
evidence by the other spouse
(b) Tracing is usually not enough to rebut, need to show intent
to keep it CP too
(c) Underlying rationale for the presumption was that when a
married man executed a conveyance of property to his W, he
must have intended to change the property rights of himself
and his W.
(2) In 1975, the equality amendments were added
(a) The married womans presumption wasnt needed because
woman took over equal management and control of CP
(3) Horsman v. Maden [1941]
(a) (when presumptions are based on title, it is important to
remember that title is not determinative but it is evidence of
how the property is held)
(b) Rule: While there is a presumption that any property
acquired by the W by an instrument in writing became her SP,
such presumption is not conclusive between the parties but is
disputable. (Rebuttal evidence must be allowed to
dispute this presumption and show the intent of the H)
(4) In re Marriage of Ashodian [1979]
(a) Facts: H was a bus driver and W was a licensed real estate
broker. She had bought and sold property (some with his
knowledge, but then he decided he didnt want to be a part of
it). At divorce, in 1975, he claimed this was CP because she
earned it with her LSE during the marriage, but she claimed it
was SP based on Family Code 803 and the married womans
presumption (she had title in writing and got it before 1975, so
803 did apply)
(b) Rule: A SP presumption applies to property acquired by a
married woman prior to 1975 by an instrument in writing, but it
is rebuttable by clear and convincing evidence. (The H
didnt meet this burden since he abandoned his interest in the
management and control of the property and as such gave her
a gift, so it is her SP.)
2. Concurrent Estates
a) Most married couples hold their property as joint tenants. One
perceived advantage is the survivorship feature of joint tenancy; the property
passes by operation of law to the survivor, without the necessity of probate
administration.
b) Joint tenancy is a form of title in which H and W each own an undivided
one-half interest that is SP, and the surviving spouse automatically becomes
the owner of the decedents interest as well as his own.
(1) A joint tenancy can only be created by explicit language: G to John
Smith and Mary Smith as joint tenants or G to John Smith and Mary
Smith as joint tenants with a right of survivorship.
c) Estate of Levine [1981]
(1) Facts: H made a will and in it said that the joint tenancy of the
home was only for convenience and really it was CP, but the W never
knew of the will.
(2) Rule: There is a rebuttable presumption that the character of the
property is as set forth in the deed. (Only agreement between spouses
can rebut the presumption; secret intentions of one spouse wont
suffice!)
d) In re Marriage of Lucas [CA SC; 1980] (key case in CP law)

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(1) Facts: During their marriage H and W purchased a home; W used SP
funds for the down payment ($6K) and for some maintenance and
improvements.
(2) Rule: SP contribution to CP is presumed to be a gift, without a
writing.
(3) Held: The act of taking title in a joint and equal form is inconsistent
with the preservation of a separate interest. (Effectively, the SP
contributor is presumed to have made a gift, and she can overcome
the presumption of gift only by proving an understanding or agreement
between the parties that she would maintain a SP interest. Her
subjective intent alone is immaterial. She must prove an
understanding by both parties which can be both oral or written.)
e) *Aftermath of Lucas (this applies only to divorce and legal separation,
not to death cases.Lucas should still apply in death cases)
(1) The CA Family Code now provides that all property held by the
spouses in joint form is presumptively CP for purposes of distribution at
divorce or legal separation.
(2) But, under Family Code 2640(c), at divorce the SP contributions
to the acquisition of the property, shall be reimbursed to the SP
contributor without interest or appreciation.
(a) Family Code 2640 provides the same reimbursement
formula when a separate contribution improves CP or reduces
the principal of a loan used to finance the purchase or
improvement of the property, but does not allow any
reimbursement for payments made for interest on the loan or
payments made for maintenance, insurance, or taxation of the
property.
(3) Aufmuth: if there is an agreement or understanding (doesnt say
it has to be in writing) that the party contributing the SP down payment
(on a house), the party making the SP down payment, retains a pro
rata SP status that increases with the equity in the house
(a) Basically: get what you put in, plus the increase in equity, off
the top at divorce and then split the rest 50/50 with spouse
3. 3 ways the courts can look at these problems:
a) SP contribution to CP asset is a gift; no reimbursement (Lucas);
b) reimbursement for SP contribution to CP asset, but no increase in value
(anti-Lucas legislationthis is current law on this specific topic);
c) pro rata, pro tanto, proportionate analysis which says that with an
agreement, the SP contribution builds a proportionate share (Aufmuthwhich
is also current law)
III. Classification of Non-Tangible Property: Chapter 3: Limitations on the Classification
Process
A. Value of Education and Professional Practice
1. Effectively, education and training acquired during marriage are not treated as CP.
Instead, at divorce, unless the parties sign an agreement to the contrary, Family Code
2641 creates an equitable right of reimbursement with interest to the community
when community funds are:
a) Used either to pay for education or training or are used to repay a loan
incurred for education or training, and
b) The education or training substantially enhances the earning capacity of
the educated party (and therefore enhances the value of the community).
(1) When such loans are still outstanding at divorce, they are assigned
solely to the educated spouse.
2. Todd v. Todd [1969]
a) Facts: At the time of the division of assets Hs law practice was valued at
almost $10K and W got nothing. Goodwill was valued at $1K. W contended

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that Hs education, partially paid for by community funds, is a community
asset and that it has substantial worth and should be taken into account when
evaluating the community estate for divorce purposes.
b) Rule: (1) A license or degree is personal and cant be monetarily valued
and therefore it is not CP. (2) The practice, however, at the time of dissolution
can be valued and is CP.
B. Contribution to Spouses Education
1. In 1984, the legislature enacted Family Code 2641 which is a reimbursement
scheme in order not to discourage spouses from supporting each other during their
educational endeavors.
a) In a divorce (must be divorce, not death), the community (not the nonstudent spouse herself) will be reimbursed for community contributions for
education or training that substantially increases the earnings of one
party.
(1) Watch out on exams for when the license or degree doesnt actually
improve substantially the earning capacity or they just sit on the couch
after they earn itreimbursement would not happen then.
b) Reimbursement can be for expenses directly related to education, such as
tuition, books, supplies, and transportation (anything that would have been
done even without the education are normal living expenses and the
community cant be reimbursed).
c) Equitable Defenses to Reimbursement Duty
(1) The community has already substantially benefited from the
education or training. There is a rebuttable presumption affecting the
burden of proof that if fewer than 10 years have elapsed between the
contributions and the initiation of the divorce, the community has not
substantially benefited. If more than 10 years have passed, a
presumption arises that the community has substantially benefited and
therefore been constructively reimbursed.
(2) If under 10 years, the courts will do a proportionate reimbursement
instead of an entire reimbursement: If within 9 years, then already
have 9/10 of the benefit, so only get reimbursed 1/10th.
2. In re Marriage of Watt [1989]
a) Facts: For the entire 9.5 years of their marriage, H was a full-time student
while W worked fulltime for Kaiser, using all of her income for family expenses.
H received his MD right after their separation. The court gave her a doublewhammyno spousal support (because she had been working) and the
community doesnt get reimbursed for Hs education.
b) Rule: When awarding spousal support, a court must consider the totality of
one spouses contributions to the other spouses attainment of a degree,
including contributions for ordinary living expenses.
C. Professional Goodwill
1. Goodwill is essentially the difference between the total value of a business or
professional practice and the value of its assembled physical assets. Goodwill is an
intangible value that develops during the life of a business and includes, among other
things, the reputation and habitual clientele of a business or practice.
2. To the extent that goodwill is earned during a marriage, CA treats it as CP.
3. Valuation is tricky: courts use one of two methodsmarket sales valuation or
capitalization of past excess earnings.
4. In re Marriage of Lopez [1974]
a) Facts: H is an atty; he formed a law partnership with two of his associates.
Each paid for 25% of the partnership. This 25% interest in the law practice
was valued at $52, 275.68 each.
b) Issue: Is professional goodwill a CP asset?
c) Rule: Yes, it may be deemed a CP asset.

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D. Royalties: If one spouse writes a book or a screenplay during the marriage, the money
brought in after the separation will be considered CP and some will be given to the noncreative spouse after the divorce.
E. Life insurance
1. Whole Life Insurance Policies
a) Traditionally Proceeds are apportioned according to who paid the
premiums:
(1) The premiums paid with SP produce SP proceeds (Example: If SP
paid , of the Proceeds will be SP and CP); the premiums paid
with CP produce CP proceeds
2. Term Life Insurance Policies
a) Law is not settledIf spouse became uninsurable during the community
funded premium period, probably use apportionment (as in whole life policy).
b) Otherwise, the rule is even less settled. Argue both positionsThe last
annual term policy is the only policy which paid proceeds. Therefore, pay all
the proceeds to the party who paid the last years premium. This is an unfair
windfall to the estate which made the last annual premium payment.
Therefore, apportion proceeds as in a whole life policy.
3. If a deceased spouse named a beneficiary (not the surviving spouse) in a CP
policy, the beneficiary will receive of the CP interest and the spouse will receive
her CP interest.
4. Military Life Insurance or any other federal life insurance:
a) Entirely preempted by federal law (anyone may be designated
beneficiary; CP has no right to reimbursement for premiums paid with CP)
5. Policy at Divorce:
a) Whole Life (With Cash Value)
(1) Take out the policy when young and healthy, pay into during ones
life, and when one dies, the main beneficiary gets the proceeds.
(2) To the extent a policy has a current cash value, that cash value is
CP in proportion as the community paid the premiums. Cash value is
just another form of savings and exists apart from the pure insurance
component of the policy.
(3) *On an exam look to see when it was purchased. Any payments
made during the marriage give the community an interest.
b) Term (Pure) Insurance
(1) These are benefits of employment and one has the option to renew
after each term expires (some are renewable every 2 years).
(2) The insurance becomes a new insurance policy upon renewal, so if
one is carrying a term life insurance policy and he splits from his W and
the policy concludes. Then, he renews the policy.the policy is now
SP.
(a) EXCEPTION: If the insured becomes disabled and therefore
uninsurable (couldnt go out and buy a new policy), some courts
say the inception of right is critical and the community has an
interest in the policy (because the policy was acquired during
the marriage, thats when the right began). The community is
not necessarily the beneficiary, but is entitled to receive some
proportionate interest value.
(3) Term insurance has no cash value. The premium covers no more
than the risk of death. When the premium period expires, there is
nothing left except the right to insure for another premium period,
usually annual periods until age 65.
(4) Look to see, on an exam, when the term was renewed. If renewed
after the separation, then SP and the community has no interest in the
term insurance. Ends when the last term during the marriage ends.
c) In re Marriage of Spengler [1992]

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(1) Facts: H had a group term life insurance plan. H and W separated
in 1986. The insurance coverage continued until 1989. At the same
time, he married another woman and named her his beneficiary. When
the H died and $100K went to the 2nd W, the first W claimed because
she claimed it was a CP asset.
(2) Rule: Because the right to renew came up after the marriage
ended, the term life insurance is not property that is subject to division
under CP.
IV. Limitations on Classification of Property under the CP System (Chapter 3 Continued)
A. The Valid Marriage Requirement (CP applies only when a valid marriage)
1. Valid marriage requires:
a) Legal capacity
(1) Age (determined by each state)
(2) Ability to understand the consequences of agreeing to a marriage
b) Legal Formalities
(1) Appropriate solemnization (ceremony)
(2) License issued and recorded by the State
(3) In the presence of witnesses (no private marriage)
2. No CL marriage in CA, but CA will recognize CL marriages that are valid in other
jurisdictions
a) CL marriage= man and woman live together and hold themselves out as H
and W and by virtue of their conduct, the society deems them to be married
3. Putative Spouses v. Unmarried Cohabitants
a) Putative: one or both in the relationship believe in good faith that they
are married, but it turns out to be an invalid marriage
b) Unmarried Cohabitants: Deliberately unmarried couple (dont get the same
rights afforded to them as a Putative spouse because of the lack of good faith
belief that they were married)
4. Same Sex Unions
a) CA=domestic partnerships in January 1, 2005; applies to same-sex couples
of any age and to male-female couples where at least one of the partners is
over age 62.
b) CA Domestic Partner Rights and Responsibilities Act is a model for property
division that is based on a CP model and extends those rights to same sex
partners
5. Putative Marriages
a) Once the court finds that a putative spouse exists, the rule is that property
acquired by the parties during the relationship that would have been CP or
quasi-CP if the marriage had been legal, then it is now quasi-marital
property and it is divided according CP principles.
b) There must be a good faith that is subjective, but within reasonable
bounds. (subjective/objective test)
c) An innocent putative spouse (could be one or both) can make a claim to
of the quasi-marital property. But, the open question is whether the guilty
party (if there is one) can claim 1/2 the quasi-marital property because he/she
defrauded the other person.
d) When a relationship is putative because one or both of the parties have a
prior legal marriage that was never terminated, many problems arise.
(1) The legal spouse has rights to the property too. But, usually the
couple is separated so the earnings, etc. are not CP under Family
Code 771. But, assets (stocks, property, etc.) acquired during the 1st
marriage and are CP.
(a) When a party to a putative marriage (guilty or innocent),
permanently separated from the prior legal spouse before
beginning the putative marriage, all earnings and
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considered SP for the 1st marriage, and are quasi-marital
property in the relation to marriage #2.
(2) After the putative (innocent) spouse finds out that shes not a legal
spouse, she can no longer claim any property acquired as quasi-marital
property
e) When the party to the putative marriage is not separated from the legal
spouse, property acquired in both relationships could be CP of the legal
marriage and quasi-marital property of the putative marriage. (bigamous
relationship)
(1) Possible solutions:
(a) Divide all of the property in both relationships in 3 ways
(b) Divide all property between the putative spouse and the
legal spouse, leaving the guilty spouse (the one in both
relationships) with nothing.
f) Upon death: The probate code makes no specific provision for testate and
intestate succession involving putative spouses. When there is also a legal
spouse in the picture, classification and succession can be complex.
(1) If the previous legal spouse is dead at the time the spouse in the
putative marriage dies, most courts treat the surviving putative spouse
as the surviving spouse for purposes of intestate succession.
(2) If the previous legal spouse is alive, and the common partner
leaves a will, the common partner may only bequeath his/ her half of
any quasi-marital property or CP.
(3) If the common partner dies intestate, modern courts usually pass
the quasi-marital property by intestate succession to the putative
spouse and only CP of the previous marriage to the prior legal spouse.
When there is no permanent separation (bigamy, concurrent
relationship), courts divide the estate of the decedent equally between
the two surviving spouses. (Vargas).
(4) As for SP, in Estate of Leslie , the California Supreme Court
expressly left open the question of distribution of the deceased's SP
when there was both a legal spouse and a putative spouse who
survived the intestate deceased. However, in Hafner, the California
court of appeal was confronted with conflicting statutes and divided all
of the decedent's intestate property between the putative spouse (she
received half) and the legal spouse and the decedent's four children
-- the five of them received the other half of the property. There were
three children from the legal marriage and one from the putative
marriage; thus, the legal spouse received one third of the second
half and the children received two thirds of the second half.
g) Coats v. Coats [CA SC; 1911]
(1) Facts: H and W were married in 1887; sought annulment (marriage
void from the beginning) due to physical incapacity of W. She was
awarded $10K based on principles on equity.
(2) Rule: Annulment erase doesnt erase all of the quasi-marital
property interest here (what would have been CP). Although there
wasnt a valid marriage, and therefore no CP, the courts can by way of
analogy apply CP principles to quasi-marital property.
(3) Held: The court must focus on the expectation of the putative
spouse. She believed and had every reason to believe they were
building the community, and so the act of annulment at the end of the
relationship shouldnt just erase all the property they gained together.
h) Estate of Leslie [CA SC; 1984]
(1) Facts: They were married in Mexico, but it was never recorded.
Both people believed they were married and lived in a house together.
But, the previous kids made a claim at her death. W died intestate.

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(2) Held: A surviving putative spouse does have a right to share in the
SP of the estate, and the court has extended equity principles to SP in
order to honor what it perceived to be the expectations of both
spouses. Lots of emphasis on the fact that they believed in good faith
that they were actually married.
i) Estate of Vegas: common spouse dies intestate, the two spouses (legal
and putative) can split equally
j) Estate of Hafner [1986]
(1) Facts: H marries Joan and had 3 kids, abandoned them, left for CA.
He met Helen, told her he was divorced even though he hadnt
bothered to get one; they marry in Mexico and again in Vegas. Helen
thought in good faith that they were married. H gets hurts and gets a
substantial PI settlement; and then dies. Helen claims that money and
Joan does too.
(2) Held: Equity requires that the court divide the property between
the original legal spouse and the putative spouse. Two innocent wives,
any resolution is going to impair somebodys legal rights, but this is the
best resolution. Helen gets half, the other half split by the rest of the
kids and Joan.
(3) *The putative spouse didnt get any of his SP.
(4) *Only of the quasi-marital property goes to the putative spouse,
and thus the other of the decedents quasi-marital property was
awarded to the legal W. (can look at this critically)
(5) Court cant take away the of the quasi-marital property that
belongs to Helen, but other than that, they can play with Hs of the
quasi-marital property.
k) Vallera v. Vallera [CA SC; 1943]
(1) Facts: No putative good faith belief because she knew that he was
married.
(2) Rule: When there is no belief that a valid marriage exists, the
cohabitant does not gain the rights of a co-tenant in the earnings and
accumulations of the other party during the course of the relationship.
(This has been superseded by some domestic partners laws, but only
apply to same-sex relationships or heterosexual couples who are older
than 62).
(a) At this time, if no legal option to get married, out of luck.
l) Marvin v. Marvin [CA SC; 1976]
(1) Facts: couple enters an agreement to cohabit and they dont get
married. Live together for 6 years, and then he kicks her out. He
supports her for one year, and then stops. She claims that they
entered an oral agreement to share equally in the property
accumulated during the course of their relationship. Also claims that
she gave up her acting career to work as a companion.
(2) Court says:
(a) If theres an express agreement between non-marital
partners, the courts will enforce it, unless such a contract is
explicitly founded on meretricious sexual relationships.
(b) In the absence of an express contract, the court should
inquire into the conduct of the parties to determine whether
such conduct demonstrates an implied in fact contract or some
other agreement (taking title or loan in a certain way that
indicates they intend to be like people living in CP system.)
(3) 4 principles that Marvin illustrates:
(a) Distribution of property acquired during a non-marital or
meretricious relationship is governed by judicial decision, not
CP statutes. (they do apply by analogy to putative spouses)

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(b) Express contracts between non-marital partners will be
enforced unless theyre based on meretricious sexual services.
(c) If there is no express agreement, the court will examine the
course of conduct of the parties to see if there is an implied
contract, agreement of partnership or joint venture, or some
other tacit understanding (raising kids together).
(d) Quantum meriut: restitution for services rendered and other
equitable remedies may be available for non-marital partners.
(4) Implied in fact relationships will probably happen more often in a
long-term relationships where the people hold themselves out to be H
and W.
m) Upon injury or death as well as dissolution, co-habitants are treated as
individuals and cant get loss of consortium, etc.
6. The Domicile Requirement
a) Rozan v. Rozan [CA SC; 1957]
(1) Facts: Couple is domiciled in CA and H goes to work in another
state, using his earnings (attributable to LSE) the couple purchases
property in ND. H argued that the real property was his SP, not
community.
(2) When there is a choice of law issue, the choice of law
doctrine favors the law of the domicile rather than the law
where the land is situated.
(a) Usually in a situation such as this, the court will allow title to
stay in tact in the other state, and will simply adjust the other
assets to compensate.
(3) Rule: Property acquired while domiciled in CA as the result of a
spouses work, efforts, ability, and skills is CP.
b) Grappo v. Coventry Financial Corporation [1991]
(1) Facts: After H and W separated, she moved to her SP on the
Nevada side of Lake Tahoe, for which H had lent her the funds to
construct a house, and H brought this action, claiming an interest in
the real property.
(2) Need to go through the CP analysis even though the property is
located in NV
(a) The property is presumed to be CP because it was acquired
during the marriage
(b) Rebuttal of the general presumption: oral agreement to
keep property separate, title to the property was in the Ws
name alone
(c) After going through this analysis, the next step would be to
see if NV would honor the CA courts decree and say that shes
required to give him of the property value.
(3) 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.
(4) Held: It is apparent that CA has the most significant relationship to
the parties and issues in this case. Therefore, the characterization of
the parties respective marital interests in the NV property must be
determined under the CP law of CA.
V. Constitutional considerations with respect to CA CP (*retroactivity is difficult to test)
A. Definition of quasi-CP:
1. Family Code 125: Quasi-CP
a) Quasi-CP means all real or personal property, wherever situated, acquired
before or after the operative date of this code in any of the following ways:

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(1) By either spouse while domiciled elsewhere which would have CP if
the spouse who acquired the property had been domiciled in this state
at the time of its acquisition.
(2) In exchange of real or personal property, wherever situated, which
would have been CP if the spouse who acquired the property so
exchanged had been domiciled in this state at the time of its
acquisition.
2. Necessity of Change in Domicile. The new statutory rules apply only where both
parties change their domicile to CA. (In re Marriage of Roesch; 1978).
3. During marriage, quasi-CP is treated as the SP of the acquiring spouse.
EXCEPTION: During marriage, quasi-CP is treated as CP with respect to creditors who
may reach the non-debtor spouses quasi-CP (unlike SP)
4. At divorce, quasi-CP is treated exactly like CP, but both parties must be domiciled
in CA and divorce must occur in CA.
5. At death, survivor spouse had a one-half interest in decedents quasi-CP.
However, decedent has no interest in the survivors quasi-CP (decedent cannot
bequeath his spouses quasi-CP in his will).
B. The Due Process and Privileges and Immunities Clauses
1. Addison v. Addison [CA SC; 1965]
a) During marriage, quasi-CP is treated as the SP of the acquiring spouse
because at the acquisition it was considered his SP and it would be an
unconstitutional taking if as soon as he crossed the border its no longer his.
(1) So, the acquiring spouse can sell it, give it away etc during the
marriage, just like normal SP, but creditors can reach it unlike normal
SP
b) At divorce, the property is CP. Why? Because theres a compelling interest
in protecting the welfare of the non-acquiring spouse at divorce. It is a taking,
but one justified by a compelling interest.
c) At death, survivor spouse has a one-half interest in decedents quasi-CP.
However, the decedent has no interest in the survivors quasi-CP. Why?
Because the decedent doesnt need the taking to protect his/her welfare
because he/she is dead.
2. In re Marriage of Roesch [1978]
a) Necessity of Change in Domicile. The new statutory rules apply only
where both parties change their domicile to CA.
b) Facts: The parties lived in Pennsylvania for virtually their entire married life
which was 27 years long. After separation, the H came to live in CA while the
W remained in Pennsylvania with their minor son.
c) Held: CAs interest in the Pennsylvania marital property was minimal,
Pennsylvanias interest was substantial, thus, CAs quasi-CP statue could not
be applied.
d) Domicile Acquisition Rule:
(1) Personal property acquired by a spouse during marriage, while
domiciled in a common-law state doesnt loose its character as SP of
acquiring spouse upon change of domicile to a CP state. (Tracing rule
applies to exchange of common-law SP.)
(2) Because the H had moved, W was still protected by the laws of PA.
(3) Court has the authority to characterize the property as quasi-CP if H
here, but first it will look at the extent the W is protected by the laws of
the home state.
C. Retroactivity Problems
1. An ongoing theme in CP law, is whether a rule is prospective or retroactive. The
general thinking is that if the problem that the legislature seeks to correct is a
substantial violation of constitutional principles, the new rule should be applied
retroactively. Otherwise, the legislation is prospectively applied so there is proper
notice for all interested parties.

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2. In re Marriage of Bouquet [CA SC; 1976]
a) Facts: There was an old statute that allowed the W to retain her earnings
and accumulations while living separate and apart as her SP. But, the Hs
earnings and accumulations during this same period were deemed CP. After
the filing for divorce, but before granting it, a new law was passed that
provided that earnings and accumulations of both spouses were deemed SP.
The W argued that the law was prospective.
b) Held: The law was passed to eliminate the probable prior unconstitutional
aspects of the former law (it was a sexually discriminatory law). As such, it
seems that, even though its rare to do, this new law should be retroactive.
3. In re Marriage of Heikes [CASC.; 1995]
a) Facts: H sought a petition for review of the proper classification of two
parcels of land which he reconveyed to himself and his W as joint tenants
during the marriage.
b) Issue: Does the Constitution permit the statutorily authorized
reimbursement of a H for SP contributions he made in 1976 to the property
divided as CP in 1992?
c) Rule: Due Process demands that the change of the law be prospective in
application unless there is a compelling state interest in retroactive
application.
(1) The only state interest considered compelling is to prevent a rank,
patent injustice.
d) Held: The CA SC was reluctant to apply an about face in the law
retroactively to acquisitions prior to the effective date of the statute. So, laws
changing the characterization of joint title property and the right to
reimbursement were not applied retroactively. (No rank, patent injustice when
dealing with the anti-Lucas reimbursements, like there was in Bouquet.)
D. The Supremacy Clause
1. Wissner v. Wissner [USSC; 1950]
a) Facts: H named his mother as the beneficiary to a Life Insurance policy
that he got through the Army rather than his estranged W. Because this
policy was purchased as a result of LSE, the W tries to claim it is CP.
b) Held: The Supremacy Clause prevails here. The W doesnt have an
interest because the federal laws preempt the states CP laws.
(1) *The right to choose the beneficiary of a federal military policy is
the policys holders right, up to of the proceeds. The W here was
actually entitled to of the proceeds, but not all of them.
c) Rationale: It would be too difficult to determine the insurance policy
distributions for each veteran based on 50 different states laws. One federal
law for every state to abide by, makes it easier to administer.
d) *Military personnel, RR workers, and ERISA (Employee Retirement
Income Security Act) situations: federal law preempts.
(1) ERISA is the statute that governs all private pension plans. It was
created to cure the inadequate funding, etc. within private pension
plans. It requires that vesting occurs within 5 years of employment
and provides that pension benefits cant be attacked by creditors.
(2) While preemption involving ERISA can be challenged on the fact
that private money is involved and should therefore be subject to state
law, the rationale behind ERISA has proven so important that it still
preempts.
2. Boggs v. Boggs [USSC; 1997] (*This would probably have lead to a different
outcome if this had been a divorce situation, but instead this dealt with a
predeceased spouse)
a) Facts: This was an appeal from a summary judgment stating that ERISA
preempted Louisiana CP laws. H and his first W were married when H began
working for a company and they remained married until her death. They had

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three sons. Within a year of W1s death, H married W2, and they remained
married until his death in 1989. The dispute over ownership of the benefits
was between W2 based on Hs will and the sons of the first marriage based on
W1s will.
(1) W2 argued that the sons competing claim, since it was based on
W1s purported testamentary transfer of her CP interest in
undistributed pension plan benefits, was pre-empted by ERISA.
b) Held: The sons dont have a claim to share in their deceased fathers
retirement plan under their deceased mothers will, due to the purpose of
ERISA. That purpose is to protect the surviving spouse. That surviving spouse
is now W2.
VI. Selected Problems in Classification
A. Commingled Funds
1. Commingling refers to the combining or intermixing of community and separate
funds into a common mass or pool (usually a bank account).
2. 3 Tracing Methods (**Funds not proven to be SP by tracing are CP)
a) No Withdrawals: If no withdrawal has been made, uncommingling is
easy. The funds retain their original character.
b) Drawers Intent: If the proponent of SP can show she intended to use SP
funds to purchase the asset and that sufficient SP funds were in fact available
at the time of the purchase of the asset, the asset is SP and the CP
presumption is rebutted. (DIRECT TRACING)
c) Exhaustion of CP funds: If the proponent of SP can show that CP was
exhausted when the asset was purchased, then the asset must be SP and CP
presumption is rebutted. (EXHAUSTION METHOD)
3. Transmutation of funds:
a) Commingling is different than transmutation because when funds are
commingled they are in one account, side by side, but with transmutation the
spouses during marriage are changing the character of the property from CP
to SP.
b) See details above for requirements and rules involving transmutations
during marriage and prior to marriage
4. See v. See [CA SC; 1966]
a) Facts: This is the Sees Candy family. H is very involved in the family
controlled corporation and deposits his salary in a corporate account and uses
this account to pay for family expenses.
b) The court required a day-by-day approach, rather than an aggregate
approach (that the H and the trial court usedH wanted to be able to show
that an excess of community expenses over community income over the
entire length of the marriage was sufficient to show that all property acquired
during the marriage was his SP) and said that the H would need to show there
were no community assets in the account on the day the asset that the H is
claiming is SP was purchased. (Exhaustion Methodthe SP proponent can
rebut the CP presumption, if at the time of acquisition, all community income
was exhausted by family expenses. Then clearly the property must have been
purchased with SP funds.)
c) This case presents the judicially created Family Expense Presumption
that assumes that family expenses are first paid by CP funds.
(1) Expenses expended for food, rent, vacations, and medical and
dental care are for family expenses. They are consumed and do not
result in acquisition of property that would ultimately be divided at
divorce or death.
(2) The rules concerning family expenses are:
(a) Available CP funds are presumed to be used to pay for
family expenses. SP funds are deemed to be used for family
expenses only when CP funds are exhausted.

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(b) When SP funds are to pay for family expenses, the separate
estate has no right to reimbursement unless the parties have
agreed to reimbursement. (it is presumed to be a gift)
d) Rule: Use the Exhaustion Method and if a spouse chooses to
commingle, he/she must keep perfect records.
e) If there are NO records in a commingled account, then the court will
assume that whatever money is being used are CP funds and any SP has been
a gift to the community.
5. In re Marriage of Mix [CA SC; 1975] (DIRECT TRACING)
a) Facts: W is an attorney and she commingles her CP earnings and SP in a
bank account. She withdraws funds to purchase rental property and is able to
produce a schedule from her records chronologically itemizing the source of
SP funds that went into the SP rentals and the balance left after each
transaction.
b) The court requires more than just her accounting records because the
records are not quite itemized enough and because she is the record keeper
and the proponent there could be a conflict of interest.
c) Held: The records coupled with her testimony and the affidavits of her
friends were adequate evidence of tracing to her SP.
d) Rule: Keep careful records and if the spouse who claims it is his/her SP is
keeping the records, they will probably have to bring in extra evidence above
just the records to prove no bad faith in the recordkeeping.
6. In re Marriage of Frick [1986]
a) Facts: H relied on the Direct Tracing Method to argue that he used SP funds
to pay off an encumbrance on property he owned before marriage. The
problem was that he had commingled his salary with his SP income. He
argued that he met his burden of rebutting the CP presumption by showing
that he received a specific amount of SP each month that he deposited into
his commingled account, and he paid a specific amount every month to make
payments on the encumbrance.
b) Rule: When payments are made out of a commingled account, the
presumption is that the funds are CP and that presumption must be rebutted
by the SP proponent.
c) Held: Because the H only produced selective evidence of how he managed
the account, the court found this was CP. It seemed to the court that the H
was actually withholding relevant information.
7. Bottom line: Tough to commingle and satisfy the strict evidentiary requirements
of the Direct Tracing method. The Exhaustion Method is also tougher for SP
proponents to meet.
8. Other ways to divide commingled accounts:
a) Stock account purchased with commingled funds:
(1) Some courts will say take stocks that have increased in value and
call them CP and the stocks that have decreased in value are SP
(2) Other courts will say look at the stocks in the account and see what
day they were each purchased and what % of the purchase funds were
CP and what % were SP in the commingled account on the day of the
purchase.
(3) If there are no records, the courts will assume a gift of SP to the
Community. (But, if no donative intent apparent on the part of the
spouse who had SP, he/she can ask for reimbursement)
b) After the account is done immediately prior to the withdraw, either the SP
proponent can ask for reimbursement or a pro rata share of the funds.
B. SP Businesses
1. Pereira v. Pereira/ Van Camp Distinction
a) (Used where marital labor contributes to the growth in value of a
SP business. Some of the increase in value will be awarded to the

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estate which provided the capital and some to the estate which
provided the labor.)
b) VAN CAMP:
(1) More likely to be used if the capital or nature of the business is the
primary cause of the increase in value (used when something other
than community effort causes the increase)
(2) VAN CAMP RULE: Pay the community a fair wage. Thats all it gets.
Give the remainder of the value of the business to the estate which
provided the capital (usually SP.)
(3) Came from 1921 case and determines the reasonable value of
the spouses service sand allocates that as CP and the remainder is SP.
(4) Fair wages are generally the market rate for comparable services.
(5) Family Expenses paid by the business should be treated like wages
paid to the family. Thus, deduct family expenses from the wages.
Whats left of the wages goes to the estate which provided the labor
(usually the community). If wages to CP were overpaid, it was a gift to
CP.
(6) Example: W owned a dry cleaning business before marriage.
During the 10 year marriage, the business appreciated in value.
Because the appreciation is more likely due to the nature of the
business than to her labor, Van Camp applies. The Community will
receive a fair salary (minus family expenses paid from the business).
The remainder is WSP.
c) PEREIRA:
(1) More likely to be used if the managing spouses labor is the primary
cause of the increases in value of a business (Example: A landscaping
business)
(2) PEREIRA RULE: Pay the original capital plus interest per year (use
10%) to the estate which provided the capital (usually SP). Thats all it
gets. Give the remainder of the value of the business to the estate
which provided the labor (usually the community).
(3) Comes from early case (1909) and apportions the profits of a SP
business by allocating a fair return on the SP investment and
allocating any excess to the CP.
(4) Facts: H has a saloon that he brought to the marriage as his SP, but
was investing LSE during the marriage.
d) The court has discretion to choose the method which produces the most
just results.
e) Pereira usually favors the community and Van Camp usually favors the SP
owner.
f) Note that with either approach, before a final distribution can be made, a
deduction for family living expenses must be made from the aggregate
amount of CP acquired during marriage. Only the balance remaining after
such deduction is CP.
2. Marriage of Koester [1999]
a) Facts: H argued that a business he owned prior to his marriage, but
incorporated after his marriage, should be dispersed as separate and not CP in
the dissolution proceedings.
b) Rule: The Pereira analysis, which awards the value of SP 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 SP 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
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3. Tassi v. Tassi [1958]
a) Facts: H, now deceased, made certain transfers of property, without Ws
consent, to other relatives.
b) Rule: Two approaches are available to a court for the allocation of earnings
from a SP business between separate and CP and the court is free to choose
whichever formula will achieve substantial justice between the parties.
(1) Still though, the court should properly exercise its discretion to
determine whether or not the community services to the SP involved
has been the key to the income generated.
4. In re Marriage of Imperato [1975]
a) If a community business increases in value after the date of separation,
the courts are instructed to use what is called reverse Pereira/Van Camp. If
the effort is considered separate effort, and the increase in value would be
considered SP. If the increase in value can be attribute do other factors, such
as economic circumstances, then the increase in value is considered CP.
C. Installment transactions:
1. Vieux v. Vieux [1926]
a) Facts: Prior to his marriage, H executed an installment contract to
purchase real property and, after his marriage, he used some CP funds to pay
installments on his contract.
b) Rule: When one spouse before marriage executes an installment contract
to purchase property and then uses community funds after marriage to pay
some of the installments, the CP is entitled to an interest in such property in
the proportion that community funds were used for installments.
D. Borrowed Funds and Credit Acquisitions:
1. Start with the basic CP presumption. Then rebut with SP tracing. However, when
property is acquired on credit during marriage, the SP proponent must trace by using
the intent of the lender.
a) Characterization of property acquired on credit is determined by whether
the lenders intent was to rely upon the purchasers SP or CP for repayment of
the loan.
b) When the lender relied on community assets for repayment of the loan,
the CP presumption is not rebutted, and the property will be characterized as
CP.
2. Gudelj v. Gudelj [CA SC; 1953]/ In re Marriage of Grinius [1985]
a) These two cases used different variations of the intent of the lender test.
b) Gudelj: Held if there is no evidence showing that the lender or seller
primarily relied on the purchasers SP in extending the credit, the CP
presumption stands.
(1) Involved Hs interest in a cleaning business that was purchased
during marriage. H paid for part of the business with cash and part
with a note. The cash was determined to be HSP; the question was
whether the note was also his SP.
(2) In Gudelj there was no testimony as to the intent of the seller.
However, there was some evidence regarding the purchase of the
interest in the cleaning business. (H had received some cash that was
his SP and he argued that it could be inferred that the seller must have
relied on his SP in selling him the interest on credit.) However, the
court decided that without evidence that the seller had actually known
of HSP, Hs rebuttal failed.
(3) Factors to determine the primary intent of the lender:
(a) Source from which the lender expects repayment (salary,
income)
(b) Signature on the loan
(c) Identity of the person whos providing security for the loan
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(e) Relative wealth of the parties
(f) Lenders intent in prior loans
c) Grinius: Held the CP presumption may be rebutted by showing the lender
intended to rely solely upon a spouses SP. (Makes it almost impossible to
characterize the loan as SP.)
(1) The couple started a restaurant business with funds borrowed from
a bank and the Small Business Administration. Even though the
business was considered CP, there was a question about the restaurant
real property that was in Hs name and that he claimed to be his SP.
(2) In Grinius, the restaurant real property was purchased with loan
funds. H argued that those funds were SP, and thus the CP
presumption was rebutted. But, the Court of Appeal said there was no
showing that the lender had relied solely on HSP and so it was still CP.
d) Both cases started by saying the interest in the cleaning business and the
restaurant real property, even though acquired through credit, were presumed
to be CP. That presumption is rebuttable by tracing to the intent of the lender.
3. Contribution of SP to CP Real Property: purchase and improvements
a) Marriage of Smith [1978]
(1) Spouse used other spouses SP for community purposes (down
payment on real property, payment on cost of swimming pool, and
purchase of equipment for family business). She was presumed to be
making a gift and entitled to reimbursement from CP or SP of the other
spouse only when there was an agreement to that effect. Such
contribution was presumed to be a gift.
b) In re Marriage of Lucas [1980]
(1) When a spouse contributes SP to down payment on CP real estate
(or other joint forms of ownership), the SP contribution is presumed to
be a gift and the spouse had no right to reimbursement.
(2) The gift presumption could be overcome only if there was an
agreement that the contribution would remain SP. If such an
agreement existed, the contributing spouse would have a proportional
SP interest in the property.
(3) NOTE: Anti-Lucas legislation effective 1/1/84 CA Family Code
2580-2581 and 2640 which reversed the gift presumption and
offered straight reimbursement applies to divorce and legal separation
only. In the case of death, the Lucas gift presumption remains intact.
c) Marriage of Walrath [1998]
(1) Rule: Spouses statutory right to reimbursement under Family Code
2640(b) is not limited to reimbursement from the specific asset to
which the SP contribution was originally made. When that original
property is refinanced and proceeds used in part to purchase or reduce
indebtedness on original and other assets, contributing spouse is
allowed to trace the contribution to SP and be reimbursed from these
assets.
4. Contributions of CP (via loan repayment) to SP Real Property:
a) In this scenario, the spouse who owned the property before marriage
would argue that the community does not acquire any interest in the property
by providing funds to reduce the loan. The other spouse would argue that the
community has acquired part of the property by providing funds to reduce the
loan. The answer is that the community gains an interest in the property.
b) A secondary issue arises in this scenario, because payments on a loan,
particularly a mortgage loan, include both principal and interest, and in some
cases, also taxes and insurance. The spouse who purchased the property
before marriage would argue that only principal payments should be
considered. The other spouse would argue that both principal and interest
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c) In re Marriage of Moore [1980]
(1) Facts: W had bought a house about 8 months before she married H.
She took the title in her name alone. She purchased the house for
approximately $57,000 and made a down payment of approximately
$17,000. She secured a mortgage loan to purchase the house. Prior to
marriage, W made payments on the loan, and the principal had been
reduced by approximately $250.00
(a) While the couple was married, the loan principal was
reduced by almost $6,000. And, the house had appreciated in
value and was now worth $160,000.
(2) The court determined that the community was entitled to a pro rata
share of the increased value of the SP asset, holding that when CP
funds are used to make mortgage payments on SP, the community
develops an interest in the property to the extent that it reduces the
principal debt. However, CP payments of interest, tax, and insurance
do not buy into ownership. The actual value of the CP interest in the
property depends on the FMV of the property.
(3) Moore Formula:
(a) Divide amount by which the CP payments have reduced the
principal by the purchase price;
(b) Multiply that community percentage by the equity value of
the house to find the capital appreciation due to CP funds;
(c) Add to that the amount of equity paid by CP funds.
(4) Important points:
(a) Community funds paid to reduce the principal on a separate
loan will result in the community obtaining a proportionate
interest in the property according to the formula established by
the Court in the Moore case. (The community builds a pro-rata
share in the SP.)
(b) Community funds paid for interest on the separate loan and
for taxes and insurance will not be included in the calculation of
the community interest in the property.
d) Marriage of Marsden [1982]
(1) Adds a twist to Moore by allowing a credit to the SP owner for any
appreciation prior to the time the first CP contribution is made.
5. In re Marriage of Frick [1986]
a) The H in Frick attempted unsuccessfully to persuade the court to use the
fair market value of the property at the time of the marriage instead of the
original purchase price to calculate the relative SP and CP percentages of
interest. This would have reduced the community interest. The court did not
agree and continued to use the purchase price, but it did allow the H a credit
for the increase in value prior to any community contribution.
b) Alternative Frick formula for calculating respective interests: CP and SP
respective interests should be based on ratio of capital contribution to
purchase price of SP property acquired before (or during) marriage. Note that
court uses purchase price of property rather than FMV of property at time of
marriage for allocation of shares. Since purchase price is smaller, this
approach is likely to give community a larger percentage.
6. Basic Formula from Moore, Marsden, and Frick:
a) Divide the contribution of the CP estate by the purchase price of the SP
asset to find the percentage of the community interest;
b) Multiply the percentage by the net value of the house to determine how
much money the community will receive;
c) If the asset has increased in value prior to any CP contribution, the SP
owner is entitled to a credit for the appreciation before you run the
calculations in (b).

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7. Marriage of Wolfe [2001]
a) Facts: CP funds used to install drip irrigation system on HSP land.
b) Rule: When the other spouse contributes CP funds to improvements on
spouses SP land, contribution spouse is entitled to reimbursement. SP
character is unaffected, and CP contributed is no longer presumed a gift.
E. Contribution of SP of One Spouse to SP Real Property of the Other Spouse:
1. No published case has decided the effect of this situation. Two approaches
appear possible:
a) Presumption of Gift. Analogy to Marriage of Lucas .
b) Reimbursement. Based on Family Code 2640 as evidence that the
legislature no longer believes that the paying spouse intends to make a gift
when SP funds are expended on real property not owned as SP.
F. Personal Injury Awards:
1. Before Marriage:
a) If the c/a arises before marriage and receipt of damages occurs before
marriage, award is SP of injured person.
b) If c/a arises before marriage and receipt of damages occurs during
marriage, inception of right doctrine suggests that award is SP of injured
spouse. However, to extent that award compensates spouse for lost wages,
award may be characterized as CP.
2. During the Marriage:
a) If c/a arises during marriage and receipt of damages occurs during
marriage, award is CP.
b) If c/a arises during marriage and receipt of damages occurs after
separation or divorce, award is CP.
3. After Marriage:
a) If c/a arises after marriage and receipt of damages occurs after marriage,
award is SP of injured spouse. Court may order reimbursement to other
spouse or community if either contributed to expenses related to injury.
Family Code 781(b).
4. Allocation of CP PI damages upon divorce:
a) Family Code 2603(b) provides that PI award received as CP during
marriage is assigned to injured spouse at divorce even though this results in
unequal division of CP UNLESS (1) non-injured spouse is entitled by interests
of justice to some of the CP PI award, not to exceed , or (2) CP PI damages
are commingled with other CP and lose their special character, in which case
they are treated like any other CP.
b) There may be inter-spousal tort if one spouse injuries the other. In this
situation, there is usually insurance involved, and any damages are the SP of
the injured spouse upon divorce. Family Code 781(c).
5. In re Marriage of Devlin [1982]
a) Facts: W appeals from judgment awarded bulk of couples property to H
because it was acquired with proceeds from Hs PI damage award.
b) Family Code 2603(a) provides that PI damages received from c/a arising
during marriage are held as CP during the marriage. Upon dissolution,
however, Family Code 2603(c) provides for the assignment of CP PI damages
to the injured spouse.
(1) Courts may take into account economic needs and condition of
each party, time elapsed since award of damages, and other conditions
that may warrant a different distribution in the interests of justice.
(2) In any event the spouse is to receive no less than one half of
award.
c) CP PI damages are not transmuted to regular CP by purchasing other CP
with the funds unless commingling occurs and tracing to PI award is
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d) Held: The award goes to the H because the trial court properly exercised
its broad discretion in basing the decision on the fact that H was a paraplegic,
and W had both the education and ability with which to secure gainful
employment and be self-supporting.

G. Employment Related Benefits

1. Retirement Benefits:
a) Retirement is a red flag for CP interest.
b) Benefits are apportioned according to the years of SP and CP contribution
to retirement:
(1) Time Rule(Number of Years Worked During Marriage/Total
Number of Years Worked) x Value of the Pension
c) Social Security Benefits are Preempted by Federal Law
d) Military Retirement Benefits are not Preempted by Federal Law, Apply CP
Rules
e) In re Marriage of Brown [CA SC; 1976]
(1) Facts: By the time H and W separated, H had accumulated only 72
of the 78 points necessary for the vesting of his pension. Thus, his
pension was an unvested pension. (He had no absolute rights to the
pension.)
(2) The Brown Court redefined an unvested pension from a mere
expectancy to one that was a contingent interest in property. The
Court distinguished the two definitions by saying that an expectancy
does not rise to the level of any interest, but a contingent interest is
still a right, even if it is a contingent one.
(a) Court defined the term vested as a pension right which
survives the discharge or voluntary termination of the
employee.
(3) Rule: To the extent an interest builds during the marriage in a
pension plan even when it is not vested, that interest is considered CP
and is subject to division at divorce.
(4) The Court thought the mere expectancy definition would have
been unfair to the community and to the W. So, the Court overruled
prior precedent and declared that pension rights, whether vested or
not vested, comprise a property interest of the community and that
[spouse] may properly share in it.
f) Family Code 2610: Retirement Plans; Orders to Ensure Benefits
(1) Except as provided in subdivision (b), the court shall make
whatever orders are necessary or appropriate to ensure that each
party receives the partys full CP share in any retirement plan, whether
public or private, including all survivor and death benefits, including,
but not limited to, any of the following:
(a) Order the disposition of any retirement benefits payable
upon or after the death of either party.
(b) Order a party to elect a survivor benefit annuity or other
similar election for the benefit of the other party and if that
election is already included in the retirement plan, no court
shall order a retirement plan to provide increased benefits
determined on the basis of actuarial value.
(c) Order a retirement plan to make payments directly to a
nonmember party of his or her CP interest in retirement
benefits.
(2) A court shall not make any order that requires a retirement plan to
do either of the following:

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(a) Make payments in any manner that will result in an increase
in the amount of benefits provided by the plan.
(b) Make the payment of benefits to any part at any time before
the member retires, except as provided in paragraph (3) of
subdivision (a), unless the plan so provides.
(3) This section is not retroactive to payments made by a retirement
plan to any person who retired or died prior to January 1, 1987 or to
payments made to any person who retired or died prior to June 1,
1988, for plans subject to paragraph (3) of subdivision (a).
g) Example: Works 5 years prior to the marriage, then 15 years during the
marriage, and then 5 years after marriage at which point H retires and starts
taking his pension payments.
(1) 15/25=60%. Therefore, the community is entitled to 60% of the
retirement benefits. And, the employed spouse gets the other 40%
outright and then half of the 60% and therefore ends up with 70% of
the pension benefits. The unemployed spouse gets 30%.
2. Disability Benefits:
a) Disability pay (including workers compensation income) is treated as
wage replacement money
(1) What income is being replaced? If CP income is being replaced, the
disability income is CP. If SP income is being replaced, the disability
pay is SP income.
(2) If the disabled party could retire and receive retirement pay, but
elects to receive disability pay instead, then the disability pay is
replacing retirement income. Therefore, it is treated as retirement
income and is CP to the extent that it replaces a CP interest in a
pension.
b) Disability benefits serve two purposes: (1) to compensate for the personal
suffering caused by the disability and (2) to compensate for the loss of
earnings resulting from the disability and the compelled early retirement.
c) But, usually, these are like PI awards and stay with the disabled ex-spouse.
d) Marriage of Elmont[CA, SC; 1995]
(1) Facts: H was a physician who had purchased disability insurance
during marriage with community funds. H began receiving disability
payments about 2.5 years after the couples dissolution proceedings
commenced. Therefore, the payments after the couple separated were
made with his earnings, which were SP.
(2) The determining factor, according to the Supreme Court majority
opinion, was that the H renewed the disability policies after separation
with SP funds and that at that time H did not intend to provide the
community with retirement income.
(a) The timing and the funds are paramount: acquisitions after
separation with SP funds are characterized as SP.
(3) The Court did agree with the decision in In re Marriage of Stenquist
and found that when a spouse has a choice in which benefits to take
(disability-SP or regular retirement benefits-CP), its CP because the
power to elect disability pay over retirement pay has the potential
to defeat the community interest in the pension.
3. Termination and Other Employment-related Benefits:
a) Marriage of Gram [1994]
(1) Facts: The former H exercised his early retirement option and
virtually doubled his retirement payments. W wanted these enhanced
benefits for early retirement to be treated as CP.
(2) Held: The enhanced portion was CP and was characterized as
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(3) Court did acknowledge that if the enhanced early retirement
compensation was viewed as present compensation for loss of income
(replacement for post-separation salary), then it might qualify as HSP.
But, here the court rejects that approach and favors the community
because retirement benefits earned during the marriage are CP and
enhancement of those must also be considered CP.
b) Not all termination benefits are CP. They tend to be classified as such
when benefits are derived from a contract (can be implied). CP presumption
is strengthened when it is based on the employed spouse working for a
specified number of seasons before coming into the retirement benefits.
(1) SP when the termination benefits are substitute for lost earnings,
lay off benefit, the termination package is designed for maintenance of
income, and payments are reduced by any earnings if the person goes
to work elsewhere.
4. Bottom Line: Retirement benefits earned during the marriage are CP,
enhancements of existing retirement plans would be included in the CP, and
supplemental retirement benefits are SP.
VII. Spousal Management of CP and Creditors Rights
A. Spousal Management:
1. Early statutes gave management and control of CP and WSP to H and so H had all
management and control.
2. 1872: W received sole control over her SP
3. 1927: W was given, via Family Code 751, a present existing and equal interest in
the community, but it was more of a trust-like situation. (Interest, but no
management rights.)
4. 1951: W controls her earnings and PI recoveries as long as she kept them
separate from CP
5. 1975: Legislature adopted Family Code 1100 which gave the concept of equal
management between spouses. This section is retroactive to CP prior to January 1,
1975.
6. SP: Managed by SP owner
7. Quasi-CP: Treated as SP during marriage for purposes of management and control
(but treated as CP with respect to creditor access)
8. CP: Both spouses have equal management and control during their lifetime. That
is, each spouse has the power to buy, encumber, sell all CP without the other spouse.
(See Family Code 751)
9. Exceptions to the rule of equal management for CP:
a) Real Property: Both spouses must join in executing any instrument by
which community real property is sold, encumbered, conveyed, or leased for
more than one year
(1) Non-consenting spouse can void the transfer if he brings an action
within one year of the filing of the transfer
(2) Non-consenting spouse can void a transfer to a good faith
purchaser with no knowledge of the marriage only if he shows that he
didnt consent to or partake in the transfer. He must then refund the
purchase price to avoid unjust enrichment.
b) Personal property: A spouse cannot convey CP household furnishings or
clothing of other spouse or children without written consent of the other
spouse.
c) Business: The manager-spouse of a CP business has primary
management and control of the business. Primary management means that
the managing spouse may act alone in all transactions, but must give prior
written notice to the other spouse of any sale, conveyance, or encumbrance of
substantially all assets of the business.
d) Bank account: Only the party named on the account has management
and control rights to the account

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e) Gifts: Gifts of community personal property require written consent of the
other spouse. The non-consenting spouse may revoke an unauthorized gift
during the donors lifetime. After the donors death, the non-consenting
spouse may only receive her half of the CP gift. The deceaseds one half CP
interest is treated as a testamentary gift.
10. Fiduciary duty: Each spouse has a fiduciary duty of good faith and fair dealing
management and control of CP and neither spouse may take advantage of the other.
a) Family Code 1100(e) provides that each spouse shall actin accordance
with the general rules governing fiduciary relationships. Therefore, this
section and the general description of spousal duties in Family Code 721,
provides that a spouse owes the other spouse a fiduciary duty.
b) Bad judgment is not bad faith
c) Upon request, the managing spouse must provide full disclosure to the
other spouse of all information regarding the CP and the other spouse needs
full access to information about assets and debts of the community when
requested.
d) Fiduciary duty is violated if spouse conveys CP without the other spouses
consent in the particular situations discussed above (gifts, home furnishings,
etc.)
11. Rights of the non-managing spouse; governed by Family Code 1100, 1101
a) Has a right to know
b) Has a right to sound management by the managing spouse
c) Has a right to participate
d) Has a right to be made whole in the event that the managing spouse has
done something to dissipate his/her share of the community or the SP
e) Has a right to full disclosure if asks for it
f) Has a right to petition the court for access to the records in order to
mitigate the damages during the marriage
12. Under Family Code 721: spouses can make contracts together and with third
parties but there must be full disclosure and an accounting.
13. Family Code 1100
a) Each spouse has absolute power of disposition during life
b) At death, though, each spouse has only power to dispose of their half of
the CP
c) 1100(b)
(1) Managing spouse may not make a gift of CP or sell it for less than a
fair or reasonable value without the written consent of the other
spouse.
d) 1100(c)
(1) Managing spouse cant sell clothes, etc. without the consent of the
non-managing spouse (usually done to avoid creditors)
(2) Community has the most interest in the property
e) 1100(d)
(1) If a spouse manages a business that is CP, the one with primary
control can act alone, but would need the written consent of the other
spouse for a significant transactions
14. Remedies
a) Court ordered accounting of the property
b) Reformation of title (court may add spouses name to title)
c) Claim against manager for breach of fiduciary duty if there is substantial
impairment of the non-managers CP interest
d) Family Code 1101Remedies
(1) 1101(a): The breach of fiduciary duty must involve impairment of
the claimants interest in the community estate.
(2) 1101(b), (c): A court-ordered accounting or a court order to add a
name to the CP held in one spouses name.

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(3) 1101(f): These remedies are available during marriage or at
divorce or upon death of a spouse.
(4) 1101(g), (h): These sections allow a court to award more than half
of the asset. A claim for breach of fiduciary duty means that there are
potential damages that can eclipse equal division of CP.
(a) For instance, under 1101(g), a remedy for breach of
fiduciary duty shall include, but not be limited to an award to
50% of an undisclosed or transferred asset plus attorneys fees
and costs.
(b) Under 1101(h), the remedy for breach of fiduciary duty,
which amounts to oppression, fraud, or malice, shall include,
but not be limited to an award of 100% of an undisclosed or
transferred asset.
(c) These provisions in actuality provide for tort damages
resulting from the breach of fiduciary duty.
(5) Another remedy statute is 2602 and has long been available if a
spouse has deliberately misappropriated CP.
15. Family Code 1102: Deals with real property rather than personal property
a) Either spouse has the management and control of the community real
property. However, both spouses must join in executing any instrument by
which that community real property or any interest thereinis sold, conveyed,
or encumbered. Joinder is also required for leases of community real
property for longer than a period of one year.
16. Tyre v. Aetna Life Ins. Co. [CA SC; 1960]
a) Facts: H attempted to reach from the grave and continue to control the CP
in his will. He changed the insurance policy payouts and didnt get the Ws
approval. When W found out, she disavowed the will provisions. The
insurance company argued that he had the management and control and
therefore could change the payouts.
b) Held: After death, less management and control rights exist, even for the
H. He only had right to management and control of of the CP that was his,
not her half. (During life, he had 100% control, after death, 50%.)
17. Marriage of Stitt [1983]
a) Facts: W settled a fraud and misappropriation of funds action her exemployer filed against her. She was also tried and convicted of
embezzlement. H made partial payments out of a joint account towards the
attorney fees incurred by his W. After the couple separated, W executed a
second trust deed on community real property in favor of the law firms which
represented her for the remaining $she owed them.
b) Held: W was outside the for the benefit of the family rule and was
mishandling the CP without providing any benefit to the family whatsoever. In
order to protect his community interest in the house, free of the Ws debt, the
court divided the houses value in half, gave the H half, and then whatever
was left after she paid her debt was hers.
18. Marriage of Duffy [2001]
a) *seems to be a case of gross mishandling or gross negligence or
reckless conduct.
b) Facts: H took his entire IRA brokerage account, almost $500,000, and
invested it in five tech stocks in 1995. The stocks were very volatile and
declined in value to $261,483 by May 1998.
c) Held: After surveying the history of the fiduciary duty statues, the court
concluded that a spouse generally is not bound by the Prudent Investor Rule
and does not owe to the other spouse the duty of care one business partner
owes to another. Thus, because H owed no duty of care, no duty of care was
violated.

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(1) Plus, the court finds that the W didnt ask any questions about the
stocks and so really she had equal management and control and didnt
use it.
(2) Spousal mismanagement would happen under this ruling when it is
objectively futile for the non-managing spouse to ask questions.
d) In response to the Duffy decision, the Legislature in 2002, inserted that
languagenot limited tointo Family Code 721 and stated its intent to
abrogate the ruling in Duffy. Therefore, under the present statute, Hs
decision to invest the couples entire IRA brokerage account in highly volatile
tech stocks would be considered a violation of a spouses fiduciary duty under
Family Code 721 because it was gross mishandling or grossly negligent or
reckless conduct.
19. Wilcox v. Wilcox [1971] (prior to 1975 equal management and control statute)
a) Facts: W had $30K of CP and hid it. The H asked the court to force his W to
release to him that $30K of CP.
b) Issue: What can a spouse do if the other spouse interferes with his or her
right to manage and control the CP?
c) Held: The c/a alleged in Hs compliant was not premised upon Ws
mismanagement of community funds, as stated in her demurrer, but upon her
violation of Hs right to manage, control and dispose of community funds. As
such, she needs to release that money.
(1) Writing in 1971, The right of the H thus conferred to manage,
control and dispose of community personal property is invaded by his
W when she deprives him thereof by taking, secreting and exercising
exclusive control over community funds. A H has a c/a against his W
for such an invasion and violation of his right in the premises with
attendant appropriate remedies.
(2) After 1975, the rule here can be applied equally to H or W, since
each has equal right to manage and control the community assets and
earnings.
B. Recapture and Reimbursement:
1. Spreckels v. Spreckels [CA SC; 1916]
a) Facts: H made gratuitous transfers of CP without his Ws consent. The
other kids object and say that their share of the Ws CP has been depleted
without mothers consent. However, she indirectly ratifies in it in her will by
leaving the kids who got the gifts out of her will.
b) If H had gotten a fair return for the community assets given, then he
wouldnt have been depleting the CP and because the gifts here werent given
for valuable consideration then the gift is voidable (not void). But, if the
spouse (like here) does anything that looks like ratification of the bequest,
then the court will find ratification in order not to undo transactions.
2. If the non-consenting spouse wants to challenge the exercise of management
rights, the courts will allow recapture during the marriage OR at divorce. (i.e. the
court will correct the situation and will give the community some $ back)
C. Creditors Rights:
1. Quasi-CP is treated as CP with respect to creditors rights
2. For debts incurred before marriage, the debtors SP and all CP are liable, nondebtor spouses SP is not liable
a) Exception: If non-debtors earnings are deposited in a separate account
to which the debtor does not have access and the funds are not commingled
with other CP, these CP earnings are not liable.
3. For debts incurred by one spouse during marriage, the debtors SP and all CP
are liable. Non-debtors SP is not liable.
a) Exception: The non-debtor may be personally liable for debts for
necessaries of life (defined as living costs consistent with the spouses
station in life.)

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4. Tort Liability
a) Satisfied by CP first, if tort occurred during an activity for the benefit of the
community
b) Satisfied by SP first, if activity was not for the benefit of the community
5. There is a right to reimbursement for
a) Child Support: If CP funds were used to pay child (or spousal) support
and SP funds were available( Family Code 915)
b) Necessaries: If the non-debtors SP was used to pay the other spouses
debts for necessaries and CP or the debtors SP was available
c) Tort Judgment Family Code 1000: if the order of satisfaction was not
followed
d) Recall, the right to reimbursement also exists for:
(1) Educational expenses
(2) Unauthorized gifts
(3) SP contributions to CP purchases or improvements (Anti-Lucas)
(4) If CP is used to improve spouses own SP, CP is entitle to
reimbursement (for the cost of the improvement or the increase in
valuewhichever is greater). If CP is used by one spouse to improve
the others spouses SP, a gift is presumed.
6. Most of the law in this area ensures that creditors can reach as much property,
usually the CP, as is available to ensure they are paid.
7. Rather than characterizing debts as CP or SP, the CA system allocates
responsibility or liability for debts between the CP and each spouses SP.
8. Family Code 910(a): protects creditors in that the community estate is liable for
a debt incurred by either spouse before or during marriage.
9. Community can obtain reimbursement when CP is used to satisfy a SP debt in
three circumstances:
a) When SP of the souse making the expenditure has been benefited by the
CP expenditure
b) When CP is used for a child or spousal support obligation that predates the
marriage, then community may be entitled to reimbursement if there was SP
from the debtor spouse that he/she could have used to satisfy the obligation.
c) When an expenditure is made within a short time of the dissolution.
10. Golemund v. Cafferata [CA, SC; 1941]
a) Facts: H had been in a car accident and owed damages in a judgment
against him. Victim of the car accident asked the court to enjoin the sale of
CP to satisfy the debt that the H owes.
b) Court declines to do this.
c) GR: CA CP acquired prior to 1927 is always liable for the debts of the H
because a rule otherwise would say that the H didnt have total management
and control of the CP property as he did before 1927, but the non-tortfeasors
SP is not available.
d) Post-1975: all CP is liable for satisfaction of the tortfeasors debt, as is his
SP.
e) There is a 7 year SOL for reimbursement after a spouse has knowledge of
property that was improperly applied to a debt.
11. In re Marriage of Braendle [1996]
a) Facts: American Overseas sought to enforce a judgment against CP (that
the H should pay the W money) held by the non-debtor spouse following the
property division in a divorce proceeding. (W and AO are both creditors of H)
b) Simple Rule: At divorce, W is the first in line as a creditor. The creditors
rights are given second priority and the Ws preferred interest in the asset
protects her from any encumbrance.
c) Property received by the non-debtor spouse is not liable unless the court
expressly assigns the debt.
Division of CP at Dissolution of Marriage

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A. Property Settlement Agreements:
1. Divorce court has jurisdiction over all CP, not over SP unless the parties consent
to that or request jointly held SP to be divided.
2. Family Code 2550: the court shall divide the community estate of the parties
equally. Thus, each spouse is entitled to a one-half interest in each community
asset. (This creates an elaborate game of offset.)
a) Courts can vary equal division when the property is in kind. (Whether a
sale can be forced on stocks is debatable.)
3. Deviation from the equal division requirement is possible when:
a) One spouse has deliberately misappropriated CP.
b) Liabilities exceed assets.
(1) Courts can make unequal distribution of debts depending on
relative ability of spouses to pay.
(2) Rationale: courts dont want to cripple people financially when they
come out of a marriage.
c) One spouse has incurred educational debt (goes with the student spouse)
d) One spouse has incurred tort liability (goes with the debtor spouse)
e) One spouse has incurred a separate debt
f) One spouse is entitled to community estate PI damages.
4. Assets and liabilities are valued as near to time of trial as possible
a) However, a spouse-managed business or professional practice in which the
primary asset is accounts receivable should be valued at time of permanent
separation rather than trial.
5. Income tax consequences of division
a) Transfers between H and W pursuant to divorce are not taxable.
b) Spouses assume an equal share of tax liability for sale of community
assets to third parties.
6. Community assets not listed in the divorce pleadings or that are not distributed
by the decree are subject to future litigation unless the property settlement decree
states it is a final settlement of all claims.
7. Setting aside property settlement or decree: (can ask the court to set aside)
a) Grounds: breach of fiduciary duty by managing spouse or extrinsic fraud or
mistake
(1) Intrinsic fraud: involves error that the claimant, through due
diligence, could have guarded against.
(2) Extrinsic fraud: fraud that the person who is adversely affected
couldnt have guarded against.
b) Recent legislation provides that uncontested judgments may be set aside
within one year on the ground of mutual or unilateral mistake.
8. Enforcement and modification:
a) In re Marriage of Hufford [1984]
(1) Facts: H appeals from a denial of request for modification of
Spousal Support.
(2) Issue: Whether the support orders can be modified depending on
the changing ability of the spouse to make payments and the changing
status of the receiving spouse?
(3) Rule: Although an agreement making spousal support nonmodifiable by the court is not contrary to public policy, the public
interest is best served when support awards reflect changes in need or
ability to pay and there does need to be some specific unequivocal
language directly on the question of modification, but no magical
words.
(4) Held: Yes, modification can happen with OSCs for modification.
(5) Remember: The decree of divorce, the property division, and the
support orders are all three separate things. Practically though, most

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courts look at them all holistically and use the SS and CS orders to
compensate for the property division.
B. Judicial Jurisdiction to Divide Property:
1. Gionis v. Superior Court [1988]
a) Facts: The grant of divorce was allowed prior to the division of property.
The H sought a writ of mandate vacating the order denying bifurcation of his
martial status from the other decisions like property and support.
b) Rule: Bifurcation is a positive thing and the court needs little evidence in
order to grant that motion.
c) But, remember cant divide property before granting divorce.
2. Robinson v. Robinson [1944]
a) Facts: H appeals judgment awarding ex-W a life interest in HSP real
property (family home). Court of Appeal did reverse this judgment.
b) Rule: Power of court to dispose of property in marital dissolution is limited
to CP. There is no power to dispose of SP of spouse or to carve out life estate
in such.
c) *Illustrates limitations of courts authority to achieve equitable result when
family home (or other major asset) is SP. Traditionally, some courts
considered property held in JT to be SP of each not subject to division and
therefore requiring a separate partition action. Today, the presumption is that
anything held in JT is CP for purposes of dissolution. Family Code 2650 gives
court jurisdiction to divide JT property at request of either party.
C. Equal Division Requirement:
1. In re Marriage of Stallworth [1987]
a) Facts: One child who had psychological issues and was in special
education. He was 10 years old. The court ordered a deferred sale of the
home. But, the higher court reversed and said that there were possible
negative economic consequences to the H.
b) Family Code 3800(b) allows for deferred division of the home if there are
minor children.
c) Rule: Custodial parent is entitled to the temporary use of the home until
the youngest child reaches majority and at that point, the house will be sold
and the proceeds will be divided equally. However, in order to do this, it must
be shown that it would be better for the childs health and welfare to remain in
the house in order to authorize a deferred sale of family home (aka a Duke
award)
(1) The Duke rule works well when the house is paid off, but when
theres still a liability in the house, there needs to be some offset for
that and only one spouse would pay down the debt.
2. In re Marriage of Tammen [1976]
a) Facts: H is appealing from a division of property in which W received a CP
award of approximately 79%. The court ordered her to pay $19,820 secured
by a trust on the family residence. 10 year agreement.
b) Family Code 2601 provides that a court may award any asset to a party in
a dissolution proceeding on any conditions deemed proper to effect an equal
division of CP. (This section gives the court enormous amount of discretion.)
c) The Court of Appeal felt this promissory note didnt accurately reflect an
equal division due to factors such as discounting due to a long deferment, the
inferiority of the security, and possible effects of inflation. (The TC didnt
justify enough why it made the division it did.)
3. In re Marriage of Eastis [1975]
a) Facts: W filed for a divorce after 3 years. Here liabilities outnumbered the
assets by $1200. W was awarded net assets worth $2500 and ordered to pay
$1000 in community liabilities. H was given assets worth $1750 and ordered
to pay $5400 of the communitys obligations.

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b) The court found that the assignment of the debt threw the equal division
of assets out of whack because W received $750 more in community assets
than H. (Thus, this part of the decision was reversed.)
c) The court must look at the division of debt and this is done in the courts
discretiondoesnt have to be equal.
4. Statutes involving the principle of Eastiscourt assigns, not divides
outstanding debts.
a) Family Code 2500 series
b) Family Code 2620
(1) Debts for which the community estate is liable have to be
confirmed or divided by the court.
c) Family Code 2621: a debt incurred before marriage shall be confirmed
without offset to the spouse who incurred the debt.
d) Family Code 2622, 2623, 2623, 2625, 2626, 2627
(1) Family code 2623(a): Debts incurred by either spouse for the
common necessaries of life of for the necessaries of life of the children
of the marriage for whom support has been ordered are confirmed to
either spouse depending on the spouses respective needs.
IX. Division of CP at Death of a Spouse
A. Rights of Surviving Spouse and Heirs or Devisees of Deceased Spouse
1. Testate Succession
a) Laws governing testamentary disposition are different for CP and SP.
Decedent spouse has power over half of the CP and all of her SP at death.
Surviving spouse is guaranteed only his half of the CP. (Probate Code 100)
b) If the decedent spouse attempts to dispose of all the CP, the surviving
spouse may be forced to make an election between her share of the CP or
taking pursuant to and under the conditions in the will (election is heavily
influenced by tax implications):
(1) Either accept a testamentary gift and forgo her statutory interest in
half the CP
(2) OR asset her interest in half the CP and thereby void the
testamentary gift.
c) The surviving spouse has no ownership interest in the SP of the decedent
spouse but the decedent spouses testamentary power over SP is still limited
regarding:
(1) Quasi-CP: Quasi-CP is treated identically to CP upon the death of
the owner spousedecedent spouse can dispose of only half and
survivor spouse has an ownership interest in the other half.
(a) Exception: real property acquired by the decedent spouse
located outside of CA which would be subject to the laws of the
state where it existed.
(i) The statutory definition of quasi-CP applies to both
dissolution and death, and includes real property and
personal property. However, under California Probate
Code section 66, out-of-state land (not a house or other
dwelling) is excluded from the definition of QCP when
the community is dissolved by the death of a spouse.
California courts will not assert jurisdiction over out-ofstate land or, if they do, they apply the law of the situs
(state) of the property.
(b) If owner spouse transfers Quasi-CP to a third party during
his life, the surviving spouse may be able to compel the
transferor to reconvey half of it to the decedents estate (which
was her half because he can only give away ) IF:
(i) Decedent spouse made inter vivos transfer while
domiciled in CA during his life;

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2.

3.

4.

5.

Fall 2006
(ii) Transfer was made to someone other than surviving
spouse without written joinder or consent of surviving
spouse AND
(a) Transfer was a suspect conveyance (i.e. no
consideration and decedent spouse retained
possession or enjoyment of property at time of
death or decedent spouse retained at the time of
his death power to revoke, consume, invade or
dispose of property, or decedent spouse at time
of his death had right of survivorship)
(2) Forgotten or omitted spouses (SP can sometimes be touched to
cure an this situation); and
(3) Forgotten or omitted children (same as above)
Intestate Succession
a) Laws governing intestacy are different for CP and SP. Where one spouse
dies without a valid will or where a valid will doesnt dispose of all the CP, the
decent spouses half o the CP passes through intestate succession to the
surviving spouse.
b) That portion of the deceased spouses SP passing through intestacy to the
surviving spouse depends on the number of children, parents, or issue of
parents of the decedent who survive.
(1) Dead H has SP but no will:
(a) Surviving spouse and one child : usually divide SP in half
(b) Surviving spouse and two +children: surviving spouse
receives one third;
(c) Surviving spouse, but no surviving children, but others
surviving such ad decedents parents, nieces, nephews,
siblings, then surviving spouse receives one-half and blood
relatives receive the other half.
(d) If no blood relatives surviving, surviving spouse receives all
SP.
Dawes v. Rich [1997]
a) Facts: Claim had been made by tenants in a trailer park and the probate
court find that since the H (debtor) died, the trailer park tenants couldnt get
paid. The tenants appealed.
b) Rule: Upon the death of the spouse, the marital community remains liable
for debts incurred by that spouse, but the SOL for anyone trying to assert a
claim against the estate is 1 year.
c) At death of the debtor spouse, the non-debtor spouse does incurs the
debts of the CP.
Collection Bureau of San Jose v. Ramsey [CA SC; 2000]
a) Facts: Action by the hospital for bills of sick (and now deceased) W.
b) Lower court saw this as part of the necessaries of life and said that a 4
year SOL applied.
c) The CA SC said, though, that 1 year SOL is applicable from the probate
code.
Estate of Prager [CA SC; 1913]
a) Facts: There was a testamentary bequest to the W that was inconsistent
with an independent claim to property under traditional CP law.
b) Rule of laws of wills: one who is given a benefit under a will can choose
between that benefit or any other claim that is inconsistent with that benefit.
c) The intent of the testator matters: Here, the H wasnt trying to give her SP
in lieu of her CP interest, instead he was attempting to give her SP in addition
to her CP.
d) This wasnt forced election because he didnt indicate in his will that he
needed to choose.

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6. Election of Benefits under Terms of a Will
a) Surviving spouses right to elect is commonly called the widows
election, although it is equally applicable to either spouse. The election allows
a surviving spouse to choose between the testamentary disposition in a valid
will and the statutory share (pursuant to the CP schemed in the Family Code).
b) The right to elect arises only if the decedents will is valid and discloses his
intention to dispose of the survivors share of the CP. Thus, an election is
required where the testator expressly requires it, or where the testator
declares all of the CP as his SP and provides for its disposition.
c) Where the testators intention is unclear, the courts disfavor forcing the
survivor to elect. Thus, the use of general terms without identifying the
community or separate character of the devised property will create an
inference that the testator intended to dispose only of his property interest,
i.e., his one-half interest in the CP and his SP. (In re Pragers Estate)
d) A survivors election to take under the will or assert community or quasicommunity rights is accomplished by filing a petition under PC 13501,
13550.
e) The surviving spouse is not required to elect between his or her CP rights
and his or her rights in intestacy.
f) A decedents SP may be devised to the surviving spouse conditioned on
giving up certain rights in CP.
g) The surviving spouses election does not transmute CP into the survivors
SP. It remains CP, subject to the decedents liabilities.

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