Marital
(Community) Property Outline
UC Davis School of Law, Professor Ikemoto
Format
I. Introduction of Marital Property
II. Transmutation: Contracts & Gifts
III. Definitional & Tracing Issues
IV. Evidentiary Presumptions in California Community Property Law
V. Classification of Property
VI. Management Issues
VII. Inception & Termination of Economic Community
VIII. Property Distribution at Divorce
IX. Analytical Outline
I. Introduction to Marital Property
A. What does marital ppty law do that ppty law does not?
1. Addresses rts/responsibilities of two ppl who are married to each other b/c they are married—not b/c they have executed a deed
a. Wirth v. Wirth (NY 1971): 30 year marriage. Both spouses worked. For 22 years, pooled earnings to pay household expenses and make investments. H’s salary went into a savings plan, and W’s salary into living expenses. Divorce. W claims savings acct, home, life insurance, retirement. H is the sole title holder of all. W argues a constructive trust—i.e. that she put in her $$ for “us”
(1) NY does not have marital ppty law @ time
(2) Ct: Need evid of the promise of repayment OR putting title in her name as well.
2. Addresses rts and responsibilities b/t married couples and 3d parties.
B. Two basic categories of marital ppty law: (1) C/L (most states); and (2) CP Statutory schemes (8 states + Wisconsin)
1. When law applies:
a. C/L:
(1) Applies at divorce.
(a) During marriage—this only becomes CP if the couple agrees to have joint ownership. CP does not accumulate at marriage
b. CP:
(1) Applies during marriage, at death, or divorce
(2) Starts accumulating @ time of marriage.
2. Policy and Concepts
a. C/L:
(1) Primary concern is the spouse @ divorce, and what their contributions are during marriage.
(a) assumes that spouses should have separate economic interest, and that they only take joint tenancy if they wish
(b) No clear assumption of equal contribution
b. CP:
(1) Marriage is an economic and equal partnership. Assumes that despite actual earnings, that spouses will share equally
3. Definition of Marital Ppty
a. C/L:
(1) Hotchpot approach: Everything couple owns @ divorce is marital ppty—no matter how it is acquired. Ct has jx over everything.
(2) Marital and Individual Ppty: Distinguishes b/t ppty acquired before marriage (individual) and ppty acquired after marriage (community)
b. CP:
(1) All things earned during marriage = community. If a gift, then SP under § 770
4. Standard for Distribution
a. C/L: Equitable distribution @ divorce
b. CP: Split in jx
(1) Majority: Equitable distribution std @ divorce
(a) Basically leaves a lot to the discretion of the courts. Ct will try and match current needs and contributions of individual parties to the financial state
(2) CA + 2 states: Equal division, 50-50. No discretion over how CP divided at divorce
C. History of CA CP law:
1. 1970: Change to a no fault divorce system
2. 1975: Gender-neutral management rule
II. Transmutation: Contracts and Gifts
A. Premarital Agreements—
1. General Rule: Premarital agreements are enforceable except in extreme cases.
a. Reasons for Getting Premarital Agreements
(1) Planning for short-term marriage
(2) Protection against creditors
(3) If unequal wealth in the marriage, protects assets for the wealthier spouse
(4) Estate planning device—e.g. protect ppty for children of a prior marriage
(5) Eliminate conflict during the marriage (e.g. take out the trash once a week)
(6) State hopes and dreams (e.g. we’ll live overseas for one year)
(7) To control behavior that might cause divorce (e.g. “bad boy” clause—penalties if one partner commits adultry)
2. Common Law
a. Marriage of Dawley (1976): Betty and James agree on a temporary marriage, since they are expecting a child out of wedlock & Betty can lose her job as a teacher. Sign a premarital agreement (1) to keep ppty separate; (2) to get support for B, her other daughter, and child until majority. Married for 8 years. B challenges the agreement @ dissolution.
(1) Betty’s 2 arguments:
(a) Contrary to Public Policy b/c encourages divorce and is contrary to policy of upholding marriage if these agreements contemplate a dissolution at a specific date
i) Ct: Will only refuse to enforce a premarital agreement IF the terms itself promote divorce (objective basis).
aa) e.g. Limiting spousal support would violate this rule
bb) Marriage of Noghrey: Short marriage. Can’t find agreement at trial. Both signed an agreement that W would get the house + $500k upon divorce. H owned the house @ marriage. Thus, W does better under agreement than under CP.
Ct: Unenforceable b/c W does better upon divorce than staying in the marriage.
--So how to carry out intent of this agreement so that it will be enforceable upon divorce? A: Transfer ppty to W upon marriage. Then, at divorce it will be SP
(b) Undue Influence
i) Ct: No b/c both were in bad bargaining positions
ii) Differs from Estate of Nelson: (50-year old real estate broker marries his 22-year-old secretary. Has her agree to waive all CP rights, spousal support, attys fees.) Here, “shocks the conscience” w/ substantial difference in legal/financial sophistication, age difference.
aa) In comparison, Betty and James are educated, adults, professionals, older.
(2) Client advice:
(a) Should have a schedule of assets to help distinguish SP and CP. Also helps w/ creditors claims during marriage.
3. California Premarital Agreement Act (CPAA)
a. NOT APPLIED RETROACTIVELY. Thus, the C/L governs agreements before 1986.
b. Provisions:
(1) § 1611: No consideration needed to enter into agreements
(2) § 1612: Subject matter of statute: (a) Property…(7) etc. clause: “Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty”; (b) cannot limit or waive child support
(3) § 1615: Standards for enforcement. Agreement can be invalidated
(a) If involuntarily entered into
(b) Shocks the conscience (unconscionability)—on the C/L std
i) Std: Reasonable person’s objective views whether the terms in the k encourage divorce.
c. Pendleton: Both parties sophisticated w/ formal education and substantial assets. K to waive spousal support.
(1) Ct: Waiver enforced under these facts. SPOUSAL SUPPORT WAIVERS ARE NOT PER SE UNENFORCEABLE. (differs from C/L approach where these waivers are never enforceable.)
(a) CPAA is silent, so left this open to the courts to decide (according to CA S.Ct).
(b) Kennard dissent: No, rule should be applied at the time of execution—NOT the time of divorce. Doesn’t account for a change in circumstances during the marriage—e.g. health, one partner losing earning potential).
d. Barry Bonds case: Barry Bonds about to marry Sun. On the plane to the wedding, Bond’s lawyer presents Sun w/ agreement to waive spousal support upon dissolution of the marriage. Lawyer suggests Sun get independent counsel and she refuses.
(1) Ct: Agreement is enforceable. (Shocking b/c ppl thought that the agreement would’ve been knocked down)
(2) Strong reaction by the family bar + legislature, so amended CPAA
e. CPAA Amendments—2001
(1) § 1612(c): Cannot waive spousal support if BOTH parties did not have independent counsel, OR if the agreement was unconscionable at the time it was signed.
(a) Unconscionability: Time of enforcement changes to the time it was signed—to account for a change in circumstances (like Justice Kennard’s dissent in Pendleton)
(2) § 1615(c): Presumption that premarital agreement was not voluntarily executed unless in writing OR independent counsel, 7 calendar days to consider the agreement, fully informed of terms, not executed under duress/fraud/undue influence/lack of capacity.
(3) Criticisms of amendments
(a) Raises the costs of entering into a premarital agreement
(b) Premarital agreement is really only for ppl with attys
4. Statute of Frauds and Avoidance Techniques
a. § 1611: Premarital agreement shall be in writing and signed by both parties. No consideration is necessary.
b. EXCEPTION: FULL PERFORMANCE: Freitas v. Freitas: Surviving spouse (widow) vs. the decedent’s children from a prior relationship. Fighting over a life insurance claim. Alleged agreement: If W married him, then he promised to name her as beneficiary of the life insurance policy. He initially put her on the life insurance policy, then changed it to his kids later.
(1) Ct: W gets the money. Statute of frauds not required b/c this was a fully executed agreement. Enough evid to show decedent’s intent.
(2) FULL PERFORMANCE IS SUFFICIENT TO OVERCOME THE STATUTE OF FRAUDS FOR THE PREMARITAL AGREEMENT
c. EXCEPTION: ESTOPPEL: Estate of Sheldon: Decedent has two kids, Helen and Marion. Her will gives ½ of total estate to each child. Decedent marries Al when they are 78 & 80 years old. Both (allegedly) agreed that neither would take in the other’s estate. Al gets 1/3 of the estate, and gives his share to Helen. Helen argues that the agreement is not enforceable, Marion wants the agreement to be enforceable
(1) Al gets some under the omitted spouse statute: Spouse gets a share of the estate—even if they were left out of a will that was written before the marriage. Point is to effectuate the intent of the parties.
(2) Ct: Agreement enforceable. Estoppel is an exception to the statute of frauds argument. Al (i.e. Helen) is estopped from asserting that the statute of frauds must be in writing based on a theory of detrimental reliance—i.e. decedent agreed not to take his estate to her detrimental reliance.
(3) No full performance argument here b/c Al’s promise not to take anything was a negative promise.
B. Transmutation During Marriage
1. Generally, transmutation can be from CP to SP; SP to SP; SP to CP
2. Pre-1985 Transmutation (C/L period)
a. Estate of Raphael: Raymond and Bertha married. 9 months later, he inherited ppty from his mother (i.e. SP). He made an oral statement that they were sharing everything equally. They filed taxes together. Raymond dies. R’s brother, Harry, challenges the oral statement and notion that the house is CP. Issue: Was the inheritance changed into CP?
(1) Ct: Sufficient evidence (i.e. oral statements, taxes) + no evid to contradict what H meant when he made the statements
(2) Criticism:
(a) Oral statements may be made w/o the intent of changing title or character of the ppty. H is dead.
(b) Differing reasons for filing taxes
(3) General rule: Cts less likely to find that the agreement is enforceable if the person dies in debt. If the marriage ends in divorce, then unlikely to find the agreement enforceable b/c this is a “he says/she says.”
b. Marriage of Jafeman: House owned before marriage by H. Marriage. Then use CP funds towards the house. @ divorce, W argues that ppty was transmuted from SP into CP. W’s evidence: H referred to house as “our house” + using community funds towards the house to pay mortgage + lived in house during marriage + subjectively thinking that the house was “ours.”
(1) Ct: Referring to house as “ours” + living their during marriage + W’s subjective idea = not enough to show intent to change character.
c. Estate of Nelson 50-year old real estate broker marries 22-year old secretary. Apt building bought before marriage by H, but H referred to ppty as “ours.”
(1) Ct: Yes, transmuted to CP.
(a) This is commercial ppty owned by a real estate broker, who is pretty protective of his SP interests. Also, filed joint tax returns.
d. RULE OF EASY TRANSMUTATION (IN C/L PERIOD): Quality of evidence is low.
3. Post-1984 Transmutation – NOT RETROACTIVE
a. Provisions:
(1) § 852(a): Must be in writing by an express declaration that is made, joint in, consented to, or accepted by the spouse whose interest in the ppty is adversely affected
(2) § 852(b): Must be recorded
(3) § 852(c): Exceptions for gifts b/t spouses.
b. Estate of MacDonald: W dies. Ppty in issue is H’s IRA (normally considered CP). Kids’ evidence: consent agreement, of IRA, signed by W that agreed to have H’s kids be the beneficiaries
(1) Ct: under § 852(a), need an express declaration in writing that W knew she was giving up her CP interest.
(2) NO EXCEPTIONS to this s/f or express declaration yet.
(3) BLR à less litigation.
c. Summers: Couple purchases ppty w/ adult daughter as joint tenants. W files for bankruptcy, and creditors getting claims in. If house is CP, then creditor can get interests of both spouses. If house is SP, then creditor can only get W’s 1/3 interest. Creditor argues for a transmutation.
(1) Ct: TRANSMUTATION ONLY APPLIES TO MARRIED PPL—does not apply b/t married people and a 3d person. Here, title is joint tenancy, so presume joint tenancy.
4. Summary:
a. Premarital agreements—in writing w/ exceptions of full performance and estoppel
(1) Before 1986 = C/L + s/f
(2) From 1986 = CPAA + C/L + s/f
b. Transmutation
(a) Before 1985 = C/L; no s/f
(b) From 1985 = § 850 et seq. + s/f + express declaration
c. Rationale for needing a s/f for premarital agreements, but not transmutations under C/L…ppl entering into marriage should be treated as fiduciaries. Assumption under C/L that married couples do not need to put everything in writing.
III. Definitional and Tracing Issues
A. Estate of Clark (1928): Dillard has 3 sons & gives each a share of D’s mineral interest. Edwin dies, leaving a possible will. Shortly after, D marries Eliza. During marriage, he contests E’s will. Lawsuit settles. D gets about $150k. D dies, leaving a will—left a trust for E, and the rest to his two sons. E decides to go for her elective share, arguing that D’s interest to his son’s settlement is CP.
1. Ct: SP. D’s claim came from his rt to contest the will based on the intestacy statute. D was named the sole heir of E’s estate. Rt did not come from the transfer of the land. As heir, D had standing to challenge the will—claim arose before D got married. Ppty acquired before marriage = SP
2. Key: LOOK @ HOW D ACQUIRED THE PPTY
B. Andrews v. Andrews (1921): H and W are caring for H’s elderly parents. Mother dies. Then H agrees to take care of father for the rest of his life and father agrees to leave all ppty to son. H then moves to alaska. Father remarries, and leaves an invalid will that leaves everything to son—only 1 witness to the signing of the will. (Under intestacy, surviving spouse gets the decedent’s share of CP + share of SP. If no intestacy, then H gets everything).
1. Only evid of the oral k is the W’s testimony. BUT…under WA state statute, if ppty interest at stake, then cannot testify. Thus, W cannot testify. Ppty passes via intestacy.
C. Downer v. Bramet: H has 1/3 interest in ranch that was transferred to him by his Er right after H and W separated. Transfer was set up as a “sale” for tax purposes. W claims H’s interest in the ranch. H claims this was a gift b/c no k said that Er had to transfer this to his Ees + no consideration present.
1. Ct: Reverses the nonsuit—i.e. saying there is enough evidence to go to trial.
2. Rationale: Only a business relationship b/t Er and Ee, not a personal relationship. The ranch was given in lieu of retirement benefits.
3. Here, ct looks beyond form to see whether ppty is truly community or truly separate—looks @ history of ppty + intent by using tracing.
IV. Evidentiary Presumptions in California Community Property Law
A. Background: The Framework of the California Evidence Code
1. Presumptions based on burden of proof = based on p.p.
2. Presumptions based on burden of evid = based on probabiliyt
B. The Presumption that Property Acquired or Possessed During Marriage is Community Property--
1. GENERAL C/L PRESUMPTION
a. Triggering facts: Ppty was possessed or acquired during the marriage
b. Presumed facts: CP
c. Rationale/explanation: Based on probability or desire to maximize CP
d. Rebuttal: Trace this back to SP by: (1) showing that ppty was acquired before marriage or (2) that ppty was acquired during marriage as a gift
2. Lynam v. Vorwerk: Couple got a joint bank account after married. 4 years later, H dies. W takes money from joint account. W dies. Two estates in lawsuit to see who is responsible to distribute it. If CP, then some money goes to H to distribute. If SP, then H’s estate distributes it all by themselves.
a. Triggering fact: possession at the end of marriage
b. Presumption: If in possession at the end of or during marriage, then presume that it was acquired during marriage (i.e. is CP)
(1) To rebut presumption, trace it back to SP (1) acquired before marriage OR (2) acquired as a gift during marriage.
c. Rationale for presumption: Assume that if ppty exists at the end of marriage, it was obtained during the marriage.
3. Mahoney: JB married for two months. Buys accident insurance policy for $1 at the airport. Dies on the plane. JB named his son as the beneficiary. Surviving spouse contests the policy as CP.
a. Remember: H can transfer his CP to anyone upon his death. BUT…if one spouse uses CP w/o the consent of the other spouse, then the other spouse may be able to retrieve their interest—what is being done here.
b. Triggering fact: acquired during the marriage
c. Presumption: If acquired during the marriage, then presume CP
d. Here, W has the burden of proof to show that the $1 came from community funds.
(1) Short marriage here, so enough to have a SP inference. Also, acct was in H’s name only.
(2) Burden of proof is lighter in a shorter marriage.
C. The Role of Title Generally
1. Tenancy in Common
a. Created:
(1) “To A & B…”
(2) Default: (1) ppty passing through intestacy & ppl end up as co-owners OR (2) language is not clear enough to create a joint tenancy
b. Can own in equal or unequal shares
c. Fully transferable
(1) Any tenant can transfer by gift @ death
(2) Can sell share
2. Joint tenancy w/ ROS
a. Created: “To A & B with the right of survivorship…”—must have clear and explicit intent.
b. Own in equal shares (no matter how much one person paid)
c. Transferability
(1) Inter vivos (during life)
(2) Will destroy the joint tenancy’s ROS
(a) e.g. Joint tenancy with 3 interests (A/B/C). If A transfers during life to X, then have 3 co-owners. A’s transfer destroys the ROS. X will then be a tenant in common to B & C.
d. Right of survivorship upon death
3. CP
a. During life, cannot unilaterally transfer his/her own interest
b. Upon death, either spouse can transfer their share of CP to anyone
c. Equal shares
d. Mutually exclusive from the others
(1) i.e. cannot have joint tenancy ROS w/ CP. It will be SP if characterized as joint tenancy ROS and tenancy in common
4. Survivorship CP—NEW
a. Explicit intent
b. Equal shares
c. No transferability
(1) During life, can’t sever CP interest.
(2) @ death, there is a right of survivorship
5. nb: No tenancy in entirety in CA
D. Forms of Title that Raise Presumptions of Gift or Agreement to Transmute
1. Married Women’s Special Presumption (MWSP)
a. § 803:
(1) Triggering facts: (1) Ppty acquired by a married woman; (2) acquired before 1975; and (3) instrument in writing
(2) Presumption: W’s SP
(3) Rationale: Back in the day, men had sole legal authority to manage or control CP. Thus, if ppty is put in W’s name, then must be an express intent to keep it for her. Assume that H intended a gift.
(4) Rebut presumption: No gift intended AND/ OR H didn’t have control over the transaction
b. Holmes v. Holmes (1915): W had title to ppty + pre-1975. H trying to rebut the presumption, arguing that the purchase price was paid w/ CP.
(1) Ct: W’s SP—even though purchased w/ separate funds.
(2) H can rebut the presumption by showing that it was not intended as a gift.
(3) THIS PRESUMPTION TRUMPS THE GENERAL PRESUMPTION
c. Louknitsky (1954): House acquired in the Bay Area. Title in W’s name only. Couple getting divorced. Issue: Can the presumption be rebutted?
(1) Ct: yes b/c facts show that W had control over the transaction. H and W were in the process of moving to the U.S. H was out of the country when she purchased the house. H could not have put his name on the deed, and thus, could not have intended a gift.
d. Hypo: Pre-1975…H is being pursued by creditors, so he transfers the deed to his wife. Enough to rebut the presumption?
(1) No b/c H intent was to by-pass the creditors, not give a gift
e. Dunn v. Mullan: Land in San Joaquin valley. Names of both spouses are on the title. H dies. W dies one day later. Ppty acquired by joint ownership. Look @ § 803(b): Presumption is that if a married woman + another person jointly own land, married woman’s share is hers as tenancy in common (i.e. SP)—unless otherwise stated.
(1) Ct: W’s estate = W’s separate ½ (under § 803b) + ½ CP [Thus, W ends up with a ¾ interest and H gets a ¼ interest]
(a) Thus, combined the general presumption w/ the MWSP
(2) Rationale: statute doesn’t speak to H’s interest
(3) In reaction to this case: § 803(c): “If acquired by H & W, AND the instrument describes them as husband and wife ? presume that they intended the ppty to be CP.
f. HYPO: Deed says, “To Henry and Wilma.” This is before 1975.
(1) § 803b applies. MWSP applies to her ½, and the other ½ is governed by the general presumption, and is thus, CP
(2) Does NOT trigger § 803(c) b/c it must say, “To H and W, as husband and wife.”
g. HYPO: Same facts as (f). But H can show that the ppty was purchased w/ his separate money.
(1) Does not rebut the MWSP + doesn’t show that he lacked control over the presumpion
(2) BUT…rebuts the general presumption that applies to ½ the ppty.
(3) Result: W gets ½ (MWSP) and other ½ is SP, that H gets
h. HYPO: Ppty acquired before 1975. Deed says, “To Herma (woman) and Will (man), as joint tenants with a right of survivorship.”
(1) Rebuts the MWSP.
(2) § 803(b): Unless a different intention is expressed (i.e. joint tenancy kicks out the MWSP)
i. HYPO: Harry purchased a family home in 1970 w/ CP funds. Title put in W’s name b/c he was engaged in several risky business ventures and wished to shield the family home from the creditors’ claims.
(1) MWSP rebutted b/c H has a different intent (i.e. no gift)
j. H and W expecting child in 1972. In anticipation, H’s widowed mother moved into an apt and sold them her single family residence, deeding it “To Harold and Wilma Carter.” Does it matter that H’s mother is willing to testify for her son in his divorce proceeding?
(1) § 803(b) applies here—Need evid to show (1) H did not have control OR (2) that H did not intend a gift.
(a) No evid to show H had no control (since this is his mother)
(b) No evid to show H did not intend a gift
(2) Mother’s testimony is irrelevant.
(a) If the mother controlled the entire transaction, then maybe her intent can control & thus, have a SP interest to each.
(b) To solve this problem, deed should’ve gone “To H and W as husband and wife” to trigger § 803(c).
(3) Result: ½ is W’s SP. Other ½ is CP. Thus, W ends up with ¾, and H ends up with ¼.
2. Property Held in Joint Title
a. Introduction—
(1) JOINT TENANCY PRESUMPTION
(a) Triggering facts: Title in joint tenancy + non-divorce situation--death or need to characterize ppty during marriage (e.g. bankruptcy)
(b) Presumption: Assume joint tenancy
(c) Rationale: Effectuate the intent of the parties
(d) Rebut: Other intent, understanding, or agreement
(2) In deciding what to put on the deed, party needs to think about: (1) tax; (2) death; (3) divorce
b. Joint Tenancy
(1) Schindler v. Schindler (1954): H and w bought a house after moving to CA. Deed says, ‘joint tenants.’ Getting a divorce. W is trying to get this as CP so that the ppty can be disposed of in the divorce (this is before no-fault divorce; thus, ct may award W, the injured party, damages by giving her more than ½ the house). W tried to rebut the presumption: (a) ppty paid for w/ community money, and (b) W had a secret understanding that the ppty was CP.
(a) Ct: Evid of paying in community funds is not sufficient alone.
(b) No need to have intent/understanding/agreement in writing, but NEED EVIDENCE OF A MUTUAL UNDERSTANDING
(2) Bowman v. Bowman: H and W own ppty in “joint tenancy.” H and W thought that the ppty was “theirs.” H knew it was joint tenancy, and that it would help to avoid probate, but not much else.
(a) Ct: Presumption rebutted. H and W thought of the ppty as “ours.” Also had no idea what joint tenancy is.
(3) Levine: Couple marries. Title says, “joint tenancy w/ ROS.” Marriage ends in death. If presumption holds, W is the sole owner of the house. H’s son from a previous relationship argues that the house is CP. Son’s evid: H was thinking that it would be joint tenancy if W predeceased him. H talked to this w/ his atty. Told atty that he wanted it to be CP if he was to predecease his son, so that son could get it.
(a) Ct: Presumption holds. Only shows the intent of one party.
(4) Tax implications of joint tenancy: IRS taxes you on the appreciation of the value of ppty. Purchase price is considered the base, and is used to measure taxable gain.
(a) e.g. Married couple buys ppty for $200k in 1960. (Thus, base is $200k). Last month, W dies. Her ½ interest goes to her surviving H. Fair mkt value of ppty is $2.2m (Thus, their gain is $1.8m, and will be their taxable income)
(b) Strategy: Reduce the gain by increasing the base.
i) So when W dies, then “step up” or increase the base of the ppty—i.e. eliminate the gap b/t the basis and fair mkt value of the ppty.
aa) If CP, entire base of the ppty gets “stepped up” (i.e. the base of the ppty will be $2.2m)…so little taxable gain when the house is sold
bb) If joint title or tenancy in common, then SP. Only the W’s ½ gets “stepped up” in base (Thus, the W’s ½ base is $1.1m, but H’s base is only $100k.) If H sells the house for $2.2m, then will have $900k in taxable gain.
(5) Implications of Joint Tenancy at Dissolution
(a) If CP, couple has fiduciary duty b/t themselves as to mgmt and control of the CP. If transfer the interest, must get permission. At divorce, judges do not have discretion to divide CP as anything but ½.
(b) If joint tenancy, any side can transfer the interest.
c. Separate Property Contributions to the Purchase Price of Jointly Titled Property
(1) Marriage of Lucas: Gerald and Brenda getting divorced. Ppty at issue: house and motorhome. B used part of her own trust to pay for the house (about 25%). The remainder was CP (75%). Deed said, “joint tenancy.” B also used trust funds ($3k) to make improvements on the house. [in general, this is treated as a gift or reimbursement—doesn’t really go to the ownership of the house]. Value of house appreciated, nearly doubled in value.
(a) @ time of the case, CA Ct. App. dealing w/ this in 3 approaches:
i) Aufmuth: Will show a proportional ownership interest in the house which is determined by which funds went into the purchase price.
ii) Trantafello: Treat house as CP unless there was mutual agreement or understanding otherwise
iii) Bjornestad: Characterize the house as CP and reimburse the SP
(b) Held: Presumes CP—even if there is a SP contribution
i) “The act of taking title in a joint and equal ownership form is inconsistent with an intention to preserve a SP interest.” Thus, If couple puts the house into joint and equal form, it must mean that it’s “ours.”
ii) Evidence presented here:
aa) Testimony that they did not intend a gift to each other
bb) B had secret intent to keep the house as SP, but never told G
cc) No mutual understanding or agreement that the house would be anything but CP
(c) LUCAS PRESUMPTION [for ppty]
i) Triggering facts: (1) Ppty in joint tenancy, tenancy in common, CP. (2) Title in joint and equal form. (3) ONLY applies at divorce
ii) Presumption: CP
iii) Rationale: If title in joint and equal form, parties must’ve intended to share
iv) Rebuttal: Any evid of a mutual understanding or agreement otherwise.
aa) If there was found to be sufficient evidence that B retain a SP interest, then she would’ve received a proportional ownership interest which reflects the proportion of the purchase of the house.
(d) re: Money to make improvements (B’s $3k) LUCAS GIFT PRESUMPTION
i) Triggering facts: SP contribution
ii) Presumed: Gift to the community
iii) Rationale: It is the family home; seems like a natural intent to contribute home improvements to the community
iv) Rebut: Agreement or understanding that the money was not given as a gift, but that it was expected to be reimbursed.
(e) re: Motorhome. Couple bought the motorhome in January 1976, and divorce in December 1976. Traded in CP car and used $100 of CP funds. Brenda pays $9000 from her trust. Title is in B’s name only.
i) Held: SP. Applies gift presumption, and find that G gave up his share of the CP and didn’t object when B’s name was on the title
(f) Weird result of the case: This is not considered new law b/c there was a fiction of the C/L. Thus, the ct need not worry about retroactivity issues.
(g) Policy reasons for the Lucas presumption:
i) Favorable to assume CP at divorce b/c couple will have ½ interest, and ct’s authority will have to make an equal division
ii) If it is a house, it will be sold (unless there are minor children). If the house is characterized as joint tenancy ROS, parties still have a relationship based on the house—assume that this is not desirable
(h) Criticized b/c:
i) Bad for wealthier spouse if a gift is always presumed
ii) Property (i.e. cars, houses, stocks) is put in title. Safe to assume that parties thought about their title before making these decisions
iii) Evidentiary std is too easy—like the rule of easy transmutation—where any evidence is effective
(2) Anti-Lucas Legislation (1984)
(a) § 4800.1—Joint title presumption
i) Triggering facts: Ppty acquired during marriage in joint tenancy + divorce
ii) Presume: CP
iii) Rebuttal: Written agreement that the parties intended otherwise
iv) **But did not totally get over Lucas b/c Lucas presumption applies to ppty held in ANY joint title (CP, tenancy in common).
(b) § 4800.2—Anti-Lucas: Reverses gift presumption
i) Triggering facts: Applies at divorce, SP contributed to CP
ii) Presumption: Non gift—is reimbursement (dollar for dollar, no interest)
iii) Rebuttal: Written waiver of the right to reimbursement
(c) Legislature intended retroactivity.
(3) Marriage of Buol (1985): House taken in joint tenancy. W made all mortgage, tax, ins, maintenance out of SP. H was an alcoholic. W has a separate account from her earnings (which is CP, but they understood that this was her SP). House appreciated 10x. H and W understood the house to be hers. Issue: Can the anti-Lucas legislation be applied retroactively? Has W’s DP been violated (i.e. did it mess up W’s ppty interest)?
(a) DP test: IS DP IMPLICATED? See who gets what under the existing law & compare to new rule. If a change, then would effect the ppty interest and have a DP issue.
i) Under law in existence, then if ppty if in joint and equal form, presume CP. But can be rebutted by testimony of H/W over the years, and their understanding that it was W’s SP
ii) Under anti-Lucas, presume CP. Need writing to rebut, which doesn’t exist here.
iii) Thus, there is a difference in ppty interests
(b) Does retroactivity violate DP?
i) Then, does the retroactivity of the law promote a state interest? i.e. Needed to cure an injustice?
aa) Here, state interest: promote the equal distribution of ppty
bb) Retroactivity of the law does NOT promote the equal distribution of ppty
cc) (in comparison to old gender rules where man’s earnings were CP and woman’s earnings were SP during divorce. there, retroactivity is needed to cure the discrepancy involved)
ii) What is the extent of the disruption?
aa) Here, people relied on the old laws
(4) In Marriage of Fabian (1986): H and W purchased a motel during the marriage as CP. Years later, H uses $275k of SP to make improvements on the motel. Issue: Can § 4800.2 be retroactively applied?
(a) Ct uses same analysis of Buol.
i) Lucas presumption: Presume a gift. Anti-Lucas legislation: Reimbursement. Thus, CP loses out ? triggers DP
ii) Retroactive application violate DP? Ct: Yes
iii) Thus, no retroactive application of § 4800.2
(5) Amendments to Anti-Lucas Legislation (1987)
(a) § 4800.1(a)(1): Purpose of the law. (1) Standard of proof in establishing the character of ppty acquired by spouses during marriage in joint title form. (2) Methods provided by case and statutory law have not resulted in consistency. (3) More of state interest
(b) § 4800.1(b): In divorce, property acquired by the parties during marriage in joint form (i.e. NOT specific to joint tenancy) is presumed CP. Rebuttal: Writing of agreement otherwise
(c) § 4800.2: Deemed fully retroactive
(6) Estate of Blair (1988): H and W have a house in LaJolla, are preparing for divorce. Title in joint tenancy. Before divorce is final, W dies. Leaves ppty to her sister. H is selling house and trying to divide the proceeds. W’s estate is arguing CP, and H is arguing JT.
(a) W’s evidence: Statements from H and W in divorce papers stating that they thought of the house as CP. Also arguing there was a transmutation agreement.
(b) Held: Need to look at key dates to see whether there is a transmutation. If before 1985, then easy transmutation. If after 1985, then need writing w/ express declaration of transmutation.
i) Here, C/L JT presumption still exists, and will be applied if W’s estate cannot rebut.
ii) Bad result if H recovers all b/c the marriage ends in death
(c) CP w/ ROS is probably the best way to resolve this problem b/c then the survivorship ends at divorce. If the marriage ends in death, then survivor gets CP.
(7) Retroactivity of the 1987 Anti-Lucas Amendments
(a) In re Marriage of Hilke (1992): House purchased in 1969 as joint tenants. Couple is getting divorce. Divorce petition filed by W in 1989. Ct bifurcated the proceedings—divorce action and ppty division. W dies.
i) Ct: Marriage ended in divorce b/c W died after divorce proceedings. Thus, apply the JT presumption for divorce.
ii) Then, which presumption to apply? H wants C/L or Lucas, so that any evidence can be used. W wants anti-Lucas legislation
iii) Issue: Can the new presumption be applied retroactively if the ppty was purchased 20 years ago and title decided then?
iv) Held: Yes, apply this retroactively.
v) Analysis: Does this implicate DP by impairing a vested interest?
aa) No—retroactive application does NOT impair a vested interest
bb) Under old law, H would get JT w/ ROS (i.e. ½ + ROS). Under 1987 presumption, the ppty is CP unless rebutted w/ writing, so H still gets ½.
cc) Thus, the only difference b/t old rule and new rule is the right of survivorship (i.e. expectancy)
dd) Mere expectancy is not protected at law b/c it is not a vested interest.
(b) Marriage of Heikes (1995): H owned a home and vacant lot as SP. After marriage, H conveyed both parcels as JT. Now, divorce. H is arguing for a reimbursement of the mkt value of the ppty @ time he changed title. Issue: Can § 4800.2 (anti-Lucas gift presumption) apply retroactively?
i) DP analysis: Vested interest impaired?