CP Outline – Simas COMMUNITY PROPERTY OUTLINE FINAL EXAM – 1 ESSAY (MAY BE MULTIPLE CALLS / OR “DISCUSS”), MULTIPLE CHOICE I. Property and Marriage – Overview A. Common Law (Majority)1 a. Property remains separate, unless parties expressly agree to hold jointly (i.e. JT, TIC) b. Management & Control of assets (post-1975) i. Married Woman’s Property Act –All property is owned separately by the spouse who earned it. c. Dissolution – “Equitable Distribution Doctrine” (usually ½) i. Gives courts authority to award property legally owned by one spouse to the other spouse during divorce proceeding ii. Spouse who made marital contributions towards buying property held in title in other spouse‘s name may claim an equitable interest d. Death – Forced/Elective Share – spouse gets (depending on st.) ½ or 1/3 OR the what was given under the will. Community Property (Minority)(CA)2 a. Presumption that property is CP unless agreement to the contrary i. All assets are classified as CP or SP 1. You can change or modify this property by a transmutation3 b. Management & Control of assets – equal (post 1975) c. Dissolution i. Equal Division (CA) ii. Equitable Division (modern trend) d. Death i. Testate 1. CP: party can only will away his/her ½ of CP 2. SP: party can will away all of it. ii. Intestate 1. CP: All goes to Surviving Spouse 2. SP: gets divided according to statute Statutory Definitions for CP and SP a. CP – All property (real or personal) wherever situated, acquired by a married person during the marriage while dom. in CA 1. Includes property acquired by a married person through the ―use of his/her time, energy, and skill‖ 2. “Real or personal” – includes tangible + intangible property a. Intangible Property – Stocks, Bonds, Pension Plans, Life Insurance Proceeds, Education 3. “Wherever situated” – property can be outside CA, just has to be acquired while domiciled in CA 4. “Domiciled” – residence + intent to stay a. Can only be domiciled in one state, although they can have multiple residences. i. Notes: Going to law school in CA w/ intent to go home is NOT domiciled ii. Strong General CP Presumption – If property meets the above standard, it is presumed CP b. SP – SP includes: i. All property owned by a person before marriage; and ii. All property acquired by the person during marriage by gift, bequest, devise or descent; and iii. The rents, issues and profits from SP iv. Earnings and accumulations while living separate and apart v. Earnings and accumulations after judgment of legal separation
B.
C.
II. 3 Basic Principles of Community Property System A. Tracing Principle –The character of property is determined at the time of acquisition – we look at the money used to purchase property to determine its character a. Spreckels Principle – CP interests are vested, therefore, character of property is not subject to retroactive change when the system changes b. Rents, issues, profits of SP (CP) are SP (CP)4 5 6 Equality Principle – the property interests of H and W during marriage are ―present, existing, and equal‖ 7
B.
1
CL Jx – W‘s earnings are her SP. She has management and control b/c she earned it. i. Divorce: H will probably get ½ due to Equitable Distribution Doctrine. ii. W Death: W wills all her property to S. H will get either amount taken under the will OR ½-1/3 due to Forced/Elective Share. iii. H Death: H wills property to his sick Parents. W will keep everything and H‘s Parents will get nothing b/c they do not qualify for Spousal Protection. iv. Creditors: May or may not be able to go after the debts of the other spouse—depends on state. 2 CP Jx – W‘s earnings are immediately CP due to CP presumption (W’s $1mil; H’s $1mil) v. Divorce: each spouse can will away their ½. vi. W Death: W wills all her property to S. S gets W‘s ½ of the CP ($1mil) + all of W‘s SP. vii. W Death Intestate: W‘s ½ share of CP ($1mil) will go to H. viii. H Death: H wills all his property to his sick Parents. Parents gets H‘s ½ of the CP ($1mil) + all of H‘s SP.
3 4
A Change in the nature of the Property George v. Ransom – dividends of certain stock purchased by D with SP could not be reached by her husband‘s creditors. The court held that SP rules apply to property in its original form and the income or profits it produces. 5 Example – Husband receives 100K gift. Invests money is apt. bldg. Rents and profits are SP. 6 If W bought a horse before marriage married horse had a full, the full would be W‘s separate property 7 Stewart v. Stewart – in a quite title action brought by the wife, the court declared the wife did does not have a present veste interest in the CP during the continuance of the marriage relation. 9/28/2009 Page 1 of 14
a. C.
CP Outline – Simas (1975) Management and control is shared equally regardless of the time of acquisition with like power to disposition, other than testamentary.
Principle of Contractual Modifications – Spouses may modify operation of CP system by K a. Uniform Premarital Agreement Act – applies to agreements executed on or after 1 / 1 / 86 i. Oral / implied in fact / written before 1/1/86 b. Premarital Agreements i. Fiduciary/Confidential Relationship – does not arise until marriage, unless actual relationship of parties gives rise to such relationship ii. Effective upon marriage, and may be amended or revoked after marriage iii. Elements: 1. Written8 2. Agreement btwn prospective spouses made in contemplation of marriage a. No consideration necessary9 3. Signed by both parties iv. What parties may contract as to: 1. rights and obligations regarding property whenever located 2. transfer rights 3. disposition of property upon dissolution or death 4. death beneficiary of insurance policy 5. choice of law 6. any matter not in violation of public policy or criminal statute 7. Spousal Support – limit or waiver does not violate public policy v. Unenforceable Agreements 1. Child Support 2. Premarital agreement is invalid, if the person against whom it‘s enforced proves: a. Not Voluntary – did not execute the agreement voluntarily i. Premarital Agreement is not voluntary unless the court finds in writing 1. independent counsel represented party at the time the agreement was signed10 or after being advised to seek independent counsel: a. party expressly waived counsel in a separate writing 2. if unrepresented, he or she: a. was fully informed of the rights given up, b. was proficient in the language of the agreement, and c. signed a separate document to the effect that he or she was received of all the information required by statute; and 3. seven day reflection period, and 4. all documents were not executed under duress, fraud, or undue infl. b. Unconscionability – The agreement was unconscionable when executed and, party proves before execution all three of the following – There was NO11: i. Fair and Reasonable Disclosure 1. F & R D K is valid even if unconscionable ii. Written Waiver of Disclosure 1. Waiver agrmt valid even if unconscionable iii. Adequate Knowledge of Property or Financial Obligations 1. Adqt knwldg or reasonably could have adqt knwldg, agmt is valid even in unconscionable (low threshold) c. Agreements that Promote Divorce – (violates public policy) applies to K‘s which promote divorce (ie. promising a payout upon divorce) instead of defining the character of property acquired prior to and after marriage.12 vi. Statute of Limitations – tolled during marriage Agreements During Marriage i. Parties may contract with each other or other people as if they were unmarried ii. Fiduciary Relationship – spouses have a duty of good faith to not take unfair advantage of the other 1. When a K advantages one spouse, the law presumes undue influence because of duty of GF. iii. Transmutation – changing the character of property, as opposed to form 1. Married people may transmute (by agreement or transfer) a. CPSP of either spouse; b. SP of either spouseCP c. SP of one spouseSP of the other spouse. 2. Requirements a. Pre-1985 Agreements i. written, oral, or implied-in fact13 agreements b. Post-1985 Agreements i. Transmutations of real or personal property must be in: 1. Writing14, with
c.
8 9
Statute of Frauds requires K be in writing. Traditional exceptions apply, including where partially performed oral premarital agreements Property present future, legal, equitable, vested/contingent, real/personal, income, and earnings In re Marriage of Bonds – no retroactive treatment, so applies to marriage after 1/1/2002 11 Don‘t need to prove three elements if the agreement was unconscionable as MOL 12 In re Marriage of Noghrey – The agreement was not the kind that sought to defin the character or property acquired after marriage nor does it seek to ensure the separate character of prior acquired prior to marriage. The agreement was a promise by the husband to give the wife a very substantial amount of money and property, but only upon the occurrence of divorce. Thus, the wife was encouraged by the terms of the divorce to seek a dissolution so she may receive a house and $500,000. 13 Implied In Fact: If one spouse frequently refers to the house as ―our‖ house, or car as ―our‖ car, then transmutation through conduct. 9/28/2009 Page 2 of 14
10
2.
3.
CP Outline – Simas an Express Declaration 15 16 17 a. a clear and unambiguous expression of intent to change the character of the property b. on the face of the writing c. independent of extrinsic evidence Joined / consented / accepted by the spouse whose interest in the property is adversely affected a. Need not be signed
ii.
iii. III. Classification of Property as Either CP or SP A.
Exception 1. Writing requirement does not apply to Gifts: a. of Personal Nature i. apparel, jewelry, tangible articles of personal nature b. Used solely by the spouse to whom the gift was made c. That are NOT of Substantial Value18 i. Valuation takes into account circumstances of the marriage A statement in a will of the character of property is not binding upon dissolution
General CP Presumption a. Rule – Property is presumed CP if acquired during marriage [or after separating] i. Time of acquisition must be proven by the party seeking to prove property is CP before presumption applies 1. Where exact time of acquisition cannot be proven, the following inference may be shown: a. No SP at the time of acquisition then the property was acquired with CP i. Inference can be drawn even where only possession can be shown (as opposed to acquisition)19 2. Length of marriage has effect on level of proof required to show prop. acquired during marriage20 3. Classification of property cannot be established simply by referring to title documents Rebuttal – Tracing a. Burden of Proof – to overcome Statutory Presumption (S/A) i. Clear and Satisfactory Proof, or ii. Preponderance of Evidence b. Direct Tracing21 i. Show property was acquired during marriage ii. Trace back to SP source: 1. before marriage 2. during marriage by bequest, gift, device 3. after separation c. Indirect Tracing i. If no CP at the time of acquisition then property was acquired with SP 1. Family expenses presumption – Community expenses are paid first from the CP. If community expenses exceed the CP at the time of purchase, the inference is that the property was acquired with SP Rebuttal – SP Statutory Presumptions a. All property owned before marriage b. All property acquired during marriage by gift, bequest, devise or descent i. Inheritance is a vested property right at the time of decedent‘s death 1. The right to contest a will emanates from P‘s vested right to inheritance. Thus, the proceeds from a settlement in a will contest action are SP22 ii. A Gift is a voluntary transfer without consideration 1. Property obtained in return for services rendered is not considered a gift, it is treated as compensation and thus CP23 c. The rents, issues and profits of any SP d. Earnings and accumulations: i. While living separate + apart
B.
C.
Estate of Bibb – an unsigned computer printout, DMV registration form registering a car in the name of H & W does not contain a clear intent to transfer the SP of the husband into CP 15 Estate of Bibb – a grant deed signed by H transferring his SP in real property to himself and his W as JT‘s satisfied express declaration requirement. ―grant‖ is clear and unambiguous expression of intent to transfer 16 Estate of MacDonald – H put pension benefits into IRA‘s w/ kids as beneficiaries. W signed the agreement, but court held consent signature was not enough to effectuate an express declaration. 17 In Re Marriage of Barneson – H suffered a stroke and ―transferred‖ his stock portfolio to his wife. At divorce the court held that the intent to transfer for management and control should not be confused with an intent to transfer ownership. 18 Marriage of Steinberger – a diamond ring bought with CP funds 5 yrs. after marriage was not the W‘s SP because it was substantial in value taking into account the circumstances of the marriage. There was no written expressed declaration transmuting the property from CP to SP, thus the transmutation was not valid. 19 Estate of Jolly – Even though the statute limits the pr esumption to property acquired after marriage, it is well settled that acquired and possessed are interchangeable for purposes of this presumption. 20 Ex1 – H worked as conductor + was married for many years; dies w/ pocket watch he always wore. We don‘t know how H acquired watch. Is it CP? Result – B/c W+H were poor before marriage + married for many yrs, probably CP 21 Freese v. Hibernia Savings – Mere change in the form of property does not change its status as either CP or SP. Where a series of partially separate and partially CP deposits have been made, tracing is impossible and the presumption of CP must prevail. 22 Estate of Clark 23 Downer – H & W separated and signed an agreement saying property obtained after a certain date would be their SP. H received a 1/3 interest in boss‘s ranch and W found out when he sold it. The requirements for a gift were met here, there was delivery and no consideration. However, the court found the ranch was given in lieu and a pension plan and thus it was given for services rendered. 9/28/2009 Page 3 of 14
14
ii. D.
CP Outline – Simas Separate + Apart Test (subjective) a. Physical separation b. Communicated intent NOT to resume marital relations i. Only one spouse need have intent ii. Though filing for divorce is typically conclusory, filing for divorce simply for shock value will not suffice24 c. Consistent25 conduct evidencing a complete and final breakup After judgment of legal separation 1.
Rebuttal – Married Woman’s Special Presumption (MWSP) a. Presumption – property acquired by a married woman before 1/1/75 by an instrument in writing is presumed SP i. If acquired by “H+W” presumed CP under retroactive app of modern JT form presumption ii. If acquired by married women (name on title alone) woman‘s SP 1. Even if purchased with CP iii. If acquired by married woman + another person presumed W is TIC 1. W‘s share is SP iv. If acquired by H+W and titled “W’s SP” super-presumption that it‘s W‘ SP b. Rebutting MWSP Presumption – clear and convincing evidence i. MWSP is rebuttable against all except bona fide purchasers – cannot recapture property ii. Tracing is not sufficient iii. H must show lack of ―intent‖ to transmute or gift property: 1. agreement to the contrary for the purpose of:26 a. convenience27 b. defrauding creditors28 c. giving up merely management and control29 2. undue influence, coercion, extortion30 3. lack of ―knowledge‖ to transmute gift or property31 c. Rebutting MWSP Super-Presumption32 i. H must show contractual fraud, mistake, undue influence, Joint Ownership of Property a. Death i. State of Title Presumption 1. Presumption – the character of property is as set forth in the document of title. a. state of title in instrument overrides CP presumption 2. Rebutting Presumption a. Rebuttable by evidence of an intention, understanding or agreement to keep prop as CP i. Pre-1985 Transmutation – Intention may be oral, written, or implied in fact ii. Post-1985 Transmutation – Intention must be in writing, express declaration, etc 1. A hidden intention will not rebut the presumption, agreement must be known to both spouses33 iii. Tracing is relevant to intent, but not enough by itself to overcome the presumption34 (ignorance of effect of JT in addition may be enough) b. Dissolution i. Single Family Residence Presumption 1. Presumption – a single family residence (condo, not apt‘s though) acquired during marriage by H and W as JT‘s is presumed CP for purposes of division upon dissolution or legal separation. 2. Rebutting Presumption a. Rebuttable by evidence of an agreement or understanding to the contrary: (written, oral, implied)35 ii. Modern Joint Form Presumption 1. Presumption – for division at divorce or legal separation, ALL property acquired in joint form – TC, JT, TE, or CP – is presumed CP 2. Rebutting Presumption
E.
24 25 26
Hardin Baragray – conduct was wholly inconsistent with communicated intent to breakup Horsman – evidence of the donor‘s declarations may be admitted to show intent 27 Ex1 – H+W buy a car together, but H is sick and can‘t make it dealership so W signs the deed. H can rebut by showing that it was only done this was for convenience sake. 28 Ex2 – H titled property in W‘s name so that creditors can‘t come after him. H can rebut MWSP by saying he intended to defraud creditors 29 Ashodian – H cannot rebut where he knows W has investments in houses and makes an affirmative statement saying he wants nothing to do with them and signs papers. His disavowal amounts to an abandonment of his rights 30 Horsman-- Pre-1975, H and W acquired a number of stocks as CP, but all in H‘s name. H was having affair. W threatened that she would go public w/ the affair unless H deeded some things solely in her name. Analysis: Stock acquired during marriage so CP Presumption applies. Stock in W‘s name—pre-1975? Yes. MWSP overrides CP Presumption. But, H can override MWSP if he can show that he did not intend for the stock to be W‘s SP. 31 Ex1 – What if H finds out about property pre-1975, but remains silent and does not do anything about it? MWSP applies. H can maybe rebut, but his silence and failure to do anything about it could make it an effective transmutation (implied-in-fact ok pre-1985). Ex2 – What if H finds out about property post-1975 but pre-1985, but remains silent and does not do anything about it? Same result as above. Ex3 – What if H finds out about property post-1985, but remains silent and does not do anything about it? MWSP applies. H probably cannot rebut b/c in order to override the MWSP, there needs to be a transmutation requiring an express declaration in writing. 32 Donze v. Donze 33 Levine 34 Lovetro v. Steers – the H‘s ignorance to the fact the property was in JT and the tracing of the funds was enough to find that there was an implied agreement and that H did not in fact intend to change the character of the property. 35 Lucas 9/28/2009 Page 4 of 14
3.
CP Outline – Simas Rebuttable by evidence of a writing: i. A clear statement in a deed or other document of title that property is SP, or 1. Must say more than ―held in Joint Tenancy‖ ii. Separate written agreement that property is SP Reimbursement a. “Contributions to acquisition” – down payments, payments for improvements, payments that reduce principal for purchase or improvement loan b. Absent a signed writing to the contrary, a party shall be reimbursed for contributions to the acquisition of property to the extent that is can be traced to SP: i. Limitation to Reimbursement 1. NO interest 2. NO compensation for change in value of money 3. No reimbursement for payments on maintenance, insurance, or taxation 4. Reimbursement may not exceed net value of property a.
See Sarah’s Chart
IV. Limitations on the Classification Process A. Property Within the System a. Education and Increased Earning Capacity
i.
Death 1.
Rule – Value of education (increased earning capacity) and right to practice profession are not assets capable of being classified a. If educated spouse dies, non-professional degree spouse gets zero b. If non-professional degree spouse dies and attempts to devise value of degree, devisee gets zero
ii.
Dissolution 1. Rule – value of education is not capable of being classified w/in the CP system, however, community shall be reimbursed for community contributions that substantially enhance earning capacity. a. Educational Reimbursement = Community Contributions + Legal Interest i. Student Loans – not a community debt, thus the whole loan is assigned to the person who acquired the education ii. ―Community Contributions‖ – payments made with CP or QCP for education or training or for repayment of loan (no matter the state or residence at the time) NOT living expenses – incurred regardless iii. Irrelevant that spouse did not take advantage of education Reduction – reimbursement may be reduced where: i. Community has substantially benefited from education Marriage >10 yrs. rebuttable presumption that marriage has benefited Education substantially reduces the need for support of that spouse. i.e. homemaker receives an education or training enabling him or her to be gainfully employed Education does not substantially increase earning capacity
1. 2.
Books, tuition, supplies, travel, fees, repayment of loans,
b.
1. 2. 1.
Marriage <10 yrs. rebuttable presumption that marriage has not benefited
ii.
iii.
c. d.
b.
1. i.e. spouse was already making a lot of $$ before she went back to school Offset – reimbursement may be offset by: i. Edu/training of other spouse ii. Gainful employment that substantially reduces the need for support Opt Out – parties may avoid application of code provision only by express, written agreement.
Professional Practice (at dissolution – battle of experts)
i.
Rule – the value of a professional practice at the time of dissolution is CP 1. Value = Goodwill + Tangible Assets a. Goodwill – Practitioner‘s: i. Age ii. Health iii. Earning Power iv. Professional Reputation v. Nature and duration of business b. Tangible Assets i. Fixed assets ii. Capital on hand iii. Accounts receivable iv. Costs advanced v. Unbilled work in progress vi. Value of Cases in Office
c. 9/28/2009
Life Insurance (see handout!) Page 5 of 14
CP Outline – Simas
i.
Forms 1. 2.
Term Insurance – K for a term to pay $X to beneficiary upon death of insured if dies w/in term a. Right to Renew Value – With term insurance, if you get a terminal illness, you still have a right to renew Whole Life (Traditional) – Combo of insurance policy + savings account
ii.
Apportionment 1. Death
a.
Term Insurance i. Last Payment Rule – the Community has an interest until the term which was purchased expires: If last payment made from CP entire policy is CP Right to Renew Rule – S/A on whether keeping right to renew alive can be classified as property:
1. 2. 1. 2.
If last payment made from SP, entire policy is SP
ii.
Personal Policy – insured has the right to renew
2.
Employment Benefit Policy – employer has the right to renew (not com asset) Whole Life i. Rule – payout is apportioned based on the time premium payments were made (before, during, after marriage) Dissolution a. Term Insurance i. Rule – the community is reimbursed for the portion of premiums paid for that specific term (e.g. if divorced during term). b. Whole Life (same as above)
b.
B.
Persons Within the CP System a. Requirements for a Valid Marriage in CA (consent, license, solemnization)
i.
Consent 1. 2.
18 years old, or Minors can consent if there is also: a. Written consent of parent b. Permission of court c. Emancipation Directory – marriage is not void if there is no license or license is improper Mandatory – marriage is void if no license or improper license
ii. iii.
License 1. 2.
Solemnization 1. There is no required form; parties are just required to take each other as H & W 2. May be performed by Clergy, Judge, retired judge, commissioner, magistrate, legislature a. Members of religious denomination with no clergy must make a statement with the return of their license that solemnization complied with requirements of their religion.
b.
Issues of Capacity
i.
Void Marriages 1. Types:
a. b.
c.
2. Effect:
Same Sex marriages (see domestic partners) Incestuous marriages i. Parents and children ii. Ancestors and descendants iii. Uncles / nieces iv. Aunts and Nephews Bigamous marriages i. May not marry someone already married Void from beginning
a.
ii.
Voidable Marriages 1. Types:
a.
b.
2. Effect:
Marriages that can be ratified: i. Underage marriage – parties may ratify by cohabitating after age of majority ii. Mental incompetence prevents consent – parties may ratify iii. Fraud – may ratify iv. Force – may ratify Marriages that cannot be ratified: i. Where party is married to a missing spouse ii. A party is physically incapable of entering marriage and incapacity is incurable Only parties can seek court action to declare marriage void. i. Even after death of one party
a.
c. 9/28/2009 Foreign Marriage
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CP Outline – Simas
i.
d.
Rule – CA recognizes marriages between a man and woman validly married in other states 1. Common Law Marriages – CA does not allow CL marriages, but will recognize one validly perfected in another state (couple is considered cohabitants)
Putative Spouses
i.
Rule – Objective standard – a spouse is putative if the marriage is void or voidable, and he/she has a reasonable good faith belief that the marriage is valid 1. Need facts that would lead a rx person to believe in a valid marriage (run to valid marriage reqs) a. ignorance in law is not reasonable – thus, a belief in a CL marriage in CA is not rx 2. Solemnization is a big factor Dissolution 1. Court will declare one or both spouses putative 2. Rule – Property acquired during a putative marriage is characterized as quasi-marital property and treated the same as CP a. Bad-faith spouse can still take advantage of QMP system even where good-faith spouse is the income earner in the home. i. Miller’s Thoughts – only good-faith putative spouse should be able to elect to take under QMP. b. Debt liability is the same under QMP c. Spousal support is available to putative spouse Death 1. Rule – QMP and SP are subject to CP rules a. Intestacy and SP i. One Spouse -- Putative spouse gets spousal share of intestate SP36 ii. Two Spouses – equitable distribution (half goes to each spouse split with kids) 37
ii.
iii.
iv.
Bigamous Relationships38 – 1. Problem there is a putative spouse and legal spouse a. Use Separate + Apart Doctrine i. W1 has no claim to property acquired while H married W2 H was living S+P ii. W2 has no claim to property acquired while H married W1 SP of H 2. Problem H is actually living with both spouses a. Rule – court will divide the property equitably39 i. See above rules for intestate succession to SP with two spouses Federal Law – 9th Circuit refuses to apply putative spouse doc to distribution of ERISA benefits
v.
e.
Domestic Partnerships
i.
Requirements: 1. Basic Requirement – file a Declaration of Domestic Partnership with the Sec. of State 2. 2 adults in intimate committed relationship of mutual caring a. Members of same sex; OR b. Members of opp sex w/ 1 person 62 + and qualify for social security Title VII benefits 3. who share common residence 4. are not married or a domestic partner of another 5. not be closely related by blood 6. at least 18 years of age 7. have capacity to consent 8. and no existing Declaration on file Rights and Responsibilities 1. Same as married spouses Termination 1. Divorce and Death rules apply to DPs
ii. iii.
f.
Unmarried Cohabitants
i.
Rule – CP, QMP, Family Law Act do not apply40 because neither person has a rx good faith belief 1. Remedies for the harsh effects of the law: a. Contracts – K‘s btwn unmarried cohabitants will be enforced i. K may be written, oral, or implied (adopting basic K principles) Implied K factors to consider a. Cohabitation, pooling of resources, banking and credit practices, joint purchases, length of time together, children ii. Meretricious Services – K is unenforceable if consideration is immoral or illicit Equitable Relief from Courts (have not proved promising) i. Quantum Meruit – compensation for reasonable value of services ii. Equitable Liens – lien attaches for services rendered to improve property for which no compensation has been paid
1.
b.
36 37 38
Leslie Hafner H leaves W1 but does not get a divorce and then marries W2 who genuinely believes that he has never been married before. 39 Vargas 40 Marvin 9/28/2009
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iii.
2.
iv. Limitations: a. Intestate Succession – Cohabitant may be a creditor, but not an heir b. Tort Actions i. May not bring survival action/wrongful death unless named as executor/admin ii. No Wrongful death iii. No loss of consortium iv. No recovery for NIED
CP Outline – Simas Resulting Trust – money or property is owned, possessed, or held by one person for the benefit of the other (usually the person who paid for it) Constructive Trust
C.
The Domicile Requirement (see Handout!) a. Domicile Rule Residence + intent to stay b.
i. Residence – place where a person lives, plans to return if they‘re absent Conflicts of Law Principle – character of property acquired during marriage is governed by the law of the state where the parties were domiciled at the time of acquisition, even if property was acquired in another state i. ii.
Property acquired while domiciled in CA CA will assert its law over the property 1. Where there is real prop in another state, CA will attempt to divide CP equally w/out changing the nature of the interests in the real prop. (ie. court won‘t order tradeoff, buyout, or transfer)
Property acquired not while domiciled in CA CA should apply other state‘s law, but see below 1. Quasi-Community Property – applies to: a. Divorce – all personal and real property wherever situated which would have been CP if acquired while domiciled in CA b. Death – all personal property wherever situated and all real property in CA which would have been CP if acquired while the parties were domiciled in CA c. Property in Other States Domicile at the time of acquisition Action : Domicile at ToA Law which governs Apply basic conflict rule – Domicile at time of acquisition controls – In CA : Both CA CA CP Law, but CA must attempt division of property without CA changing title In CA: Both CA QCP No Apply basic conflicts rule – Domicile at time of acquisition controls – In CA: One party CA No other state‘s laws apply d. Property in California Domicile at the time of acquisition CA NO NO CA
Action : Domicile at ToA In CA : Both CA In CA : Neither CA In other state : Neither CA In other state : Neither CA
Law Which Governs CA CP Other State‘s Law‘s apply as to whether property is CP or not Other State‘s law controls even if property in CA If other state follows basic conflicts rule, they would characterize according to CA law and apply CP If other state follows CA rule, we would call it Quasiother state‘s law Property
D.
Retroactive Application of Statutes (see Handout!) a. Addison – state may impair vested right under police powers
i.
Requirements: 1. Intent by legislature to make law retroactive a. Express or implied 2. State interest must be sufficient to cure injustice a. Here, QCP was applied retroactively based upon state‘s interest in supervising marital property on divorce (would work for all CP laws)
b.
Bouquet – affirms Addison holding states‘ interest in equitable dissolution of marital relationships supports the use of police power to abrogate rights in marital property that derived from patently unfair former law Spreckals (Modern Trend) – new law will not be applied retroactively because such a change amounts to a taking of a vested property right
ii. i. ii.
Despite express statements by legislature justifying retroactive application, recent cases have not found the rank injustices needed to require retroactive application Miller thinks the Cal Supremes are open to retroactive application in the right situation
E.
Preemption a. Rule – federal law is the supreme law of the land under Art. VI §2‘s Supremacy Clause. Federal law preemts state law when there is: Conflict btwn state and federal law 1. interfere with uniform national plan administration 2. have a ‗connection‘ with ERISA Applications:
i. ii. i.
Congressional intent to preempt, or /and
b.
Federal Salaries subject to CP
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CP Outline – Simas
ii. iii.
Federal terms of insurance for military personnel preempts state law 1. Federal law gives policyholder the right to designate beneficiary so W cannot take half as her portion of CP a. Caselaw indicates set-off is possible
41
Federal Pensions may be divided under state law 1. McCarty – SCT said federal law preempted so state cannot divide a. State can divide pensions under congressional authorization i. Uniformed Services Former Spouses‘ Protection Act – military pension ii. Retirement Solvency Act of 1983 – railroad pension ERISA express preemption clause 1. Does allow pensions or retirement funds to be divided under state CP law, but places requirements on division and established procedures a. Qualified Domestic Relations Order must be filed 2. Survivor Benefits a. Testamentary disposition by participant or non-participant ex-spouse, may not reduce surviving spouse‘s share to less than 50% of annuity42 b. Beneficiaries identified in plan documents take i. Thus state law providing for automatic revocation of spouse as beneficiary on pension plans is preempted 3. Disposition upon Dissolution a. Must meet Retirement Equity Act of 1984 b. Must have QDRO Social Security not subject to division 1. spouse of ten years can get enhanced benefit Bankruptcy does preempt Copyright subject to CP
iv.
v. vi. vii.
A.
V. Selected Problems in Classification Commingling a. Problem property has both SP and CP i. Presumption – funds in / paid from a commingled account are presumed to be community funds43 ii. Rebuttal 1. Direct Tracing44 a. Rule – Party seeking to show property / funds are SP must show: i. Accurate Accounting schedule with exact Inflows / outflows of CP and SP ii. SP inflows exceeded SP outflows and enough SP existed to purchase the asset iii. Intent at the time of withdrawal to use SP funds to purchase asset 2. Indirect Tracing a. Family Expense Presumption – family expenses are presumed to be paid from CP first, thus if family expenses > CP available at the time of acquisition, it is inferred that the property was purchased with SP45 3. De Minimus Rule – an account that is mostly SP w/ a small CP contribution is considered SP Business Profits (see Handout!) a. Problem Business started before marriage with SP and continued after marriage (CP in work i. Reimbursement Statute does not apply to SP businesses and does not apply when there is no transmutation 1. Incorporation of a business is not a change in character from SP to CP46 b. Valuation – two methods i. Each method can be used to determine the character of: 1. cash in the business 2. cash withdrawn from the business to purchase a gift47 (see Handout!) 3. the PV of the business ii. Pereira Method – Determines pre-marriage SP balance left over is CP 1. Notes: a. Use where value is in time, efforts, skill of spouse b. Do not deduct value of salary c. Do not add in CP capital investments
B.
41 42
Wissner Boggs v. Boggs -43 In re Marriage of Frick – Prior to marriage, H owned real property. During marriage, H used funds to reduce principal balance of an encumbrance on the property. Upon dissolution, W contended that funds so used were CP where funds are paid from a commingled account, the presumption is that the funds are community 44 In re Marriage of Mix – W commingled the community earnings from her law practice w/ SP in several accounts. She showed her SP deposits to these accounts exceeded her withdrawals but could not associate which deposits and which withdrawals 45 See v. See – in 21 yrs of marriage H commingled CP and SP. Couple divorced and H claimed that the fact that aggregate community expenses exceeded aggregate community income during marriage justified a finding that no CP remained. commingled funds will be characterized as CP unless SP owner can specifically identify which funds are SP. 46 Marriage of Koester – Prior to marriage, H owned Koester Electric as a sole proprietor. A few years after marriage, it was incorporated, but no stock was issued. The couple divorced reimbursement statue was never designed to apply to SP businesses and it is inherently not applicable to businesses when the requirements for transmutation have not been met. 47 Tassi v Tassi – H made purchases of gifts without W‘s consent using funds drawn from his business. It is within the court‘s discretion to determine which method to use – Van Camp or Pereira 9/28/2009 Page 9 of 14
CP Outline – Simas 2. Formula: a. DOM Value at X% for X yrs = Return on SP b. DOM Value + Return on SP = Total SP c. PV – Total SP = Total CP
iii.
iv. C.
3. Van Camp Method – Determines CP balance left over is SP 1. Formula: a. Value of CP services / Capital Investment48 – Value of Draw = CP Share b. PV – CP Share = SP Share Imperato Method – Where business is started with CP (reverse Pereira and Van Camp)
D.
Installment and Credit Acquisitions a. Community Contributions to SP Asset i. Problem Loan started with SP installments b4 marriage and paid with CP installments during mar. 1. Presumption – payments during marriage are presumed CP 2. Pro Rata Apportionment Rule – Community shares in the property in the same proportion as the amount the community contributed to the purchase price49 3. Moore / Marsden Rule (see Handout!) – community gets reimbursed for contribution to principal reduction (but not for interest, taxes, insurance) + % of appreciation equal to % of principal reduction a. Note: don‘t forget to look at 1984 Lucas rule b. SP Contributions to CP Asset During Marriage i. Problem H used SP during marriage to purchase property. 1. Presumption – property acquired during marriage through a credit / loan acquisition is presumed CP 2. Rebuttal a. Transmutation b. Tracing c. Lender’s Intent – prove lender intended to rely primarily / solely50 on SP of borrower. i. Note: Personal credit and earnings are not SP!! ii. Problem H contributed SP to the purchase of a home during marriage 1. Presumption – single family residence acquired by a couple during marriage as JT is CP, SP interest is deemed to be a gift to the community. 2. Rebuttal a. Dissolution i. Before 1984 – show an oral, implied, or written agreement to the contrary to retain SP interest 1. Once asset is found to be SP, apply pro-rata apportionment ii. After 1984 – SP contributor is reimbursed only their exact contribution 1. Once asset is found to be SP, apply reimbursement a. Allows reimbursement for purchase of subsequent properties from SP of original residence51 2. S/A on retroactive application b. Death i. Pre 1984 rule applies ? ii. Writing requirement for a gift? Improvements a. CP to Improve SP i. Before 197552 1. H use CP to improve W‘s SP presumed gift of CP to SP absent a contrary agreement 2. H use CP to improve H‘s SP CP must be reimbursed ii. After 1975 – There is a right to reimbursement in all situations absent an agreement to the contrary 1. Writing is required for gifts b. SP to Improve CP i. Before 1984 – presumed gift w/ no reimbursement absent a contrary agreement53 ii. After 1984 1. Dissolution – reimbursement regardless if improvement increases value, absent a written waiver 2. Death – no statute applies, presumed gift absent any agreement (implied, oral, written) Personal Injury Awards a. Personal Injury Award – money received by judgment or settlement in satisfaction or compromise of a claim for damages for a personal injury.54 i. Presumption – PI awards are presumed CP if accrued during marriage
E.
48 49
Investment of CP in business Vieux v. Vieux – prior to marriage, H executes and installment K to purchase real property and pays $280 as down payment. After marrying, H used $553.68 in CP to pay installments on K. W files for divorce and claimed the land was partially CP community is entitled to the portion that community funds were used for installments, no matter what the title is. Had H taken a full loan before marriage, the property would have remained his separate property 50 In re Marriage of Grinius – H and W purchased a restaurant with money secured through several loans, including $80,000 SBA. SBA loan was secured by SP and CP loan proceeds are presumed CP. This presumption may be overcome by showing the lender relied solely on the SP of the borrower to secure the loan. 51 Walrath – Prior to marriage H owned house with SP of $146,000. After marriage, in 1992, H deeded house to H + W as JT‘s (so CP). W invested $20,000 SP in Lucerne (Post 1984). In 1993, H and W got a new mortgage of $180,000 and used $60,000 to pay off their existing mortgage on the home, $62,000 to pay off loan on Nevada Property and $40,500 to buy Utah Property and put $16,000 in savings. H seeks reimbursement 180,000 / 146,000 = 81% SP of H ; 20,000 / 180,000 = 11% SP of W. Rest is CP. 52 Rules rely on the fact that husband had management control
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1.
2. F.
CP Outline – Simas Dissolution – award is assigned to party who suffered injuries, with no offsetting (exception to basic rule of equal division), unless justice dictates otherwise a. Rule applicable to acquisition traced to PI awards b. Whether justice requires offsetting, examine: i. Community assets used to pay med bills ii. Time since injury occurred iii. Economic condition and needs of parties Death – award is treated as CP
Retirement Benefits a. Terminology: i. Defined Contribution – employer and employee pay a defined amount into a fund. The payout depends on market factors ii. Defined Benefit – there is a contract with a promise to pay a defined amount for a defined period if the employee meets certain conditions, usually length of employment iii. Non-vested – Subject to loss if employment is terminated Non-Vested Rights ARE Divisible iv. Vested – not subject to loss or forfeiture if employment is terminated, but there still may be a condition precedent to payout, such as the employee must reach age 62 Divisible v. Matured – there is an unconditional right to immediate payment. The employee may defer payment until later time vested and divisible b. Apportionment: (see Handout) i. Time Method – use months contributions were made to determine SP and CP ii. Contribution Method – use actual dollar contributions to determine SP and CP c. Valuation: i. Use an Expert 1. $500-$2000 possibly including QDRO ii. Considerations: 1. Vested – discount for possibility the employee will die before reaching retirement age 2. Non-Vested – discount for change that employee will die or employment will be terminated before vesting and maturity 3. Defined Contribution a. Actual amount contributed and return on the contribution b. Rate of return c. Time the return will be paid d. Any defined benefit component 4. Defined Benefit a. Number of years until payout b. Dollar payout per month at retirement c. Number of years of payout 5. Discount for PV if there is a cash-out or trade-off 6. Miscellaneous Factors: a. Possibility of becoming disabled b. Ability of employee to select various payout plans c. Possibility of lump sum payout d. Possibility of early or late retirement e. Death Benefit iii. Methods of Division 1. Offset or Trade-off with waiver of interest in pension a. Cash-Out i. employee receives pension plan ii. non-employee receives cash and waives interest in pension iii. does not require QDRO b. Trade-off i. Employee receives retirement plan ii. Non-employee receives property of comparable worth and waives of all interest pension iii. Does not require QDRO c. Possible to have both 2. In Kind – immediate division, works in two situations: a. Matured Plans: i. Court may order portions paid to each recipient QDRO req. ii. Court may order employee to pay a certain amount of money to the other spouse each month b. Vested Defined Contribution Plans: i. Court may order each party have an account in the pension fund. 3. Delay Division, retain jurisdiction and divide proceeds in kind at payout: a. Requires a present order dividing the pension iv. Advantages and Disadvantages to Division: 1. Cash-Out or Trade-off a. Problems: i. Problem determining PV 1. Employee spouse wants low valuation 2. Non-employee spouse wants high valuation ii. Parties must have sufficient other property to trade iii. One party may be cash poor iv. Employee may die before receiving benefit b. Advantages: i. No QDRO ii. Clean Break 9/28/2009 Page 11 of 14
CP Outline – Simas iii. 2. May put cash in hand of non-working spouse Immediate Split a. Problems: i. If there is no direct payment, the non-employee spouse may have a hard time with collecting ii. If there is direct payment: 1. need QDRO b. Advantages: i. Clean Break, unless employee spouse has been ordered to pay portion to non-employee. ii. Money for both on retirement Delay Division: a. Problems: i. No clean break ii. Employee may die b. Advantages i. No PV valuation problems
3.
d.
e.
f.
Refusal to Retire: i. Problem there is a delayed benefit, but employee refuses to retire 1. Rule – non-employee spouse has an immediate right to receive his/her portion of the benefits regardless. a. Spouse will receive benefits by: i. Direct payment from pension, or 1. ERISA does allow for direct payment ii. Court order on non-retiring spouse to directly pay non-employee spouse 1. applicable where pension plan does not allow direct payments Terminable Interest i. Problem delay of division and non-employee spouse dies before payout 1. Rule – abolished terminable interest rule; court may order payment to heirs Death of Employee Spouse: i. Problem delay of division and employee spouse dies before payout 1. Rule – two ways of handling a. Assign death benefits to ex-spouse b. Purchase insurance to protect ex-spouse
G.
Disability Benefits a. General Rule – CP during marriage and assigned to disabled spouse after separation and divorce i. Exception: disability payments in lieu of retirement are treated as retirement benefits and divided equally55 1. Community acquires interest in disability benefits to the extent that the disability benefits are intended to compensate for lost retirement 2. Private Disability Policy – use intent of the parties at the time of acquisition a. Intend to compensate for lost income? Or retirement? ii. Exception: if term disability is renewed after separation with SP, then it will be entirely SP 56 1. even if the original purpose of the disability included a component for retirement Termination Benefits a. Rule -- divisible i. Benefits accrued during marriage are CP ii. Benefits acquired after separation are CP to the extent they are compensation for services rendered during marriage 57 iii. Benefits acquired after separation for compensation of lost future earnings are SP 58 Stock Options (see Handout) a. Rule – divisible i. Apportioned and divided just like retirement benefits59
H.
I.
VI. Management and Creditor’s Rights J. Management and Control a. Personal Property i. Rule – Both spouses have M+C regardless of the time of acquisition 1. Gifts – no unilateral gifts without written consent 2. Sales – no encumbrance or sale without written consent a. Business – operating spouse has primary control and may dispose of business but is required to give written notice b. Real Property i. Property in both spouses‘ names 1. Rule – Both spouses have M+C if both names are on the instrument a. does not apply to transactions between spouses ii. Property standing in H‘s or W‘s name alone
Stenquist – husband had a military pension worth 65% of salary and a right to a military disability pension which would pay 75% of basic salary. Military awarded him the latter so 65% of the disability pension was treated as a retirement benefit and divided equally 56 Elfmont 57 Horn – football play got X amount of dollars for every season played vested upon retirement. Intended as a benefit, not to replace income. 58 Gram – H received termination benefits in the form of enhanced retirement benefits – court held it was to compensate for future earnings and therefore SP 59 In re Marriage of Hug – Whether the options are characterized as being granted for future or past services, or both depends on the circumstances involved in the grant of the stock option. The standard corporate purpose of retaining the services of select employees is often the reason. The option plan needs to be construed as compensating for future benefits. 9/28/2009 Page 12 of 14
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c.
CP Outline – Simas Rules a. Before 1975 – H‘s transaction to a BFP w/out knowledge of marriage is presumed valid as to BFP b. After 1975 – presumption applies to both H and W iii. Action must be brought w/in 1 year 1. COA breach of fiduciary duty Remedies (see Handout) i. Reimbursement 1. During marriage full amount 2. After dissolution or death ½ amount ii. Recapture 1. Protection for Wronged Spouse: a. During marriage recover the entire property b. After dissolution or death recovery ½ interest in property 2. Protection for Third Party: a. Gifts: i. Gift is voidable ii. May be Ratified oral, written, implied consent60 b. Sale: i. For Recapture, Purchaser‘s consideration is returned ii. BFP w/out knowledge of marriage is protected from recapture iii. One year statute of limitations from time of recording of sale iv. Three year statute of limitations from time of discovery of sale of non-recorded property v. Laches iii. Court may order an accounting iv. Court may add name to CP except to: 1. Partnership interest 2. Professional corporation or association 3. Asset of business run by one spouse 4. Any other property, if it would affect the rights of third persons 1.
K.
Creditors’ Rights (see top ten Handout) a. Terminology i. Debt – obligation incurred by a material person before or during marriage 1. Contract – incurred when the contract is made61 2. Tort – incurred when tort occurs 3. Other – incurred when obligation arises b. Rule – CP estate liable for debt incurred by either spouse before or during the marriage. i. Segregated CP earnings during marriage are not liable for other spouse‘s debt before marriage so long as they are not commingled and spouse has no right of withdrawal ii. Separate Property is liable for a debt incurred by that person before or during marriage 1. SP is not liable for a debt incurred by that person‘s spouse before or during marriage 2. Joinder or consent to encumbrance of CP does not subject SP to liability iii. Married person is personally liable for the following debts incurred by spouse during marriage: 1. Necessaries while living together 2. Common necessaries of life while living separately 3. SP may be used to satisfy a debt for which the person is personally liable. If SP is used when there is CP or SP of the spouse incurring the debt, then there is a right of reimbursement iv. Child and Spousal Support 1. Treated as a debt incurred before marriage regardless of when award is made 2. CP of current marriage is liable and may be used to satisfy the debt. However, when SP of obligor is available, then CP is entitled to reimbursement v. After Dissolution: 1. A person‘s SP at the time of divorce and CP divided in divorce: a. Are liable for the debt occurred by that person before or during the marriage Personally liable regardless of whom the debt is assigned to in the division. b. Are not liable for the debt occurred by that person‘s spouse before or during marriage and not personally liable unless assigned to that person as division. 2. If a person pays judgment assigned to spouse, he/she is entitled to reimbursement vi. Right to Reimbursement: 1. Right arises regardless of whether the spouse voluntarily or involuntarily applies funds or whether debt is satisfied in whole or part 2. Property is valued at the time the right to reimbursement arises (e.g. when debt is paid) 3. The right must be exercised at the earlier of the following two times: a. At division, or b. Within three years of the time the holder of the right has actual knowledge of application of property in satisfaction of the debt vii. Personal injuries caused by Married Person: 1. Spouse of that person is not liable unless would be if not married. 2. Liability is satisfied in the following order: a. If conduct was for the benefit of the community satisfaction first from CP, then from SP b. If conduct was not for the benefit of the community satisfaction first from SP, then CP 3. Section does not apply to the extent liability is satisfied by insurance payments.
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Sprechals – both husband and wife left 2 of there children out of the will. Thus, H‘s gifts to the 3 other children were ratified by W. Feldner – suit was filed against H for a debt on a K. Even though filed after separation, debt was incurred during marriage and thus CP is liable. 9/28/2009
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CP Outline – Simas a. There is an implied right of reimbursement i. Must be exercised within 7 years
L.
Dividing the Family Residence a. Division: i. Sell and divide proceeds ii. Trade-off iii. Buy-Out iv. TC‘s and delay division 1. (Duke Award) One party lives in house with children and division is delayed until children reach maturity 2. That party pays rent. 3. Balance the following to determine if delayed division is appropriate a. Economic detriment to the ―out‖ spouse of granting order b. Economic, emotional, and social benefit to children and ―in‖ spouse b. Tax Consequences: i. Rule – Transfer between parties incident to divorce not a taxable event ii. Rule – Sale to third person is a taxable event iii. Parties will be taxed on gain: 1. if it exceeds $250,000 for an individual and $500,000 for a couple 2. exclusion can be used every two years 3. house must have been the exclusive residence of the user for two years of the last five years prior to the sale 4. Special exception that allows the Duke Award to be considered a parties principal residence ―while such individual‘s former spouse is granted use of the property under a divorce decree‖
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