Community property
 At divorce:
o CP is divided equally.
o SP belongs to each spouse and is not divided by the court.
 At death:
o if spouse dies without will, all CP goes to surviving spouse.
o SP also goes to surviving spouse if there are no other heirs
(parents/children).
 Otherwise, surviving spouse receives ½ or 1/3 of decedent’s
SP.
 If heirs, spouse gets at least 1/3.
o if spouse dies with will, that spouse may devise ½ CP and all of
his/her SP to anyone.
 Ex: specifies all property go to nephew at death.
 CP definition:
o “All property, real or personal, wherever situated, acquired by a
married person during marriage while domiciled in this state.”
 SP definition:
o “All property owned before marriage and all property acquired after
marriage by gift, bequest, devise, or descent. Also, the rents,
issues, and profits.”
o Separate and apart: economic community ends
o SP:
 property owned before marriage,
 earnings after economic community ends ,
 inheritances received during marriage is SP.
o ex: H owns stock before marriage = SP. Dividends that accrue are
also SP.
 IMPORTANT QUESTIONS TO ASK:
o (1) The time of the acquisition, before marriage or after separation,
is a significant determinant of the character of the property of the
spouses.
o (2) The type f acquisition, either through labor or through a gift or
inheritance, will also determine whether the property is CP or SP.
FIT (Funds, Intentions, Titles)
 There is a presumption that property is CP in CA.
o To rebut this, must trace to SP funds.
o If something/property is untitled acquired during marriage while in
CA, it is presumptively CP.
 FUNDS: In CA, when the title is in one spouse’s name, title does not
determine character of property.
o Tracing: Always look to the source of funds used to acquire the
property.
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INTENTIONS: (Intentions only apply if there’s been a valid transmutation)
H and W may have intended/agreed property was to become SP even if
Community funds were used to buy car. How to change property?
o Transmutation: As of 1985, to transmute, there must be:
 (1) an express declaration
 (2) in writing
 (3) by the spouse whose interest in the property is adversely
affected.
o Ex: “ To W, as her separate property.”
Ex: W buys chair with her funds from savings (it’s $25). H and W
separate. Chair is valued at $25,000. How to characterize and divide?
o Chair is untitled so presumptively CP. Using W’s funds doesn’t
transmute. Chair would be divided 50/50 with the $25,000.
o If W wanted to keep chair, H could receive another item of equal
value from CP or she could buy him out.
Ex: Same hypo but W receives inheritance of 10K from aunt and opens a
different savings account in her name, puts 10K into that account. She
withdraws 1K from the account and uses $25 to buy chair. How to
characterize and divide?
o It is untitled, presumptively CP. But W would try to rebut by tracing
to SP funds. If W can show funds used to purchase chair came
from inheritance, she would be able to rebut.
Ex: H and W use W’s savings from her earnings to buy $10 worth of stock.
They put it in W’s name. Orally agree stock will be W’s SP. H and W
separate. W wants to claims stock as SP.
o Funds used to buy stock are CP because came from earnings
during marriage.
o Title is in W’s name but title isn’t determinative of character.
o Intentions are that stock will be W’s SP, but intentions were orally
expressed.
o Property was acquired during marriage before separation.
Presumption = CP. W cannot rebut by tracing b/c funds used to buy
stock are CP (came from her earnings). Title doesn't help. Oral
agreement isn’t sufficient because as of ’85, must be in writing and
expressly declare the spouse adversely affected, here H,
consented to giving up interest in property. Value of stock will be
split evenly.
Premarital Agreements (Antinuptial/Prenuptial)
 Challenging Premarital Agreements
o To protect economically inferior spouse, challenge agreement
because there could’ve been:
 (1) fraud
 (2) duress
 (3) undue influence
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
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o Nelson: H and W had one-sided agreement. W was pregnant and
young. Older H made her sign K, she didn’t want to have child out
of wedlock. W waived spousal support. Undue influence here—
grossly oppressive and unfair advantage of necessities/distress.
o Dawley: major provision in agreement concerned mutual separate
property clauses. (These are routinely upheld today.) W claimed
undue influence but she was educated and had counsel, so no
undue influence even though she faced unplanned pregnancy. H
also agreed to support W and child for 14 months. The waiver of
spousal support was enforceable because it didn’t waive all of it.
Timeline of Premarital Agreements (1986- Present)
o Prior to 1986, case law allowed evidence of implied modification or
retraction based on oral agreement or conduct.
o Premarital Agreement Act of 1986:
 only applies to premarital agreements executed on or after
January 1, 1986.
 former law continues to apply to agreements made prior to
1986.
 General requirements:
 (1) must be in writing
 (2) signed by both parties.
o Simply adhering to these requirements don’t
automatically render enforceability.
 *** Must also abide by K law.
 Shaban: Parol evidence isn’t allowed to
insert missing terms and conditions
absent from the agreement to make the
agreement enforceable, although such
evidence would be allowed to interpret
existing terms.
 *** Writing requirement is subject to Statute of Frauds
exception – estoppel. (Partial performance of a
couple’s oral agreement qualifies as exception to the
requirements of the Statute of Frauds.)
o Party seeking enforcement must have
performed bargain and in so doing irretrievable
changed his/her position.
Subjects of Premarital Agreements
o Property
o Choice of law
o Personal rights and obligations
o Child support is not included.
Defenses to Enforceability
o 2 methods to invalidate premarital agreement
 (1) Prove the agreement was not executed voluntarily

Must show: (1) fraud, (2) coercion, (3) lack of
knowledge.
 Involuntary standard: California Supreme Court said
while retention of independent legal counsel was a
relevant factor in determining voluntariness, there are
other factors:
o (1) proximity of execution of agreement to
wedding
o (2) surprise from presentation of agreement
o (3) presence/absence of independent counsel
or opportunity to consult counsel
o (4) inequality of bargaining power (age and
sophistication of parties)
o (5) disclosure of assets
o (6) understanding and awareness of
agreement.
 (2) party against enforcement must prove both that the
agreement was (1) unconscionable when it was executed
and that (2) before the execution, the spouse was not
provided with fair and reasonable disclosure of the property
or financial obligations of the party.
 There must also be proof the party didn’t voluntarily
waive, in writing, his/her disclosure of the property or
financial obligations, and party didn’t have actual or
reasonably could not have had adequate knowledge
of property/obligations.
 If there’s an adequate disclosure, the agreement will
be upheld regardless of degree of unconscionability at
time of execution.
2002 Premarital Agreement Act Amendments
 Subjects included:
o Spousal support
 New provision includes that spousal support provisions in agreements will
not be enforceable unless the party against whom enforcement is sought
was represented by independent counsel at the time the agreement was
signed.
o Even if that party was represented by independent counsel,
spousal support provisions can still be held unenforceable if they
are unconscionable at time of enforcement.
2002 Enforceability
 Added requirements regarding voluntariness.
 Agreement shall not be deemed voluntarily executed unless the party
against whom enforcement was sought was represented by legal counsel
at time premarital agreement was signed, or after being advised to seek
independent legal counsel, expressly waived representation in a separate
writing.
o Also must have not had less than 7 calendar days between the time
that party was first presented with agreement and advised to seek
independent legal counsel and the time the agreement was signed.
o If party chooses to waive counsel, must be informed of rights and
obligations unrepresented party would be giving up and must have
a document declaring they received explanation.
o It also cannot have been done under fraud, duress, or undue
influence.
Retroactivity on 2002 amendments
 Until issue of retroactivity is settled by Supreme Court, trend is toward
nonretroactivity.
TRANSMUTATION: Prior to 1985
 Could be done by conversation or conduct.
 Raphael: object of oral agreement of transmutation was fully performed
when agreement was made for it immediately transmuted and converted
the SP of each spouse in CP, nothing further remained to be done.
 Jafeman: Only evidence supporting agreement to convert H’s house he
owned before marriage to CP was W’s testimony that they referred to it as
“our home.” Not sufficient.
 Changes to transmutation resulted from Marriage of Lucas.
 Marriage of Lucas: Transmutation was from CP to SP of W. H and W
bought a home partially with CP and partially with W’s SP. Her funds
made up 65% of cost. Court affirmed that H transmuted his interest in
home as it was supported by sufficient evidence: W wanted to have title in
her name alone, title and registration was in W’s name alone. Although
purchase agreement was in H’s name alone, H didn’t object to title and
registration being in W’s name. It was H’s silence that resulted in
transmutation of asset into W’s SP.
TRANSMUTATION: 1985 to the Present
 As of January 1, 1985, more difficult to transmute.
 The critical time is the date of the alleged transmutation, NOT the
date of the acquisition of the property.
 Legislature intended the new rules to apply to all property owned by
spouses no matter when property was acquired.
o It is the intention of the spouse adversely affected by the
transmutation that controls.
 Transmutation may be by:
o written agreement by an express 5eclaration OR
o transfer.
o no consideration is needed.
 How to accomplish transmutation:

o writing of express declaration and
o spouse whose interest in the property is adversely affect must
make, join, consent to, or accept express declaration in writing.
Thought transmutation can be accomplished by written agreement, what
really matters is written understanding of spouse whose interest is
affected.
HOW TO TRANSMUTE
 Court said all written docs would be sufficient to transmute.
o (1) Must meet express declaration requirement: stating
characterization of ownership of property is being changed.
 Words like “transmutation,” “CP,” and “SP” were magic
words.
 Magic words not required but language must show the
spouse affected knows that he/she is giving up their interest
in the property.
 Court interpreted language of statute to preclude introduction
of extrinsic evidence to supplement written document.
Express declaration was supposed to get rid of that.
Extrinsic evidence can’t be used to prove oral agreement.
o (2) The writing must show a spouse truly intended a transmutation
such as adding a sentence indicating he was giving up his interest
in stocks or directing that the stock should be transferred to her
name as her sole and separate property.
 Mere transfer isn’t enough.
 Points:
o No extrinsic evidence
o No exceptions to Statute of Frauds
GIFT EXCEPTIONS TO TRANSMUTATION
 Not all transmutations of marital property should be in writing.
 1985 transmutation statute excludes certain gifts from express declaration
requirement.
 Limits on the exclusion is required to be:
o (1) A gift between the spouses of clothing, wearing apparel, jewelry
and other tangible articles of a personal nature, (2) that is used
solely or principally by the spouse to whom the gift was made, and
(3) that is not substantial in value taking into consideration the
circumstances of the marriage.
 All requirements must be met or there has to be an express declaration in
writing to transmute the gift to the SP of donee spouse.
 Steinberger: Ring was bought for W. Court found it was substantial in
value. Wouldn't be considered converted to SP without writing required. If
W wanted to keep ringt, she would owe H ½ value of ring. The ring was
purchased with community funds and there was no express declaration in
writing of H giving up his interest in CP.

Neighbors: W bought H birthday car with her SP funds. Car doesn’t count
as a tangible article. If car were to be CP, W would have right to
reimbursement of her SP funds.
COMMINGLED OR OTHERWISE COMBINED EXCEPTION TO
TRANSMUTATION
 Family Code states the commingling rules will govern characterization of
commingled property.
 Commingling refers to separate and community funds being deposited in a
bank account or other type of account.
 Combined scenario: when spouses use SP and CP funds to purchase an
asset and take title in joint form.
o At divorce, when property is held in joint form and there are
“combined” funds used to purchase the asset, Family Code controls
characterization of that property.
STATEMENT IN A WILL ON TRANSMUTATION
 In some cases, a statement in a will can transmute property.
 A statement would not be admissible as evidence of a transmutation of the
property in a proceeding commenced before the death of the person who
made the will.
o If H and W divorce, H would change his mind about giving up
something to W as her SP. Also, a will does not become effective
until the death of decedent, so H can change will up to that point.
 IMPORTANT: Transmutation is effective from the time it was made, and
only another transmutation would change it back to a different character.
EVIDENTIARY PRESUMPTIONS:
General CP Presumption:
 property acquired during marriage is presumed to be CP.
o Unless rebutted by spouse who claims property is SP, presumption
is conclusive.
 At death:
o if one spouse dies without a will, all CP will go to surviving spouse.
A spouse has right to will ½ of CP to anyone chosen by testator.
 Ex: H and W buy piano using W’s inherited funds. P was acquired during
marriage. Proof that it was acquire during marriage will raise the CP
presumption. Tracing can be used to rebut this, however.
 Ex: H and W marry, H dies without will. W finds box of cash with $100K
and H’s brother claims that money goes to him as H’s SP. W claims it’s
CP and belongs to her.
o Problem here is little evidence. $100K could be either CP or SP.
o Formulation of general CP presumption as property acquired during
marriage doesn’t help—unknown how and when funds were
acquired.
o Courts have held the general CP presumption encompasses
property possessed during marriage as well as property acquired
during marriage.
o RULE: So, after a long marriage, where there is limited evidence of
the source of the founds, the general CP presumption will apply to
property possessed during the marriage.
o H’s brother wouldn’t be able to trace to a SP source so $100K
would be CP.
Short Marriages and Burden of Proof on General CP Presumption:
 Standard of proof for rebutting the general CP presumption:
o preponderance of the evidence.
 Does possessed formulation apply to short marriages where evidence can
be inferred as to the source of the funds?
o Probably wouldn't want to rely on the possessed formulation.
o Mahoney: W and son from prior marriage claimed proceeds of a
flight insurance policy H bought for $1. It was clear it was bought
during the marriage, but unclear whether the $1 used to purchase
the policy was acquired before or during the marriage. Married only
2 months before crash. Determined proceeds were SP and went to
son as named beneficiary of policy. Stated W had to establish the
policy was acquired with community funds to prove the proceeds
were CP, but W should’ve been able to raise CP presumption
merely by showing the policy was purchased during marriage. Then
burden would’ve been on SP proponent, the son, to trace $1 to
father’s earnings before marriage.
Presumption When Title is in One Spouse’s Name
 Property titled in one spouse’s name is treated differently from jointly titled
property
 Title in one spouse’s name does not mean that the property is SP of that
spouse.
o General CP presumption applies.
 Ex: H and W buy boat, put title in W’s name, and use funds W received
from inheritance.
o Common sense says it’s W, but CP presumption applies first.
o Boat was acquired during marriage so presumption is raised.
o SP proponent, W, has burden of rebutting presumption.
APPORTIONMENT
When couples use CP and SP to purchased property.
 Ex: H and W buy lamp for $10K during marriage. $6K from W’s
inheritance and $4K from H’s earnings. Going to divorce.
o Characterization of lamp begins with general CP presumption
because lamp is untitled and lamp was acquired during marriage.
o W could try to rebut presumption through tracing. If she can, she
will only rebut partially because $6K was used out of $10K.
o Conclusion would be part SP and part CP. The portion of SP is in
direct proportion to the contribution toward the purchase price.
o $4K is from community funds. So at divorce, W gets $6K SP and
$2K as her ½ share of CP. H would be entitled to $2k.
Property increase in value.
 Ex: Lamp now worth $30K, increased in value by $20K.
o 60% of W’s SP is in lamp and 40% of CP is in lamp.
o Increase in lamp will also be 60% W’s SP and 40% CP.
o $20K increase will be split: $12K (60% increase in value) as W’s
SP and $8K (40% increase in value) as CP. W will be entitled to
$12K as her SP, $4K as her ½ share of CP, and H $4K as his ½
share of CP.
o Then add proportional original contributions to purchase of lamp
plus increase in value to determine how lamp will be divided.
o At divorce, W will be entitled to $24K value of lamp, and H will be
entitled to $6K of value of lamp.
 If W wants lamp, she can buy out H’s share by either giving him $6K or
another item valued at $6K.
 Property apportioned according to the funds used is called Pro rata
apportionment.
THE MARRIED WOMAN’S SPECIAL PRESUMPTION
This is the only separate property presumption in CA CP law: Married
Woman’s Special Presumption.
 The presumption is if property was acquired prior to January 1, 1975, by a
married woman in an instrument in writing, it is presumed to be her SP.
o The title raises the presumption, not when it was acquired.
 The presumption is rebutted NOT by source of funds but by the
INTENTION of the husband.
o If H didn’t intend gift or didn’t intend to change nature of property,
then his testimony can rebut the presumption.
 Prior to 1975, H was manager and controller of CP.
o Law presumed that because of this, putting title in W’s name
signified a gift of CP to her.
o The title or deed in W’s name raises the presumption the property
is her SP.
 In 1975, Married woman’s special presumption was abolished.
 The Married Woman’s Presumption only applies to property (1) titled in
W’s name (2) prior to January 1, 1975.
JOINT TENANCY DEEDS AND TITLES
 Joint tenancy has the right of survivorship. Joint tenancy is initially
classified as SP.
 Joint tenancy provides that spouses hold undivided ½ interest in the joint
tenancy.

If spouses use CP to buy the house or any other purchase and hold it in
JT, solution is to divide the property in half at divorce.
Title or Funds
 Issue: Purchase made with SP of one spouse or with part SP and part CP.
 Rule: As of 1984, all JT property acquired during marriage will be
presumed to be CP at divorce.
o Rule: When the spouses make an agreement to hold the property
jointly, the presumption that arises can only be rebutted by another
agreement.
o When spouses put property in joint title, CP presumption can never
be rebutted by tracing to funds used to buy the property.
o Rule: It can only be rebutted by an agreement that the property I
not held jointly as of 1984 and the agreement must:
 (1) be in writing OR
 (2) in a clear statement in a deed or title.
Reimbursement of Separate Property
 As of 1984, there is a right to reimbursement of contributions to the
acquisition of the property to the extent the party traces the contributions
to a SP source.
 Ex: If house was purchased in ’84, if W can trace to her SP the $100K
contribution to the acquisition of the house, she’ll be reimbursed without
interest.
o What about the $250K appreciation of the house?
 Rule: Appreciation will remain CP and will be split between
H and W.
 So if W can trace to her SP contribution, she’ll receive
$100K as reimbursement plust ½ of the appreciation, $125K
and H will receive $125K.
 At divorce:
 W will receive $225K and H will receive $125K.
Two-Step Analysis: Characterization and Reimbursement
 Step One: Characterization
o Look only to the title an any agreements about the property.
o Once it has been determined that there are no agreements about
the property, and the joint tenancy property is characterized as CP,
then move to Step Two.
 Step Two: Remedy for the Separate Property Contributor
 IMPORTANT: What if there’s an agreement? “ At divorce,
house will be part W’s SP.”
 Step 1: Characterize—If they divorce, house will
initially be presumed CP. Written agreement as SP
and CP will be sufficient to rebut the CP presumption.

House will be characterized as W’s SP and will
receive house as hers in toto.
 ***Step 2: No need to do Step 2 because the house is
her SP and not part of community estate
IMPORTANT: What if the agreement is “At divorce, house
will be part W’s SP and part CP?”
 Characterize: initially will be presumed CP.
 Apply Step 2? NO. Don’t apply it because it applies
only if we characterize the house as ALL CP. The
house will be apportioned according to the
proportions specified in the agreement.
(Apportionment is the Step Two)
Oral or Written Agreement for Rebuttal?
 What if there’s an agreement about the property but it is oral or implied
from conduct?
o Rule: As of 1984, if the property was acquired in JT, the agreement
MUST be in writing.
 Oral or implied-from-conduct will not rebut the presumption
that JT property is presumed to be CP at divorce.
 Rule: Tracing to funds can never rebut CP presumption that
arises when spouses’ property is held in joint form.
Oral Agreement Prior to 1984
 What if property was acquired before ’84 and couple had an oral or
implied agreement?
o Ex: H and W bought a house with W’s $100K SP but acquisition
was in ’80. They put title in JT, and at the time they orally agreed
that the house would be W’s SP. House has appreciated and is
worth $350K. Recently separated. (At this time, oral agreement
was permitted to rebut CP presumption at divorce)
 Step One: Characterization:
 House is in JT and would be presumed CP at divorce.
 Supreme Court refused to apply to writing
requirement to acquisitions prior to 1984.
 RULE: CP presumption can be rebutted with an oral or implied agreement
if the property was acquired prior to 1984
No Agreement Prior to 1984
 Same hypo as above but not agreement as to character of the house. So,
the house would be characterized as CO at divorce.
o W would want to know if she’ll have a right to reimbursement of her
SP contribution as provided by 1984 legislation.

NO. RULE: Marriage of Lucas held that a SP contributor
could receive reimbursement only if there is an agreement
between the parties to that effect.
 Court viewed the SP contributor as a gift to the
community. So, any appreciation would be split
between the community. So no reimbursement
because they had no reimbursement agreement.
SUMMARY
 Step 2 is to determine if there’s right to reimbursement when there’s been
a SP contribution to the acquisition of the property.
 Step 2 is relevant only if there’s been a characterization of CP at Step 1.
 For acquisitions in ’84 or after, there’s a right to reimbursement based on
tracing. Appreciation of the property goes to the community—it’s not
apportioned.
 For acquisitions prior to ’84, reimbursement is available to the SP
contributor only if there’s an agreement to that affect. It can be oral,
implied, or written. If no agreement regarding reimbursement, considered
a gift to the community.
COMMUNITY PROPERTY DEEDS AND TITLES
 Couples can hold property in CP deeds and titles, not just JT.
1987 Amendments
 When Legislature enacted the 1984 Anti-Lucas legislation, they focused
exclusively on JT deeds and titles. They omitted mention of CP or any
other joint deeds or titles.
 As of 1984 a JT title required something in writing to rebut the
presumption. Because CP deeds and titles were omitted from the ’84
legislation, prior law continued to operate.
o Under that law, a CP title could be rebutted by an oral or implied
agreement.
o So, as of ’84, it was harder to rebut the CP presumption if the deed
or title was in JT b/c of the writing requirement, than if the deed or
title was in CP.
 REMEMBER: JT and CP titles are presumed to be CP at divorce.
 Ex: H and W buy house for $100L in ’84, and deed says house is CP. Oral
agreement that house is W’s SP. Divorce.
o If house is in JT, oral agreement wouldn’t rebut CP presumption at
divorce. Written agreement or statement in deed/title is required to
rebut.
o But, law regarding CP deeds and titles continued to allow rebuttal
by oral or implied agreement. So, here, house would be
characterized as W’s SP based on oral agreement. If house were
in JT, it’d be characterized as CP b/c there was nothing in writing to
rebut.


In 1987, amendment included all property “in joint form, including property
held in TIC, JT, tenancy by the entirety, or as CP.”
What about time period from ’84-’87?
o The type of rebuttal of the CP presumption depends on when
property was acquired.
o For JT, oral or implied agreements can rebut presumption for
acquisitions up until ’84.
o For CP deeds and titles, oral or implied agreements can rebut the
presumption up until ’87.
COMMUNITY PROPERTY WITH RIGHT OF SURVIVORSHIP
 As of July 1, 2001, H and W may hold title as CP with right of survivorship.
 Created: when “expressly declared in the transfer document” that title is
CP with right of survivorship.
o No explanation of exact requirements of “transfer document.”
o Court would likely focus on “expressly declared” language if the
property is designated in some document other than a “transfer
document.”
 I.e. title or deed could be the required “transfer doc.”
 At divorce:
o Property will be treated as CP.
 At death:
o Property treated as JT and the surviving spouse gains the property
by right of survivorship.
TENANCY IN COMMON
 TIC is a “joint title” and will be presumed to be CP at divorce.
 Tenancy in common:
o People owning in TIC can have equal or unequal interests.
 H could specify having ¼ interest and W could have ¾
interest b/c they invested that much respectively.
o At death:
 no right of survivorship.
 If W dies, H has right to only his interest, ½ of property.
o
 Joint tenancy:
o People with JT have equal, undivided interests in the property.
 ½ interests in the property even if they have invested
unequal amounts in property.
o At death:
 carries right of survivorship.
 If W dies, H automatically receives the property via right of
survivorship. Entire property becomes H’s.
o If one assigns or sells his/her interest in the property, the JT is
severed and becomes TIC.

If JT is not severed and becomes TIC, decedent’s share
goes to his/her heirs via intestacy law or by will to whomever
he/she specifies.
REIMBURSEMENT
 Once JT has been characterized as CP and there was SP contribution to
acquisition of property, Fam Code provides right to reimbursement based
on tracing.
o Payments on interest on a loan and payments for maintenance,
insurance on, or taxation of property = expenses, NOT part of
acquisition. NOT REIMBURSABLE.
 Fam Code:
o Reimbursement right based on tracing
o Right to reimbursement can be waived in writing
o The amount reimbursed will not exceed net value of the property at
the time of division
 Most relevant to value of stock purchases.
 Where value has decreased, Fam Code will allow the SP
contributor to recoup whatever value is left at the time of
division.
 Ex: H and W bought stock in a Corp 1 in ’95 for $10K. To
purchase stock, H sold stock in Corp 2 he owned from
before marriage. They put the title to Corp 1 stock in JT. In
’98, stock was worth $50K and after stock market bubble
burst, Corp 1 stock is now worth $5K. Divorce.
 JT stock will be presumed CP at divorce, if no
agreement about character about stock, it will be
characterized as CP. H will have a right to
reimbursement bc of Fam Code if he can trace to his
SP. If he traces, he’d get $5K as reimbursement. B/c
statute says amount shall not exceed net value of
property at time of division, he will not be reimbursed
for entire $10K SP contribution.
 FamCode application of reimbursement to acquisitions of property prior to
’84.
o In most cases where a down payment is made or a purchase is
made with SP funds, the date of the acquisition of the property and
the date of the SP contribution are contemporaneous.
 Then the date would be purchase date.
o Where improvements are made with SP funds some time after the
purchase of the property, it would be possible to interpret
acquisition as transaction and apply the date the SP contribution
was made.
IMPROVEMENTS
 2 ways for determining rights to improvement:
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o 1) consider the improvement a gift OR
o 2) permit reimbursement of the funds used for improvement
3 scenarios:
o (1) spouse uses his/her SP funds to improve other spouse’s SP.
o (2) spouse uses community funds to improve other spouse’s SP.
o (3) spouse uses community funds to improve his/her own SP.
(1) Before January 1, 2005, no interest or right to reimbursement—
presumed to be a gift.
o After January 1, 2005, would have right to reimbursement of SP
contribution to improve other spouse’s SP.
o Probably no retroactivity.
(2) Traditional rule = use of CP funds to improve other spouse’s SP is
presumed to be a gift, absent an agreement to the contrary.
o Under Marriage of Wolfe and recent cases, use of community funds
to improve the other spouse’s SP creates instead a right to
reimbursement to the community without interest.
(3) …..
Amount of Reimbursement
 Marriage of Warren:
o amount expended was the correct amount to be reimbursed. But in
that case, amount expended was greater than the value added y
the improvement. It noted that when H attempts to improve his own
land with community funds, iinjured wife is entitled to either the
amount expended or the value added—whichever is greater so that
there will be no benefit from the breach of trust.
 Ex: H used $20K of community funds to add swimming pool to home. It
can be determined pool added approx $50K value to home. Should
community be entitled to $20K or $50K?
o Rationale of rule is to prevent H from using community funds for
own self-interest, the value added by improvement would be correct
figure to use. Makes sense community should benefit from
appreciation that can be attributed to improvement.
COMMINGLED BANK ACCOUNTS
 Remember: Commingling rules apply at death, not just divorce.
o Keep adequate records of SP and CP.
 Special rules with tracing to funds used for family expenses.
o Family expenses = not acquisitions:
 food, vacation, rent, med/dental care
 not divided at divorce or death.
RULES:
 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
community funds are exhausted.
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When SP funds are used to pay for family expenses, the separate estate
has no right to reimbursement unless the parties have agreed to
reimbursement.
Ex: H has $1,500 CP and $2,000 SP put in checking account in H’s name.
They take a trip which costs $2k. $1,500 of CP used (trip is expense, not
acquisition). Once CP is exhausted, remaining $500 of SP is used.
o Under second rule, H can’t claim reimbursement from community or
from W’s SP unless they had agreement he’d be reimbursed.
o Ex. continued… H has $500 SP left and again deposits paycheck
into same account of $1500 for CP. Gets inheritance of $10K and
puts it into account. H pays $2K in health bills (expenses), so under
rule, CP funds are used to pay for fam expenses. $1,500 CP goes
to that and the remainder is used from SP. Then, he buys car for
$10K and puts that in his name and wants to claim it as his SP. If
he can prove CP funds were exhausted when he bought car, he will
succeed.
 Analysis: Depends on application of general CP
presumption and special rules for tracing to commingled
accounts.
 (1) general CP presumption applies b/c car was
acquired during marriage. Burden is on H, SP
proponent, to rebut presumption by tracing to his SP.
Title isn’t determinative.
 (2) See v. See on rules for tracing to commingled
accounts.
o Rule: SP proponent can rebut the CP
presumption if, at the time of acquisition, all
community income was exhausted by family
expenses.
DIRECT TRACING METHOD
 Another method to trace commingled bank accounts is direct tracing.
o When both types of funds are in a bank account, the SP proponent
need only show that SP funds were in the account and the SP
proponent intended to use the SP funds to acquire the property in
question.
o Ex: (refer to example above) H would be allowed to prove that (1)
SP funds of $10K were available at time of acquisition of car, and
(2) he intended to use those funds to purchase the car as his SP. If
he could prove these, he would rebut CP presumption.
JOINT BANK ACCOUNTS
 Problem: jointly titled bank accounts rather than in one spouse’s name.
o Does title or funds control?
 Legislature made provision:

Rule: At divorce, contributions to bank accounts of
married persons are presumed to be CP and can be
rebutted by tracing to SP.
COMMUNITY BUSINESSES, PROFESSIONAL PRACTICES, AND GOODWILL
Goodwill
 Goodwill of an entity is an asset that is valuable property interest, which
accounts for the expectation of continued public patronage.
o A value we place on the probability an establishment will continue
to exist and be successful.
o The value the purchase is willing to pay above the actual, tangible
value of the business is value of the “goodwill” of business.
o Beyond mere value of stock, funds, property.
o It is reputation, local position, skill, necessities, etc.
o Where person acquires reputation for skill, he often creates an
intangible valuable property by winning confidence of patrons and
secures immunity from successful competition.
 How to value goodwill
o At divorce:
 Both H and W present evidence on value of goodwill
consisting usually of expert testimony.
o Common methods:
 (1) Market value:
 expert looks at what a willing buyer would pay in cash
for the community business if it were sold at the time
of separation or divorce
 (2) Capitalization:
 Looks at net income of a professional practice for 1
year, subtract from it what a reasonable salary would
be for a professional of comparable experience, and
multiply by a multiplier of some value.
 Idea is to take into account past earnings and project
these into present value of goodwill.
o IMPORTANT: Goodwill may not be valued by any method that
takes into account the post-marital efforts of either spouse.
 Any method based on the earnings or projected earnings of
a spouse after sep/divorce is prohibited.
o IMPORTANT: Value of goodwill must exists at the time of the
dissolution. That value is separate and apart from the expectations
of the spouse’s future earnings.
EDUCATIONAL DEGREES
 Courts have been convinced that an educational degree is personal to
holder and cannot be considered divisible property.
o B/c it cannot be sold, transferred, or assigned to anyone else.
o Cannot be inherited.
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o So, not subject to division at dissolution.
Problem:
o Couple agrees one spouse should get advanced degree to get
better standard of living.
Solution (Fam Code):
o Partial remedy.
o Although student spouse receives degree, a loan incurred during
marriage for education is assigned for payment to student spouse.
With diploma goes debt.
o Primary remedy for supporting spouse = reimbursement of
community contributions.
 Along with assignment of loan to student spouse without
offset, reimbursement is the exclusive remedy.
 However, attainment of degree and efforts of spouse who
supported spouse may also be considered in awarding of
spousal support.
Who Receives Reimbursement?
 Community receives reimbursement.
 How to define community contribution?
o Community contributions to education/training = payments from
community from community or quasi-community property for
payment for education or training or repayment of a loan incurred
for education or training.
o Includes direct payments: tuition, fees, books, supplies,
transportation. Special living expenses related to education
experience, but not ordinary living expenses.
 How is reimbursement calculated?
o Amount reimbursed includes interest at the legal rate, starting from
end of calendar year in which contributions were made.
 Statute provides that reimbursement and assignment of loan may be
reduced or modified if unjust.
o Reason: when community has substantially benefited from
education, training, or loan incurred.
 Rebuttable Presumption That Community has Substantially Benefited from
Community Contributions Made More than 10 years Before
Commencement of Proceeding
o Presumption addresses where spouses have already accumulated
significant CP, and there’s no need to reimburse the community for
the contributions made to education or training.
o There’s a contrary presumption that community has not
substantially benefited from community contributions made less
than 10 years before commencement of proceeding.
 This addresses scenario where couple divorces soon after
student spouse gets degree and there’s little to not CP to
divide.
Loan Incurred Prior to Marriage
 Community contributions include payments made with CP… for
repayment of a loan for education or training. Community shall be
reimbursed for this – Fam Code.
 Weiner- H went to med school before marrying W. During marriage, paid
money on loans incurred. Court held the language of the statute
supported conclusion that reimbursement included payments for
premarital educational loans. Statute was intended to correct inequity that
arises with community contributes financial support to education but does
not share in benefits of that education. Reimbursement rememdy
provided in statute governed community contributions made to repay
premarital educational loan.
 Problem: If a balance on the loan remains, how is loan assigned?
o Rule: reimbursement and assignment is the exclusive remedy
regarding educational loans. (Fam Code)
o Bottom line: Reimbursement applies to community
contributions during marriage that repay an educational loan
incurred prior to marriage. Assignment of a premarital loan will
also be to the student spouse who incurred the loan.
Education: Enhancement of Earning Capacity
 Reimbursement remedy is for CP contributions to education or training
that substantially enhances the earning capacity of the party.
 Problem: What if someone just got a degree because? Not for better
living?
o Analysis: Contributions were made to tuition and clearly CP and
potentially reimbursable. BUT, this was not what was intended by
Fam Code.
o Rule: Does not provide reimbursement for any and all education or
training.
o Rule: Limitation is that the education or training must substantially
enhance earning capacity of spouse seeking education.
o Conclusion: Here, community contribution is a gift.
 Remember: Whether the education or training substantially enhances
earning capacity of student spouse is determined on case-by-case basis.
PENSIONS
 Pension:
o A deferred wage payment.
o Can be either:
 Defined benefit: pension that pays out a certain amount each
month.
 Defined contribution: someone contributes a certain amount
and that amount is later distributed.
o If earned during marriage, but paid at later date, it is CP and
divisible at divorce.
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Retirement savings:
o Subject to division at divorce.
Vested Pension:
o A period of employment before the pension “vests.”
o If employee leaves employment before pension vests, there are no
rights accrued from pension. (Must work a length to receive rights.)
o If earned during marriage = CP and divisible at divorce.
Unvested Pension:
o May never vest due to quitting or being fired.
o Someone may divorce prior to pension vesting.
o It is a mere expectancy, a contingent interest in property upon
continued employment.
Brown:
o Held pension rights, vested or unvested, comprise a property
interest of the community and that the spouse may properly share
in it.
Mature Pension:
o Even though a pension is vested (person has right to it even if
employment may terminate), it may not have matured yet.
o Matured when it provides an unconditional right to immediate
payment.
o Usually matures when employee reaches the eligible age for
retirement.
o (One can continue to work after it matures.)
o Gillmore: H became eligible to retire after marriage dissolved.
Continued to work rather than retire. W requested court order H to
pay her share of pension benefits even though H hadn’t retired and
didn’t plan on it. His pension was both vested and matured, so W
had right to it as CP. Issue = whether right to it immediately. YES.
 Rule: cannot, by invoking a condition wholly with his control,
defeat the community interest of the other spouse.
 Rule: Spouse’s interest in the share becomes fixed and
doesn’t increase as earning spouse’s pension rights
increase.
Disability Benefits
 Purpose:
o (1) compensate for personal suffering caused by the disability
o (2) compensate for the loss of earnings resulting from the disability
 When employee works until retirement, even after becoming disabled,
then retirement benefits may not be solely for personal suffering and loss
of earnings.
o Retirement benefits may accrues b/c spouse earned them.
o If spouse continues working, the time and effort resulting in
retirement benefits would be considered CP.
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Problem: How to characterize and divide benefits when receiving both
disability and retirement benefits?
o Stenquist: Suffered injury 80% disabled. Continued working until
retirement. Entitled to choose regular retirement or disability pay.
Disability rate was hire, began to receive higher disability pay.
Divorce. Rule: Trial court apportioned his disability pay: First was
by time (pension rights attributable to the time before he married
was considered his SP); second apportionment was by type of
benefit (pension rights attributable to his disability were considered
his SP, the pension rights attributable to ordinary pension rights
earned during marriage were considered CP.) CP was divided
equally.
o Rationale: Cannot invoke a condition wholly within his control and
defeat community interest of spouse and disability is to compensate
for loss of earnings.
IMPORTANT: Federal law preempts CP law for many federally authorized
benefits.
o I.e. pension benefits of railroad workers are owned by retired
worker rather than treated as CP.
o Military benefits are treated, however, according to state law—
Except for disability pay. So, disability pay elected instead of
retirement pay is controlled by federal law.
Problem: In military services when a spouse purchased disability
insurance.
o Rule: Apportionment by time and type of benefit.
o Saslow: H got disability policies with community funds and during
marriage, became disabled. After collecting benefits, divorce.
Question was whether disability benefits were H’s SP or CP.
 Issue: Policies purchased with community, benefits
considered CP. Purpose of policy was to give disabled
spouse help with lost earnings and benefits could be SP.
 Rule: Spouses’ intent controlled.
 If spouses intended that the insurance was to replace
lost earnings, benefits = SP.
 If intended was to replace retirement income,
considered CP and split between spouses.
o Elfmont: H purchased disability insurance during marriage w/
community funds. H didn’t begin to receive disability until 2 years
after dissolution. Payments after couple separated were therefore
made with his earnings, which are SP. Determining factor = H
renewed disability polices after separation with SP funds and at the
time, H did not intend to provide community with retirement income.
Severance Pay
 Important: Note when severance pay and disability pay was received:
during or after separation!
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Hypo:
o H was terminated, offered a severance package, and occurred
during marriage.
o Issue: whether it was CP or H’s SP.
o Analysis:
 (1) clear that CP includes employment benefits earned
during marriage;
 (2) SP includes employment benefits earned before
marriage and after separation.
 Rule: Also, the characterization of many employment
benefits is determined not only by timing but by categorizing
them either as pension benefits or disability benefits.
 Rule: If benefits earned by employee during
marriage, those = CP. If benefits instead compensate
for loss of future earnings and diminished earning
capacity after separation, the benefits = SP.
Severance pay = similar to disability benefits, so would probably be SP.
Wright: H terminated and got lump sum termination pay. Employer knew H
would have hard time finding job. Because pay was similar to disability
benefits, it was characterized as SP.
Remember: If benefits can be characterized as earned by employee
spouse, then benefits will be CP if earned during marriage. So, even if
benefits received after separation, it’ll be CP.
o If benefits can be characterized as replacing future earnings, will be
SP if received after separation.
o B/c benefits like severance pay replace future earnings and are not
tied to employee’s earnings during marriage, = SP.
Early Retirement
 Rule: H and W separate and H continues to work. At dissolution, court
determines that H’s retirement benefits are CP to extent earned during
marriage. Ct retains jdx to divide H’s retirement benefits once H retires.
o Hypo: After several years, work offers H early retirement package
which means it’ll increase H’s monthly retirement payment if he
retires early.
 Issue: Whether additional payment is CP or H’s SP.
(Lehman)
 Lehman: H and W haggling over retirement benefits as enhanced. They
divorced but H continued to work. H was offered enhancement iffer which
added to retirement benefit. The benefits were CP, but dispute was over
enhancement. H claimed SP and W claimed CP.
o Rule: Enhancement is CP b/c the enhancement derives from
retirement benefits earned during marriage.
o Rule: Once he/she has accrued a right to retirement benefits, at
least in part, during marriage before separation, the retirement
benefits themselves are stamped a community asset from then on.
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IMPORTANT: If employment benefits can be tired to community efforts
during marriage, it’ll be characterized as CP. If benefit serves purpose
other than rewarding employment during marriage, it wouldn’t derive from
employment and could then be characterized as SP.
o In Lehman, his enhancement was to encourage retirement.
Hypo: H and W married in ’85. W worked at Company since ’80. Pension
vested in ’03 and was able ti retire in ’04. Her monthly pension is $1K a
month. Couple separated. Rights of H to W’s pension?
o Apportionment.
o Time period for pension to vest was 20 years. Of the 20, 5 were
before marriage and 15 were during. So, ¼ of her pension (5/20) is
her SP and ¾ (15/20) is CP. W will receive ¼ her monthly pension
as SP. W and H will split ¾ of W’s monthly pension.
SEPARATE PROPERTY BUSINESS
 If spouse owns prop prior to marriage or receives gift during marriage, that
property is SP. Any rents, issues, and profits of that property are SP.
 Rule: If a spouse owns business prior to marriage or starts a business
during marriage using funds received from gift or inheritance, then that
business is SP.
 Rule: If a business is CP, but under sole management of one spouse, that
spouse would be able to solely manage the business except the managing
spouse would need to provide written notice if he/she wanted to sell,
convey, or otherwise encumber the business.
Pereira
 If the increase in value of a business can be attributed to community effort,
then this approach applies.
 Rule: Apportion for the profits of a separate property business by
allocating a “fair return” on the SP investment and allocating any “excess
to the CP.”
 Favors the community.
Van Camp
 If the increase in value of a business is attributed to something other than
community effort, then this approach applies.
 Rule: Determine the “reasonable value” of the spouse’s services and
allocates that as CP and the remainder is SP.
 Favors the SP owner.
 Gilmore: H owned 3 car companies. Van Camp was applied and allocated
to community the salaries the H received. Concluded all income was spent
on community expenses during marriage and so community had received
its share of the increase attributeable to SP business. So, community
received its share and all increase in value in dealerships belonged to H
as his SP.
o KEY: major factor was that in the period after WWII, there was a
tremendous increase in automobile business. It was market
conditions that caused the increase in value, not H’s efforts.
Hypo:
 W owned business before marriage. After marriage, she designed bracelet
that was instant hit and business tripled in value. At divorce, H claims he
should share in increase of W’s business.
o Analysis: W’s business is her SP b/c owned before marriage. But,
during marriage, W’s design was community effort, and therefore
any profits attributable to that effort belong to the community.
 To accommodate W’s SP interest and community effort,
Pereira approach allocates to both.
 Pereira says W deserves some increase in value—she
deserves “reasonable rate of return” on investment of her
SP.
 Reasonable rate “rate of legal interest” which is 10% unless
different rate is proven appropriate.
 Community interest is anything over that reasonable rate of
return.
 B/c W’s business tripled in value from her efforts, community
will have greater share in that value. W keeps business as
her SP PLUS reasonable rate of return, plus ½ share of
community interest.
 Same scenario but increase in her business was due to fashion fad that
had a bead W had in her store.
o Analysis: Business increased in value, but increase is attributable
to economic circumstance, so use Van Camp approach.
o Here, community deserves whatever can be attributed to
community effort.
o It’s assumed W’s community effort were rewarded if she received a
salary. (If she did, it’s considered what the community deserved
from the SP business.)
 In a small business, owner doesn’t always receive salary but
instead draws out money as needed.
 If W didn’t receive a salary, courts will use the reasonable
salary that someone in W’s position would’ve received.
 Rule: Van Camp also subtracts the community expenses
from the community income to calculate the community
share of the profits from the SP business.
 If all income was spend during marriage, remainder is all SP that belongs
to W.
 If H and W lived frugally, and their expenses were less than their income,
then community will split whatever remains.
CREDIT ACQUISITIONS
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First, General CP presumption applies for characterization.
o Property acquired by either spouse during marriage is presumed
CP. (Car, business, home acquired in one spouse’s name is
presumed to be CP)
Second, General CP presumption is rebuttable by tracing to SP funds.
Exception: When property is acquired on credit during the marriage, SP
proponent must trace by using intent of the lender/seller.
o Rule: Characterization of property acquired on credit is determined
by whether lender’s intent was to rely upon purchaser’s SP or CP
for repayment of the loan.
o Rule: When lender relied on community assets for repayment of
loan, CP presumption is NOT rebutted, and property will be
characterized as CP.
Gudelj: Business bought during marriage. H paid for part of it with cash
and part with note. Cash was SP, but question was to note from lender.
Rule: When tracing borrowed funds, the character of property acquired by
a sale upon credit is determined according to the intent of the seller to rely
upon the SP of the purchaser (or upon a community asset.  not the case
anymore).
o In this case, there was no testimony as to intent of seller.
Regardless of whether seller actually knew of H’s SP and his
business failures, RULE: it is the seller or lender’s intent that
controls whether the community property presumption can be
rebutted.
Grinius: Rule: seller or lender must have relied solely on SP in selling the
property OR in lending the funds to purchase the property. This is the
more recent test. Rule: If the seller/seller relied on both, the SP
proponent fails and the property will be characterized as CP.
SEPARATE PROPERTY LOAN/COMMUNITY PROPERTY REPAYMENT
 Problem: Where a person acquires property prior to marriage on credit.
Then that person marries. During marriage, CP is used to pay back loan
on property. At divorce, issue is (1) whether the CP contributions
represent acquisition of an interest in the property or (2) merely will
provide a right to reimbursement of community funds use to pay back
loan.
o Rule: Acquiring interest in property means the property will be
apportioned part SP and part CP, giving community a share in any
increase in property’s value.
o Rule: Reimbursement means the community will receive the funds
used to reduce the loan but no share in any increase in the
property’s value.
o In above hypo, community gains an interest in the property.
 Problem: Because community gains interest in the property, how to
calculate?
o Moore/Marsden.
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Moore: W bought house before marriage. Took title in name alone.
Purchased house for approx $57K and made down payment of $17K.
Secured mortgage loan to purchase house. Prior to marriage, W made
payments on loan, and the principal had been reduced by approx $250.
While married, they made payments on loan from community funds and
loan principal was reduced by almost $6K. House appreciated in value;
market value of house was $160K. Court held community acquired
interest.
o Characterization: Home and loan used to purchase house = SP.
o Since W was unmarried, lender must have been relying on her
credit and her ability to repay the loan when deciding to grant loan.
Her creditworthiness before marriage is considered SP in
character.
o If house was considered to be W’s SP in its entirety, she’d have
been entitled to entire increase in house’s value. If community
acquired interest, community would have some proportional share
in the increase in house’s value and both would be entitled to ½
community share in the increase in value.
o Moore formula: Ratio is based on ratios of funds to the purchase
price, not to the total reduction of payments of principal.
 $6K community funds yielded a community interest of a little
more than 10% ($6K (community attributed)/$57K (purchase
price)) and W’s separate interest of almost 90%
($51K/$57K). $51K was reached by attributing to W’s
downpayment of $17K plus $40K loan and then subtracting
the $6K of community funds. So, community interest was
almost $17K and W’s SP interest was $110K. H would
receive ½ of community interest, $8,500, and W would
receive $118,500, her SP interest plus the other ½
community interest.
 The Supreme Court formula is the one that is used to
calculate the interests in property acquired before
marriage on credit with community funds used to
reduce the principal loan.
o Bottom line formula: Calculation of the community and separate
interests would be the ratio the separate/community contributions
that reduce principal bear to the purchase price:
 SP funds/purchase price and CP funds/purchase price.
That ration will produce a percentage that is the share to
be attributed to the community and the SP spouse. The
ratio will be multiplied by the amount of appreciation.
The figure will be added to the community funds and the
SP funds respectively. SP spouse will receive the
separate interest plus ½ of community interest.
Important: (1) Community funds paid to reduce the principal on a
separate loan will result in community obtaining a proportional interest in

property according to formula established by Supreme Court in Moore. (2)
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.
Marsden:
o Marsden scenario: someone purchases property before marriage
on credit, marries, and community funds are used to pay back the
loan.
 Even more complex scenario: marriage comes some years
after purchase of property. During time between purchase
and marriage, payments are made that reduce principal of
loan and property increase in value. Community funds during
marriage are used to reduce principal of loan, and increas in
value of property is greater. How to calculate SP and
community interests in that property?
o Ex: L buys house in ’95, taking title as single woman. Purchase
price = $100K, makes down payment of $20K. Secured mortgage
loan for remaining $80K. Between ‘95=’00, made payments on the
loan that reduced principal to $70K. House appreciated in value to
$200K. She married in ’00, and at that time, house and loan would
be considered SP. Payments made to reduce principal on loan are
SP, and increase in value of $100K = SP b/c both occurred before
marriage. After marriage, payments to reduce principal were made
from community funds. At time of divorce, payments from
community of $20K reduced principal on loan to $50K. House also
appreciated in value to $500K.
o Marsden analysis of example above: Court applied Moore formula.
L’s SP interest included all contributions to reduce loan and
increase in value of the property before marriage. To calculate
community interest, Court used the ratio that the amount of
community funds bore to the purchase price to calculate the
community interest. That was $20K/$100K or 20%. Then that figure
was multiplied by the increase in value during marriage. That would
be 20% of $300K. That equals $60K. So, community interest would
be the community funds that reduced the principal ($20K) plus the
community share n the appreciation ($60K). The total of $80K
would be split.
o Review pg. 186-187.
MANAGEMENT AND CONTROL OF COMMUNITY PROPERTY
Community PERSONAL Property
 Rule: CA statute limits access in one spouse’s name to that spouse.
o Ex: If H puts earnings in bank account in his own name, W won’t
have access to that bank account. (W could obtain a court order
that her name be added to H’s account.)
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Rule: Gifts to 3rd parties and community businesses, will be treated
separately.
Rule: The other exception requires written consent before a spouse sells,
conveys, or encumbers community personal property used as the “family
dwelling, or the furniture, furnishings, or fittings of the home, or the
clothing or wearing apparel of the other spouse or minor children, which is
community personal property.”
o Ex: W got loan and used furniture in home as collateral. W
defaulted on loan and creditor carted off furniture. Encumbrance
on furniture would be void and creditor would have to return
furniture b/c H didn’t given written consent.
Rule: There’s a general duty regarding community personal property that
each spouse shall act in good faith w/ respect to other spouse in
management and control of community property.
GIFTS
 Rule: Limitation on management and control of community personal
property concerns gifts. Prohibits gifts or disposal of community personal
property for less than fair and reasonable value unless the other spouse
has given written consent.
o This does not cover gifts between the spouses. Transmutation
statute covers that, allowing a spouse to transmute SP to CP
and vice versa.
 What happens if a spouse violates the mandate of the statute and gives
away community personal property without the consent of the other
spouse?
o During the marriage, the nonconsenting spouse has the right either
to ratify the gift or to revoke the gift and sue to recover all the
property for the community. After the death of the donor spouse,
the nonconsenting spouse has the right to ratify the gift or to void
the gift up to ½ the value of the gift.
o This was the case in early Spreckels v Spreckels: Feud over gift of
stock that father had given to son. Son fell out of favor w/ dad, dad
tried to revoke gift. Dad argued gift was void b/c he hadn’t obtained
W’s written consent Argument failed, b/c written consent statute
wasn’t applied retroactively to CP acquired prior to date of the
statute. (pg. 199) Dad gave money to elder sons. At time of dad’s
death, his fortune had been reduced b/c of earthquake. Younger
children who got nothing sued challenging gift. Lawsuit was
complicated when W died in middle of proceedings.
o In later Spreckles, ossue concerned W’s rights if H gave gift w/o her
written consent. Supreme Court held H’s gift wasn’t void, but
voidable afer H’s death. Court then considered whether wife had
ratified gifts in her will, she had. Court considered the gifts to be
valid.
 Issue: Who can be sued to recover gifts made without other spouse’s
consent?

o Fields v. Michael: H had given away gifts to various ppl without W’s
consent. Problem was people who got gifts had used up the gifts.
Question was whether W had remedy. Rule: Court held a W
whose CP rights have been violated is entitled to pursue whatever
course is best calculated to give her effective relief. W was entitled
to sue H’s estate for gifts.
Issue: Whether community personal property transferred to 3rd party was
really a gift or whether it was given in return for fair and reasonable value.
o Estate of Bray: W questioned accounts and bonds that were in
name of H and his son from former marriage. Son claimed the
accounts and bonds as surviving JT. W claimed the money in the
accounts and used to buy the bonds was a gift given w/ written
consent. Son’s argument was the money was given in return for
services rendered by son who worked for father’s business. Most
damaging fact was during the entire time H was putting $ into bank
accounts and buying bonds, son never knew about them. Son had
also received a salary while working for his father. Court concluded
there wasn’t enough evidence to show the bank accounts and
bonds were for services rendered. They were instead gifts and W
was entitled to half those gifts made without consent.
COMMUNITY BUSINESSES
 Rule: Fam Code gives primary management and control to spouse who is
operating or managing a business or an interest in a business that is all or
substantially all community personal property. That means managing
spouse may act alone in all transactions.
o However, spouse must give “prior written notice to the other
spouse” for major actions such as “sale, lease, exchange,
encumbrance or other disposition of all or substantially all of the
personal property used in the operation of the business.
o Still, if the managing spouse fails to give that prior written notice,
the validity of the transaction will not be adversely affected.
 REMEDY: Family Code 1101 lists possible remedies such as breach of
fiduciary duty and ordering of an accounting.
 Ex: W starts pet business using community funds. Purchased 3 vans and
equipped them for grooming. Has employees. H was happy she started
business. H was allergic to animals and went no where near business.
The business is CP, owned by H and W. Under general management and
control provisions, either H or W has management and control. Under
primary management provision, W, who operates business, may act alone
in all transactions. There’s no problem w/ W purchasing van, expending
$$ in equipping them, hiring employees and running business. She
needn’t consult H in making business decisions.
o If W receives offer to sell her business, including vans, she must
give prior written notice to H she’s plas on selling. If she goes
ahead and sells without the notice, sale will still be valid. If H is
displeased after sale, he could go to court and file claim for breach
of fiduciary duty or request an accounting.
FIDUCIARY DUTY
 Rule: With regard to community personal property, Fam Code explains
the duty includes full disclosure and full access to info about assets and
debts of the community, upon request.
o Duty to highest good faith and fair dealing. Neither spouse shall
take advantage of each other.
 Marriage of Walker: W handled accounts. Over the years, she withdrew
total of $69K to meet family expenses. Tax penalties were incurred. She
never hid withdrawals or tax penalties nor did H ever ask about them. W
breached fiduciary duty by failing to inform H of depletion of IRA accounts.
Court awarded H over $71k (amount withdrawn plus tax penalties).
 Rule: in 2003, Corp Code imposes duty on partners to furnish withot
demand, any info concerning partnerships’ business required for proper
exercise of partner’s rights and duties.
o Rule: it is applied retroactively to events occurring prior to Jan 1,
2003, but that failure to disclose assets will become a focal point of
divorce litigation.
o In Beltran: H forfeited community military pension b/c of criminal
conviction and in Stitt, W incurred attorneys’ fees to defend against
embezzlement charges. Both involved intentional misconduct or
knowing violation of the law and would be considered breach of a
spouse’s fiduciary duty.
 Rule: Fam Code 721 explains a partner’s duty of care is limited to
refraining from engaging in grossly negligent or reckless conduct,
intentional misconduct, or a knowing violation of he law.
o Schultz: spouse’s negligence wasn’t considered “deliberate
misappropriation” of CP. H failed to contest debt owed by
community. Debt wasn’t divided equally, H appealed additional
share of debt that was awarded to him. Ct said fiduciary would be
liable for gross mishandling of community financial affairs, which
would be tantamount to fraud, but negligence wouldn’t. Negligence
wouldn't be considered breach of the duty of care a spouse owed to
other spouse when managing CP.
o Duffy: H took his entire IRA brokerage account and invested it in
stocks. The stocks were very volatile and declined in huge value 3
years later. Court said Rule: a spouse doesn’t owe to other spouse
the duty of care was violated.
o Fam Code 721: Neither shall take unfair advantage of other.
 Situation that could result in unfair advantage is when both
CP and SP funds are available for investment.
 Marriage of Lucero: H used SP funds rather than CP funds
to reinstate community pension. By using SP funds, W
would’ve been deprive of her share of the pension.



Somps v Somps: H used SP funds instead of CP funds to
buy investment realty. That was not considered taking undue
advantage nor a breach of fiduciary duty.
 Rule: If use of SP funds represents an attempt to deprive
other spouse of an interest in a community investment like a
pension or employment opportunity, that action differs from a
simple choice of which funds to invest.
Current Rule since 2002: H’s decision to invest couple’s entire IRA
brokerage account in highly volatile technology stocks would be
considered “gross mishandling” or “grossly negligent or reckless conduct.”
This would be considered violation of spouse’s fiduciary duty.
Rule: Rebuttable presumption of undue influence arises when one spouse
obtains an advantage over another in a CP transaction.
o Rule: To rebut presumption, advantaged spouse must show that
the deed in question was freely and voluntarily made and with a full
knowledge of the facts, and with complete understanding of effect
of transfer.
o Bottom line: The claim of breach of fiduciary duty presents an
avenue for overturning interspousal transaxns that advantage one
spouse. The issue is whether that advantage is unfair to the other.
Community REAL Property
 Rule: Equal management and control applies to community real property,
too. (Either has control.)
o However, both spouses must join in executing any instrument by
which that community real property or any interest therein is sold,
conveyed, or encumbered.
o Joinder is also required for leases of community real property for
longer than a period of 1 yr.
o “Equal” means both spouses must participate in decisions.
 HYPO: H and W own community real property, but title is in H’s name. H
meets buyer. H has debts and sells property to Bob. H doesn’t tell W
about sale and H doesn’t tell Bob he’s married. Bob has no way to know
it’s CP b/c title is in H’s name. H disappears, W finds out after sale
property is sold. Bob and W are innocent.
o Rule: Fam Code creates presumption of validity of the sale if the
purchaser in good faith didn’t know about marriage of spouse who
sold property.
o Here, Bob would be good faith purchaser. But there’s a requirement
still that W had to join in the sale, and she didn’t. W has right to
“void” the instrument that H executed w/o her. So, Bob would have
no right to property. W would own property.
 Here, Courts have required that the community repay
purchase price to bona fide purchaser. However, if the
property has appreciated in value, the community benefits

from that increase in value and may be able to borrow the
money needed to pay Bob.
o Review pg. 210-211.
Issue: When community real property is encumbered.
o A spouse borrows money. The transaction involves: the loan and
the security for the loan. The loan creates a debt, and the security
for the loan creates a security interest in the real property. When
loan is for large sum, lender requires that security interest, in even
the debt isn’t paid. If loan isn’t paid, lender can obtain judgment for
loan amount, and the judgment can be recorded as lien on
property.
o Review pg. 212.
RESTRAINTS DURING DIVORCE PROCEEDINGS
 Rule: Once spouses live separate and apart, earnings become their SP,
and C is not liable for most debts incurred during that time period.
o However, the fiduciary duty doesn’t end when spouses separate.
Fiduciary duty continues until “date of distribution of the community
or quasi-community asset or liability in question.”
 Rule: When divorce proceedings are initiated, the summons shall contain
a TRO prohibiting spouses from transferring, encumbering, concealing, or
disposing of property, real or personal, wheter community, quasi, or
separate, without the written consent of the other party or an order of
court.
o EXCEPTIONS: (1) in the usual course of business and (2) for the
necessities of life. (3) Also, extraordinary expenditures- a spouse
must notify the other spouse of any proposed extraordinary
expenditure at least 5 days before incurring such an expenditure
and account to court for all extraordinary expenditures. Attorneys
are protected b/c TRO doesn’t preclude party from using
community, quasi, or SP to pay for attorney’s fees and costs.
 Issue: What can spouse do during divorce proceedings with CP and SP?
o HYPO: H and W own real property in JT. Initiate divorce
proceedings and TRO is in effect. H severs JT. While proceedings
pend, H dies. If severnce is ineffective (so still JT) b/c it violates
TRO, W takes property as surviving JT. If severence is effective, ½
prop goes to H’s estate and son would inherit according to H’s will.
o Estate of Mitchell: Issue = whether H’s severance was “transfer” of
property in violation of TRO. Also, whether severance “disposed” of
property in violation of TRO.
 Held severance was a disposition of property b/c it disposed
of W’s right of survivorship. Ct didn’t consider right of
survivorship to be property, but a mere expectancy. So
severance only affected expectancy. Thus, TRO was not
violated.

REMEDY for Breach of Fiduciary Duty: When breach falls within
oppression, fraud, or malice, it shall include but not be limited to an award
to the other spouse of 100%, or an amount equal to 100% of any asset
undisclosed or transferred in breach of fiduciary duty.
o Marriage of Rossi: W concealed lottery. Argued H was physically
and mentally abusive. Court said it’s better to reveal community
assets and split them at divorce.
REMEDIES TO BREACH OF FIDUCIARY DUTY
 (1) A court-ordered accounting or a court order to add a name to the
community property held in one spouse’s name.
o This remedy is available during marriage, or at divorce, or upon
death of spouse.
 (2) Court can award more than half of the asset.
o Ex: a remedy “shall include, but not be limited to” an award of 100%
of an undisclosed or transferred asset.  These provisions
provide for “tort” damages resulting from breach of fiduciary
duty.
 (3) If spouse has “deliberately misappropriated CP”—court has discretion
to assess an additional award from or an offset against existing property.
o Williams: as divorce became imminent, H withdrew money. If
money was CP and deliberately misappropriated, Ct ha discretion
to award her more than half, which would have been her one-half
share.
 REVIEW 216-217
DEBTS/CREDITORS’ RIGHTS
LIABILITY FOR MARITAL AND PREMARITAL DEBTS
 In CA, it allocates responsibility or “liability” for debts between the CP and
each spouse’s SP.

EXCEPTIONS TO LIABILITY RULES
CHILD AND SPOUSAL SUPPORT OBLIGATIONS
TORT OBLIGATIONS
LIVING SEPARATE AND APART
DIVISION AT DIVORCE: SEPARATE AND APART
LOOK AT ALL THE CONDUCT
WHAT IF DEBTS EXCEED ASSETS
DEBTS AFTER SEPARATION
DIVISION AT DEATH: JOINT TENANCY COMPARED TO COMMUNITY
PROPERTY
PRESUMPTIONS RE JOINT TENANCY
ORAL OR WRITTEN AGREEMENT
QUASI-COMMUNITY PROPERTY
PUTATIVE OR PARTNERS