Classification of Property
A. Tracing Property Purchase From a Commingled Fund
See v. See
 Procedure:
o P (H) and cross-complainant W are appealing from an interlocutory
judgment that grants each divorce.
 H attacks finding he was guilty of extreme cruelty, granting of a
divorce to W, and award to her of permanent alimony of
$5,400 per month.
 W attacks finding there was no CP at time of divorce.
 Facts:
o H was employed by family-controlled See’s Candies. He served as
president of its subsidiary for most o the time he was employed there
and for the 21 years of marriage, he received more than $1 mil in
salaries from the two corporations.
o H had personal account on books of Sees Candies called Account 13
where his annual salary, which was $60K at the time of the divorce,
was credited to this account. Many of the family expenses were paid
by checks drawn on it. He also occasionally transferred funds to it
from an account called the Security Account.
o The funds deposited in Security Account came mostly from H’s SP. He
sometimes deposited his annual $15K salary from Sees in that account
as a reserve against taxes.
 So, there was comingling of CP and SP in both the Security
Account and Account 13.
o Trial court: followed H’s theory that a proven excess of community
expenses over community income during marriage establishes that
there’s been no acquisition of property with community funds.
 Analysis:
o Court here says that theory would disrupt the CA community property
system.
 It would transform a W’s interest in the CP from a “present,
existing and equal interest” into an inchoate (not fully formed)
expectancy.
 Rule:
o The character of property as sep or comm. is determined at the time
of its acquisition. (If it is CP when acquired, it remains so throughout
the marriage unless the spouses agree to change its nature or the
spouse charged w/ management makes gift of it to other)
o Property acquired by purchase during a marriage is presumed to be
CP, and the burden is on the spouse asserting its separate character to
overcome the presumption.
Presumption applies when H purchases prop during marriage
w/ funds from undisclosed or disputed source, such as account
or fund which he has commingled his sep funds w/ comm.
funds.
 He may trace the source of the prop to his sep funds and
overcome presumption w/ evidence that community expenses
exceeded community income at time of acquisition.
 If he proves at time all community income was exhausted by
family expenses, he establishes that the property was
purchased with sep funds.
An H who commingles the property of the community with his sep prop, but
fails to keep adequate records cannot invoke the burden of record keeping as
a justification for a recapitulation of income and expenses at termination of
marriage.
o Once he commingles, he assumes burden of keeping records adequate
to establish the balance of community income and expenditures at
time an asset is acquired through commingled property.
Ruling:
o P didn't meet burden of proving exess of comm.. expenses over cmm
income at times other assets purchased during marriage were
acquired.  But this is not conclusive.



NOTES:
 H wants reimbursement for separate.
 H is fighting to say his separate bank account and all junk they bought during
marriage is his.
 H had to show 2 things on every item in garage to show it was his SP. At time
of purchase, the asset in question….. and second, you have to tell us that you
intended to use your separate property to purchase that item.
 Note 2:
Marriage of Mix
 Procedure:
 Facts:
o At time of marriage, W owned property including real property, a
residence, life insurance policy, and bank accounts. H then changed
his bank account into their joint account. In this account, they
deposited all their earnings as well as W’s separate property. Then in
’63, W opened up account in her name alone where she deposited
most of her income both from law practice and investments.
o Trial court found that specific items were CP: to W, equity in home, an
Oldsmobile automobile, interest in W’s law partnership, undivided
1/6 interest in 10 acres of real prop, household furniture and
furnishings, and tennis club membership. To H, 2 sailboats,



Volkswagen, and sum of $6,137. Court found all other property (real
and personal) in W’s name was her SP.
o W contended she introduced sufficient evidence to trace source of
funds used to acquire each item of disputed property to her sep
property in accordance with tracing test.
 Introduced into evidence a schedule which itemized
chronologically each source of separate funds, each
expenditure for SP purposes, and balance of SP funds
remaining after each such expenditure.
 Court found she was able to establish her intention to use only
her SP funds for SP expenditures.
 Trial court believed her testimony about her intent even
though she couldn’t produce all the receipts for items and
expenditures.
 This court, said it was sufficient evidence for trial court to
believe her.
Issue:
o The property that trial court found to be W’s property was purchased
by her during marriage w/ funds from several bank accounts
containing her commingled community earnings and SP income.
Analysis:
o If SP and CP or funds are commingled in such a manner that it’s
impossible to trace the source of the property or funds, the whole will
be treated as CP.
o Court concluded the controlling presumption in the case is the one
that property acquired during marriage is CP.
Ruling:
o For W.
NOTES:
 Since all the Mix transactions occurred before ’75, why did W not get the
benefit of the Family Code section 803 married woman’s presumption that
title to property taken in her name alone was her SP?
o Because it was shown to be community.
 Treatment of joint accounts at the death of a spouse
o ….
Estate of Murphy
 Procedure:
 Facts:
o The disputed assets were acquired by purchase during marriage at
times when adequate community funds were available for such
acquisition. H also had sep income during these times but there wasn’t
evidence from which that income could be directly traced to any of the
assets in dispute.
Court here said mere fact that H received substantial separate
income concurrently w/ receipt of substantial community
income doesn’t dispel presumption that property acquired by
purchase during a marriage is presumed to be CP. (burden is
on spouse asserting its SP character to overcome presumption)
o 2 methods of carrying burden of showing property purchased during
marriage to be separate:
 Direct tracing to a SP source OR proof that at time of purchase
all community income was exhausted by family expenses.
o In this case, there wasn’t proof by either method requiring the trial
court to find any of the disputed assets to be other than CP.
 Issue:
o Whether it was SP or CP.
 Analysis:
 Ruling:
o Upheld it was CP because they looked at whether it was used as family
expenses. If you start tracing when someone dies, it’s harder than
when you trace if they’re alive.
RULE: If you have SP and you comingle and you don’t have records to unscramble it,
you lose. No equity. You lose unless there’s a written agreement. IMPORTANT—
could be on exam.

NOTES:
* Direct tracing:
Marriage of Frick
 Procedure:
o Trial court found during marriage, H used community funds to reduce
principal balance of debt.
 He’s appealing and contends that he adequately traced
principal payments to sep prop sources.
 Facts:
o Before marriage to W, H owned real prop. He operated a hotel and
restaurant, which was encumbered by a debt to Transamerica.
o in ’78, he entered into lease which called for a payment of $9,166 per
month. They were reduced to $6,666 per month at end of ’79. He
deposited this amount into his personal account, and each month
made trust deed payments on the hotel and restaurant to
Transamerica out of his personal account. In ’78, the payments were
$5K per month and by time of trial, it was $5,700 per month.
 H contends payments to Transamerica should’t have been
credited to the community since they were made
contemporaneously with his deposit of the monthly rental
charge and the payments were traceable to a separate
property source.



Court disagrees.
Analysis:
o While the rule is that rents which are received from a sep property
source are considered SP, H commingled these funds with CP funds.
 H testified the Hotels had two accounts—general and payroll.
He also had personal account.
 Income from operation of hotel and restaurant is first
deposited into general account, then he takes money from the
account and puts it into payroll account to meet corporate
payroll needs. He deposits his salary, CP, into his personal
account. It’s also in this account that he deposits the rent he
receives from the corporation and he makes payments to
Transamerica from this account.
o Rule: Where funds are paid from a commingled account, the
presumption is that the funds are community funds.
 To overcome presumption, party must trace funds expended to
a separate property source.
 There are two methods fro tracing expended funds to sep prop
source:
 (1) direct tracing
o (H relied on this.) When sep funds deposited
with community funds continue to be on deposit
when the withdrawal is made and it’s the
intention of the drawer to withdraw sep funds
specifically, the sep prop status of the withdrawn
funds is established.
o H gave testimony saying he satisfied the test, however the testimony
according to court, is not enough to satisfy the requirements.
 Court says he made no other showing of the activity that
occurred in this account during this month.
Ruling:
NOTES:
 Frick isn’t consistent with Mix.
Apportionment of Business Growth and Profits



This classification issue arises when a spouse has a separate property
business in which he/she works during marriage.
CA has two competing formulas for apportionment of business growth and
profits.
The two elements of a business are:
o labor
o capital



In a business, you have certain investments (capital: laptops, printers, etc).
Labor is work you do for your clients.
Sitting around and waiting for income is not labor.
o If you invest other people’s money and advising them how to do that
is labor.
Van Camp focuses on labor and Pereira focuses on capital.
Beam v. Bank of America
 Procedure:
o W, defendant in divorce action, is appealing from a judgment
awarding a divorce to both H and W. Trial court determined that the
only CP existing at time of trial was a promissory note for $38,000 and
upon H’s stipulation, awarded this to W. Court found all other
property to be SP of the party possessing it and W was awarded
$1500 per month in alimony. H also had to pay $250 per month for
support of the children.
o W’s claim: She is appealing primarily b/c trial court (1) failed to
compensate the community for income attributable to H’s skill, efforts
and labors expended in the handling of his separate estate during
marriage and (2) erred in suggesting that community living expenses,
which were paid form income of H’s separate estate, should be
charged against community income in determining balance of
community funds.
 Facts:
o Prior to and during earlier years of marriage, H inherited $1,629,129
and he wasn’t employed at all during the marriage but instead
devoted time to handling the separate estate and engaging in private
ventures with his own money. He wasn’t successful in this and
according to W, his total estate had a modest increase of about
$200,000.
o Evidence showed the only money received and spent by the parties
during marriage were from H’s separate estate. W was a housewife.
 Analysis:
o Court looked to Section 5108 of Civil Code which says generally,
profits accruing from H’s SP are also SP.
 But, the court also recognized that the community should
receive a fair share of the profits derived from H’s work of
more than minimal time and effort to the handling of his SP.
 The courts currently hold that an apportionment of profits is
required not only when the H conducts a commercial
enterprise but also when he invests sep funds in real estate or
securities.
 Here, H’s efforts in managing SP throughout marriage were
more than minimal, so trial court felt that the total profits
should properly be apportioned as community.

o Court here also discussed two methods of apportionment:
 (1) Pereira Test: allocating a fair return on H’s separate
property investment as separate income and to allocate any
excess to the CP as arising from H’s efforts.
 (2) Van Camp Test: determining the reasonable value of H’s
services, allocate that amount as CP, and treat the balance as SP
attributable to the normal earnings of the separate estate.
o Trial court used the first method. So it adopted the legal interest rate
of 7 percent simple interest as the reasonable rate of return on H’s SP.
 Wife is attacking this 7 percent as too high.
 Testimony showed that based upon this 7 percent simple
interest growth factor, H’s SP would’ve been worth approx 4.2
mill dollars at the time of trial, and under the first method, the
entire increase in the estate’s value over the 29 year period
would be attributable to the normal growth of the property
itself, and therefore, all income would be designated as SP.
 W says that method doesn’t achieve substantial justice
between the two parties.
 Court here, says the evidence sufficiently demonstrates
that all the remaining assets in the estate constitute SP.
In looking at second method, H introduced evidence
that a professional investment manager, performing
similar functions as H during marriage, would have
charged annual fee of 1 % of corpus of funds he was
managing.
o W contends: such a fee would amount to $17,000
per year and over the full term of their marriage,
the salary would come to $357,000 of
community income. She asserts that under the
Van Camp test, she’s entitled to half of that
amount.
o Court says it overlooks the distinction between
total community income of the marriage (figure
derived from Van Camp formula) and the
community estate existing at dissolution of
marriage. RULE: CA has long held that it’s
presumed the expenses of the family are paid
from community rather than separate funds.
Ruling:
o Judgment is affirmed and is for H.
o Even if trial court had used Van Camp test, court would still have
properly concluded that there was no resulting CP from earnings of
her H’s SP.
NOTES:
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

Growth occurred during the marriage.
Van Camp: You deduct community expenses from the income. You don’t
under Pereira but you do under Van Camp.
Pereira: says what is a fair return on his SP investment. W didn’t have
anything to do with this. However, if his investment got him more than what
he should’ve gotten, the excess should go to W as CP.
Gilmore v. Gilmore
 Facts:
o P and D were married in ’46 and lived together for 6 years before
divorcing.
 Procedure:
o P contends that trial court erred in finding that there was no CP. She
says during marriage, D’s net worth representing his interest in three
incorporated automobile dealerships increased from $182,010.46 to
$786,045.52. During this time, D received salaries from his
dealerships ranging from a total of $22,000 in ’46 to a total of
~$66,000 in ’52. Trial court found salaries paid D by corporations for
his services were sufficient to compensate D and community for all
services rendered during the marriage.
 Analysis:
o Court looks to Huber v. Huber which says the rule is where the H is
operating a business which is his SP, income from the business is
allocated to community or separate property in accordance with the
extent to which it is allocable to H’s efforts or his capital investment.
 The frequently used method for making allocation was to
deduct from the total earnings of the business the value of H’s
services to it. The remainder, if any, represents the earnings
attributable to the SP invested in the business. (Trial court
followed this.)
 In this case, D worked short hours and took extended
vacations. Expert testimony stated salaries he received, which
were found to constitute community income, were more than
ample compensation for services he gave.
o P, Wife, claims the proper method or determining what part of the
increase in value of the business was CP is to subtract from the total
increase a reasonable return on the value at the time of the marriage
and treat the remainder as CP.
 She relies on Pereira case where court said in absence of
circumstances showing different result, it is to be presumed
that some of the profits were justly due to the capital
investment. There’s nothing to show all of it was due to D’s
efforts alone. The probable contribution of capital to the
income should have been determined from the circumstances


of the case, and as the business was profitable it would amount
at least to the usual interest on a long investment secured.
Court here, says Pereira is only applied in the absence of
circumstances showing a different result, and the court clearly
recognized that if H could prove that a larger return on his
capital had in fact been realized, the allocation should be made
differently. In this case, D introduced substantial evidence the
salaries he received were a proper measure of the community
interest in the earnings of the business.
Ruling:
o Affirmed for Defendant, husband.
NOTES:
 Issue here is 180K to 700K.
 Court said it would use the Van Camp theory.
o W lost under Van Camp because the reasonable value of the services
rendered (his salary) during marriage was offset with the CP
expenses. Since there was no net, there was nothing to divide.
 Under Pereira, the original value of $180K plus $100K which is a reasonable
interest for H and give that to him, then the excess would go to W. Half of a
million dollars.
 Why did judge not use Pereira?
o Court has equal ability to use either case. It won’t be disturbed on
appeal.
Tassi v. Tassi
 Facts:
o Plaintiff and decedent lived together married until H died. At time of
marriage, decedent H owned a wholesale meat business. During
marriage, decedent opened 7 trustee accounts (three for his W
totaling ~$73,000 and four for his brother totaling $120,000). 3 days
before his death, decedent wrote himself a $20,000 check on his bank
account. In ’51, decedent gave his brother 5 $1,000 US Bearer Bonds
and in ’46 purchased for him 300 shares of corporate stock. All of
these transactions were w/o (plaintiff) appellant’s knowledge or
consent.
 Trial court found that the source of the fund,s which set up
accounts and purchased the bonds was the earnings and
profits of a wholesale meat business. It found decedent set up
trustee bank accounts with intention of passing money to
beneficiaries with minimum expense and delay when he died.
It also found the earnings and profits from the business are
allocable 27% to the CP of decedent and P and 73% to the
separate property of decedent.


o Plaintiff-appellant’s claim: attack is on the sufficiency of the
evidence to support the allocation of earnings from the business in the
ratio of 73% SP and 27% CP.
 Evidence showed during marriage, decedent withdrew
~$400K from the business and paid living expenses of ~$44K.
Decedent didn’t attempt to allocate the withdrawals between
salary and business earnings. He devoted full time to
management of the business.
 This court adopted the formula which states to determine the
reasonable value of H’s services in the business, allocate that
amount as CP and treat the balance as separate property
attributable to normal earnings of the business.
 There was evidence of witnesses familiar with the meat
business that the reasonable salary for the general
manager of this kind of business was rom $10K to $15K
per year. Court says evidence is sufficient to support
trial court’s conclusion that the reasonable value of
decedent’s services didn’t exceed $15K per year. There
was testimony about the period of WWII and the profits
in meat business, so court’s finding that business
earnings were chiefly attributable to business rather
than decedent’s services was justified.
 Since earnings were not allowed to accumulate in the business
and the business investment was the SP of decedent, we find
no substances in the complaint that some part of the increase
in the value of the business should’ve been allocated to CP.
Analysis:
Holding:
o Affirmed . Not for W.
NOTES:
 Court used Van Camp approach here. Because the increase in business was
not due to H, it uses Van Camp.
 Beam approves two different methods of apportioning gains from
community labor and separate capital.
o What is the difference between Van Camp and Pereira apportionment?
Which method was used in Gilmore? Tassi?
 Van Camp identifies the community component of a business that one spouse
brought into marriage by valuing that spouse’s employment in the business
during marriage. Any remaining value is the business spouse’s SP. Beam
additionally applies the family expense presumption: The value of
community labor during marriage must be reduced by family expenses.
(Here, apparently, recapitulative accounting is acceptable. Why?)
o What facts in Beam suggest that the value of Mr. Beam’s community
labor should be reduced by the family’s living expenses?



o Is this treatment of family expenses appropriate for most divorcing
couples today?
o What are the critical factual issues in dealing with family expenses
under a Van Camp accounting?
In Pereira, it identifies the separate contribution by valuing the business at
the beginning of the marriage and adding a fair rate of return for the life of
the marriage.
o Rule: If the current value of the business exceeds the original value
plus imputed interest, the excess is attributed to community labor and
thus belongs to community.
Beam instructs lower courts to account for family expenses and to subtract
such expenses from the community component in Pereira, as well as Van
Camp, accounting.
HYPO pg. 278: Applying Van Camp and Pereira problem: Assume (i) an
annual average legal interest rate of 10% simple interest (the current legal
interest rate) during the relevant period (1991-2011), (ii) an average annual
managing pharmacist’s salary of $50K during the relevant period, and (iii)
average annual family expenses of $40K for the Smith and Jones families
during the relevant period.
o a….
o b…
In re Marriage of Walker
 Facts:
o Appellant, W, appeals from judgment that distributed community
assets following their divorce. She argues the trial court incorrectly
valued the community real property and there was insufficient
evidence she breached her fiduciary duty.
o During the marriage and prior to his retirement, H contributed to a
retirement fund he’d opened 20 years before marriage. When he
retired, he rolled that fund into an individual retirement account
worth $105,000 at the time. Some years after his retirement, they
bought a house in CA. Then the parties separated and W moved out of
that house. At separation, the Morgan Stanley IRA was worth between
$2,900 and $3,200. The house she moved out of was appraised at
$265,000 in 2003 and H also petitioned for dissolution in 2003. Later
in 2003, the house was appraised at $303,000 and the dissolution of
the marriage became effective in July 2004.
 At trial, it assigned the house a value of $303,000 based on the
later 2003 appraisal and H’s opinion. It found W had a
fiduciary duty and that although the Morgan Stanley IRA was in
H’s name, it was CP b/c of commingling of community and
separate property funds and an inability to trace the SP
contributions. It found W who was family bookkeeper

breached her fiduciary duty to H by failing to inform him of the
depletion over the years of the Morgan Stanley IRA and the
consequent tax penalties. The January 2005 judgment
awarded the house to H and $71,066—the sum of what wife
had withdrawn from the IRA and the tax penalties.
Analysis:
o W’s first contention: is that the house should nor have been valued
at the later 2003 appraisal, but rather the 2004 appraisal.
 Court here: states rule that court has broad discretion to
determine the manner in which the community shall be
divided, including the valuation date and to fix the value of
assets and liability and it’s a factual issue. H’s opinion of
houses’ $303,000 value was in concurrence with a formal
appraisal based on specifics of his buying and selling
experience of comparable houses. W’s opinion of the 2004
appraisal was an estimate based on generalities, so affirms trial
court decision.
o W’s second contention: didn’t breach fiduciary duty by not
disclosing depletion of funds. Says the IRA was H’s SP and the statutes
(Family Code sections 721 and 1100) apply only to breaches in CP.
Also argued in the alternative that there’s insufficient evidence she
mismanaged the funds.
 Court here: found W knew everything about transferring of
funds and made withdrawals along with knowledge tax
liability. H never withdrew funds from IRA. Also, W’s argument
was premised on the entire IRA being H’s SP and now on
appeal, she is accepting that a portion was CP. This court finds
it unfair to posit a new theory for why $69,000 is H’s SP. It also
found she can’t be subject to statutory breach of fiduciary duty
for mismanagement of SP to sound public policy and the
Family Code section 721.
o Court on duty to disclose: W breached because she made withdrawals
from the IRA and she failed as bookkeeper to inform H that the IRA
was shrinking significantly each year as a result of her withdrawals
and the tax consequences. W said H never requested knowing about
this.
 This court: tries to ascertain Legislature’s intent with the two
Family Codes and they found that it intended that the duty to
make full disclosure and duty to provide equal access both
turned on a request by the other spouse.
o Then discussed a Corporations Code that the original Family Code
section 721 incorporated was repealed. That code defined the rights
and duties of the spousal fiduciary relationship required only that
partners provide each other “on demand” all info affecting
partnership.


This court says it should not be applied retroactively. The
Family Code section 721 was amended with intent to clarify
that the fiduciary relationship between spouses includes all the
same rights/duties in management of CP as rights and duties of
unmarried business partners. In this case, parties separated in
2002 and that section was amended in 2003.
 Court says: To penalize W for breach of statutory
spousal duty that didn’t exist during parties’ marriage
would not be correct.
Ruling:
o Judgment reversed to extent it awarded H $71,066, representing
withdrawals fro the Morgan Stanley IRA form from 98-2002 and tax
penalties. In all other respects, judgment is affirmed.
NOTES:
*
Evans v. Evans
NOTES:
Hypos on pg 280:
Credit Acquisitions
Gudelj v. Gudelj
 Facts:
o Prior to marriage in 1938, H was owner and operator of Pacific
Avenue Cleaners, which he continued until 1943. When he was
discharged from military service, he operated Owl Cleaners with a
partner, and that partnership ended a year later. H purchased a ¼
interest in the Helene French Cleaners.
o The court found that an undivided ¼ interest in that cleaners was the
SP of H. The records showed that the cleaners was purchased by H for
$11,500. $1,500 was in cash and the remaining $10K was executed in
a note. Trial court found the cash payment was H’s Sep funds and the
entire partnership interest was SP.
 W disagrees with the findings from evidence.
 Analysis:
o Court here: the evidence concerning the source of the $1,500 was
sufficient to support a finding that it came from H’s SP. H had testified
the money came from Owl Cleaners.
 Wife claims: Owl Cleaners should be presumed to have been CP
because the business was acquired during their marriage,

however RULE: that presumption is controlling only when it is
impossible to trace the source of specific property.
 In this case, presumption = rebutted by testimony of H
that Owl Cleaners was purchased with funds acquired
from the sale of the equipment of the first Cleaners—
which was his SP.
o Court here: states the record doesn’t support conclusion that the
balance of the purchase price of the partnership interest was made
from H’s SP.
 That part of the payment was made with a note signed by H,
and Rule: there’s a rebuttable presumption that property
acquired on credit during marriage is CP. Rule: 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. Rule: In absence of
evidence tending to prove that the seller primarily relied upon
the purchaser’s SP in extending credit, trial court must find in
accordance with the presumption.
 Here, no testimony was offered concerning intent of seller in
extending credit to H.
Ruling:
o H, having contributed $1500 (his sep property that he traced) (or
3/23 of the purchase price) is entitled to 3/23 of its value…
NOTES:
 His business property wasn’t divided equally. He got 3/23 back based upon
his investment. The balance was the community.
 Rule: In absence of evidence tending to prove that the seller primarily relied
upon the purchaser’s SP in extending credit, trial court must find in
accordance with the presumption. (THIS IS THE OLD RULE)
 Note 1: You want to start your law practice and you’re married. You go to the
bank and banker says what’s your income? Nothing. No cosigner but I’m
getting married. This is the credit worthy issue—do you have the ability to
repay. Where is the ability to repay coming from? SP or CP? Assume you have
money $10K from SP and I’ll assign it to you to pay the loan. Banker would
say no, I’ll assign it to you.
o What if we’re in land of “primarily relied upon.” Issue is now whether
the law practice was started with SP or CP. Relied on SP of ex.. That’s
how we determine primarily relied upon.
o What did the bank rely upon?  This is a question of fact.
 Note 4: CA has anti-deficiency rule. Protects family from debt they incurred.
Ford v. Ford
 Facts:
o H is appealing from the property provisions, which awarded his W.

o H argues: (1) the court erred in treating a farm as CP and (2) certain
funds accumulated from income produced by the farm.
o H owned as tenant in common with his brother 2 farms before he was
married. 4 years later, H traded his ½ interest in the Walnut
Township farm for his brother’s ½ interest in the Ohio Township
farm. At the same time brother sold the farm for $105,000. H got a
$113,000 loan from a bank to cover purchase price. The note to the
bank was signed by H and W.
o H was ordered to pay W the sum of $20,000 as her share of CP. Court
found this based on bank balances and other assets traced to farm
income, which was to be treated as CP.
o Trial judge found the equity in the Walnut farm (worth about
$33,500) was CP. Also found community interest in other assets
derived from farm income came to $3,350.
Analysis:
o W has to show clear and convincing evidence to rebut presumption
that postnuptial acquisitions are CP.
o W (respondent) cites 4 items of evidence for support:
 Her signature on the mortgage and promissory note
 Lender’s supposed reliance upon respondent’s income as
security for the loan
 References to the Walnut property as “our farm”
 Pictures taken of respondent and appellant at the farm.
o Court: says if money for purchase of property is obtained on credit of
community estate, the result is a community purchase and the intent
of the lender with respect to the credit upon which the loan was made
is determinative, so W’s evidence needs to be evaluated with respect
to the bank’s intention for extending credit.
o Court: secondly says pictures of the farms doesn’t help with figuring
out intention of the lender of the purchase price.
o Court: Only thing that gives support is W’s signature upon the
mortgage and promissory note.
o Court: says issue is: whether the signature of W on note and
mortgage is sufficient to support the implied finding that the lender
relied upon the credit of the community.
 Says many cases indicate signatures don’t compel a finding in
favor of the community.
 State of mind of the seller is a question of fact
 Circumstance in this case required W’s signature and it
raises inference that if she had not been willing to
execute the documents credit wouldn’t have been
extended.
o H points to Supreme Court decision which holds the signature of one
spouse on a note and purchase money mortgage encumbering
separate property of the other spouse cannot affect the right of the
parties as to the community or separate character of the proceeds.
 Court says the Supreme Court decisions H points to is difficult
to reconcile with Gudelj idea that the character of loan
proceeds may be determined according to the intent o the
party extending credit.
 Ruling:
o Court ultimately holds that W’s execution of note and mortgage
couldn’t affect the rights of the parties and under the evidence
presented, the only other inducement to the bank’s extension of credit
was the security given upon appellant’s SP. So Wlanut Township farm
and rent and profits it produced appear to have been SP.
o Reversed and for H.
NOTES:
 Note 1: That is a question of fact and W loses.
Marriage of Grinius
 Facts:
o W appeals from a judgment awarding restaurant real property to H as
his SP. W contends the purchase money loans were acquired or
obtained with a view toward community assets and contributions and
therefore are CP.
o Shortly after marriage, H resigned from his job so he and W could
open a restaurant. They found a building costing $60,000 and the
purchase money was obtained from a $20,000 downpayment from an
$80,000 Small Business Administration loan guarantee lent by a bank
and also $40,000 loaned by Home Federal Savings and Loan. H had
signed the SBA loan guarantee, H and W signed the promissory note
from the bank, and H signed the Home Federal Savings and Loan
promissory note alone. (SBA loan was secured by both CP and SP.
Without W’s knowledge, H placed title to the property in his name
alone.
o The $60K of the SBA loan was used to remodel, buy equipment, and
pay for their living and restaurant expenses. These were disbursed
through the restaurant’s checking account on which H and W were the
signators. This is also where personal and restaurant expenses were
paid from (it was a joint account). Their community earnings were
placed in the restaurant checking account but H would sometimes
deposit funds received from his SP into the account. Monthly
payments on purchase money loans were made from joint restaurant
checking account. Every so often, H would use his SP funds to pay for
SBA and Home Federal loans.
o Eventually H an W signed a $63K installment not in favor of SD Trust
and Savings, secured by a trust deed on the restaurant property. From



this, $42K was used to pay the balance on the Home Federal
promissory note.
o When they separated and before trial, H stipulated the restaurant
business was CP and the business was sold so they were granted $5K
each from the sale proceeds. Trial court found all the contested
assets, except the restaurant, to be CP. The restaurant, worth $340K
was determined to be H’s SP.
Issue on appeal:
o Trial court’s characterization of the restaurant property as H’s SP.
Analysis:
o (1) Court states rule that property bought during marriage by either
spouse is rebuttably presumed to be CP and spouse asserting its
separate character must overcome this presumption.
 In this case, H traces source of payments for restaurant
property to overcome the fundamental community
presumption. He argues the purchase money loans were SP
and the restaurant real property maintains the same character.
 Court: while the restaurant property was acquired shortly after
marriage and is presumed to be CP, however Rule: the
character of credit acquisitions during marriage is “determined
according to the intent of the lender to rely upon the SP of the
purchaser or upon a community asset…
o (2) Court analyzed a few cases and says that in all of them, loan
proceeds were characterized as a spouse’s separate property only
when direct or circumstantial evidence indicated the lender relied
solely on SP in offering the loan.
 Court then restates rule that loan proceeds acquired during
marriage are presumptively community property; however,
this presumption may be overcome by showing the lender
intended to rely solely upon a spouse’s SP and did in fact do so.
 Here, H presented no direct evidence of lender intent. The SBA
required 9 separate conditions.
 The primary collateral for the loan was the restaurant
property and that alone provides no inference of lender
intent. Also, W’s signing of the documents, without
more, does not compel a finding in favor of the
community.
Ruling:
o The restaurant real property is CP
o H failed to present sufficient evidence to rebut presumption.
Apportionment of Ownership vs. Reimbursement by the Title Estate
Vieux v. Vieux (This is a K of sale case)



Facts:
o This is an appeal from part of a judgment that was given in a suit for
divorce.
o Prior to marriage, P and D discussed purchasing a lot and they agreed
they wanted the property. Before marriage, P had entered into a K for
the purchase of the property and P paid $280 on account of the
purchase price and therefore took possession of it. After they married,
P and D expended community funds on the property with $553.68.
After the marriage, P received $2200 as payment for a bonus for the
execution of an oil lease covering the property and the $2200 was
paid by P on account of the balance of the purchase price on the
property. P then executed and delivered a deed of conveyance of the
property to his parents. During their marriage, P and D accumulated
CP in amount of $713.60 and $553.68 was expended on the property.
o At trial, it said Defendant (W) had no right, title, or interest in the
property.
Issue:
o Whether the property referred to was SP of the H.
Analysis:
o Court says it can infer the total purchase price of the property was
around $3,000—the sum of $280 having been paid by H prior to
marriage, sum of $553.68 after having been paid out of the
community funds, and $2,200 derived from the bonus for an oil lease
on the property having been used to complete the purchase price.
o Court found H expended $280 in acquiring the property while the sum
of $553.68 was contributed from community funds.
o Civil Code section 163 states “All property owned by the H before
marriage with the rents, issues, and profits, is his SP”
 Court says Rule: between H and W where community funds
are used to a considerable extent in payment of purchase price,
the meaning of the statute relating to the definition of separate
and community property of spouses can’t be so limited. The
confidential relationship existing between H and W forbids a
strict construction to be placed upon the statute which would
destroy the probably intent of H and W.
 It clarified legislature’s intent and said the ownership in the H
through and by virtue of which the W’s interest would be
entirely excluded, would necessarily be an absolute ownership,
as distinguished from a limited ownership and that so far as
community funds might participate n the acquisition or
protection of vested rights, to that extent proportionally should
the property be considered as community.
 Says other courts have held in similar cases that a part of
property involved may be regarded as community and a part
as separated depending upon conditions, not necessarily the


manner in which the contract for the purchase of the property
was entered into, but rather in which the payments were
made.
o In this case, H acquired a right to become an absolute owner o the
property in question and facts showing the required conditions were
met with funds furnished by the community. So the rights of the
parties should be measured by the direct contributions made b the
respective parties to the purchase price of the property.
Ruling:
o Community interest was entitled to share in the title to the property
in the same proportion as the amount contributed to the purchase
price by the community.
o Reversed and trial court needed to enter a new judgment on its
findings of fact.
Rule:
o Property purchased by one spouse before marriage is SP though the
deed therefore is not executed and delivered until after marriage, and
this is true though a part of the purchase price is not paid until after
marriage, in the absence of a showing that any part of the balance was
paid with community funds. In any event it would be CP only to the
extent and in the proportion that the purchase price is contributed by
the community.
NOTES:
 He made a down payment and bought property on time, but didn’t get title to
property.
 He put SP into purchase of his house, but didn’t get title b/c had to pay entire
K off before he could get title.
 He had right to get title upon payment of entire proceeds. He only had a K to
purchase, which was a conditional purchase. He did it with Community funds
and sep funds.
 We are now in equity. “Justice demands that the rights of the parties should
be measured by the direct contributions made by the respective parties to
the purchase price of the property.”
 This case was before Lucas.
 H took title. Not H and W.
 Note 1: gives overview.
o Family Code section 2640 may be read to supplant apportionment
and to introduce the reimbursement remedy associated with
“inception of right” and “time of vesting” analysis to those cases it
controls.
o Section 2640 is anomalous…
 Mortgage is called a deed of trust.
 Reimbursement is dollar-for-dollar reimbursing for payments made.
 No Lucas or anti-Lucas in this case.

No reimbursement here. It’s a percentage ownership of the property.
Marriage of Moore
 Facts:
o H appeals from judgment dissolving his marriage and contests trial
court’s determination of the CP interest residence.
o W purchased house in ’66 before she married H. Purchase price was
$56,640.57 to which W made down payment of $16,640.57 and
secured a loan for the balance of the purchase price. She took title in
her name alone.
o Before marriage, she made 7 monthly payments and reduced the
principal loan by $245.18. During marriage, community funds were
used. When they separated, W continued to live there and continued
to make payments. Trial court concluded the residence was W’s
separate property but that the community had an interest in it by
virtue of property payments made during marriage.
 Trial court found that community interest was to be
determined according to the ratio that the reduction of
principal resulting from community funds bears to the
reduction of principal from separate funds.
 Issue:
o Parties agreed that the community had acquired an interest in the
house through community funds to make payments. They disagreed
over how the interest should be determined.
o Appellant (H) contended that CP interest should be based upon the
full amount of the payments made, which includes interest, taxes, and
the insurance, rather than only on the amount by which the payments
reduce the principal.
 Analysis:
o Discussed Vieux rule, which says property purchased by one spouse
before marriage is SP and is true even though part of the purchase
price isn’t paid until after marriage in the absence of a showing that
any part of the balance was pad with community funds. It would be
CP only to extent and in proportion that the purchase price is
contributed by the community.
o Court then says Vieux isn’t persuasive because it didn’t expressly
consider the question of whether there should be any community
interest at all.
o Court next states the rule on community funds used to make
payments on property purchased by one of the spouses before
marriage, which is Rule: In CA, it gives to the community a pro tanto
community property interest in such property in the ratio that the
payments on the purchase price with community funds bear to the
payments made with separate funds. (This rule is understood to exclude
payments for interest and taxes.)



Appellant argues: interest and taxes should be included
because they represent a substantial part of current home
purchase payments, but the court doesn't agree.
Court disagrees because: The expenditures don’t increase the
equity value of the property. Also, the amount paid for interest,
taxes, and insurance don’t contribute to the capital investment.
Ruling:
o Finds no basis for departing from the rule which excludes amounts
paid for interest, taxes, and insurance from the calculation of the
separate and community interests.
NOTES:
 Lucas doesn’t apply b/c she took title in her name alone.
 only get credit for the paydown of the mortgage only.
 You take the paydown of mortgage and apply it to purchase price and
current price.
 Note 1: …
 Purchase price was $56,640.57. <- value of property went up. Therefore,
there’s a percentage ownership because the increase and the paydown
were co-extensive.
 Rule: In CA, it gives to the community a pro tanto community property
interest in such property in the ratio that the payments on the purchase
price with community funds bear to the payments made with separate
funds. (This rule is understood to exclude payments for interest and taxes.)
 Rule applied in this case: The separate property percentage interest is
determined by crediting the SP with the downpayment and the full
amount of the loan less the amount by which the CP payments reduced
the principal balance of the loan. ($16,640.57 plus ($40K minus
$5,986.20) equals $50,654.37).
E. Tort Recoveries and Insurance Proceeds


Initially, CA classified personal injury recoveries received during
marriage as community property.
It was not until the enactment of the Family Code, effective January 1,
1994, that the legislature explicitly articulated a general rule in section
780.
§ 780. Damages for Personal Injury to Married Person as Community
Property.

Except as provided in section 781 and subject to the rules of allocation set
forth in section 2603, money and other property received or to be
received by a married person in satisfaction of a judgment for damages
for personal injuries, or pursuant to an agreement for the settlement or
compromise of a claim for such damages is community property if the
cause of action for the damages arose during the marriage.
In contrast, with respect to distribution of personal injury recoveries at divorce, in
1968, the legislature took a new tack and enacted what is now Family Code section
2603.
This is still CP.
§ 2603. Community Estate Personal Injury Damages.


(a) “Community estate personal injury damages” as used in this section
means all money or other property received or to be received by a person
in satisfaction of a judgment for damages for the person’s personal
injuries or pursuant to an agreement for the settlement or compromise of
a claim for the damages, if the cause of action for the damages arose
during the marriage but is not separate property as described in section
781, unless the money or other property has been commingled with other
assets of the community estate.
(b) Community estate personal injury damages shall be assigned [at
divorce] to the party who suffered the injuries unless the court after
taking into account the economic condition and needs of each party, the
time that has elapsed since the recovery of the damages of the accrual of
the cause of the action, and all other facts of the case, determines that the
interests of justice require another disposition. In such a case, the
community estate personal injury damages shall be assigned to the
respective parties in such proportions as the court determines to be just,
except that at least one-half of the damages shall be assigned to the party
who suffered the injuries.
When was the money received by the parties = key question.
1968: legislature repeal 1957 provision and enacted now Fam Code 783.
Marriage of Devlin
 Facts:
o Parties separated in May 1977. W then initiated proceedings to
dissolve marriage, but parties reconciled prior to entry of final
judgment of the dissolution. They remained together until May ’81
and W later filed action to dissolve marriage. Before their first
separation, H had been injured in an accident and had damages
totaling $175,000, which he received after the parties had
reconciled.
o At trial, evidenced showed the PI damages had been spent and all
of the property of the community at the time of separation was



purchased with the proceeds from the personal injury. Trial court
found all of the CP was traceable to H’s personal injury proceeds.
Issue:
o Whether trial court erred in awarding most of the parties’ CP to H
on the basis that the property was acquired with H’s personal
injury proceeds.
Analysis:
o Court noted that personal injury damages received or to be
received from a cause of action arising during marriage are CP.
Upon dissolution however, Family Code 2603 says the proceeds
labeled “community estate… personal injury damages,” are to be
assigned to the injured spouse unless the court, considering the
facts of the case, determines the interests of justice required
another disposition.
o This court stated the Family Code 2603 recognized the special
nature of CP personal injury damages, but also vests discretion in
the trial court in distributing these damages upon dissolution of
the marriage.
 Wife contends: the property divided was purchased with
community property personal injury damages and
shouldn’t be divided, but court disagrees. She also wants to
transmute community property personal injury damages
into ordinary community property.
 Court here: says Rule: the rules regarding the
transmutation of separate property to community property
don’t apply to community property personal injury
damages. (SP is subject to complete control of spouse
owning that property. When that spouse voluntarily
decides to use SP for community purposes, it’s logical to
imply a gift of that property to the community in absence of
any agreement or understanding to the contrary.
 The form of title in which property is taken when
purchased with CP personal injury damages is not
determinative as to how property should be divided on
dissolution.
 Court says: Rule: the only time proceeds from a personal
injury award lose their character as CP personal injury
damages is, in the absence of an express agreement, when
such proceeds have been “commingled” with other CP and
it’s impossible to trace source of property or funds.
 In this case, there’s no commingling.
Rule:
o the only time proceeds from a personal injury award lose their
character as CP personal injury damages is, in the absence of an
express agreement, when such proceeds have been “commingled”

Notes:

with other CP ad it’s impossible to trace source of property or
funds.
Ruling:
o Affirmed for H.
NOTE 5.
Marriage of Logan
 Facts:
o W appeals from order denying her any CP interest in the proceeds
of her former H’s employment-related term life insurance policy.
o H worked for American Airlines, which deducted premiums for a
company-sponsored group term life insurance plan from his
salary. The judgment ordered H to maintain this life insurance
with the couple’s minor children as beneficiaries until they were
old enough. When H died, his children were adults and W brought
the action. Trial court determined she had no CP interest in the
proceeds and denied her request for a 39% share in the proceeds
of H’s life insurance policy because it didn’t believe the term
policies were CP. The court had rejected a few cases.


Issue:
Analysis:
o This court analyzed 3 similar cases:
 Biltoft v. Wooten: After separation but before dissolution,
decedent had changed the beneficiary under the policy
from his spouse to children. Issue on appeal was whether
the proceeds were CP or SP. Held proceeds were part CP
and SP according to the proportion that the amount of
premiums paid with CP contributed to the total amount of
premiums paid.
 Reasoning: Each premium payment did not
purchase a new contract of insurance because, if the
decedent had tried to purchase the policy after
separation, it’s unlikely he’d have been able to
obtain same coverage for same premium on same
terms of eligibility and decedent’s community
efforts for the 20 years prior to separation
maintained the policy in force.
 Lorenz, it dealt with the right to proceeds from term
insurance upon the death of the insured spouse prior to
dissolution. The analysis was that many fringe benefits of
employment such as use of an employer’s health club


NOTES:

facilities, reduced prices at the company or discounts were
of value to an employee, but didn’t constitute CP divisible
upon dissolution. Although the benefits become payable,
the policy itself is worthless and isn't divisible as CP.
 Gonzales reasoned Lorenz was incorrect and that spouses
had acquired rights because the policy had been obtained
during marriage with community funds, but this court, says
its conclusions have no basis.
o This court believes the Gonzales and Bowman decisions were from
an erroneous analysis of the nature of term life insurance policies.
They say term insurance is life insurance written for a fixed or
specified term.
 Says correct rule is that life insurance covering a
spouse who remains insurable is CP only for the period
beyond the date of separation for which community
funds were used to pay the premium. Means it can be
traced. If the insured dies during period the proceeds if
the policy are fully community. Otherwise, the insured
remaining insurable, a term policy doesn’t constitute a
divisible community asset since the policy is of no
value.
Rule:
o A term life insurance policy upon the life of one spouse is not
divisible as community property under the Family Law Act, even
though premiums for the policy before separation were paid with
community property funds.
 Exception: Arises if the insured spouse becomes
uninsurable during the term paid with community funds,
since the right to continued coverage upon payment of
future premiums is a valuable community property asset
for one who is insurable.
o (If the insured dies during the term paid with community funds,
the proceeds of the policy are community property)
o When premiums for a new term have been paid from
postseparation separate property earnings and the insured
remains insurable, the policy must be confirmed to the insured as
separate property.
Ruling:
o Affirmed for H.
Term insurance and the right to reinsure: Logan dictum has been rejected.
The right of an uninsurable person to renew his life insurance policy for
successive terms surely has economic value, but should that economic
value be treated as distributable community property at divorce?

Benificiary designation on CP life insurance policy. A married person
purchasing life insurance with community funds may designate as
beneficiary someone other than his spouse
F. EMPLOYEE BENEFITS
1. Retirement Benefits
 Fringe benefits are paid to you in different forms.
o They were not taxable.
o Examples of fringe benefits:
 life insurance
 child care
 paid vacation
 maternity leave
 membership to company gym
 Deferred benefits:
o Paid to you now but payable later.
 Two types of pension plans.
o Defined contribution plan:
 Reduce income tax by the amount of your contribution and
now and you pay it out when you retire.
 Most people want this plan.
o Defined benefit plan:
 It’s going away.
 You work for me for 30 years and at end of that time, you
get fixed payment.
 Time rule:
o Only works for a defined benefit plan because the contributions
may vary under a defined contribution plan.
Marriage of Brown
Rule: Vested pension rights, if earned during marriage, are CP that are subject to
division at divorce.
Vested= employee must work for some period of time before gaining any
pension rights. Means unconditional right to receive.
Matured = can take money now.
 Facts:
o Concerns the nonvested pension rights of respondent. His
employer (General Telephone Company) maintained a
noncontributory pension plan where the rights of the employees
depend upon their accumulation of points based on the years of
service and their age. This plan state an employee who is
discharged before he accumulates 78 points forfeits his rights.
(Employee with 78 points can opt for early retirement at lower

pension or continue to work until age 63 and retire at an increased
pension)
o When Respondent separated from his W, he’d accumulated 72
points which was hugely acquired during his marriage. Trial court
held that since Respondent hadn’t acquired a vested right to
retirement position, value of his pension rights didn’t become CP
subject to division by the court. Court awarded her the larger
share of the divided property and alimony of $75 per month, W is
appealing from portion of judgment that declares his pension
rights aren’t CP.
o Because his pension was an “unvested” pension, he had no
absolute rights to the pension. (If he had been discharged from
employment, he would’ve forfeited his pension rights.)
o Court here looked at prior law which described an unvested
pension as a “mere expectancy” because there was a possibility
that the pension would never vest. However, this court states it’s
actually “contingent interest in property” meaning it’s contingent
upon continued employment. It stated that characterizing an
unvested pension as a “mere expectancy” would result in an
inequitable division of community assets.
o This Court also says that if the mere expectancy definition of the
pension was used, those 24 years of community effort would
“escape division by the court as a community asset” and if this
happened, it would violate the fundamental principle that
property attributable to community earnings must be divided
equally when the community is dissolved. Essentially, W would be
deprived of her fair share of the community efforts if the pension
were not considered CP divisible at divorce. So it concluded that
pension rights, vested or not vested, comprise a property interest
of the community and that the spouse can share in it.
Ruling:
o Reversed and for W.
This is a defined benefit plan in this case.
Ex: Stream of income can be reduced in future to current value. (Take life
expectancy of person retiring, figure out monthly payment on pension, then figure
out value on pension, and then have person buy out)
Marriage of Gillmore
 Facts:
o H and W had separated after 14 years of marriage. H became
eligible to retire soon after their marriage dissolved, but because
he was young and healthy, he decided to continue working rather
than retiring. W had requested that the court order H to pay her

share of the pension benefits even though H hadn’t retired and
wasn’t planning to. His pension was both vested and had matured
(an unconditional right to immediate payment, usually matures
when employee reaches eligible age for retirement). (W did have
right to pension as CP).
o The question was whether she had a right to it immediately, and
the court stated that she did. It recognized that H was in control of
when he would retire, and also said that it is settled principle that
one spouse cannot, by invoking a condition wholly with his
control, defeat the community interest of the other spouse.
o So, trial court was order to distribute to W her share of H’s
retirement benefits. H would be required to pay W her share until
he retired. Also, her share remains “fixed” and doesn’t increase
when H’s pension rights increase. W, however, shares in cost of
living increases added to his pension rights.
Ruling:
o Portion of trial court’s order denying W’s request for immediate
distribution of her share of H’s retirement benefits is reversed.
Defined benefit plan case because getting paid monthly.
Gillmore right: If a person is allowed to retire, it’s vested and matured, but he/she
doesn’t retire, the nonemployee spouse who has interest in the plan will be paid.
Employe spouse will pay out of current earnings what it would’ve paid had he
retired.
ERISA (Employee Retirement Income Security Act)
 Intended to cure 2 problems in private sector pension plans: inadequate
funding and management, and unduly long vesting periods.
 It now permits 2 vesting options: total vesting of accumulated employer
contributions when the employee completes 5 years of employment, or
gradual vesting from the third through the seventh year of employment.
 QDRO (qualified domestic relations order):
o The pension plan qualifies the QDRO.
o It I a state court order relating to marital property rights, alimony,
or child support that satisfies certain formal requirements and
creates or recognizes an alternate payee’s right to all or a portion
of an employee’s pension benefits.
Marriage of Poppe

Facts:
o H is appealing from order granting W modification of a judgment
by fixing her interest in the pension being received by her husband
o
o
o
o
o
o
on the basis of the “time rule” at ½ the fraction 27.25/31.50, the
numerator being the number of years of reserve service during the
marriage before separation and the denominator being the
number of former H’s qualifying years of service, which amounts
to $253.60 of the total of $592 per month currently received.
H entered Navy on 1937 and served actively until July 1946 and
became a member of the Naval Reserve. He had married W a few
months before July 1946. They separate in June 1973. After
separation, H continued serving in Naval Reserve and retired in
October 1977. He began receiving pension payments in November
of that same year.
Retirement benefits paid to Navy personnel retiring from active
duty are based on number of years served and amount of the
retiree’s salary during active service. On the other hand, amount
of pension paid to Naval Reserve retirees is a percentage of the
base pay for the rank achieved arrived at on the basis of the
number of points accumulated by the retiree during his service in
the Naval Reserve.
H retired with 5,002 points and more than 3,000 were earned
during period he was on active duty prior to the marriage. 1,632
were during marriage. The rest was after his separation.
At trial court, H contended W’s interest in pension should be
computed by ½ times the fraction (1632/5002) times the amount
of the pension, ($592/month). Trial court determined H’s
qualifying years totaled 31.50 and using the time rule, divided the
27.25 years between marriage and separation by the 31.5
qualifying years. (The difference between what H contended and
court’s determination is W now gets bigger amount per month).
This court agrees with H that the apportionment was incorrect.
W asserts that the time rule is normal basis for apportioning
retirement benefits earned in part during marriage.
 Court here says the time rule is appropriate only where
the amount of the retirement benefits is substantially
related to the number of years of service. (RULE: This is
done by first determining the community interest to be that
fraction of retirement assets, the numerator represents the
length of service during the marriage but before separation,
and the denominator represents the total length of service
by the employee-spouse. Where the total number of years
served by an employee-spouse is a substantial factor in
computing the amount of retirement benefits to be received
by that spouse, the community is entitled to have its shared
based upon length of service performed on behalf of
community in proportion to the total length of service
necessary to earn those benefits. )


o In this case, amount of H’s pension is NOT substantially related to
the number of years he served in the Naval Reserve. The court
also says the amount of the pension is not a function of the
number of years of service; the number of years of service during
marriage is not a fair gauge of the community contribution.
o Court reversed the trial court’s ruling on part that says it
establishes W’s interest in the pension, with directions for it to redetermine the interests in the pension in a manner consistent with
the rule.
Ruling:
o Reversed.
Rule:
o This is done by first determining the community interest to be that
fraction of retirement assets, the numerator represents the length
of service during the marriage but before separation, and the
denominator represents the total length of service by the
employee-spouse. Where the total number of years served by an
employee-spouse is a substantial factor in computing the amount
of retirement benefits to be received by that spouse, the
community is entitled to have its shared based upon length of
service performed on behalf of community in proportion to the
total length of service necessary to earn those benefits.
Mariage of Lucero


Facts:
o H was working for the government which was interrupted a few
times. At the time of his retirement, H received credit for 30 years
and 1 month of employment service, but he had withdrawn his
retirement contributions. To obtain the maximum retirement
benefit, he had to redeposit these funds in the amount of $9,373.
He did this after separation from his wife using his own separate
funds. As of the date of his retirement, his monthly retirement
benefit was $840 per month. If H hadn’t redeposited his
retirement contributions, his monthly benefit would’ve been $474
per month.
o Trial court determined the community interest extended only to
the benefit H would’ve received absent the redeposit funds or
approximately 68% of $474. W contends trial court was wrong in
determining the community interest in H’s pension extended only
to the benefits that would’ve been received absent redeposit
funds.
o The husband used separate property funds rather than community
funds to reinstate a community pension.
Analysis:


o Here, H withdrew his retirement contribution in 1966 and this
money was spent for community purposes. His benefits
immediately increased by $366 per month so that the total
redeposit amount (9,373) was recouped in about 2 years.
o This court says to allow the H sole right to decide whether to
redeposit and right to elect whether to redeposit with sep or
community funds is to treat the redeposit right as H’s SP, and court
says this is incorrect because the redeposit right is a pension right
and the community owns all pension rights attributable to
employment during marriage.
o (Supplement Notes: By using separate property funds, the wife
would’ve been deprived of her share of the pension. Use of the SP
funds would be considered taking unfair advantage of the other
spouse and thus a breach of the fiduciary duty. )
Ruling:
o Modified and it helps W. Respondent (H) was ordered to pay W
122/361 of all retirement benefits received to that date.
Rule:
o By using separate property funds, the wife would’ve been
deprived of her share of the pension. Use of the SP funds would be
considered taking unfair advantage of the other spouse and thus a
breach of the fiduciary duty
Marriage of Jones



Facts:
o H lost his leg in combat and was retired for disability. When W
filed suit for dissolution of the marriage a few years later, she
claimed her H’s right to lifetime disability payments as a
community asset. Superior court rejected that claim ruling that
payments received after dissolution would be SP of the H. This
court agreed.
Issue:
Analysis:
o In reaching this decision, the court stated that H’s disability
payments derive from a military retirement program. H could
retire if he served at least 20 years, his disability rate was at 30%
or higher and he served at least 8 years, or his disability rates at
30% or higher and was incurred on active duty or in the line of
duty during wartime.
o H served for 12 years and had no vested right to a pension by
reason of longevity of service—he receives a pension only because
of his disability. The court then stated even though the court holds
that community property law vested retirement benefits,

attributable to employment during marriage, constitutes a
community asset subject to division upon dissolution, disability
pay doesn’t serve primarily as a form of deferred compensation
for past services like retirement benefits.
o They reasoned that the reduced earnings of the veteran are a loss
to the community if the marriage continues. But the loss doesn't
continue after dissolution. So, because disability pay serves
primarily to compensate the disabled serviceman for lost earning
capacity, court concluded that only such payments as are received
during the marriage constitute a community asset.

Ruling:
o Because disability pay serves primarily to compensate the
disabled serviceman for lost earning capacity, court concluded
that only such payments as are received during the marriage
constitute a community asset.
Marriage of Stenquist



Facts:
o The husband served in the military and was injured. H married in
1950 after he’d been in the military for 6 years. In 1953, he
suffered an injury that left him 80% disabled, but he continued to
work in the military until he retired in 1970. Upon retirement, he
was entitled to choose regular retirement pay or disability pay.
The retirement pay was paid at a rate of 65% of his basic pay;
disability pay was paid at rate of 75% of his basic pay. H began to
receive the higher disability pay.
o In 1974, H sought a divorce and the trial court determined that all
pension rights attributable to H’s military service before marriage,
plus the portion of those rights earned during marriage
attributable to H’s disability, constituted his SP. It also ruled that
that portion of the pension rights earned after the marriage
equivalent to an ordinary retirement pension, constituted a
community asset.
Issue:
o H appeals from judgment awarding his W part of his pension as
CP.
Analysis:
o This court states the Rule: amount of retired pay the serviceman
receives depends largely on his monthly pay at retirement, a
function of longevity of service and rank, and rank itself is closely
related to length of service. It cites Jones and says they held a
serviceman’s right to disability pay, acquired before he had earned


a vested right to ordinary retirement pay, was SP. It also cited
Brown saying it held that vested and nonvested pesion rights
should be treated alike. They say these cases support the division
of H’s pension here.
o Then looked to Jones where they held when a spouse is entitled to
received a pension only because he is disabled, and has no right to
a pension because of a longevity of service, the disability benefit
payments are his SP upon dissolution of the marriage.
o Here, the court says it can’t permit the serviceman’s election of a
disability pension to defeat the community interest in his right to a
pension based on longevity. Also, only a portion of H’s pension
benefit payments, though termed disability payments, is properly
allocable to disability.
Ruling:
Rule:
NOTES:
* Marriage of Elfmont and In Marriage of Saslow.