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53 Cards in this Set

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How to ID the community property question on the bar exam
1. Hank and Wilma or Herb and Wendy

2. Question always end “Answer according to CA law”
Statutory definitions apply to property unless:
The character of the asset has been altered by

1. parties' agreement

2. parties' conduct

3. how title was taken
Separate Property
1. Property owned by either spouse before marriage

2. Prop acquired during marriage by gift, will or inheritance

3. Prop acquired during marriage with the expenditure of separate funds

4. The rents, issue and profits thereof- the income and capital gain from separate property
Community Property
- Prop other than SP, acquired by either spouse during marriage. The most common examples

i. Salary and wages earned by either spouse

ii.The income from community assets
Community Presumption
All assets acquired during marriage are presumptively community property.

Absent showing of the parties agreement or that title was taken in a form that overcomes the community presumption, the burden of proof that a particular asset is separate property is on the party so contending
Domestic Partnership
Same laws apply
CA does not recognize
1. Common law tenancy by the entirety estate

2. Does not have an “elective share statute”
Economic Community ends
1. Permanent Physical Separation

2. Intent not to resume marital relations (One spouse)
- Does not end if keep up Facade
CP not divided on divorce:
The court retains continuing jurisdiction to award CP that was not previously adjudicated and on motion the omitted or unadjudicated CP will be divided 50-50 unless court finds that “the interests of justice require an unequal division”
Absent property settlement agreement, all CP must be
Divided equally (50-50)

Each and every community asset divided equally

Unless economic circumstances warrant awarding certain assets wholly to one spouse (and each spouse ends up with 50% of all CP in terms of total economic value.)
Disparity in earning power etc.
can be considered only as to:

Spousal support

Child support
Where “economic circumstances” exception applies
Giving particular asset wholly to one spouse and “cash out” other spouse with other assets (with each spouse ending up with 50% of total CP in value)

1. Family residence and loss of family home would uproot couple's minor children

2. All 100 shares of a closely held corporation are CP

3. Awarding all of H's pension to H, other assets to W, so they can go their separate ways
Statutory Exceptions to 50-50 division
One spouse can end up with more than 50% in total value

1. One spouse misappropriates CP

2. One spouse's educational debt

3. One spouse incurred tort liability not based on activity for benefit of community

3. Personal injury award is given to injured spouse

4. Negative community: community liabilities exceed assets; relative ability of spouses to pay the debt is considered
Gift of CP
- Neither can make a gift of CP without other spouse's written consent

- Set aside or, on divorce, offsetting CP

- If don't learn until after H's death, can set aside as to one half CP (recover from donee or estate)

- Applies to life insurance unless US Gov't Bonds are involved (fed preemption unless purchase of bonds was a fraud or breach of trust)
Testamentary Disposition
Each spouse has the power of testamentary disposition over all of his or her separate property
Widow's Election Will
H gives all of one CP asset to someone else; Leaves all else to W

Can elect either, not both

Widow can take residuary estate under will (including devise in violation of CP)

Widow can take CP

Treated like an offer and acceptance of property settlement agreement
Acquisition on credit during marriage
Funds borrowed during marriage, and goods purchased on credit during marriage are presumptively on community credit

However, funds (and credit purchases) are classified according to primary intent of the lender (primarily looking to in satisfaction of the debt)

General reputation and creditworthiness are regarded as Community Assets

If secured by SP, probably SP (but still must look to intent of lender)

Regardless of character at time of acquisition, subsequent actions of the parties in paying off the mortgage may change the character of the asset under proration or “buy-in” rule
Undue Influence
Spouses are subject to fiduciary duties that arise from their confidential relationship, imposing a duty of highest GFFD with each other.

If one spouse gains an advantage from a transaction, a presumption of undue influence arises and that spouse has the burden of proof to show that he did not breach his fiduciary duty.

Moreover, a grossly negligent and reckless investment of community funds is a breach of spouse's fiduciary duty.
Altering the Character of Assets by Agreement
1. Agreement can alter specific assets or as to all acquisitions

2. May be made before or during marriage

- Premarital agreement must be in writing; signed by both parties

3. Transmutation: changed during marriage (gift or agreement)

- No consideration required
Exceptions to Statue of Frauds for premarital agreements
1. Oral agreement with partial performance (name as beneficiary)

2. Estoppel based on detrimental reliance (bring suit against estate)
Premarital agreement limit either party's obligation to furnish child support
Void, against statute and public policy

Can't limit rights of others
Defenses to enforcement of a premarital agreement
1. That it was not signed voluntarily

2. Unconscionable

- Old Cases: can't promote divorce ($100,000 not enough)
Premarital agreement not signed voluntary
1. Was represented by independent legal counsel at time agreement was signed (or waived in separate writing)

2. Was given at least 7 days to sign between

(i) being presented with agreement was signed and advised to seek legal counsel and

(ii) the signing

3. If not represented by ind counsel, was fully informed in writing (in a language in which the party was proficient) of terms and basic effect of agreement and what rights and obligations were being given up.

- Party must execute document

(i) document declaring that he or she received this information and

(ii) identifying who provided the information
Unconscionability
For all provisions in a premarital agreement other than waiver of spousal support, the agreement is unenforceable if it was “unconscionable when made” AND

(i) there was no fair, reasonable and full disclosure of the other party's property or financial obligations

(ii) the right to disclosure was not waived in writing; and

(iii) the party seeking to avoid enforcement had no adequate knowledge of the other party's property or financial obligations

- Unconscionability is decided as a Matter of Law
Waiver of Spousal Support
Unenforceable on one of two grounds

1. The provision is unenforceable unless party against whom enforcement is sought was represented by independent legal counsel at time agreement was signed

OR

2. Provision regarding spousal support is unconscionable at time of ENFORCEMENT- even if the party was represented by independent legal counsel.

- An unenforceable provision regarding spousal support may not become enforceable solely because the party against whom enforcement is sought was represented by independent counsel
Transmutations
- Before 1985, could be oral (express or implied)

- 1985: Must be
(i) in writing
(ii) signed by the spouse whose interest is adversely affected, AND must
(iii) expressly state that a change in ownership is being made

- Exception: gifts of tangible property of personal nature which are not substantial in value (circumstances)
Statement in a will as to character of property
In any proceeding commenced before death

Will not be admissible
Married Women's Special Presumption
Where CP was used to take written title in a married woman's name before 1975 and the title didn't indicate CP or JT was intended, the property is presumptively the wife's separate property

- Presumption not rebuttable against 3rd party BFP

- Presumption rebuttable as between H and W (can show other justification)

Three situations

i. Title taken in W's name alone before 1975

ii.Title taken in name of W and H before 1975, but title is not taken in joint tenancy form and not “husband and wife”(H's is still CP)

iii. Title in name of W and some 3rd party before 1975
Use CP to take written title in married woman's name post 1975
Presumption of gift

No inference of gift if shown as device to insulate from creditors
Presumptions that arise from taking title in both spouse's names (in “joint and equal form”)
- Marriage of Lucas: taking title in a form that raised a presumption of community property was inconsistent with the idea that W intend to preserve SP ownership interest (no source rule: can't trace; subjective intent immaterial)

- Legislature modification:

1. Lucas still law if issue arises at death

- If title is taken in joint and equal from, presumptively community property

- Presumption can be overcome only by proof of an agreement

- If taken as joint tenants, held in joint tenancy

- If taken as CP with right of survivorship, same

- No Separate Ownership – No Claim for Reimbursement

2. On Divorce (Anti-Lucas Statutes)

- Presumptively CP rebutted only by:

i. Express statement in the deed

ii. Written agreement by the properties

- Post 1984 contributions of SP to the acquisition or improvement of CP is entitled to reimbursement w/out interest for contributions to

DIP

1. Downpayments
2. Improvements,
3. Principal payments on mortgage (DIP)

- No reimbursement for interest, taxes, insurance, maintenance
Source Rules
Can trace where SP used to make downpayment
Installment purchase before marriage; debt paid down with CP after marriage
The community estate takes a pro rata portion of the property, measured by the amount (percentage) of Principal Debt Reduction attributable to the expenditure of community of funds

Only principal payments; payments of mortgage interest, property taxes, insurance premiums, etc., are not counted
Life insurance
1. Whole Life: Proration rule applies to payments

- Even if names another beneficiary, CP gets percentage of premiums paid

2. Term insurance: last premium determines character (each premium buys 1 year)
Community funds to improve SP
On own property:

- Fixtures Doctrine

- Improvements do not give an ownership interest

- Community: CP reimbursement claim (greater of cost or enhanced value)

Not Lucas (Lucas is SP on CP; this is CP on SP)

On other's property

- One court: presumption of gift

- Other: rejected presumption of gift (b/c other's cases antedate 1975)
Commingled Bank Accounts
Used Recapitulation accounting

The mere fact that SP funds are commingled with CP funds does not transform or transmute the SP into CP.

Burden of Proof on H (must use exhaustion method (no CP funds) or direct tracing)

Family expense presumption: it is presumed that expenditures for family expenses were made with community funds, even though separate funds were available.

If paid with SP funds: gift to the community with no reimbursement intended

Direct Tracing

1. Sufficient SP available

2. Intent to use

- Caveat: Anti-Lucas statutes to not apply to joint bank accounts
Business owned before marriage greatly increases in value during marriage
- Discuss both Van Camp and Pereira

- Make a judgment whether major factor in growth was capital investment (Van Camp) or personal skills and labor (Pereira)

“use the one that does substantial justice”
Pereira
Personal skills and effort

Favors CP

Spouse's time, skill, effort are all CP

Creative ideas, long hours, drew modest salary

Formula: Pay interest (simple) on SP value, rest is CP
Van Camp
Valuable company or asset

Strongly favors separate estate

Capital investment key factor in business's growth

Spouse paid substantial salary and large bonus (CP rewarded)

Value community labor, the rest is SP

CP: Value of spouse's services at market rates subtract out family expenses paid from CP
The rest is SP
W manages CP business
Reverse Pereira/Van Camp accounting
Pensions
- All employee retirement benefits acquired during marriage, whether or not vested, are CP

- Whole employment package are CP

- Proration rule

- Form of decree if not entitled

i. “When and if received decree”

ii. Pay with other assets of equal value

iii. Court can retain jurisdiction

- If has matured: election not to take cannot defeat present right

- If NPS predeceases: federal preemption- ERISA; no interest

- If divorce, NPS loses when dies

- Spouses of military personnel do have a CP right in military retirement plan
Disability retirement and workman's comp
Treated as wage replacement so classified as to when received, not when earned

Unless had option to take regular retirement benefit
Severance Pay
Split

SP: replaces lost earning

CP: part of compensation package
Stock Options
CP: form of incentive compensation

Date option awarded to date economic community ended/years awarded to exercisable
Goodwill of a professional practice
CP

Goodwill : those qualities that generate income beyond that derived from

(1) professional's labor and

(2) reasonable return on capital and physical assets.

Def: The factor that raises the expectation of continued patronage.

Valued:

i. Expert Witness

ii. Capitalization of excess earnings attributed to goodwill

- Buy-sell agreement with partners capping goodwill is evidence, but not conclusive
Educational Expenses
1. Professional degree is not property

2. Reimbursement available for educational expenses that enhanced earning capacity

- Reimbursement available if the educational expenses were incurred before marriage and the loans were paid with community funds after marriage

3. Defenses to reimbursement:

i. Community has already substantially benefited (10 yrs passed presumption)

ii. Other spouse also received CP-funded education

iii. Reduce spousal support

4. Debt goes with educated spouse
One spouse is tortfeasor of injured spouse
Recovery is SP or would benefit from wrongful act
3rd party tortfeasor settlement
Recovery is CP

BUT: in property division upon DIVORCE entire recovery to injured spouse as long as not been expended or commingled with other CP

UNLESS interests of justice, including economic need, require otherwise (only marital asset)

Death: CP
When H or W is tortfeasor to 3rd party
CP can be reached by judgment creditor

Order

i. If performing act for community: CP first, then SP

ii. If not performing for community: SP first, then CP

iii. Can't reach SP of nontortfeasor
Management
1. Equal management and control (buy, sell)

Exceptions

i. Business: spouse who operates a business interest that is all or substantially all CP has primary management and control (must notify in writing if sell, etc)

ii. Personal belongings: one spouse cannot sell or encumber personal property in family dwelling (transaction voidable)

2. Can void conveyance if the transfer w/in 1 yr SOL

i. Neither spouse can transfer or encumber their one-half interest in CP; only entire interest can be transferred or encumbered

ii. Exception “Family law attorney's real property lien”; only family law attorneys

3. Each spouse can incur community obligations (debt)

4. CP can reached if the debt was incurred before marriage unless earnings held in separate account and not commingled with other CP funds

5. SP can reached for medical debt, etc. (if CP available, reimbursed)

- True even if economic community had ended, only ends when marriage ends

Quasi CP treated the same
Debts after divorce
A creditor cannot reach CP awarded to a spouse unless that spouse

1. Incurred the debt

or

2. Was assigned the debt by the court
Multi-State Problems
1. Property acquired while the couple was domiciled in a non-community property state, which would have been classified as CP had it been acquired under the same circumstances in CA, is QUASI-CP.

2. For divorce, foreign real property treated the same as true CP (require execution of conveyance because have personal jurisdiction)

3. On death: personal property still treated like CP; foreign real property, situs law controls

- Quasi-CP does not give the non-acquiring spouse an ownership interest (no power of disposition) unconstitutional; like elective share

4. Creditors claim: same as CP

5. If from another CP state: CP is CP is CP

6. Buy foreign property with CP is CP upon divorce, upon death SP

- Death: since purchase from CP funds, may get resulting trust or constructive trust
Property Acquisitions Outside the Marital Relations
- CA does not recognize common law marriage unless validly contracted in other states

- Can be governed by contract law, aka Marvin agreement: express or implied from conduct; partnership or joint venture (as long as not 100% for sexual services)

- Putative spouse v. Unmarried cohabitants (absent Marvin agreement)

1. Objectively reasonable and good faith belief that she was married

2. Assets are quasi-marital property (divided 50-50 like CP)

If inducer brings claim: split decisions
Opening Paragraph to Essays
In California, all property acquired during marriage is community property (CP), while property acquired before marriage or after permanent separation, or by gift or inheritance, is separate property (SP)

The characterization of an asset as community property or separate property depends on three factors: (1) the source of the item, (2) actions of the parties that may have altered the character of the item, and (3) any statutroy presumptions affecting the item