CP Outline
LoisSchwartzFall 2006
CP Outline
Important Dates:
- January 1, 1975: Married Woman’s Special Presumption; Equal Management and control for spouses
- January 1, 1984: Family Code §2640:Anti-Lucas legislation (reimbursement scheme)
- January 1, 1984: Reimbursement to the community who contributes to SP education
- January 1, 1985: need express written declaration by spouse whose interests are adversely affected to transmute property from CP to SP
- January 1, 1986: Premarital Agreement Actprenups must be in writing and signed by both parties
- Prior to January 1, 2000: unmarried same-sex couples=unmarried cohabitants
- January 1, 2000-July 1, 2003: could register as domestic partners
- January 1, 2001 or 2002: Anti-Bonds legislationFamily Code §11615(c)
- January 1, 2005: CA Domestic Partner Rights and Responsibilities Act of 2003 is passedCP laws now apply to Domestic Partners
I.(Into toCP) Chapter 1—Development of the CA CP system
A.Intro
1.Unless the couple makes an agreement to the contrary, all property acquired during marriage by the labor, skills, or efforts (LSE) of either spouse is CPthat is owned equally by both spouses.
2.Characterization (CPor SP) is the heart of the CP question. (No property can be both.)
3.8 statutory CP scheme states (CA is different though); rest are CL states who often use equitable distribution schemes to rectify some of the harsh results of a non-CP scheme.
a)CP: Louisiana, Texas, New Mexico, Arizona, CA, Washington, Idaho, and Nevada
b)CL: each spouse owns whatever he/she earns.
c)Wisconsin has a modified system that amounts to a CP scheme.
4.CP is specified in the CA Family Code and has origins in the CA constitution (1849), art. 11, §14
B.CP Defined
1.Property held in common by anH and W, each having an undivided one-half interest in this property by virtue of their marital status. (Applies only to H/Ws or domestic partners who are legally married and only to income and assets acquired during the marriage.)
C.The Meaning of Marriage
1.Maynard v. Hill [USSC; 1888]
a)Facts: H left W in Ohio and didn’t support her and the kids financially. Claim by the W’s heirs as to a parcel of real property acquired by the H. If her challenge to the ex parte divorce was found valid, she’d be entitled to a significant amount of property under the land grant to her former H’s name.
b)Rule: Marriage is a social institution rather than a private K allowing the parties to set their own terms and thus is subject to legal constraints beyond the terms of the marriage K.
(1)CP law automatically applies to CA marriages, regardless of what the parties intend or understand.
D.Development of the Tracing Principle
1.Tracing Principle: SP produces SP and CP produces CP
2.CP includes all the property acquired by a married person through the use of his or her Labor, Skills, or Efforts (LSE)
a)When CP is used to buy other acquisitions, the new asset is CP. Similarly, when property classified as CP produces rents, profits, income, and increases in value, these products are CP.
3.George v. Ransom [CASC; 1860] (intro to tracing)
a)Facts: A creditor of H, sought W’s separate funds in payment for her H’s debt.
b)Rule: The creditor of the H cannot subject the proceeds or dividends of the SP estate of his W to his claim. (Rents/profits from W’s SP remains SP.)
c)Held: Court held that the H’s creditors could reach CP for his debts, but they could not reach the W’s SP or the proceeds or dividends of that property.
E.Development of the Equality Principle
1.Equality Principle: spouses have equal ownership interests in the CP
2.Stewart v. Stewart [CASC; 1926] (no longer good law; discusses the equality principle but elects against applying it)
a)Rule: The W does not have a present vested interest in the CP during the continuance of the marriage relation. She merely has a protected expectancy in the Stewart’s CP.
b)*Note: a year or so later, the Legislature did enact legislation stating that the interests of both spouses in the CP are present, existing, and equal.
F.The Principles of Contractual Modification
1.Parties may entirely or partially avoid the CA CP system by agreement. [CA Family Code §1500] (premarital or antenuptial agreements)
a)Premarital agreements made on or before January 1, 1986 are regulated by CA’s modified version of the Uniform Premarital Agreement Act. [CA Family Code §§1600-1617]
(1)Good faith required
(2)No consideration required
(3)Statute of Frauds requirement: there must be a writing signed by both parties. [CA Family Code §1611]
(a)BUT, an oral premarital agreement may be enforced when :
(i) the executory promise was fully executed by the promisor (an executory promise is one that not yet been performed, when it is performed , the promise is executed)
(ii) the promisor is estopped to assert the SOFbecause the other party relied to his/her detriment on the oral premarital agreement (getting married or staying married is not grounds for estoppel though), or
(iii) adoption or ratification during the marriage (pre 1985)
(4)Agreement is unenforceable if:
(a)Agreement limits support duties
(b)Agreement promotes divorce (In re Marriage of Noghrey)
(c)Unconscionable and non-disclosure
(i)If the party against whom enforcement is sought proves that: (i) it was unconscionable when executed; and (ii) the party did not and could not have had adequate knowledge of the wealth of the other party, and did not waive her right to disclosure of such wealth [CA Family Code §1615(a)(2)]
(d)Involuntarily executed
(e)*See new requirements in Family Code §1615 (c), subsection (c) which were added in 2001 in response to Marriage of Bonds (*very important)
(i)This § provides that an agreement was not executed voluntarily unless the court finds all of the following:
(a)The party against whom enforcement is sought was represented by independent counsel when she signed the agreement or, after being advised to seek independent counsel, expressly waived such representation in a separate writing;
(b)At least seven days before it was signed, the agreement was presented to the party against whom enforcement is sought and that party was advised to seek independent legal counsel;
(c)If unrepresented by legal counsel, the party against whom enforcement is sought was fully informed, in writing prior to the signing of the agreement, of the terms of the agreement and the rights she was giving up by signing the agreement, and was proficient in the language of the explanation and the agreement;
(d)The agreement and the other required writings were not executed under duress, fraud, or undue influence; and
(e)Any other factors the court deems relevant.
2.Policy Considerations (prenups)
a)In re Marriage of Noghrey[1985]
(1)Facts: There was an agreement that said if divorce, H gives ½ of his assets and $500,000 or whichever is greater to the W.
(2)Rule: An antenuptial agreement, the terms of which encourage or promote divorce, is against PP and is unenforceable.
(a)*A promise to give a substantial amount of $ or property only in the event of divorce, facilitates such an event and would be in violation of PP; whereas agreements that define the legal rights of the spouses with respect to property acquired before or after doesn’t violate the PP.
(3)*Consideration is not required for a prenup and there cannot be illusory consideration in the form of a K for preexisting marital duty.
b)Marriage of Bonds [CASC; 2000]
(1)Issue: Did Sun enter the agreement voluntarily?
(2)Rule according to the Bonds Court: In premarital agreement situations, the parties are not in a confidential or fiduciary relationships and the burden is on the party challenging the agreement to show a lack of voluntariness in entering the agreement.
(3)Sun had the burden of showing that she didn’t enter the agreement voluntarily and the Court found she didn’t meet that burden.
(4)*Legislature went ballistic and added (c) to §1615 added the requirements stated above in 2001. This § is not retroactive.
3.FormalitiesTransmutation
a)Pre-1985, Oral and implied agreements are enforceable
b)After January 1, 1985, a signed writing is required which expressly declares that a change in ownership of the property is being made [Family Code §852: signed by person who is adversely affected] (Estate of MacDonald)
(1)Exception: A writing is not required of personal gifts (like jewelry, clothes, stocks) between spouses which are relatively insubstantial in value in light of their circumstances. (Marriage of Steinberger) [Family Code §852(c)]
(2)A declaration of character of property in a will is not admissible evidence of a transmutation before the death of the testator (compare with a characterization of property in an inter vivos trust which is admissible to show transmutation)
c)Estate of Bibb [2001]
(1)Facts: The son, Dozier, from the first marriage, filed a petition to establish the estate’s ownership of the property lot, apartment building, and Rolls Royce. He contended that the property had not been validly transmuted from his dad’s SP to CPbecause the DMV records and grant deed didn’t clearly state the change.
(2)Rule: Need a writing that satisfies the SOF, clear and unambiguously states the change of status of the property independent of extrinsic evidence, and is consented to by the party who rights are adversely affected. [Family Code §852(a)]
(3)Held: Yes, the grant deed signed by the H transferring his SP interest in real property to himself and his W as joint tenants satisfies the express declaration requirement of the Family Code. BUT, no, an unsigned computer printout of DMV registration, indicating that the Rolls Royce was reregistered in the names of the H or the W (needs to be more specific than A or B) does not satisfy the requirements for a valid transmutation under the Family Code.
(a)*Extrinsic evidence is not allowed here
d)Marriage of Steinberger [2001] *Important exception to the §852 (a) writing requirement
(1)Facts: James gave Buff a diamond ring in celebration of their fifth wedding anniversary. When the couple filed for divorce, Buff claimed that it was her SP.
(2)Rule: Under Family Code §852, gifts of personal property that are substantial in value, taking into account the circumstances of the marriage, will not be considered converted to SPwithout the writing required by §852.
(3)*cards accompanying the gift doesn’t count as the writing
(4)*must know the financial worth of the couple to determine this issue
II.Chap. 2—Classification of property as CP or SP
A.General Presumption of CP (Presumption that Acquisition During Marriage is CP)
1.Basic presumption is that all earnings during marriage are CP, but a competing presumption is that if anything can be traced to SP prior to the marriage, it will remain SP.
2.Family Code §760: CP Defined
a)All property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is CP.
3.Family Code §770: SP of a Married Person
a)SP of a married person includes all of the following:
(1)All property owned by the person before marriage
(2)All property acquired by the person after marriage by gift, bequest, devise, or descent.
(3)The rents, issues, and profits of the property described in this section. [This is different than the original Spanish-Mexican system where these were CP.]
(4)A married person may, without consent of the person’s spouse, convey the person’s SP.
4.How to determine the present character of property:
a)Determine the character of the source property
b)Exchange Rule: A change in form doesn’t the change the character of the asset
c)Tracing
5.Raising the General Presumption of CP
a)The general presumption comes into play when the fact of acquisition during marriage is established.
b)Wilson v. Wilson [1946]
(1)Facts:H and W’s house was purchased in 1938 (7 years into the marriage), title was taken and remains in the H’s name. H paid for the house in cash and used funds that were accumulations of dividends from property owned by him before marriage. H argued that because the community funds were exhausted in paying for the living expenses, the house must have been purchased with his separate funds. (This is rebuttal evidence to the CP presumption.)
(2)Court held that because the house was purchased during the marriage, the CP presumption is strongly invoked. [Here, just by looking at the date of acquisition, the burden shifted to the party asserting the SP nature.]
(3)To overcome the CP presumption, H would have needed to trace clearly back to his SP funds (like a trust fund, etc); using process of elimination like he did doesn’t cut it.
c)Estate of Jolly [CASC; 1925]
(1)Facts: The probate judge ordered that distribution of the whole estate of W (who died 10 years after H) to be made to her heirs to the exclusion of H‘s heirs. They argue just becauseH died, doesn’t make the propertySP, it remains CP. They supported their argument by showing that she never did anything to enhance her estate by labor, skills, and efforts.
(2)Rule: All property acquired after marriage by either H or W or both is presumed to be CP and this presumption can be overcome only by clear and satisfactory proof that the property in question is SP—even in cases where only possession (as opposed to acquisition) of such property after marriage can be established.
(3)*Note: Court relied on the basic presumption that all property acquired after marriage starts is CP (acquisition approach). There is nothing here to show that anything has changed that CP status; her heirs could have rebutted by showing it was hers via gift, etc. or her LSE, but they just didn’t have any evidence to do that.
(4)*Note: CA Probate Code §640.5 which preserves CP says when the second spouse dies, a determination is required that shows what CP is traceable to CP and then CP rule will apply. The court will split the property between the relatives. (Peculiarity to CA law.)
6.Rebuttal of the General CP Presumption by Tracing
a)The usual method of rebutting the general CP presumption is to trace the asset back to a SP source. Difficult to do with bank records that are not clearly earmarked describing their source (Freese highlights this).
b)Freese v. Hibernia Savings and Loan [CASC; 1903]
(1)Facts: W owned two parcels of land and sold them both. She had opened a bank account in the name of “Frank or Ellen Denigan.” The account was closed 3 months after her death and $1K of it was paid to a third party. Her heirs argue that it was SP and so H can’t give it away. But, he argues that she transmuted the property by the title.
(2)Rule: The “clear and satisfactory” evidence standard for overcoming the general CP presumption requires only a preponderance of the testimony under all the facts and circumstances. If property can be traced back to SP, the presumption is overcome.
(a)Clear and satisfactory standard: little higher than a preponderance of the evidence, but is a little lower than clear and convincing evidence.
(3)Held: established beyond doubt that the two properties were Ellen’s SP and the profits therefore should have remained her SP.
B.Common Statutory Presumptions Regarding SP
1.Assets falling within one of these statutory categories are presumed to be SP:
a)Family Code §770: SP of a married person
b)Family Code §771: Earnings and accumulations during period of separation
c)Family Code §772: Earnings or accumulations after entry of judgment of legal separation
2.Estate of Clark[1928]
a)Issue: Is the $150K his SP because the right to get that $ was his right prior to the marriage and therefore his SP or should the receipt of the $150K be treated like income?(inception of right doctrine)
b)Rule: Property acquired by compromise is SP if the right compromised is SP.
3.Downer v. Bramet [1984]
a)Facts: H was given the W-4 ranch in Oregon along with two other employees by his boss. He didn’t mention this during the settlement talks. W argues this isn’t post-separation income, but deferred payment for LSE of the H during the marriage
b)Held: Even though the transfer of the ranch interest was legally a gift, there is substantial evidence the gift was made by former H’s employer in recognition of H’s devoted and skillful services during his lifelong employment.
c)*Note: Property acquired after the date of separation is SP, but the court makes an exception here because the H had been working all these years during the marriage and can’t just postpone his receipt and keep as SP.
4.In re Marriage of Hardin [1995]
a)Facts: H and W were married in 1961 and in 1969, H walked out of the apt. But, H and W continued their economic relationship and saw each other often. In 1991, they asked the court to judicially find when the date of their separation was. W argues it was in 1982 when Victor wanted to remarry, but H says it was in 1969 when he moved out.
b)Rule: The date of separation occurs when either of the parties does not intend to resume the marriage and his/ her actions bespeak the finality of the marital relationship.
c)*Note: there is both an objective and subjective component to this rulethe court will look, when there’s no agreement on the date of separation, at the subjective perception of one or both parties
(1)Objective look at objective factors like the date when there was no present intention of continuing the marriage combined with a complete and final break
d)*Note: date of separation requires more than just living separate and apart, factors relevant but not determinative are:
(1) the date the spouse moves out;
(2)the fact that the spouse never moves back;
(3)whether the move follows a heated argument;
(4)whether there are frequent arguments between the spouses;
(5)whether the spouse ever spent the night again; whether the spouse dated other people;
(6)whether the spouses cease to attend business, social, and family events together;
(7)whether the spouse has filed previous divorce papers
e)Factors indicating they haven’t legally separated:
(1)Continuing close personal relationship
(2)Economic togetherness (purchasing property, keeping a joint bank account)
C.Special Presumptions within the CP System
1.Special presumptions based on form of title
a)Married Woman’s Special Presumption:
(1)Despite the general presumption that property acquired by a married person is CP, when written title to property was placed in a married woman’s name alonebefore 1975, that property is presumptively the married woman’s SP. [Family Code §803]
(a)However, under Horsman, the court must allow rebuttal evidence by the other spouse
(b)Tracing is usually not enough to rebut, need to show intent to keep it CP too
(c)Underlying rationale for the presumption was that when a married man executed a conveyance of property to his W, he must have intended to change the property rights of himself and his W.
(2)In 1975, the equality amendments were added