Opinion
8-16-1984
IN RE MARRIAGE OF BUOL. Robert BUOL, Plaintiff and Appellant, v. Esther BUOL, Defendant and Respondent. A016355.
T.G. Fitzgerald, San Rafael, for plaintiff and appellant. Mary Catherine Farley, Sausalito, for defendant and respondent.
Page 543 205 Cal.Rptr. 543 159 Cal.App.3d 174 IN RE MARRIAGE OF BUOL. Robert BUOL, Plaintiff and Appellant, v. Esther BUOL, Defendant and Respondent. A016355. Court of Appeal, First District, Division 5, California. Aug. 16, 1984. Rehearing Denied Sept. 11, 1984. For Opinion onHearing, see 218 Cal.Rptr. 31, 705 P.2d 354. Page 545 T.G. Fitzgerald, San Rafael, for plaintiff and appellant. Mary Catherine Farley, Sausalito, for defendant and respondent. KING, Associate Justice. In this case we hold that joint tenancy property acquired during marriage is community property upon a dissolution, even though purchased entirely with the separate property funds of one spouse pursuant to an oral agreement or understanding that the property is the separate property of that spouse. We further hold that although one spouse's traceable separate property funds expended for the down payment, improvements, and the principal balance of mortgages on such property are reimbursable to that spouse, all appreciation in the property is community property, even though no community property funds were expended on the property. Although we reach a result which is inequitable, we are compelled to do so by newly enacted sections 4800.1 and 4800.2 of the Civil Code. Achievement of more equitable results must come from legislative recognition of the inequity and statutory enactments to cure it, not by judicial end runs. FACTS Robert and Esther Buol married in 1943 and separated in 1977. There are three children of the marriage. Esther had one child from a prior marriage. In 1954 Esther began earning money by housekeeping, babysitting, and taking care of an elderly woman. In 1957 she received a lump sum payment of $2,000 as support for her child by the prior marriage. From 1959 until the time of trial, Esther worked as a nurse's assistant at Kentfield Medical Hospital. She placed all of her earnings and her lump sum support payment in a bank account held in her name alone. The trial court found that Robert and Esther agreed all of her earnings and the child support payment would be her separate property. In 1963 Esther purchased a house in San Rafael for $17,500. She paid the down payment of $1,500 from her separate bank account, and financed the balance with two mortgages. The court found there was "overwhelming" evidence that Robert and Esther had a common understanding, both prior to and after its purchase, that the house would be her separate property. At a realtor's suggestion, however, title to the house was taken in joint tenancy. Esther made all subsequent house payments from her separate bank account. No community funds were ever expended on the property. TRIAL COURT'S DETERMINATION On August 10, 1980, Robert filed a petition for dissolution of marriage, claiming Page 546 the house was community property. After trial the court rendered findings that, (1) the parties had an understanding within the meaning of In re Marriage of Lucas (1980) 27 Cal.3d 808, 166 Cal.Rptr. 853, 614 P.2d 285 that the house would be Esther's separate property, (2) the parties had an understanding that all of Esther's earnings during marriage would be her separate property, and (3) Esther made all payments of principal, interest, and taxes on the house from her separate property earnings. In the judgment of dissolution, relying on Lucas, the court awarded the house to Esther as her separate property. Robert challenges this disposition of the house. We reverse the judgment and remand the cause for further proceedings. DISCUSSION Robert contends that the evidence was insufficient to support the trial court's finding of a Lucas agreement. While this appeal was pending, however, the Legislature enacted Assembly Bill No. 26, adding sections 4800.1 1 and 4800.2 TO THE CIVIL CODE 2 . 3 Section 4800.1 establishes a presumption that "property acquired by the parties during marriage in joint tenancy form is presumed to be community property." The presumption is rebuttable only by a statement in the documentary evidence of title or by a written agreement that the property is separate property. Section 4800.2 provides for reimbursement to a spouse for contributions to the acquisition of such community property to the extent the spouse can trace them to a separate property source. Reimbursement is limited to down payments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property, and is not permitted for payment of interest or payment for maintenance, insurance, or property taxes. (See In re Marriage of Neal (1984) 153 Cal.App.3d 117, 200 Cal.Rptr. 341.) Sections 4800.1 and 4800.2 are applicable to the present proceeding, as the action was not yet final as of the statutes' effective date. 4 Thus it is now irrelevant whether the evidence was sufficient to support the finding of a Lucas agreement or understanding. Regardless of the parties' oral understanding regarding the ownership of the house, the section 4800.1 presumption of community property for property acquired during the marriage in joint tenancy form can only be rebutted by a writing. (Id., at pp. 122-125 fns. 6, 12, 200 Cal.Rptr. 341.) The judgment must be reversed, and Page 547 on remand the house must be characterized as community property. However, Esther adequately traced all contributions to the acquisition of the house to a separate property source, so she is entitled to the reimbursement provided by section 4800.2. Several witnesses testified that Robert had said on many occasions that Esther's earnings were her own money, and Robert admitted in his own trial testimony and in deposition testimony that he and Esther had agreed that her earnings were her own. At trial Esther presented evidence, in the form of cancelled checks from her separate bank account, that she had made the down payment and all mortgage payments with her separate earnings from her separate bank account. This evidence supported the trial court's finding that Esther made all house payments from her separate property earnings. 5 On remand, therefore, the trial court shall order reimbursement to Esther for her separate property contributions to the acquisition of the house. Under section 4800.2 this reimbursement shall include the down payment, payments to principal and payments for improvements, if any, but not payments of interest or for maintenance, insurance, or property taxes. ANALYSIS OF PRESUMPTIONS Assembly Bill No. 26 (1983 Stats., ch. 342) enacted sections 4800.1 and 4800.2, and amended section 5110. The report of the Senate Committee on the Judiciary on Assembly Bill No. 26 6 contains statements which make it appear that the Legislature adopted this legislation intending to simplify and make consistent, however title might be held, the following: (1) the characterization of property where claims of separate property interests are made, (2) a right of reimbursement for any separate property so expended, and (3) the apportionment (or non-apportionment) of appreciation between separate and community property interests in the asset. However, the section 4800.1 limitation requiring a writing to overcome the presumption of community property is applicable only to property acquired during the marriage in joint tenancy form. Our analysis of Assembly Bill No. 26, of previously existing statutory and case law, and of subsequent appellate decisions makes it clear that if consistency in the treatment of property upon dissolution of a marriage was the legislative goal, it has not been accomplished. For the benefit of the bench and bar, and for consideration by the Legislature, we set forth our analysis. There are ordinarily five circumstances where presumptions arise as to the character of property in which a separate property interest is claimed at the time of dissolution. To illustrate the inconsistency in characterization of property, reimbursement or non-reimbursement of separate property contributions, and apportionment or non-apportionment of appreciation between separate and community property interests, depending upon the form of title by which property is held, we analyze each of the five presumptions, considering the effect upon each of the enactment of Assembly Bill No. 26. I. Form of title presumption. This is a presumption, sometimes called the "common law" presumption, that the form of title by which property is held gives rise to a rebuttable presumption of its character. Thus, record title is determinative of character, no matter when the property was acquired, or what the character of the funds utilized for its purchase, unless ownership interests are otherwise sufficiently established. (In re Marriage Page 548 of Lucas, supra, 27 Cal.3d at pp. 808, 813-815, 166 Cal.Rptr. 853, 614 P.2d 285; Socol v. King (1950) 36 Cal.2d 342, 223 P.2d 627.) Tracing the character of funds expended upon the property is insufficient to rebut this presumption; there must be an understanding or agreement, which can be oral, that ownership is to be other than as indicated by the form of title. (In re Marriage of Lucas, supra, 27 Cal.3d at p. 813, 166 Cal.Rptr. 853, 614 P.2d 285.) Enactment of section 4800.1 has the effect of changing this presumption only if the property was acquired during marriage in joint tenancy form. (In re Marriage of Neal, supra, 153 Cal.App.3d at pp. 126-127, 200 Cal.Rptr. 341.) If not, this presumption is subject to the holding in Lucas, thus there would be an equitable apportionment of any appreciation in such property between separate and community interests in accordance with the Aufmuth formula. (In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 152 Cal.Rptr. 668, as approved in In re Marriage of Lucas, supra, 27 Cal.3d at p. 816, 166 Cal.Rptr. 853, 614 P.2d 285.) II. Community property presumption for joint tenancy property acquired during marriage. Assembly Bill No. 26 repealed the presumption previously contained in section 5110 that a single family residence acquired by spouses in joint tenancy during marriage was presumed to be community property. The enactment of section 4800.1 both superseded the "common law" presumption as to property acquired during marriage in joint tenancy, and also greatly expanded the former section 5110 presumption to apply to all property acquired in joint tenancy during the marriage. In adopting section 4800.1, the Legislature also, in effect, created a statute of frauds by providing that this presumption of community property could be rebutted only by a writing. (See In re Marriage of Neal, supra, 153 Cal.App.3d at pp. 122-123, 200 Cal.Rptr. 341.) Unlike section 4800.1, section 4800.2 is applicable to all community property, not just that held in joint tenancy. It allows a right of reimbursement for traceable separate property contributions "to the acquisition of property," as that phrase is defined within the section, but precludes the separate property contributor from receiving any portion of appreciation in the property. This right of reimbursement for traceable separate property contributions to the acquisition of community property, not previously available in the absence of a Lucas agreement or understanding, caused this legislation to be referred to as anti-Lucas legislation. Section 4800.2 also, in effect, creates a statute of frauds by mandating the reimbursement of such separate property contributions, absent a writing to the contrary. III. Separate property presumption for acquisition by a wife prior to 1975. The presumption contained in section 5110 that property acquired by a married woman by an instrument in writing prior to January 1, 1975, is presumed to be her separate property is unaffected by the enactment of Assembly Bill No. 26. This presumption can be rebutted by a greater range of evidence including a showing that the husband had no intent to make a gift to the wife, that the wife used community property to purchase the property in her own name without her husband's knowledge or consent, that there was no agreement between husband and wife to transmute community property to wife's separate property, or that wife used community property to purchase property in her own name with husband's knowledge, but husband did not intend a gift. (See In re Marriage of Rives (1982) 130 Cal.App.3d 138, 181 Cal.Rptr. 572; In re Marriage of Ashodian (1979) 96 Cal.App.3d 43, 157 Cal.Rptr. 555.) IV. Presumption of community property where title is taken as husband and wife. Also unaffected by the enactment of Assembly Bill No. 26 is the presumption Page 549 contained in section 5110 that property acquired by spouses by an instrument in writing describing them as husband and wife is presumed to be community property. This presumption cannot be rebutted merely by tracing the funds utilized for the acquisition of the property to a separate source. (See In re Marriage of Cademartori (1981) 119 Cal.App.3d 970, 174 Cal.Rptr. 292.) However, it may be rebutted by a written or oral agreement or understanding showing a different ownership status and, if so rebutted, an apportionment of appreciation between separate and community property interests would be required applying the Aufmuth formula. (See In re Marriage of Lucas, supra, 27 Cal.3d at p. 816, 166 Cal.Rptr. 853, 614 P.2d 285.) If the presumption is not rebutted, although section 4800.2 provides for a right of reimbursement of traceable separate property funds utilized for "the acquisition of the property," it also requires that all appreciation belongs to the community. V. General presumption of community property. If none of the foregoing presumptions apply and the character of the property is disputed, section 5110 provides the general presumption that all property acquired by either spouse during marriage, if not separate property pursuant to sections 5107, 5108 or 5126, is presumed to be community property. (See v. See (1966) 64 Cal.2d 778, 51 Cal.Rptr. 888, 415 P.2d 776; In re Marriage of Baragry (1977) 73 Cal.App.3d 444, 140 Cal.Rptr. 779.) This general presumption of community property is the one most easily rebutted. It is not a title presumption, and thus is not governed by the holding in Lucas. It may be overcome by tracing pursuant to In re Marriage of Mix (1975) 14 Cal.3d 604, 608-612, 122 Cal.Rptr. 79, 536 P.2d 479, by proof of an agreement or understanding, or by proof it was acquired as a gift pursuant to sections 5107 or 5108. To the extent separate and community property interests are found to exist in such property, appreciation in the property would be apportioned between those interests utilizing the Aufmuth formula. (In re Marriage of Lucas, supra, 27 Cal.3d at p. 816, 166 Cal.Rptr. 853, 614 P.2d 285.) VI. Summary of analysis. Thus it can be seen that passage of Assembly Bill No. 26, rather than making the disposition of property held in different forms of title more consistent upon a marital dissolution has, in fact, made it less consistent. Since section 4800.2 only applies to community property in which there are traceable separate property contributions "to the acquisition of the property," that section will most frequently be applicable when the character of the property has been determined as community pursuant to section 4800.1, because it was acquired in joint tenancy, or for other community property for which a Lucas agreement cannot be proven. When any other presumption applies and is rebutted by proof of a Lucas agreement or understanding to establish a separate interest in the property, that separate property interest, as well as apportionment of appreciation to it, is segregated out by use of the Aufmuth formula, leaving no separate property interest in the community portion and the appreciation apportioned to the community portion of the property. 7 CONCLUSION With regard to the instant case, if the realtor had advised Esther to take title in any form other than as joint tenants or tenants in common, we would affirm the trial court's judgment that Esther receive the home as her separate property. Because of the fortuitous circumstance of taking title with Robert in joint tenancy, a harsh result occurs. This home was purchased entirely with Esther's separate property funds for $17,500. The difference between that amount (as well as any other separate property funds of Esther used for Page 550 "the acquisition of the property") and the home's fair market value, alleged to be $175,000 at the time of trial, must be found, pursuant to sections 4800.1 and 4800.2, to be community property. Thus, because the property was acquired in joint tenancy, the community, which did not put a penny into the property, could receive in excess of $140,000, while Esther, whose separate property funds made all payments on the property, will be reimbursed something in the neighborhood of $17,500. It is a trap for the unwary (which would include most spouses) for different allocations of property to occur upon a dissolution of marriage based solely upon the form of title by which property is taken. The Report of the Senate Committee of the Judiciary on Assembly Bill No. 26 began by stating, "A continuing problem in California law is that married persons frequently take title to property in joint tenancy form even though the property is acquired with community funds and even though the married persons are unaware of the different legal consequences of joint tenancy and community property tenure." (See Rep. of Sen. Com. on Judiciary on Assem. Bill No. 26, July 14, 1983, 83 Sen.J. (1983 Reg.Sess.) p. 4865.) Thus the Legislature itself has recognized the inequities which arise upon a dissolution of a marriage because parties take title to property during marriage without any recognition or understanding of how it will effect their interests in the property if an unforeseen dissolution of their marriage occurs. Upon dissolution it would appear more equitable, however title may be held, to have all property acquired by spouses during the marriage which contain separate and community interests treated consistently for purposes of characterizing the property, rebutting any presumptions as to the character of the property, providing for the reimbursement of separate property contributions to the acquisition of the property, and apportioning appreciation between community and separate property interests in the property. For example, it defies both logic and common sense not to apportion appreciation in the property between separate and community contributions to the acquisition of the property where property is held in joint tenancy form, but to apportion appreciation if title is held as husband and wife, as community property, or in the names of both parties. The inequity having arisen by statute, however, any cure should come from the Legislature. DISPOSITION The judgment is reversed. The cause is remanded with directions to the trial court to characterize and divide the house as community property after ordering reimbursement to Esther for her separate property contributions under section 4800.2. Esther shall recover her costs on appeal. LOW, P.J., and HANING, J., concur. --------------- 1 Section 4800.1 states: "For the purpose of division of property upon dissolution of marriage or legal separation, property acquired by the parties during marriage in joint tenancy form is presumed to be community property. This presumption is a presumption affecting the burden of proof and may be rebutted by either of the following: (a) A clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property. (b) Proof that the parties have made a written agreement that the property is separate property." 2 Section 4800.2 states: "In the division of community property under this part unless a party has made a written waiver of the right to reimbursement or signed a writing that has the effect of a waiver, the party shall be reimbursed for his or her contributions to the acquisition of the property to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and shall not exceed the net value of the property at the time of the division. As used in this section, 'contributions to the acquisition of the property' include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property." 3 All statutory references are to the Civil Code. 4 See 1983 Statutes, chapter 342, section 4 [Civil Code section 4800.1 applies to "proceedings commenced before January 1, 1984, to the extent proceedings as to the division of the property are not yet final on January 1, 1984"]; Report of Senate Committee on Judiciary on Assembly Bill No. 26, July 14, 1983, 83 Senate Journal, 1983 Regular Session, pages 4865, 4867; footnote 6, post. 5 Robert also argues that he was prevented from rebutting Esther's evidence of a Lucas agreement by two allegedly misleading comments made by the court during trial. With the enactment of section 4800.1, this argument has become irrelevant. 6 A copy of the Report of the Senate Committee on Judiciary on Assembly Bill No. 26, July 14, 1983, 83 Senate Journal, 1983 Regular Session, pages 4865, 4867 is attached as an appendix to this court's opinion in In re Marriage of Neal (1984) 153 Cal.App.3d 117, 127-129, 200 Cal.Rptr. 341. 7 For a more detailed discussion of the presumptions and their effect, see Major 1984 Legislation--Family Law Practice (The Rutter Group) at pages 5-30.