Bay Area Divorce Lawyer Blog

California divorce courts generally consider any property owned by one spouse before a marriage that spouse’s separate property to be kept by the spouse in the event of a divorce. Community property, on the other hand, includes anything that one or both spouses acquire through their efforts during the marriage, and it is typically divided equally between the spouses upon divorce. A recent case from the state’s Fourth District Court of Appeals shows how spouses can change the nature of separate property by specifically granting the other spouse an interest in it.

Husband and Wife were married for roughly 32 years before separating in 2007. Two years earlier, they signed an agreement in which the couple stated that all of the property they owned now and anything they acquired going forward would be considered community property. The spouses were eventually able to resolve many of the issues related to the divorce, but a nine-day trial was also held to consider lingering matters related to property distribution.

Wife argued that the trial court erred in awarding Husband reimbursement for his separate property under Family Code section 2640 because of the agreement to transmute all separate property to community property.

Family Code section 2640. (a) “Contributions to the acquisition of property,” as used in this section, 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.   (b) In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate 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 may not exceed the net value of the property at the time of the division.

The court rejected Wife’s contention that Husband waived his 2640 reimbursement right when he signed the community property agreement. The account became community property with the signing of the community property agreement the right to reimbursement can only be waived with a specific writing that waives the right of reimbr]ursement. Since the community property agreement did not expressly waive the right of reimbursement, the account and the court said this was therefore a contribution of separate property to the community and therefore the 2640 reimbursement was applicable at the time of divorce. However, the court further found that because Husband and his father had added Wife to the account as a joint tenant prior to the father’s death the presumption of title and a section of the probate code prevailed such that the property was not separate property at the signing of the community property agreement, but was actually community property.

California divorces often raise a wide variety of complex issues, including those related to assessing and dividing community property. These issues – and much of the stress that often accompanies divorce cases – can be minimized through alternatives to litigation, such as collaborative divorce and mediation. With offices throughout the San Francisco Bay Area, California divorce lawyer Lorna Jaynes provides innovative legal tools to resolve many family law disputes without the bitterness and acrimony engendered by the adversarial process.

Related blog posts:

How Time Limits and Filing Deadlines Can Complicate California Divorce Cases – Ellis v. Ellis

Dividing Retirement Accounts in California Divorce Cases – In re Marriage of Keitany

Why Must I File a Lawsuit to Obtain a Divorce in California

California law operates under a set of guidelines in child support cases that is used to calculate a parent’s support obligations based primarily on each parent’s income and time with the child. The overall aim of the guidelines is to set the support at an amount that attempts to equalize the living standard in both homes. The guidelines calculation is generally presumed to be correct, but there are some circumstances in which a court may choose to order support at an amount lower than the calculated rate. As the Fifth District Court of Appeals recently explained, that includes situations in which the paying parent has an “extraordinarily high income,” and the guideline amount is more than the child needs.

boarder-1536813Mother and Father’s four-year marriage was annulled in 2004, after it was found that Mother was still married to her first husband. They had two daughters:  one born during the marriage, and the other born in 2008. Mother lived in Bakersfield with the children, as well as with a son that she had with her previous Husband and another daughter that Father had from a previous marriage. Father paid Mother more than $17,500 in child support per month for his three children. As a member of the Manuel Band of Mission Indians, Father received annual distributions from the tribe based on its profits from a casino. That money often totaled more than $2 million per year, according to the Court. He wasn’t employed and didn’t have any other sources of income.

Mother went to court in 2012, asking a judge to order Father to pay her at least the guideline child support amount of about $20,000 per month for the couple’s two daughters. The court declined, setting the amount instead at roughly $12,500. It said that the amount “would adequately ensure that the children’s needs will be provided for.” Mother had been receiving nearly this amount from Father for the two kids prior to the ruling, the court said, and failed to show that it wasn’t enough to meet the children’s needs.

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“Dogs are our link to paradise. They don’t know evil or jealousy or discontent. To sit with a dog on a hillside on a glorious afternoon is to be back in Eden, where doing nothing was not boring–it was peace.”
Milan Kundera

It is estimated that about 50% of American marriages end in divorce. It is also estimated that 62% of American households include at least one pet. So, it is reasonable to conclude that many divorces also involve pets.

Do you consider your dog to be a highly adored member of the family? If so, you may be surprised to learn that most family law courts consider your ball-catching canine to be classified as personal property.

Divorces in California almost always include the division of property (assets and debts) between spouses. And sometimes, quite often in fact, the property is a dog. Since most courts consider pets to be personal property just like your toaster or car, judges usually follow the same guidelines they use to determine who gets to keep personal property when couples are dividing things in a divorce. All of this applies equally to cats but for some reason, it is the care and control of dogs more so than cats, that are disputed issues. California’s First District Court of Appeals recently considered a dispute over the family dog.

dog-3-1403648Husband and Wife entered into a stipulated agreement resolving most of the issues related to their divorce. However, they were unable to agree on what to do with Sadie, the family dog. The stalemate led to a two-day trial, after which a judge concluded that the pet was community property. The California Family Code requires community property to be split evenly between spouses. Courts often award the property to one spouse and require that person to compensate the other spouse for his or her interest in the property. Here, the trial judge awarded the dog to Husband, noting that Wife had maintained sole use and possession of the animal since Husband filed for divorce two years earlier.

Wife appealed the decision, arguing that her daughter from another marriage was the dog’s true owner. She said her daughter adopted Sadie and registered the animal with local authorities under her own name. Unfortunately, however, Wife didn’t point to any evidence in the record from the trial court hearing showing that this was actually the case. Moreover, the First District said she didn’t even provide a transcript of the proceedings. A person appealing a divorce decision is not required to provide the transcript of the proceedings, but courts in California typically don’t go and get those records on their own and are likely to presume that the decision was supported by adequate evidence if there is no transcript to review.

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When a divorce involves a business of one or both spouses that is community property, issues of valuation arise, including how and when the business is valued. California’s Second District Court of Appeals recently considered the question of when a business is valued.

business-card-1525590Husband and Wife divorced in April 2012, after entering into a written settlement agreement related to the division of their community property and the payment of spousal support. They weren’t able to agree on one issue, however:  what to do with the small heating and air-conditioning company that the former spouses owned and operated together. Husband managed the company’s day to day work, while Wife was in charge of the business’s marketing and finances.

According to the Court, Husband “frustrated” Wife’s attempts to get information about the business by ousting her from her job, filing for bankruptcy, and refusing to produce financial records or to be deposed about the company’s financial health. He also transferred assets from the business to another business owned by a former employee and managed by Husband. Because of these actions, the trial court eventually decided to value the business based on what it was worth in May 2012 instead of setting the value at the time of a trial on the issue nearly two years later. The court accepted a valuation prepared by business broker and accountant Rodd Feingold, who set the value at about $470,000. Although a separate appraiser – Phillip Sabol – said the company was only worth $47,000, the Court rejected that valuation because it didn’t take into account the business’ goodwill and tangible assets. The court awarded the business to Husband and ordered him to pay Wife half of its value.

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California law imposes what’s called a “fiduciary duty” on spouses, which mandates the highest duty of good faith and fair dealing in their interactions with each other and to not take advantage of each other through fraud or other means.  As the state’s Third District Court of Appeals recently explained, however, the duty no longer exists once the spouses divorce.

old-books-1057004Husband and Wife were divorced in December 2010, after 14 years of marriage. They entered into a marital settlement agreement, under which the former spouses agreed that their individual stock ownership stakes in two different companies (OMI and Lifekind) would be considered each spouse’s separate property. They also pledged to “cooperate” in efforts to sell both companies.

Wife went back to court about a year later, seeking to force Husband to cooperate in selling both companies. She alleged that he had diluted her interest in OMI by obtaining a stock option agreement to give him a majority interest in the company, that he had obstructed the sale of Lifekind and OMI, and that he had breached his fiduciary duties related to the businesses. She asked a trial court to rescind Husband’s stock options deal and to issue sanctions against him for breaching the duty. The trial court ultimately declined, however, finding that Husband didn’t owe Wife an ongoing fiduciary duty after they divorced. The judge also found that the question of whether Husband owed Wife or other company shareholders a separate fiduciary duty based on his positions and ownership interests in the companies was beyond the family court’s jurisdiction.

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An annulment is a legal procedure in which a court rules that a marriage is legally invalid. Unlike a divorce, in which parties agree to legally end their marriage, an annulment treats that marriage as if it were invalid from the start. There are limited grounds on which an annulment can be granted, including when the marriage was obtained by fraud or physical force. A recent case out of California’s Fourth District Court of Appeals shows that an annulment can itself be wielded as some sort of threat. It also shows that a person who uses an annulment to try to make life more difficult for his or her spouse is likely to have a hefty bill to pay.

us-passport-1239581Husband and Wife – a Chinese citizen – separated in June 2012, following roughly two years of marriage. Husband filed for an annulment soon thereafter, claiming that Wife had defrauded him in order to obtain citizenship in the U.S. He also notified federal immigration authorities about the litigation, according to the Court, in order to interfere with Wife’s petition for permanent residency in the U.S. The Court said he later told Wife that he would withdraw the annulment petition if she agreed to “walk away from the marriage with her car and nothing more.”

Husband repeatedly declined to dismiss the annulment petition, the Court recalled, and made various moves to stall the discovery process in the case. During the discovery process, parties to a lawsuit have the opportunity to seek information, documents, and other evidence from one another. Husband “failed to cooperate and engaged in actions preventing his deposition and precluding Wang from obtaining relevant information,” the Court said.

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Filing a petition for dissolution of marriage in California, just like filing any other type of lawsuit in the Golden State, requires a lot of dotting of “I’s” and crossing of “T’s,” so to speak. In other words, there are a number of rules and regulations that must be closely followed. There are also many time limits and deadlines. In In re Marriage of Short, the state’s Fifth District Court of Appeals explains that courts enforce these procedural rules very strictly, even if you are in jail at the time of the divorce proceedings and not represented by a lawyer.

1390182_barbed_wire.jpgHusband filed a petition seeking to dissolve his marriage with Wife in Superior court in the County of Fresno in June 2010. The matter was later transferred to a court in Stanislaus County after Wife filed her own dissolution petition and request for a change of venue 10 days later. Husband represented himself without an attorney following the venue change. He was later arrested and held in Fresno County Jail in early December 2010 and was sent to a facility in Vacaville after being sentenced to six years in prison.

Husband filed a response to Wife’s dissolution petition while incarcerated. He did not, however, provide a preliminary declaration of disclosure. A party to a divorce proceeding in California is required to file a declaration regarding their financial disclosures, which includes providing a schedule of assets and debts as well as information about income and earning opportunities, on the other party. Despite warnings from the court and Wife’s legal counsel – served on Husband at the Vacaville facility – he did not file the disclosure.

Wife filed a motion to strike Husband’s response and enter a default. Wife’s motion was based on Husband’s failure to comply with the court order to file and serve a preliminary declaration of disclosure. Then Husband filed a motion for a continuance and a declaration in support of his motion for a continuance. Neither Husband’s motion for a continuance nor the declaration in support of that motion is included in the clerk’s transcript. The clerk’s transcript does contain Wife’s opposition to Husband’s motion for a continuance and her declaration in support of her opposition.

The court ultimately denied Husband’s request for a continuance  and extension of time and granted Wife’s motion to strike his response and enter  a default judgment. The judgment denied spousal support to both parties, divided community property and debts, and confirmed certain items at the separate property of Husband or Wife.

The court thereafter denied a motion to set aside the judgment later filed by Husband, ruling that it was not timely.

The Fifth District affirmed the default decision on appeal.

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When a couple decides to divorce, one of the many issues that they often grapple with is how to divide community property. California law provides that any and all assets acquired due to the efforts of either spouse during the course of the marriage are to be split evenly between them upon divorce. Sometimes this means awarding an asset to one spouse and requiring him or her to make an equalizing payment to compensate the other spouse for their interest in the property. First, of course, you have to know how much the property is worth. Assets such as real property or financial accounts are generally easy to value, whereas a business can be very complex. A recent case out of the Sixth District Court of Appeals is a good example of how courts may determine the value of a family business, a figure that often includes “goodwill” built up by the business over time.

calculator-1406929-mHusband and Wife moved to California from India at some point after they married in 1976. Husband started his own trucking company in 1993, and Wife worked seasonally as a produce packager to supplement the family’s income. They bought a home in Watsonville, with Husband using income from the business to pay the mortgage and Wife using her wages to cover certain household expenses. They separated in February 2009 but continued to live in the home. Husband continued making the mortgage payments through May 2012, when Husband moved out of the home after Wife filed for divorce. They reached an agreement wherein Wife was responsible for the mortgage payments and Husband paid her $465 per month in temporary spousal support.

Following a divorce trial, a court awarded Husband the full trucking business and an equalizing payment to Wife. The trial court found the business had an overall value of $40,000, including $15,000 in actual value and $25,000 in goodwill. The goodwill aspect was based largely on Husband’s business relationship with his cousin, which the trial court said allowed him to gain a steady revenue stream without incurring marketing expenses.

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California’s community property system is meant to simplify property division issues in divorce cases by making it clear that all property gained through the efforts of either or both spouses during the marriage is to be split evenly between them. The reality, however, is that complicated issues still arise, including those related to property and income taxes. The state’s Fourth District Court of Appeals recently considered such a case.

accounting-calculator-tax-return-90376-mHusband and Wife married in 1997 and had two daughters before separating nine years later. While their divorce case was pending, the couple entered into a “post nuptial agreement,” wherein they resolved various issues, including their rights to the family home in Southern California. They agreed to list the home for sale and to treat the proceeds as community property, except that Husband was entitled to an additional $2.5 million for separate property funds he had contributed to the residence.

The couple eventually sold the home in 2009 for $10 million. They used nearly $1.4 million from the proceeds to pay state and federal taxes on their estimated capital gains from the transaction. They evenly divided the remaining $3.5 million after covering the additional $2.5 million owed to Husband, as well as interest, fees, commissions, and closing costs. Husband and Wife filed separate 2009 tax returns, with each reporting $5 million in income from the sale of the family home. Husband was required to pay an additional $65,000 in estimated capital gains taxes, while Wife estimated a $475,000 refund because she included the $2.5 million separate property payment as part of her nontaxable basis for the property.

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If you’ve read this blog before, you may already know that we prefer to help clients resolve divorce and other family law matters through alternatives to litigation that help them work collaboratively with a former spouse to reach a positive solution. One of the many drawbacks of the traditional litigation route is the dizzying array of procedural requirements that can end up costing a person his or her case. A recent decision out of California’s Second District Court of Appeals is a good example of one of the primary procedural hurdles:  time limits and filing deadlines.

time-is-going-1415573-mHusband filed for divorce from Wife in May 2009, roughly 10 years after the couple was married. Following a six-day trial, the court ordered Husband to prepare a draft judgment reflecting both the trial court’s decision and a partial settlement agreement that the couple had reached. Wife refused to sign the draft judgment, however, and the court entered it as a final judgment in March 2013. The judgment divided the couple’s assets and set monthly spousal support to be paid by Husband to Wife. The court modified the judgment – with a few handwritten changes to the 12th paragraph – one week later. The court granted Wife’s request to further modify the judgment in May 2013, making clear that Husband was required to make an equalizing payment to Wife covering her share of his Individual Retirement Account (IRA).

Wife filed a notice of appeal two days later. The Second District dismissed the appeal, however, ruling that it was untimely. The applicable rules, the Court noted, require a person seeking to appeal a family court ruling to file an appeal within 60 days of the ruling. Although the lower court had just modified the ruling two days earlier, the Second District said the 60 days started to run when the trial court issued its original ruling in March 2013. That’s because the Court said the modifications made after that time were not “substantial.”

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