Miller v. Cooper (In re Cooper)

Wife also testified the proceeds of the sale of her separate property house "were deposited into three investment accounts," specifically referencing Franklin Templeton accounts 0768 and 9961. From the settled statement, it does not appear husband's testimony directly disputed these investment purchases were made with wife's separate funds. He did, however, maintain the jointly-held investment accounts were community property. He also testified "the community paid taxes on the capital gains from the investment accounts," explaining, "the years where taxes were withdrawn from the accounts is clearly noted on account statements," and where there are no such withdrawals from the accounts themselves, the taxes were paid out of their salaries, further explaining that "he actually wrote the checks to pay the taxes, and did so out of his own checking account which held community funds," although he "did not provide any evidence of such payments."

With respect to the purchase of the Elk Grove house, wife testified the house was purchased on October 16, 1991, and the down payment, $40,656.93, "came from her separate property," i.e., "savings/investments she accumulated prior to marriage." Wife further testified husband "had no savings or investments at the date of marriage" and "there was not enough time (1988-1991) for the community to build up a savings of $40,000.00+ to make the down payment." Husband testified, "the down payment must have come from community savings."

With respect to Epstein credits and Watts charges, wife admitted to having exclusive possession of the Elk Grove house from the date of separation to the time of trial, explained there was no mortgage on the house, although she did not state when the mortgage was paid off, and further explained she paid the property taxes (in the amount of $19,335.64) and homeowner's insurance premiums (in the amount of $8,948.68) during that time. Wife also testified the house "needed certain repairs and maintenance" following the separation, costing her a total of $45,385.25. Various invoices and statements supporting these figures were admitted into evidence. Wife further testified the fair rental value of the house was $1,600 per month, an opinion based on "what houses in her neighborhood similar in size were renting for," but disputed owing the

On November 15, 2012, the trial court issued a statement of decision. As relevant to the issues raised on appeal, the trial court found the foregoing investment accounts to be wife's separate property. The trial court also found wife made a down payment of $40,000 from her separate property on the Elk Grove house and ordered that she be reimbursed in that amount. The trial court further awarded wife Epstein credits in the amount of $36,040.25 for post-separation repair and maintenance expenditures and denied husband's request for Watts charges on equitable grounds. Judgment was entered January 9, 2013. Husband filed a timely notice of appeal.

DISCUSSION

Standard of Review

We first note this is an appeal on a short record, in which a settled statement summarizes the evidence adduced during the trial. In such a case, "we are bound to assume that enough appears [in the record] to enable us to decide whether reversible error was committed and we must make our ruling upon the basis of what affirmatively appears in the record." ( Sloan v. Stearns (1955) 137 Cal.App.2d 289 , 293, 290 P.2d 382 , citing former rule 52 of the Rules on Appeal (now Cal. Rules of Court, rule 8.163 ) and In re Estate of Pierce (1948) 32 Cal.2d 265 , 274, 196 P.2d 1 .) Thus, "the evidence to support the essential findings and conclusions [of the trial court] must be found in the settled statement or the judgment must fall." ( Kovacik v. Reed (1957) 49 Cal.2d 166 , 170, 315 P.2d 314 .)

B.

Title Presumption for Property Held in Joint Title

Generally, property acquired by married persons during the marriage while domiciled in California is community property. (§ 760.) By contrast, "[p]roperty owned before marriage or acquired during marriage by gift, will, or inheritance is separate property." (Cal. Const., art. I, § 21.) The characterization of property as community or separate usually depends on when the property was acquired. (

As the California Supreme Court has explained, "post-marital property can be established to be separate property by two independent methods of tracing. The first method involves direct tracing.... The second method involves consideration of family expenses." ( In re Marriage of Mix (1975) 14 Cal.3d 604 , 612, 122 Cal.Rptr. 79 , 536 P.2d 479 ( Mix ).) "Under the 'family living expense' or 'recapitulation' method, it is assumed that family living expenses are paid out of community property funds. [Citations.] Payments may be traced to a separate property source by showing community income at the time of the payments or purchase was exhausted by family expense, so that the payments or purchase necessarily must have been made with separate property funds." ( In re Marriage of Braud (1996) 45 Cal.App.4th 797 , 823, 53 Cal.Rptr.2d 179 ( Braud ).)

of $25,000.00; proceeds appear to [be] part of the proceeds from the sale of [wife's] separate property, 7031 Demaret Drive., Sacramento, CA (see separate file on Demaret Dr. property for details)."

For the three Franklin Templeton accounts, "Boehm opined that the likely source of funds came from the sale of [wife's] separate property home located at 7031 Demaret Drive, Sacramento, CA since it was sold on January 25, 1991, less than 30 days from the date of opening the account and he could see no accounting of the funds." Wife, however, expressed certainty the sale of her separate property residence was the source of the three Franklin Templeton accounts at issue.

Taken together this documentary and testimonial evidence suffices to support the trial court's findings about the separate property sources for the investment accounts. ( Mix, supra, 14 Cal.3d at p. 613, 122 Cal.Rptr. 79 , 536 P.2d 479 .) In Mix, wife "introduced into evidence a schedule compiled by herself and her accountant from her records which itemized chronologically each source of separate

Credits and Charges for Exclusive Use of Community Asset after Separation

Section 2550 provides that a court must "divide the community estate of the parties equally" unless the parties agree otherwise. Generally, a spouse who uses separate funds to pay community obligations is entitled to reimbursement for such expenditures. ( Epstein, supra, 24 Cal.3d at p. 84, 154 Cal.Rptr. 413 , 592 P.2d 1165 .) Conversely, a spouse who has exclusive use of community property such as a house after the parties have separated must reimburse the community for the use of the residence. ( Watts, supra, 171 Cal.App.3d at p. 374, 217 Cal.Rptr. 301 .)

The determinations of Watts charges and Epstein credits are matters addressed to the sound discretion of the trial court. "When a trial court concludes that property contains both separate and community interests, the court has broad discretion to fashion an apportionment of interests that is equitable under the circumstances of the case." ( In re Marriage of Steinberger (2001) 91 Cal.App.4th 1449 , 1459, 111 Cal.Rptr.2d 521 ; accord Hebbring v. Hebbring (1989) 207 Cal.App.3d 1260 , 1272, 255 Cal.Rptr. 488 .) Stated another way, "reimbursement is not automatic, but involves the consideration of ... a variety of factors" such as whether the parties had an

DISPOSITION

The judgment is reversed and remanded with instructions to (1) characterize as community property the following investment accounts: Franklin Templeton ending in numbers 9961, 3412, 0768, and Pioneer ending in number 2830, (2) reimburse wife for her separate property contributions to these four investment accounts, (3) deny wife's claim for reimbursement of $40,656.93 as her separate property for her contribution to the down payment made on marital residence, (4) order wife to pay Watts charges ( Watts, supra , 171 Cal.App.3d 366 , 217 Cal.Rptr. 301 ) for the monthly rental value of the house during the periods when she had exclusive use of the marital residence after separation and before trial during which the Hawaii dissolution action was not pending, and (5) award to wife Epstein credits ( Epstein, supra , 24 Cal.3d 76 , 154 Cal.Rptr. 413 , 592 P.2d 1165 ) for the periods in which she owes the community Watts charges. In all other respects, the judgment is affirmed. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (5).)

We concur:

HULL, Acting P.J.

MURRAY, J.

On appeal, husband contends (1) the jointly titled investment accounts are community property for which wife was not entitled to any reimbursement, (2) wife

Accordingly, we reverse and remand.

FACTS

Husband and wife married on February 14, 1988. Thereafter, they opened various joint investment accounts and purchased a house in Elk Grove. The details of these transactions will be set forth in greater detail later in this opinion. The parties physically separated sometime in 1995, when husband, an Air Force officer, was transferred from McClellan Air Force Base in Sacramento to Wright-Patterson Air Force Base in Ohio. Wife, a college professor and Army Reserve officer, stayed in the Sacramento area to retain her position with the Los Rios Community College District. However, based on evidence neither party considered the marriage over until June 1, 2004, the trial court determined that to be the date of legal separation, a ruling that is not challenged on appeal.

In 2005, husband filed for dissolution of the marriage in Hawaii, where he was stationed at the time. In 2006, wife filed for dissolution of the marriage in California; she continued to reside in the Elk Grove house. The California action was stayed pending resolution of the Hawaii action. The Hawaii action was later dismissed for lack of jurisdiction. Husband unsuccessfully appealed to the Intermediate Court of Appeals in that state, and thereafter unsuccessfully sought review in the Hawaii Supreme Court. In 2011, after the Hawaii Supreme Court denied review, the California action proceeded.

With respect to Watts charges, wife admitted living in the house after the separation and acknowledged the community, "[u]nder ordinary circumstances," would be entitled to reimbursement for the fair rental value of the house during her exclusive post-separation possession, about $1,600 per month according to her valuation. She argued awarding such charges in this case, however, would be inequitable because husband initially filed for dissolution in Hawaii, and then appealed the dismissal of that case all the way to the Hawaii Supreme Court, forcing wife to incur over $60,000 in attorney fees and delaying this case for six years. The trial court should not, she argued, allow husband to "profit" from these actions. Instead, because husband "could have dropped the Hawaii case any time after 2006 and this matter would have been resolved 6 years earlier," and because husband "left Hawaii 6 weeks after he filed" that lawsuit, and therefore "neither party resided in Hawaii" for the majority of the time that case proceeded in the Hawaii courts, the trial court should deny husband's request for equitable relief under Watts . Wife further argued because she was busy litigating the Hawaii case, she did not consult a California attorney regarding potential Watts charges until 2011, when this case resumed; therefore, if such charges were to be assessed, they should be assessed not from the date of separation, but from the date this case resumed.

In response, husband filed a trial brief arguing because the investment accounts were opened after marriage and held in their joint names, they are presumed to be community property, and wife would not be able to rebut that presumption at trial or prove entitlement to separate property reimbursement from these accounts. With

Trial commenced on October 11, 2012. Husband and wife each testified, as did Boehm, the forensic accountant retained by wife to trace the sources of the various investment accounts. The record does not contain a reporter's transcript of the trial. Instead, we have a settled statement setting forth a summary of the testimony. A binder containing account statements for 20 investment accounts and summaries of each account's transaction history (Exhibit P) that was prepared by Boehm was also admitted into evidence.

Four specific investment accounts are the subject of husband's first contention on appeal: three Franklin Templeton accounts with account numbers ending in 9961, 3412, and 0768; and one Pioneer account with an account number ending in 2830. Each of these accounts was opened during the marriage and held jointly by the parties. Pioneer account 2830 was opened April 27, 1989, with a transfer of funds from another Pioneer account with an account number ending in 6605 that was opened by wife before the marriage. No other investment purchases were made in this account. Franklin Templeton accounts 9961 and 0768 were opened February 21, 1991, each with an initial investment purchase of $25,000. No other investment purchases were made in these accounts. Franklin Templeton account 3412 was opened March 17, 1989, with a transfer of shares from another Franklin Templeton account with an account number ending in 9225 that was also opened during the marriage but held in wife's name only. Between February 1990 and February 1991, various investment purchases totaling $20,000 were made in this

Husband testified, "the fair rental value was $4,556 per month in June 2004, and thereafter declined linearly each month such that it was $3,893 in May 2006, and $1,791 in July 2012," for a total of $358,097 owed to the community during wife's exclusive post-separation possession of the house. Husband acknowledged on cross-examination, however, he was not a real estate agent, had no expertise in real estate, and had not "consulted any real estate professional regarding the rental rates in Sacramento/Elk Grove in 2004-2006." He also "provided a calculation of the present value of [the] improvements [wife made to the house], given the economic life of those improvements and the fact that [wife] would be keeping the

The Jointly Titled Investment Accounts (Franklin Templeton Nos. 9961, 3412, 0768, and Pioneer No. 2830)

Husband contends the trial court erred in finding wife owned as her separate property three Franklin Templeton accounts with account numbers ending in 9961, 3412, and 0768, and one Pioneer account with an account number ending in 2830. We agree.

A.

Evidence Regarding the Jointly Titled Investment Accounts

Each of the four investment accounts at issue was opened during the marriage and the statements for these accounts all note husband and wife were joint tenants. Although wife and wife's forensic accountant testified about the source of the funds for these accounts, no written document was introduced to show the parties intended the investment accounts to be wife's separate property. Instead, the testimonial and documentary evidence showed the source of the funds for these four investment accounts likely came from wife's separate property. By contrast, husband "alluded to but did not establish through testimony or documentation that the

However, when a party acquires property during marriage in joint title form, the presumption of section 2581 applies. Section 2581 provides: "For the purpose of division of property on dissolution of marriage or legal separation of the parties, property acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, 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." (§ 2581.)

As a leading treatise explains, "[t]he § 2581 presumption attaches to any type of joint title acquisition by spouses during marriage (real and personal property, whether tenancy in common, joint tenancy, tenancy by the entirety or community property). [§ 2581 ] [¶] As a result, stocks, motor vehicles, boats, any form of real property, and any other assets acquired in joint title form during marriage are presumptively community property." (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2015) ¶ 8:410, p. 8-145 -146.)

Under section 2581, the joint title presumption cannot be overcome by tracing the source of funds for the property acquired during marriage to a party's separate property. ( Haines, supra, 33 Cal.App.4th at p. 291, 39 Cal.Rptr.2d 673 [interpreting predecessor statute to section 2581 ].) Further, "under section 2581 spouses cannot hold property in joint title while preserving the property's separate property characterization through oral or implied agreements." ( In re Marriage of Weaver (2005) 127 Cal.App.4th 858 , 865, 26 Cal.Rptr.3d 121 .) As pertinent to this case, the joint title presumption can only

In short, no documentary evidence was introduced at trial to overcome section 2581's presumption that the four investment accounts at issue were community property.

C.

Wife's Right of Reimbursement

However, the evidence that traced the source of the investment accounts to wife's

• Pioneer No. 2830 was opened with $206,393.11 "prior to marriage and in [wife's] name alone" and no contributions were made during the marriage. It was converted to joint title during the marriage.

• Franklin Templeton No. 0768, according to Exhibit P, was funded on February 21, 1991, by a $25,000 " 'direct purchase'-likely source is from sale of Demaret residence 1/25/91 [¶] See ck # 105 from DSC & BMC." The Demaret residence was wife's separate property.

• Franklin Templeton No. 3412 was opened with wife's separate property funds and no contributions were made during the marriage. Exhibit P bears the following notation for deposit of $50,000 on February 19, 1991: "direct purchase; likely source is from proceeds of sale of Demaret Dr. property."

• Franklin Templeton No. 9961, according to wife's testimony, was opened with proceeds from the sale of her separate property residence and no contributions were made during the marriage. Exhibit P states that, in 1991, this "account opened with purchase

Here too, the exhibits and testimony by wife and her forensic accountant suffice to establish all four investment accounts were funded with wife's separate property. Exhibit P shows wife opened the Pioneer account prior to marriage and converted it to joint title during the marriage. And the testimony confirmed the timing of three Franklin Templeton investment accounts at issue as having been funded within a month of the sale of wife's separate property residence.

Husband argues Boehm's testimony about the "likely" source of the funds for the Franklin Templeton accounts provides insufficient certainty to support the trial court's finding about the separate property source of the funds. We disagree. Wife was required to rebut the community property presumption by a preponderance of the evidence. ( Peters, supra, 52 Cal.App.4th at p. 1491, 61 Cal.Rptr.2d 493 .) That the forensic accountant testified about the "likely" source of funds did not mean his testimony did not meet wife's burden of proof. Indeed, CACI No. 200 defines a preponderance of the evidence in plain English to mean "more likely to be true than not true." On this record, wife met her burden of proof in rebutting the community property presumption regarding the separate property source of funds.

In the absence of any writing indicating an intent by wife to waive her right of reimbursement, she is entitled to her separate property contribution to Franklin

Husband argues the trial court erred in ordering wife be reimbursed $40,656.93 for her separate property contribution to the down payment made on marital residence. We agree.

A.

Evidence Regarding the Down Payment

As the settled statement recounts, wife "testified that she and [husband] purchased a home on October 16, 1991 in Elk Grove, CA and that the down payment on the marital home came from her separate property. She testified, without opposition, that it was $40,656.93. She testified that the funds came from the savings/investments she accumulated prior to marriage. She also testified [husband] had no savings or investments at the date of marriage. She also testified that there was not enough time (1988-1991) for the community to build up a savings of $40,000.00+ to make the down payment. [Wife] also testified that no account statement obtained in all 20 accounts tabbed in Exhibit P contain any deposits from [husband's] separate checking/saving account from 1988-1991. She specifically referred to all 20 Tabs contained in the binder."

Boehm did not testify about the source of the down payment on the marital residence.

B.

Adequacy of Tracing

The trial court erred in finding the down payment on the marital residence was wife's separate property on grounds wife "had substantial savings at the time of the marriage" and husband did not prove he made any contribution to the down payment. As we explained in part II C., above, a party may establish entitlement to reimbursement by tracing separate property contributions to property acquired by the community during the marriage. However, oral testimony of intent does not suffice to overcome the presumption that property acquired during marriage belongs to the community. ( Braud, supra, 45 Cal.App.4th at p. 823, 53 Cal.Rptr.2d 179 .) Instead, direct tracing to a separate source requires reference to specific written records showing the source of the funds. ( Ibid. )

In short, the trial court erred in ordering wife to be reimbursed for the down payment on the marital residence acquired three years after the parties married.

Epstein Credits and Watts Charges

In two related arguments, husband asserts the trial court erred in denying his request for Watts charges and in granting wife's request for Epstein credits. We conclude wife's exclusive use of the marital residence was subject to Watts charges for the periods when there was no litigation in Hawaii and wife's Watts charges should be offset by Epstein credits for her preservation of the community asset.

However, insofar as the trial court erred in denying husband's request for Watts charges during the period after separation and before trial in this case and while the Hawaii litigation was not pending, wife is entitled to offset the fair rental value of the marital residence for which she must reimburse the community. Her testimony established she "made the mortgage payments, paid maintenance bills, property