Filed 5/6/16 Marriage of Cooper CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
In re the Marriage of BILLIE and DANE COOPER.
BILLIE MILLER, C073014
Respondent, (Super. Ct. No. 06FL04490)
v.
DANE COOPER,
Appellant.
In this marital dissolution case, the trial court found four investment accounts held
in joint title by Billie Miller (wife) and Dane Cooper (husband) during their marriage to
be wife’s separate property. The trial court also ordered that wife be reimbursed for her
down payment of $40,000 on the marital residence on the ground her separate property
was the source of the down payment. After the parties separated, wife lived in the marital
residence for approximately eight years. For this time period, the trial court determined
wife should be reimbursed for $36,040.25 she paid to maintain the residence. (See In re
1
Marriage of Epstein (1979) 24 Cal.3d 76 (Epstein), superseded by statute on other
grounds as noted in In re Marriage of Prentis–Margulis & Margulis (2011) 198
Cal.App.4th 1252, 1280.) However, the trial court denied husband’s request for the
community to be reimbursed the fair rental value of the house during the same time
period. (See In re Marriage of Watts (1985) 171 Cal.App.3d 366 (Watts).)
On appeal, husband contends (1) the jointly titled investment accounts are
community property for which wife was not entitled to any reimbursement, (2) wife
introduced insufficient evidence to show the separate property nature of the funds used to
purchase the marital residence, and (3) the trial court abused its discretion by allowing
wife to live rent-free in the marital residence during the years after separation while
making husband pay half of the maintenance and repairs for which the community
received no benefit.
We conclude the trial court erred in finding wife’s tracing of the source of funds
for the jointly titled investment accounts overcame the presumption that the jointly titled
accounts belong to the community. Wife did not introduce any document sufficient to
overcome the title presumption imposed by Family Code section 2581.1 Nonetheless,
wife is entitled to reimbursement for her separate property contributions to these
investment accounts. The documentary and testimonial evidence sufficed to show wife’s
contributions to the investment accounts originated from her separate property.
However, wife’s oral testimony did not suffice to show her separate property was the
source of the down payment on the marital residence. Thus, the trial court erred in
ordering her to be reimbursed for the down payment. We conclude the trial court had
discretion to conclude wife did not owe the community Watts charges (Watts charges) for
1 Undesignated statutory references are to the Family Code.
2
the fair rental value of the marital residence during the period after separation and before
trial in this case when husband pursued redundant and unsuccessful marital dissolution
litigation in Hawaii, a forum where the parties never lived together. (Watts, supra, 171
Cal.App.3d 366.) However, wife owes the community Watts charges for the other
periods when she had exclusive use of the marital residence but there was no Hawaii
litigation pending. Husband should not be ordered to pay Epstein credits (Epstein
credits) to reimburse wife for the period in which the community is not entitled to Watts
charges. However, wife is entitled to Epstein credits (Epstein, supra, 24 Cal.3d 76) for
the periods when she owes Watts charges.
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
3
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.
In August 2012, the parties stipulated to a number of property-related matters.
Among other things, they agreed the Elk Grove house would be awarded to wife, who
would pay husband half of the property’s appraised value as his community property
interest therein, but reserved the court’s jurisdiction to determine whether wife should be
required to pay Watts charges to the community, i.e., the fair rental value of the house
during the time she lived there after the separation, and whether wife should receive
Epstein credits, i.e., reimbursement from the community for repair and maintenance
expenses she incurred during that time. The parties also agreed a valuation of the joint
investment accounts would be done by a neutral and qualified party and reserved the
court’s jurisdiction to order division of those accounts. Other matters were also agreed
to, but are not pertinent to the issues raised on appeal.
On October 4, 2012, the trial court entered a judgment of dissolution as to status
only and reserved jurisdiction as to all other matters. Thereafter, wife filed a statement
of issues and contentions, arguing a number of property-related issues. The following
are relevant to the issues raised on appeal. With respect to the investment accounts, wife
noted she hired Larry Boehm, a retired supervisory special agent for the Internal Revenue
Service’s Criminal Investigation Division, to trace these accounts to their original sources
and stated the parties may be able to come to an agreement “as to what portion of the
accounts is community and what is separate property.” With respect to the Elk Grove
house, previously agreed to be community property, wife asserted she should be
reimbursed the amount of the down payment that she claimed was made with her
separate property. Wife also argued she was entitled to Epstein credits in the amount of
4
$38,689 for expenditures made to repair and maintain the Elk Grove house after the
separation.
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 respect
to the Elk Grove house, husband argued because the house was purchased after marriage
with community funds and held in their joint names, the trial court should divide the
5
house along the lines already agreed upon, i.e., award the house to wife and order
payment to husband of $130,000, i.e., half the appraised value of $260,000, with no
reimbursement to wife for the down payment. Husband did not dispute wife’s
entitlement to Epstein credits for repair and maintenance expenditures. He did, however,
dispute her calculation of such credits, arguing because there was no agreement as to the
need for the expenditures, the fair market value of the property after the expenditures
minus the fair market value before the expenditures should be the measure of Epstein
credits. Finally, with respect to Watts charges, husband argued the community was
entitled to such charges at a fair rental value of about $1,800 per month when property
values were low and about $3,200 per month when property values were high, for a total
of more than $300,000 during the eight-year period of wife’s post-separation possession.
Apparently addressing wife’s argument regarding the delay caused by the Hawaii action,
under a separate heading of his trial brief, husband argued he “offered to transfer the
action to a different forum if [wife] would agree to bifurcate the property issues from the
issue of status and allow him to terminate the status of the marriage” and appealed the
Hawaii court’s decision to dismiss the case only after wife “refused this offer.” Husband
further argued, after he lost his appeals and the California case resumed, wife caused
“numerous delays” in this case, including “the need for a trial on the separation date, [a]
request for reconsideration of that court decision[,] . . . delay in getting paperwork
signed,” and “fail[ure] to respond to repeated requests for discovery.”
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
6
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 account using two joint bank accounts. On February 19, 1991, two days
before Franklin Templeton accounts 9961 and 0768 were opened, a $50,000 investment
purchase was also made. Boehm testified the likely source of this $50,000 investment
purchase, as well as the two investment purchases of $25,000 each, that opened Franklin
Templeton accounts 9961 and 0768, was wife’s sale of a separate property house that was
sold less than 30 days before these purchases were made and the net proceeds of which
were just under $100,000.
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
7
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
community Watts charges because husband “purposefully delayed the dissolution of
8
marriage” by filing suit in Hawaii and then appealing the dismissal of the case to the
Hawaii Supreme Court.
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 house,” concluding, “the present value of
these improvements was $2,566.”
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
I
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
9
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, 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.) 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.)
“We review the trial court’s factual findings regarding the existence and character
of the parties’ property under the substantial evidence standard. The trial court’s
selection of what legal principles to apply is subject to de novo review. [Citation.] This
includes the choice of the applicable standard of proof, which is a question of law that we
review de novo. [Citation.]” (In re Marriage of Ettefagh (2007) 150 Cal.App.4th 1578,
1584.)
II
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
10
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 source of these funds were from
community funds.”
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. (In re Marriage of Rossin
(2009) 172 Cal.App.4th 725, 732.) Thus, property acquired during marriage is subject to
the rebuttable presumption that it is community property. (Id. at p. 733.) “This is a
rebuttable presumption affecting the burden of proof; hence it can be overcome by the
party contesting community property status. [Citation.] Since this general community
property presumption is not a title presumption, virtually any credible evidence may be
used to overcome it, including tracing the asset to a separate property source, showing an
agreement or clear understanding between parties regarding ownership status and
presenting evidence the item was acquired as a gift.” (In re Marriage of Haines (1995)
33 Cal.App.4th 277, 290 (Haines).) The party seeking to rebut the community property
presumption must do so by a preponderance of the evidence. (In re Marriage of Peters
(1997) 52 Cal.App.4th 1487, 1491 (Peters).)
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
11
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 [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.) As pertinent
to this case, the joint title presumption can only be overcome by clear and convincing
evidence in the form of a written document.2 (§ 2581; In re Marriage of Weaver (1990)
224 Cal.App.3d 478, 486.)
2 The joint title presumption can also be overcome by proof of undue influence by
one spouse over another. (Haines, supra, 33 Cal.App.4th at pp. 301–302.) In this case,
12
If separate property was converted to joint title, the reason for the conversion does
not affect the burden of proof of requirement in section 2581 of a writing to show intent
to retain the separate property nature of the asset. (In re Marriage of Neal (1984) 153
Cal.App.3d 117, 124, fn. 12 (Neal), disapproved on other grounds in In re Marriage of
Buol (1985) 39 Cal.3d 751, 758, fn. 8; In re Marriage of Fabian (1986) 41 Cal.3d 440,
451, fn. 13.)
The four investment accounts at issue here (Franklin Templeton Nos. 9961, 3412,
0768, and Pioneer No. 2830) are all held in joint title form. Consequently, the joint title
presumption applies to render these accounts community property in the absence of
written evidence showing an intent to preserve the separate property nature of the
accounts. (§ 2851.) Because no documentary evidence was introduced to rebut the joint
title presumption, the trial court erred in concluding the four jointly titled investment
accounts are wife’s separate property.
Wife points out the investment accounts were originally held in her name alone.
As the settled statement indicates, wife changed the accounts to share joint title with
husband “because the military had instructed her to do so in order to protect the welfare
of her son who was a minor at the time.” Although the trial court noted that “this advice
made sense” and was the reason for the change, the reason for the change to joint title
does not overcome the presumption of section 2581. (Neal, supra, 153 Cal.App.3d at
p. 124, fn. 12.)
Wife also points out the evidence supported the trial court’s finding she was able
to trace the source of the investment accounts to the sale of her separate property
residence. As we note above, tracing of assets from separate property sources does not
however, there is no allegation of undue influence to overcome the joint title
presumption.
13
overcome the joint title presumption. (Marriage of Weaver, supra, 224 Cal.App.3d at
p. 486.) To overcome the presumption, documentary evidence of intent to preserve the
separate property nature of the investment accounts was necessary.
We also reject wife’s contention there is documentary evidence in the form of the
statements issued to the parties by the companies that held the investment accounts.
Section 2581 requires documentary evidence showing either that the jointly titled
property “is separate property and not community property” or that “the parties have
made a written agreement that the property is separate property.” Here, the investment
account statements show neither -- they merely show the investments held in the jointly
titled accounts.
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
separate property funds is pertinent to her entitlement to reimbursement. In Marriage of
Weaver, the court noted that “even if property held in joint tenancy loses its separate
property characterization under section 2581, section 2640 provides a right to
reimbursement upon dissolution for the spouse who contributed separate property to the
acquisition of property held in joint title, absent a written waiver of the right to
reimbursement.” (127 Cal.App.4th at p. 865.) To this end, subdivision (b) of section
2640 provides that “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
14
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.”
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 (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 (Braud).)
The question of whether a spouse “has adequately traced an asset to a separate
property source is a question of fact for the trial court, and its finding must be upheld if
supported by substantial evidence.” (Braud, supra, 45 Cal.App.4th at p. 823.) Here,
substantial evidence supports the trial court’s finding wife’s forensic accounting sufficed
“to trace the deposits and withdrawals of these accounts” and show her funds from the
sale of her separate property home provided the funds for the four investment accounts at
issue. The record shows that:
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
15
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 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.) In Mix, wife “introduced into evidence a schedule
compiled by herself and her accountant from her records which itemized chronologically
each source of separate funds, each expenditure for separate property purposes, and the
balance of separate property funds remaining after each such expenditure.” (Id. at p.
16
613.) Husband argued the schedule did not provide substantial evidence for purposes of
tracing the purported separate property. (Ibid.) The Mix court agreed that “the schedule
by itself is wholly inadequate,” but found the evidence to be sufficient when including
wife’s testimony. (Id. at p. 614.) Wife “personally testified that the schedule was a true
and accurate record, that it accurately reflected the receipts and expenditures as
accomplished through various bank accounts, although she could not in all instances
correlate the items of the schedule with a particular bank account, and that it accurately
corroborated her intention throughout her marriage to make these expenditures for
separate property purposes, notwithstanding her use of the balance of her separate
property receipts for family expenses.” (Ibid.) Taken together with the schedule, the
evidence was sufficient. (Ibid.)
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.) 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
17
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
Templeton Nos. 9961, 3412, 0768, and Pioneer No. 2830.
III
Down Payment on the Marital Residence
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.
18
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.) Instead, direct tracing to a separate source requires
reference to specific written records showing the source of the funds. (Ibid.)
Our review of the record reveals no documents showing the source of the payment
on the marital residence, and wife does not cite any in her respondent’s brief other than to
cite “Exhibit P” as a whole. However, none of the account statements collected in
Exhibit P shows a withdrawal of any amount approximating the $40,656.93 down
payment made in 1991.
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.
IV
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.
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A.
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.) 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.)
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; accord Hebbring v.
Hebbring (1989) 207 Cal.App.3d 1260, 1272.) Stated another way, “reimbursement is
not automatic, but involves the consideration of . . . a variety of factors” such as whether
the parties had an agreement, the rental value of the asset being used exclusively by one
spouse, whether the conduct of one spouse led to losses to the community, whether
exclusive use of the asset represented a duty of support, and additional considerations.
(In re Marriage of Feldner (1995) 40 Cal.App.4th 617, 625.)
B.
Watts Charges
Husband argues the trial court erred in denying his request for Watts charges for
the fair rental value of the marital residence during the time after separation when wife
had exclusive use of the residence. As we explain, we agree in part.
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In pretrial briefing, wife’s counsel stated wife “has incurred $63,845.67 in attorney
fees in Hawaii just so that the case could conclude and she could proceed in this case.”
And at trial in this case, wife “testified that [husband] purposefully delayed the
dissolution of marriage by filing several appeals in Hawaii. She testified that [husband3]
filed for dissolution of marriage in Hawaii in 2005. Upon [wife’s] motion, the trial court
in Hawaii dismissed the case and [husband] filed an appeal. [Wife] testified that
[husband] lost the appeal and applied to have the case heard by the Hawaii State Supreme
Court. She testified that on May 19, 2011 the State Supreme Court denied [husband’s]
application, after which, this case could proceed.” Wife estimated the fair rental value of
the marital residence was $1,600 per month.
The trial court denied the Watts charges because husband “commenced an action
in Hawaii that prolonged the dissolution process and created incredible expense for” wife
so that “[t]he relief [husband] is requesting would result in an inequitable award to him.”
The trial court did not abuse its discretion in denying husband’s request for Watts charges
for wife’s use of the marital residence during the period in which he litigated a redundant
dissolution action in a state in which the parties had never lived together. Husband’s
insistence on litigating the issue of residence in Hawaii was the cause of the long period
during which wife lived in the marital residence after separation but before final
judgment was entered. The redundant and unsuccessful litigation was also the source of
wife’s expenditure of more than $63,000 in legal fees in Hawaii. Thus, we reject
3 The settled statement erroneously indicates it was “Petitioner” (i.e., wife) who
filed the dissolution action in Hawaii. The parties agree husband filed the Hawaii
dissolution action.
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husband’s contention regarding Watts charges for the period when the Hawaii case was
pending -- from 2005 to July 2011.4
However, the trial court should have imposed Watts charges for the period wife
had exclusive use of the marital residence after separation but before the Hawaii
dissolution action was commenced -- i.e., from June 2004 until 2005. And the trial court
should have imposed Watts charges for exclusive use of the house from July 2011 until
the date of trial in this case in October 2012. Accordingly, the trial court’s denial of all
Watts charges erred to the extent wife must reimburse the community for her exclusive
use of the marital residence after separation and before the date of the trial during times
when there was no Hawaii litigation.
C.
Epstein Credits
Husband contends the trial court erroneously ordered him to pay Epstein credits
to reimburse wife for maintenance and repair to the residence even though the
community received no benefit from the expenditures. As with the Watts charges, we
agree in part.
As we noted above, a spouse who uses separate property funds after the date of
separation to pay community debts is entitled to reimbursement out of the community
property at dissolution absent circumstances that would make reimbursement
inappropriate. (Epstein, supra, 24 Cal.3d at pp. 84–85.) Here, the trial court found that
“the Property taxes in the amount of $19,335.64 and homeowners insurance premiums in
the amount of $8,948.68 are the sole responsibility of” wife. However, the trial court
awarded wife “one-half reimbursement for the maintenance and repair” of the marital
4 The record does not establish when in 2005 husband filed for dissolution in
Hawaii.
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residence for the period after separation during which wife had exclusive use of the
property. The judgment states that “[t]he community shall reimburse [wife] the amount
of $36,040.25 as per evidence presented at trial, for expenditures to repair and maintain
the” marital residence.
Insofar as we conclude the trial court properly denied husband’s request for Watts
charges during the time period spanning the Hawaii litigation, the trial court erred in
awarding this Epstein credit because the community received no benefit from wife’s
preservation of the marital residence by payment of taxes, maintenance, or repair during a
period in which she had exclusive use of the house. The evidence does not suggest the
maintenance and repair increased the value of the property, but only that wife made the
necessary expenditures to “preserve the 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 taxes and
homeowner’s insurance from her income.” If the community is to reap the fair rental
value of the marital residence it must also bear these burdens of asset preservation
shouldered solely by wife. (Epstein, supra, 24 Cal.3d at p. 84.) On remand, the trial
court shall award to wife Epstein credits only for the periods in which she owes Watts
charges.
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) order wife to
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pay Watts charges (Watts, supra, 171 Cal.App.3d 366) 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 (4) award to wife Epstein credits (Epstein, supra, 24 Cal.3d 76) 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).)
/s/
HOCH, J.
We concur:
/s/
HULL, Acting P. J.
/s/
MURRAY, J.
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