Separate Property vs Community Property

H and W were married in 1988 and lived in the Sacramento area. H was an Air Force officer and W was a college professor and Army reserve officer. The couple separated in 1995, when H was transferred to Ohio, and W remained in California, but they did not consider their marriage over until 2004.

In 2005, H filed for divorce from W in Hawaii, where he was stationed at the time, and for the next six years, W battled H over whether Hawaiian courts had jurisdiction over their case. (In fact, six weeks after H filed for divorce, he was transferred out of the state and never appeared in a Hawaiian court again). At about the same time, W filed for divorce in California, and the case was stayed (put on hold) pending the results of the case in Hawaii.

Finally, in 2011, the Hawaiian Supreme Court determined that H was not a resident of Hawaii; therefore, Hawaii had no jurisdiction and dismissed H’s case. Their divorce then proceeded in California.

The main issue in their divorce was property. W claimed that the down payment on the house was purchased with her separate property funds and she should be reimbursed for the amount. She also claimed that three of their brokerage accounts also came from her separate property funds. H claimed the accounts were community property because they were listed in both their names, and since the house was listed in joint tenancy, it was community property as well with each party entitled to one half of its value. During the eight years of the parties’ separation, W lived in the house. H wanted Watts charges (value for rent) for the time W lived in the house, and W wanted Epstein credits (reimbursement) for the maintenance on the house.

The trial court determined the investment accounts and the $40,000 down payment for the house to be W’s separate property. The trial court also awarded W Epstein credits in the amount of $36,040.25 for post-separation repair and maintenance expenditures and denied H’s request for Watts charges for rent the community could have received during the eight years W lived at the house rent-free.

H appealed.

The Appellate Court held that Family Code Section 2581 provides: “…on dissolution of marriage…, property acquired by the parties during marriage in joint form is community property, [unless there is]… (b) Proof that the parties have made a written agreement that the property is separate property.” Therefore, since the accounts were listed as joint owners, and there was no written documentation to show that the accounts were W’s separate property, the accounts were community property and H was entitled to half.

Regarding the down payment on the house, however, the court held W was entitled to her reimbursement under Family Code Section 2640, which states “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 Appellate Court also awarded H Watts charges, but only during the times before and after H’s divorce actions in Hawaii.

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