Community Interest in Real Property: Moore/Marsden Updated

In December of 2004, Wife [W] gave birth to her and [H’s] first child.  In February of 2005, they moved into a house that H had purchased.  H and W married in April of 2007, and in June of 2007, W gave birth to their second child.  The family continued to live in the house and house payments were made from community assets until H and W separated in April of 2015.

H purchased the house for about $740,000 with a down payment of $140,000 and mortgaged the $600,000 owed.  At the time of their separation, the home’s value was estimated by H to be $950,000 with a balanced owed of about $545,000. His house payments included this principal payment, interest fees (variable rate), homeowner’s insurance, and property taxes; for a total payment of about $3500.00 per month.  During their eight-year marriage, approximately $336,000 of community funds were paid in house payments.  (H’s statements were made while on the witness stand and examined by W’s attorney.)

W wanted her community interest in the equity of the home.  She argued to the trial court that she was entitled to one-half of $109,000 or about $55,000.  H argued that W failed to properly determine her community interest based on the 1980 In Re Marriage of Moore decision and its follow-up 1982 case In Re Marriage of Marsden.  These two state Supreme Court decisions are now referred to as the Moore/Marsden Formula and for 40 years have remained the standard for determining community interest on separate real property.  The trial court denied H’s argument and determined that the community interest in the house was $426,680 based on H’s testimony, even though not all of the information for the formula was provided.

The Moore/Marsden Formula:

  1. “Determine the amount by which the community property payments (typically, payments made from the date of marriage until the date of separation) reduced the principal on the mortgage.
  2. Calculate the community property percentage share by dividing the amount determined in step one by the purchase price.
  3. Determine the appreciation in the value of the house during the marriage (i.e., from the date of marriage until the date of dissolution).
  4. Multiply the appreciation during the marriage (the amount determined in step three) by the community property percentage share (the percentage determined in step two) to determine the community property share in the appreciation of the property.
  5. Add the community property share in the appreciation of the property (the amount determined in step four) to the amount of community funds used to pay down the principal on the mortgage (the amount determined in step one) to determine the total community interest in the property at the time of dissolution.”

In other words, to make the determination, the trial court must have (a) the purchase price of the house; (b) the amount of community funds used to reduce the mortgage principal; (c) the market value at the start of the marriage; and (d) the market value at the date of separation.

In this case, the trial court did not have the Moore/Marsden information needed.  W did not provide it, and H said he did not have to provide it.  According to H, since W was making the argument about how much she was entitled to, she had to provide the information.  When she failed to provide the information, she lost her argument.

The Appellate Court reversed the trial court on the providing information for a Moore/Marsden determination stating:

“We hold that where it is undisputed that there is a community property interest in real property, it is the obligation of both spouses to ensure that the family court has the information necessary to determine that interest, no matter which spouse brought the dissolution action. If the spouses fail to do so, the family court must direct them to furnish the missing information, reopening the case if necessary. Because the determination of the community property interest in the property at issue in this case was based upon incomplete information, we reverse the judgment and remand with directions to the family court to hold a limited retrial to determine the amount of community funds used to reduce the mortgage principal and to recalculate the community property interest.”

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