Community Property Outline

Iglesias

I. Introductory Principles:
1. Only 2 kinds of Property – Separate and Community:
a. FC § 760 Definition of CP: Except as otherwise provided by
statute (meaning that there are exceptions, for example, people can
opt out of the system) all property, real or personal (all property)
wherever situated (the property does not have to be in CA)
acquired (gifted, bought, inherited, etc.) by a married person
(definition of legal married person matters) during marriage (when
does marriage begin or end, and what counts as separation under
the law) while domiciled in CA (what about thing bought while
domiciled outside of CA and how is quasi-marital property
handled) is community property.
b. FC § 770 Definition of SP: Separate Property of a married person
includes all of the following (not an exhaustive definition but the
following are examples): (1) all property owned before marriage,
(2) all property acquired after marriage (i.e. After your marriage
begins) by gift, devise, bequest, or descent (3) the rents, issues or
profits of the property described in this section (refers to tracing
principle).
c. Title: not determinative. Must look to the source of the funds that
are used to acquire the asset during marriage.
2. FC § 771 Earnings and Accumulations During Period of Separation:
The earnings and accumulations of a spouse and the minor children living
with, or in the custody of, the spouse, while living separate and apart from
the other spouse, are the separate property of the spouse.
i. Rule: No accumulation of CP while living separate and apart
ii. Standard: Intent to never reconcile & conduct which proves this
intent. Subjective test.
3. FC § 772 After Entry of Judgment of Legal Separation: After entry of
a judgment of legal separation of the parties, the earnings or
accumulations of each party are the separate property of the party
acquiring the earnings or accumulations.
4. Tracing Principle: The source of the funds controls. Property acquired
during marriage that is untitled or titled in one spouse’s name is presumed
to be CP unless the funds used to acquire the property can be traced to a
SP source. 2 methods:
i. Change in Form does not change character (Ex. Bequest of
Stocks are cashed out)
ii. Fruits of the Property (Ex. Get $ from inheritance, invest in
stock + appreciation)
5. Equality Principle:
i. Equality Presumption: the partners in the marriage make equal
contributions to the economic benefits of the household. Both
partners have equal management and control of the marital
property.

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ii. FC § 751 Community Property, interests of the parties: The
respective interests of the husband and wife in community
property during continuance of the marriage relation are present,
existing, and equal interests. (As of ’75)
II. Contractual Modification of CP or SP:
1. Premarital Agreement:
a. General Requirements:
i. Writing Requirement: Agreements made on or after 1/1/86 are
required to be in writing and signed by both parties and is
enforceable w/o consideration (FC § 1611). Once recorded they
have legal effect (FC § 1502)
ii. Must abide by General K law principles
iii. Amendment or Revocation: After 1/1/86, after marriage a
premarital agreement may be amended or revoked only by a
written agreement signed by the parties. Before 1/1/86, case law
allowed evidence of implied modification or retraction based on
oral agreement or conduct.
iv. Agreements before 1/1/86: Governed by old requirements (FC §
1503)
b. Subjects of Premarital Agreements:
i. FC § 1612 Broad Subject Matter: Can address property
(including all rights thereto), choice of law (SP v. CP principles),
and any other matter, including personal rights and obligations, not
in violation of public policy.
ii. Child Support: the right of a child to support may not be
adversely affected by a pma. FC § 1612(b).
iii. Spousal Support Waivers:
 1/1/86-1/1/2002: Not per se against public policy. If executed
by intelligent, well-educated persons, each of whom appears
to be self-sufficient in property and earning ability + advice
of counsel at time of execution, waiver does not violate pp.
 After 1/1/2002: FC § 1612(c) – spousal support provisions in
p.m.a’s will not be enforceable unless the party against whom
enforcement is sought was represented by independent
counsel at the time the agreement was signed.
c. 2 Defenses to Enforceability:
i. FC § 1615(a)(1) Involuntary: requires a showing of fraud,
coercion, or lack of knowledge.
 1/1/86 – 1/1/2002 - 6 Factors: (1) proximity of execution of
the agreement to the wedding (2) surprise from the
presentation of the agreement (3) the presence or absence of
independent counsel or an opportunity to consult independent
counsel (4) inequality of bargaining power (indicated in some
cases by relative age and sophistication of the parties (5)
disclosure of assets and (6) the understanding and awareness
of the intent of the agreement.

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 After 1/1/2002: Precise requirements. An agreement will not
be deemed voluntary unless (1) the party against whom
enforcement is sought was represented by counsel at the time
it was signed or (2) Express waiver of representation in
writing (3) 7 day waiting period b/w first getting presented
w/ agreement and advised to get counsel and signing date (4)
If there is counsel waiver, that party must be fully informed
of the terms and basic effect of the PMA as well and the
rights and obligations he/she would be giving up by
executing it (5) A writing describing the rights and
obligations that the unrepresented party would be giving up
must be delivered to that party prior to signing + party must
be proficient in the language of the PMA + before signing the
PMA, the unrepresented party must execute a document
declaring that he/she received explanation of rights and
indicate who provided that information + at no point could
there have been duress, fraud or undue influence.
ii. FC § 1615(a)(2) Unconscionable: party against whom the
agreement is being enforced must prove (1) that the agreement was
unconscionable when it was executed and (2) that before execution
of the agreement, the spouse was not provided with fair and r/s
disclosure of the property or financial obligations of the party and
(3) There must be proof that the party did not voluntarily waive, in
writing, his/her right to disclosure of the property or financial
obligations, and the party did not have actual or reasonably could
not have had adequate knowledge of the property or financial
obligations. NB: The unconscionability of the agreement must
have been present at the time it was executed and fair and r/s
disclosure of property and financial obligations will save even an
unconscionable agreement.

2. Transmutation Agreement:
a. Transmutations Prior to 1985: very easy to transmute. Could be done
orally or by conduct. The intent of the spouse whose interest was affected
controlled. (Lucas). NB: Critical date is the date of transmutation not the
date of the acquisition of property
b. Transmutations 1985 to Present:
i. How to Transmute:
(1) Rules apply to transmutations of CP to SP, SP to CP or SP.
(FC § 850(a)-(c)).
(2) Transmutation may be by written agreement or transfer,
w/or w/o consideration. (FC § 850).
(3) Strict Writing requirement with express declaration (§
852(a)).
 Intent: It is the spouse whose interest in the property is
adversely affected who must make, join, consent to, or

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accept the express declaration in writing (i.e. what
really matters is the written understanding of the spouse
whose interest is affected by the transmutation).
 Express Declaration Requirement: the document
must contain language which expressly states that the
characterization of ownership of the property is being
changed. Language must show that the spouse affected
knows he/she is giving up his/her interest in the
property.
ii. Extrinsic Evidence: evidence of oral agreements will be excluded.
Possible Exception: Exception to the Statute of Frauds such that
partial performance of the oral agreement. If there is part
performance, court can consider evidence of couple’s oral
transmutation agreement.
iii. Gift Exception: Not all transmutations of marital property need to
be in writing. Requirements: (1) A gift b/w spouses of clothing,
wearing apparel, jewelry, or other tangible articles of a personal
nature (2) that is used solely or principally by the spouse to whom
the gift is made (3) that is not substantial in value taking into
consideration the circumstances of the marriage. (Marriage of
Steinberger: Ring bought w/ CP funds not transmuted)
iv. Commingled or Otherwise Combined Exception: Commingling
rules, not § 852, govern characterization of commingled property.
“Nothing in this section affects the law governing characterization
of property in which separate property and community property are
commingled or otherwise combined.” (FC § 852(d))
v. Statement in a Will: FC § 853 – a statement in a will can effect a
transmutation. Ex. “I bequeath to my W my coin collection.”
Limit: not admissible as evidence of a transmutation of property in
a proceeding commenced before the death of the person who made
the will.
vi. Creditor Protections FC § 851: Transmutation Subject to
Fraudulent Transfer Laws: Ex. Can’t transmute as a way of
keeping $ away from creditors.
3. Other Statutes:
i. FC § 720 Mutual Obligations: Husband and wife contract toward each
other obligation of mutual respect, fidelity, and support. Non-delegable
and cannot be contracted out of.
ii. FC § 721 Fiduciary Duties: (a) Subject to subdivision (b), either husband
or wife may enter into any transaction with the other, or with any other
person, respecting property, which either might if unmarried. (b) Except as
provided in §§’s, in transactions between themselves, a husband and wife
are subject to the general rules governing fiduciary relationships which
control the actions of persons occupying confidential relations with each
other. This confidential relationship imposes a duty of the highest good
faith and fair dealing on each spouse, and neither shall take any unfair

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advantage of the other. This confidential relationship is a fiduciary
relationship subject to the same rights and duties of non-marital business
partners, as provided in §§’s, including, but not limited to, the following:
(1) Providing each spouse access at all times to any books kept regarding a
transaction for the purposes of inspection and copying. (2) Rendering
upon request, true and full information of all things affecting any
transaction which concerns the community property. Nothing in this
section is intended to impose a duty for either spouse to keep detailed
books and records of community property transactions. (3) Accounting to
the spouse, and holding as a trustee, any benefit or profit derived from any
transaction by one spouse without the consent of the other spouse which
concerns the community property.
iii. FC § 853 Characterization of Property in a Will: A will only creates an
expectancy interest and no property interest. Property in a will does not
create a transmutation b/c a will can be re-done at any time.

III. Evidentiary Presumptions: Classification of Property as CP or SP:

1. General Community Property Presumption: Property acquired during
the marriage is CP. Reflects preference for CP characterization. Unless the
presumption is rebutted by the spouse who claims the property is SP, the
presumption becomes conclusive. NB: If there is a lack of evidence
regarding when the asset was acquired (and it was a long marriage),
general CP presumption extends to assets possessed during marriage.
2. Rebuttal by Tracing to Source of Funds:
a. Rule: Rebut the CP General Presumption by tracing the asset
back to a SP source. Classification of property as CP or SP
cannot be done by reference to title documents. Depends on
factors including circumstances of acquisition, agreement b/w
spouses, etc. Shifting Burdens: If acquired during the marriage
the burden is on the party asserting the separate character of the
property.
b. Pro-Rata Apportionment: when both SP and CP are used to
acquire property, the property will be apportioned according to
the funds used. The increase in value is also apportioned
according to the proportions of the contributions.
3. Common Statutory Presumptions Respecting SP: When an asset falls
w/in one of the statutory definitions of SP, the courts assume is SP.
4. Evidentiary standard: preponderance of the evidence is sufficient to
rebut the presumptions.
5. Title: title does not control, the CPGP control and the separate property
proponent must trace the source of the funds.
IV. Special Presumptions Based on the Form of Title:
1. Acquisitions by a Married Woman Before 1/1/75:
a. FC § 803 Property acquired by married woman before
January 1, 1975; conclusiveness of presumptions:
Notwithstanding any other provision of this part, whenever any

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real or personal property, or any interest therein or encumbrance
thereon, was acquired before January 1, 1975, by a married
woman by an instrument in writing, the following presumptions
apply, and are conclusive in favor of any person dealing in good
faith and for a valuable consideration with the married woman or
her legal representatives or successors in interest, regardless of
any change in her marital status after acquisition of the property:
(a) If acquired by the married woman, the presumption is that
the property is the married woman's separate property.
(b) If acquired by the married woman and any other person,
the presumption is that the married woman takes the part
acquired by her as tenant in common, unless a different
intention is expressed in the instrument. (i.e. W will hold
her portion as SP)
(c) If acquired by husband and wife by an instrument in which
they are described as husband and wife, the presumption is
that the property is the community property of the husband
and wife, unless a different intention is expressed in the
instrument.
b. 3 Elements to raise Married Woman’s SP Presumption: (1)
Married Woman (2) Acquires property in her name (3) Before
1975).
c. Rebuttable: with clear and convincing extrinsic evidence. Facts:
(1) Lack of an agreement b/w H and W to transmute CP into SP
(2) No intent by H to make a gift of CP or SP to wife (3) W using
CP funds to purchase property in her own name w/o H’s
knowledge.
d. Rationale: Before 1975, women did not have equal management
and control rights so before ’75 if the H put the property in the
W’s name, the courts presume a gift and courts treat it as W’s
SP.
2. Concurrent Estates:
a. Definitions:
i. 5 unities: possession, interest, title, marriage and time
ii. TIC: Only need unity of possession. Most flexible of all
forms b/c interest can be willed away or passed by
intestacy. Rare for married couples
iii. Joint Tenancy: Need possession, title, interest, and time.
Right of Survivorship so title passes to other joint tenant
w/o going through probate. “Fragile Form” b/c any owner
can sell interest unilaterally which severs the JT and right
of survivorship
iv. Community Property: Need to be legally married, have
equal interests, don’t need to take title at same time,
spouses cannot unilaterally sell their interests. At divorce,

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split 50/50. At death (intestate), all goes to spouse. At death
(testate), at least half goes to spouse and ½ can be devised.
v. CP w/Right of Survivorship: Same except at death the
property passes to the other spouse w/o going through
probate. (Leg. Intent: to push married couples away from
using JT form).
b. Special Community Property Presumption:
i. General Rule: If a married couple buys property and takes
title as Joint Tenants and want the property to be a Joint
Tenancy, there must be a written agreement expressing that
the property is not CP. NB: Before 1984, an oral agreement
was enough.
ii. FC § 2581 Division of Property; Presumptions: 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.
iii. Right to Reimbursement:
(1) FC § 2640 Contributions to the acquisition of the
property; waivers; amount of reimbursement:
(a) “Contributions to the acquisition of
Property,” as used in this section, include
down-payments, 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 CP estate under this
division, unless the 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 the
property to the extent the party traces the

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contributions to a SP source. The amount
reimbursed shall be w/o interest or
adjustment for change in monetary values
and shall not exceed the net value of the
property at the time of division.
(c) Right created on 1/1/84. Not retroactive.
(2) Basically: If there is no written agreement and party
can trace their contribution back to SP, that party
can get a right to reimbursement w/o appreciation.
iv. At Death: If marriage ends in death, the court will treat it
as a JT.
v. Divorce: Treated as CP unless there is a writing? Ask prof.

V. Limitations on the CP System:

1. Persons w/in the CP System:
a. Ceremonial Marriage: Must meet all the requirements. Must be man
+ woman, capacity to marry (physical and mental capacity) + at least
18 years old (or w/consent of guardian and court) + consent +
marriage license + solemnization ceremony + Not void (incest,
bigamy, etc.)
i. Void Marriages: never valid
ii. Voidable Marriage: During the life of the marriage, a
party in the marriage can void the marriage due to some
incapacity (i.e. not old enough)
b. Common Law Marriage: CL marriages are not recognized in CA
but, under FFC clause, CA will recognize a couple as married if they
had a CL marriage in another state and moved to CA.
c. Putative Spouse: Good faith belief (based on objective evidence) that
you are married. Quasi-marital property rule: Property in this
marriage is considered qmp but at divorce will be treated the same as
CP.
d. Cohabitants: Not in CP system. Can get rights if there is an express or
implied contract (nb: consideration for K cannot be sex). Implied
agreements are shown through conduct or other evidence. Contract
remedies and equitable remedies can be applied. (Marvin v. Marvin)
e. Registered Domestic Partners: Once registered, have all the same
rights and obligations as married people. Statute includes same-sex
couples and seniors.
2. Constitutional Limitations:
a. General Rule: Constitution protects vested interests in Property. Situs
Rule: the law of the state where real property is exists is generally
applied. CA CP system butts up against Situs Rule.
b. Due Process and Change of Domicile:
i. FC § 125 Quasi-Community Property: QCP means all
real or personal property, wherever situated acquired before

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or after the operative date of this code in any of the
following ways:
(a) By either spouse while domiciled elsewhere which
would have been CP if the spouse who acquired the
property had been domiciled in this state at the time
of its acquisition.
(b) In exchange for real or personal property, wherever
situated, which would have been CP if the spouse
who acquired the property so exchanged had been
domiciled in this state at the time of its acquisition.
NB - Domicile: “Out of state CP” is acquired by a
couple domiciled in CA but the property is out of state.
QCP is property acquired by couple while not
domiciled in CA.
ii. Probate Code § 66 Quasi Community Property: As used
in this code, QCP means the following property (other than
CP as defined in § 28)
(a) All personal property wherever situated, and all real
property situated in this state, heretofore or
hereafter acquired by a decedent while domiciled
elsewhere that would have been CP of the decedent
and the surviving spouse if the decedent had been
domiciled in this state at the time of its acquisition.
(b) All personal property wherever situated, and all real
property situated in this state, heretofore and
hereafter acquired in exchange for real or personal
property, wherever situated, that would have been
the CP of the decedent and surviving spouse if the
decedent had been domiciled in this state at the time
the property so exchanged was acquired.
iii. Probate Code § 191Quasi CP: Upon the death of a
married person domiciled in this state, ½ of the decedent’s
QCP belongs to the surviving spouse and the other half
belongs to the decedent.
iv. QCP: Death v. Dissolution. Upon divorce QCP is treated
just like CP. At death, CP rules only apply if the acquiring
spouse dies. Rationale: QCP rules were developed to take
care of surviving spouses and the financially less powerful.
c. Due Process and Retroactivity:
i. General Rule: can’t apply a statute to something that
happened before the law was passed. (In re Marriage of
Heikes: Right to reimbursement of SP funds used to buy
property during the marriage, which was created by statute on
1/1/84, cannot be applied retroactively. The property is CP).
ii. 2 part Test to Determine if Statute Can Apply
Retroactively:

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(1) Significance of state interest
(2) Does the State Intend to make it retroactive?
d. Supremacy Clause and Preemption: Federal law trumps conflicting
state law. Issue arises w/federally created benefits like retirement
benefits, Soc. Sec., US Savings Bonds, ERISA, Military Retirement.
Can’t fit these federally created benefits into the CP system.
3. Property w/in the System:
a. Degrees: Not CP. Degrees are not property.
b. Professional Education or Training Received During the
Marriage: See FC §§ 2627, 2641. Reimbursement for non-degreed
spouse is the only remedy for professional education or training
received during the marriage. Reimbursement goes to the community.
(1) Limitation: the education/training must have substantially
increased the earning capacity of the degreed spouse.
(2) Duration of the Marriage: After 10 years of working in the
field it is presumed that the degreed spouse has paid back the
community for the cost of the education.
(3) Rebuttable Presumption: Maybe the degreed spouse had
supported the non-degreed spouse at an earlier time such that
reimbursement to the community would not be equitable???
ASK PROF.
c. Professional Education Debt: Educational loans are assigned to the
party who incurred them.
d. Future Earnings Potential Attributable to Degree earned during
Marriage: future earnings are not part of CP system.
e. Goodwill in Business: Goodwill is the “expectation of continued
public patronage.” It is the value that is placed on the probability that
an establishment will continue to exist and be successful. Goodwill in
a business is CP b/c it is produced with efforts during the marriage.
Rule: court will make a factual determination of the value of the
goodwill. Generally, it is the value that the purchaser is willing to pay
above the actual, tangible value of the business.
f. Term/Whole Life Insurance Death Benefits: The source of the funds
of the last policy premium determines who gets the death benefit.
Matter of tracing.
(1) Term Life Insurance: expires after a term (ex. 10 years) and
has a death benefit. Series of Ks based on a bet that the person
will/won’t die. Right to renew: not a property interest in the
CP system and will not factor into property division. The RTR
is dependent on the insurance company to keep offering the
benefit.
(2) Whole Life Insurance: investment vehicle w/death benefit.
Part of the premium goes into a fund in case you die. Can be
cashed out. Better rates of return than a CD.
VI. Classification of Specific Types of Property:

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1. Co-mingled Funds: the mixing of community and separate funds into a common
pool. Basic rebuttable presumption is that an asset bought with commingled funds
is CP. General CP presumption that any property bought during the marriage is
CP attaches but, it is possible to rebut this presumption by directly tracing the
asset to a SP source. Title is not determinative. Caution: A spouse who
commingles must be advised that the chances are great that any acquisitions from
a commingled account will be considered CP. 2 Methods:
(1) Direct Tracing: Slightly favors the SP proponent (not preferred
method). Does not require exhaustion of CP funds. When both types of
funds are in a bank account, the SP proponent can show that SP funds
were in the account and the SP proponent intended to use the SP funds
to acquire the property in question. (Marriage of Mix)
i. Requirements: SP Proponent must show the disposition of
funds by producing documentary evidence + testimony to show
that SP funds were used to acquire the property. Must make
this showing at death and upon divorce.
ii. Apportionment Rule: Use %’s.
(2) Indirect Tracing:
i. Exhaustion Method: Preferred method. The SP proponent can
rebut the CP presumption if, at the time of acquisition, all
community income was exhausted by family expenses. (nb: CP
expenses are presumed to be paid w/ community funds first).
The time of acquisition controls so that the character of
property is not left in limbo until the end of the marriage.
Policy: Not sympathetic to a spouse who commingles CP and
SP funds. When that spouse makes the choice to commingle
funds, that spouse assumes the burden of keeping records
adequate to establish the balance of community income and
expenditures at the time an asset is acquired. (See v. See)
ii. Totaling/Re-Capitulation Method: Only when, through no
fault of the SP proponent spouse, it is not possible to ascertain
the balance of income and expenditures at the time property
was acquired, can recapitulation of the total community
expenses and income throughout the marriage be used to
establish the character of property. (Ex. Fire or Earthquake
destroying the records).
2. Separate Property Business and Business Profits:
i. Typical Scenario: Spouse has a SP business (i.e. SP assets) but their labor
is CP. At divorce, court has to split the business profits by figuring out
how much is attributable to SP (capital) and CP (labor, efforts). This is an
exception to rule that SP produces SP and CP produce CP. The effort that
the spouse owning the SP expended on that SP is “community” effort.
ii. Apportionment Rule: the profits should be apportioned according to the
relative SP and CP contributions. Decision about which approach to use
depends on type of evidence available.

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(1) Pereira Approach: the increase in value can be attributed to
community effort. Apportions the profits of a SP business by
allocating a fair return on the SP investment and allocating any
excess to the community. Favors the community.
 R/S rate of return is the rate of legal interest which
is 10% unless a different rate is proven appropriate.
 SP proponent keeps the SP business + r/s rate of
return + ½ share of community interest.
(2) Van Camp Approach: increase in value is attributable to
something other than community effort. Determine the “r/s
value” of the spouse’s services and allocate that as CP. The
remainder is SP. Favors the SP owner.
 Salary: If the SP owner received a salary, than that
is considered what the community deserved from
the SP business. If no salary, courts will use the r/s
salary that someone in their position would have
received.
 Community Income – Community Expenses =
Community Share of the profits from SP business.
So, if all income was spent during the marriage, the
remainder is SP.

3. Installment Acquisitions: Title does not pass until the final payment is made.
Use pro-rata approach based on the source of funds used to make payments.
Determine what % of purchase price was paid with CP funds and SP funds.

4. Credit Acquisitions:
a. Generally: the character of the property is a function of the character of
the loan which will be either SP or CP. Character of the loan is based on
the intent of the lender (i.e. who/what was the lender relying on as
collateral to pay back the loan).Presumption: if the loan was taken out
during marriage, the loan is CP.
b. Intent of Seller/Lender Test:
(1) General CP presumption: property acquired by either spouse
during marriage is presumed to be CP.
(2) Rebuttal through Tracing: General CP presumption is
rebutted by tracing to SP funds but when property is acquired
on credit during the marriage, the SP proponent must trace by
using the intent of the lender.
(3) Lender’s Intent: Was the lender’s intent to rely upon the
purchaser’s SP or CP for repayment of the loan? When lender
relied on community assets for repayment of the loan, the CP
presumption is not rebutted.
c. Primary v. Solely:

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(1) Gudelj: If the seller “primarily” relied on the purchaser’s SP,
then the community property presumption would be rebutted
and the asset would be characterized as SP.
(2) Grinius: the CP presumption may be overcome by showing the
lender intended to rely solely upon a spouse’s SP in selling the
property on credit or in lending the funds to purchase the
property. If the seller or lender relied on both, the SPP fails and
the property will be characterized as CP.
5. Appreciation (SP Loan/CP repayment):
a. Common Scenario: a person acquires property prior to marriage on
credit. During the marriage, CP is used to pay back the loan. Upon
divorce, issue is whether the CP contributions represent acquisition of an
interest in the property.
b. Rule: Community funds paid to reduce the principal on a SP loan will
result in the community obtaining a proportional interest in the property
according to the formula established by the SC in Moore. Community
funds paid for interest on the loan, taxes, and insurance will not be
included in the calculation of the community interest b/c these are
expenses.
c. Purchase Price Ratio: The court will calculate the separate and
community interests using the purchase price.
6. Classification of Improvements:
a. Generally: Under FC § 2640 there is a right to reimbursement for various
types of SP contributions based on tracing. 2 alternatives for determining
rights to the improvement: (1) consider it a gift or (2) permit
reimbursement of the funds used for the improvement. No ownership
interest.
b. Rules:
(1) SP Funds Improve Other Spouse’s SP: the contribution is
presumed to be a gift. The presumption can be rebutted w/
evidence that the SP was not a gift. Rationale: a spouse has
management and control of his/her SP funds. When that spouse
chooses to use SP funds to improve the other spouse’s SP, it is a
selfless act and does not gain that spouse an interest in the other
spouse’s SP nor does it merit reimbursement.
(2) CP Funds Improve Other Spouse’s SP:
i. Traditional Rule: Use of CP funds to improve the
other spouse’s SP is presumed to be a gift, absent an
agreement to the contrary.
ii. Wolfe Rule: Use of CP funds to improve the other
spouse’s SP leads to a right to reimbursement to the
community. (NB: Consistent w/ FC § 2640 which states
that SP funds used to improve CP leads to a right to
reimbursement to the SP contributor).
(3) CP Funds Improve His/Her Own SP: If either spouse
appropriates community funds for his/her own benefit, w/o the

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consent of the other spouse, the community should be reimbursed.
Even if in theory both spouses have equal management and control
rights, if one spouse acts in his/her self interest to the detriment of
the community interest, the community is entitled to restitution. If
the use of community funds is never discussed, the community is
entitled to reimbursement. Amount of Reimbursement: When
Community Funds are used to improve SP, the community is
entitled to the amount expended or the value added – whichever is
greater so there will be no benefit from the breach of trust.
7. Personal Injury Damage Awards/Settlments:
(1) Cause of Action arose after separation: SP
(2) Cause of Action arose during the marriage: the PI Award or settlement
will be classified as CP. Exception to Rule that CP is split 50/50: Upon
divorce, PI damages are assigned to the injured party unless the interests
of justice require another disposition” but at least ½ the damages must still
go to injured spouse. See FC § 780, 781, and § 2604.
(3) One spouse caused the injury: the award will be the SP of the injured
spouse.
VII. Classification of Employment Related Benefits:
1. General Rule: if a particular benefit represents deferred compensation for
services rendered during the marriage by the employee spouse, likely the benefit
will be classified as CP.
2. Retirement Benefits:
a. Plans:
(1) Defined Contribution Plan: employer and employee contribute to
an individual account. Cash value of account easily ascertainable.
(2) Defined Benefit Plan: upon completion of a specific term of
employment, the employee is entitled to a certain % of his annual
income. Problem: if employee spouse has not reached retirement
age, valuation of the CP interest in the plan is speculative b/c pv is
dependent on many unknown variables.
b. Vested/Unvested Pensions: A vested pension is a pension right which
survives the discharge or voluntary termination of the employee. An
unvested pension is a contingency interest in property. Rule: Pension
rights, whether vested or not, compromise a property interest of the
community that the non-employee spouse can share in.
c. Mature/Unmatured Pensions: A pension has matured when it provides
an unconditional right to immediate payment (usually a pension matures
when the employee reaches the eligible age for retirement).
(1) Mature Rule: Once a pension is mature, the non-employee
spouse has an immediate right to their portion. The non-
employee spouse’s share becomes “fixed” and does not
increase as the employee spouse’s pension rights increase. The
non-employee spouse does get a share of the cost of living
increases added to the pension rights. 2 methods:

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(a) Cash Out Method: Employee spouse can buy out
the non-employee spouse by valuing the retirement
and offsetting w/other CP assets. (Gillmore)
(b) Reserve Jx and supervise future payments.
(2) Unmatured Pension Rule: Most uncertainty b/c employee
spouse may die, change jobs, etc. Generally, court will
maintain Jx and, if and when benefits become mature, the court
will order division.
d. Death: If non-employee spouse dies, non-employee spouse can convey
their CP interest in the employee-spouse’s retirement benefits.
3. Disability Benefits:
a. 2 Purposes: (1) to compensate for the personal suffering caused by the
disability and (2) to compensate for the loss of earnings resulting from the
disability.
b. Apportionment: (1) Time: before marriage/during marriage and (2) type
of benefit – retirement/disability. Must determine what portion of the
benefit was meant to compensate the disabled employee for lost earning
capacity and personal anguish and what portion was meant for retirement.
c. Intent Test: if the spouses intended that the disability insurance was to
replace lost earnings resulting from the disability, the benefits would be
considered SP. If the spouses intended the disability insurance to replace
retirement income, then the benefits would be considered CP and split b/w
the spouses.
d. Right to Renewal: if a spouse renewed the policy after separation with SP
funds and that at that time the spouse did not intend to provide the
community w/retirement income, then the benefits will be SP. NB: Timing
and the source of funds are paramount. (Elfmont: 2 years after
dissolution, doctor paid renewal fees w/ SP, the benefits were his SP).
4. Severance Pay (termination pay): replace future earnings so SP. The
characterization is determined not only by timing but by characterizing the benefit
as either a pension benefit or a disability benefit. These benefits generally
compensate for loss of future earnings and diminished earning capacity after
separation. NB: the spouse can not have previously accrued any right to the
benefit.
5. Early Retirement Benefits: considered an enhancement that is CP b/c it derives
from retirement benefits earned during the marriage. This is a modification of an
asset, not the creation of a new one. (Analysis Tip: If the type of employment
benefits can be tied to community efforts during the marriage, it will be
characterized as CP. If the benefit serves a purpose other than rewarding
employment during marriage, it would not derive from employment and could
then be characterized as SP.)

VIII. Spousal Management and Control of CP:

a. Community Personal Property:
i. Rule: Spouses have equal management and control rights. FC §1100(a):
either spouse has the management and control of the community personal

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property … with like absolute power of disposition, other than
testamentary, as the spouse has of the separate estate of the spouse. (b)
Don’t need written consent, or notice, to expend CP b/c there is a
presumption that the expenditure is for the benefit of the family (FC §
1101(b)). Effective 1/1/75 and retroactive to CP that existed in ’75. .
ii. Exceptions:
1. CA Fin. Code § 851: limits access to bank accounts in one
spouse’s name to that spouse.
2. Written Consent Requirement: A spouse must have written
consent before that spouse sells, conveys, or encumbers
community personal property used as the “family dwelling, or the
furniture, furnishings, or fittings of the home, or the clothing or
wearing apparel of the other spouse or minor children which is
community personal property.” FC § 1100(c)
b. Gifts:
i. FC§ 1100(b): prohibits gifts or disposal of community personal property
for less than fair and r/s value unless the other spouse has given written
consent. Consent can be validly given after the fact (Spreckles)
ii. Remedies:
1. During the Marriage: the non-consenting spouse has the right to
either rarify the gift or revoke the gift and sue to recover all the
property for the community.
2. After the death of the donor spouse: the non-consenting spouse
has the right to ratify the gift or void the gift up to ½ the value of
the gift.
3. Who can be sued: A spouse whose CP rights have been violated is
entitled to pursue whatever course is best calculated to give her
effective relief. Ex. Wife can sue H’s estate for the gifts made w/o
her consent.
c. Community Business:
i. FC § 1100(d): gives primary management and control to a spouse who is
operating or managing a business or an interest in a business that is all or
substantially all community personal property. The managing spouse may
act alone in all transactions. Rationale: the managing spouse needs
freedom to run the business w/o interference.
ii. Written Notice Requirement: the managing spouse must give prior
written notice to the other spouse for major actions such as sale, lease,
exchange, encumbrance or other disposition of all or substantially all of
the personal property used in the operation of the business. But I f
managing spouse fails to give prior written notice, the validity of the
transaction will not be adversely affected. NB: Does not require consent.
iii. Remedy: FC § 1101 – file a claim for breach of fiduciary duty or request
an accounting.
d. Fiduciary Duty:
i. FC § 1100(e): each spouse shall act in accordance w/the general rules
governing fiduciary relationships. Duty includes full disclosure and full

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access to information about assets and debts of the community, upon
request.
ii. FC § 721: H and W are subject to the general rules governing fiduciary
relations which control the actions of persons occupying confidential
relations w/each other. Duty of care is limited to refraining from engaging
in grossly negligent or reckless conduct, intentional misconduct or a
knowing violation of the law. Ordinary negligence is excluded.
e. Community Real Property:
i. Generally: require joint spousal decisions for major transactions and aim
to protect both an innocent spouse and an innocent 3rd party from
unilateral actions by a conniving spouse.
ii. FC § 1102
(a) Either spouse has the management and control of the community
real property but both spouses must join in executing any
instrument by which that community real property or any interest
therein is sold, conveyed, or encumbered. Problem: when
community real property is held on one spouse’s name.
(b) -
(c) -
(d) One year statute of limitations: gives an innocent spouse one
year to file an action to avoid a unilateral transfer of community
real property in violation of the joinder provision. Limitation
period only applies to bona fide transferees w/ no knowledge of the
marriage relation who have no reason to suspect another signature
is necessary.
(e) Attorney’s Fees: Ensures a spouse will be able to seek adequate
representation in dissolution proceedings and other similar
situations. A spouse may encumber his/her interest to pay r/s
attorney’s fees in order to retain or maintain legal counsel.
iii. Unilateral Sale: FC § 1102(c)(2) creates a presumption of validity of the
sale if the purchaser in good faith did not know about the marriage of the
spouse who sold the property. Transaction is voidable by the non-
consenting spouse and the bad spouse is bound by the transaction.
(1) During the marriage: If spouse did not join in the sale, the
non-consenting spouse has a right to void the sale and the
community would re-own the property. But, the community
must repay the purchase price to the bfp.
(2) After Dissolution/death: innocent spouse can recapture ½
of the property by tracing his/her ½ interest into the hands
of the 3rd party and recapture it as SP.
iv. Unilateral Encumbrance: Here, one spouse borrows $. The loan creates
a debt, and the security for the loan creates a security interest in the real
property. If the loan is not paid, the lender can obtain a judgment for the
loan amount, and that judgment can be recorded as a lien on the property.
Clear violation of FC §1102(a). Resolution: the community receives the

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property back b/c the encumbrance is void, but the community still owes
the debt.
v. Married Woman’s Presumption: If unilateral sale/encumbrance
occurred before 1975 and title was in W’s name only, H will probably
lose.
f. Restraints During Divorce Proceedings:
i. Living S & A: earnings become SP and the community is not liable for
most debts incurred. But, the fiduciary duty does not end but continues
until the date of distribution of the CP or QCP. (FC § 1101(e))
ii. FC § 2040 TRO: when divorce proceedings are initiated, the summons
shall contain a TRO prohibiting the spouses from transferring,
encumbering, hypothecating, concealing or in any way disposing of any
property, real or personal, whether CP, QCP, or separate w/o the written
consent of the other party or court order. Big limit on spousal management
and control of all property either CP or SP.
iii. Exceptions:
(1) Usual Course of Business:
(2) Necessities of Life:
(3) Extraordinary Expenditures: spouse must notify the other
spouse of any proposed extraordinary expenditures at least 5 days
before incurring such an expenditure and account to the court.
iv. FC § 1101(h) Remedy for breach of fiduciary duty during divorce
proceedings: When the breach is oppression, fraud or malice the other
spouse shall be awarded 100% of any asset undisclosed or transferred in
breach of the fiduciary duty. Ensures full disclosure of all assets b/c better
to reveal and split than to risk loss of entire asset if found out (Ex. Lottery
Ticket).
g. Remedies for breach of fiduciary duty when managing CP:
i. FC § 1101: Lists possible remedies
(a) The breach of a fiduciary duty must involve impairment to the
claimant’s interest.
(b) Court ordered accounting.
(c) Court order to add a name to the CP held in one spouse’s name.
(d) –
(e) --
(f) Remedies available during marriage, at divorce, or upon death of a
spouse
(g) A remedy for breach of a fiduciary duty shall include, but not be
limited to an award of 50% of an undisclosed asset or transferred
asset + attorneys fees and costs
(h) The remedy for breach of a fiduciary duty which amount to
oppression, fraud or malice shall include, but not be limited to an
award of 100% of an undisclosed or transferred asset.
IX. Creditor’s Rights
a. FC § 910(a): protects creditors in that the community estate is liable for a debt
incurred by either spouse before or during the marriage. 912 same as QCP is

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liable for a debt incurred. Policy: creditors should be paid for the debts owed to
them. Very broad protection of creditors.
b. FC § 913(a)-(b): a spouse’s SP is liable for his/her own debts but not for the
debts of the other spouse. Thus, a creditor can reach the CP for a debt incurred by
one spouse, and if there is no CP or limited CP or QCP, the creditor can also
reach the SP of the spouse who incurred the debt. NB: SP liability follows the
spouse who incurs the debt. CP liability does not depend on the spouse who
incurs the debt.
c. Creditors Rights at Death: the courts treat the debts as if the deceased is still
alive.
d. Exceptions:
(1) Necessaries of Life: FC § 914(a)(1) - spouse’s SP is liable for
“necessaries of life” incurred by the other spouse while the spouses are
living together (i.e. during the marriage). Def.: living costs consistent w/
the spouses’ station in life. (ex. furniture).
(2) Common Necessaries of Life: a spouse’s SP is liable for “common
necessaries of life” while the spouses are living apart. Def.: expenses
required to sustain life.
(3) FC § 911(a) Earnings: the earnings of a married person during marriage
are not liable for a debt incurred by the person’s spouse before marriage.
Requirements: must keep earnings separate in an account to which the
other spouse has no right to withdrawal, must not commingle those
earnings w/any other CP.
(4) FC § 916(b): Provides for a right of reimbursement in certain situations if
you paid for a debt for which you were not personally liable.
d. Child Support and Spousal Support Obligations:
i. FC § 915(a): a child or spousal support obligation of a married person that
does not arise out of the marriage shall be treated as a debt incurred before
marriage i.e. the community estate will be liable for the debt unless the
non-obligor spouse shields their earnings under § 911(a).
ii. FC § 915(b) Reimbursement: allows for reimbursement to the
community estate from the obligor’s separate income. Also, the obligor’s
SP would be liable for the support payments but not the other spouse’s SP.
iii. Policy: ensure that children and spouses of prior marriages will not be
disadvantaged by the re-marriage.
e. Tort Obligations:
i. Rule: no difference b/w treatment of a tort obligation from other debts i.e.
community estate is liable for the debt incurred before or during the
marriage. A spouse can shield his/her earnings from the tort debt incurred
before marriage by the other spouse. The SP of the tortfeasor is liable and
the SP of the other spouse is not liable.
ii. FC § 1000(b)(1)(2) Order of Satisfaction: depends on whether the
liability of the married person is or is not based on an act or omission
which occurred while the married person was performing an activity for
the benefit of the community. If the liability is based on an act or omission
that occurred during an activity for the benefit of the community, then the

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liability shall first be satisfied from the CP estate and second from the SP
of the tortfeasor.
f. Living Separate & Apart:
i. FC § 910(b): during marriage extends only until the spouses separate i.e.
liability for the community estate for debts ends when the spouses
separate.
ii. FC § 914(a)(2) Exception for Common Necessaries of Life: a married
person is personally liable for a debt incurred for common necessaries of
life of the other spouse while the spouses are living separately. Ex. Rent,
food, medical care.
iii. Reimbursement: At division of property, if there is CP left over the
spouse who used their SP to pay for the other spouse’s “necessaries of
life” will be reimbursed.
5 Questions to ask:
1. What properties are creditors seeking to pay for the debt?
2. Status of marriage when the debt is incurred?
3. Which spouse incurred the debt?
4. Inter-spousal agreement regarding debt or asset?
5. Nature of debt

X. Distribution of CP at Death
a. General Rule: the presumption follows the title (i.e. FC § 2581 does not apply).
JT is presumed to be JT and CP is presumed to be CP.
i. Spouse dies Intestate:
(a) CP: Under PC § 6401(a) the surviving spouse is entitled to ½ of
the CP + the other ½ that belonged to the decedent = 100% CP
goes to surviving spouse.
(b) SP: depends on relatives. One Surviving child = spouse and child
each get ½ of the SP. 2 or more surviving children = spouse gets
1/3 and children split remaining 2/3. If no children but (parents,
brothers, sisters) = spouse get ½ and rest split ½. Only if decedent
left no issue, no parent, no brother/sister, and nieces/nephews will
SS receive all SP.
ii. Spouse dies Testate: Under PC § 6401(b) the decedent has the right to
dispose of the decedent’s ½ of the CP by will.
iii. Gifts: If spouse gives away CP as a gift and then dies, the court will treat
it as a testamentary gift of ½ of his portion.
iv. Survivor’s Duty to Elect: if property is owned as CP and, in a will, one
spouse devises that property to someone else but devises other CP to the
SS, the SS must elect to give up her ownership in the property that was
devised away in order for the other parts of the will to be followed. I.e. A
decedent spouse can write a will which forces the surviving spouse to
either take what they will get in the will and give up their CP rights, or just
take what they would get under CP law.

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b. JT Presumption: The title controls. If spouse dies and property is held in JT, it is
presumed the property is a JT. Presumption cannot be rebutted by tracing to SP
funds. Rebuttable: by showing the intentions of the parties.
c. Oral v. Written Agreement: the bop is on the party trying to rebut the
presumption.
i. Before 1/1/85: Oral transmutation agreement was sufficient.
ii. After 1/1/85: as of this date all transmutations are valid only if made in
writing by an express declaration by the spouse whose interest in the
property is adversely affected. FC § 852(a)-(e).
d. Death During Divorce Proceedings:
i. Death before Divorce Decree: Upon death, JT property is presumed JT.
Upon divorce, JT property is presumed CP. If the spouses are going to get
a divorce, but a spouse dies before the divorce decree is entered, the JT
presumption is still operative b/c they are still technically married. (Looks
like windfall to technically surviving spouse. Practice Pointer: when a
couple separates, JT property should be severed so that the property
becomes a TIC and CP.
ii. Death after Divorce Decree but before Property Division: Because the
marriage is already dissolved, FC § 2581 controls and the JT property is
considered CP. The CP presumption could only be rebutted by a writing,
either in the deed or a written agreement that the property was other than
CP.
 PC § 5601: a JT is severed when the court dissolves the marriage
and converts it into a TIC.
e. Community Property w/Right of Survivorship: Property treated as CP during
the marriage and at divorce, but if one spouse dies, the property will be treated
like joint tenancy. Confirms that in the event of death, the surviving spouse will
receive the home w/o having to go through probate.

XI. Division of CP at Dissolution

1. Living Separate and Apart: FC § 771 states that earnings and accumulations of
a spouse while living separate and apart from the other spouse, are the SP of the
spouse. Def. of Separate and Apart: when spouses have come to a parting of the
ways w/no present intention of resuming marital relations. Court looks at parties
conduct and will consider all facts of the relationship to determine when
separation actually occurred. But, living apart physically is an indisputable
threshold requirement to separation. Legal separation is formal of living separate
and apart.
2. Division of Assets an Liabilities at Divorce:
a. FC § 2550 Equal Division Requirement: the court shall divide the
community estate of the parties equally (very few exceptions). Unpaid
debts must be divided equally or “confirmed” to one of the spouses (FC §
2551).
i. Jx: FC § 2010 gives court Jx to divide CP and QCP. FC § 2650
gives court Jx to divide SP interests in jointly held property upon

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request of either party, otherwise the parties would have to
partition the property in a different proceeding.
ii. Statutory Exceptions to Equal Division Requirement:
(1) Family House w/Minor Children: the custodial parent gets
the house and non-custodial parent gets offset. Or, Delayed
disposition: court lets custodial parent live in house until kids
are 18 at which point it is sold or the one spouse buys out the
other.
(2) Economic circumstance: may award an asset of CP to one
party as the court deems proper to effect a substantially equal
division of the CP
(3) Misappropriation: Under FC § 2602 the court may award,
from one spouse’s share of the property, any sums deliberately
misappropriated by that spouse
(4) CP estate less than $5K + Missing party: court can award all
property to the non-missing spouse.
(5) PI Damage Awards: If recovered by the spouse during
marriage they are CP but upon divorce they are assigned to the
injured spouse unless the interests of justice require another
disposition (but 50% must go to injured spouse).
(6) Closely Held €: Can be awarded to managing spouse.
(7) Debts: If debts exceed assets, court can award debts to spouse
that is best able to pay.
b. Characterizing Debts:
i. General Rule: Court will characterize the liabilities of the parties
as either separate or community and then divide them as specified
in FC §§2620-2627.
ii. Exceptions:
(1) Educational Loans: assigned to the spouse receiving the
education.
(2) Tort liability: if based on an act or omission which occurred
while married person was not performing an activity for the
benefit of the community, will be assigned to tortfeasor w/o
offset.
iii. Pre-Marriage Debts: Confirmed w/o offset to the spouse who
incurred the debt. FC § 2621.
iv. Debt Incurred During Marriage: must be characterized as either
a community debt or a separate debt.
(1) Community debts: divided equally and separate debts are
confirmed w/o offset to the spouse who incurred the debt. FC
§ 2622: allows awarding an asset to one party to effect a
substantially equal division.
(2) Separate debt: can be incurred during the marriage and before
separation if the debt was not incurred for the benefit of the
community. Does not include family or necessary expenses.

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Necessary: refers to a living expense that is appropriate to
one’s station in life.
c. Debts Exceed Assts: FC § 2623 states that to the extent that community
debts exceed total community and quasi-community assets, the excess of
debt shall be assigned as the court deems just and equitable, taking into
account equitable factors, such as the parties’ differing earning capacities.
Big exception to Equal Division Requirement.
d. Debts After Separation but before dissolution:
i. 3 categories of debts can be incurred:
(1) Common Necessaries of Life: a spouse is responsible for
these debts i.e. those items that are necessary to sustain life
(food, clothing, housing, and medical care)
(2) Necessaries of Life: items necessary to the spouses’ station in
life.
(3) Non-Necessaries: confirmed w/o offset to the spouse who
incurred the debt.
ii. FC § 2623(a): if the debt was for the common necessaries of life
of either spouse or the necessaries of life of the children of the
marriage, that debt shall be confirmed to either spouse according to
the parties’ respective needs and abilities to pay at the time the
debt was incurred
e. A debt after Entry of Judgment but Before Divorce is Final:
i. Rule: At this time a spouse is responsible for his/her own debts.
Any debts incurred during this time shall be confirmed w/o offset
to the spouse who incurred the debt. (FC § 2624).
ii. Delay: 6 month delay b/w time judgment is entered and when the
decree is final.
3. Division by Property Settlement Agreement:
a. Scope and Validity: Parties to a property settlement agreement are free to
enter into whatever type of property division they desire, including an
unequal division. Fiduciary Duties apply during negotiation of agreement
which includes obligation of full disclosure. Policy: Ks in contemplation
of dissolution conserve resources.
b. Enforcement and Modification: a fair and equitable property settlement
agreement is a binding K.
i. Enforcement:
(1) Incorporation + Approval = No legal significance and
agreement is enforceable only as a K
(2) Incorporation + Merger = Parties must intend the merger
and agreement becomes a part of the court order and can be
enforced by the court.
ii. Modification: Property divisions are not modifiable
4. Post Dissolution Remedies: evidence of fraud or mistake can re-open a
judgment.

Notes:

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1. Go through scenario in E & E’s p. 163
2. Memorize FC §§ 1100 and 1102.
3. 2 questions. 1 ends in divorce. 1 ends in death. Both deal with creditors rights.
Will have a management and control in both one.

4 types of legal issue:

1. Preliminary Issue (Does CA law apply?)
2. Characterization issue (CP, SP)
3. Management + control of CP
4. Disposition issue (Who gets what)

4 situations
1) Divorce/legal separation/separate apart
2) Death of one of the spouse
3) Creditors right
4) Management + control of CP

2 essays – 2 hours

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