When a couple goes through a divorce process in California, there are three types of assets they may have: the first spouse’s separate property, the second spouse’s separate property, and community property. If the classification of each of your assets is completely black and white, agreeing on a division of property in your divorce may be relatively straightforward. But few things in life are ever all black and white. What happens if the couple took money from a community asset and invested it in improving an asset that was one of the spouses’ separate property? That was the issue recently before the Fifth District Court of Appeal, which decided that such a scenario gave the community a right of reimbursement, and that right, when not accounted for in the couple’s divorce judgment, gave the wife a valid cause for action under the statute governing unadjudicated assets.
The couple, Tara and Vince Weber, finalized their divorce in 2013. When they did, they had already reached a marital settlement agreement. The agreement gave some of the community property to the wife and some to the husband. It also directed that the husband retain his separate property, including a piece of real property located on Woodland Avenue. The agreement also stated that each spouse waived receiving spousal support.
The following spring, the ex-wife returned to court, this time asking for the division of “an unadjudicated asset pursuant to section 2556” of the Family Code. In this case, the unadjudicated asset was the funds the couple had taken from their community property and expended on improving the husband’s separate property on Woodland Avenue. Specifically, the wife asserted that they used community money to purchase a mobile home placed on the property and to set up an almond orchard on the land. In addition to the cost of planting and maintaining the trees, the couple also allegedly used community funds to pay for taxes, insurance, and mortgage payments for the Woodland orchard. The couple’s marital settlement agreement did not explicitly mention any right of reimbursement for the community funds that were put into improving the husband’s orchard, so she argued she was entitled under Section 2556 to go back and demand it now.
The trial court, however, ruled for the ex-husband. The trial court ruled that the reimbursement claim the wife asserted related to the Woodland Avenue orchard did not qualify as an asset under Section 2556, so the law did not allow her to pursue a claim for reimbursement. The appeals court disagreed, ruling for the wife and sending the case back to the trial court. As the court pointed out, the California Family Code doesn’t define what is (or is not) a “community estate asset.” Without a statutory definition, the court crafted its own version, using a combination of the Merriam-Webster dictionary and Black’s Law Dictionary. When it finished piecing together each of the parts, the court concluded that a community estate asset was anything of value that was “acquired by a married person during the marriage while domiciled in this state.”
Using this definition, the appeals court disagreed with the trial court and concluded that the ex-wife’s right of reimbursement was a community estate asset. The right of reimbursement was a significant property interest acquired by the couple during the marriage (acquired at the moment they spent community funds on the husband’s orchard), and it definitely had value to the ex-wife. As a result, the right of reimbursement was a community asset and was unadjudicated by the divorce judgment, meaning that the wife was legally entitled to pursue her reimbursement demand under a Section 2556 action.
There are many issues and numerous items that must be addressed in a divorce case, especially when it comes to dividing and distributing property. Just because you’ve accounted for the cars, the house, the furniture, and all of your tangible community property doesn’t mean that that is the end. The diligent San Diego divorce attorneys at Doppelt & Forney have helped clients throughout Southern California, including in San Diego, Encinitas, La Jolla, and Chula Vista, and can help you ensure that your divorce judgment is both fair and complete. For a free consultation about your divorce, reach out to Doppelt & Forney through our website or call toll-free at (800) ROY IS IT (769-4748).
More blog posts:
California Husband Who Slept Through His Trial Not Allowed to Re-try Property Division Issues, San Diego Divorce Lawyer Blog, Oct. 25, 2016
California Family Court Had Exclusive Jurisdiction Under Marital Settlement Agreement, San Diego Divorce Lawyer Blog, Jan. 12, 2016
Photo credit: Nehrams2020 at Wikimedia Commons.