Omitted Community Property Debts and Reimbursement in California

for_sale_signA recent case before the Second Appellate District tasked that court with addressing an unusual case of reimbursement following the post-divorce sale of a couple’s marital home. The appeals court reversed a trial court’s order of reimbursement in favor of the wife because that trial court made several procedural errors, including improperly refusing to consider the husband’s argument that the wife unreasonably delayed in selling the home.

The couple in this case was a pair who decided to divorce in 2007 after almost 25 years of marriage. Eight months later, in early 2008, the divorce became final. That order called for the wife to manage the sale of the marital home. The wife was not able to complete a sale of the home until 2013.

During the five years between the divorce decree and the home sale, both the wife and the husband lived in the home (along with some of the wife’s relatives on an intermittent basis). During this five-year period, the wife made all the home loan payments, paid all the property taxes and all the expenses of preparing the house for sale “so as to attract buyers and to get the highest purchase price possible.”

The sale produced net proceeds of $430,000 for the couple, of which each spouse got $215,000. After the escrow company paid the proceeds, the wife went to court to demand that the husband pay her almost $56,000 in an “equalization payment.” She argued to the court that she had, between 2008 and 2013, spent $111,900 of her separate property on the house and that the husband owed her a sum equaling 50% of that total.

The husband argued that he owed the wife nothing. His half of the sums that the wife spent out of her separate property on the house, such as loan payments and property tax payments, should be considered to constitute (or be in lieu of) spousal support, he contended.

The trial court generally sided with the wife, declaring the loan payments and the property tax payments to be “omitted community property debts,” for which the husband was 50% responsible.

The appeals court reversed that ruling. One of the husband’s arguments was that the wife, by engaging in an unreasonable delay in selling the house (while she and some of her relatives lived in the property) unfairly harmed his legal position. Had he known that the wife was going to make a claim for a $56,000 payment for these expenses five years in the future, he could have launched a timely claim for spousal support, but the wife’s delay (and failure to ask for money earlier) induced him to forego asking for spousal support, he argued. The trial court should have addressed this argument before deciding whether or not an equal or unequal distribution of the debt was proper under the statute to satisfy the “interests of justice.”

If you are seeking reimbursement for unresolved community property debts you paid, or your ex-spouse is seeking such reimbursement, you need to have skilled and knowledgeable counsel on your side. The experienced San Diego family law attorneys at Roy M. Doppelt & Associates have been assisting clients throughout Southern California, including in San Diego, Encinitas, La Jolla, and Chula Vista, for many years, helping clients resolve reimbursement and many other divorce-related cases. For a free consultation, reach out to Doppelt & Forney through our website or call toll-free at (800) ROY IS IT (769-4748).

More blog posts:

California Court Says Wife Can Pursue Claim for Community Assets Spent on Husband’s Property, San Diego Divorce Lawyer Blog, Nov. 1, 2016

California Court Upholds Valuation of Marital Property in Divorce, San Diego Divorce Lawyer Blog, May 12, 2015