In every California dissolution (divorce) proceeding, the court is required to divide the  parties’ community property estate.  The community estate includes the property acquired by either party during the marriage with several exceptions.  Inheritances, for example, are not part of the community estate.  In the division of the community estate, unless a party signs a written waiver, either party is to be reimbursed for his or her contributions to the acquisition of property to the extent the party traces the contributions to a separate property source.

In a recent case, a California court determined Husband’s testimony alone was insufficient to trace his separate property interest to subsequently purchased community assets.  Prior to the marriage, Husband purchased a property in London for which he claims he made several improvements during the marriage.  After the marriage, Husband conveyed this property to himself and Wife as joint tenants.  The couple refinanced the property and deposited $225,000.00 of the proceeds into their joint account. After refinancing the property, Husband and Wife used these funds as a down payment to purchase another property.  Husband produced no records to indicate the source of the money used as a down payment on the second property.  The second property was subsequently sold and the couple used the profits as a down payment to purchase a third property.  Approximately seven years after its purchase, the couple sold the first property and used to proceeds as a down payment to purchase a fourth property.

At the couple’s dissolution trial, Husband testified that his separate property could be adequately traced from the first property to the fourth.  However, he was unable to provide any documentary evidence because he claimed the evidence had been destroyed.  The trial court was forced to rule on his testimony alone and concluded that Husband was credible enough finding Husband’s separate property had been adequately traced to the first property.  Wife appealed the trial court’s finding and the trial court was reversed.

Commingling of funds does not alter the status of separate property if the funds can be traced to a separate property source.  The spouse claiming a separate property interest in a community asset carries the burden of tracing the funds to a separate property source.  Here, Husband had the burden to overcome the presumption that property purchased during the marriage is a community property asset.  Generally, the testimony of a single witness is sufficient to support a finding of a certain fact.  However, there is a heightened evidentiary standard to prove a separate property interest in property that is presumably acquired during a marriage.

Dividing assets can be a complicated issue.  For more information contact our Certified Family Law Specialists.  We offer a private consultation and our lawyers are skilled in a variety of family law issues including divorce matters.  Feel free to send us an email or call our office at (619) 284-4113, where our attorneys will be able to speak with you directly.  You can also email our firm.

In the recent, unpublished matter of IRMO Price & Turkanis (Dist. 2, Division 8, Filed May 11, 2011), the Court of Appeal affirmed the trial court’s use of a comparable sales approach to value a community property business.  In this case, the husband owned 78% of a radiology business on the date that he married his wife in 1995.  Between 1995 and 1998, the husband’s business increased in value and was sold to another company for $7.4 million.  The parties agreed to value the community’s interest in husband’s business using the Pereira case, and that the husband would be entitled to a rate of return of 7.19% simple interest on the value of the business from the date of marriage.  There was evidence of the business’ pre-marriage income and post-separation earnings. 

At trial, three experts testified regarding the business’ valuation, using various valuation methods including capitalization of cash flow, the capitalization of excess earnings, and a comparable transaction analysis.  The experts varied in valuing the business as of the date of marriage, one saying the value was $0.00 and one saying the value was $6.2 million.  The trial court ultimately ruled that the value was $6.2 million as of the date of marriage.  Further, the court ruled that the increase in value of the business did not necessarily occur during marriage, which is what the wife wanted the court to rule, citing Family Code 760.  By agreeing to value the husband’s business using the Pereira case, the wife’s argument failed.  The wife should not have agreed to use that case as a benchmark to value the husband’s business, and should have instead considered arguing for the Van Camp case as the proper valuation method.  The court noted that the date of acquisition determines the character of the property. 

In divorce and legal separation cases, if either party owns a business, or if the community owns a business, the valuation, division and ultimate disposition of the property can be a tricky endeavor.  It is important to have an experienced attorney working hard on your behalf to help determine the best strategy for your case.  This planning should be done in the early stages of the divorce, if not before a case is ever filed.  Feel free to call our office at (619) 284-4113 or visit our Contact Us page to schedule your free initial, private consultation today.

San Diego Child Support Experts

In the recent matter of IRMO Tong & Samson (filed July 5, 2011), the Court of Appeal held that a parties’ receipt of severance pay should not be considered as one-month’s pay for purposes of calculating guideline child support.  In the Tong matter, the parties separated after a 22-year marriage.  The court ordered the husband to pay the wife over $9000 per month in support, plus 35% of all his compensation in excess of $25,000 pursuant to the Smith-Ostler formula. The order contemplated both child and spousal support.

One year later, the husband was laid off from his job and received over $300,000 in severance.  One and a half years after he was laid off, the husband filed a motion to modify support and sought to clarify whether his severance pay would be spread over a thirteen month period based on the Stephenson case, which allows the court to spread over a period of time large receipts of money for support purposes. The Court of Appeals reversed the trial court and found that the husband’s severance pay cannot be treated as one-month’s earnings and should be spread out over thirteen months.  The husband’s severance pay had several components, including pay for past years’ service, pay in lieu of commissions, and other components.  The fact that the husband’s pay was partitioned for certain past and future pay was crucial in the court’s eyes because the lump-sum severance pay was obviously intended by the husband’s employer to compensate for more than one-month of pay.

If the Court had not determined that the husband’s severance pay was intended to compensate for more than one month of service, the husband could have suffered a disastrous court order.  Essentially, the court could have said the $300,000 payment for the husband’s severance was a monthly earnings amount, thus increasing the husband’s monthly support obligation to an amount that he would never have been able to pay.

The court had also ruled on the husband’s request to downward modify support based on the wife’s cohabitation with an unrelated male pursuant to Family Code 4323.  The court denied the request based on the fact that the unrelated male contributed only $800 per month to the wife’s monthly expenses, and therefore this amount did not significantly reduce the wife’s need for support.

Child and spousal support issues must be dealt with a careful manner.  The Tong case could easily have been decided in a manner significantly different than the actual outcome.  As a result, it is imperative that family law litigants have an expert on their side to guide them through the process.  At Wilkinson & Finkbeiner, LLP, our attorneys have extensive litigation experience with child and spousal support matters.  Feel free to call or email us today using our Contact Us page.

Residency Requirement Law Altered for Non-Resident Same-Sex Couples Effective January 1, 2012

Generally, in order to obtain a divorce in California, one spouse must be a resident of the State of California for six months and of the county where the proceeding is filed for three months preceding the filing of the petition.  Either party may file for dissolution (divorce) of their marriage as long as the petitioner satisfies the requirements, or the respondent satisfies the requirements and also wants a divorce.

The six-months/three-months residence prerequisite applies only to marriage dissolutions.  There is no residence requirement for filing for legal separation.  Therefore, if neither spouse satisfies the residency requirement but wish to obtain a divorce in California, a spouse can file for legal separation and later amend the petition.  This tactic could be used if one party intends to fulfill the six-months/three-months prerequisite eventually but would like to start the dissolution process immediately.  Once the requirement is satisfied, the spouse may amend the petition or the response to request dissolution instead of legal separation.

There is no minimum residence prerequisite to dissolve a domestic partnership that was established in California.  Domestic partners who register their partnership with the California Secretary of State thereby consent to California jurisdiction to end the partnership as well.   However, the residency requirements still apply in California if the domestic partnership was established outside of California.

For a brief period in 2008, California granted marriage licenses to same-sex couples.  Since November of 2008, California has banned such licenses. A problem arose when these married same-sex couples moved out of California to states that did not recognize their marriage and therefore would not grant them a divorce.   The couple no longer satisfied the California residency requirements and could not obtain a divorce in the state where they currently resided.

In 2011, the Domestic Partnership Equality Act was passed effective January 1, 2012.  The Act authorizes a judgment for dissolution or legal separation of a marriage between persons of the same sex to be entered if the marriage was entered in California and neither party resides in a state that will dissolve the marriage.  This law allows same-sex marital partners who are non-residents who were married in California to obtain a divorce.

When contemplating a divorce or legal separation, it is imperative to consider where to file the petition. Dissolution cases involve difficult and life changing decisions. Because of the complexity of this issue, it is best to hire an attorney who is experienced in such matters. The attorneys at Wilkinson and Finkbeiner, LLP are Certified Family Law Specialists and have successfully handled a variety of dissolution cases and can assist you with your matter. Feel free to call today at (619) 284-4113 for your free initial consult. You can also send us an email inquiry.

Community Property Presumptions and Importance of Title

In the May 2011 case of Irmo Valli, the Court of Appeals reversed a family trial court’s judgment that an insurance policy that was taken out during marriage and paid for with community property was community property.  The Court of Appeals said that the insurance policy was the separate property of the wife, who was the named beneficiary on the account.

In California, property acquired during marriage is presumed to be community property.  Family Code 2550 requires the family courts to value and divide equally the parties’ community property estate.  However, before the court can value and divide property, it must characterize that property as community, quasi-community, or separate.  The date in which property is acquired and the title in which the property is taken are key aspects to the characterization of property.  Separate property includes are property acquired before marriage, after the date of separation, or by gift, inheritance, and so forth.  Since property acquired during marriage is presumptively community property, the party claiming a separate property interest in something acquired during marriage must overcome the presumption by a preponderance of the evidence.  However, the specific act of specifying a form of ownership in the conveyance of title may remove the property from being presumably community.  If the title of property is taken in only one party’s name, it is the party asserting the community has an interest in the property to prove by clear and convincing evidence that the property is jointly owned.

In Valli, although the insurance policy was acquired during marriage, it was acquired in the wife’s name only.  The Court of Appeals said that the presumption of title ownership trumped the presumption of community property under California Family Code 760. 

Our attorneys are experts in characterizing property.  We are available to answer your questions today regarding how property is characterized and treated in divorce and dissolution of domestic partnership proceedings.  Call us at (619) 284-4113 or send us an email.

Want to Bend the Rules in a Divorce Proceeding?  If so, Prepare to Pay a Hefty Penalty.

In the recent opinion of Irmo Davenport (filed May 4, 2011), the Court of Appeal affirmed a trial court’s ruling that penalized a family law litigant the sum of $100,000 for her attorney’s bad behavior, plus awarded an additional $304,000 in attorney fees to Husband. The Court’s ruling in the Davenport case is a reminder to family law participants and their attorneys that you either play by the rules and act in an appropriate manner, or you pay.

In family law cases, there are reasonable litigants and unreasonable litigants.  There are also attorneys, although fortunately not many, that are unreasonable and who attempt to bend the rules of the Family Code, Local Rules and general rules of ettiquite and civility.  Handling tough litigants and tough attorneys are one reason that many people hire an experienced attorney to represent them in their divorce case.  At our law firm, we have handled hundreds of cases where a difficult party or attorney was on the other side.  Having the experience to handle difficult personalities and resolve conflict is a learned technique that we have mastered in our many years of practice.  Our Certified Family Law Specialists are available to answer your questions right now if there is a difficult person or lawyer on the other side of your divorce, paternity or other family law case.  Call us at (619) 284-4113 or email us today.

Even if spouse freely and voluntarily signs a Quitclaim Deed during marriage, if there is a promise to restore title to joint ownership, the Deed may be set aside

In Fossum (2011) (CA 2/1 – Opinion filed January 28, 2011), a Husband and Wife married in 1994 and purchased a home jointly thereafter.  To secure a better interest rate, Wife quitclaimed her interest in the home to Husband.  Husband promised to convey the property to the community after the loan closed, and did so about 10 months later.  In 1998, the parties refinanced to secure a lower interest rate.  Wife again quitclaimed to Husband and relied on his promise to reconvey back to the community.  Wife admitted that she freely and voluntarily signed the quitclaim deed knowing that the title would be held by Husband solely.  However, Husband never reconveyed title to the community. 

The Court of Appeal decided that the property was community property because it was acquired during marriage.  Property transactions between spouses are affected by the confidential and fiduciary relationship between spouses, including a duty of good faith and fair dealing.  If one spouse secures an advantage in the transaction, there is a presumption that undue influence occurred.  If undue influence is presumed, the advantaged spouse has to prove that the other spouse acted freely, voluntarily and with full knowledge of all the facts and understood the effect of the transaction.

Husband argued that “form of title” should prevail.  The Court disagreed, ruling, “The form of title presumption simply does not apply in cases in which it conflicts with the presumption that one spouse has exerted undue influence over the other.”  The Court acknowledged Wife’s admission that she freely and voluntarily signed the document; however, she did so only because Husband promised to re-title the property in joint names at a later date. 

It is common for spouses to enter into agreements with each other during marriage regarding holding title of property.  Many times it is necessary to achieve better interest rates or loan terms.  However, entering such agreements may have significant legal effects.  Our attorneys are experienced in litigating the characterization of marital property, asset and debt division, and setting aside legal documents.  Contact our attorneys today if you have questions in your divorce case concerning the characterization of assets or if you have questions whether a document is legal binding.

San Diego Divorce Attorney Experts Discuss the Reality of the New Law

With this new year of 2011, many news articles declare that the cost of divorce cases will increase in San Diego County due to new Family Code 217, which requires oral testimony in family law proceedings. Some “experts” claim that this new law will cause all hearings to be conducted like trials, with no declarations, which will thereby cause the cost to litigate a case to increase substantially. The reality is that the cost of obtaining a divorce (or dissolution of marriage) in San Diego likely will not change much, if at all.

First, parties to dissolution actions may work together to reach agreements outside of court on issues such as child custody and visitation, support, and the division of assets and debts.

Second, the Court may easily find that good cause exists to refuse to receive oral testimony. For example, if parties submit written declarations a court may substantiate a ruling denying oral testimony based on the fact that no additional new information will arise from such testimony. The San Diego Local Rules require written declarations in all family law motion hearings.

Finally, the term “live, competent testimony” is subjective and may not entail significant time at all. For example, a family law judge may simply and quickly swear in parties, ask questions pertaining to issues the judge needs answered to understand a parties’ position or argument, and that will likely meet the requirements of the statute.

California Family Code 217 states:

Hearing on motion; live, competent testimony to be received; refusal to hear testimony for good cause with written reasons; service of witness list

(a) At a hearing on any order to show cause or notice of motion brought pursuant to this code, absent a stipulation of the parties or a finding of good cause pursuant to subdivision (b), the court shall receive any live, competent testimony that is relevant and within the scope of the hearing and the court may ask questions of the parties.

(b) In appropriate cases, a court may make a finding of good cause to refuse to receive live testimony and shall state its reasons for the finding on the record or in writing. The Judicial Council shall, by January 1, 2012, adopt a statewide rule of court regarding the factors a court shall consider in making a finding of good cause.

(c) A party seeking to present live testimony from witnesses other than the parties shall, prior to the hearing, file and serve a witness list with a brief description of the anticipated testimony. If the witness list is not served prior to the hearing, the court may, on request, grant a brief continuance and may make appropriate temporary orders pending the continued hearing.

While California Family Code 217 is certainly a new and interesting statute, it does not yet significantly change the landscape of family law or divorce cases, nor does it mean that obtaining a divorce will now be significantly more expensive.

In other local counties such as Orange County, family law judges and commissioners have long accepted live, oral testimony at hearings. Keep in mind that it is always more cost effective and faster to reach agreements to issues involved in a temporary motion filed by either party.

To discuss your matter with our family law experts, call us at (619) 284-4113 or email us today.

San Diego Divorce Expert Attorney Answer

If you and your spouse have recently decided to separate or get divorced there are many questions you may have. You may be wondering, where am I going to live? How are my finances going to change? Who is going to get custody of the kids? It may feel like there are a whirlwind of issues that need to be decided.

One important issue that often arises is what to do with the family home. If you and your spouse own a home, either together or maybe titled under one spouse’s name only, you are now faced with the decision of what to do with a home that is community property, quasi-community property, or separate property with a community property interest. Do you sell it now or keep it? Can spouses getting a divorce continue to maintain joint ownership of a home after entry of a divorce judgment? The good news is that the family residence may not need to be sold right away. In fact, you do not need to sell a community home before a final judgment is entered, or in some cases, even after a divorce judgment is entered.  However, it is vital that you contact a qualified family law expert to get advice concerning how your family residence may be characterized, what effects the sale of a community family residence may have in your overall case, the advantages and disadvantages of maintaining joint ownership of property post-judgment, and other important issues such as how a Marital Settlement Agreement may be drafted to protect your interests.   

In California, spouses owe each other a “fiduciary duty” to act in the best interest of the community. This essentially means that each spouse must act fairly and honestly when dealing with each other and cannot take advantage of the other. However, refusing to sell your community home when your spouse wants to and you do not is probably not a breach or violation of a spouse’s fiduciary duty. Often one spouse may insist on selling the home immediately in order to make a quick and clean break. This however may not be the best decision financially or for the family. The housing market might be experiencing a downturn, or you and your children may still wish to live in the home for example. Thus, delaying or deferring the sale of the home until a later specified date might be the best option. If parties to a divorce action cannot agree when a residence will be sold, the Court has broad discretion to fashion orders pertaining to a deferred sale.  However, the court will normally order a property to be sold absent a good cause showing by the party objecting to the sale that a sale would negatively impact the community financial estate, negatively impact minor children, and so forth.  Accordingly, it may be okay to decide to wait to make a decision about what to do with a family residence until a divorce is final.

For more information contact our Certified Family Law Specialists.  We offer a private consultation and our lawyers are skilled in properly preparing divorce pleadings and litigating community property issues.  Feel free to send us an email or call our office at (619) 284-4113 where our partners are available to speak with you directly.

Permanent spousal support orders may be modified post-judgment

Many recipients or obligors of spousal support ask the question, “Can a “permanent” spousal support order be modified?” The answer is generally yes.

Permanent spousal support orders are subject to modification if the court that originally issued the order reserved jurisdiction over that issue. In most cases, divorce judgments incorporating marital settlement agreements specifically detail the extent of the court’s jurisdiction to modify spousal support after the judgment is first entered. An agreement may say that jurisdiction is only reserved for five years, for example. In some cases agreements state that the court reserves jurisdiction indefinitely because no end date is established.

If a divorce case concludes by a trial, the trial court judicial officer can either set a termination of jurisdiction date, or if the parties were married for approximately ten years or more and the marriage is determined to be a “long term marriage” under Family Code 4336, no termination date will be set. The court does have the power to create a “step down” order, where spousal support is decreased over time. In the event the court does enter such a step down order, the court must find specific facts that warrant such a step down order.

Either party may file a noticed motion to ask the court to modify a permanent spousal support order. The person filing the motion must show the court that there has been at least some changed circumstances since the original order was entered. Absent such a showing, the motion will be denied. There are no set rules as to what might constitute a changed circumstance, but examples include a reduction in salary or rental income, loss of property, increased earnings in certain circumstances, cohabitation by the recipient of spousal support with someone of the opposite sex (see Family Code 4323), loss of healthcare benefits, reduction or loss of child support payments, failure to comply with a Gavron warning (i.e. a warning that every person should strive to become self-supporting) by the supported spouse, or other basic changes in a person’s life.

Once a party has shown that some changed circumstance exists, the court must then analyze and weigh all relevant factors listed within Family Code 4320. Notably, this is the same code section that the court uses to order permanent spousal support in the first place. A detailed discussion of the 4320 factors can be found here, from our Orange County office website.

In cases where a divorce judgment says that a permanent spousal support order is “non-modifiable” the order may not be modified, even upon a showing of changed circumstances.

For more information on spousal support, click here.

Contact our spousal support experts

Our Certified Family Law Specialists located in San Diego are available to answer your questions about modifying spousal support orders right now. We are available by email or by telephone at (619) 284-4113.