A beneficial partial interest in husband's separate property becomes really beneficial. . .
In an opinion vacating trial court's judgment and remanding, Fourth District holds that Watts charges may be ordered against husband where he lived in his separate property house after DOS and Moore/Marsden formula gave the community a beneficial interest in the house because payments were made during marriage with community funds.
In re Marriage of Mohler
(April 13, 2020)
California Court of Appeal 4 Civil E071314 (Div 2) 47 Cal.App.5th 788, 261 Cal.Rptr.3d 221, 2020 FA 1933, per Raphael, J (Codrington, Acting PJ, and Fields, J, concurring). Riverside County: Bennett, J, vacated and remanded. For appellant: Joel Seidel, CFLS, (818) 832-7850. For respondent: Brian Unitt, CALS, (951) 682-7030, and Joseph Howington, CFLS, (909) 581-6000. CFLP §§ K.55, K.55.1.1.
In February 1995, Greg Mohler bought a house in Rancho Cucamonga for $168,000, taking title in his sole name. After he married Jodie in September 1998, they lived in that house until they separated on July 2, 2011. The payments on the house were made from community funds, to the tune of $56,557, until the separation date; after that, Greg lived in the house and made the payments from his own separate funds.
At the parties' disso trial in late 2017, the trial court valued the house at $530,000. The parties agreed that the Moore/Marsden formula should be used to calculate the interest that the community acquired in the house by making the house payments. Using that formula, the trial court calculated that the community interest amounted to 33.66% or $172,684, the appreciation in the house's value plus the mortgage payments. However, Jodie argued that the community's interest must be increased to 64.9% to encompass the six years that Greg lived in the house post-separation and paid the mortgage with his separate property. The trial court agreed and re-calculated the community interest under Moore/Marsden at $332,944, which included Greg's separate property payments of $52,482.
Greg appealed, and the Fourth District vacated that order and remanded.
More and more Moore/Marsden. . .
The justices quickly determined that the trial court had valued the house at the time of trial, which was appropriate, since neither party had requested an alternative valuation date. However, they continued, the lower court erred by using Moore/Marsden to increase the community interest in the house post-separation. They explained that by making payments on Greg's separate property house with community funds, the community acquired a beneficial interest in the property, the amount of which should be calculated by application of the Moore/Marsden formula. However, the community ceases to acquire a beneficial interest in a spouse's separate property when the payments from community funds cease. Here, that was after the date of separation, when Greg resumed making the mortgage payments from his separate funds. The panel reasoned that Greg's pre-marital payments on the house didn't increase the community's interest, and his post-separation payments from his separate funds shouldn't either. Thus, the trial court erred by applying Moore/Marsden beyond the date of separation to include the time when Greg was living in the house and paying for it with his separate funds.
Watts what? . . .
The panel wasn't completely convinced that the community couldn't receive some compensation for Greg's having lived in the house for six years before the disso judgment. They found that compensation could come in the form of Watts charges. The justices acknowledged that those charges are generally used to compensate the community when one spouse has had exclusive use of a community asset between separation and trial. However, they reasoned that "where, as here, the community does not own the property outright but instead maintains a beneficial partial interest in the property due to a Moore/Marsden calculation," Watts charges may be applied. Accordingly, the panel vacated the trial court's order and remanded for further proceedings in line with this opinion.
The justices were doing all right until they got to the Watts charges part. Declining to extend Moore/Marsden is in line with the way that courts (and family law attorneys) have looked at cases where the formula is involved. However, when they say that the community "maintains a beneficial partial interest in the property" because of the Moore/Marsden calculation, they seem to believe that interest changes the characterization of the property, which becomes part-community and part separate. In a footnote, they tell us that Moore could be read to indicate that the community interest is in fact a legal one, and that a consequence of that might be that where there is a Moore/Marsden interest, the property could not be sold without the consent of the community. They hasten to assure us that they aren't addressing that issue because it isn't before them. Nonetheless, it's a disturbing analysis, to say the least. We find it hard to believe that a client who has a separate property asset that is subject to a Moore/Marsden calculation may find out that the asset is no longer his or her separate property because the calculation has established an ongoing community interest in the property.
11 Witkin, Summary of Cal. Law (11th ed. 2020) Com Prop, § 206
Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2019) ¶¶ 8:295, 8:855 to 8:860