Husband need not earn his right to reimbursement by working during marriage. . .
In a partially published reversal, Third District holds that trial court erred by failing to order wife to reimburse community, per Fam.C. §2641, for community funds used to repay her educational loans; husband's failure to contribute to loan repayment or family expenses does not mean that statutory reimbursement exceptions apply.
In re Mullonkal and Kodiyamplakkil
(June 29, 2020)
California Court of Appeal 3 Civil C085825, 51 Cal.App.5th 604, ___ Cal.Rptr.3d ___, 2020 FA 1944, per Murray, J (Butz, Acting PJ, and Renner, J, concurring). Placer County: Gazzaniga, J, reversed with directions. For appellant: Stephanie Finelli, (916) 443-2144. For respondent: Jay-Allen Eisen, CALS, (916) 520-5290. CFLP §M.67.12.
Carolyn Mullonkal and Sithaj Kodiyamplakkil met in India. By 2009, Carolyn had completed medical school and had begun her residency in Michigan. She lived with her parents while she completed her residency and started paying off her considerable medical school loan debt. Meanwhile, Sithaj was living and working in India. Carolyn and Sithaj were married on August 27, 2011.
From July 2012 to May 2013, Carolyn worked for a hospital in Michigan and lived with her parents, paying them for living expenses from her salary of $225,000 per year. In May 2013, she moved to California to begin working for a new health care provider. Sithaj also moved to California, where the couple lived together. Sithaj got his residency card in July 2013 after Carolyn paid for his immigration fees. She also continued paying off her medical school loans from her salary and had them paid off by early 2014 to the tune of $130,000 since the couple's marriage. Having paid off her student loans, Carolyn began paying back loans her parents had made to her. At first, she paid $2000 a month, then made two lump sum payments of a little over $48,000 in December 2014 and $60,000 in January 2017.
Between September 2011 and July 2013, Carolyn spent more than $75,000 for gifts to her family and a loan repayment to her brother. She also paid for cruises for her parents and her uncle, a trip to Las Vegas for her brother's birthday, his airfare for a Christmas visit, and a cruise for her parents and Sithaj. She also paid for two Hawaii vacations and a trip to India for Sithaj. For his part, Sithaj, who had earned income and accumulated assets in India, did not work after he came to the U.S. Meanwhile, Carolyn became pregnant, giving birth to their child in late 2014. On January 27, 2015, Carolyn filed for divorce.
At the disso trial, Sithaj contended that the community was entitled to reimbursement, per Fam.C. §2641, for community funds used by Carolyn to repay her student loans, along with reimbursement for other noneducational loans and gifts of community funds to her family members made in violation of her fiduciary duty. He testified that the marital standard of living was not commensurate with Carolyn's salary because they lived frugally so that she could pay off her student loans. When the trial concluded, the trial court issued a final statement of decision in which it denied Sithaj's reimbursement request under Fam.C. §2641. The trial court found that the facts here—Carolyn worked and paid off her educational loans while Sithaj did not work and contributed nothing to the payoff—did not establish the kind of situation for which Fam.C. §2641 reimbursement was intended, and that reimbursement would be "'contrary to law and unjust.'" The trial court also denied Sithaj's claim of breach of fiduciary duty under Fam.C. §1101 for Carolyn's payments and gifts to family members as well as made orders regarding his request for attorney's fees and characterized one of his bank accounts as community property. The court declined to rule on Sithaj's issues regarding immigration law and support.
After moving unsuccessfully for a new trial, Sithaj appealed, and in a partially published opinion, the Third District reversed and remanded.
It's in the book. . .
Sithaj contended that the lower court erred by denying Fam.C. §2641 reimbursement for community funds used to pay Carolyn's education loans. The justices first focused on the statute itself. They noted that it mandates reimbursement for community contributions to a spouse's education. However, Fam.C. §2641(c) provides exceptions to that rule under certain situations; it permits a reduction or modification of reimbursement to the extent that circumstances render the disposition unjust. Exceptions to fully reimbursement, the panel explained, include, but are not limited, to a situation where the community has substantially benefited from the education, the education of one party is offset by the education of the other party to which the community also contributed, or the party's education reduces the need for his or her support. An express written agreement between the parties may also preclude reimbursement, the panel said. The justices also noted that for marriages where the community contributions were made less than 10 years before the disso, there is a rebuttable presumption that the community has not benefited from the contributions, but the opposite is true for contributions made more than 10 years prior to the disso.
What could have been. . .
Carolyn contended that the trial court's finding that reimbursement would be unjust was supported by substantial evidence. As she saw it, the wording of the exceptions as including but not limited to those enumerated meant that the trial court had broad discretion to find an exception on the pertinent facts. The justices agreed that the lower court had broad discretion but found that it was not as broad as Carolyn argued. They reasoned that any new exception must be of the same kind as those listed. And, when they reviewed those, they saw a "pattern of purpose" that the exceptions applied where the parties have mutually benefited from the contributions and neither has nor will receive a windfall. Here, they found, Sithaj had not received commensurate benefits to Carolyn's because he did not enjoy the standard of living the community could have achieved during marriage. The panel could find nothing in the legislative history of the statute to support denying reimbursement where the student-spouse repays his or her loans without contribution from the other spouse. Sithaj did not have to earn his right to reimbursement and his failure to work did not preclude his entitlement. The justices expressed understanding of the reasoning of the trial court but found that its ruling was "grounded on improper criteria and an incorrect legal assumption." The statute, the justices concluded, addresses community contributions to education but does not designate the source of the contributions. Therefore, the lower court abused its discretion by misapplying the law.
All he got was the tee-shirt?. . .
The justices then turned to the issue of whether the community had substantially benefited from Carolyn's payments. They noted that this was not a long marriage; thus, there was a presumption that the community had not substantially benefited. The panel was not persuaded that the fact that Carolyn paid Sithaj's immigration fees, their living expenses, and the costs of several vacations was sufficient benefit when compared to the community funds she expended in paying of her various loans. "18 months of modest living expenses along with four trips" did not rebut the presumption, the panel concluded. Moreover, any "strong understanding" that the parties may have had concerning reimbursement does not qualify as an express written agreement that would preclude reimbursement. Summing up, the justices held that the community must be reimbursed for payments that Carolyn made toward her educational loans and other family loans with community funds and reversed the trial court's judgment. On remand, the panel ordered the lower court to vacate its ruling on Sithaj's bank account and directed that court to order Carolyn to reimburse the community for the funds used to pay the various loans, to award Sithaj his share of community funds under Fam.C. §1101, to redetermine its attorney's fees award, and to reallocate the community assets in line with this opinion.
Non-pub. . .
In the unpublished parts of the opinion, the panel found that the trial court erred by denying reimbursement for noneducational loan payments, finding no breach of fiduciary duty in Carolyn's gifts to family members, ordering a low amount of attorney's fees, and concluding that Sithaj's bank account was community property. However, they affirmed the court's denial of a new trial.
We can understand why the justices were "sympathetic to the result the trial court apparently sought to achieve here." We are, too. If we recall correctly, this statute was intended to bring some measure of fairness to situations where one spouse, often the wife, worked to put the other spouse through college, medical school, or law school, only to be dumped when the other spouse achieved his or her educational goals. In a footnote, the justices acknowledge that in cases such as In re Marriage of Weiner (2003) 105 Cal.App.4th 235, 129 Cal.Rptr.2d 288, 2003 CFLR 9248, 2003 FA 1079, and In re Marriage of Slivka (1986) 183 Cal.App.3d 159, 228 Cal.Rptr. 76, 1986 CFLR 3172, 1986 FA 230, courts found that it was unjust for the student spouse to attain an increased opportunity for higher earnings while the working spouse got little to no benefit. With that reasoning in mind, they followed the California Supreme Court in In re Marriage of Sullivan (1984) 37 Cal.3d 762, 209 Cal.Rptr. 354, 1985 CFLR 2698, 1985 FA 148. However, the panel here cautions that, despite that reasoning, Weiner and Slivka should not be read to require the non-student spouse to contribute to the community effort as a prerequisite for obtaining reimbursement.
In discussing whether the community benefited substantially enough to preclude reimbursement, the justices estimate that Sithaj would have had a higher standard of living, commensurate with Carolyn's salary, if she hadn't used community funds to pay off loans. We are told that during their brief marriage, the couple lived in a two-bedroom, two-bath apartment for which they paid $1,200 a month; had one car that they leased from Carolyn's brother for about $400 a month; and had no significant expenses other than food, rent, utilities, and Carolyn's loan payments. Her salary during the marriage was $200,000. The panel scoffs at the idea that 18 months of modest living (for which Sithaj paid nothing) plus 4 trips could be said to constitute a substantial benefit to the community, when compared to the loan repayments. We question whether it is appropriate to base a determination of substantial benefit on an assumption of the MSL that might have been achieved absent the loan payments. Evidently, one more way to measure the benefit is to compare the amount of loan repayment to the parties' actual living expenses. Clearly, the rent for a two-bedroom, two-bath apartment in Placer County is less than a similar apartment in Alameda, Contra Costa, or San Francisco counties, which makes that method of measurement a little iffy.
All in all, these justices issued an opinion that narrowly interprets Fam.C. §2641. It's long on strict construction of the statutory language and short on equitable considerations.
11 Witkin, Summary of Cal. Law (11th ed. 2020) Com Prop, § 113
Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group) ¶8:829