Under California’s property division system, all of the property that a couple brings to a marriage is considered separate. That means the spouse who owns the property at the time of the marriage keeps the property in the event of divorce. The same goes for any property obtained using separate funds. All other property obtained during the course of the marriage, on the other hand, is community property to be split evenly upon divorce. So what happens when one spouse uses separate money to buy real property and then uses community funds to improve it? The state’s Sixth District Court of Appeals recently took on that issue.
Husband and Wife separated in September 2008, following roughly 37 years of marriage. The couple purchased a home in Gilroy for $275,000 a year after they married, using $75,000 from Wife as a down payment. They also used Wife’s separate trust account for a $20,000 payment on the loan that they obtained for the rest of the purchase price. The couple later bought a parcel of land next to the property for another $64,000 from Wife’s separate money. They made various improvements to the land, including building a large home with a pool and basketball and tennis courts. They also remodeled the new home several times.
Both properties – collectively called “the Redwood Retreat Ranch” – remained in Wife’s name alone until 2005, when ownership was transferred to Husband and Wife jointly. During the divorce proceedings, the couple argued over the value of the property and the various improvements. A court heard testimony from several experts and eventually determined that the property was worth more than $5.4 million. The judge also said Wife adequately showed that she used separate money from her trust fund to pay for about 47 percent of the property through down payments and mortgage payments. The remaining 53 percent was community property, according to the court, to be split evenly among the spouses.
Husband appealed, asserting that the judge should have credited the community for improvements made to the property using community funds. Many of these improvements were made using Husband’s contracting company. The Sixth District agreed with the lower court. It found that the improvements made little or no impact on the value of the property. Instead, the Court noted that experts found the vast majority of the property’s value came from the underlying parcels of land, not the home and other improvements.
“The court’s finding of the value of the property was based on its review of the evidence presented at trial, and in particular, the testimony of multiple experts for both parties,” the Sixth District said. It was up to the trial judge to weigh any competing testimony, according to the Court, and determine which it found most credible. “As an appellate court, we do not weigh the evidence presented in the trial court, nor do we make a determination of a witness’ credibility,” the Court said.
Property division is just one of the many complicated issues that can come up in a California divorce case. If you’re considering a divorce or are grappling with community property and other issues in California, contact San Jose divorce attorney John S. Yohanan. With more than 30 years of experience, Mr. Yohanan is an accomplished family law attorney who has helped a number of clients resolve a wide variety of marital disputes. Call our office at (408) 297-0700 or contact us online to schedule a consultation.
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