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The Court's characterization of Property as Community Property or Separate Property

California

,

United States of America

Issue

Will separate property that was brought into the marriage by one spouse be considered community property if the other spouse contributed to its appreciation in value during the course of the marriage?

Conclusion

The court's characterization of the parties' property as community property or separate property determines the division of property between the spouses in a marital dissolution proceeding. (Valli v. Valli (In re Valli))

The characterization of property as either community or separate property is determined by the source of the assets used to produce it unless the characterization has been altered by contract. Property that a spouse acquired before the marriage is that spouse's separate property. Property that a spouse acquired during the marriage is community property unless it is traceable to a separate property source or acquired by gift or bequest. (In re Marriage of Rossin, Valli v. Valli (In re Valli))

Property that is separate at the time of acquisition (and has not been transmuted or sufficiently commingled) remains separate, except for any increase in value due to community efforts or contributions. (Bonvino v. Bonvino (In re Bonvino), In re Marriage of Rossin)

When the community's efforts increase the value of a spouse's separate property business during the marriage, it becomes necessary to equitably apportion the contributions of the separate capital and community effort to the increase. The community is entitled to the increase in profits attributable to the community endeavour. (Brandes v. Brandes (In re Brandes))

There are two main methods of apportioning increases in value attributable to community efforts during the course of the marriage. The Pereira method is applied where business profits are principally attributed to efforts of the community. The Van Camp method is applied where community effort is more than minimally involved in the separate business but the business profits accrued are attributed to the character of the separate asset. Van Camp applies when the efforts of others within a company cause the increase in value; it is not limited to situations where market forces are the sole reason for the increase in value. The court may select whichever formula will achieve substantial justice between the parties. (Van Camp v. Van Camp, Pereira v. Pereira, Brandes v. Brandes (In re Brandes))

Pereira and Van Camp are methods of equitable apportionment, which is not the same as ownership. The community does not obtain an ownership interest in a spouse's separate business. (Brandes v. Brandes (In re Brandes))

Where community funds, as opposed to efforts, are used to make capital improvements to a spouse's separate real property, the community is entitled to reimbursement or a pro tanto interest under a different formula, the Moore/Marsden rule. The rule gives to the community a pro tanto community property interest in such property in the ratio that the payments with community funds bear to the payments made with separate funds. (In re Marriage of Moore, In re Marriage of Marsden, Bono v. Clark)

Amounts of community funds paid for interest, taxes, and insurance cannot be used when determining the community property percentage share. (Ramsey v. Holmes (In re Ramsey), In re Marriage of Moore)

A spouse who permits community funds to be used to improve the other spouse's separate property is entitled to the same protection provided in Cal. Fam. Code § 2640 for separate property contributions to the acquisition of community property. (In re Marriage of Allen)

It is inappropriate to use the Moore/Marsden approach when a separate property business is improved by the devotion of community efforts as opposed to community funds. In such cases, the prevailing approach is equitable apportionment under the Pereira or Van Camp formulas. (Brandes v. Brandes (In re Brandes))

Law

As explained by the Supreme Court of California in Valli v. Valli (In re Valli), 58 Cal.4th 1396, 324 P.3d 274, 171 Cal.Rptr.3d 454 (Cal. 2014), the court's characterization of the parties' property as community property or separate property determines the division of property between the spouses in a marital dissolution proceeding (at 456-457:

In a marital dissolution proceeding, a court's characterization of the parties' property—as community property or separate property—determines the division of the property between the spouses. (In re Marriage of Benson (2005) 36 Cal.4th 1096, 1102, 32 Cal.Rptr.3d 471, 116 P.3d 1152; In re Marriage of Haines (1995) 33 Cal.App.4th 277, 291, 39 Cal.Rptr.2d 673.) Property that a spouse acquired before the marriage is that spouse's

[171 Cal.Rptr.3d 457]

separate property. (Fam. Code, § 770, subd. (a) (1).) Property that a spouse acquired during the marriage is community property (id.,§ 760) unless it is (1) traceable to a separate property source (In re Marriage of Lucas (1980) 27 Cal.3d 808, 815, 166 Cal.Rptr. 853, 614 P.2d 285; In re Marriage of Mix (1975) 14 Cal.3d 604, 610, 612, 122 Cal.Rptr. 79, 536 P.2d 479), (2) acquired by gift or bequest (Fam. Code, § 770, subd. (a)(2)), or (3) earned or accumulated while the spouses are living separate and apart (id.,§ 771, subd. (a)). A spouse's claim that property acquired during a marriage is separate property must be proven by a preponderance of the evidence. (In re Marriage of Ettefagh (2007) 150 Cal.App.4th 1578, 1591, 59 Cal.Rptr.3d 419; see Estate of Murphy (1976) 15 Cal.3d 907, 917, 126 Cal.Rptr. 820, 544 P.2d 956 [a spouse asserting that property acquired by purchase during a marriage is separate property must prove that the property is not community].)

The characterization of property as either community or separate property is determined by the source of the assets used to produce it unless the characterization has been altered by contract, per the California Court of Appeal for the Sixth District in In re Marriage of Rossin, 172 Cal.App.4th 725, 91 Cal. Rptr. 3d 427 (Cal. Ct. App. 2009) ("Rossin") (at 731):

(1) "California community property law is a complex amalgam of principles derived initially from Spanish law extant during early statehood." (1 Raye et al., Cal. Civil Practice: Family Law Litigation (2002) Character and Valuation of Property, § 5:4, p. 9; see also In re Marriage of Haines (1995) 33 Cal.App.4th 277, 288-290 [39 Cal.Rptr.2d 673].) "It has evolved to reflect the prevailing attitudes towards marriage and the relationship between spouses. Three principles developed early and remain fundamental. [¶] (1) Equality of Interests. Spouses have equal ownership interests in community property. . . . [¶] (2) The `Source' Doctrine. In the absence of a controlling statutory presumption to the contrary, the character of property as community or separate will be determined by the source of assets used to produce it. . . . [¶] (3) Alteration by Contract. Within certain public policy limits, and subject to certain formalities, the parties can agree to alter the application of community property laws to their marital property." (Raye, p. 9.)

Community property and separate property are defined in the Family Code. (Further unspecified statutory references are to that code.)

Separate property is any property owned by a spouse before the marriage or after the marriage, or inherited or received as a gift during the marriage (at 731-732):

(2) Section 770 states: "Separate property of a married person includes all of the following: [¶] (1) All property owned by the person before marriage. [¶] (2) All property acquired by the person after marriage by gift,

[172 Cal.App.4th 732]

bequest, devise, or descent. [¶] (3) The rents, issues, and profits of the property described in this section." (§ 770, subd. (a).) Our state Constitution similarly provides: "Property owned before marriage or acquired during marriage by gift, will, or inheritance is separate property." (Cal. Const., art. I, § 21.) In addition, by statute, the spouses' postseparation "earnings and accumulations" are separate property. (§ 771, subd. (a).)

The characterization of property as separate depends on the time of the acquisition, the operation of certain presumptions, and whether the property has been "transmuted" or commingled with community property to the extent that tracing is impossible (at 732):

(3) "Characterization of property, for the purpose of community property law, refers to the process of classifying property as separate, community, or quasi-community. Characterization must take place in order to determine the rights and liabilities of the parties with respect to a particular asset or obligation and is an integral part of the division of property on marital dissolution." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291.) Generally speaking, property characterization depends on three factors: (1) the time of acquisition; (2) the "operation of various presumptions, particularly those concerning the form of title"; and (3) the determination "whether the spouses have transmuted" the property in question, thereby changing its character. (Ibid.) In some cases, a fourth factor may be involved: whether the parties' actions short of formal transmutation have converted the property's character, as by commingling to the extent that tracing is impossible. (1 Kirkland et al., Cal. Family Law: Practice and Procedure (2d ed. 2006) § 20.11, p. 20-31.)

If property was separate when it was acquired (and has not been transmuted or sufficiently commingled), it continues to remain separate. However, the Rossin Court held that any increase in the value of separate property during the marriage due to the contributions of the community by virtue of capital or industry are excepted (at 732-733):

(4) As well-settled case law recognizes: "The character of the property as separate or community is fixed as of the time it is acquired; and the character so fixed continues until it is changed in some manner recognized by law, as by agreement of the parties." (Mears v. Mears (1960) 180 Cal.App.2d 484, 499 [4 Cal.Rptr. 618], disapproved on other grounds in See v. See (1966) 64 Cal.2d 778, 785 [51 Cal.Rptr. 888, 415 P.2d 776]; accord, In re Marriage of Jafeman (1972) 29 Cal.App.3d 244, 255 [105 Cal.Rptr. 483].)

[172 Cal.App.4th 733]

"Whether property held by a [spouse] during coverture is separate is determined by the time of its acquisition. If it was separate then, it continues to remain so with the exception of such increase thereof as may have been due to the contributions of the community by virtue of capital or industry." (Kenney v. Kenney (1950) 97 Cal.App.2d 60, 65 [217 P.2d 151]; see also, e.g., Beam v. Bank of America (1971) 6 Cal.3d 12, 17 [98 Cal.Rptr. 137, 490 P.2d 257].)

This was more recently reiterated by the California Court of Appeal for the Second District in Bonvino v. Bonvino (In re Bonvino), 241 Cal.App.4th 1411, 194 Cal.Rptr.3d 754 (Cal. Ct. App. 2015) (at 1423):

Property that a spouse purchases with separate property funds continues to be separate property. (Thomasset v. Thomasset (1953) 122 Cal.App.2d 116, 123, 264 P.2d 626.) Separate property does not change character simply because the owner is married, or the property is used in the marital relationship, or the property changes form or identity. (Id. at p. 124, 264 P.2d 626.) Property that is separate at the time of acquisition remains separate, except for any increase in value due to community efforts or contributions. (Id. at p. 123, 264 P.2d 626.) “Commingling of separate and community property does not alter the status of the separate property interest so long as it can be traced to its separate property source. [Citation.]” (In re Marriage of Cochran (2001) 87 Cal.App.4th 1050, 1057, 104 Cal.Rptr.2d 920.)

As explained by the California Court of Appeal for the Fourth District in Brandes v. Brandes (In re Brandes), 239 Cal.App.4th 1461, 192 Cal.Rptr.3d 1 (Cal. Ct. App. 2015) ("Brandes"), when the community's efforts increase the value of a spouse's separate property business during the marriage, it becomes necessary to equitably apportion the contributions of the separate capital and community effort to the increase. The community is entitled to the increase in profits attributable to the community endeavour. The Pereira method, from the California Supreme Court decision of Pereira v. Pereira, 156 Cal. 1, 103 P. 488, 1909 Cal. LEXIS 509 (Cal. June 30, 1909), is applied where business profits are principally attributed to efforts of the community. The Van Camp method, from the California Court of Appeal decision of Van Camp v. Van Camp, 53 Cal. App. 17, 199 P. 885, 1921 Cal. App. LEXIS 374 (Cal. Ct. App. 1921), is applied where community effort is more than minimally involved in the separate business but the business profits accrued are attributed to the character of the separate asset. The court may select whichever formula will achieve substantial justice between the parties (at 1472-1473:

When a spouse's personal efforts increase the value of his or her separate property business, "it becomes necessary to quantify the contributions of the separate capital and community effort to the increase," because the "community is entitled to the increase in profits attributable to the community endeavor." (Dekker, supra, 17 Cal.App.4th at p. 851, 21 Cal.Rptr.2d 642; Beam, supra, 6 Cal.3d at p. 17, 98 Cal.Rptr. 137, 490 P.2d 257.) California courts have developed two alternative

[239 Cal.App.4th 1473]

approaches to allocating business profits between separate and community estates. (Dekker, at pp. 852–853, 21 Cal.Rptr.2d 642 fn. omitted.)

[192 Cal.Rptr.3d 10]

"Pereira is typically applied where business profits are principally attributed to efforts of the community." (Dekker, supra, 17 Cal.App.4th at p. 853, 21 Cal.Rptr.2d 642.) "The Pereira approach is to allocate a fair return to the separate property investment and allocate the balance of the increased value to community property as arising from community efforts." (Id. at pp. 852–853, 21 Cal.Rptr.2d 642.) In a Pereira allocation, the court need not "limit the community interest to a salary as reward for a spouse's efforts...." (Id. at p. 853, 21 Cal.Rptr.2d 642.) "To limit the community to compensation received by way of salary during the marriage would ignore California's egalitarian marriage model and the apportionment formula of Pereira ...." (Id. at p. 854, 21 Cal.Rptr.2d 642.)

"Conversely, Van Camp is applied where community effort is more than minimally involved in a separate business, yet the business profits accrued are attributed to the character of the separate asset." (Dekker, supra, 17 Cal.App.4th at p. 853, 21 Cal.Rptr.2d 642.) "The Van Camp approach is to determine the reasonable value of the community's services, allocate that amount to community property and the balance to separate property." (Ibid.)

" ‘In making such apportionment between separate and community property our courts have developed no precise criterion or fixed standard, but have endeavored to adopt that yardstick which is most appropriate and equitable in a particular situation ... depending on whether the character of the capital investment in the separate property or the personal activity, ability, and capacity of the spouse is the chief contributing factor in the realization of income and profits [citations].’ " (Beam, supra, 6 Cal.3d at p. 18, 98 Cal.Rptr. 137, 490 P.2d 257.) The court " ‘may select [whichever] formula will achieve substantial justice between the parties. [Citations.]’ " (Ibid. italics added; Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 1998) ¶ 8:347, p. 8–133 (rev. 2015) (hereafter Hogoboom & King) ["No precise standards govern the trial court's decision in choosing between Pereira or Van Camp (or, for that matter, any other equitable apportionment method).].)"

The Brandes Court emphasized that Pereira and Van Camp are methods of calculating equitable apportionment, which is not the same as ownership. The community does not obtain an ownership interest in a spouse's separate business (at 1478):

Linda continues to conflate issues of ownership and equitable allocation. Until the community interest under Pereira was calculated at the time of dissolution, it was merely theoretical; it was not in the nature of a capital contribution made by the community to BIP as of the end of the Pereira period. Alacer, supra, 201 Cal.App.4th at page 1344, 136 Cal.Rptr.3d 669, confirms that absent the commingling of separate and community funds, which is not an issue here, the community does not obtain an ownership interest in a spouse's separate business. We conclude that rule of law applies whether the court uses Pereira, Van Camp, or, as here, some hybrid thereof.

Where community funds, as opposed to efforts, are used to make capital improvements to a spouse's separate real property, the community is entitled to reimbursement or a pro tanto interest under a different formula, the Moore/Marsden rule. In Bono v. Clark, 103 Cal.App.4th 1409, 128 Cal.Rptr.2d 31 (Cal. Ct. App. 2002) the California Court of Appeal for the Sixth District explained (at 1423):

As the Allen court explained: "A spouse who consents to the use of community funds to improve the other spouse's separate property does not necessarily intend a gift.... Where community funds are used to make capital improvements to a spouse's separate real property, the community is entitled to reimbursement or a pro tanto interest under the Moore/Marsden rule both because its rationale applies equally to the reduction of an encumbrance and to capital improvements, and also because the legal underpinnings of the alternative rule ... [citation], have been destroyed by intervening changes in family law." (Allen, supra, 96 Cal.App.4th at p. 501, 116 Cal.Rptr.2d 887, fn. omitted.) "The Moore/Marsden rule is based upon the principle that where community funds contribute to the owner's equity in separate property, the community obtains a pro tanto quasi-ownership stake in the property.... [Citation.] Because contributions

[128 Cal.Rptr.2d 41]

to capital improvements also increase the property's equity value, Moore's rationale applies as well to capital improvements made to separate property." (Id. at p. 502, 116 Cal.Rptr.2d 887. Cf., Fam. Code, § 2640, subd. (a) [separate property contributions to the acquisition of community property include payments for improvements].)

We agree that the rationale of the Moore/Marsden rule applies with equal force to capital improvements, as a matter of both logic and fairness. We therefore adopt the principles expressed in Wolfe and Allen. In doing so, we necessarily disagree with earlier cases, such as Jafeman and Camire, to the extent that they apply a gift presumption to community funded expenditures for capital improvements to a spouse's separate property.

The Moore/Marsden rule was set out by the California Supreme Court in In re Marriage of Moore, 168 Cal.Rptr. 662, 28 Cal.3d 366 (Cal. 1980) ("Moore") (at 371-372) and repeated by the California Court of Appeal in In re Marriage of Marsden, 130 Cal.App.3d 426, 181 Cal.Rptr. 910 (Cal. Ct. App. 1982) (at 436-437):

"Where community funds are used to make payments on property purchased by one of the spouses before marriage 'the rule developed through decisions in California gives to the community a pro tanto community property interest in such property in the ratio that the payments on the purchase price with community funds bear to the payments [130 Cal.App.3d 437] made with separate funds.' [Citations.]" (In re Marriage of Moore (1980) 28 Cal.3d 366, 371-372, 168 Cal.Rptr. 662, 618 P.2d 208.) [...]

As explained by the California Court of Appeal for the Second District in In re Marriage of Allen, 96 Cal.App.4th 497, 116 Cal.Rptr.2d 887 (Cal. App. 2002), a spouse who permits community funds to be used to improve the other spouse's separate property is entitled to the same protection provided in Cal. Fam. Code § 2640 for separate property contributions to the acquisition of community property (at 503):

The distinction between community contributions toward reducing an encumbrance and toward capital improvements, however, is neither self-evident nor consistently recognized. Family Code section 2640, which authorizes reimbursement for separate property contributions to the acquisition of community property unless a writing expressing the intent to make a gift has been executed, includes "payments for improvements" in its definition of "`[contributions to the acquisition of the property.'" (Fam. Code, § 2640, subd. (a); see Wolfe, supra, 91 Cal.App.4th at p. 967, 110 Cal.Rptr.2d 921.)3 To paraphrase Gowdy, which followed Moore, it would be anomalous to hold that a spouse who permits community funds to be used to improve the other spouse's separate property has fewer rights than a spouse who permits his or her separate property to be used for the same purpose with respect to a community property. (See Gowdy, supra, 178 Cal.App.3d at p. 1234, 224 Cal. Rptr. 400.)

In Brandes, supra, the Court of Appeal held that it is inappropriate to use the Moore/Marsden approach when a separate property business is improved by the devotion of community efforts as opposed to community funds. In such cases, the prevailing approach is equitable apportionment under the Pereira or Van Camp formulas (at 1477):

Linda contends Alacer was incorrectly decided. She asserts "the problem with [Alacer] ... is that the opinion does not mention, let alone analyze and apply the existing equitable apportionment precedent" set forth in cases such as In re Marriage of Moore (1980) 28 Cal.3d 366, 168 Cal.Rptr. 662, 618 P.2d 208 (Moore) and In re Marriage of Marsden (1982) 130 Cal.App.3d 426, 181 Cal.Rptr. 910 (Marsden). "Generally, ‘[w]hen community property is used to reduce the principal balance of a mortgage on one spouse's separate property, the community acquires a pro tanto interest in the property. [Citations.] This well-established principle is known as "the Moore/Marsden rule."’" (In re Marriage of Nelson (2006) 139 Cal.App.4th 1546, 1552, 44 Cal.Rptr.3d 52.)

Alacer, however, does cite and consider the Moore/Marsden rule. In Alacer, the wife alternatively asserted the community was entitled to a "pro tanto interest" in the husband's business. (Alacer, supra, 201 Cal.App.4th at p. 1344, 136 Cal.Rptr.3d 669.) The court noted she "relies on case law giving the community a pro tanto interest in separate property—real property, typically—purchased, paid down, or improved with community funds, " citing Moore and Marsden. (Alacer, at p. 1344, 136 Cal.Rptr.3d 669, italics added.) Alacer held: "[U]sing the Moore / Marsden approach here would conflict with the prevailing approach used when a separate property business is improved by the devotion of community efforts—equitable apportionment using Pereira or Van Camp. [Citation.] The [trial] court did not err by declining to extend the Moore/Marsden approach to this set of facts." (Ibid.)

We agree with Alacer and conclude it controls here. It is well established that the community's interest in a spouse's separate business is confined to equitable allocation based on the extent to which the spouse's personal efforts resulted in increased value during the marriage. (Beam, supra, 6 Cal.3d at pp. 18–20, 98 Cal.Rptr. 137, 490 P.2d 257, favorably citing allocation approaches of Pereira, supra, 156 Cal. 1, 103 P. 488, and Van Camp, supra, 53 Cal.App. 17, 199 P. 885.) Linda presents no cogent argument for the application of the Moore / Marsden rule pertaining to the use of community funds to improve separate property. She concedes

[192 Cal.Rptr.3d 14]

"that no case has held that the investment of community efforts should be treated the same as the investment of community funds."

In Ramsey v. Holmes (In re Ramsey), 67 Cal.App.5th 1043, 282 Cal.Rptr.3d 622 (Cal. Ct. App. 2021), the California Court of Appeal for the Second District found that the family court erred when it used the total amount of the mortgage payments when calculating the community property interest in the house, which the husband bought as separate property before the marriage, where a significant portion of the mortgage payments went to interest, taxes, and insurance rather than principal. The Court noted that in Moore, the Supreme Court held that amounts paid for interest, taxes, and insurance cannot be used when determining the community property percentage share. The Court explained that once the family court determined that a community property interest existed, the family court was obligated to determine the value of that interest and divide it equally, and thus should have required the parties to furnish any additional evidence it needed to make that determination (at 1051-1052):

Acknowledging that there is a dearth of authority that might have guided the family court in the evidentiary dilemma it faced, we conclude the family court erred by using the total amount of the mortgage payments when calculating the community property interest in the house, in light of the evidence that a significant portion of those payments went to interest, taxes, and insurance rather than to principal. While we understand that the court was hampered by the parties’ failure to introduce evidence establishing exactly what portion of those payments went to reduce the principal on the mortgage, the Supreme Court made clear in Moore that the amounts paid for interest, taxes, and insurance cannot be used when determining the community property percentage share. (Moore, supra, 28 Cal.3d at pp. 372–373, 168 Cal.Rptr. 662, 618 P.2d 208.)

Our determination that the family court erred, however, does not complete our review. The question remains, what should be done? Ramsey takes the position that the judgement should be affirmed regardless of any error because Holmes forfeited his challenge. At trial, Holmes took the position that Ramsey bore the burden of proof to establish the community property interest in the house purchased as Holmes's separate property, and therefore the family court should have declined to award her a share of the community property interest. If Holmes's trial argument were to prevail, the judgment would have to be reversed to the extent it awarded Ramsey any share of the community property interest. On appeal, Holmes takes a less extreme position, arguing that the judgment should either be corrected by this court using evidence he submitted with his objection to the tentative decision, or be reversed and remanded with directions to the family court to determine the correct amount of community funds used to reduce the principal and then to apply the Moore/Marsden formula.

[67 Cal.App.5th 1052]

We conclude the most appropriate disposition is to reverse the judgment and remand with directions.

First, we decline to find that Holmes forfeited his challenge. Forfeiture is not appropriate here because at trial Holmes clearly pointed to the absence of evidence to establish the community-funded reduction in principal. (C.f. Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184–185, fn. 1, 151 Cal.Rptr. 837, 588 P.2d 1261 [" ‘An appellate court will ordinarily not consider procedural defects or erroneous rulings, in connection with relief sought or defenses asserted, where an objection could have been but was not presented to the lower court by some appropriate method’ "].)

Second, while Holmes is correct that, generally, "a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting" (Evid. Code, § 500), his decision not to provide the missing evidence in this case was misguided. The material fact at issue in this case was whether there was a community property interest in the house. Holmes conceded this fact. Since it was thus established that a community property interest existed, the family court was obligated to determine the value of that interest and divide it equally. (See Fam. Code, §§ 2550, 2552; In re Marriage of Andresen (1994) 28 Cal.App.4th 873, 880, 34 Cal.Rptr.2d 147; In re Marriage of Cream (1993) 13 Cal.App.4th 81, 86–88, 16 Cal.Rptr.2d 575.) Both spouses had an equal interest in ensuring that the court

[282 Cal.Rptr.3d 630]

had sufficient information with which to fulfill its judicial responsibility. In fact, as the mortgagor, Holmes was in the best position to provide the evidence needed to establish the reduction in principal.

Finally, in light of the court's obligation to determine the value of the community property interest in the house, and its recognition that there was an "absence" of evidence, the court "should have required the parties to furnish [the] additional evidence" it needed to make the determination. (In re Marriage of Hargrave (1985) 163 Cal.App.3d 346, 355, 209 Cal.Rptr. 764.) Such a requirement, especially when the information is readily available to one of the parties, is consistent with the Legislature's stated public policy to "favor[ ] the reduction of the adversarial nature of marital dissolution and the attendant costs." (Fam. Code, § 2100, subd. (b).) Accordingly, we reverse the judgment and remand the matter to the family court so it may do so now.

In Mohler v. Mohler (In re Mohler), 47 Cal.App.5th 788, 261 Cal.Rptr.3d 221 (Cal. Ct. App. 2020), the California Court of Appeal for the Fourth District noted that the application of the Moore/Marsden rule terminates once community funds are no longer used to build equity in an asset, an event that often happens upon the separation of the parties. In this case, the husband lived in the property at issue for more than six years after the parties separated, paying the mortgage with his separate income; thus the Moore/Marsden rule did not apply for those six years, but Watts charges could be levied against him for that period. Watts charges compensate the community for one spouse's use of a community-owned home (at 790-791):

In this dissolution case, the husband entered the marriage owning a home that the parties lived in as spouses for over 12 years. The parties agree that application of

[261 Cal.Rptr.3d 228]

the Moore/Marsden rule through the date of their separation resulted in the community beneficially owning 33.66 percent of the property. However, by the time of their dissolution trial, the husband had lived in the property for more than six years post-separation, paying the mortgage with his separate income. At the wife's request, the trial court found that the community's interest in the property continued to increase throughout those years, just as if community funds had been used to pay the mortgage during that time, resulting in the community obtaining a 64.9 percent interest in the property.

We hold that this was error. The Moore/Marsden rule applies only insofar as community funds are used to buil

Alexsei publishing date:
2022-01-04 19:56:18.829935
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