In re Marriage of Rossin

• Decision Date: 24 March 2009
• Docket Number: No. H032258.,H032258.
• Citation: 91 Cal. Rptr. 3d 427,172 Cal.App.4th 725
• Court: California Court of Appeals Court of Appeals
• Parties: In re the Marriage of BELITA and RICHARD ROSSIN. BELITA ROSSIN, Appellant, v. RICHARD ROSSIN, Respondent.

172 Cal.App.4th 725

91 Cal. Rptr. 3d 427

In re the Marriage of BELITA and RICHARD ROSSIN BELITA ROSSIN, Appellant, v. RICHARD ROSSIN, Respondent.

No. H032258.

Court of Appeals of California, Sixth District.

March 24, 2009.

Law Office of Mary K. Simpson, Mary K. Simpson; Law Office of Mary Bird and Mary C. Bird for Appellant.

Law Office of Lance A. Russell and Lance A. Russell for Respondent.

OPINION

McADAMS, J. —

In this marital dissolution case, the parties dispute the proper characterization of disability benefits. Prior to the marriage, the wife had purchased a private disability policy, paid all the premiums, and started collecting benefits. The trial court nevertheless treated the benefits received by the wife during marriage as community property, reasoning that they were a substitute for wages.

As a matter of first impression, we conclude that the private disability benefits paid to the wife during marriage are her separate property, because she acquired the right to those benefits before marriage without any contribution from the community. We therefore reverse.

BACKGROUND

The parties to this appeal are appellant Belita Rossin (the wife), and respondent Richard Rossin (the husband). The parties were married in July 2000 and separated in March 2005.

In June 1991, some nine years prior to the marriage, the wife purchased a private disability insurance policy, to provide income in the event that she was disabled from working as a pediatrician. In January 1997, the wife left the practice of medicine for mental health reasons. In April 1997, she began receiving benefits under the policy in the form of monthly payments from the insurer, which continued throughout the parties' marriage. Under the terms of the policy, the wife was not obliged to pay premiums during disability. Although disabled from working as a pediatrician, the wife was self-employed during the marriage as a music teacher. According to the husband, "the parties commingled their assets and contributed their respective incomes to maintain the community home and their life style."

In July 2005, the wife brought this proceeding for dissolution of the marriage. In connection with the property division, the wife claimed the disability benefits as her separate property and sought reimbursement. The husband disputed that claim, asserting that the disability benefits received during the marriage were community property.

In September 2006, by stipulation, the dispute was submitted for decision by written briefs. In October 2006, the trial court filed a statement of decision, finding that the disability benefits received during marriage were community property. In the court's view, because they "were intended to replace or substitute for salary/wages, it necessarily follows that the disability benefits received during marriage were community property." In September 2007, the court entered its dissolution judgment and property division order, which includes the challenged characterization of the disability benefits as community property.

This timely appeal by the wife followed. The sole issue on appeal is the character of the disability benefits as separate or community property.

DISCUSSION

As a framework for our discussion, we first describe the general principles of marital property law that inform our analysis.

I. General Principles

A. Overview

(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 .) "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.)

1. Community Property

Section 760 states: "Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property." Under this section, "there is a general presumption that property acquired during marriage by either spouse other than by gift or inheritance is community property unless traceable to a separate property source." (In re Marriage of Haines, supra, 33 Cal.App.4th at pp. 289-290; see also, e.g., In re Marriage of Mix (1975) 14 Cal.3d 604, 611 [122 Cal.Rptr. 79, 536 P.2d 479].)

2. Separate Property

(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 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).)

B. Characterization

(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.)

1. Time of Acquisition

"Perhaps the most basic characterization factor is the time when property is acquired in relation to the parties' marital status." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291; see also, e.g., In re Marriage of Lehman (1998) 18 Cal.4th 169, 183 [74 Cal.Rptr.2d 825, 955 P.2d 451].)

a. Property character generally is fixed at acquisition.

(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 , 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 .)

"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 ; see also, e.g., Beam v. Bank of America (1971) 6 Cal.3d 12, 17 [98 Cal.Rptr. 137, 490 P.2d 257].)

The same is true of community property. Property acquired during marriage as the result of a spouse's employment thus is "stamped a community asset from then on." (In re Marriage of Lehman, supra, 18 Cal.4th at p. 183.) "To the extent—and only to the extent—that an employee spouse accrues a right to property during marriage before separation, the property in question is a community asset." (Ibid.) Thus, "what is determinative is the single concrete fact of time." (Ibid.)

b. Apportionment is distinct from characterization.

(5) In some cases, a property right is earned partly during marriage. For example, the right to enhanced retirement benefits may derive partly from employment during marriage and partly from the employee-spouse's post-separation efforts, as was the case in In re Marriage of Lehman, supra, 18 Cal.4th at pages 179-180. In such cases, "the question what extent such an enhancement belongs to the community and separate estates is one of apportionment and not characterization." (Id. at p. 180; see also In re Marriage of Frahm (1996) 45 Cal.App.4th 536, 545, fn. 2 .)

2. Presumptions

(6) Although time of acquisition generally is the pivotal element in characterization of property, other factors may affect the analysis in some cases, including presumptions. "Where property status cannot otherwise be proved, characterization is determined by applicable presumptions." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291.) "One category of presumptions includes those presumptions arising from the form of title . . . ." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291.) Another type of presumption comes into play when the property must be traced for characterization purposes:...